By Tony O’Reilly-
The London Stock Exchange is preparing to put shares on blockchain as it tries to reinvent the capital’s financial markets at precisely the moment that billions of pounds worth of British companies are disappearing from the exchange.
On Tuesday, the London Stock Exchange announced plans to launch tokenised versions of UK-listed equities and said it was working with Payward, the parent company of cryptocurrency exchange Kraken, to develop a new route into public markets.
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Subject to regulatory approval, the exchange intends to list and trade so-called xStocks on its planned LSE 24 venue in 2027. The tokens will represent publicly traded shares on a one-to-one basis and are designed to bring traditional equities into the digital-asset ecosystem.
The move is one of the clearest signs yet that London’s oldest financial institutions are attempting to adapt to a market in which investors increasingly expect assets to move at digital speed and trading to continue around the clock. It comes against a strikingly different backdrop.
While the exchange is preparing to put shares on blockchain, some of the companies already listed in London are being bought and taken off the market. Three more London-listed companies are now set to disappear following takeover agreements involving Bodycote, Gamma Communications and Capricorn Energy. Their deals take the value of transactions removing companies from London’s public market this year to almost $110bn, according to Bloomberg data.
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The contrast is difficult to miss.London is trying to build the stock market of the future while struggling to retain some of the companies that make up its present one.Bodycote, the FTSE 250 industrial group listed in London since 1972, has agreed to a £1.84bn takeover by US private equity firm Veritas after a bidding battle involving European buyout group CVC.
Gamma Communications has recommended a £1.1bn takeover by UK private equity firm Epiris.Capricorn Energy, meanwhile, has agreed to be acquired by Norwegian rival DNO for $396m after switching its recommendation from an earlier offer by Genel Energy. These are not isolated transactions.
EasyJet has agreed a £5.7bn takeover by US private equity group Apollo. Warehouse landlord Segro is being acquired by US rival Prologis for £14bn. Schroders, one of Britain’s most recognisable investment companies, has agreed a £9.9bn takeover. Intertek has agreed a £10bn deal with a consortium led by Swedish private equity group EQT, while specialist insurer Beazley has agreed an £8bn acquisition by Zurich. The cumulative effect is a serious challenge for London.
A stock market needs companies as much as it needs investors. Every major business that leaves reduces the range of assets available to investors and potentially makes the market less attractive to the next generation of companies considering a flotation. That is the problem the exchange’s digital strategy is now attempting to address.
The London Stock Exchange says tokenisation could broaden access to capital markets while preserving the shareholder rights and protections associated with conventional public markets.
The idea is simple in principle. Instead of a share existing only within the traditional infrastructure of brokers, exchanges and settlement systems, a digital token can represent the underlying security and move through blockchain-based systems. The potential advantages are speed, programmability and access.
LSE 24, the exchange’s planned new trading venue, is designed to operate for 24 hours a day from Monday to Friday and is intended to give global investors greater access to markets outside conventional UK trading hours. The exchange says client testing is expected by the end of 2026, with the first exchange-traded products planned for the first half of 2027, subject to regulatory approval. Tokenised equities would take that experiment a step further.
The London Stock Exchange says its xStocks will be backed one-to-one by the underlying publicly traded shares. They are intended to be capable of moving between centralised exchanges, self-custodied wallets and on-chain applications.
That could eventually allow an investor in another part of the world to gain exposure to a London-listed company through a digital platform rather than a conventional brokerage account. The ambition goes beyond creating a new type of share. It is an attempt to make the infrastructure of the financial system itself more competitive.
The exchange is developing a Digital Securities Depository to support the issuance, settlement and servicing of tokenised securities. It is also developing the Digital Settlement House, designed to allow real-time settlement in commercial bank money across payment networks. In other words, the London Stock Exchange is not simply putting traditional shares on a blockchain. It is trying to build an alternative digital layer around the entire market.
Julia Hoggett,(icctures) chief executive of the London Stock Exchange and head of digital and securities markets at LSEG, said tokenisation could change how investors access markets and how companies use them, but argued that the development had to preserve the trust and protections of regulated markets. That emphasis on regulation is crucial. London is not attempting to turn the stock exchange into a crypto casino.
The ambition is to take some of the technology associated with digital assets and put it inside a regulated financial-market framework. The partnership with Payward is particularly significant because it attempts to connect two worlds that have historically operated separately: traditional capital markets and the crypto ecosystem.
Payward’s Arjun Sethi described the opportunity as bringing London-listed companies “onchain” The experiment comes with an obvious question. A relevant question is whether digital innovation compensate for the continuing loss of companies from the conventional market? The answer is unlikely to be simple.
Tokenisation may make markets more accessible and efficient. It may attract investors who would never use traditional brokerage infrastructure. It could allow securities to trade and settle faster and potentially create new forms of liquidity. None of that, however, replaces the need for companies to choose London as a place to raise capital and remain publicly listed.That is the paradox facing the exchange.
London is building sophisticated new infrastructure for a financial world that is becoming increasingly digital, global and continuous. At the same time, established British companies are being bought by US, European and international investors and removed from the public market.
Private equity firms are offering boards the prospect of greater flexibility and a longer-term ownership structure. Foreign strategic buyers are offering access to larger international businesses. Shareholders are often presented with takeover premiums that are difficult to reject. Bodycote and Gamma, the argument for private ownership has centred on flexibility and long-term investment. In every successful takeover creates the same underlying problem.One fewer listed company.
One fewer potential source of new investment. One fewer established business contributing to the depth and breadth of the market. The exchange’s response is therefore becoming increasingly ambitious. It wants longer trading hours. wants tokenised securities. blockchain-based settlement.
It wants to connect traditional finance with digital assets. And it wants London to remain a major global financial centre while the mechanics of finance are being transformed around it. The timing could hardly be more revealing. On the same day that Bodycote’s takeover by Veritas highlighted the continuing appetite for London-listed companies, the exchange announced its partnership with Payward to bring tokenised equities into its future digital market. One story is about companies leaving.
The other is about the exchange trying to attract investors in a new way. Together they describe the central challenge facing London. The city does not simply need more companies.It needs a reason for companies and investors to believe that the London market is where the future of finance will be built. The move into tokenised shares is an attempt to provide that answer.
If London can combine the trust of a regulated stock exchange with the speed, accessibility and programmability of digital assets, it could create a new generation of financial markets. In any event cannot persuade companies to remain listed while doing so, the irony will be difficult to escape. London could end up building one of the world’s most sophisticated digital markets on top of a stock exchange that is steadily losing the companies it was created to trade.
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