The London Stock Exchange is to be protected by new legislation from overseas regulation in the event of a sale to a foreign buyer.

Times (London) Correspondent Martin Waller outlines the fear : “If Nasdaq, the most likely bidder, does take over, it might one day be tempted to impose the much more onerous regime that governs New York under the 2002 Sarbanes-Oxley Act.”

However, speaking to business executives in Hong Kong, Ed Balls, the Economic Secretary to the Treasury, stated that the government would introduce new legislation to ensure the stock exchange operator would not be bound by stricter overseas regulations if the group is sold.

“The introduction of Sarbanes-Oxley legislation in the US has increased the regulatory burden on companies listed there and encouraged many smaller companies to seek listings outside the United States. London’s Alternative Investment Market has been a prime beneficiary of that move to find an alternative to US-based stock exchanges.”

Ed Balls claimed the government was neutral on the nationality of any future owner of the LSE. Any new regulation would give the Financial Services Authority (FSA) greater powers to assert itself over companies listed on the London exchange.

Balls went on : “The issue was that if you had a foreign owner and that owner’s home regulator starts exporting its rules to London, then the FSA would be able to not let that happen. This legislation will confer a new and specific power on the FSA to veto rule changes proposed by the exchanges that would be disproportionate in their impact on the pivotal economic role that exchanges play in the UK and EU.”

The proposed legislation, if needed, would “outlaw the imposition of any rules that might endager the light touch, risk-based regulatory regime that underpins London’s success”.

Despite claims that this won’t impact on a future foreign buyer, one has to wonder if yet another obstacle is being thrown in the path of Nasdaq in its blatant pursuit of the LSE.

With the country’s electricity sector starved of investment, Russia’s biggest power company is planning an £800m float on the London Stock Exchange which would value the company at £3.2 billion.

The UK Independent newspaper reports : “UES, which owns the country’s power stations through dozens of operating companies such as Mosenergo, wants to raise almost £42bn for the investment-starved electricity sector by the end of the decade. If approved, a listing could see 25 per cent of Mosenergo’s equity listed in London and would take place early next year. Another UES subsidiary, OGK 5, is also planning a listing in London later this year as part of the group’s restructuring. But Mosenergo, also known as TGK 3, is much bigger than its Urals-based sister company”

Russian state-controlled oil giant Rosneft listed in London in July, raising £5.6bn. The successful flotation has encouraged the Kremlin to raise more funds in this way.

Euronext, the Pan-Continental stock exchange, is said to be pressing on with its plans to merge with the New York Stock Exchange. Final clearance should be obtained by January.

Suggestions that Euronext may walk away from the NYSE deal in favour of a tie-up with Deutsche Borse and Borsa Italiana, have been scotched by a number of sources.

Meanwhile, the London Stock Exchange waits on the next move by Nasdaq, which can now launch a full bid for the LSE, if that’s its intention.

Anatole Kaletsky of The Times (London) reminds us that “the financial hurricane season” is now upon us : “Nearly all the greatest financial accidents — the Wall Street crashes of 1929 and 1987, Nixon’s closure of the Bretton Woods gold window in 1971, the Asian currency crisis of 1997, the Mexican and Russian defaults, the attack on the French franc in 1993, the sterling devaluations of 1949, 1976 and 1992 — have occurred between late August and October”.

In the UK, the old stockbrokers’ maxim of ceasing to buy between May and the St Ledger (September 9 this year) is usually a stable guide to events (pun intended).

On Wall Street buyers generally hold off until Hallowe’en, on October 31, while selling is automatic for various reasons : “…selling of equities is partly a passive phenomenon, since portfolios have to be liquidated when their owners die or cash retirement cheques or make insurance claims.

“These liquidations happen steadily through the year, regardless of seasons. Buying, on the other hand, requires conscious decisions and investors are less likely to make these when they and their brokers are away on holiday.”

Given that September clears the way for the start of The Great Consolidation Season, in which Nasdaq is able to mount a full-scale bid for the London Stock Exchange, it should be an interesting time.

But do consolidation and hurricanes have much in common? We shall see.