MICHAEL Lawrence, the chief executive of the London Stock Exchange (LSE), was dismissed after members of some of the largest investment banks staged a revolt against the manner in which he was implementing trading reforms.

Two leading investment bankers met Mr John Kemp Welch, the exchange's chairman, in mid December to make a formal protest at the method by which the exchange's board was planning to change how shares are traded in London.

Senior members of the exchange say the protest over the way reforms were being implemented was not directly connected with Mr Lawrence's dismissal. However, the incident contributed to discontent with Mr Lawrence among City of London financiers.

The protest by Lord Rockley, chairman of Kleinwort Benson, the investment bank owned by Germany's Dresdner Bank, and Mr Martin Owen, chief executive of NatWest Markets, the investment banking arm of National Westminster Bank, led to a change of heart by the LSE board on Thursday.

At the meeting, it both approved a call for Mr Lawrence's resignation and added representatives from three firms of market makers, which act as wholesale share traders, to a committee which will monitor trading reforms.

Although the exchange has not yet announced the membership of the nine person committee, Mr Michael Marks of Merrill Lynch, Mr Scott Dobbie of NatWest Markets and Mr Hector Sants of Union Bank of Switzerland, have been added.

Mr Kemp Welch said on Thursday that no single incident led to Mr Lawrence's dismissal, and he had been dismissed as a result of a "loss of confidence over a long period" among the exchange's 350 member firms and its board.

Investment bankers say they were exasperated by a series of incidents unconnected with trading reforms. They disliked what they regarded as a failure by Mr Lawrence to consult them on issues before implementing controversial changes.

"People were left feeling that they never quite knew what was going on, and they had to keep jumping up and down to get attention. The handling of this issue simply crystallised the feeling," said a leading member of the exchange.

Mr Lawrence (52) was on a one year contract which paid him £342,000 sterling last year. He has not yet been paid a bonus he was due for the year to December 31st, and is likely to seek a payment of about £500,000 from the exchange.

He may consider suing the exchange for wrongful dismissal if negotiations between his lawyers and those of the exchange are not concluded successfully. An action could centre on a claim that he was given insufficient warning.

Government officials are thought to have been concerned that Mr Lawrence was not warned of dissatisfaction with his performance before he was told by Mr Kemp Welch on Thursday that the board wanted his resignation immediately.

Although Mr Lawrence's proposals for trading reform were approved at a board meeting on November 30th, some members were unhappy at the way in which Mr Lawrence proposed offering a "hybrid" system of trading from August this year.

After the dispute over trading reforms, Mr Kemp Welch asked the exchange's senior appointments and remuneration committee, chaired by Mr John Bond, of the banking group HSBC Holdings, to discuss Mr Lawrence's position.

One senior executive at an exchange member firm said that, by forcing Mr Lawrence's departure, major market making firms may hope to force the Exchange to leave the market the way it is, at least for the largest stocks.

But, he said, "it might even have the opposite effect of causing the government, or the Bank of England, to get involved and say you're too incompetent to run your own affairs'".