Breaking News: LCH.Clearnet’s European operations to be sold by LSE
As the European Commission opens an investigation into the potential merger between LSE and Deutsche Boerse, citing concerns that competition for clearing and derivatives trading would be stifled, London Stock Exchange seeks to sell LCH SA, its European subsidiary of LCH.Clearnet
FinanceFeeds reported this morning that the proposed merger between Deutsche Boerse and London Stock Exchange has been halted as an investigation is being opened by the European Commission into the effect on derivatives trading that such a joining of two major venues could have.
This is the last in a long line of regulatory, government and corporate wrangling over the proposed deal since Deutsche Boerse began to show interest in proceeding with the £21 billion bid.
Certainly it appears that London will retain its 215 year old prestigious mainstay of exchange traded derivatives and listing venue for the world’s blue chip firms, however as the deal crumbles, London Stock Exchange is now seeking to sell the European division of its in-house clearing firm, LCH.Clearnet.
As described in our report this morning, the proposed merger has been highlighted by officials as presenting a possible threat to competition in several areas of the financial ecosystem, including clearing and derivatives trading, hence another byproduct would be the potential reduction of the total amount of collateral that they transact to LCH.Clearnet in London and Eurex, which is Deutsche Boerse’s clearing house.
According to research by the European Commission, a merger would create the world’s largest margin pool with a value of 150 billion euros, therefore could impede competition for smaller trading venues that rely on LCH.Clearnet as well as other firms that offer similar collateral settlement services.
On this basis, London Stock Exchange has stated that it is considering selling LCH SA, which is the France-based European division of LCH.Clearnet in order to address proactively any anti-trust concerns.
LCH Group which holds the European subsidiary LCH SA is 57% owned by the London Stock Exchange, with the remainder being owned by other users of the service.
It is ironic that the concerns of Lord Myners and other senior London officials with lifelong careers in the exchange traded derivatives sector in the largest financial center in the world were ignored by Germany, and that it has taken a report by the anti-business and staunch socialist European Commission whose interests are anti-British to stifle a potentially harmful merger which would have placed the control one of London’s fine institutions in Frankfurt, which is absolutely nowhere on the world’s financial markets and electronic trading stage.
The potential price that LCH SA may be sold for has not been disclosed, however this shows that London Stock Exchange’s British clearing operations remain a priority, and rightly so.
