Brussels extends inquiry of Stock Exchange deal
THE European competition authority has been given more time to scrutinise the London Stock Exchange’s planned merger with Deutsche Boerse.
The £21bn deal, which would create Europe’s largest exchange operator, is going through a full investigation over worries that it could stifle competition in clearing and trading of derivatives, short-term bank debt and other parts of the financial markets.
The European Commission now has until March 6 to weigh up whether the LSE’s offer to sell off its LCH clearing operations in Paris is enough to assuage the rest of the market’s concerns. The deadline was originally mid-February, and could be extended again if needed.
The clearing business, which acts as a middle man between buyers and sellers, has also been dragged into the spotlight by politicians in Europe calling for euro-based clearing to return to the currency area following the UK’s vote to leave the EU.
London’s LCH.Clearnet is the dominant clearing house for the $600bn-a-day euro derivatives market. The European Central Bank’s attempts to shift clearing into the eurozone were blocked by the European Court of Justice in 2015.
Shareholders for both companies have approved the merger, which was first announced last November. To appease the regulators, the LSE offered to sell its LCH.Clearnet SA business.
However, it is not yet clear whether this will be enough to secure clearance. Europe’s competition regulators have previously blocked big mergers including Deutsche Boerse’s attempts to merge with NYSE in 2012, over worries that the deal created a near-monopoly in exchangetraded derivatives.
Both firms in this deal have insisted a merger would create a European champion to compete with large bourses based in the US and Asia.
LSE boss Xavier Rolet has dismissed switching to a deal with the American group ICE.