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118/12 14 December 2012
The OFT has today cleared the anticipated acquisition by the London Stock Exchange Group plc (LSEG) of majority control of LCH.Clearnet Group Limited (LCH.Clearnet).
LSEG owns a number of trading venues including the London Stock Exchange, Turquoise and MTS. LCH.Clearnet is an international clearing house.
The parties do not compete with each other in relation to the vast majority of their activities but LCH.Clearnet provides clearing services for trades executed on LSEG trading venues. The OFT therefore assessed whether post-transaction the parties would foreclose or otherwise harm their rivals, for example, through raising trading or clearing fees, refusing access to certain services or degrading the quality of these services, and in doing so raise the cost of trading and clearing for customers.
The OFT framed its investigation by looking separately at the trading and clearing of equities securities, fixed income securities and exchange traded derivatives. Following a thorough investigation in which the OFT assessed the parties' ability and incentive to engage in foreclosure the OFT concluded that there is no realistic prospect of competition concerns arising.
The OFT notes that any attempt to engage in foreclosure would be transparent to many customers in particular those who are also shareholders. These customers, who are sophisticated financial institutions, are represented on the LCH.Clearnet board, on its risk committees and on its product advisory groups. This governance arrangement further limits the likelihood that the parties would engage in activities that would harm customers.
The OFT also considered whether the horizontal overlap between the clearing services provided by LSEG's subsidiary CC&G and LCH.Clearnet raised competition concerns. It found that there was only limited pre-existing competition between these two clearing houses and that post-merger there will be sufficient competitive constraints on the merged party.
Ali Nikpay, OFT Senior Director and Decision Maker in this case, said:
'Given the importance of the activities undertaken by the parties to the UK economy, we conducted an extensive and thorough review of this transaction. We engaged with a large number of third parties including industry participants, regulatory agencies in the UK and competition agencies in Spain and Portugal. We concluded that the deal did not raise competition concerns.'
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