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OFT statement regarding the recognition of ICE Clear Europe

61/08    13 May 2008

The Financial Services Authority (FSA) has granted recognition to ICE Clear Europe Ltd (ICE Clear) as a Recognised Clearing House for the purposes of the Financial Services and Markets Act 2000 (FSMA).

If a clearing house or investment exchange applies to the FSA for recognition under the FSMA, the OFT is required to report on whether one or more of the regulatory provisions of the clearing house or exchange have a significantly adverse effect on competition, and a report is sent to the FSA, the Competition Commission and the Treasury.

In this case the OFT concluded that the recognition of ICE Clear would not lead to a significantly adverse effect on competition and a further investigation by the Competition Commission was not required.

A non-confidential version of the OFT's report will be published on its website when the OFT has completed consultations with the parties who provided evidence.

The OFT recognises that some competition concerns have been expressed about clearing and settlement in the derivatives market. The European Commission is currently considering these and similar issues. The OFT would welcome views from interested parties that would inform the OFT's prioritisation decision as to whether to undertake any work looking at clearing and settlement in the derivatives market. Any such submissions should be sent to the OFT by 30 June 2008 and should include a view on why the OFT is best placed to act.

Please send submissions to:

FSMA Team
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4Y 8JX

Email: fsma.team@oft.gsi.gov.uk

Notes

1. Clearing houses and investment exchanges wishing to operate in the UK have to obtain recognition by the FSA which conducts its own investigations into their suitability and makes recommendations to the Treasury. The OFT's report on whether there is a significantly adverse effect on competition is part of this wider process. The recognition process is specified in the FSMA. The OFT's duties are set out in s303.

2. ICE Clear's application for recognition was received by the OFT on 31 July 2007. The OFT consulted interested parties about the competition effects of recognition in the autumn of 2007. It received several responses. Its report was sent to the FSA, Competition Commission and the Treasury on 15 April.

3. ICE Clear is a subsidiary of the IntercontinentalExchange Group of companies which includes ICE Futures Europe, the leading energy futures exchange in Europe.

4. In addition to the OFT's duty under the FSMA to report on whether the regulatory provisions of clearing houses and investment exchanges seeking recognition have a significantly adverse effect on competition, it also has the following relevant powers:

• Under the FSMA, to investigate whether the regulatory provisions and practices of recognised investment exchanges and clearing houses have a significantly adverse effect on competition.
• Under Articles 81 and 82 of the EC Treaty, to take enforcement action if it has reasonable grounds to suspect that an investment exchange or clearing house has entered into anti-competitive agreements or is abusing a dominant market position which may affect trade between Member States.
• Under the Enterprise Act 2002, either to make a market investigation reference to the Competition Commission if it has reasonable grounds to suspect that any feature or combination of features of the relevant market prevents, restricts or distorts competition in the United Kingdom, or to conduct its own market study.

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