The London Stock Exchange’s offer to take a controlling stake in LCH.Clearnet, the clearing house, has cleared the first of three regulatory hurdles after Spanish antitrust authorities approved the UK bourse’s bid.
It was approved by the Spanish Comisión Nacional de la Competencia without conditions, according to two people familiar with the situation. The LSE is seeking to take a stake of up to 60 per cent in LCH in a deal that implies a valuation of €813m for the Anglo-French group. LSE and LCH shareholders approved the deal in April, leaving it requiring clearance from UK and Portuguese antitrust authorities.
Securing LCH would give the LSE its own clearing house as global regulators push for greater use of such clearing houses to safeguard the financial system. It would enable the LSE to earn more from charging lucrative clearing fees and allow it to compete with rivals like NYSE Euronext and Deutsche Börse, who already own their own clearing houses. LCH.Clearnet clears nearly half of the world’s $400tn global interest rate swap market and is the second largest clearer of bonds and repos in the world.
The LSE has stressed that unlike its rivals, it would have a so-called “horizontal” approach to the business rather than a “vertical silo”. A horizontal model separates ownership of the clearing house from the exchange, allowing them to offer services to any trading platform.
Critics have argued an LSE-LCH deal would stifle competition among exchanges in Europe. In a letter to the UK Office of Fair Trading, Equiduct, a trading system for retail investors, said approval of the deal would give the LSE control over three separate clearing facilities and that Equiduct had been unable to use an LSE-owned Italian clearing house.
”Despite the fine words of encouraging applications and granting access, it has proved practically impossible to gain access to the Italian clearing house although we have been working on this since 2010,” said Peter Randall, chief executive of Equiduct.
The LSE also owns Cassa di Compensazione & Garanzia, which came with its acquisition of Borsa Italiana five years ago.
Get alerts on Clearing and settlement when a new story is published