UK clears LSE plan to buy LCH Clearnet

Britain’s competition watchdog has given the green light to the London Stock Exchange’s planned purchase of clearing house LCH Clearnet, though questions remain about how soon the deal will complete.

The proposed tie-up would not threaten rivals through market dominance

In a statement, the Office of Fair Trading said the proposed tie-up would not threaten rivals through market dominance.

Clearing houses sit between trading firms and ensure trades of securities such as stocks and bonds are completed and insure against losses if one side of a deal defaults.

They have taken on greater importance since the collapse of Lehman Brothers four years ago and regulators want to force more trading through such vehicles to ensure smoothly functioning markets even at times of stress.

OFT clearance does not yet seal the €600 million deal, however, as the London exchange is trying to work out better terms than the €19 per share originally agreed in April.

The European Securities and Markets Authority may not finalise its demands until early next year, and only then will the LSE know by how much it must renegotiate the terms of its LCH takeover.

Analysts expect LCH‘s capital shortfall will be less than early estimates and should come in at about €220 million.

The LSE would only need to pay 60 per cent of that, but that would still leave it on the hook for at least €100 million, which its shareholders will want factored into the terms of the LCH takeover.


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