CMA Proposes ICE Sells Trayport Due to Acquisition Causing a Lessening of Competition

UK watchdog raises issue of potential “substantial lessening of competition” as a result of $650 million acquisition last year, suggests “complete divestiture” as possible remedy. The Competition and Markets Authority (CMA), a UK governmental department, has found that the acquisition of energy and commodities trading platform Trayport by the Intercontinental Exchange (ICE) may result in “a substantial lessening of competition” and has proposed a complete divestiture of the platform. ICE's acquisition of the UK-based platform from BGC Partners was finalized in December last year for$650 million; however an inquiry into the deal was opened by the CMA in January and then referred for an "in-depth" investigation in May by an independent panel.

Outlining its findings, the CMA raised concerns over a potential lessening of competition as a direct result of the acquisition, stating that "not only traders, but also the brokers, exchanges and clearinghouses that compete with ICE depend on the Trayport platform to carry out their energy trading activities effectively."

The ultimate concern of the CMA is the possibility of ICE diverting trades to its own platforms, as well as increasing fees for execution and clearing, and worsening terms offered to traders. As a result, one potential remedy proposed by the authority is for ICE to completely divest its ownership of Trayport.

"We examined the merger's competition risks and given the high level of dependence of market participants on Trayport's integrated software offering, we provisionally concluded that the merged entity would have the ability and incentive to harm ICE's main rivals' ability to compete effectively," said Simon Polito, chair of the CMA inquiry, in a statement. "This could lead to higher prices, a general worsening of terms and less innovative trading solutions offered to traders in wholesale energy markets."

Waters Wavelength

Waters Wavelength Podcast Episode 88: CBOE's Bryan Harkins, SEC Hack, Esma Proposal

Bryan Harkins joins to discuss how the CBOE-Bats integration is going and plans for the exchange operator going forward. Anthony and James talk about the SEC hack and Esma's potential new powers.