The London Stock Exchange Group (LSE) and LCH.Clearnet have announced the agreement of revised terms that will see the exchange group take a majority stake in the clearinghouse.
Under the new terms, the LSE will acquire a further 55.5 percent stake in LCH.Clearnet, in addition to the 2.3 percent it currently owns. The deal values LCH's entire issued share capital at £544 million ($818 million) prior to the capital raise.
The LSE had announced its intention to acquire the stake almost a year ago to the day, but regulatory mandates that require clearinghouses to hold more capital in order to guard against systemic risk from a possible business failure prompted a revisit.
Exchanges across the world are looking at acquiring, building out or retaining clearing capabilities, in line with regulatory reform over how post-trade operations function, particularly with listed derivatives. The revenue stream is potential a lucrative one. The NYSE-ICE merger from last year, for instance, included a clearing component in a side deal, while exchange groups such as the Chicago Mercantile Exchange and Deutsche Börse have done well out of owning and operating a clearing vertical alongside their traditional market and technology businesses.
"Our partnership with LCH.Clearnet will be transformative," says Xavier Rolet, CEO at the LSE. "Together with our customers, we will promote greater innovation, choice and competition in the risk management industry, especially in listed derivatives. This new-style open-access clearing model, will build upon the successes we have already had with our existing equity and fixed income trading partnerships, Turquoise and MTS."
As well as the terms between the LSE and LCH.Clearnet, US exchange operator Nasdaq OMX will increase its own stake in the clearinghouse from 3.7 percent to 5.0 percent, with its CEO, Bob Greifeld, joining the LCH board.
Exchanges across the world are looking at acquiring, building out or retaining clearing capabilities, in line with regulatory reform over how post-trade operations function.
James and Anthony talk about the looming Sibos event in Toronto and take a look at some recent M&A activity and blockchain developments in the capital markets.Subscribe to Weekly Wrap emails