Following the recent proposals in the EU to force clearing houses to hold more capital, Tom Osborn, Financial News, looks at the impact this will have on the London Stock Exchange (LSE) and LCH Clearnet deal.
The timing of the proposals have come at an inopportune moment for the London Stock Exchange as it nears the final stages of the takeover of the clearing house, as the rules will force CCPs to put up some of their own capital in the event of a large default, before that of their members.
Additionally, the competition commission are keeping a close eye on the deal but the LSE has maintained it will keep LCH’s open access model, clearing for multiple exchanges rather than just its majority owner, which is in contrast to most other CCPs. Fred Ponzo, Managing Partner, GreySpark, agrees this is a good decision for the LSE since it ultimately translates into higher revenues. He is also of the opinion that there aren’t any other reasons the merger could be blocked on competition grounds, adding that there are still plenty of synergies to be found between the technologies of the two firms.
The article goes on to highlight that it is unlikely LCH will walk away from the deal, with Ponzo adding that if the deal does fall through they will find themselves in the same position they have been for the past five years.