Competition Commission Will Allow LSE Mergers Subject To Conditions

The Competition Commission will allow either Deutsche Borse AG or Euronext NV to acquire the London Stock Exchange, with the stipulation that each party promises to ensure the independence of LSE's clearing provider. The commission's report found that the proposed

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The Competition Commission will allow either Deutsche Borse AG or Euronext NV to acquire the London Stock Exchange, with the stipulation that each party promises to ensure the independence of LSE’s clearing provider.

The commission’s report found that the proposed acquisition of LSE by either Deutsche Borse or Euronext would substantially lessen competition, either merger making it more difficult for other exchanges to compete with LSE in trading UK equities because of the bidders’ direct control or influence over the provision of clearing services.

In the case of Euronext, the commission’s proposed structural remedy would remove Euronext’s direct influence over LSE’s existing clearing provider, LCH.Clearnet. In the case of Deutsche Borse, it would only apply where LCH.Clearnet is to be replaced with a clearing provider linked to Deutsche Borse. In both cases, the remedies would primarily operate through limiting the acquirer’s shareholdings and board representation in LSE’s clearing provider.

The behavioural commitments suggested by the commission are meant to reinforce the independence of LSE’s clearing provider by addressing the residual influence Deutsche Borse or Euronext may retain once the structural remedy has been implemented. These include commitments by the two not to obstruct access to LSE’s clearing provider by any potential competitor to LSE, and to provide users with greater influence over any decision concerning a change of clearing provider.

The commission has yet to confirm that both Deutsche Borse and Euronext have agreed to meet the requirements.

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