EU regulator set to focus on derivatives clearing in exchange merger probe

William Turvill
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Flags in front of the European Commissio
The European Commission has until 6 March to investigate the merger (Source: Getty)

EU competition regulators probing the London Stock Exchange’s (LSE) merger with Deutsche Boerse are set to narrow their focus on derivatives clearing this week.

And, with the European Commission’s statement of objections due in the coming days, City A.M. understands the LSE is seeking to push through the sale of its French clearing business, LCH SA, before Christmas.

Read more: Deutsche Boerse boss in warning over London Stock Exchange deal hurdles

In anticipation of concerns around clearing, the London Stock Exchange placed its LCH SA up for sale in September. Pan-European exchange company Euronext is thought to be the frontrunner, though US companies such as Nasdaq and CME Group have also been linked with LCH SA.

The Financial Times first reported today that the European Commission’s focus is now on the clearing of derivatives contracts, having originally named a number of other areas of preliminary concern.

Read more: China and US will dominate if merger is blocked, warns Deutsche Boerse exec

The European Commission, which announced the in-depth probe into the deal at the end of September, has until 6 March to complete its investigation.

Announcing the probe in September, commissioner Margrethe Vestager said:

Financial markets provide an essential function for the European economy. We must ensure that market participants continue to have access to financial market infrastructure on competitive terms. Therefore, we have opened an in-depth investigation to assess the proposed merger.

Winning approval from the EU regulator is seen as the main hurdle facing the London Stock Exchange and Deutsche Boerse, though other bodies also need to be convinced, including the State of Hesse, where the German company is based.

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