The UK’s competition watchdog has raised concerns today that the London Stock Exchange Group’s takeover of transaction risk firm Quantile could damage competition in the post-trade risk services sector.
The Competition and Markets Authority (CMA) cautioned the firms today that the takeover of Quantile could lead to LSEG, which owns a majority stake in clearing house LCH, shutting out third party compression providers or providing worse terms to Quantile’s rivals.
Bosses at the CMA said that post-trade compression services were a vital part of reducing risk, and competition in the space was essential.
“Reducing risk’ can sound abstract, but it matters – it underpins a range of services, like fixed-rate mortgages, that are vital to consumers,” said David Stewart, Executive Director of Markets and Mergers at the CMA.
“It is vital we ensure that LSEG, as a large and powerful firm in the financial sector, isn’t likely to use its strong market position to stifle competition or restrict innovation.”
The investigation was launched in March after LSEG announced it had snapped up Quantile in December for up to £274m, in a push to expand its range of post-trade risk management solutions to banks, hedge funds and financial institutions that trade derivatives.
But the CMA has now set a deadline of May 10 for the firms to offer a justification of the merger in order to avoid an in-depth investigation.
London Stock Exchange Group said it continues to “engage constructively with the CMA and other regulatory authorities and expect to close the transaction in 2022, subject to the relevant approvals.”