27 May 2011

FT: Exchanges fight for LCH.Clearnet

The move for the London-based clearer, between NYSE Euronext, Nasdaq OMX and the London Stock Exchange, is a sign that the world’s bourses are desperate to snap up businesses that allow them to profit from sweeping post-crisis reform of the financial system.

All three bourses tabled bids ranging from €350m ($500m) to €1bn at a board meeting held two weeks ago. LCH.Clearnet confirmed that it had “received various proposals indicating an interest in pursuing some form of possible business combination or other co-operation with LCH.Clearnet”. LCH.Clearnet’s considerations are at a preliminary stage and there can be no certainty that these proposals will result in any transaction”, the London-based clearer said.

"The LSE has offered €21 a share for LCH.Clearnet, valuing it at €1bn", one person said. However, the LSE on Saturday distanced itself from any move, saying it noted "recent press speculation" regarding it and LCH.Clearnet and "confirms that it is not engaged in any discussions with LCH regarding a possible transaction".

All three bidders want control of LCH.Clearnet since it operates, with big banks, a clearing service for OTC interest rate swaps called SwapClear, which recently pushed into the US to compete with CME Group, the US exchange, in derivatives clearing. Interest rate swaps are the largest part of the OTC derivatives market and market experts believe they are set for growth, as they are pushed on to electronic platforms by the reforms.

For the LSE, one of the few exchanges not to own a domestic clearer, the move was described as “a survival move” to get deeper into clearing as rivals Deutsche Börse and NYSE Euronext pursue a $9.4bn merger. That deal, if consummated, would bring together the Börse’s Eurex futures exchange with NYSE Euronext’s London-based Liffe futures exchange, with clearing being concentrated at Eurex Clearing, owned by the Börse.

Nasdaq OMX has tabled a bid that would value LCH.Clearnet at €350m, according to the article. Nasdaq’s talks with LCH.Clearnet started about six weeks ago.

The article claims that NYSE Euronext has teamed up with Markit, a financial information company specialising in OTC derivatives, in a €10 a share bid that values LCH.Clearnet at under €500m.

Full article (FT subscription needed)

© Financial Times