CMA refers LSEG’s acquisition of Quantile for in-depth investigation
The UK Competition and Markets Authority (CMA) has referred the proposed acquisition of Quantile by LSEG for an in-depth investigation.
As FNG has reported, on May 3, 2022, the CMA decided that it was or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
Pursuant to section 73A(1) of the Enterprise Act 2002 (the Act), on 10 May 2022, the merging parties offered undertakings (the Proposed Undertakings) to remedy the CMA’s concerns that might be accepted by the CMA under section 73(2) of the Act.
Following an assessment of the Proposed Undertakings, the CMA said today that it considers that it is not a clear-cut solution to the competition concerns identified arising from the Merger. Accordingly, the CMA has decided not to exercise its discretion under section 73(2) of the Act to accept undertakings in lieu of reference.
Therefore, pursuant to sections 33(1) and 34ZA(2) of the Act, the CMA has decided to refer the Merger to its chair for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013 to conduct an in-depth investigation.
LSEG is an international financial markets infrastructure and data business which holds a majority shareholding in the LCH clearing house group. A clearing house helps reduce the costs and risks of a transaction between a buyer and seller in a financial market, by standardising the steps leading up to payment.
Quantile also helps financial institutions to reduce risk in transactions, along with their overall regulatory costs, including through specific services such as multilateral compression for financial institutions dealing with derivative instruments.
Multilateral compression providers for over-the-counter interest rate derivatives depend on LCH to help build compression proposals for trades cleared at LCH. The CMA is concerned that after the acquisition of Quantile, LCH could refuse to allow third party compression providers to provide these services. LCH could also provide support to Quantile’s rivals in multilateral compression on worse terms. This could potentially lead to reduced competition in UK financial services, which is a key employer and contributor to GDP.