The European Commission today announces that it has approved, under the EU Merger Regulation, the acquisition of Refinitiv by the London Stock Exchange Group (LSEG). The approval is conditional on full compliance with a commitments package offered by LSEG.
The Commission’s investigation focused on trading services for European Governments Bonds (EGBs), where both parties are active, as well as on the provision of financial data products and the provision of trading and clearing services for over-the-counter interest rate derivatives (OTC IRDs), where one party is active upstream of the other in the value chain.
Following its in-depth investigation, the Commission had concerns that the transaction, as initially notified, would have harmed competition in the following markets:
- a) Horizontal concerns in electronic trading of European Government Bonds (EGBs);
- b) Vertical concerns in trading of dealer-to-customer over-the-counter interest-rate derivatives (OTC IRDs);
- c) Vertical concerns in consolidated real-time datafeeds (CRTDs) and desktop services;
- d) Vertical concerns in index licensing.
To address the Commission’s competition concerns, LSEG offered the following commitments:
- To divest its 99.9% stake in the Borsa Italiana group, which includes MTS (LSEG’s trading venue for EGBs), to a suitable purchaser. In this regard, on October 9, 2020 LSEG and Euronext signed a definitive and binding sale and purchase agreement. This commitment fully removes the horizontal overlap between the companies’ activities in EGB electronic trading.
- To continue offering its global OTC IRD clearing services performed by LCH Swapclear on an open access basis and to not engage in commercial strategies that would discriminate customers based on the source of their OTC IRD trade submitted to LSEG for clearing.
- To provide access to the LSE venue data, FTSE UK Equity Indices, and WM/R FX Benchmarks to all existing and future downstream competitors. More specifically LSEG commits to not degrade technology, quality or service compared to that provided intragroup. LSEG also commits to maintain an information barrier between the personnel handling sensitive information of LSEG’s customers and Refinitiv’s CRTD and desktop service businesses to ensure that there is no exchange of such information with Refinitiv that could negatively impact third party data vendors.
The duration of the OTC IRD and financial data commitments is ten years.
The commitments also include a fast track and binding dispute resolution mechanism that can be relied upon by third parties who believe that LSEG does not comply with these commitments. A trustee will monitor the implementation of the commitments, and act as a point of contact for potential complainants, including in the context of the fast track dispute resolution mechanism.
The commitments offered by LSEG fully address the competition concerns raised by the proposed transaction. The Commission therefore concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional on full compliance with the commitments.