LONDON, Dec 20 (IFR) - Euronext has entered into exclusive
talks with the London Stock Exchange Group regarding a potential
acquisition of LCH.Clearnet SA, its Paris-based clearing
A sale of the French clearinghouse could pave the way for a
planned US$14bn acquisition of LSEG by Deutsche Boerse. Earlier
this month, the European Commission laid out its objections to
the proposed deal and competition regulators are focusing on
derivatives clearing as part of an in-depth investigation into
the planned tie-up.
While DB's Eurex is one of the most active European venues
for trading and clearing listed derivatives, LSEG's London-based
LCH is responsible for over 95% of cleared swaps activity -
primarily through interest rate swaps clearinghouse SwapClear.
Once very distinct markets, over-the-counter and listed
derivatives liquidity pools are becoming increasingly merged
through portfolio margining, which enables clients to net swaps
exposures with listed futures and options.
LSEG is offering to offload its French clearing business,
which houses credit default swap clearinghouse CDSClear, to
assuage regulators' concerns that a tie-up between the two
exchange operators will create a single, dominant provider in
Around 972bn gross notional of CDS has been cleared through
CDSClear since its launch in 2012 while InterContinental
Exchange has cleared more than US$80trn across its US and
London-based CDS clearinghouses since 2009.
While the slim volumes do little to cut LCH's dominance in
cleared swaps, the business could provide Euronext with a
registered swaps clearinghouse from which it can expand.
Any agreement between LSEG and Euronext would be conditional
on the successful closing of the deal.
"At this stage, there can be no certainty that these
discussions will lead to a transaction, or as to the terms on
which a transaction, if any, might be agreed," Euronext said in
In addition to Euronext, CME Group has also been touted as a
possible buyer of the Paris clearing business. The US
derivatives exchange currently has registered swaps
clearinghouses in the US and London. A platform in continental
Europe could prove useful if European politicians force euro
clearing into the European Union following the UK's departure
from 28-country bloc.
(Reporting by Helen Bartholomew)