Clearing house LCH.Clearnet has confirmed that it has received proposals indicating an interest in possible “business combinations” or other forms of cooperation.
The company would not comment on press reports that interested parties include market operators groups Nasdaq OMX, the London Stock Exchange (LSE) and NYSE Euronext, the latter working in partnership with financial information company Markit. The LSE, which has been reported in the Financial Times as making a €21 a share offer for LCH.Clearnet, has said that it is not “engaged in any discussions with LCH regarding a possible transaction.”
Recent regulatory developments make LCH.Clearnet, which operates SwapClear, a clearing service for OTC interest rate swaps, a potentially desirable acquisition target.
European regulators are currently establishing a framework of rules, the European markets infrastructure regulation, to meet the obligations of the Group of 20 countries to centrally clear standardised OTC derivatives by the end of 2012.
UK and Swiss regulators have also begun the approval process for interoperability arrangements between LCH.Clearnet and fellow central counterparties EuroCCP and SIX x-clear which will allow them to compete for clearing business in cash equities.
Exchange groups are currently battling to diversify their businesses in the face of competition from alternative trading venues.
Merger discussions are ongoing between several market operators: LSE and TMX, the Canadian firm that manages the Toronto Stock Exchange, announced their plans to merge in February closely followed by NYSE Euronext and Deutsche Börse. Both deals emphasised the potential value of business lines other than equities trading, such as derivatives and clearing.
In a statement LCH.Clearnet said “Considerations are at a preliminary stage and there can be no certainty that these proposals will result in any transaction.”