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NYSE, Nasdaq, LSE Bid for Clearinghouse LCH

Sunday, 29 May 2011 03:09 PM

NYSE Euronext, Nasdaq OMX Group and London Stock Exchange Group Plc have made offers for European clearinghouse LCH.Clearnet, a source familiar with the matter said.

The exchange operators made the bids in the last two weeks after LCH, Europe's largest independent clearinghouse, decided to consider its strategic alternatives, said the source, who was not authorized to talk to the press about the matter.

Earlier Friday, the Financial Times reported on its web site that the bids ranged from 350 million euros to 1 billion euros (about $500 million to $1.43 billion), and were made at a board meeting, citing three sources familiar with the matter.

LCH -- owned by a wide swath of banks and other market participants, and the target of bids in the past -- has made no final decision on selling, the first source said.

LCH and the three exchanges declined to comment.

Clearinghouses, which stand between parties to a trade to guarantee obligations if there is a default, have entered the spotlight since the 2007-2009 financial crisis. Legislators and regulators want to run as many private derivatives as possible through the clearers to stabilize the financial system.

Meanwhile the exchanges are in the midst of perhaps the industry's largest consolidation wave ever, with NYSE Euronext set to merge with Germany's Deutsche Boerse AG and LSE planning to combine with Canada's TMX Group Inc. Nasdaq's counteroffer for NYSE failed earlier this month.

While NYSE Euronext has a stake in LCH, its merger partner, Deutsche Boerse, already runs its own clearinghouse called Eurex.

The Big Board parent teamed with privately-held financial information company Markit to bid nearly 500 million euros for LCH, the first source said.

LSE's offer is valued at 1 billion euros, while Nasdaq's offer is worth 350 million euros, the FT report said, citing separate sources.

Nasdaq OMX shares jumped 4.1 percent to $25.37 while NYSE Euronext rose 0.4 percent to $35.67, ahead of a long weekend. LSE shares fell 3 percent after hours after closing up 4.3 percent in London, according to Reuters data.

In the last few years, exchanges such as NYSE Euronext's Liffe derivatives venue have said they are cutting ties with LCH in an effort to launch their own operations. Even the LSE has been working behind the scenes on its clearing strategy, which could reduce its reliance on LCH.

"LCH should sell, otherwise it could face implosion," said Diego Perfumo, analyst at Equity Research Desk, a Connecticut-based advisory firm specializing in exchanges.

The clearinghouse also likely needs to adapt its structure as regulators in Brussels restrict the ownership levels of dealers, Perfumo said.

LCH dominates the clearing of European interest rate swaps with its valuable SwapClear unit, which aims to ramp up business in the United States.

But Eurex entered the market earlier this year, adding to pressure in other asset classes from CME Group Inc, which is targeting Europe for clearing. LSE and U.S.-based IntercontinentalExchange Inc could also ramp up clearing there.

In 2009, giant U.S.-based clearinghouse Depository Trust & Clearing Corporation (DTCC) backed away from its nearly $1 billion offer for LCH after a consortium of LCH users made a counteroffer.

© 2017 Thomson/Reuters. All rights reserved.

 
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NYSE Euronext, Nasdaq OMX Group and London Stock Exchange Group Plc have made offers for European clearinghouse LCH.Clearnet, a source familiar with the matter said. The exchange operators made the bids in the last two weeks after LCH, Europe's largest independent...
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2011-09-29
Sunday, 29 May 2011 03:09 PM
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