EUROPEAN COMMISSION HAS CONDITIONALLY CLEARED THE ACQUISITION OF REFINITIV BY LONDON STOCK EXCHANGE GROUP
25/01/2021
The European Commission (Commission) has cleared the acquisition of Refinitiv by the London Stock Exchange Group (“LSEG”) subject to conditions. The Commission carried out an in-depth investigation that 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.
LSEG is one of Europe’s pre-eminent financial infrastructure companies, best known for operating the London Stock Exchange and owns Borsa Italiana. LSEG is also active in the post-trading space, most notably in clearing through the several clearing houses which it owns. Refinitiv is one of the main providers of financial markets data and infrastructure and it offers financial data products, such as desktop services and data feeds.
The Commission raised 4 preliminary concerns in 4 separate markets where 3 of them are vertical and 1 of them is horizontal concerns. LSEG proposed commitments for these concerns. These markets, concerns and commitments are briefly as follows:
- The parties own venues with a leading position in the “Electronic trading of EGBs” market and are close competitors. Hence if the acquisition comes true, this will result in a very large combined market share. It is also considered that it is difficult for a new trading venue to become a close competitor. LSEG offered to divest its 99.9% stake In the Borsa Italiana group which includes LSEG’s trading venue for EGBs and with this commitment the horizontal overlap fully removed.
- Regarding the trading and clearing of over-the-counter interest-rate derivatives (“OTC IRDs”), the largest category of derivatives globally, the proposed transaction would lead to a combined entity with significant market power both upstream (trading) and downstream (clearing). LSEG offered 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. This commitment will continue for ten years.
- The parties aggregate and commercializes three types of data and these types are significant inputs for data feeds and desktop services that offer by Refinitiv. The concern is that competitors in the consolidated real-time data feed and desktop services could be shut out from accessing LSEG's input data.
- Refinitiv is one of the largest suppliers of consolidated real-time data feeds (CRTDs) and foreign exchange indices that are significant inputs for index providers. FTSE Russell, owned by LSEG, is a major provider of financial indices in the EEA and globally. The concern is that competitors in index licensing could be shut out from accessing Refinitiv’s necessary input data. LSEG offered for third and fourth concerns, to provide access to the LSE venue data, FTSE UK Equity Indices, and WM/R FX Benchmarks to all existing and future downstream competitors. These commitments also will continue for ten years.
Based on these commitments, the European Commission has decided the competition concerns of the acquisition fully removed and cleared the acquisition conditional on full compliance with the commitments. (European Commission – 13.01.2021)
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