EU launches probe into LSE-Deutsche Börse merger, LCH France up for sale

The European Commission said it would probe the deal on concerns it would reduce competition in "several financial market infrastructure areas" by combining UK, German and Italian exchanges, as well as several of the largest European clearing houses, to create the largest European exchange operator by some distance.

EC competition chief Margrethe Vestager said: “Financial markets provide an essential function for the European economy.

"We must ensure that market participants continue to have access to financial market infrastructure on competitive terms. Therefore, we have opened an in-depth investigation to assess the proposed merger.”

Vestager's team in particular highlighted that in acting as counterparties of clearing trades, providing collateral or 'margin' for both sides, the merged group would bear a combined margin pool of €150bn - the largest in the world.

In derivatives, not only is DB's Eurex the global market leader for exchange traded long-term interest rate derivatives and LSE's SwapClear by far the largest player for the clearing of interest rate derivatives traded over-the-counter, but both have burgeoning competing offerings to each other’s franchises.

Both parties are also close competitors and the only clearing counterparties for certain types of repurchasing agreements or 'repo', while also combining two of the three largest venues currently offering trading of German listed equities, and two of the largest players in the areas of listing, trading and clearing of exchange traded products.

Soon after the EC announcement the LSE said it and LCH Group "intend to explore a potential sale of LCH SA, LCH Group Limited's French-regulated operating subsidiary", in order to enable it to "address proactively" the anti-trust concerns raised.