LONDON Feb 20 The London Stock Exchange (LSE.L)
is backing a consortium bidding for LCH.Clearnet, Europe's top
securities clearing house, as it seeks new strategic revenue
streams to compensate for squeezed trading margins.
"The LSE has a strong interest in initiatives that make
post-trade more efficient, as it is an increasingly important
component in the cost and quality of services provided to the
market," an LSE spokesman said.
Last October, U.S. clearing house the Depository Trust &
Clearing Corp, offered 739 million euro ($929 million) for
Anglo-French LCH.Clearnet to create a transatlantic clearer.
Interdealer broker ICAP (IAP.L) set up consortium with 10
banks to mull a cash counterbid for LCH.Clearnet, which is 73
percent owned by a bank consortium, 16 percent by Euroclear and
11 percent by various exchanges.
The DTCC is due to sign final terms on March 15.
Strategically, LCH.Clearnet would give LSE a stake in a core
part of market infrastructure that clears most of its trades.
Owning a clearing house is seen as an additional way of
capturing trading volumes and generating extra revenues, and the
LSE's move marks a fundamental change in strategic thinking.
The exchange was long a proponent of horizontal market
structures by insisting that separately owned trading, clearing
and settlement venues was the best way to promote competition.
The London exchange has already acquired Italian clearing
house CC&G as part of its takeover of the Milan Exchange.
CC&G will become a pan-European clearer for Baikal, a "dark
pool" trading venue the LSE is launching to compete with a host
of new trading platforms eroding LSE's market share and forcing
it to cut fees.
Britain's Observer newspaper has reported the ICAP-led
consortium was offering about 800 million pounds, a 23 percent
premium to the DTCC deal.
LCH.Clearnet has said ICAP's preliminary approach did not
amount to an offer and it was continuing its merger discussions
Its net income rose 45 percent to 179 million euros in 2007,
as turnover grew 10 percent to 1.36 billion. Equities and
derivatives and swaps made up 75 percent of its revenue mix.
LSE shares, which peaked at 2,002 pence in January 2008 when
it was itself a bid target, were down 4.6 percent at 434 pence
by 1235 GMT,
(Reporting by Daisy Ku, editing by Dan Lalor)
($1 = 0.7034 pound)
($1 = 0.7952 euro)