LONDON, Dec 14 (Reuters) - Britain's competition watchdog
has given the green light to the London Stock Exchange's
planned purchase of clearing house LCH.Clearnet.
The Office of Fair Trading on Friday gave its unconditional
approval, clearing what was viewed as the biggest regulatory
hurdle to the proposed 600 million euro ($785 million) tie-up.
The timing of the deal is still unclear, however, as both
parties renegotiate terms to reflect higher capital requirements
being imposed on exchanges by European regulators overhauling
the financial system after the banking crisis.
Clearing houses sit between trading firms and ensure trades
of securities such as stocks and bonds are completed, holding
cash to refund firms left out of pocket by a counterparty
default.
They have taken on greater importance since the collapse of
Lehman Brothers four years ago and regulators want to force more
trading through such vehicles to ensure smoothly functioning
markets even at times of stress.
The LSE said on Friday it was still in discussions over
"potential changes to the commercial terms of the transaction"
on account of new recommendations from European regulators.
Under the deal terms agreed in April, the LSE proposes to
buy up to 60 percent of the clearing house for 19 euros per
share.
"I think both parties want the deal to go through so
something will be arranged... My guess is that the LSE will get
something but probably not the full amount of the additional
cost that they'll have to bear," said James Hamilton, an analyst
at Numis Securities.
The European Securities and Markets Authority may not
finalise its demands until early next year, and only then will
the LSE know by how much it must renegotiate the terms of its
LCH takeover.
Analysts expected LCH's capital shortfall will be less than
early estimates and should come in at about 220 million euros.
The LSE would only need to pay 60 percent of that, but that
would still leave it on the hook for at least 100 million euros,
which its shareholders will want factored into the terms of the
LCH takeover.
LCH.Clearnet shareholders include nearly one hundred of the
world's largest trading banks and two exchanges - the London
Metal Exchange and NYSE Euronext.