2nd UPDATE: NYSE CEO Thinks LCH.Clearnet Will Stand Alone
10 Giugno 2011 - 11:01PM
Dow Jones News
NEW YORK (Dow Jones)--The head of NYSE Euronext (NYX), which
confirmed last week its participation in a takeover approach to
LCH.Clearnet Group Ltd., on Friday said he believes the
London-based clearing firm ultimately will "stand alone."
The Big Board parent confirmed last week it had joined with
market data firm Markit Group Ltd. in an proposal to buy
LCH.Clearnet, one of several proposed deals for the company that
processes trades in securities, futures and the $465 trillion
interest-rate swap market.
"I don't think anything's imminent," NYSE Chief Executive Duncan
Niederauer said Friday, speaking at an event hosted by Sandler
O'Neill. "I can't speculate on other proposals."
Alongside NYSE Euronext, Nasdaq OMX Group Inc. (NDAQ) and London
Stock Exchange Group PLC (LSE.LN) were also reported to have
submitted bids, though LSE subsequently distanced itself from any
talks.
A spokeswoman for LCH.Clearnet declined to comment Friday.
LCH.Clearnet is a London clearing firm about 80% owned by its
users, which include the biggest dealer banks in the world,
alongside stakes held by NYSE Euronext and the London Metal
Exchange, which together own about 17%. The firm in late May
confirmed the receipt of several business proposals.
"It's obviously a company that's looking to think about what it
wants to do strategically," said David Warren, a special adviser to
Nasdaq OMX and its former chief financial officer, speaking Friday
to investors at the same event.
"Clearing is something we've talked about for a long time as
something we see as an interesting opportunity," said Warren in
response to a question on Nasdaq OMX's interest in LCH.Clearnet,
declining to be more specific.
LCH's disparate ownership group has made previous dealmaking
difficult. An effort by the U.S.-based Depository Trust &
Clearing Corp. ran aground in 2009 after a rival bid emerged from a
consortium of banks led by the inter-dealer broker Icap PLC (IAPLY,
IAP.LN). LCH.Clearnet ultimately chose to remain independent, and
converted to a utility model.
Some of LCH.Clearnet's biggest exchange customers have pulled
away their business in recent years, which has been seen as
applying pressure to LCH.Clearnet's viability. NYSE Euronext
announced last year that it would move to build its own
clearinghouse functions in the U.K. and Europe, which would see it
ending its longstanding relationship with LCH.Clearnet.
The London Stock Exchange Group PLC and London Metal Exchange
also have eyed constructing their own clearing units. The move
would give exchange groups additional revenue from clearing trades
on their own markets, and more control over the launch of new
products and services.
The Markit-led approach to buy LCH.Clearnet would have seen NYSE
Euronext raise its stake in the business to 30% to 40%, according
to people familiar with the matter, and would have brought the
exchange company closer in-line with dealer banks that control much
of the business in over-the-counter derivatives products.
Exchanges are pushing to develop clearing services to handle
transactions in off-exchange markets, which far outsize the
on-exchange derivatives market. LCH.Clearnet maintains a
long-dominant position in clearing interest-rate swaps trading, the
biggest segment of the $601 trillion OTC derivatives market.
NYSE's Niederauer said that raising its ownership in
LCH.Clearnet, in conjunction with Markit, would help build its
partnership with dealers. Banks number among the ownership of both
groups.
NYSE Euronext's progressing merger with Deutsche Boerse AG
(DB1.XE, DBOEF)--which includes shifting the clearing of NYSE's
markets to German facilities--is not seen as being affected by any
deal for LCH.Clearnet, according to Niederauer.
-By Maxwell Murphy and Jacob Bunge, Dow Jones Newswires;
212-416-2171; maxwell.murphy@dowjones.com
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