The UK’s competition watchdog has given the London Stock Exchange Group (LSEG) a deadline to hand over evidence that proves its recent merger with fintech company Quantile is not harmful to competition.
The Competition and Markets Authority (CMA) has given LSEG and Quantile Group until 10 May to provide adequate documents to avoid an in-depth investigation into the merger.
Quantile was founded in 2015 and provides portfolio, margin and capital optimisation services for banks, hedge funds and financial institutions trading derivatives.
LSEG acquired the fintech last December for £274m. The stock exchange said the goal of the acquisition was to expand its trading risk management solutions services for financial institutions.
The CMA launched the initial phase one investigation into the merger in March.
The CMA’s concerns stem from LSEG’s existing majority stake in the LCH clearing house group, which helps reduce the costs and risks of a transaction between a buyer and seller in a financial market by standardising the steps leading up to payment.
Because Quantile also helps financial institutions reduce transaction risks and regulatory costs, the merger was flagged for potentially being damaging to market competition.
“Reducing risk can sound abstract, but it matters – it underpins a range of services, like fixed-rate mortgages, that are vital to consumers. Post-trade services, including compression, are one way of doing this,” said the CMA’s executive director of markets and mergers, David Stewart.
“The CMA has decided, on the information currently available to it, that it is or may be the case that the following merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.”
LSEG has said it is engaging constructively with the CMA and, subject to regulatory approval, expects to close the transaction this year.
In February, the LSEG acquired US trading tech company TORA in a $325m deal that could give the UK’s main market the capability to offer digital asset trading.