Singapore’s Competition and Consumer Commission (CCCS) today revealed concerns over the London Stock Exchange’s proposed acquisition of financial data provider Refinitiv. The antitrust watchdog was concerned that a combined company could offer its customers preferential services for critical data and would examine a possible concentration of derivatives trading.
The CCCS also warned about an overlap in the supply of fixed income index and licensing services to customers in Singapore. It had worries about possible anti-competitive effects of the LSE’s $27 billion bid that covers multiple exchanges, trading venues, clearing houses and vast quantities of vital trading data.
A completed deal, says CCCS, would require both LSEG and Refinitiv to provide further details about six categories of products that generate revenue from customers in Singapore. As the combined entity would be one of the world’s largest managers of financial markets, the watchdog needs to be aware how the combined entity will be running (i) trading services; (ii) clearing services; (iii) index licensing; (iv) financial information products; (v) regulatory reporting services; and (vi) IT services/software.
“CCCS is unable to determine at this stage whether competitors are able to deploy effective and timely counter-strategies to mitigate the risk of foreclosure by the merged entity of access to the WM/R FX benchmarks. There is also insufficient information available for CCCS to determine if the competition concerns could be addressed through any existing regulations overseas on the global supply of the WM/R FX benchmarks,” the regulators said.
The CCCS also cited concerns raised by third parties who were worried about the merged entity’s market power in trading and clearing of over-the-counter derivatives used by local and global investors to hedge risks. It said another key concern was how the merged entity will continue to supply Refinitiv’s WM/Reuters foreign exchange benchmarks at fair, reasonable and non-discriminatory terms to rival providers in the market.
“In view of the concerns raised, CCCS will need to consider in more detail the effect of the Transaction in a Phase 2 review,” the watchdog concluded.
Both UK and US regulators cleared the all-stock deal, which was revealed in August 2019. The Committee on Foreign Investment in the United States (CFIUS) said the takeover doesn’t raise any national security concerns. The City watchdog also gave the purchase offer’s circular its backing in November, and LSEG’s shareholders also have overwhelmingly voted in favor of the institution’s planned buyout that will put them in competition with giants like Bloomberg.
European Union regulators, however, cited the complexity and the massive amount of data involved in the deal, which would result in a “very large combined market share” in the electronic trading of European government bonds. And as Refinitiv and LSE have been leading venues, close rivals in this space, it suggests that it will be difficult for a new trading venue to attract clients in sufficient numbers and become a real alternative to their combined business.