The European Commission (EC) has launched an in-depth probe into the proposed $27bn acquisition of Refinitiv by London Stock Exchange Group (LSEG) under the EU Merger Regulation.
Following an initial market investigation, the commission is of the opinion that the proposed all-stock deal could bring down the competition in trading and clearing of various financial instruments and in financial data products.
The London Stock Exchange Group signed an agreement in late 2019 to acquire Refinitiv from certain investment funds affiliated with Blackstone and also from Thomson Reuters. The stock exchange firm aims to create a global financial markets infrastructure provider through the acquisition.
The London-based Refinitiv offers financial data and infrastructure to its clients in various parts of the world.
Concerns of the European Commission over LSEG’s acquisition of Refinitiv
As per the European Commission, the proposed deal brings together major trading venues where electronic trading of bonds of the UK, European Economic Area (EEA), and Swiss governments takes place.
Included in the trading venues are the London Stock Exchange Group’s MTS and Refinitiv’s Tradeweb and their combination is expected to create a very large combined market share in the electronic trading of European Government Bonds, said the European Commission.
The combination of the British stock exchange firm and Refinitiv is also expected to have significant market power in upstream (trading) and also downstream (clearing).
Besides, the proposed transaction could result in competitors in consolidated real-time datafeeds and desktop services being shut out from accessing the input data of London Stock Exchange Group, said the European Commission.
Another concern of the governing body is that competitors in index licensing can potentially be shut out from accessing Refinitiv’s necessary input data. The concern of the European Commission is based on the logic that Refinitiv is among the largest suppliers of foreign exchange indices, while the acquiring stock exchange company’s FTSE Russell is a key provider of financial indices in the EEA and across the world.
The European Commission will probe in-depth into the impacts of the transaction to determine if its initial competition concerns are valid.
European Commission Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “Financial markets provide an essential function for the European economy. Access to financial market infrastructure and financial data products is needed to make investment decisions, trade, and to protect savings.
“We have opened an in-depth investigation to assess whether the proposed transaction which will combine the activities of LSEG and Refinitiv would negatively affect competition in these markets.
“It is key for a well functioning financial market to ensure that market participants continue to have access to financial market infrastructure and financial data products on competitive terms.”
