In May 2022, the Competition and Markets Authority (CMA) referred the merger between London Stock Exchange Group (LSEG) and Quantile Group Limited (Quantile) to a group of independent CMA Panel members for an in-depth Phase 2 investigation, after identifying competition concerns during an initial Phase 1 review that warranted further investigation.
As a result of this Phase 2 investigation, the CMA has determined that the transaction does not raise significant competition concerns in the UK. The Phase 2 investigation evaluated the transaction against a higher threshold than the Phase 1 investigation, and included consultation on the Phase 2 preliminary findings, which were published in September 2022.
LSEG is an international infrastructure and data firm for financial markets that owns a controlling stake in the LCH clearing house group (LCH).
By acting as a central counterparty between the parties to a transaction, a clearing house helps decrease the costs and risk of a contract between a buyer and a seller in a financial market.
Through services such as multilateral compression, Quantile assists financial institutions trading in derivative products to decrease their capital needs and total regulatory expenses. Multilateral compression service providers for LCH-cleared interest rate futures rely on LCH to be able to offer their services.
Phase 1 of the CMA’s investigation indicated concerns that, following the acquisition of Quantile, LCH could potentially disadvantage third-party compression providers in competition with Quantile, so reducing competition.
During Phase 2 of its inquiry, the CMA communicated extensively with consumers of LSEG and Quantile, as well as third-party compression service providers, and performed a more in-depth review of the potential transaction. Even while the evidence suggested that LSEG would be able to disadvantage Quantile’s competitors after the merger, the investigation determined that LSEG would not have an economic motivation to do so because its customers were aware of the actions they could take to thwart such efforts.
In light of all the evidence, including replies to its consultation on the provisional Phase 2 conclusions, the CMA has determined that the proposed purchase will not substantially reduce competition between Quantile and its competitors, and has thus approved the transaction.
Martin Coleman, chairman of the independent CMA investigation committee, stated:
We were able to engage extensively with LSEG, Quantile, and their customers and competitors, so gaining a greater understanding of the transaction’s impact on those firms and the market, thanks to the exhaustive investigation and consultation. Based on this interaction and other evidence acquired, we are confident that this transaction will not reduce the options available to businesses and consumers. Therefore, the deal can proceed.
Please visit the LSEG/Quantile inquiry page for further details.
Remarks to editors
Contact the CMA press office at 0203 738 6460 or press@cma.gov.uk for media inquiries.
A Phase 1 investigation evaluates if there is a reasonable possibility that the merger will substantially reduce competition. A Phase 2 investigation is subject to a different legal standard than a Phase 1 investigation. Phase 2 examines whether it is more likely than not that the merger will result in a substantial decrease of competition – a higher threshold than Phase 1. Due to this and the fact that phase 2 choices are made by a different group of independent decision-makers after a more in-depth study, some transactions that are not cleared in phase 1 will ultimately be cleared in phase 2.