The London Stock Exchange is increasing its majority stake in LCH Group, the company at the heart of a political debate because of its critical role in clearing euro-denominated derivatives.
The LSE said in a statement on Wednesday that it had agreed to add up to a 6.8% slice of LCH to its existing 57.8% stake in the clearer, which sits between traders to guarantee contracts in the event of default.
Acquiring more shares in LCH comes after European competition authorities stopped a planned merger between the LSE and its German rival, Deutsche Börse, the owner of the Eurex clearing house.
Since the collapse of the merger, LCH has come under scrutiny because of the dominant role it plays in euro-clearing. The UK’s looming departure from the European Union means that the part of LCH that clears the contracts, which is based in London, will be outside of the bloc.
Some politicians want to ensure that authorities on the continent have more oversight over clearers deemed systemically important to the EU’s financial stability, or potentially drag euroclearing into the bloc.
But amid calls for regulators to force euro-clearing to take place inside the EU, Christopher Giancarlo, a top US derivatives regulator, warned the EU against “piecemeal and contradictory rule-making” earlier this week.
The EU’s executive arm has previously said that forcing clearing houses of systemic importance to relocate to within the bloc would be a “last resort“. Last night, Philip Hammond, the UK’s finance minister, said in a speech that the UK “will not accept protectionist agendas, disguised as arguments about financial stability”.
Minority shareholders in LCH have agreed to sell shares to the LSE, according to the statement, which means the exchange’s stake looks set to rise from 57.8%. The LSE said that all shareholders in LCH had been notified.
The clearing house has become a major driver of the LSE’s earnings since the exchange group agreed to buy a majority stake in 2012. In the…