Brussels refers LSE-Refinitiv deal for full antitrust investigation

Brussels has sent the London Stock Exchange Group’s planned $27bn takeover of Refinitiv for an in-depth antitrust investigation, with regulators concerned that a combined company could offer its customers preferential services for critical data used on global markets.

The EU’s competition watchdog warned on Monday that it also had worries about an overlap in European sovereign bond trading and would examine a possible concentration of derivatives trading.

A completed deal would transform the LSE into one of the world’s largest managers of financial markets, running exchanges, trading venues, clearing houses and supplying vast quantities of vital trading data. 

The LSE plans to buy the data provider in an all-share deal that would involve Blackstone, the private equity group, taking a 37 per cent economic interest in the stock exchange group.

Brussels has been formally examining possible conflicts of interest in the deal for a month. Authorities will now have until October 27 to make a final ruling. That deadline could be extended if authorities demand the two companies make concessions, such as selling assets, to satisfy their concerns. The US competition agency, part of the Department of Justice, began asking market participants about the deal at the start of June.

Margrethe Vestager, executive vice-president responsible for competition policy, said consumers and users needed to be offered competitive terms.

“Financial markets provide an essential function for the European economy,” she said. “Access to financial market infrastructure and financial data products is needed to make investment decisions, trade, and to protect savings.”

In response, the LSE said it would continue to engage constructively with the Commission.

Brussels has already intensely scrutinised the deal in a so-called pre-notification phase, where companies and regulators have a chance to identify potential concerns and remedies before a formal probe starts.

The agency has sent a 130-page questionnaire to rivals of the LSE and Refinitiv, according to one person who has seen the document.

It asks whether the LSE and Refinitiv could discriminate on pricing, offering more advantageous terms to Refinitiv’s customers. Regulators also have concerns that Refinitiv’s rivals that are licensing LSE data could receive a slower or more inferior service, the person said.

A combined business would control vast amounts of data used every day on the world’s equity, bond and derivatives markets. Nearly $20tn of fund managers’ stock and fixed-income assets rely on LSE’s FTSE Russell data, as it is the benchmark for daily closing share prices in their portfolios. Refinitiv has more than 400,000 users.

Cross-selling indices, data and analytics to each other’s customers is a key part of the deal for the LSE and Refinitiv.

Brussels is also looking at the potential overlap between MTS, the LSE’s bond-trading venue, and Tradeweb, in which Refinitiv holds a 54 per cent economic interest. The early investigation “suggests that it is difficult for a new trading venue to . . . become a real alternative to incumbent venues”, the EU said.

In recent weeks Italian authorities and politicians have highlighted MTS as a national strategic asset because it allows fund managers and the country’s central bank to find and buy sovereign debt.