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Consolidation of Clearing Houses good or bad?

The DTCC buying LCH.Clearnet looks a no brainer deal for both companies with both increasing their business potential and both able to rationalise their cost structures. This is certainly the case at LCH.Clearnet where it has been common knowledge that they need to modify their systems.

We will not know if the deal will be concluded for some months until due diligence is completed but as far as the market is concerned it will surely be welcomed.

The many new trading venues that have emerged after MiFID will also be keen to see this deal completed, as it clearly benefits their cost structures as it will the users. The Stock Exchanges will see the merger of the two businesses as attractive because it increases the overall attraction of companies listing and the operational efficiencies and costs in financial services firms. The investors should also benefit with reduced risks and costs.

In the minority of those that may not see this deal as good for them might be OM NASDAQ who stated a little while ago that they will compete with the DTCC. This deal makes this less likely. Could they look towards Deutsch Börse and Clearstream for a merger? This would be an aggressive move and offer the European markets good competition.

With the markets in turmoil and needing to recover lost confidence of the investors this type of deal is exactly what's required. It could spark a new round of mega changes to the infra stricture of the markets on the way to building a better, more secure and cost efficient financial industry.     





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Gary Wright

Gary Wright


BISS Research

Member since

19 Sep 2007



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