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British competition watchdog wants ICE to sell Trayport

17 October 2016  |  4551 views  |  0 Dead end

Britain's competition watchdog has ruled that IntercontinentalExchange should sell Trayport to preserve competition in wholesale energy trading markets.

ICE acquired Trayport in December 2015 for $650 million. The firm's software forms an integrated platform which underpins over 85% of European utilities derivatives trading.

The merger was called in for review by the Competition and Markets Authority in January 2016, and on 3 May 2016 it was referred for an in-depth investigation.

The watchdog was concerned that ICE could use its ownership of Trayport’s platform to reduce competition, leading to increased fees for execution and clearing, and worse terms offered to traders.

In its ruling, the CMA says the majority of its inquiry panel agreed that the sale of the Trayport business was the only effective remedy. It rejected remedial action proposed by the companies, concluding that it would not be effective.

Simon Polito, Inquiry Chair, says: "Participants in this market have a high level of dependence on Trayport’s integrated software offering, alternatives are weak and barriers to entry in this market are high. We found that the merged company would have the ability and incentive to use its ownership of Trayport to restrict the competitiveness of ICE’s rivals. This could lead to a range of adverse consequences for traders and venues in the vitally important wholesale energy markets including higher prices, a general worsening of terms and quality and less innovative trading solutions."

ICE has expressed disappoint in the ruling and is considering its options, including an appeal.

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