CMA May Reverse ICE’s $650 Million Trayport Takeover

The Competition and Markets Authority has found that ICE’s acquisition of Trayport may give rise to competition concerns.

Financial and commodity markets operator Intercontinental Exchange (ICE) should consider reversing its $650 million takeover of commodities trading software house, Trayport, according to the Competition and Markets Authority (CMA), Britain’s competition watchdog.

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Trayport’s software permits the trading of energy commodity and utility derivatives. Its software forms an integrated platform which underpins over 85 percent of European utilities derivatives trading.

Concerns

The CMA is concerned that ICE could use its ownership of Trayport’s software to raise prices and/or reduce the quality of its service to rival exchanges to divert its rivals’ trades to ICE’s own exchange and clearing house.

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ICE acquired Trayport for $650 million in December 2015. The merger was called in for review by the CMA in January 2016 and was consequently referred for an in-depth investigation in May.

In today’s statement, the CMA said: “This loss of constraint could lead to increased fees for execution and clearing, and worse terms offered to traders.The merger could also result in a loss of competition between ICE and its rivals to launch new products, find innovative trading solutions and enter markets with new offerings.”

Remedies

It set out possible remedies for public consultation before it makes a final ruling, adding that it considered a “complete divestiture” of Trayport by ICE would likely be an effective remedy to the “adverse effects provisionally identified”.

Simon Polito, Inquiry Chair, said: “We examined the merger’s competition risks and given the high level of dependence of market participants on Trayport’s integrated software offering, we provisionally concluded that the merged entity would have the ability and incentive to harm ICE’s main rivals’ ability to compete effectively. This could lead to higher prices, a general worsening of terms and less innovative trading solutions offered to traders in wholesale energy markets.”

The CMA will make a final rule on the merger by 18 October, 2016.

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