InterContinental Exchange (ICE), which owns the New York Stock Exchange, has been told for the third time that it must sell Trayport, the energy trading technology shop it acquired for $650 million in December 2015.
The UK Competition and Markets Authority (CMA) has selected the forced sale option to reverse Intercontinental Exchange’s takeover of Trayport, as the watchdog decided that the deal undermines competition.
The CMA’s decision said that the agreement for additional connectivity between ICE and Trayport signed in May 2016 should be terminated.
The CMA said in its ruling statement: “Following its provisional decision in April, the CMA has found that the loss of competition identified in the original merger investigation (see below) would not be comprehensively remedied if the agreement remained in place.”
It continued: “In particular, the agreement, is a legacy effect of ICE’s control over Trayport and risks the ability of Trayport’s future owner to set its own commercial strategy towards ICE, while also potentially offering ICE beneficial terms as result of that control.”
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Following the UK’s Competition Appeal Tribunal’s judgement, which upheld a ruling that Intercontinental Exchange must sell Trayport, ICE has requested permission from the CAT to appeal to the Court of Appeal.
ICE loses final battle
The Competition Appeal Tribunal said earlier this year that it backed a ruling by the UK antitrust watchdog that the deal could curb competition in the European energy trading market. The US-headquartered group refused the British competition regulator’s ruling, saying that it is disappointed with the decision and would consider an appeal.
Following possible ICE’s complete sale of the platform, the new buyer also will have to be approved by the CMA in order to preserve competition.
ICE beat arch-rival CME Group to buy the broker-tech platform license, but the UK`s competition authority now believes a complete divestiture is the only effective remedy to the substantial lessening of competition.
Earlier in August 2016, the CMA highlighted that ICE’s $650 million investment in Trayport could hurt competition for wholesale European utilities trades, where Trayport’s software helps facilitate 85 percent of activities. It also voiced concerns about possibly worse terms for traders due to higher fees for executing and clearing trades.
Other market participants such as Nasdaq, EEX, Tradition and ICAP have told CMA that they fear OTC gas and power markets could be subject to the mandatory clearing provisions that are being applied to other commodity markets. According to the CMA, all the third party submissions said that the sale of the Trayport business is the only comprehensive solution to all aspects of its competition concerns. The independent group rejected alternative remedial actions, such as forcing Trayport to offer better terms to customers, concluding that it would not be effective.
In response to the CMA’s claims, ICE expressed its disagreement with the findings as they do not align with its vision for Trayport’s business. However, the Atlanta-based exchange operator said that “it will now complete the CMA process, terminate the agreement as instructed and move forward with the divestment of Trayport expeditiously so that Trayport’s future ownership is resolved. In the interim, Trayport will continue to be operated separately and independently as it has been throughout the process.”