The London Stock Exchange Group (LSEG) announced this Wednesday that they have acquired a 16 percent stake in AcadiaSoft. Alongside the deal, AcadiaSoft, a provider of risk workflow solutions, has signed a deal LCH, a clearinghouse that the LSEG owns a 60 percent stake in.
The deal seems to have been driven by a desire, on LCH and LSEG’s behalf, to expand into the non-cleared market. A large part of AcadiaSoft’s ‘raison d’etre’ is to provide services catering to that market with the firm providing margin automation for counterparties engaged in collateral management.
More specifically, LCH appears to be interested in catering to firm’s attempting to adhere to the European Securities and Markets Authority’s non-cleared over-the-counter (OTC) derivatives margin requirements. Without going into great detail, these requirements mean that firms must exchange margins when certain thresholds are met regarding the total value of a firm’s outstanding non-cleared OTC derivatives positions.
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In all likelihood, market participants are more likely to feel the impact of the agreement between LCH and AcadiaSoft than the LSEG’s partial acquisition of the firm. This is because the two firms will be working together on products that should simplify margin calculation for market participants.
Today’s announcement provided some insight into how the firms might go about doing this. LCH noted that it would be providing collateral data, collected via its LCH SwapAgent service, to the AcadiaSoft Hub, a margin processing solution.
Commenting on the partnership with, and partial acquisition of, AcadiaSoft, Daniel Maguire, CEO of LCH Group and a member of LSEG executive committee, said: “The acquisition of a stake in AcadiaSoft underlines our strategy to expand into the non-cleared space, an area in which AcadiaSoft has considerable experience. The non-cleared margin rules continue to impact the dealer and buy-side community, and it is crucial that integrated services are available to support market participants in reducing risk while maximising their capital and operational efficiencies. LCH SwapAgent brings our expertise in managing risk, and operational resilience to the bilateral market and we are delighted to be collaborating with AcadiaSoft to foster further innovation in this market.”