Clearing the way for more consolidation

All eyes on Deutsche Börse and Italy’s Monte Titoli after rival exchange Euronext divested itself of all but five per cent of its holding in clearing and settlement agent LCH.Clearnet (LCH.Clearnet to buy out Euronext).

European investment banks and lawmakers in Brussels have been pushing Europe’s exchanges to cut their ties to post-trade clearing agencies, arguing that such lock-down arrangements eliminate choice and raise costs for investors.

In November, the German and Italian exchanges – Europe’s most ardent proponents of the vertically-integrated business model - were signatories to a voluntary code of conduct designed to slash the cost of trading shares across borders by injecting more transparency and competition into clearing and settlement operations. The unbundling of clearing and settlement from trade execution was an implicit element in the agreement. 

So, no surprise to see German financial daily  Börsen-Zeitung report on plans by Deutsche Börse chief Reto Francioni to change the legal structure of the exchange to that of a holding company under which derivatives exchange Eurex and settlement arm Clearstream would become independent concerns. 

One consequence of such a move would be to free up the German exchange to play a more active part in industry consolidation and make further acquisitions. Who knows, with the London Stock Exchange now free to pursue new partnerships, we could yet see Frankfurt and London tie the knot. Alternatively, there's always Nasdaq.