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Derivative investors doubt benefits of LSE-Deutsche Börse tie-up 

April 6, 2016

Philip Stafford, The Financial Times

Deutsche Börse’s $20bn combination with the London Stock Exchange Group promises an “industry-defining combination” but there are doubts that traders and investors relying on derivatives in a post-crisis world will see the benefits.

The deal will bring together London, Europe’s leading financial hub with Frankfurt, the home of the European Central Bank and the eurozone, into a behemoth able to trade in equities and futures, benchmarks, index and data analytics.

But it is in the world of risk management, or post-trade as it is known, where the new exchange promises the biggest changes. A combination offers clearing of futures and swaps and collateral management on a scale no other exchange operator in the world can match.

For some, it is an indication of how global markets are changing rapidly, overturned by the impact of capital rules on banks and the growth of exchange traded funds (ETFs) and other passive investing.

Anthony Perrotta, a former broker and head of research at Tabb Group, the US capital markets consultancy, says the capital rules were the “single biggest issue” affecting over-the-counter markets. Read more

 
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