LCH snubs DTCC merger

A proposed merger between London-based derivatives clearing house LCH.Clearnet and US clearing giant, the Depository Trust & Clearing Corporation (DTCC) has fallen through.

LCH.Clearnet had signed a non-binding merger agreement with the DTCC on October 22 2008, which was due to be completed by March 15 this year. However, after numerous extensions to the deadline, the DTCC confirmed today that the merger will not take place because LCH.Clearnet had "not agreed on a basis for consummating" the deal. The London firm declined to comment.

In December LCH.Clearnet terminated the exclusivity arrangement of the merger agreement so as to entertain a potential rival bid from a consortium of major dealers. A letter from the consortium was read by LCH.Clearnet's board in its meeting yesterday detailing the dealers' progress towards making an offer. A spokesman for the consortium said that the firms have committed to making an offer by the end of next month.

Since the consortium was first announced on February 2, the composition of the group has evolved. Initially the group included BNP Paribas, Deutsche Bank - which was also acting as adviser on the acquisition - HSBC, JP Morgan, Royal Bank of Scotland, Société Générale, and UBS, along with interdealer broker Icap, while other firms such as Citi, and even the London Stock Exchange were reported to have been involved.

Currently the consortium is made up of 12 financial institutions. Deutsche Bank remains group adviser, but the spokesman declined to give the names of the other participants, except that at least three changes had been made from the original group.

See also: Dealer interest delays LCH.Clearnet and DTCC deal
LCH.Clearnet bid sparks conflict of interest fears
US and European firms in bid for LCH