The former head of the US Commodity Futures Trading Commission says Washington would have “great concern” about a potential takeover of the London Stock Exchange Group by Hong Kong buyers.
The comments from Christopher Giancarlo, who chaired the US derivatives watchdog until July, add to early scepticism that Hong Kong Exchanges and Clearing’s shock bid for the iconic UK stock market would clear regulatory hurdles.
Giancarlo told Financial News: “A deal like this would have to be carefully thought through and considered by US authorities.”
HKEX launched its unsolicited £30bn-plus offer for the LSE on Wednesday. The Hong Kong group is offering a hefty premium to tempt shareholders, who would also have to reject the LSE’s already-agreed takeover of Refinitiv, the US data company.
But the bid was received tepidly in the City. Analysts and investors said handing ownership of important UK financial infrastructure to a company with close ties to China, at a time of increasing geopolitical tensions, would worry authorities.
Giancarlo added: “I wouldn’t expect US authorities to have inordinate concern over the equity business of the LSE. The issue would be in the derivatives clearing. This would be of great concern to US regulators.”
The LSE owns more than 80% of LCH, the clearing house that handles the vast majority of global swaps — derivatives used by companies to protect against movements in borrowing costs, including for dollars.
The CFTC regulates LCH alongside the Bank of England.
In February, the two regulators agreed continued cooperation over derivatives trading and clearing regulation whether or not the UK leaves the EU without a deal. Fears of undue influence from Beijing in the event of a HKEX takeover could upset this delicate balance of cooperation, Giancarlo warned.
He said: “Clearing of dollar-based derivatives takes place in a regulatory regime in the UK where we have a long history of working together. Both are common-law jurisdictions with a record of working successfully through good and bad markets. Any potential change to that would be of great concern to US regulators.”
He added: “I would think the EU would have a concern as well. Europe needs a singular, world-class financial capital. I think there should be concerns generally about the ramifications of change in control of Europe’s premier equity venue and the world’s largest derivatives clearing venue.”
A person familiar with the HKEX offer said the exchange recognised the importance of a strong corporate governance structure in any takeover.
The CFTC was contacted for comment.
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