WM/R at Heart of Singapore Concerns over LSEG, Refintiv Merger

Singapore’s Competition and Consumer Commission (CCCS) says it wants a full, in-depth review of the proposed takeover of Refinitiv by London Stock Exchange Group (LSEG), citing in particular the dominant position of the WM/R FX benchmark as a concern going forward.

Based upon information supplied by the parties, the CCCS says it has raised competition concerns with them, specifically referring to “third-party feedback as to whether the merged entity will continue to supply FX benchmarks at “fair, reasonable and non-discriminatory terms” to rival providers in the index licensing and derivatives clearing services market.

“This is because post-Transaction, Refinitiv would be merged and/or affiliated to a major clearing provider (i.e. LCH Group) as well as a major index licensing provider (i.e. FTSE Russell) with global presence, which may reduce its incentive to continue the supply of inputs to rival providers,” the CCCS states. “Furthermore, feedback suggests that WM/R FX benchmarks are critical inputs for index licensing and derivatives clearing services as they are considered the industry benchmark for foreign exchange reference rates and there is no reasonable substitute that rival index providers and derivatives clearing service providers are able to switch to without incurring significant disruption and costs to their businesses.

“CCCS is unable to determine at this stage whether competitors are able to deploy effective and timely counter-strategies to mitigate the risk of foreclosure by the merged entity of access to the WM/R FX benchmarks,” it continues. “There is also insufficient information available for CCCS to determine if the competition concerns could be addressed through any existing regulations overseas on the global supply of the WM/R FX benchmarks.

“In view of the concerns raised, CCCS will need to consider in more detail the effect of the transaction in a Phase 2 review,” it concludes.

The WM/R benchmark is already in the spotlight thanks to what are seen in some quarters as excessive price moves in the five minute window at the most popular London 4pm Fix and Refinitiv was recently encouraged by the Global FX Committee to engage further with the FX industry over its composition. A source familiar with the issue expresses confidence Singapore’s concerns can be overcome, noting that Refinitiv’s benchmark business already engages fully with competitor organisations around the Fix, for example through the use of EBS, which is owned by CME Group, and Currenex, owned by State Street, data for certain currency pairs in the fixing window. “Refinitiv may have to codify these processes in legal agreements, but it is not in the benchmark business’ interest to cut itself off from other FX data providers – and that will be the case with index providers as well,” the source argues.

Colin Lambert

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