The UK’s Competition and Markets Authority, which begin an in-depth investigation of the acquisition in April, said in an August 16 statement that its concerns centred on ICE’s potential to divert trades to its own trading platforms.
Trayport’s software forms an integrated platform that underpins more than 85% of European utilities derivatives trading, according to the CMA.
The CMA said a group of independent panel members investigating the merger had provisionally found that it “may be expected to lead to a substantial lessening of competition” and added that possible remedies included a full divestiture of Trayport by ICE.
The CMA said: “At this stage, the group considers that a complete divestiture of Trayport by ICE would be likely to be an effective remedy to the [substantial lessening of competition] and the resulting adverse effects that it has provisionally identified.”
It also suggested a behavioural remedy, whereby Trayport would be required to grant all of its customers access to its products and services on a “fair, reasonable and non-discriminatory’ basis”; as well as forcing Trayport to open up its application program interface in relation to its products to encourage the development of a viable competitor.
ICE said in a statement: “If remedies are ultimately required, ICE is confident that they will be line with how ICE intends to operate Trayport as an open and autonomous software provider.”
The CMA is inviting responses to its provisional findings and remedies notice by August 30, and will continue to assess all the evidence before making a final decision.
Simon Polito, the CMA’s inquiry chair, said in a statement: “We examined the merger’s competition risks and, given the high level of dependence of market participants on Trayport’s integrated software offering, we provisionally concluded that the merged entity would have the ability and incentive to harm ICE’s main rivals’ ability to compete effectively. This could lead to higher prices, a general worsening of terms and less innovative trading solutions offered to traders in wholesale energy markets.”
ICE bought Trayport from BGC Partners for $ 650 million in late November. Trayport licenses its technology platform to brokers, allowing them access to the European over-the-counter utility markets. ICE said the deal would allow it to provide services to European energy markets.
ICE, which is based in Atlanta, has quickly grown into one of the world’s largest exchange groups, covering energy, agriculture and financial derivatives. It bought the London-based International Petroleum Exchange in 2001 and, through its 2011 acquisition of NYSE Euronext, also acquired the London derivatives market, Liffe.
The CMA first issued an enforcement order to ICE in mid-January, which forced ICE and Trayport to halt their integration.