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ICE/Trayport merger faces in-depth investigation

First Published 28th April 2016

CMA says ICE could use its ownership of Trayport's software to raise prices and/or reduce the quality of its service to rival exchanges, brokers and clearinghouses in order to divert its rivals' trades to ICE's exchange and clearinghouse and/or to protect its market position from increased competition.

Intercontinental Exchange Inc (ICE) is a global operator of exchanges and clearinghouses. It has its own proprietary software which facilitates trading of energy commodity and utility derivatives on its exchanges.

Trayport is a provider of software which facilitates the trading of energy commodity and utility derivatives. Trayport's Trading Gateway, configured with its desktop screen 'Joule', enables trading across multiple energy and commodity markets on a single screen, and it is the most widely used price discovery and trade initiation tool for the trading of many types of European and UK energy derivative products.

The CMA is concerned that ICE could use its ownership of Trayport's software to raise prices and/or reduce the quality of its service to rival exchanges, brokers and clearinghouses in order to divert its rivals' trades to ICE's exchange and clearinghouse and/or to protect its market position from increased competition.

The merger will therefore be referred for an in-depth phase 2 investigation by an independent group of CMA panel members unless ICE is able to offer undertakings which address the competition concerns (see notes).

Andrea Coscelli, CMA Executive Director of Markets and Mergers, and decision-maker in the phase 1 investigation, said:

ICE is the leading exchange for energy trading in the UK, and in Europe, and based on the evidence we've gathered, it may have the ability and incentive to increase prices and/or reduce the quality of Trayport's software products and services - on which its rivals are dependent - in order to divert trading from rival exchanges, OTC brokers and clearinghouses to its own exchange and clearinghouse, and/or in order to protect its market position from increased competition.

Given these concerns and their potential effect on those providers that currently compete with ICE, along with extensive third party concerns, we think the merger warrants an in-depth investigation unless ICE can offer suitable undertakings.

All information relating to the investigation is available on the case page.

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