Deutsche Borse Angers Banks by Taking Control of Clearstream for Pounds 1bn

Article excerpt

DEUTSCHE BoRSE, the Frankfurt stock exchange, dealt a blow to hopes for the creation of a pan-European clearing system for share trades after moving yesterday to take control of Clearstream, the Luxembourg- based clearing house.

The proposal would establish a "vertical silo" in which the stock exchange controlled access to, and the cost of, clearing and settlement of share trades. That contrasts with the UK's hourglass model whereby a central counterparty mediates between a variety of channels for transaction settlement.

Deutsche Borse, which already owns 50 per cent of Clearstream, is offering to pay 1.75bn euros (pounds 1.07bn) in cash for Cedel, the company that owns the remainder of the business. Cedel has recommended the offer, and Andre Roelants and Robert Douglass are to retain their roles of chief executive and chairman.

UBS Warburg led the protests against the deal, which many banks see as anti-competitive and likely to drive up the cost of settlement by restricting choice. …