Hong Kong’s bold bid for London Stock Exchange faces scrutiny of global regulators, adding kinks to its arduous approval process

Hong Kong’s financial marketplace operator faces an uphill battle to obtain regulatory approval for its unsolicited takeover bid for the London Stock Exchange (LSE), said the former chief executive of the United Kingdom’s 300-year-old bourse.

That is because the London Clearing House (LCH), 82.6-per cent owned by LSE, clears half of the world’s interest rate swaps, and is the second-largest clearing house for bonds and repos that serve 13 government debt markets.

Founded in 1888, the LCH clears commodities, securities, exchange traded derivatives, credit default swaps, energy contracts, freight derivatives, interest rate swaps and foreign exchange.

While the broad range of financial assets attracted the attention of Hong Kong Exchanges and Clearing Limited (HKEX), their geographical span also gives the regulators of France, Germany, Italy, and the US Commodity Futures Trading Commission (CFTC) the sway to weigh in on Hong Kong’s bid, adding to the requisite approval by the Bank of England and the UK’s Financial Conduct Authority, said the LSE’s former chief executive Xavier Rolet.

“HKEX is taking a very ambitious and aggressive move to propose the offer, but it would not be easy,” Rolet said in a telephone interview with South China Morning Post. “It is not just the UK, but the HKEX will need to get approval from the US and many other regulators on the takeover the LSE.”