(Reuters) - Singapore Exchange Ltd (SGX), Asia’s second-largest bourse operator by market capitalization, is in talks to buy a stake in transatlantic clearing house LCH.Clearnet, betting on an increase in trading volumes for derivatives, the Financial Times reported on Monday.
SGX (SGXL.SI) may participate in the London Stock Exchange Group’s (LSE.L) bid for a 60 percent holding in LCH or buy a separate stake, the Financial Times said, citing three people familiar with the situation.
The three parties are discussing the structure of the deal, the daily added. The LSE last month agreed to pay 366 million euros ($496 million) for a majority stake in LCH.
“As the Asian Gateway, SGX is open to partnerships and alliances for the benefit of shareholders, the company and our customers. However, we do not comment on media reports or speculation,” SGX spokeswoman Carolyn Lim said in an emailed statement.
Clearing houses sit between trading firms and ensure trades of securities such as stocks, bonds and derivatives are completed, holding cash to refund firms left out of pocket by a counterparty default.
Exchanges are trying to expand into central clearing following a regulatory overhaul of the over-the-counter derivatives market by the Group of 20 leading economies (G20).
Regulators want trades in derivatives, such as interest rate swaps, to be put through a clearing house in order to reduce the level of systemic risk posed by the market and make it more make transparent.
SGX already has its own clearing service, AsiaClear, which handles trades in commodities and financial derivatives, including interest rate swaps and foreign exchange forwards.
LSE won approval from the UK’s competition watchdog in December for its planned acquisition of LCH, the transatlantic clearing house. ($1 = 0.7376 euros)
Reporting by Rachel Armstrong in Singapore and Karen Rebelo in Bangalore; Editing by Tim Dobbyn and Richard Pullin