The London Stock Exchange (LSE) has reached agreement for a takeover of the Borsa Italia exchange in a move that looks set to give the LSE control of the prized MTS European electronic bond trading platform.
A battle for control of the platform appeared to be behind rival bids for the Milan-based Borsa from the LSE and – according to press reports – European exchange NYSE Euronext.
The Borsa has already exercised its call option rights to purchase all Euronext shares in MBE Holding, the joint venture company that owns 60.73% of MTS. The holding company is 51% owned by Euronext, with the Borsa owning the remaining 49%.
Control over MTS – a regulated European electronic exchange for government bonds and other types of fixed income securities – would extend the LSE's influence and trading reach.
The Borsa board has now agreed a deal that will see the LSE offer about €1.6 billion (£1.07m) for the Italian exchange, Italian news agency Ansa reported.
The move comes just after the London exchange went live with its new TradElect electronic trading platform, as it moves to extend its capacity for high-speed trading.
High-speed electronic trading is now crucial to the success of the exchange, as its annual results posted last month revealed. The LSE saw revenues leap 20% while operating profits shot up 55%, with particularly strong growth in trading on the exchange's electronic order book, SETS, that pushed revenue in the broker services division up 31%.
But the LSE faces a potential stumbling block in its attempts to add the MTS platform to its resources, because the investment banks that hold minority shares in MTS and are its largest users look set to oppose the Borsa's attempts to seize hold of the trading platform.
The banks expressed alarm, saying they have little confidence in the way the bond platform would be run under the Italian exchange, the Financial Times reported.
They are understood to be particularly concerned about the Borsa's control of the post-trading clearing and settlement infrastructure and the implications for the cost of bonds trading.