The Competition Markets Authority (CMA) has warned that a £650 million energy trading merger could harm competition.
Energy trading firm Intercontinental Exchange (ICE) acquired software company Trayport in December last year. The merger was called in for review by the CMA.
It found that the merger could lead to a substantial lessening of competition as not only traders but also brokers, exchanges and clearing-houses that compete with ICE, depend on the Trayport platform to carry out their energy trading activities effectively.
The CMA is concerned that ICE could use its ownership of Trayport’s platform to reduce competition between ICE and its rivals for wholesale European utilities trades.
It then, could lead to increased fees for execution and clearing and worse terms offered to traders, as well as a loss of competition between ICE and its rivals to launch new products, find innovative trading solutions and enter markets with new offerings.
Simon Polito, Inquiry Chair said: “We examined the merger’s competition risks and given the high level of dependence of market participants on Trayport’s integrated software offering, we provisionally concluded that the merged entity would have the ability and incentive to harm ICE’s main rivals’ ability to compete effectively.
“This could lead to higher prices, a general worsening of terms and less innovative trading solutions offered to traders in wholesale energy markets. We are now inviting responses to our provisional findings and remedies notice, and will continue to assess all the evidence before we make our final decision.”