The London Metal Exchange’s takeover by Hong Kong Exchanges & Clearing Ltd. is unlikely to raise issues about China’s control of the exchange, said Robert Finney, partner at Holman Fenwick Willan LLP in London who specializes in financial services and regulation. He made the following comments in an e-mail yesterday.
“Although the merger must be approved by the Financial Services Authority as the LME’s regulator, that should be a swift process. The FSA has only 3 months to object following the receipt of formal notice from Hong Kong Exchanges of its intention to acquire control, and I am sure that Hong Kong Exchanges and other potential acquirers were discussed with the FSA.
“There are unlikely to be issues about Chinese control of the exchange. It is worth remembering that Martin Wheatley, managing director of the relevant unit at the FSA, the Conduct Business Unit, was chair of the Hong Kong Securities and Futures Commission for almost six years, until mid-2011 when he joined the FSA.
“While some concerns may be expressed about implications of the acquisition for the future of the LME, the transaction terms seem to ensure not only the continuation and planned development of the LME’s business model but also a robust governance structure.
“Note, too, that one of the LME’s express reasons for selecting Hong Kong Exchanges from among the bidders is transaction certainty. While FSA approval is a condition of the transaction, the LME Holdings board clearly consider that neither that nor any competition issues will delay or derail the deal.”