London Stock Exchange Group (LSEG) today announced that 11 leading global banks (together, the Investing Banks) have agreed to invest in its Post Trade Solutions business, taking a 20% stake.
The investing banks include: Bank of America, Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC, J.P. Morgan, Morgan Stanley, Nomura, Societe Generale and UBS.
The Investing Banks will each become shareholders in Post Trade Solutions, acquiring the stake for aggregate cash consideration of £170 million, valuing the whole of Post Trade Solutions at £850 million. Post Trade Solutions generated revenue of £96 million and normalised EBITDA of £16 million in 2024.
The Investing Banks are major customers of LSEG’s clearing services and Post Trade Solutions business. As a result, this initiative continues the strong history of strategic partnership with LSEG and market participants, replicating the original LCH model that continues to prove so successful for LCH and its customers.
As shareholders in Post Trade Solutions, the Investing Banks will benefit from strategic input into Post Trade Solutions and its future growth. Three directors nominated by the Investing Banks will join the Board of Post Trade Solutions.
LSEG will also acquire an increased proportion of the revenue surplus from the SwapClear business. Previously, the founding members of SwapClear, which include the Investing Banks, were entitled to c.30% of SwapClear’s revenue surplus through to 2035 (the Revenue Surplus Share). As a result of this transaction, the Revenue Surplus Share for the SwapClear banks will reduce to 15% for 2025 (applied retroactively to 1 January 2025) and 10% from 2026.
The Investing Banks have reaffirmed their commitment to the ongoing successful partnership in SwapClear through an extension of the Revenue Surplus Share at the 10% level from 2035 until 2045.
The amount paid in relation to the Revenue Surplus Share in 2024, included in LSEG’s cost of sales, was €0.2 billion. LSEG is paying a total cash consideration of £1.15 billion for this change in terms, payable in two instalments in 2025 and 20264. A further payment of up to a maximum of £200 million will be payable should certain future growth targets be met.
The transaction will be accretive to the EBITDA margin of the Markets division and LSEG as a whole, and will be approximately 2-3% accretive to AEPS in 2025 with further benefits anticipated in 2026.
Daniel Maguire, Head of Markets, LSEG and CEO, LCH Group, said:
“Our SwapClear business was at the forefront of innovation when it was founded in collaboration with our clearing members 25 years ago – and that spirit of innovation and partnership continues today. Our clearing services have been highly successful in generating substantial growth and ensuring robust risk management for the OTC derivatives market. This has only been possible thanks to our long-term strategic partnership with our customers. With this proven track record of success, I’m pleased that our partners are committed to continuing the approach with our Post Trade Solutions business, where we collectively see an opportunity to bring material efficiencies across capital, risk and operations to the bilateral OTC derivatives market.
I look forward to working with our bank partners to transform this marketplace and enable it to continue to flourish and grow, efficiently and effectively.”
