Eleven leading global banks – Bank of America, Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC, J.P. Morgan, Morgan Stanley, Nomura, Societe Generale and UBS – have agreed to invest in London Stock Exchange Group ( LSEG )’s Post Trade Solutions business, taking a 20% stake.

Post Trade Solutions provides risk management and optimization services to the uncleared derivatives market and includes LSEG’s Acadia, Quantile, SwapAgent and TradeAgent businesses.

The investing banks will each become shareholders in Post Trade Solutions, acquiring the stake for aggregate cash consideration of £170 million ( US$226.68 million ), valuing the whole of Post Trade Solutions at £850 million. The business generated revenue of £96 million and normalized earnings before interest, taxes, depreciation and amortization ( 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 model of LSEG majority-owned financial markets infrastructure firm LCH that continues to prove so successful for LCH and its customers.

As shareholders in Post Trade Solutions, the investing banks, LSEG points out, will benefit from strategic input into the business and its future growth. As well, three directors nominated by the investing banks will join its board.

LSEG will also acquire an increased proportion of the revenue surplus from the LCH-owned SwapClear business, which dominates the London market for over-the-counter ( OTC ) interest rate swaps. Previously, the founding members of SwapClear, which include the investing banks, were entitled to approximately 30% of SwapClear’s revenue surplus through to 2035 – the revenue surplus share ( RSS ).

As a result of this transaction, the RSS for the SwapClear banks will reduce to 15% for 2025 ( applied retroactively to January 1 2025 ) and 10% from 2026. The investing banks, the LSEG notes, have reaffirmed their commitment to the ongoing successful partnership in SwapClear through an extension of the RSS at the 10% level from 2035 until 2045.

The amount paid in relation to the RSS in 2024, included in LSEG’s cost of sales, was €0.2 billion. LSEG, it states, is paying a total cash consideration of £1.15 billion for this change in terms, payable in two instalments in 2025 and 2026. A further payment of up to a maximum of £200 million will be payable should certain future growth targets be met.

The transaction, which is expected to close in 2025, will be accretive to the Ebitda margin of the markets division and LSEG as a whole, and will be approximately 2% to 3% accretive to adjusted earnings per share in 2025, with further benefits anticipated in 2026.

“Our clearing services have been highly successful in generating substantial growth and ensuring robust risk management for the OTC derivatives market,” says Daniel Maguire, head of LSEG’s markets division and CEO of LCH Group. “This has only been possible thanks to our long-term strategic partnership with our customers. 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. ”