By Huw Jones
LONDON (Reuters) - Britain's competition watchdog said on Wednesday it is to open an in-depth investigation into Intercontinental Exchange's (N:ICE) takeover of commodities trading software house Trayport unless the exchange can offer undertakings within five days.
The Competition and Markets Authority (CMA) said it was concerned that ICE could use its ownership of Trayport's software to raise prices and/or reduce the quality of its service to rival exchanges to divert its rivals' trades to ICE's own exchange and clearing house.
"Given these concerns and their potential effect on those providers that currently compete with ICE, along with extensive third party concerns, we think the merger warrants an in-depth investigation unless ICE can offer suitable undertakings," CMA executive director of markets and mergers, Andrea Coscelli, said in a statement.
ICE's $650 million takeover of London-based Trayport was completed in December.
A CMA spokeswoman said ICE has five days to offer suitable undertakings and if any are offered, the watchdog has another five days to decide if they address its competition concerns.
The watchdog said in February it was considering whether the acquisition hurt competition and on Wednesday spoke of "extensive third-party concerns".
ICE said Trayport's business complemented the exchange's existing operations and there has been no loss of customer choice.
"However, this is a complex industry and Trayport's software services are important to a range of market participants. So an in-depth review is not unexpected," ICE said in a statement.
"We will continue fully to co-operate with the review process and believe that the CMA will not object to ICE owning Trayport," it added.
An ICE spokeswoman later declined to comment on whether ICE would submit any undertakings.
ICE beat off arch-rival CME Group (O:CME) to acquire Trayport and reinforce its position in European energy trading markets.
ICE also completed a $5 billion (£3.4 billion) acquisition of fixed income data provider IDC last December, and is considering whether to make a bid for the London Stock Exchange Group (L:LSE), which has agreed to merge with Deutsche Boerse (DE:DB1Gn).