(Reuters) - Britain's competition watchdog said it would refer the proposed merger of ICAP Plc's (L:IAP) global hybrid voice broking business with Tullett Prebon Plc (L:TLPR) for an in-depth phase 2 probe unless the companies were able to address some of its concerns.
The Competition and Markets Authority (CMA) said the merger would be referred for an investigation by an independent group of CMA panel members unless the companies provide solutions for its concerns about overlap in voice/hybrid broking of oil products.
The CMA said ICAP and Tullett faced limited competition from other brokers, electronic platforms and exchanges for broking of oil products, which brings in about 228 million pounds in industry-wide revenue every year in Europe, the Middle East and Africa.
The CMA said on Tuesday it did not find significant competition concerns in 19 of the 20 overlapping product categories it considered such as spot FX, equity derivatives and interest rate swaps.
ICAP said it was confident of obtaining CMA clearance, while Tullett Prebon said it would explore how best to satisfy the concerns.
The brokers said the deal was on track to complete this year.
A phase 2 investigation by the CMA could take up to 36 weeks in the most complicated merger situations, according to the watchdog's website.
The U.S. Department of Justice had in February requested additional information over the proposed deal.
The companies last year agreed to the 1.11 billion pounds deal to better compete in a sector where trading volumes have shrunk.
ICAP said it would be renamed as NEX Group Plc following the sale of the key business to Tullett Prebon.
Interdealer brokers, which match buyers and sellers of currencies, bonds and other tradeable instruments, have been hit in recent years by regulation designed to rein in the riskier trading activities of their traditional investment bank clients.
Shares in Tullett were down 2.5 percent at 317 pence at 0713 GMT, while ICAP stock was down marginally on the London Stock Exchange.