New York Stock Exchange owner ICE will make a bid for the London Stock Exchange, even if it’s for show, according to investment bank Jefferies.

In a note to clients on Friday, analysts at the firm said ICE has to seriously evaluate a transaction, as does Chicago based CME, given the scarcity of clearing houses.

“As has been the case with other exchange mergers, the crown jewel of a potential transaction is the clearing business LCH,” said equity analyst Daniel T. Fannon.  

“The addition of LCH to either ICE's Liffe or Deutsche Borse's Eurex would result in a much more formidable competitor and likely market share winner in the long term for European interest rates.”

Last week ICE acknowledged its potential pursuit of an acquisition of LSE and has until 29 March to make or announce an offer.

Deutsche Borse must do so by 22 March, unless it gets an extension from the UK mergers regulator.

Jefferies added that there are likely a greater amount of expense synergies between Deutsche Borse and LSE given geographies and business overlap.

However, it added that ICE has a solid track record of integrating and optimising businesses on both a small and large scale.

Will an ICE bid be approved?

If recent history is any guide, regulatory approval will not be without its challenges.

“The timing is interesting given the recent passing of Mifid in Europe and its goal of promoting competition, in addition to the election cycle taking hold in the US," added Fannon.

"Until final details of the proposals are announced it is difficult to gauge probability of approval.

“But it is important to note that the last round of global M&A in 2012 resulted in several failures due to regulatory complications.”

What will CME do?

In short, Jefferies doesn’t anticipate much.

“The regulatory burden of approval is high, and probably the highest for CME due to its existing interest rate franchise.

“However, given its current balance sheet, we think it has the potential to be more aggressive with a possible offer.”