EU set to block stock market mega merger

London Stock Exchange says the European Commission will not approve the deal but Deutsche Börse insist it is LSE that are not following through. [Pavel Ignatov/ Shutterstock]






ECB's monetary policy under attack, Brexit scavengers continue to circle UK

The European Central Bank (ECB) is under increasing pressure to exit its loose monetary policy but the Frankfurt bank remains unconvinced by inflation growth. The institution is also looking into cross-border bank mergers, as the rest of Europe eyes the UK’s post-Brexit scraps.

In a separate statement, Deutsche Börse attributed the decision to LSE alone. LSE “resolved tonight to not commit to the required divestment of LSEG’s majority stake in MTS,” Deutsche Börse said, adding that it expected a final decision from the Commission by the end of March.

The EU executive declined to comment.

The two exchanges announced plans to merge in a €29 million deal just over a year ago, aiming to create a giant trading powerhouse that would better compete against US rivals that were starting to encroach on the pair’s turf.

The exchanges had already agreed to sell part of LSE’s clearing business, LCH SA, in order to satisfy antitrust requirements.

LSE said the Commission had also raised concerns this month about the impact on the European market landscape of access to bond and repo trading feeds were the two exchanges to merge. LSE said it had offered certain proposals to address this but that the Commission had requested they sell all of MTS instead.

The EU executive had given the exchanges until today (27 February) to come up with a proposal to meet that demand.

MTS is a relatively small part of LSE’s business but it is a major platform for trading European government bonds, particularly in Italy, where it is classified as a “systemically important regulated business”.

Brexit’s economic impact remains unknown

British small business owners are still undecided on how to vote in the upcoming referendum on the UK’s EU membership, according to a new poll, published as financial leaders warned that Brexit could damage the economy and scuttle Deutsche Börse’s takeover of the London Stock Exchange.

LSE said that such a sale would need regulatory approval from several governments in Europe, and it would be detrimental to its wider Italian business.

“Taking all relevant factors into account, and acting in the best interests of shareholders, the LSE Board today concluded that it could not commit to the divestment of MTS,” the exchange said.

The two exchanges had already negotiated concerns over the UK’s decision to leave the EU but this latest blow could leave the agreement dead in the water.

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