Out-Law / Your Daily Need-To-Know

EU to investigate proposed merger of LSE and Deutsche Börse

29 Sep 2016, 4:26 pm

The European Commission is to assess whether the proposed merger of the London Stock Exchange (LSE) and German stock exchange Deutsche B ö rse will reduce competition in several financial market infrastructure areas.

By combining the exchanges of Germany, the UK and Italy, as well as several of the largest European clearing houses, it would create by far the largest European exchange operator, the Commission said.

Deutsche Börse is best known for operating the Frankfurt Stock Exchange but also runs other regulated exchanges, most notably the Eurex and EEX exchanges, trading various types of derivative products. Apart from trading its activities include the supply of post-trade infrastructure services such as clearing, settlement and custody services, the Commission said.

LSE operates the London Stock Exchange but also owns Borsa Italiana, the Italian stock exchange, and operates a number of other trading platforms for trading of stocks, other equity-like exchange traded products, bonds and derivatives. LSE is also active in the post-trading space, most notably in clearing through the London Clearing House and through Cassa di Compensazione e Garanzia, the Italian clearinghouse, the Commission said.

Shareholders in Deutsche Börse gave approval for the planned merger in July, after Deutsche Börse lowered the minimum acceptance threshold to make sure that the vote succeeded.

The public exchange offer made by the new holding company that is to be the parent of both LSE and Deutsche Börse had been subject to a minimum acceptance level of 75% of the shares in Deutsche Börse. This threshold was reduced to 60%.

Commissioner Margrethe Vestager, who is in charge of competition policy, said: "Financial markets provide an essential function for the European economy. We must ensure that market participants continue to have access to financial market infrastructure on competitive terms. Therefore, we have opened an in-depth investigation to assess the proposed merger."

The exchange operators agreed on the proposed £21 billion merger in February, and recommitted to the deal the day after the UK referendum on 23 June. Shareholders of the LSE then "overwhelmingly" voted to approve the merger on 5 July.

A possible counterbid for the LSE from the owner of the New York stock exchange, Intercontinental Exchange, "never came to pass", the LSE said.