The takeover of the London Stock Exchange (LSE) by two rival operators would “substantially lessen competition”, a regulatory body warned today.
The Competition Commission said it had provisionally found that a merger with either Deutsche Boerse or Euronext would make it more difficult for other exchanges to compete with the LSE in the trading of UK equities.
It is a particular blow to Paris-based Euronext, which had been awaiting the verdict before deciding whether to press ahead with a £1bn (€1.4bn)-plus bid.
German rival Deutsche Boerse has already pulled out of the running after its interest in buying the LSE came under fire from shareholders.
Euronext, a pan-European exchange, said today that it would continue to work closely with the Competition Commission and other relevant parties in order to address the issues raised.
The main sticking point identified by the Competition Commission (CC) was Euronext’s leading shareholding in the LSE’s current clearing services provider, LCH.Clearnet.
The CC said that a merger between Euronext and LSE “would make it difficult for potential competitors to gain access to LCH.Clearnet’s services, and hence potential competitors would be less able to compete at the trading services level”.
In a similar ruling on Deutsche Boerse, the CC said it was concerned that the German firm would introduce its own clearing services provider, Eurex Clearing, as LSE’s provider. It would then become harder for rivals to access the Eurex service, the regulator believed.
In its provisional ruling, the CC said: “Any exchange attempting to compete with LSE and win the business of trading firms on the LSE would require access to LSE’s clearing services provider.”
The CC pointed out that the removal of either Deutsche Boerse or Euronext, as a result of a merger with the LSE, would not reduce competition as rival business was provided by other exchanges in Europe and the United States.