The London Stock Exchange’s (LSE) potential merger with Deutsche Boerse has been scuppered by the European Commission’s request it sells its 60% stake in fixed income trading platform MTS.
The Commission raised issues over bond and repo trading feeds provided through MTS and urged the LSE to sell its majority stake in the business to settle concerns.
The LSE proposed the sale of its French clearing unit, LCH SA, to settle the Commission’s competition concerns, but this was rejected.
In December last year, both exchange groups stated the Commission’s concerns had narrowed following its proposed sale of LCH SA, and Euronext made an all-cash offer of €510 million for the clearing business.
“LSE regards the required MTS remedy as disproportionate,” the exchange operator said and highlighted its importance in the role of trading Italian government bonds.
The Group also said any change of control of MTS would require complex regulatory approval and therefore “it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSE were to give the commitment.”
“Based on the Commission’s current position, LSE believes that the Commission is unlikely to provide clearance for the merger,” the LSE concluded.
Deutsche Boerse responded explaining both parties will await further assessment by the European Commission and expect a final decision on the merger by the end of March this year.
LSE and Deutsche Boerse confirmed plans to merge in February this year. If completed, the merger would create one the largest exchange groups in the world.