31 July 2011

FT: LSE chief warns of merger's threat to UK voice

London's position as a global financial centre is under threat from the proposed merger of Deutsche Börse and NYSE Euronext as key investment decisions affecting the group's UK businesses may shift abroad, the chief executive of the London Stock Exchange, Xavier Rolet, has warned.

Mr Rolet added that the UK was under-represented in Europe, reducing its ability to fight its case amid sweeping reform of the financial sector. He pointed out that while the FSA had a seat on the ESMA, it had 8 per cent of the group’s vote, while the UK represented two-thirds of financial services activity in Europe. “There’s a clear mismatch there and a risk”, Mr Rolet said.

His comments come as European antitrust authorities in Brussels are expected this week to decide whether to move an ongoing probe into the planned Deutsche Börse-NYSE Euronext combination into a more detailed phase. Winning the approval of Brussels is the remaining hurdle for the pair, after shareholders of each exchange last month gave their overwhelming approval of the deal. The deal will create by far the largest exchange by revenues, spanning US and European equities, futures and options, and clearing. It would also have five times the revenues of the LSE.

However opponents of the deal, mostly rival exchanges and some large bank customers, have ramped up criticism of the proposed combination in recent weeks. They are concerned about the alleged market power that the combination would have by merging the US group’s London-based NYSE Liffe futures exchange with Eurex, the German exchange’s futures arm in Frankfurt. A combination of Eurex and Liffe would combine to create a platform with over 90 per cent of key contracts currently trade, mirroring the share that Chicago-based CME Group has of trading in equivalent US futures contracts.

Mr Rolet said: “What we are arguing for is to expand the scope of concessions [demanded by Brussels as part of allowing Deutsche Börse-NYSE Euronext to go ahead] that would permit others to survive and grow”.

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