Merger of LSE and Deutsche Bo­erse ‘ would be the last mega- deal in the sec­tor’

Yorkshire Post - Business - - BUSINESS -

IF THE merger be­tween Lon­don Stock Ex­change and Deutsche Bo­erse goes ahead, it could be the fi­nal mega- deal in the in­dus­try as fur­ther com­bi­na­tions of such scale are likely to hit an­titrust buf­fers, ac­cord­ing to an­a­lysts.

The two com­pa­nies will seek to over­come the kind of reg­u­la­tory con­cerns that scup­pered Deut- sche Bo­erse’s at­tempt to merge with NYSE Euronext four years ago, a deal blocked be­cause it would have cre­ated a near- mo­nop­oly on ex­change- traded de­riv­a­tives in Europe.

They could ar­gue there is less over­lap be­tween cer­tain busi­ness lines in any one re­gion, namely Europe, say in­dus­try ex­perts; for ex­am­ple while Deutsche Bo­erse has a big Euro­pean de­riv­a­tives trad­ing op­er­a­tion, LSE is largely ab­sent from that busi­ness.

If the deal is cleared it would cre­ate a ‘ Big Four’ of trad­ing pow­er­houses that out­strip ri­vals in terms of mar­ket value and global reach – ICE and CME in the United States, LSE- DB in Europe and Asia’s Hong Kong Ex­changes and Clear­ing.

Each would have such large global op­er­a­tions in shares and de­riv­a­tives trad­ing, as well as indices and clear­ing, that any ar­gu­ment that busi­ness lines do not over­lap could not pre­vail again, say in­dus­try of­fi­cials and an­a­lysts.

“The very big play­ers are al­ready start­ing to be in dan­ger of run­ning into an­titrust any­where they go,” said Pa­trick Young, a con­sul­tant to ex­changes since the days of the first LSE- Deutsche Bo­erse tie- up pro­posal back in 2000.

“We are com­ing to the point where the great ex­changes merg- er game is com­ing to an end, the great pow­ers have been de­fined.”

Reg­u­la­tors would be un­likely to al­low the CME and ICE to merge, for in­stance, given a com­bined group would have a nearunas­sail­able po­si­tion in US se­cu­ri­ties trad­ing.

It is also un­likely that ICE would be al­lowed to buy a com- bined LSE- Deutsche Bo­erse group as this would cre­ate an ef­fec­tive mo­nop­oly of listed de­riv­a­tives trad­ing in Europe, say an­a­lysts.

It would also be hard to en­vis­age the Chi­nese govern­ment al­low­ing a for­eign ex­change take over Hong Kong Ex­changes & Clear­ing, they said.

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