Why WE should be deciding the fate of City’s crown jewel

THE proposed £21billion merger between the London Stock Exchange Group (LSEG) and its German rival Deutsche Boerse provides a golden opportunity for Prime Minister Theresa May to live up to her promise to carefully scrutinise overseas takeovers.

The London Exchange sits at the heart of the City and is the dominant institution for settling and clearing billions of pounds of financial payments in Europe.

The European Commission has now announced that it will be conducting a full probe into the deal, which would make the German exchange the dominant shareholder in the LSEG.

The EC will assess the impact on competition for share dealing, options trading and clearing for settlement of transactions across the European Union.

So far, Brexiteers have been reluctant to interfere with the transaction, which would appear to show that the UK is still open for business – and to foreign investment – despite June’s vote for Britain to leave the EU.

But letting the bloc’s competition commissioner take charge of a probe that is vital to the future of the City of London looks like an act of supreme folly.

There is an ironclad case for Britain’s own regulator – the Competition and Markets Authority – to investigate the deal’s impact on Britain’s booming financial services industry in the wake of Brexit.

There is widespread concern in the City that if the deal goes ahead, the centre of gravity for share and options dealings in the euro and other currencies could shift from London to Frankfurt – undermining the role of the Square Mile as a global financial centre. Under the terms of the deal, which already has won approval from shareholders, the London Stock Exchange would report its financial results in euros and be headed by Deutsche Boerse’s German chief executive Carsten Kengeter. It has been promised that its operational headquarters would be in London.

The LSEG is regarded as one of the three pillars of the City, along with the insurance market Lloyd’s of London and the Bank of England. Tracing its origins back to 1698, it is by a long chalk the largest cash market for shares, bonds and other financial products in Europe. In the recent past it has fended off takeover efforts from the New York Stock Exchange, Deutsche Boerse, the Scandinavian exchange OMX and the aggressive Australian private equity investor Macquarie.

BY remaining independent it has grown in leaps and bounds, adapting seamlessly to the complexities of digital trading. As the LSEG is a vital part of the City’s infrastructure, failure of the Government to investigate the impact of the deal on the UK’s trade in services with the rest of the world would be a dereliction of duty – particularly when Frankfurt and Paris are vying to steal Britain’s leadership in financial services.

It is to the credit of the forensic competition commissioner Margrethe Vestager, a Dane, that she is willing to take up the cudgels against big corporate power.

However, it should be obvious in Downing Street that the fate of one of Britain’s most distinguished institutions should not be adjudicated by the European Union. Post-Brexit, it borders on ridiculous to leave the task of assessing the competition implications to a European Commission in which we want no part.

The fate of a key home-grown institution should be regulated from London not Brussels.