France pushes to extend LSE pact

THE LONDON and Frankfurt stock exchanges yesterday bowed to pressure from the French and agreed to talks aimed at widening their bilateral alliance announced in July to include the smaller continental bourses.

The LSE chief executive, Gavin Casey, and Deutsche Borse chairman Werner Seifert have accepted an invitation to meet their counterparts at seven of the other European stock exchanges for talks in Paris next Friday.

The French finance minister, Dominique Strauss-Kahn, indicated yesterday that he expected France to join the alliance in January. Madrid and Milan have also publicly expressed a wish to come in on the London-Frankfurt deal.

In a separate development, the London International Petroleum Exchange said yesterday that it was forming a joint working group with the New York Mercantile Exchange to look at whether the two markets should merge.

The Paris meeting will be attended by the heads of the exchanges of Amsterdam, Brussels, Milan, Madrid, Stockholm and Zurich. Invitations were not extended to the Dublin, Lisbon, Copenhagen and Helsinki exchanges after objections from London.

The meeting follows months of lobbying by the French who were angered at their exclusion from talks that led to the London-Frankfurt pact. Its purpose is to "define the next steps towards the creation of an efficient and accessible market".

An attempt by the French to set up a parallel alliance has collapsed. Instead the French have now accepted, after discussions with both London and the other continental exchanges, that the agreement between London and Frankfurt should form the basis of any wider deal.

London and Frankfurt insist they will go ahead as planned with the first stage of their co-operation on 4 January, which will involve crossover membership of the two exchanges.

Nathalie Boschat, the London representative of the Paris Bourse, said the important thing was that it was now accepted that a genuine pan-European alliance had to be "multilateral not bilateral".

Mr Casey was yesterday unwilling to respond to questions about developments. However, a spokesman said: "We warmly welcome the participation of other European exchanges who share our strategic vision," but he insisted that as far as the London stock exchange was concerned, matters were still a long way from a deal.

The decision to widen the talks was welcomed by brokers, who have been frustrated at the inability of the stock exchanges to set aside differences and work together to create a common pool of liquidity for European shares.

Scott Dobbie, at securities house BT Alex.Brown, said yesterday: "We are very keen to see concentration of liquidity. We don't want a dozen stock exchanges. It appears that London and Frankfurt have got up a sufficient head of steam to make everyone feel that they are going to get left out.

"The important thing is that they are not going to stop to let everyone else catch up. London, Frankfurt and Paris together account for around 80 per cent of trade. Together it is a winning combination."

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