Börse hits new obstacle in £1.3bn LSE bid as bankers get bolshie

Deutsche Börse's £1.3bn tilt at the London Stock Exchange is to be dealt another blow when the London Investment Bankers Association wades into the row about settlement charges and ownership.

Liba - which is headed by Morgan Stanley's Sir David Walker and represents most of the major users of the LSE - is expected to make a statement on the takeover battle this week.

It will say that it is concerned about the potential for lack of competition in settlement and clearing - the activities which happens after trades take place - if a bid for the LSE succeeded.

It also wants reassurance that the cost of trading shares in London will not rise as a result of a takeover.

Deutsche Börse owns its own settlement company, Clearstream, which anyone who trades on the exchange is required to use. However, the LSE settles its trades through an independent service, Crest, and clears them though LCH.Clearnet, an operation that is partially owned by Euronext, a Franco-Dutch exchange company.

Euronext has said it is interested in making a rival offer for the LSE. Its chairman, Jean-Francois Theodore, met with the LSE's chief executive, Clara Furse, on Friday and is expected to make a bid in the next few weeks. Ms Furse met with Deutsche Börse's chief executive, Werner Seifert, earlier in the week.

Further meetings between the LSE and its two suitors are scheduled for later this week.

Chris Tupker, the chairman of another rival clearing company, Euroclear, warned that the takeover of the LSE by a company that owned its own clearing business should be a "red light" to competition authorities.

This was interpreted as a criticism of Deutsche Börse, as Euronext has only 25 per cent of the voting shares in LCH.Clearnet. Deutsche Börse denied that it would sell Clearstream if this was an impediment to winning the LSE.

Deutsche Börse has claimed settlement costs would fall if it bought the LSE. But many in the London market are not so sure.

"The bidders will need to get £500m of synergies to pay for buying the LSE, and a lot of that will come out of the pockets of the users," said one stockbroker.