Brussels set to probe German LSE bid

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The Independent Online

The risk of intervention by Brussels in a Deutsche Börse bid for the London Stock Exchange rose yesterday after Euroclear stepped up its attack on the German exchange.

The risk of intervention by Brussels in a Deutsche Börse bid for the London Stock Exchange rose yesterday after Euroclear stepped up its attack on the German exchange.

Euroclear, the cross-border share settlement system owned by its users, said the LSE should insist that Börse sell its Clearstream settlement and Eurex clearing businesses before agreeing to any bid. Börse maintains it has no plans to sell either unit.

Euroclear is the preferred settlement partner for Börse's rival Euronext, which owns 3.6 per cent of it. Euroclear stands to lose important cash flows from settlement if Börse wins the takeover fight and transfers the LSE's clearing and settlement from LCH.Clearnet and Crest.

But Euroclear's comments also echoed concerns voiced by the users of the London exchange, who fear Börse's integrated structure - combining equity trading, clearing and settlement operations - gives it too much pricing power. While Frankfurt has sought to reassure users, they are worried that over time they would be forced to switch to Börse's providers.

Börse plans to file its takeover proposal to the UK's Office of Fair Trading shortly, and has already approached Germany's antitrust watchdog, the Bundeskartellamt, for approval of the deal. But while the deal is too small to merit the automatic attention of regulators in Brussels, it could still end up being referred to the European Commission, whose regulators are known to be concerned that high cross-border clearing and settlement costs prevent the creation of a pan-European capital market.

A spokeswoman for the OFT said: "We will consider referring a case to the European Commission where it is apparent that the European Commission is the best place of authority to review the merger," for instance if the assets involved are located outside the UK.

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