Goldman divisions surface over London-Frankfurt merger

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The Independent Online

Traders at Goldman Sachs are understood to have stated their opposition to the London Stock Exchange's merger with the Deutsche Börse, despite the investment bank advising the German exchange on the deal.

Traders at Goldman Sachs are understood to have stated their opposition to the London Stock Exchange's merger with the Deutsche Börse, despite the investment bank advising the German exchange on the deal.

Their dislike has been voiced in a number of internal memos, echoing the comments of dealers at Merrill Lynch, which is advising the LSE.

They centre on concerns about liquidity, regulatory problems, costs and speed of integration. A leaked Merrill report described the merger as "unworkable".

A source said that the feeling at Goldman was almost as strong. He quoted one senior dealer saying it would take a decade for the market to iron out the problems of merging London with Frankfurt to create iX.

However, the only other plan on the table at the moment, the £900m bid for Swedish group OM, is expected to suffer a major setback this week.

An influential group of stockbrokers is expected to say that it would prefer a deal that "addresses the European issues" as a replacement to the iX merger.

"The Swedish deal offers to keep London as a stand-alone exchange, but we have gone too far down the road for that," said a source at one of the London market's largest traders.

The comment will encourage the Euronext consortium, made up of the Amsterdam, Brussels and Paris markets, to step up its plans to make a bid for the LSE. However, a Euronext spokesman said dealers should not hold their breath. "The merger of the three exchanges does not become a fact until 22 September," he said. "Until then we are merely watching closely."

Also waiting in the wings are Instinet, the trading business owned by Reuters, and Nasdaq, the giant US exchange specialising in technology. Instinet is understood to be looking to make a cash offer for the LSE, possibly in conjunction with a partner. Nasdaq is understood to be willing to become a white knight in any deal with the LSE.

OM was expected to put out an offer document last week but failed to produce it by Friday. It hopes to publish its full offer in the next few days.

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