Liffe boss renews attack on Deutsche's merger plan

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The Independent Online

The chief executive of Liffe, the London futures exchange, renewed his attack on Deutsche Börse yesterday, as the German exchange operator launched a "charm offensive" in the City.

Deutsche is desperate to break up the Paris-based Euronext's attempt to merge with the New York Stock Exchange but faces furious opposition in the City.

Liffe boss Hugh Freedberg has already claimed that a successful Deutsche bid for Euronext would result in the closure of Liffe, which would be merged with Deutsche's Eurex to create a single dominant exchange for derivatives.

The antipathy of London firms to this is likely to trigger a full-scale European competition inquiry into Deutsche's bid proposals.

Deutsche has sought to assuage City concerns by saying traders would still be allowed to clear their derivatives trades through London's LCH-Clearnet rather than having to use the Deutsche Börse-owned Clearstream.

However, Mr Freedberg said: "We can't see how this would work in practice. Deutsche has said it will dismantle the Liffe connect trading system. So they would have to build a new link between Eurex's system and LCH-Clearnet That would be disruptive and expensive in terms of technology and administration."

Mr Freedberg also denied Deutsche claims that the two exchanges had complementary products and did not compete except at the margins.

"We actively compete in equity derivatives and in several interest rate products," he said. "All the technology, the chief executive, and all the senior management would end up in Frankfurt. There might be a few sales offices in London. It would be bad for customers."

Deutsche maintains that it is committed to retaining London as a "derivative hub" and has denied a merger would be anti-competitive.

Some hedge funds are pressing Euronext to do a deal with Deutsche, but Euronext's preferred option is the NYSE and an extraordinary meeting to vote on the New York exchange's offer is likely to be held in December.