The Swedes are good news for the Stock Exchange

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You do not need to be a day trader in stocks and shares to know that a single stock market for the whole of the European Union is probably both inevitable and desirable. In order to exploit the advantages of the single market, European companies need to reap the efficiencies of scale not just of a market of 320 million consumers, but of a market for capital that is still heavily divided by national boundaries and different regulatory regimes.

You do not need to be a day trader in stocks and shares to know that a single stock market for the whole of the European Union is probably both inevitable and desirable. In order to exploit the advantages of the single market, European companies need to reap the efficiencies of scale not just of a market of 320 million consumers, but of a market for capital that is still heavily divided by national boundaries and different regulatory regimes.

Capital markets, unlike product markets, are of course less tied to geography, as the Nasdaq exchange for new technology stocks has proven. It is based in the US, but is used all over the world. But geographical centres of financial expertise still matter, and the City of London is still vitally important to Britain's future prosperity.

The logic behind the proposed merger between the London Stock Exchange and its Frankfurt rival, the Deutsche Borse, is therefore irresistible. But that is roughly as far as the case for the merger gets. The practicalities of setting up the new exchange - to be called iX as if it were some kind of trendy coloured-plastic computer - have been handled so disastrously that the merger should now be called off.

Don Cruickshank, the chairman of the London Stock Exchange, has responded to repeated expressions of concern about the terms of the merger with waffly assurances that it will turn out all right in the end. We should be grateful that the company which runs the Swedish stock exchange, OM, has stuck a large spanner into this vat of treacle. Its takeover bid for the London Stock Exchange, which has just converted from a gentlemen's club to a public company, should at last force some clarity on the complex issues at stake.

There are only three issues at stake in running Europe's capital markets and they are efficiency, efficiency and efficiency. OM thinks it can run the biggest whelk stall better than Mr Cruickshank, the man who used to regulate BT. From the London Stock Exchange's recent history of systems foul-ups, let alone BT's continued fleecing of its customers by virtue of its dominant position, the evidence favours the Swedes.

OM's intervention will either cause the iX merger to collapse or force the managements of the London and Frankfurt exchanges to revise their plans to explain clearly how they will provide a better service than at present.

The Swedes have given us Abba, better furniture and safer cars. Now they might have given Europe more efficient capital markets. We have a lot to thank them for.

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