LSE/Deutsche Börse merger blocked by European Commission

Mar 31st, 2017 | By | Category: ETF and Index News

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The European Commission has formally announced they have blocked the proposed merger of the London Stock Exchange (LSE) and Deutsche Börse, in a move that confirms widespread market expectations. Had it been allowed, the £24 billion union of Europe’s two largest exchange operators would have overseen a combined market share of around 70% of ETF trading volume in Europe.

LSE/Deutsche Börse merger blocked by EU

ETF trading hubs LSE and Deutsche Boerse have had their merger opportunity officially blocked by the European Commission.

The Commission’s objections about the deal were that the combined company would have had a “de facto monopoly” in the markets for clearing of fixed income instruments in Europe, as well as removing “horizontal competition for the trading and clearing of single stock equity derivatives”. The combined company would have included Borsa Italiana, which is currently owned by LSE.

LSE had agreed to the sale of LCH SA to Euronext to avoid the Commission’s first point of concern. However, the final ruling released on 29 March came as no surprise after LSE announced last month that it was not willing to divest its Italian trading platform, MTS, as part of the deal to appease the regulators’ second point of concern.

Deutsche Börse became the first European exchange to list an ETF in 2000. It now lists over 1,100 ETFs with an average monthly trading volume of around €15bn. LSE currently lists around 900 ETFs with a monthly trading volume of £30bn.

In addition to the exchanges, the combined company would have owned the FTSE Russell and STOXX, two of the largest index providers to the European ETF industry.

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