Brussels has blocked the merger of the London Stock Exchange Group and Deutsche Börse, vetoing a union unbalanced by the Brexit vote only minutes before the UK serves its European divorce papers.
Margrethe Vestager, EU competition regulator, ended the third attempt in 17 years to combine the Anglo and German exchanges after they refused to meet her requests to offset concerns about market concentration in fixed income clearing.
The formal halt – which had been widely expected – brings to an end a 15-month effort by the exchanges to create a European champion, which one its chief executives argued would be able to rival US and Asian competitors.
Ms Vestager said the merger would have created “a de facto monopoly” in the crucial area of fixed income instruments. As the parties failed to offer the remedies required to address our competition concerns, the Commission has decided to prohibit the merger.”
The finely-weighted deal was severely unbalanced by the UK’s vote to leave the European Union last June. It had been calibrated to allow for decision-making in London, Frankfurt and Milan, where the main market infrastructure is also owned by the LSE. Brexit radically altered the public debate on key issues such as the combined group’s headquarters, and clearing, which ensures trades are completed if one party in a deal defaults.
The LSE committed to selling its French clearing house to rival Euronext for €510m to assuage fears that a combination would curb competition in clearing of repo markets, which are used by banks to help fund their short-term lending.
However it balked at a further demand from the Commission to sell MTS, an Italian bond trading venue, which the Commission felt would ensure the clearing house sale was viable. The LSE acknowledged its decision, in late February, meant it was unlikely Brussels would pass the deal.
Get alerts on FT Trading Room when a new story is published