EU pulls plug on LSE's merger with Deutsche Borse

European regulators have killed off the London Stock Exchange Group's agreed £21 billion merger with Deutsche Borse, saying the deal would have forged a 'de facto monopoly'.

The EU has blocked the blockbuster merger between the London Stock Exchange and Deutsche Borse. Picture: Odd Andersen/AFP/Getty Images

The European Commission moved to block the deal after it said the two exchanges had failed to address its competition concerns.

Last month the LSE rejected the commission’s request to offload its 60 per cent stake in the Italian trading platform MTS as a bargaining chip to get the merger agreed.

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Margrethe Vestager, the EU’s competition commissioner, said: “The European economy depends on well-functioning financial markets. That is not just important for banks and other financial institutions. The whole economy benefits when businesses can raise money on competitive financial markets.”

She added: “The merger between Deutsche Borse and the London Stock Exchange would have significantly reduced competition by creating a de facto monopoly in the crucial area of clearing 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 tie-up has faced multiple hurdles since it was first mooted in February last year, with Britain’s Brexit vote flagged by analysts as a potential barrier.

The LSE had agreed to offload its French clearing business LCH to Euronext to help smooth the passage of the merger.

However, further doubts were raised last month when it was revealed that Deutsche Borse boss Carsten Kengeter was under investigation by German authorities over alleged insider dealing.

It marks the third failed attempt in 17 years to create a British-German exchange and came just hours before Britain triggered negotiations over its exit from the European Union.

The London Stock Exchange Group said it regretted the EU Commission’s decision. “LSEG believes the proposed merger with Deutsche Borse in combination with the LCH SA remedy would have preserved credible and robust competition in all markets.

“This was an opportunity to create a world-leading market infrastructure group anchored in Europe, which would have supported Europe’s 23 million SMEs and the development of a deeper Capital Markets Union.”

The LSE said it disagreed with the EU Commission’s findings that LCH SA could not be a “viable stand-alone competitor” without MTS’s sale.