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New doubt cast on LSE Deutsche Boerse merger

First Published 27th February 2017

London Stock Exchange 'highly unlikely' to be able to meet 'disproportionate' demands from European Commission to sell its 60% stake in MTS.

Following London Stock Exchange's agreement to sell part of its clearing business, LCH, the European Commission has has now requested that Deutsche Börse and London Stock Exchange Group commit to the divestment of LSEG's majority stake in MTS, the Italian regulated electronic trading platform, in order to secure merger clearance.

The Commission requested that the parties formally submit a remedy proposal for the divestment of LSEG's majority stake in MTS by 12pm (CET) on Monday, 27 February 2017.

In a statement the LSEG said it regards the required MTS remedy as disproportionate and resolved to not commit to the required divestment of it's majority stake in MTS.

The statement continued: Following dialogue with Italian authorities about the Commission's required remedy and given prior discussions between the principals and Italian authorities regarding LSEG's Italian businesses in the context of the Merger, the LSEG Board believes that it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSEG were to give the commitment. Moreover, the LSEG Board believes the offer of such a remedy would jeopardise LSEG's critically important relationships with these regulators and be detrimental to LSEG's ongoing businesses in Italy and the Combined Group, were the Merger to complete.

LSEG said it will continue to take steps to seek to implement the Merger.

MTS is a regulated electronic trading platform for European wholesale Government Bonds and other fixed income securities. It is a systemically important regulated business in Italy due to its significant role in the trading of Italian Government bonds and other securities. Although MTS is not on its own a major contributor to LSEG Group revenues, LSEG's Italian businesses represent a significant proportion of LSEG Group revenues and profitability.

Any change of control of MTS would require, in particular, the approval of the Italian authorities and would trigger parallel regulatory approval processes in other jurisdictions including the UK, Belgium, France and the USA.