EU Regulators Sound Alarm on LSEG, Deutsche Börse Merger

EU regulators have warned that the merger could threaten rivals' chances of competing for clearing operations.

The landmark merger between the London Stock Exchange Group (LSEG) and Deutsche Börse has once again drawn concern from European Union regulators who fear that rivals will be pushed out of the market given the scope of the newly merged entity.

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This week, EU regulators told Deutsche Börse and the LSEG Plc that the prospective deal could potentially eliminate rivals for clearing services, which would effectively suggest a monopoly on this type of service, according to a recent Bloomberg report. The latest concerns constitute a long list of grievances against the merger in the EU, which previously included France, Portugal, and Belgium.

Back in July, Portugal’s Finance Minister Mario Centeno warned: “The merger would negatively impact the functioning of the capital market. Such a concentration of trading and trade-related services poses a clear threat to competition. It also endangers the viability of several European stock exchanges.”

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The merger would negatively impact the functioning of the capital market

The sheer magnitude of the operations following the merger would make it difficult for clearing competitors to have a chance against the combined entity. For its part, the European Commission stated these concerns in a statement of objections it sent to Deutsche Börse and LSEG in December.

The LSEG has taken steps to mitigate these concerns, including the sale of a French clearing unit to Euronext NV. Earlier this week the LSE shot down rumors that it would be relocating the core of its clearing business to Frankfurt after the merger. Several parties were concerned about the extant flow of jobs and personnel from the UK to Germany following the deal.

The fears of a large-scale relocation of talent are well founded, given the present situation unfolding across the UK’s financial services industry. Over the past two years, leading banks have jettisoned thousands of IT and back office jobs, while trading desks have shrunk or been consolidated, or simply packed up shop and moved to other regions.

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