More trouble for London Stock Exchange and Deutsche Boerse, as European investors group opposes merger to create "quasi-monopolistic" group

 
William Turvill
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The sign for the London Stock Exchange i
The London Stock Exchange and Deutsche Boerse agreed a £21bn merger in March (Source: Getty)

A European investors trade body has written to the European Commission to say it is “highly concerned” about the implications of the London Stock Exchange-Deutsche Boerse merger.

"The merger swiftly creates a long lasting position of ‘super’ dominance for LSE/DB and therefore poses a direct threat to the freedom of choice for (future) listed companies and investors,” the European Investors’ Association wrote to commissioner Margrethe Vestager.

“It will also result in a weakening of legal protection for continental European market participants. We therefore wish to urge the European Commission to take the aforementioned into consideration when investigating the planned merger.”

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Signed by chairman Paul Koster, the letter highlighted the fact the merged company’s market capitalisation of €26bn (£22bn) would be 10 times larger than its nearest competitor, Euronext.

The organisation fears the tie-up would mean “in several critical market segments [including indices, exchange traded funds and clearing] there will be a move from a situation where there is substantial competition among three major market players to a quasi-monopolistic one in which the merged entity is overly dominant”.

It said: “Therefore, the merger will result in a substantial lessening of effective competition and reduction of freedom of choice.”

Read more: Rival exchange eyes from LSE merger "opportunities" as EU opposition grows

The body also said the deal would “pose a direct threat” to Europe’s planned Capital Markets Union (CMU).

“The CMU is built around the concept of a harmonised European regulatory regime,” the letter said. “There is however a real possibility that companies seeking a listing on LSE/DB will circumvent DB, thus avoiding important EU rules in areas where the UK regime seems more malleable.

“Such regulatory arbitrage is harmful to investors, and jeopardises the level playing field that CMU is trying to promote.”

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