Wednesday 6 July 2016 1:42 pm

Deutsche Boerse tells German politicians: Merged stock exchange will have EU HQ

Deutsche Boerse has informed politicians in Germany that it will have an EU headquarters after a merger with the London Stock Exchange, City A.M. has learned.

This would mean that, after a full Brexit, London would either lose or share the HQ of the combined group.

Mark Garnier, a Conservative MP on the Treasury Select Committee, told City A.M. the move would be “very, very profound” and “symbolically enormously significant”. He also dismissed the idea of having a joint HQ as “completely absurd”.

Read more: London may lose, or share, merged stock exchange HQ after Brexit – sources

Both exchanges had previously said London would host the joint HQ as a condition of the deal. And, in a joint statement, they said: “We refer back to our previous statements on this matter – those still stand. The terms of our deal – which are binding – remain unchanged.”

But sources close to the deal told City A.M. earlier this week that the deal’s Referendum Committee – made up of representatives from both exchanges – will consider the HQ issue.

No decisions have yet been made, but it could recommend a joint HQ system, whereby London would share the status with another European city, such as Amsterdam.

It has also been made clear to politicians in Hessen, the German region where Frankfurt and Deutsche Boerse are based, that the merged exchange will have an EU-based HQ.

Ulrich Caspar, a member of parliament in Hessen, told City A.M. Deutsche Boerse represenatives assured him on Tuesday night that there will be an EU base. He said other politicians in the area have been told the same.

Read more: Deutsche Boerse to "devote all efforts" to make stock exchange merger work

“In a practical sense, we just have to make sure that we respond to this with the right legislative programme, the right regulatory programme and taxation,” Garnier said.

“But the symbolism of a European city securing that, even if it is a joint headquarters, would be very, very profound. I would take it very, very seriously indeed.”

He added: “You can’t possibly have a joint headquarters. The whole idea is completely absurd. You can’t run anything from two HQs. And apart from anything else, look at the great arguments we have about Brussels and Strasbourg.”

German politicians also may be unhappy with the arrangement. Asked whether he would be supportive of the deal under a dual HQ system, Caspar said: “No, we think the HQ has to be in Hessen. In Germany, stock exchanges are public institutions, not private companies.

“Deutsche Boerse AG is the operator of the Frankfurt Stock Exchange and Eurex. Therefore, from a political view it is essential that it operates under regulatory supervision, which in this case is by the State of Hesse.”

London Stock Exchange shareholders approved the deal earlier this week, and Deutsche Boerse investors have until 12 July to do the same.