(September 8) – “UK regulators believe Anglo-German attempts to harmonise share trading rules will be ‘a nightmare’ if the London Stock Exchange and Deutsche Borse merge to create iX,” write Vincent Boland and Francesco Guerrera in today’s Financial Times.
“This emerged on Thursday as further details came to light from a report commissioned by Merrill Lynch, the investment bank advising the LSE. The report says senior staff at the Financial Services Authority have said privately that it will be difficult to achieve ‘any practical level of harmonisation’ of UK and German stock market regulations.”
“Merrill said on Thursday that it ‘remains committed to the vision of an integrated European equity capital market and the benefits this will bring to investors and companies’ “.
“It added that ‘had the extraordinary general meeting of LSE been held on September 14, it would have voted in support of the [iX] merger’. However, the bank declined to say how it would vote if the merger plan came before shareholders at a later date or what its intentions are towards the hostile bid from Sweden’s OM Group.”
“Harmonisation of the different regulatory regimes in the UK and Germany is considered essential for investor confidence in iX. The FSA and Germany’s Federal Securities Trading Supervisory Office are working on ‘a common regulatory approach wherever appropriate’ for the proposed new market.”
“The FSA is known to have been aware of the Merrill report, which caused a furore at the bank and among LSE shareholders Thursday after details were published in the Financial Times. It was commissioned by executives in the bank’s equities division to examine the implications of iX and was written by the law firms Linklaters and Cleary Gottlieb Steen & Hamilton.”
“But the regulator denied on Thursday that the comments in the report reflected its views. ‘We have a process in place to develop effective arrangements for supervising iX and to work towards appropriate harmonisation of supervisory standards if iX is the preferred choice of shareholders [in the LSE and Deutsche Borse],’ the FSA said.”
“Senior LSE executives are understood to have requested copies of the report. Paul Roy, head of the Merrill division that commissioned it, said ‘we continue to support the stock exchange and Deutsche Borse in their intention to form iX.’ “
“The LSE said it was not concerned by the report even though Merrill is its adviser on the merger and is also the biggest user of the stock exchange. The LSE is also trying to head off a revolt at next week’s annual meeting by opponents of the iX merger against the appointment of Don Cruickshank as chairman.”