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. Last Updated: 07/27/2016

Exchanges Set to Resume Merger Talks




LONDON -- British and German stock exchange officials resume merger talks Tuesday, aware that omens for success are less than auspicious.


The London Stock Exchange and Frankfurt's Deutsche Boerse were saying little Monday but officials did nothing to discount speculation that the outcome may be known in around 10 days' time.


The talks take place against a background of reports that the LSE is also wooing the U.S. technology-led Nasdaq market and after negative British Sunday newspaper commentary.


The atmosphere was also soured by an accidental pre-weekend leak of an LSE document that prepared to blame the German side for intransigence if the discussions failed.


The Sunday Times said the LSE was fighting to avoid becoming the junior partner in a deal with Frankfurt.


The Sunday Telegraph also reflected concern about a diminished role for London, depicting the sign outside the LSE building edited to read "The Bosch Exchange" and the German eagle sprayed on the wall.


"The Exchange is still Europe's biggest equity market and has a pivotal role in any rationalization. It must ensure it ends the bungling and strikes a deal which ensures its future pre-eminence," the paper said.


Officials say the deal has been helped along by an agreement to exclude clearing and settlement from a merger. Part of the Frankfurt exchange's power comes from its 50 percent holding in settlement house Clearstream.


It also has a 50 percent share with the Swiss Exchange in Eurex, which claims to be the world's leading derivatives exchange.


The Financial Times also said Saturday the LSE was insisting that a merger be structured not to look like a takeover by the Deutsche Boerse.


Papers said the LSE was in talks with Nasdaq about joining the linkup. The Daily Telegraph said Nasdaq, which is already planning a European operation, wanted a role in a merged exchange.


An LSE spokeswoman on Monday would not comment on the reports but said it had been in talks with a number of exchanges.


Deutsche Boerse's chief executive Werner Seifert is widely expected to lead any merged bourse, which raises the question of who would get the chop in a post-merger board shake-out. LSE chief executive Gavin Casey may well be the fall guy.


Despite talk of a deal in 10 days' time, one source said last week that if the deal was not done this weekend - a four-day Easter break - the probability was that it would fail.


"The exchanges set a deadline of last Friday to conclude this deal and they did not, and they gave themselves one further week," he said, adding that the German exchange was under pressure to produce details for its initial public offering prospectus, ahead of its May 4 shareholders' meeting.


Bourses are being forced to merge to derive better economies of scale by having just one trading platform, as advances in technology and globalization of trading lower entry barriers.


Last month, the Paris Bourse stole the limelight on the European stage by announcing it would merge with exchanges in Amsterdam and Brussels to create Euronext.