Paris warns on LSE-Deutsche Börse merger

Michel Sapin, France's finance minister, speaks at a news conference during the International Monetary Fund (IMF) and World Bank Group Spring Meetings in Washington, D.C., U.S., on Thursday, April 10, 2014. Photographer: Andrew Harrer/Bloomberg©Bloomberg

Michel Sapin says he cannot see how Britain can retain influence in the EU if it is outside the bloc

Paris has warned it may raise competition fears with regulators over the planned $ 30bn merger between the London Stock Exchange Group and Deutsche Börse.

The deal is expected to create a London-based European trading, data, settlement and risk management behemoth that could compete against rivals in the US and Asia.

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It will put some of the region’s largest stock markets and clearing houses, which manage risk in equity and derivatives trades, under one company.

Both the UK and German managements have also said the deal would benefit Europe’s planned capital markets union, which is aimed at stimulating growth and market-based investments on the continent.

However, on a visit to Japan, Michel Sapin, French finance minister, said he wanted to “express the concern of the French government on this tie-up”.

“We have doubts about the consequences this could have for the financing of the real economy in France and Europe,” he said in an emailed statement to the FT.

“The merger of these two entities will result in a large group which could hold within it a majority of the tools that make our markets function efficiently. That poses a competition problem, and we want to make sure the European Commission gets involved to avoid a situation where a dominant position arises.” The comments were first made in an interview to AFP.

The tie-up between London, Europe’s largest trading hub, and Frankfurt, home of the eurozone central bank, may put Paris’s role in financial markets further in the shade.

The combined company intends to keep Clearnet, the French clearing house that processes equities, derivatives and credit swaps, as part of the deal. However, they have considered offloading the Paris-based business to attempt to allay competition concerns, according to three people familiar with the talks.

The LSE and Deutsche Börse will put their merger to both sets of shareholders in July. Approval would allow the deal to be put before European antitrust regulators in Brussels. The deal is expected to close by early next year.

In France, Clearnet operates under a banking licence and is also kept under the supervision of the European Central Bank. It merged with the London Clearing House more than a decade ago but the two divisions are not fully integrated.

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