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The LSE said it had “no intention” of relocating “certain of its businesses” if the €28bn tie-up with its German rival is blessed by European authorities. No such action was being contemplated and “any statements suggesting otherwise are inaccurate and misguided”, it said. Its forthright denial came in response to a study released by Deutsche Börse last week that talked up the benefit of the merger to Frankfurt as a financial centre. The study said that “clear improvements in the conditions for issuers and investors can be expected . . . and regulatory bodies will retain their ability to intervene in London’s financial centre . . . especially if clearing and settlement processes were to be integrated in Frankfurt”. It was written by Dirk Schiereck, chairman of corporate finance at Technische Universität Darmstadt. The findings touched on tensions over the fate of London’s euro-denominated clearing after Britain’s exit from the EU, and pressure from German politicians to move the joint headquarters of what will be Europe’s largest exchange to Frankfurt. Euro-denominated clearing has been flagged as a potential flashpoint in forthcoming Brexit negotiations, with the UK government tasked with protecting the City of London, the world’s biggest centre for clearing euro derivatives.
Deutsche Börse said the study was based on independent scientific research and would not comment on its findings. “We do not want to prejudge the decisions that politicians, central banks and regulators may or may not take in future. At its core, the LSEG/DBG merger is not about relocating businesses,” it said.
The LSE said there would be no change of location to any of the regulated clearing and settlement entities that were part of the merger — including Deutsche’s Eurex and Clearstream units, and its own LCH and Italian operations. The report also said the German exchange had “a good chance” of winning market share in interest rate and currency derivatives trading, citing the example of Bund futures switching from London to Frankfurt in the late-1990s. Others have described that move as “a one-off”.
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