Top German regulator says no to London HQ for Deutsche Boerse-LSE

Tue Jun 28, 2016 12:33pm EDT
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By Jonathan Gould, John O'Donnell and Huw Jones

FRANKFURT/LONDON (Reuters) - Germany's financial market regulator delivered a double blow to London on Tuesday, saying it could not host the headquarters of a planned European stock exchange giant after Britain leaves the EU, and nor could it remain a centre for trading in euros.

Felix Hufeld, who heads the Bafin regulator, is the most senior official to rule out London publicly as the head office of the merged Deutsche Boerse-London Stock Exchange group after Britons voted last week to leave the European Union.

Adding to uncertainty over the City of London's future, an EU official said the European Central Bank would push for the clearing of euro transactions to move to the common currency area within a couple of years.

Hufeld's remarks underline the vulnerability of what is currently Europe's dominant financial centre, with London's mayor trying to limit the damage while rival Paris wants to capitalise on the fallout from Thursday's referendum.

"Without doubt ... it is hard to imagine that the most important exchange venue in the euro zone would be steered from a headquarters outside the EU," Hufeld told reporters. "There certainly has to be an adjustment here."

Hardening positions in Germany, where politicians have made similar remarks, have created an additional hurdle to the planned $25 billion merger, which is now in danger of unravelling after Britain opted from Brexit.

Deutsche Boerse (DB1Gn.DE: Quote) declined to comment. An LSE (LSE.L: Quote) spokesman said shareholders would vote on the deal - which was first announced in February - on July 4 and the offer terms were unchanged.

As Germany's top supervisor, Hufeld's comments hold considerable weight and jar with recent statements from the LSE and Deutsche Boerse that the deal to create a European trading powerhouse will go ahead as is.   Continued...

The German share prize index (DAX) board and the trading room of Frankfurt's stock exchange (Boerse Frankfurt) are photographed with a circular fisheye lens during afternoon trading session in Frankfurt, Germany, February 23, 2016. REUTERS/Kai Pfaffenbach