Friday 28 July 2017

London tie-up tipped to boost Frankfurt stock exchange

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt
Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt

Will Hadfield

Brexit will help strengthen Frankfurt's status as a main European financial hub if Deutsche Boerse completes its $12.4bn purchase of London Stock Exchange Group, according to research commissioned by the German exchange operator.

The merger "produces a wide range of potential opportunities and positive network effects for Frankfurt as a financial centre" to counter the German capital's recent decline in significance, according to the report.

Deutsche Boerse is trying to win the blessing of German regulators, which have voiced concerns about basing Europe's largest exchange operator in the UK capital, which is likely to be outside the jurisdiction of the European Union once the deal closes.

Political leaders in several eurozone countries have called for a rule change to force euro-denominated clearing - a process that makes it easier to settle very large trades - to take place within the EU once the UK leaves.

LSE subsidiary LCH is the world's largest clearinghouse for off-exchange interest-rate derivatives. Trading these products, which currently takes place between banks, could move to Frankfurt if the contracts can be turned into on-exchange derivatives, the report said.

"The LSEG/DBG merger is not about relocating businesses," Deutsche Boerse said in an e-mailed statement. "We do not want to prejudge the decisions that politicians, central banks and regulators may or may not take in future."

The Times earlier reported the findings of the research commissioned by Deutsche Boerse and produced by Professor Dirk Schiereck of the Technische Universitat Darmstadt.

(Bloomberg)

Irish Independent

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