New LSE Suitor Steps Down

by Robin Pilgrim, LawAndTax-News.com, London

26 September 2006

UK interdealer brokerage, Icap revealed this week that it had been in talks with the London Stock Exchange regarding a possible merger, but that negotiations have been called off.

According to reports in the UK media, the giant brokerage felt that the LSE shares were too expensive. However, a return to the negotiating table has not been ruled out by either party.

The LSE has attracted several potential suitors in recent years, including Deutsche Boerse, Australia's Macquarie Bank, and Euronext, a coalition of stock exchanges in the Netherlands, France, Belgium and Portugal. Nasdaq is also reported to be interested in significantly increasing its stake in the LSE, according to a Wall Street Journal report.

The implications of a foreign takeover of the Exchange have raised concerns in the UK, prompting the government to propose granting the Financial Services Authority greater powers in relation to recognised exchanges.

Earlier this month, Economic Secretary to the UK Treasury, Ed Balls, announced that the financial regulator will be given the power to veto rule changes proposed by recognised exchanges that would be disproportionate.

Talking about the planned legislation in a speech to the Hong Kong General Chamber of Commerce and the British Chamber of Commerce, in Hong Kong, Mr Balls explained that:

"The Government's interest in this area is specific and clear: to safeguard the light touch and proportionate regulatory regime that has made London a magnet for international business. That has made London an economic asset for the UK, for Europe, and for countries throughout the world. I can therefore announce today that the UK Government will now legislate to protect our regulatory approach."

He continued:

"This legislation will confer a new and specific power on the FSA to veto rule changes proposed by exchanges that would be disproportionate in their impact on the pivotal economic role that exchanges play in the UK and EU economies."

"It will outlaw the imposition of any rules that might endanger the light touch, risk based regulatory regime that underpins London's success."

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