German lawmaker warns US exchanges against Deutsche Boerse bids

March 30, 2017 10:13 AM

U.S. stock exchanges should not attempt to buy Deutsche Boerse, the German exchange whose bid to merge with its London counterpart has just collapsed, a senior German politician said on Thursday. 

"Deutsche Boerse is not only a private company but it also has state responsibilities," Thomas Schaefer, finance minister for the German state of Hesse, told reporters.

"The stock exchange authorities of Germany have to guarantee that if there is a change of owner, it has to guarantee that business has to continue uninterrupted as normal and it doesn't matter who makes an offer," Schaefer said.

Asked what his response would be if a U.S. exchange like ICE stepped in to bid for Deutsche Boerse, Schaefer replied: "I would rather recommend colleagues in America not to attempt to do this."

Hesse regulates the financial center in Frankfurt where Deutsche Boerse is based and also has a veto over any merger involving the exchange. 

The European Commission on Wednesday vetoed a planned tie-up between Deutsche Boerse and the London Stock Exchange Group, saying it would have reduced competition in fixed income markets.

In 2012, Brussels also vetoed a merger between Deutsche Boerse and NYSE Euronext, the U.S. exchange which ICE later acquired.

The collapse of the latest merger effort has triggered speculation of fresh attempts at consolidation among exchanges, with Singapore Exchanges looking at tie-ups abroad, according to media reports on Thursday.

Frankfurt to grow
Schaefer was in London to visit financial institutions and regulators as Frankfurt hopes to benefit from banks in London having to beef up their continental bases to continue serving clients after Brexit.

"We believe Frankfurt will grow," Schaefer said.

However, he expects that the Brexit "cake" will be divided among several financial centers in the EU.

Insurance market Lloyd's of London said on Thursday it has chosen Brussels for its European Union subsidiary because of its strong regulatory framework.

Schaefer said he believed banks would make decisions in principle over the next three to six months on where to set up new entities and relocate.

He also met with the European Banking Authority (EBA), which will have to relocate its headquarters from London, and noted that the European Commission has proposed that it is merged with the European Occupational and Pensions Authority, which is based in Frankfurt.

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