Brokers demand more detail on iX regulation

British and German regulators yesterday issued their preliminary findings on a framework to govern the merged London and Frankfurt stock exchanges, but brokers said that the document left many key issues unresolved.

British and German regulators yesterday issued their preliminary findings on a framework to govern the merged London and Frankfurt stock exchanges, but brokers said that the document left many key issues unresolved.

The long-awaited joint paper from the Financial Services Authority and its German counterpart, the Federal Securities Trading Supervisory Office, comes less than a month before LSE shareholders vote on the deal on 14 September.

Yesterday's paper appeared to endorse the use of London's disclosure requirements, regarded by many City-based brokers as tougher and more desirable than Germany's. But the paper conceded more consultation was needed ahead of a firm decision. It said no change in takeover codes was planned.

Brian Winterflood, head of Winterflood Securities, said; "The [paper] from the FSA means nothing. They are setting up more and more committees.... We haven't got the answers to all the questions."

The document recognised that some harmonisation measures would require legislation, with legal codes governing share trading and market monitoring evolving after iX, the proposed name for the new exchange, came into existence.

"The market surveillance units for iX exchanges will be able to monitor all the transactions conducted on each exchange," the document said. "For these purposes, the authorities need to know all trades the firms have undertaken (whether in Germany or the UK)." Some UK brokers have voiced concern that with 30 per cent of German trades being conducted off-market, and not reported, use of the German code could dilute the City's regulatory regime. But the document added, "the authorities note that the legal and regulatory requirements governing the scope and level of their transparency arrangements needs further consideration". To secure the vote on 14 September, the LSE needs the approval of three-quarters of its shareholders.

The issuing of the regulators' document coincided with a meeting in London of the Association of Private Client Investment Managers and Stockbrokers (Apcims) to discuss the merger. Apcims has voiced serious concern about the deal, with a delegation visiting Frankfurt last Friday to meet Werner Seifert, head of Deutsche Börse.

Angela Knight, Apcims head, described the regulators' document as preliminary, saying: "It's evidently not enough to sort out all the issues."

Mr Winterflood, who was on the Apcims delegation, said yesterday's meeting had been "pretty fiery". Last Friday, Mr Seifert had backed a movement towards City standards on disclosure, Mr Winterflood said.

Don Cruickshank, chairman-designate of the iX, welcomed the release and said the document proved the regulators were committed to establishing an effective regulatory framework.

Sir Howard Davies, FSA chairman, said the proposals would be amended over the coming weeks and conceded that brokers' opposition may scupper the deal. Sir Howard said: "We will continue to work closely with the German authorities to refine these arrangements if the deal goes ahead."