Brussels threat to iX deal

Mario Monti, the European Competition Commissioner, may step in to block the proposed merger between the Frankfurt and London stock exchanges.

The managements of the two markets have conceded there is little chance of the merger avoiding scrutiny from Brussels, and are now talking with lawyers to try and avoid the deal being frustrated.

The competition authorities are concerned that merging the London Stock Exchange with the Deutsche Börse will stop rival markets, such as the pan-European exchanges planned by Belgium's Easdaq and Tradepoint in London, from gaining a foothold.

The new merged exchange, named iX, will command over 95 per cent of traded volume in German and British equities and if, as is expected, the Nasdaq market in New York joins the group, iX will be the biggest stock exchange in the world.

However, there has been opposition to the merger from a number of quarters. Euronext, the group created by the merger of the Paris, Amsterdam and Brussels exchanges, rejected an invitation to join iX and is concerned about the dominance of the two large markets, while small brokers in the UK are concerned that the merger is too heavily biased towards the large brokers and large capitalisation, blue-chip stocks.

In London there was also concern that the deal, which splits the new company 50:50 with Frankfurt, is biased towards the German partner.