EU blocks London Stock Exchange merger with Deutsche Boerse

European regulators have formally blocked the £25bn merger between the London Stock Exchange (Other OTC: LDNXF - news) (LSE) and Deutsche Boerse (IOB: 0H3T.IL - news) .

The development, which was widely expected, was significant in that it was announced just hours before the UK was due to formally trigger divorce proceedings from the EU.

The LSE had previously warned that the tie-up was all but dead in the water because it would not meet a requirement that it sell a 60% stake in a bond trading platform called MTS.

It described that regulatory demand as "disproportionate".

A deal would have created a trading powerhouse - headquartered in London - to rival the biggest US operators and it remained on track through last summer despite doubts raised by the UK's Brexit vote.

The European Commission ruled against it on competition grounds, saying it would have created a "de facto monopoly" in Europe.

Margrethe Vestager, the EU's competition commissioner, said: "The European economy depends on well-functioning financial markets.

"That is not just important for banks and other financial institutions. The whole economy benefits when businesses can raise money on competitive financial markets.

"The merger between Deutsche Boerse and the London Stock Exchange would have significantly reduced competition by creating a de facto monopoly in the crucial area of clearing of fixed income instruments.

"As the parties failed to offer the remedies required to address our competition concerns, the Commission has decided to prohibit the merger."

The LSE Group, which had already sold off its French clearing business LCH to help satisfy Commission concerns, responded: "LSEG believes the proposed merger with Deutsche Boerse in combination with the LCH remedy would have preserved credible and robust competition in all markets.

"This was an opportunity to create a world-leading market infrastructure group anchored in Europe, which would have supported Europe's 23 million SMEs and the development of a deeper Capital Markets Union."

The decision marked the third failed attempt at a merger between the pair in 17 years and it could be seen as an opportunity for Intercontinental Exchange (NYSE: ICE - news) , the owner of the New York Stock Exchange, to renew its interest in LSE.

Its shares were 2.6% up in the wake of the ruling with the result largely priced-in when it warned the deal was on a knife-edge last month.