Deutsche Boerse says failed merger is a ‘setback for CMU’

The blocked merger between LSE and Deutsche Boerse will hinder the progress of the CMU project according to chairman of the German exchange group. 
By Jonathan Watkins
The blocking of the proposed merger between the London Stock Exchange and Deutsche Boerse will be a setback for the capital markets union (CMU) according to the chairman of the supervisory board at the German exchange group.

The European Commission has officially blocked the proposed merger between the London Stock Exchange (LSE) and Deutsche Boerse, citing a de facto monopoly in fixed income clearing as the reason for its decision.

Following the announcement, Joachim Faber, chairman of the supervisory board of Deutsche Boerse, said: “The prohibition is a setback for Europe, the Capital Markets Union and the bridge between continental Europe and Great Britain.

“A rare opportunity to create a global market infrastructure provider based in Europe and to strengthen the global competitiveness of Europe’s financial markets has been missed.”

The CMU is designed to harmonise cross-border rules and obligations in areas including post-trade, loan origination and distribution.

The initiative has had multiple setbacks since its inception, including Brexit, the stepping down of Lord Jonathan Hill and a waning interest from a market swamped by regulations.

“Many market participants are currently too focused on keeping their heads above the water with the pace of regulatory change to make full use of the opportunities CMU offers,” said Mark John, head of product and business development EMEA at BNY Mellon’s Pershing.

Brexit will have a major impact on the CMU, despite the optimism of new European commissioner, Valdis Dombrovskis, who took over from Lord Hill.

The UK was set to have a major role in the formulation and implementation of the project, however due to Brexit, UK institutions are unlikely to be beneficiaries in the long-term.

The chairman of the European Securities and Markets Association, Steven Maijoor, warned EU countries last week about the impacts on the CMU from luring business away from the UK following Brexit.

Jurisdictions including Paris, Frankfurt, Dublin, Amsterdam and Luxembourg have been engaging with financial institutions in the UK mulling over their post-Brexit status.