Warning to LSE bidders

The two potential bidders for the London Stock Exchange were today given a high-level warning to keep regulation of the London market in the UK.

In letters to Euronext and Deutsche Boerse, Peter Montagnon of the Association of British Insurers (ABI) said any move that jeopardised confidence in the regulatory environment “would be a serious setback”.

The organisation, which represents members owning around one fifth of the market, stressed it had no view about the nationality of the LSE’s ownership.

But Mr Montagnon, who is director of investment affairs, said: “All exchanges depend on the goodwill of their customers for their continuing business.

“As customers, our members consider that any change in the regulatory arrangements which undermined their confidence in the market would quickly lead to a quest for alternative UK-based arrangements.”

Both bid parties have given assurances that they intend to keep the LSE’s base in the capital and so continue regulation from the UK.

However, Mr Montagnon told the chief executives of both companies that he wanted further details on how the pledges would be met in the long term.

He pointed out that confidence in UK equities had been enhanced by various regulatory mechanisms, including the Takeover Code and the market abuse regime, which it said could not be “operated satisfactorily at a distance”.

The race for control of the LSE began in December when it received takeover approaches from Deutsche Boerse and Euronext.

Deutsche Boerse has already seen a £1.3 billion proposal rejected on the grounds that it undervalued the London company. Euronext, which runs the Amsterdam, Brussels, Paris and Lisbon exchanges, has not yet disclosed how much it might be willing to pay.

The LSE is Europe’s biggest stock market and one of the world’s oldest exchanges, with stocks worth a total of £1.4 trillion.