A GROUP of big City investors have warned the two continental bidders for the London Stock Exchange that unless the Financial Services Authority continues as the regulator of the market they will boycott the LSE and find other ways of trading shares in London.
The warning falls short of a threat to set up a rival exchange. Both bidders, Euronext and the Deutsche Börse, have said that they wish the FSA to continue as regulator but there is some scepticism in London over their long-term aims.
In particular there is concern that the Börse could eventually relocate its business to Frankfurt. The warning, from the Association of British Insurers, whose members own shares equivalent to almost a fifth of the London market, is designed as a “shot across the bows” to ensure “watertight” commitments from the bidders and prevent any subsequent change of course, insiders said.
The letter says that one of the most important reasons why London is the largest market in Europe is the regulatory environment, including the “consensual approach” taken by the Takeover Code and the market abuse regime, which “cannot be operated satisfactorily at a distance”.
Any change in these arrangements “would quickly lead to a quest for alternative UK-based arrangements”, the letter, from Peter Montagnon, the ABI’s director of investment affairs, states.
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The Börse said: “We’d be mad if we wanted to move the RIE (Recognised Investment Exchange) out of London, and we don’t.” Euronext said: “We would still see the FSA as the sole regulator.”
The ABI was echoing the views of the FSA a fortnight ago, when the regulator said it would prefer the LSE to continue to be listed in London and subject to UK regulatory rules.
But the ABI said it had no view on the future structure or listing of the exchange.