Crucial vote looms on markets merger

The London Stock Exchange will roll out its big guns on Thursday to present what the iX merger partners hope is a convincing clearing and settlement blueprint to help scupper any hostile bid for LSE from Stockholm.

LSE chairman Mr Don Cruickshank will chair the presentation on clearing and settlement for iX, the planned LSE and Deutsche Borse merger, at a news conference in the Stock Exchange Tower in London.

Officials admit the presentation could be a "make-or-break" day for the troubled iX merger, which faces a crucial vote by both exchanges' shareholders on September 14th.

This compares with the low-key announcement last week about regulatory issues surrounding iX that was distributed by press release only.

Clearing and settlement, and regulation are among the top concerns that LSE shareholders have about the planned iX merger - they complain these aspects are too vague and lack cost savings.

"The key thing will be the significant cost reductions that we are able to provide and how we are going to make it happen," said Mr David Cowan, head of public affairs at Clearstream, which is half owned by Deutsche Borse.

Clearstream and Crest, which is independent of the LSE, are expected to say they will create a direct link between the two for cross-border clearing and settlement so brokers in Germany and Britain do not have to install new links if iX goes ahead.

Cross-border clearing and settlement is much more expensive compared to domestic-based transactions.

LSE shareholders will want to know how much it will cost them to clear and settle, via their current link with Crest, a trade in, for example, Germany's Deutsche Telekom.

Last week, OM Gruppen, operator of the Stockholm Stock Exchange, made a £27 sterling (€44) per share cash and paper approach to the LSE, but was rebuffed. LSE shares last traded at £23.50 on Friday, before the approach was revealed.

OM was expected to mount a hostile bid directly to LSE shareholders, perhaps as early as today. An LSE spokeswoman reiterated yesterday that the September 14th vote by LSE shareholders was still scheduled but any formal bid for the company could alter this.