Ontario to defer to Ottawa on TMX-LSE deal -report
*Ontario defers to Ottawa for review of deal
*Says German-US tie up might be better for Canada
TORONTO Feb 18 (Reuters) - Ontario's government, critical of a proposed $7 billion combination of the Toronto and London stock exchanges, said it won't rush to block a deal but would defer to Ottawa to decide if a merger would benefit Canada.
Ontario, Canada's financial capital and home to hundreds of thousands of jobs in that industry, will allow the federal government's review of the London Stock Exchange's (LSE.L) bid for TMX Group (X.TO) to run its course, the provincial finance minister told the Globe and Mail newspaper.
Dwight Duncan, who has emerged as the proposal's most vocal critic, also said the TMX Group might be better off with a U.S. business partner than with the London Stock Exchange, which he said is not a "particularly robust" market.
"Maybe we want to tie into the German-New York group," Duncan said, referring to Deutsche Boerse's proposed takeover of NYSE Euronext, a deal that would create the world's largest exchange group.
Duncan also discussed his meeting last week with the architects of the Toronto-London deal -- TMX CEO Thomas Kloet and his LSE counterpart Xavier Rolet.
"Not only are they not a very good story teller ... but if they have not thought through the communications of this, have they not thought through the substance of it?"
Duncan said the federal government's review, which could take up to 75 days, was the logical first step.
Other provinces such as British Columbia, Alberta and Quebec, will also have a regulatory say over the transaction.
Shares of TMX, which opened on Friday at C$40.40, have been trading well below the implied per-share price of C$44.53 offered by LSE, suggesting investors are hedging their bets.
(Reporting by Claire Sibonney; Editing by Frank McGurty)