UPDATE 1-Ontario legislators to approve TMX-LSE deal
* Panel to recommend TMX/LSE deal with conditions
* Report will be presented to legislature April 19 (Adds details, background)
TORONTO, April 13 (Reuters) - London's proposed C$3 billion ($3.2 billion) takeover of Canada's main stock exchange operator TMX Group (X.TO) will be approved with conditions by an Ontario legislative committee, a source familiar with the panel's report told Reuters on Wednesday.
The report is likely to set the tone for a series of regulatory tests of the controversial deal to take over TMX, owner of the Toronto Stock Exchange.
The source asked not be identified because the recommendations will not be made public until April 19.
Reuters reported last week that one committee member, a critic of the deal, would issue a minority report that opposes the majority recommendations. [ID:nN12210046]
Sources say conditions will likely include more clarity on regulatory roles and on the makeup of the new entity's board of directors.
The tie-up with the London Stock Exchange (LSE.L) would create a $7 billion transatlantic exchange doing $4 trillion in annual trading, but critics argue that Canada could lose control of its capital markets to a British holding company as a result of the deal.
Among the deal's early and vocal critics was Ontario Finance Minister Dwight Duncan, though he recently softened his stance.
The committee's report is not binding, but it is expected to carry weight with provincial securities regulators, and with federal government officials, who will have to approve the deal in a multilayered process that won't be over for months.
The province of Ontario, whose capital, Toronto, is Canada's financial center, formed the all-party legislative committee to review the deal soon after it was proposed in February.
($1=$0.96 Canadian) (Editing by Peter Galloway)
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