LSE gets U.S., Russia nod for Brexit-clouded Deutsche Boerse merger

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008. REUTERS/Toby Melville/File Photo

(Reuters) - London Stock Exchange Group LSE.L said on Thursday that U.S. and Russian authorities had approved its $27 billion merger with Deutsche Boerse DB1Gn.DE, giving it the first set of regulatory clearances needed to create a European exchange giant.

However, there still remain questions whether EU regulators will approve the deal, given the huge combined presence of the two companies in derivatives clearing and the status quo of LSE’s LCH.Clearnet as Europe’s main clearing house for euro-denominated swaps.

LSEG shareholders and industry experts have also questioned the viability of the deal after Britain’s shock vote to leave the European Union, a move that could dent London’s title as a global financial hub.

Last week, German markets regulator BaFin said it was hard to see how the head office of the merged group could still be in London given that Britain was leaving the EU.

Despite these concerns, LSEG shareholders voted overwhelmingly on Monday to approve the merger, after Chief Executive Xavier Rolet said the group was “extremely well positioned” globally no matter what the outcome of British negotiations with the EU on new trading terms.

Deutsche Boerse has also asked its shareholders to back the deal – the third attempt by the LSE to merge with the German exchange operator in some 16 years – in a postal vote that closes on July 12.

The merger, if approved by the shareholders and cleared by other regulators, will create the world’s biggest exchange by revenue, forecast to be 4.7 billion euros this year from stock, bond and derivatives trading, indexes, market data, and clearing and settlement.

Reporting by Esha Vaish in Bengaluru; Editing by Savio D’Souza