Carsten aside

Lots of people seem sad that the merger of London Stock Exchange Group with Deutsche Boerse has been blocked. The European Commission, which did the blocking, is sad that LSE refused to allay competition concerns by selling its trading platform, MTS. LSE is sad that Brussels insisted on that to begin with. Deutsche Boerse is sad that there will now be no $30 billion European infrastructure giant.

Deciphering exactly who is to blame is harder. LSE boss Xavier Rolet is the one who refused to sell MTS even though antitrust tsar Margrethe Vestager had made clear his original remedy – selling LSE’s French clearing business – was insufficient. LSE has some basis to complain of insufficient time to offload an important asset. But this shouldn’t have been an insurmountable barrier.

Ultimately, tears are unnecessary. Had it gone ahead, the deal could have generated synergies with a taxed and capitalised value pushing 5 billion euros. But German regulators and politicians turned up their nose at the decision to headquarter the new group in London. It would have been odd if LSE had not been concerned at Deutsche Boerse chief Carsten Kengeter becoming the focus of an insider-trading probe. And then there was Brexit.

The impact of the UK’s EU exit would have rendered every decision to shed jobs in either market toxic, imperiling cost savings. For the same reason, the real appeal of the merger – the chance to reduce the amount of margin clearing customers hold against each trade – looked increasingly unlikely. That would probably have required LSE’s LCH clearing house to surrender business to Deutsche Boerse’s Eurex, or vice versa.

All this explains why shares in both companies rose slightly: investors had long since decided the synergies were unlikely to come through. Compared to just before the deal was announced in February 2016, both groups have risen with the market. Aside from the fact shareholders had to pay millions of euros in fees, the only real losers are Rolet, Kengeter and their boards – for not seeing risks that were obvious right from the start.

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