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London Stock Exchange could sell French clearing arm as part of Deutsche Boerse merger

The London Stock Exchange and Deutsche Boerse have offered to sell the LSE’s French clearing operations in a bid to calm competition regulators’ concerns over the two exchanges merging.

European competition authorities have to give their approval before the £21bn deal can pass, and so the companies have proposed this as an option to reduce their dominance over the sector, according to the Financial Times.

The proposal comes at a sensitive time for the exchanges.

Politicians in Hesse, the German state in which Deutsche Boerse is based, want the merging firms to put their combined headquarters in Frankfurt, not in London where current plans aim to put it.

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At the same time prosecutors from Hesse last week raided the office and apartment of Carsten Kengeter, the Deutsche Boerse chief executive who is lined up to take over as CEO of the combined entity.

Prosecutors allege that Mr Kengeter’s €4.5m purchase of shares in December 2015 could constitute insider trading, coming two months before the announcement of the merger.

They argued that the companies had been discussing merging for several months when Mr Kengeter made the transaction - something which Deutsche Boerse strongly denies.

“The allegations have no basis. Carsten Kengeter purchased the shares according to a compensation programme limited to December 2015 and agreed on by the Supervisory Board,” said Joachim Faber, the chairman of Deutsche Boerse’s supervisory board.

“The chairmen and CEOs of both LSE Group and Deutsche Boerse only agreed in the second half of January 2016 to enter into merger negotiations.”

Brexit also adds to the strains of the deal, as the regulations covering the financial sector across borders could change as the UK leaves the EU.