A merger to create a pan-European stock market is expected to be announced in London today after the board of the British exchange met last night. The board of the Deutsche Borse in Frankfurt has already backed the move.
The proposed merger will also include a link with Nasdaq, the US technology stock market. Mr Frank Zarb, chairman of the National Association of Securities Dealers, Nasdaq's parent, was in talks last night with the LSE before today's expected announcement.
It is understood the new exchange, which will be based in London, would initially see German and British stocks quoted in their respective domestic currencies - euros and sterling. British stocks would also be listed in euros when the merger is completed, which could take up to a year.
Quoting British stocks in euros as well as sterling would broaden their appeal to European investors.
But it would renew pressure on the government to clarify Britain's stance on the single currency.
The merger gives Europe's two leading exchanges the firepower to compete against increasingly intense competition from electronic exchanges and other bourses.
Confirmation that the tie-up has been rubber-stamped will officially end two years of on-off negotiations between the German bourse and the London exchange, already Europe's biggest.
The merged entity will be based in London and Deutsche Borse's chief executive Mr Werner Seifert is widely expected to become chief executive of the combined entity, although the two exchanges have decided to merge as equal partners, according to Deutsche Borse supervisory board sources.
Recently-appointed London Stock Exchange chairman Mr Don Cruickshank is expected to stay as chairman of the enlarged organisation.
The new London exchange will trade British and German blue chips under British regulation, with growth stocks and futures located in Frankfurt.
Bankers said dual pricing could see liquidity in British shares switching eventually from sterling to euros. Euro-denominated assets account for a growing share of assets under management at the leading pension funds, the biggest users of both the LSE and Deutsche Borse.
Private client brokers also deal in euros regularly when trading European stocks for their clients.
