They said it was the deal that "will not break down". In a crowded conference centre in the City of London in May, Deutsche Borse and the London Stock Exchange announced to the world's press their merger to form the iX market. Senior executives praised the virtues of a merger that would create "the leading international exchange" - the largest European stock market and the world's biggest derivatives exchange. They emphasised a link with Nasdaq, the US technology exchange, to set up a pan-European market for high-growth companies.
Mr Werner Seifert, chief executive of the Frankfurt exchange and the man who would move to London to run iX, was one of the most confident speakers. He said the deal would not fail like a previous attempt at Anglo-German co-operation. "The deal won't break down. We have a 100-page agreement (covering) the minutest details, and we have a blueprint of the new market ready," he said. Four months later, Mr Seifert was to be proven wrong. This week, the LSE pulled out of the iX deal blaming the two exchanges' inability to resolve many of the issues raised by the deal.
The demise of the deal has been a long time in coming. Some LSE shareholders, most of them brokers and users of the exchange, voiced concern about iX soon after it was announced. They criticised plans to split the blue-chip and high-growth markets between London and Frankfurt and raised questions on the future of smaller companies and brokers. LSE managers, however, promised shareholders that their concerns - about issues such as listing rules, regulatory differences between the UK and Germany and the settlement costs of cross-border trades - would be answered in a memorandum. When the long-awaited document came out in mid-July, it was a bitter disappointment for shareholders. Brokers and investors alike complained that their concerns were not answered, and pressure started to grow for a delay of the vote on the iX plans.
Even the offer of a £30,000 sterling (€49,000) payment to cover the costs of migrating from London's Sets trading system to the new iX platform was not enough to placate concerns because the technology costs were not detailed. By then, news about iX had become almost exclusively negative. By mid-August it looked as if the 75 per cent vote needed to approve iX might not be achieved. The negative publicity surrounding the iX merger opened the way for a surprise hostile bid from OM, a little-known technology company that operates the Stockholm exchange.
Mr Don Cruickshank, LSE chairman, dismissed the £803 million sterling( cash-and-shares bid as "derisory" but the offer forced the LSE to postpone the vote on the iX merger, scheduled for yesterday. The arrival of the Swedish bidder was welcomed by shareholders seeking an alternative to iX. Opponents of the Deutsche Borse deal were given further ammunition last week, when a confidential report commissioned by Merrill Lynch, one of LSE's main advisers and shareholders, said iX would be almost unworkable.
The final nail in the coffin of the iX deal came on Monday, when Deutsche Borse issued a statement saying that it was keeping "all its strategic options open". The comment was interpreted in LSE circles as a sign that Deutsche Borse was not committed to the plan and was looking at alternatives. The deal that could not break down had, finally, broken down.
