Takeover bids for the London Stock Exchange were put on hold until September when the UK's Office of Fair Trading decided to refer them to the country's Competition Commission for a full-scale inquiry.
The OFT ruled yesterday that bids from Euronext and Deutsche Borse should undergo a 24-week investigation by
the Commission.
The ruling had been widely expected but dealt another blow to Clara Furse, the chief executive of the LSE, who has bet the market's future on a foreign takeover.
Shares in the LSE plunged 21.75p (57.49c) to 452.25p, after hitting 600p two months ago when a bidding war seemed likely between the two European rivals.
Since then, a shareholder revolt led by US and UK hedge funds forced Deutsche Borse to drop its £1.35bn ($3.6bn) - 530p a share - bid, although it has reserved the right to come back with a new proposal if Euronext makes an offer.
Neither can now table a formal bid until the Commission has given its verdict, expected by 12 September. The antitrust watchdog can ask for an extra eight weeks.
Sir John Vickers, the chairman of the OFT, said: "The proposed bids for the LSE come at a time of emerging competition in equities trading between the LSE, Deutsche Borse and Euronext."
Although such competition has so far been episodic, it needs to be investigated whether either merger would lessen future competition in equities trading in the UK.
The Competition Commission will also want to consider the effects of the mergers in clearing services, particularly with the Deutsche Borse bid.
The Frankfurt-based exchange operator also owns clearing and settlement houses, giving it the much-criticised "vertical silo" structure that users fear could push up tariffs.
Mr Vickers said even though Deutsche Borse and Euronext had made "constructive undertakings", the OFT concluded that neither proposal was "at this stage able to resolve all competition concerns in a sufficiently clear-cut manner".
Euronext responded by saying it would work closely with the Competition Commission.
It stressed it was the "natural partner" for the LSE, and "a combination of Euronext and the LSE would benefit users and create significant value for shareholders in both companies".
The Commission can block mergers or demand changes to bids before allowing them to proceed, which could prolong further the takeover battle that began in December.
- INDEPENDENT
Takeover bids for the London Stock Exchange were put on hold until September when the UK's Office of Fair Trading decided to refer them to the country's Competition Commission for a full-scale inquiry.
The OFT ruled yesterday that bids from Euronext and Deutsche Borse should undergo a 24-week investigation by
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