The two exchanges have said their plan to link London and Frankfurt will provide cheaper equity and debt financing to the EU’s millions of small and medium-sized enterprises and blue-chips.
But Michaël van Straalen, chairman of MKB-Nederland, the Dutch SME association, has voiced fears that the creation of an exchange giant will mean the region’s smaller exchanges receive less attention from investors.
In a blog on MKB-Nederland’s website dated August 19 van Straalen wrote that a combined LSE/Deutsche Börse would create a trading platform 10 times the size of Amsterdam-based Euronext.
He said this would be detrimental to the region’s smaller exchanges and the role they play in helping SMEs raise money.
“There must remain sufficient competition and good financing solutions close to home. That is in the interest of Dutch businesses,” van Straalen wrote.
SMEs make up 99% of all businesses in the EU, according to the European Commission, playing a key role in the economy. LSE and Deutsche Börse have pledged to support SMEs by building initiatives such as AIM – which is the LSE’s market for smaller, growing companies – and support programmes such as the Frankfurt exchange’s Venture Network.
Van Straalen’s blog echoes worries expressed by Johan van Overtveldt, Belgium’s finance minister, who has said the merger would harm access to capital for smaller firms and “draw liquidity away from smaller markets such as Euronext Brussels”.
The European Investors’ Association, a body founded in the summer of 2015 to represent European retail investors, said in an August 4 statement that the merger could mean smaller exchanges in continental Europe “may diminish in relevance for SMEs and might no longer be able to continue to play a pivotal role in the financing of the real economy”.
Having already secured the approval of their shareholders, LSE and Deutsche Börse still need to win over the European Commission and other regulators for the merger to go ahead. In an August 18 research note on market structure, Exane BNP Paribas said it sees “material risk” of the deal being blocked.
LSE declined to comment. Deutsche Börse did not provide comment in time for publication.