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LSE Gains in U.S. Over-The-Counter Trading on Merger Speculation

London Stock Exchange Group Plc shares trading over the counter in the U.S. awoke from seven days of inactivity to rise almost 10 percent on speculation the company is in merger discussions.

The stock, quoted in the U.S. on an off-exchange venue operated by OTC Market Inc., climbed 9.8 percent to $16.75 on volume of 20,600 shares. Prior to today, the equities hadn’t traded since July 9. LSE’s London-listed securities closed up 2.1 percent to 1,023 pence earlier.

Magnus Bocker, the chief executive officer of Singapore Exchange Ltd., had a series of informal conversations with LSE CEO Xavier Rolet in recent weeks, the Telegraph newspaper in London reported, without saying where it got the information. Victoria Brough, a spokeswoman for LSE, declined to comment. Carolyn Lim and Joan Lew of Singapore Exchange couldn’t be reached outside of normal business hours.

“Exchanges talk to each other all the time,” Sang Lee, managing partner at Aite Group LLC in Boston, said in a phone interview. “I don’t know how much of this is reality or if it’s just very preliminary in its discussions. Every year we seem to run into a potential mega-deal. I would consider it a huge deal, but it still seems very much in its initial stages, if at all.”

Both bourses had failed international mergers last year. LSE scrapped its $3.4 billion bid for TMX Group Inc., owner of the Toronto Stock Exchange, in June 2011 after failing to win support from TMX shareholders. SGX’s $8.8 billion bid for ASX Ltd. collapsed after Australian Treasurer Wayne Swan said in April 2011 the deal wasn’t in the national interest.

Diversifying Business

Rolet has been diversifying the exchange’s business away from traditional equities after losing market share. In December, LSE agreed to buy the 50 percent of FTSE International Ltd. it didn’t own from Pearson Plc for 450 million pounds. In March, LSE announced it would purchase a majority stake in LCH.Clearnet Group Ltd.

The London and Singapore bourses announced an agreement July 11 that would allow the largest and most actively traded stocks from each market to trade in the other. London investors will be able to trade 36 SGX-listed companies on LSE’s so-called “International Board.” Singapore’s members will be able to trade FTSE 100 securities on the Asian bourse’s GlobalQuote Board, LSE said in statement that day.

The trading of SGX-listed shares on LSE will probably start next quarter, while LSE-listed securities are expected to start trading on SGX in the first half of 2013.

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