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British and German market regulators said jointly Aug. 21 they would assist the merger of the London and Frankfurt stock exchanges to ensure the integrity of the market. But lawyers and others who have been trying for more than three months to decipher how the merger would affect the legal status and obligations of public companies will find no answers in the document. The regulators did not explain to what extent they could reconcile German and English rules on listing or disclosure requirements, for instance, or how the rules of one country might be applied to companies in the other after the merger. The exchanges announced plans in May to create iX International Exchanges PLC, in alliance with the Nasdaq, that is expected to become the dominant European exchange. They have said that Frankfurt would be the primary market for younger and high-tech companies, while blue chip trading will be centered in London. But they have not said how that would be achieved without bringing English emerging growth companies under German rules and German blue chips under English law. The three regulators – Britain’s new Financial Services Authority, Germany’s Federal Securities Trading Supervisory Office (“BAWe”) and the Exchange Supervisory Authority of the Hessian Ministry of Economics, Transport and Urban and Regional Development – said they have formed working groups to explore six topics: market structure (including the structure and corporate governance of iX); listing requirements; transaction reporting and market surveillance; legal issues in connection with insider dealing and market abuse; corporate takeovers; and clearing and settlement systems. The regulators said that they “looked forward to working with the regulated entities,” and would work among themselves to unify rules, where possible. German and British rules differ substantially now on crucial matters such as disclosure, takeovers and insolvencies. Some of the gaps may narrow as European Union rules on takeovers and insolvencies force member states to create more uniform codes, but EU rules leave latitude. The FSA has broad responsibilities covering financial services and markets in the United Kingdom, except for takeovers, which are regulated by London’s Takeover Panel, an industry self-regulatory body. BAWe is the German federal agency whose jurisdiction includes investigating insider dealing, ensuring market transparency, protecting investors and international cooperation. The Exchange Supervisory Authority of the Hessian Economics Ministry is the regional governmental agency responsible for regulating the Frankfurt Stock Exchange. Copyright �2000 TDD, LLC. All rights reserved.

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