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(Corrects to 29 billion euros in 8th paragraph)
Feb 26 (Reuters) - London Stock Exchange said its proposed merger with Deutsche Boerse AG was unlikely to be approved by the European Commission, leaving the stock market operators' third attempt at combining on the brink of failure.
The LSE said in a statement late on Sunday that the commission had asked it to sell its 60 percent stake in fixed-income trading platform MTS to satisfy antitrust concerns over the merger of Europe's two largest market operators.
Calling the request "disproportionate," the British exchange said it believed that it would struggle to sell MTS and that such a sale would be detrimental to its ongoing business.
"Based on the commission's current position, LSE believes that the commission is unlikely to provide clearance for the merger," it said.
The exchange added that it would still work to make the merger with Deutsche Boerse succeed, but that would be impossible unless the commission changed its position.
In a separate statement, Deutsche Boerse attributed the decision to LSE alone. LSE "resolved tonight to not commit to the required divestment of LSEG's majority stake in MTS," Deutsche Boerse said, adding that it expected a final decision from the commission by the end of March.
The commission declined to comment.
The two exchanges announced plans to merge in a 29 billion euro deal just over a year ago, aiming to create a giant trading powerhouse that would better compete against U.S. rivals that were starting to encroach on the pair's turf.
The exchanges had already agreed to sell part of LSE's clearing business, LCH SA, in order to satisfy antitrust requirements.
LSE said the commission had also raised concerns this month about the impact on the European market landscape of access to bond and repo trading feeds were the two exchanges to merge. LSE said it had offered certain proposals to address this but that the commission had requested they sell all of MTS instead.
The commission had given the exchanges until Monday to come up with a proposal to meet that demand.
MTS is a relatively small part of LSE's business, but it is a major platform for trading European government bonds, particularly in Italy, where it is classified as a "systemically important regulated business."
LSE said that such a sale would need regulatory approval from several governments in Europe, and it would be detrimental to its wider Italian business.
"Taking all relevant factors into account, and acting in the best interests of shareholders, the LSE Board today concluded that it could not commit to the divestment of MTS," the exchange said. (Reporting by Ismail Shakil in Bengaluru; Additional reporting by Rachel Armstrong, Andreas Kroener and Foo Yun Chee; editing by Jason Neely and Cynthia Osterman)