(Repeats story that ran late Tuesday; no change in text.)
* $27 bln deal in balance as German politicians demand HQ
* UK City minister says deal agreed has London HQ
* Kirby says government following deal closely
By John O'Donnell and Andreas Kröner
FRANKFURT, Feb 21 Britain's government played
down suggestions the London Stock Exchange's
headquarters could move to Frankfurt after merging with Deutsche
Boerse, but cautioned it was watching the deal
"We are not complacent about the position of UK financial
services companies," Simon Kirby, the minister responsible for
the City of London, told lawmakers on Tuesday during a
parliamentary debate about the stock exchange's future.
Under the terms of a merger deal struck before Britain voted
to leave the European Union, Deutsche Boerse Chief Executive
Carsten Kengeter is due to head the combined group, with London
the home of the main holding company and its joint board.
But a number of German politicians have made it clear they
now want the headquarters to be in Frankfurt to back the $27
billion merger, which would create the biggest stock market in
Kirby said the deal that was agreed named London as the
headquarters and that this could not be changed without the
backing of 75 percent of shareholders, adding that British
regulators also had to approve the merger.
"We are following it closely and we are in touch with the
regulators," he said.
During the debate, Bill Cash, a eurosceptic Conservative
lawmaker, criticised the merger and said Britain stood to lose
out if executive power shifted from London to Frankfurt.
He said keeping the LSE headquartered in London was a matter
of national interest and the British government must dig in.
"It's not a normal commercial operation. This is much more
about the acquisition of the crown jewels," Cash, who chairs the
House of Commons' European Scrutiny Committee, told Reuters
ahead of the debate in a telephone interview.
"That's a matter of national interest. There is no
conceivable reason why it can be in our national interest to
have it transferred to Frankfurt," he said.
Cash said he hoped the debate would trigger wider discussion
about an issue that has received little attention from the
British media or the government so far as preparations for
divorce talks with the European Union hog the headlines.
The meeting itself, attended by a small group, was
overshadowed by a larger discussion in the House of Lords, the
upper house of the British parliament, on a bill that will
formally begin divorce talks with the EU next month.
If the British authorities, including the Bank of England,
were to firmly oppose moving the LSE headquarters to Frankfurt,
it would put London on a collision course with Berlin and
potentially torpedo the merger.
The location of what will be Europe's biggest stock exchange
has symbolic and operational significance, with regulators keen
for oversight of its derivatives processing business.
Advisers and company executives are divided about whether
London's status as the main headquarters can be changed. Some
people involved argue it could require a new vote by
shareholders of both exchanges, which could upset the deal.
LSE chief executive Xavier Rolet recently insisted that "the
deal is set". Deutsche Boerse chief Kengeter described the
question of a move only as "speculative".
However, Britain's departure from the European Union may
isolate London as Europe's financial centre and that has turned
the tables in favour of Frankfurt.
"The reasons for the headquarters being in Frankfurt are
crystal clear," Thomas Schaefer, the finance minister of the
state of Hesse, home to Frankfurt and Deutsche Boerse, told
Reuters earlier this month.
One of the chief concerns for EU regulators is that
London-based LCH Clearnet, majority owned by the London Stock
Exchange, clears more than half of all interest rate swaps
traded around the world, many of which are in euros.
That means as soon as Britain leaves the European Union, the
clearing and regulation of euro transactions will be outside the
(Writing by John O'Donnell; editing by David Clarke)