February 22, 2017 / 1:54 PM / 6 months ago

Pressure builds on Deutsche Boerse chief over London tie-up

* Merger deal upset by Brexit

* Kengeter faces German demands HQ move to Frankfurt

* Lawmaker Boddenberg says London out of question

By John O'Donnell and Andreas Kröner

FRANKFURT, Feb 22 (Reuters) - The head of Deutsche Boerse came under renewed pressure to ensure Germany has greater sway over the group after its merger with the London Stock Exchange, ahead of a meeting with regional lawmakers on Wednesday.

The $27-billion-plus deal to create Europe's biggest stock market was struck before Britain voted to leave the European Union. It is now entering a critical phase, with European antitrust officials due to decide by April 3 whether to approve the deal.

Brexit has prompted German politicians to demand that the merged company's headquarters move to Frankfurt, setting the scene for a clash with Britain as it seeks to safeguard London's standing as Europe's financial capital.

On Wednesday, Chief Executive Carsten Kengeter will attend a reception hosted by Deutsche Boerse for local lawmakers in Wiesbaden, the capital of Hesse, people familiar with the matter said. Hesse is home to Frankfurt, where Deutsche Boerse is based.

He is expected to face a grilling as politicians reiterated calls by Hesse's finance minister that the headquarters move to Frankfurt.

"I think the idea of having the holding company in London is out of the question and, in this regard, I share the view of (German financial regulator) Bafin," said Michael Boddenberg, a member of Chancellor Angela Merkel's Christian Democrat party in the regional parliament.

Under the merger deal, Kengeter is due to head the group, while the main holding company and its board will be based in London.

LSE Chief Executive Xavier Rolet recently insisted that "the deal is set".

But Britain's split from the 28-member bloc will isolate London and that has turned the tables in favour of Frankfurt, the financial capital of Europe's biggest economy.

Tobias Eckert, a lawmaker with the Social Democrats, said he hoped Kengeter would talk about switching to Frankfurt.

"If you hold an event like this with Hesse's politicians and at a time like this, then it can't be just about a nice meal and chatting about the weather ... he has to say something of substance," Eckert said. Deutsche Boerse declined to comment.

Kengeter is also under scrutiny after German police and prosecutors, investigating possible insider trading by the executive, searched his office and apartment.

A switch to Frankfurt would face resistance in London. This week a small group of British parliamentarians urged the government to block such a shift.

Bill Cash, a eurosceptic Conservative lawmaker, said keeping LSE's headquarters in London was a matter of national interest and that the British government must protect the "crown jewels".

Simon Kirby, the minister responsible for the City of London, played down the prospect of such a move.

The location of the merged group has symbolic and operational significance, with regulators keen for oversight of its derivatives processing business.

LCH Clearnet, which is 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.

LCH Clearnet has already offered to sell its French clearing business. LSE and Deutsche Boerse are also planning further concessions to satisfy the EU antitrust authorities, two sources familiar with the matter have said. (Writing by John O'Donnell; Editing by Susan Fenton)

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