Deutsche Bourse CEO Kengeter raided over insider trading

03 Feb 2017


German prosecutors have raided the Frankfurt apartment of Deutsche Börse chief executive Carsten Kengeter and the company's offices amid a probe into suspected insider share dealing ahead of the group's planned merger with the London Stock Exchange.

The Frankfurt prosecutor's office said the investigation related to talks about a merger that took place between the management of Deutsche Börse and the LSE between July and early December 2015.

The prosecutor's inquiry centres on Kengeter's purchase of Deutsche Börse shares worth about €4.5 million on 14 December 2015. Two months later, in February 2016, Deutsche Börse and the London Stock Exchange unveiled their merger plans, an announcement which sent their share prices soaring.

The prosecutor's office said several prosecutors and civil servants from the Hessen state office of criminal investigation had carried out searches at the company's headquarters in Eschborn near Frankfurt and Kengeter's private apartment in Frankfurt on Wednesday. Prosecutors said the searches were ''intended to clarify the course of the negotiations until 23 February 2016,'' when the merger plans were made public for the first time.

Kengeter, who attended the company's annual reception in London on Tuesday evening, was not present during the raids.

A Deutsche Börse spokesman said Kengeter had always been ''transparent'' about the share purchase.

The operator of the German stock exchange said on Wednesday that the Frankfurt public prosecutor's office ''today investigated at Deutsche Börse in respect of a share purchase by its chief executive officer which was carried out on 14 December 2015''.

The share purchase was ''in implementation of the executive board's remuneration programme as approved by the supervisory board of Deutsche Börse'', it said. ''Such a programme provides for an investment of the executive board members in shares of Deutsche Börse,'' it added, saying that the company and Kengeter were cooperating fully with prosecutors.

Deutsche Börse board chairman Joachim Faber said the accusations against Kengeter were ''without foundation'', arguing that merger discussions with the London market between the two chairmen and chief executives did not begin until the second half of January 2016.

The LSE backed its German counterpart on Thursday, saying, ''LSE welcomes the strong statement of support by Joachim Faber, chairman of the supervisory board of Deutsche Börse who has described the allegations related to Carsten Kengeter as without foundation. We look forward to working towards completion of our proposed merger.''

Trading behemoth

The London Stock Exchange and Deutsche Börse merger would create a financial markets giant able to compete with the Chicago Mercantile Exchange and ICE, the operator of the New York stock exchange, as well as the Hong Kong stock exchange.

The planned merger, which has hit turbulence after last year's shock decision by the UK to quit the EU, would create one of the world's biggest groups for stock listings and market data, tying the Frankfurt-dominated eurozone to a post-Brexit London.

The proposed deal has drawn sharp rebukes from France, Belgium, Portugal and the Netherlands, fearful for their own stock exchanges, owned by Euronext.

Deep concerns over competition scuppered two earlier merger attempts by Deutsche Börse and the London market, in 2000 and 2005. Last month the LSE agreed to offload the French arm of clearing house LCH to Euronext in order to ease some of those fears.

London hosts roughly €1.3 trillion of euro clearing transactions every year, but this has been put at risk by the UK vote to leave the EU.

Deutsche Börse operates the Frankfurt exchange, as well as the Luxembourg-based clearing house Clearstream and the derivatives platform Eurex.

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