Shares in the London Stock Exchange surged higher this morning after the Competition Commission said a takeover by Deutsche Borse or Euronext would "substantially lessen" competition among international exchanges.

Within an hour of the market opening, shares in the LSE had risen by 16.25p to 531.25p - a rise of more than 3 per cent that pushed the exchange's share price above the 530p offer price originally mooted at the end of last year.

The shares closed last night some 6p higher on the day at 515p, valuing the exchange at just over £1.3 billion.

The Commission said a takeover by either exchange would "make it more difficult for other exchanges to compete with the LSE in trading UK equities because of both bidders ownership control over the future provision of clearing services to LSE".

Deutsche Borse, which operates the Frankfurt stock and derivatives market, owns stock and derivatives clearing operation Eurex Clearing.

Euronext, which was formed out of the merger of the Belgian, French and Dutch stock markets, has a stake in clearing company LCH.Clearnet.

The Commisson said both exchanges might make it difficult for potential competitors to gain access to their clearing services and offer sustainable price competition.

Aside from the issue of clearing share trades, the Competition Commission said it does not believe a takeover of the LSE would harm competition in other exchange services such as listings and commissions on trading.

The Commission said it will now hold talks with potential bidders "concerning actions that could be taken to remove the anti-competitive effects of the proposed mergers".

Deutsche Borse claimed the Commission's preliminary findings represented a victory in that it did not express worries about Clearstream, the settlement business it owns that many observers had felt would be a competitive stumbling block in a merger.

It said: "Deutsche Borse has welcomed the provisional findings relating to a possible offer for the London Stock Exchange issued by the Competition Commission and in particular the fact that the position of Deutsche Borse and Euronext from a competition law perspective is considered identical.

"Deutsche Borse sees itself in a favourable position with regard to potential remedies suggested by the Commission: The Commission’s concerns are solely related to clearing services for UK equities."

The bourse was forced earlier this year to scrap its £1.3 billion bid proposal for the LSE after coming under intense pressure from hedge funds including TCI and Atticus.

Werner Seifert, the chief executive, was forced to resign. However, Deutsche Borse has reserved the right to re-enter the fray if a formal bid from Euronext emerges.

Euronext, which has been seen as the favourite following the travails of its Frankfurt rival, said it "will continue to work closely with the Competition Commission and other relevant market constituencies to address the issues raised".

In noting the Commission's preliminary findings, the LSE kept its options open.

It said: "The strong Q1 results announced by the exchange on July 13 reinforce the board's confidence in the exchange's growth prospects as an independent group.

"However, the board also continues to believe that a combination, on the right terms, with another major exchange could be in the best interests of shareholders and customers."

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive