EURONEXT, the continental exchanges operator, will start talks with the EU Competition Commission on Monday to clear the way for an agreed bid for the London Stock Exchange.

Shares in the LSE rose sharply yesterday after the Commission, which had been examining the twin bids for the Exchange since March, came out with its preliminary rulings, ending 25¼p higher at 540¼p. That is ahead of the 530p-a-share conditional offer launched by the other potential bidder, Deutsche Börse, in December.

Although the regulator found that the two potential offers would lessen competition between exchanges and adversely affect customers, it gave the bidders a clear way of overcoming this. The Commission’s concern centres on the influence both bidders would have on clearing of trades in London, if they were to control the LSE.

Euronext, which operates the Paris, Brussels, Amsterdam and Lisbon stock exchanges and the Liffe London financial futures market, owns almost 41 per cent of LCH. Clearnet, which carries out clearing in London, although it has agreed to vote only 24.9 per cent of the shares.

The Börse, which withdrew from the auction for the London Stock Exchange in March, operates an inegrated market model under which trading, clearing and settlement are kept under the same roof. There had been concern among customers over this model being introduced to London. The Commission found that a successful bid from either for the LSE would have no effect on the actual trading in shares because of competition provided by other exchanges in Europe and the US, a ruling that surprised some observers.

But it did call for changes in the governance of the bidders’ clearing services. The Börse is not expected to re-enter the bidding, although it issued a statement welcoming the findings.

Euronext, which is now the clear favourite to buy the LSE, said that it would “continue to work closely with the Competition Commission . . . to address the issues raised”.

Analysts at Dresdner Kleinwort Wasserstein, the broker, said that a potential deal was more possible now “as the Commission’s remedies could be met easily”.

The regulator’s main concern is that a bidder could use control of vital clearing services to shut out any other potential entrant to the London market, by denying them access to these. Yesterday’s ruling sets out a number of ways that either bidder could get around this, including an outright sale by Euronext of its holding. Alternatively, it could give “behavioural commitments” that future competitors would not be disadvantaged.

The London Investment Banking Association, the trade body for LSE customers, welcomed the ruling. Alan Yarrow, the chairman, said: “I can see Euronext being quite able to achieve most of this.”

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