Deutsche Börse Chief Executive Being Investigated For Insider Trading

German law enforcement authorities have raided the Frankfurt residence of Carsten Kengeter, the chief executive of Deutsche Börse as a part of their probe into alleged insider trading ahead of the exchange’s merger with the London Stock Exchange (LSE).

The prosecutor’s office in Frankfurt is investigating a suspicious trade carried out by him shortly before the merger announcement was made. In December 2015, Kengeter purchased Deutsche Börse shares worth €4.5 million (£3.8 million). The merger between Deutsche Börse and the LSE was announced two months later which gave a major boost to the share prices of both exchanges.

Officials from the Hessen state office of criminal investigation along with prosecutors from Frankfurt carried out searches in both Kengeter’s apartment and the company’s headquarters.

Financial Times

The searches were carried out in order to gain clarity on the course of negotiations that occurred before 23 February 2016 when the merger plans were publicly unveiled. A spokesperson from Deutsche Börse said that Kengeter had always been transparent about the purchase.

According to a statement issued by German stock exchange, the purchase was a part of the executive board’s approved remuneration program that allows senior board executives to buy shares of the company. Both the company and Kengeter are said to be cooperating with the investigation. Deutsche Börse board chairman Joachim Faber called the insider trading charges baseless since discussions on merging with the LSE did not begin until late January 2016. The LSE has supported the position of its German counterpart.

In a statement the LSE said,

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.

The proposed £21 billion merger between the two of the largest exchanges in Europe is a bid to counter increasing competition from other large exchanges. Under the merger deal, Deutsche Börse's shareholders would get 54.4 percent of the new entity, while LSE shareholders would be in control of the remaining 45.6 percent. London handles currently around €1.3 trillion (£1.1 trillion) of euro-based clearing transactions annually.

The deal is expected to undergo extensive scrutiny including assessment by around 40 financial watchdogs from across the world. The raid has put an already-controversial deal in jeopardy. The shock British vote to exit Europe has resulted in questions about the deal and has drawn censure from a wide array of European leaders.

Chad Simmons

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