THE takeover of the London Stock Exchange (LSE) by two rival operators would substantially lessen competition, a regulatory body warned yesterday.

The Competition Commission said it had provisionally found that a merger with either Deutsche Boerse or Euronext would make it more difficult for other exchanges to compete with the LSE in the trading of UK equities.

The ruling is a blow to Paris-based Euronext, which had been waiting for the verdict before deciding whether to pursue a £1bn-plus bid.

German rival Deutsche Boerse pulled out of the running after its interest in buying the LSE met opposition from shareholders.

Euronext, a pan-European exchange, said it would continue to work with the commission and other parties to address the issues raised.