Italy readies plan to bolster watchdog powers to defend Milan bourse

By Giuseppe Fonte

ROME (Reuters) - Italy's ruling parties plan to increase the powers available to market regulator Consob to shield the country's stock exchange, according to draft legislation seen by Reuters.

Italy's bourse is owned by the London Stock Exchange (LSE) <LSE.L>, which is seeking to acquire data and analytics company Refinitv. Thomson Reuters <TRI.TO>, <TRI.N>, the parent company of Reuters News, owns 45% of Refinitiv.

European antitrust authorities last week opened an in-depth investigation into the LSE/Refinitiv deal, and the possibility that asset sales will be required to safeguard competition has raised alarm in Italy's ruling coalition.

Rome is closely monitoring the deal as the Italian stock exchange includes MTS, a trading platform of strategic importance for Italian sovereign bonds.

Two Italian sources close to the matter told Reuters this week LSE might sell MTS to win the EU's green light for the Refinitiv deal.

LSE was not immediately available for comment. CEO David Schwimmer said in February he is not expecting a change in the ownership of Borsa Italiana.

Under the proposed legislative changes in Italy, to be voted on in parliament next week, the co-ruling 5-Star Movement and Democratic Party aim to impose stricter control over any changes in the stock exchange's shareholding structure.

Prior notification to Consob will be needed for anyone who exceeds or falls below holdings of 10%, 20%, 30% and 50% by acquiring or divesting a stake in the Milan bourse or in the company that controls it.

Under current law, Consob must be informed of any plans to acquire a direct or indirect controlling stake, and can oppose the plans if it deems them a threat to "sound and prudent management of the market".

Brussels has expressed concerns about the large market share of a combined LSE-Refinitiv entity in the trading of European government bonds, because both LSE's MTS trading venue and Refinitiv's Tradeweb are market leaders.

LSE said in a statement last week that it continued to engage constructively with the European Commission and that it remained committed to closing the transaction in 2020. Refinitiv declined last week to comment.

The 5-Star Movement is fiercely against any attempt by LSE to break up the Milan bourse and is trying to persuade Italy's biggest financial institutions to bid for the stock exchange.

(Additional reporting by Angelo Amante and Elvira Pollina; Editing by Gavin Jones and Frances Kerry)