Financial watchdogs in Frankfurt and London are to start hammering out a common regulatory framework for iX, the proposed Anglo-German stock exchange.

Observers have given outline support to plans by the UK's Financial Services Authority and the BAWe and Hesse economics ministry, its German counterparts, to set up working groups to iron out differences between the two countries' systems.

A joint statement released on Monday said the working groups would address points including transparency, which is less strongly supervised in Germany, and has been a particular point of concern in London.

UK financiers have been worried that if iX regulation was too lax, investors could build up large stakes in companies, as platforms for launching lightning takeovers, without the firms concerned having to be made aware.

Sudden demands

"You could get someone building up a 25% stake in a company, which would not be aware until it was faced with a demand for a place on the board," said John Pierce, chief executive of the UK's Quoted Companies Alliance.

The watchdogs' statement said: "The authorities agree the importance of high levels of transparency for the iX markets."

The initiative was welcomed by the London Stock Exchange, fighting to win 75% support from shareholders for the merger by 14 September, as an "important step forward".

The need to lead

Don Cruickshank, the LSE's chairman, had predicted that movement for Anglo-German regulation would come only once iX looked a serious possibility.

Apcims, the trade association representing financiers in the private client sector, whose members hold about a third of LSE shares, gave the announcement cautious approval.

"It is not a bad effort," an Apcims spokesman said. "The regulators are looking at the areas of concern to us."