The UK’s Treasury has given its financial regulator the power to veto rule changes by exchanges in that country, a move designed to address concerns about a possible takeover of the London Stock Exchange plc by a foreign company.

The Economic Secretary to the Treasury, Ed Balls, announced today that the government is to legislate to enhance the Financial Services Authority’s powers in relation to recognized exchanges. The FSA will be given the power to veto rule changes proposed by recognized exchanges “that would be disproportionate”.

“The government’s interest in this area is specific and clear: to safeguard the light touch and proportionate regulatory regime that has made London a magnet for international business. That has made London an economic asset for the UK, for Europe, and for countries throughout the world. I can therefore announce today that the UK government will now legislate to protect our regulatory approach,” Balls said in a speech to the Hong Kong General Chamber of Commerce and the British Chamber of Commerce, in Hong Kong.

“This legislation will confer a new and specific power on the FSA to veto rule changes proposed by exchanges that would be disproportionate in their impact on the pivotal economic role that exchanges play in the UK and EU economies,” he said. “It will outlaw the imposition of any rules that might endanger the light touch, risk based regulatory regime that underpins London’s success.

“Nothing in this legislation has any consequence for the nationality of the ownership of UK exchanges. It will neither make overseas ownership easier or more difficult. We remain open to overseas investment that will continue to be able to benefit from our regulatory regime,” he added.