Shares in the London Stock Exchange fell more than 3 per cent on Monday after it said that the European Commission was “unlikely to provide clearance” for its £24bn tie-up with Deutsche Börse, dealing a massive blow to the possible deal after a year of negotiations.

One of the European Commission’s conditions for approving the merger is that LSE has to sell MTS, an electronic trading platform used for the dealing in government bonds.

Late on Sunday, the LSE group said that it could not commit to spinning off the business.

“Taking all relevant factors into account, and acting in the best interests of shareholders, the LSEG board today concluded that it could not commit to the divestment of MTS,” the exchange operator said.

“Based on the commission’s current position, LSEG believes that the commission is unlikely to provide clearance for the merger,” it added.

It also said, however, that it “remains convinced of the strategic benefits of the merger and recognises the strong support from shareholders for the transaction” and that it would continue to seek steps to try and allow the deal to go ahead.

“There is a long, long way to fall if this tie-up dies,” said Neil Wilson, a market analyst at ETX Capital. “The regulatory hurdles were always a risk and with Brexit there are additional hurdles to clear that seem close to insurmountable now.”

Sunday’s warning comes after more than three dozen well-known financiers, executives and other City figures in an open letter to The Times published on Friday asked Theresa May and Bank of England Governor Mark Carney to delay the planned tie-up, saying that it would be destabilising during Brexit negotiations.

The letter, signed by City grandees like former Chancellor Lord Lawson, Andrew Beeson, the former chairman of asset management company Schroders, and Lord Flight, the chairman of Flight and Partners and former deputy chairman of the Conservative Party, insisted that the merger was “a risk that the Government should recognise, evaluate – and not take now”.

Among the 40 signatories of the letter are Peter Cruddas, chief executive of CMC Markets and former Tory treasurer, Edmund Truell, chairman of Disruptive Capital, and John Mills, chairman of JML Group.

The merger, first announced last February, would create a European powerhouse in trading stocks, bonds and other financial instruments to rival exchanges of similar size in Asia and the US.

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The agreement to merge came 16 years after the pair first attempted a tie-up and will bring together LSE's strength in share trading with Deutsche's Eurex derivatives trading arm in what they have called a “highly complementary combination”.