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Political protectionism and regulatory uncertainty may prevent near-term European exchange operator megadeals after London Stock Exchange (LSE) [LON:LSE] and Deutsche Boerse’s [ETR:DB1] failed merger, sector bankers said. But a number of smaller deal opportunities remain, some of them added.

Countries across Europe are turning more protectionist, and the “national flag” emotions sweeping the continent may need to subside before new high-profile exchange deals become realistic, one of the bankers argued. Political “meddling” in regulatory deal decisions may be on the rise, a second banker agreed. This risk is pronounced for exchange operators because they are heavily regulated entities with crucial roles for financial stability, he cautioned.

Another question mark after the UK’s Brexit vote is how and where euro clearing will be handled once the separation is finalized, the first banker said. Some potential large-scale deals may remain unfeasible until this is settled, he argued.

Even so, investment banks keep pitching deal ideas to exchange operators, the first banker said. The “deal fatigue” after LSE/Deutsche Boerse’s collapse will wear off and executives will continue considering growth options, he suggested. A case remains for geographic and structural diversification, and this should fuel deals in the sector, a third banker argued.

Operators could also need to optimize cost-heavy “back end” systems like custody and data, the first banker suggested. Some of this could be handled through operational investments and rationalizations, but bolt-on buys and divestments would be an option, he argued.

Deutsche Boerse could launch smaller takeovers even as regulatory hurdles may stymie major deals, a person familiar with the German company said. Coming deals could be similar to its 2015 purchase of trading platform 360T, he added.

Meanwhile, LSE sees a strong standalone future for itself and will focus on organic growth but could make smaller acquisitions, a person familiar with that company said. It could make sense for LSE to make more data and technology add-ons, in line with its 2016 acquisition of Mergent, the second banker suggested.

As reported, sector watchers have earlier believed US-based operators CME Group [NASDAQ:CME] and InterContinental Exchange (ICE) [NYSE:ICE] could approach Deutsche Boerse and LSE respectively. ICE considered a rival deal with LSE last year but eventually backed off.

Still, Deutsche Boerse and LSE see no need for specific takeover defences after their failed merger, the persons familiar with the companies said. Deutsche Boerse is not concerned about becoming a target because the European Commission (EC) and Hessen’s Exchange Supervisory Authority would likely block any attempts, the person familiar with it added.

ICE might leave LSE alone at least until Brexit is finalized, the first and a fourth sector banker agreed. Even after that, regulatory changes in areas including euro clearing could make LSE unattractive to the US operator, the first argued.

While a transatlantic megadeal may look unlikely at this stage, a number of European deal cases could see sensible business logic and might be feasible if political hurdles are overcome.

It could make sense for Deutsche Boerse to acquire Euronext [EPA:ENX] in order to boost growth, the first and fourth bankers agreed. The German incumbent could slash costs in the cash equities area and monetize the Franco-Dutch operator’s data business, the first suggested.

But the bid case may not be strong enough to weigh against the risks, he cautioned. Overlaps on single stock options could create antitrust issues and French lawmakers might attempt to block such a deal, he said. Nationalist candidate Marine Le Pen’s showing in the French presidential election looms large over sentiment, he added.

A merger between Euronext and Spanish exchange operator BME [BME:BME] could also see some rationale, the first and third bankers said, with the first pointing to their potential for scale advantages. But such a deal could well run into Franco-Spanish political clashes over where the synergies should fall, they agreed.

BME’s Chairman-CEO Antonio Zoido may be reluctant to do deals but its General Manager Javier Hernani might be more open about the matter, a source close to the Spanish group said. A merger with Euronext “makes perfect sense”, the source conceded. However, BME is keener on Deutsche Boerse’s business model and might prefer the German company to Euronext if it should seek a tie-up, this source added. But BME could consider a proposal from either company for some collaboration, such as within systems integration, maybe as a waymark on the path to a merger, the source suggested.

Still, BME has done decently for itself and might not agree to a Deutsche Boerse takeover without a significant bid premium, the first banker said. The commercial merits of that combination may not be strong enough for that, he argued. BME stock is up around 17% over the past 12 months.

UK-based, globally focused interdealer broker NEX Group [LON:NXG] might also play some role in further European consolidation, the first banker said. It has less ties to any one geographic market than other operators, and could thus face less opposition from national politicians, he suggested.

Among other mid-sized European players, Nasdaq OMX [NASDAQ:NDAQ] might lack the scale to drive consolidation, the first banker said. It most likely option in a consolidation scenario might be to sell the Nordic OMX business, but it is hard to see any potential buyer able to motivate a big premium, he added. And a scale-boosting merger with Euronext would primarily increase Nasdaq OMX’s presence in continental European equities, which may not be in line with its growth strategy, the second banker said.

Still, the European exchange landscape should see consolidation in one form or another, the third banker said. Sector players did not stop doing deals after the EC’s 2012 block of Deutsche Boerse/NYSE – and should not do so after LSE/Deutsche Boerse either, he argued.

Spokespersons for LSE, Deutsche Boerse, Euronext and BME declined to comment.