Britain urged European Union competition officials on Wednesday to reject political interference and vested interests when ruling on plans to create the world's biggest stock exchange.

EU officials have signalled they will recommend blocking Deutsche Boerse's $9 billion (5.8 billion pounds) takeover of transatlantic rival NYSE Euronext because it would account for over 90 percent of European listed derivatives trading and a large chunk of clearing.

The two exchanges are mounting last-minute efforts to rescue the merger and Britain has made no secret of its wish to promote open markets and competition in clearing.

The European Commission' 27 commissioners are to meet possibly as early as February 1 to rule on the merger and Financial Services Minister Mark Hoban urged them to avoid being swayed by political arguments.

In a post-crisis market where we have seen extensive consolidation across the board, we cannot afford to sit back and sacrifice competition and customer welfare, he said in remarks to be delivered at the London Stock Exchange , a top rival to the planned megabourse.

The EU competition directorate general has a fierce reputation for objective and rigorous analysis, and a record of promoting the bloc's single market objectives, he said.

It is vital that DG Competition lives up to those duties in the weeks and months to come, without political interference, Hoban said.

I fully understand nonetheless that the Commission faces a huge challenge to resist pressure to delay, obfuscate and pander to vested interests in the EU, Hoban added.

The bloc's national competition regulators backed the proposed EU veto on Tuesday, a source told Reuters.

Brussels faces some pressure to allow a merged European champion that could compete globally with giants like the Chicago Mercantile Exchange .

MIFID WATCH

Britain, the EU's biggest financial centre, is taking a more confrontational stance to stop Brussels damaging its financial sector which generates 12 percent of UK tax revenues.

Last month Prime Minister David Cameron vetoed plans for a new EU treaty for all 27 member states to help resolve the euro zone debt crisis because of concerns over how it would affect the single market and Britain's financial services.

Hoban echoed Cameron's rejection of a Europe-only tax on financial transactions and spoke of the need to preserve the free flow of capital across the single market.

Britain is keen to ensure competition in clearing of securities and has won commitments in a new EU derivatives law to ensure choice in clearing off-exchange traded contracts.

It is now pushing to keep similar provisions in a sweeping update of EU securities markets, known as the markets in financial instruments directive or MiFID II.

Some industry officials predict that if the megabourse is blocked, Germany may try to dilute such provisions to avoid Deutsche Boerse's trading-to-clearing model being broken up.

MiFID II includes radical plans to curb ultra fast high-frequency trading and rein in commodities trading using position limits which the United States has already adopted to stop price-influencing positions being built up in areas like food.

It is incorrect to think that blanket limits will enable governments to control prices as some would seem to suggest, Hoban said.

Reform of MiFID has to be driven by evidence and not political whim and that imposing the share trading model used in the current MiFID rules on bonds and derivative may be inappropriate, he added.

Britain, home to 230 foreign banks, is worried that MiFID II will block access to EU financial markets for institutions from outside the bloc until they can show their home regulation is equally tough.

We gain nothing by browbeating emerging economies and their most successful firms and sovereign wealth funds with additional and unnecessary burdens, Hoban said.

(Reporting by Huw Jones; Editing by Jon Loades-Carter)