European bourses Euronext and Deutsche Boerse must ensure the independence of London Stock Exchange's (LSE) clearing provider if they want to take over.
The LSE has been attracting interest from Australian bank Macquarie
The UK Competition Commission made the announcement after 14 months in which the LSE has been pursued by suitors.
Experts say the ruling means Deutsche Boerse could keep its Eurex clearing venture, but Euronext would have to cut its stake in clearing outfit Clearnet.
Trades on the LSE, Europe's biggest exchange, are cleared via Clearnet.
Last July the Competition Commission warned that a takeover of the LSE by either Euronext or Deutsche Boerse could "substantially lessen competition", as it would leave the buyer in control of the LSE's clearing services.
Deutsche Boerse launched its bid for the LSE in December 2004 with a £1.3bn ($2.3bn) approach which the LSE rejected.
In March 2005, Deutsche Boerse was forced to withdraw its offer in the face of widespread opposition from its own shareholders.
The failure of the Frankfurt exchange's 530 pence a share offer eventually led to the resignation of its chief executive Werner Seifert.
Pan-European exchange Euronext has not yet presented a firm proposal, but has said it might be interested in a deal with the LSE.
However reports have said that it too faces stiff challenges in its bid to add London to the stock exchanges in Paris, Brussels, Amsterdam and Lisbon which it already owns.
In December the list of would-be suitors was joined by Australia's Macquarie Bank, which launched a £1.5 bn hostile bid rejected by the LSE as "derisory".
Deutsche Boerse did not comment on the Competition Commission's new report, and Euronext said interested parties had 15 days to provide an opinion.