* CEO's lawyers in talks with prosecutor - Handelsblatt
* D. Boerse may face fine of up to 10 mln eur - Handelsblatt
* Prosecutor's office says investigation ongoing (Updates with comment from public prosecutor and Deutsche Boerse, details from report)
FRANKFURT, May 22 (Reuters) - Deutsche Boerse Chief Executive Carsten Kengeter's defense team is negotiating with prosecutors to drop an insider trading investigation against him, German daily Handelsblatt reported on Monday.
In return, the German stock exchange operator may face a fine of up to 10 million euros ($11.2 million) for delaying the announcement of its plans to merge with the London Stock Exchange, the report said.
Such a deal could still take several weeks, said Handelsblatt, which cited multiple unnamed sources.
A spokesman for Deutsche Boerse declined to comment.
A spokeswoman for the Frankfurt prosecutor's office said that the office was handling the two cases together but that "investigations on the suspicion of insider trading at Deutsche Boerse are still pending."
Kengeter has previously denied the insider trading allegations, saying he did not determine the timing of his share purchases ahead of the announcement of merger plans with the London Stock Exchange.
The plan to combine the stock exchanges, however, was later struck down by European regulators, who said the deal - the pair's fifth attempt to merge - would result in a monopoly in the processing of bond trades.
Last week, Kengeter said he and Deutsche Boerse were fully cooperating with the public prosecutor's office in the insider trading probe.
"I am certain that, following detailed investigation, the allegations will turn out to be unfounded," he said at the company's annual general meeting.
($1 = 0.8955 euros) (Reporting by Tom Sims; Additional reporting by Hans Seidenstuecker and Alexander Huebner; Editing by Himani Sarkar and Louise Heavens)