March 6, 2021

DealBook: Europe Opens Broad Review of Deutsche Borse-NYSE Deal

Joaquín Almunia, the European Union commissioner for competition policy.John Thys/Agence France-Presse — Getty ImagesJoaquín Almunia, the European Union commissioner for competition policy.

7:26 p.m. | Updated

European Union antitrust regulators opened an in-depth review on Thursday of the $9 billion merger between Deutsche Börse of Germany and NYSE Euronext, after complaints from customers and rivals that the stock exchange combination could harm competition.

The approval of the European Commission is the biggest hurdle for the deal, which would create the largest operator of equities and derivatives markets.

The regulators’ main concern is the hold that Deutsche Börse and NYSE Euronext would have on exchange-based futures trading in Europe. In part, they are worried about the overlap between the Eurex derivatives platform, operated by Deutsche Börse, and Liffe, a similar platform operated by NYSE Euronext.

“The proposed merger would remove a strong competitor from the market and would give the merged company by far the leading position in derivatives trading in Europe,” Joaquín Almunia, the European Union’s commissioner for competition policy, said in a statement. “The commission needs to make sure that markets which are at the heart of the financial sector remain competitive and efficiently deliver to users.”

The commission said it had 90 working days, or until Dec. 13, to make a decision on whether to clear or block the deal. It could extend the deadline if the exchanges offer concessions that ease the regulators’ concerns.

Antitrust experts said the exchanges were probably considering appeasements that would not force them to sell parts of their combined derivatives and clearing businesses, which provide a significant source of the deal’s value.

“The key to a green light sometime early 2012 will likely be a creative approach to remedies,” said Kristina Nordlander, a partner in Brussels with the law firm Sidley Austin. The exchanges would be focused on “avoiding the kind of structural divestment remedies that might be a deal-breaker,” said Ms. Nordlander, who does not represent parties involved in the case.

The decision in Europe to give the merger a longer review was widely expected after Mr. Almunia described the merger as a complex case in March. Since then, some groups representing the financial services sector have warned that the combination risked being too powerful in some areas.

The merger “will create an exchange with a near-monopoly in European exchange-traded derivatives,” the FIA European Principal Traders Association said in a policy paper in July. The association has Citadel Securities Europe and Knight Capital Europe among its members.

Officials from NYSE Euronext already made clear that they expected a longer review in Europe. The focus was most likely to be on “what conditions may be placed on us, not on how to make or break the deal,” Duncan L. Niederauer, the chief executive of NYSE Euronext, said this week.

Mr. Niederauer also suggested that some of the loudest complaints were coming from rivals, including the London Stock Exchange and Nasdaq OMX, rather than from customers like banks, funds, traders and brokers.

Article source:

Speak Your Mind