May 26, 2024

DealBook: Justice Dept. Approves Merger of NYSE Euronext and Deutsche Borse

The Justice Department approved on Thursday the proposed merger of NYSE Euronext and Deutsche Börse, but required the sale of the German exchange’s stake in Direct Edge Holdings within two years.

The proposed settlement offered by the Justice Department is the latest obstacle that NYSE and Deutsche Börse have hurdled in their nearly yearlong bid to create the world’s biggest stock exchange operator.

But the biggest problem, obtaining antitrust approval from European Union regulators, has not yet been fixed. The European Commission has reportedly told the two exchange operators that their proposed antitrust remedies don’t go far enough, according to Bloomberg News. Some analysts have speculated that the two companies may be forced to divest one of their major derivatives-trading platforms altogether.

While the Justice Department’s antitrust team required other asset sales, the biggest required was the sale of the 31.5 percent stake in Direct Edge, the fourth-largest stock exchange operator in the country. Deutsche Börse has owned the stake through its International Securities Exchange subsidiary since 2008.

The Justice Department’s primary concern was that should NYSE and Deutsche Börse be allowed to combine, that new colossus — together with the stake in Direct Edge — would own too much market share.

“Without the divestiture and other restrictions obtained by the Justice Department, a combined NYSE and Deutsche Börse entity could influence the actions of Direct Edge, and thereby lessen the zeal of an aggressive and innovative exchange competitor,” Sharis A. Pozen, the Justice Department’s acting antitrust chief, said in a statement.

Besides selling the stake within two years, Deutsche Börse must also provide a written plan outlining how it will step back from all corporate governance roles at Direct Edge. (The German company has special voting rights and the ability to name three board members.)

“We are very pleased to have received the approval of the DOJ, an important milestone on our path to completing our compelling trans-Atlantic combination,” Duncan L. Niederauer, NYSE’s chief executive, said in a statement.

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