9:11 a.m. | Updated
LONDON — NYSE Euronext and Deutsche Börse have submitted new concessions to the European authorities as the exchanges attempt to gain approval for their proposed $9 billion merger.
The move comes as the European Commission and a local German regulator have raised concerns about the deal, which would give the two companies a dominant position in the exchange-traded derivatives market.
To allay these concerns, the companies said on Tuesday that they had agreed to divest more of their equity derivatives trading operations, as well as provide the new owner access to Eurex Clearing, a clearinghouse for derivatives products.
The concessions include the disposal of all of NYSE Euronext’s single-stock derivatives businesses in Europe, according to a person with knowledge of the matter.
If local regulatory approval isn’t given for divestments in individual European countries, the companies would look to dispose of Deutsche Börse’s complementary operations in those countries, the person added.
NYSE Euronext, the parent of the New York Stock Exchange, and Deutsche Börse also said they would license Eurex’s trading system to third parties looking to offer interest-rate derivatives.
The firms said the European authorities were now expected to make a decision on the merger by February; the previous deadline was January.
“The revisions are designed to reflect the European Commission’s feedback on the initial proposal, and thereby fully address the commission’s remaining concerns while preserving the industrial and economic logic of the merger,” the companies said in a statement.
The new concessions echo a similar move in November when NYSE Euronext said it would sell its pan-European single-equity derivatives units, but not the options businesses in its home markets. Deutsche Börse said it would divest similar operations. The companies had also agreed to give rivals access to Eurex Clearing to offset regulatory concerns that the pending merger would lead to uncompetitive practices.
The European authorities are concerned the merger would give the companies a dominant position in the exchange-traded derivatives market, where the firms’ operations represent up to 90 percent of trading activity in certain contracts.
NYSE Euronext and Deutsche Börse are adamant that the proposed merger does not break antitrust rules. They cite competition from the so-called over-the-counter market, dominated by many of the world’s largest investment banks, which still represents the majority of derivatives trades in Europe.
Under new global regulatory proposals, these opaque deals are being required to use clearinghouses — financial intermediaries that guarantee trades if one side defaults — and to trade on exchanges.
William Rhone, a senior analyst at financial consulting firm TABB Group in New York, said the over-the-counter derivatives market, not the exchange-traded sector, was where antitrust regulators should be focusing their attention.
“The NYSE Euronext and Deutsche Börse is an attractive proposition that will allow them to compete with the oligopoly of the O.T.C. dealers,” Mr. Rhone said. “It’s that market, not the exchanges, where the debate about competition should be.”
Last week, Deutsche Börse’s chief financial officer, Gregor Pottmeyer, said the deal could be in jeopardy if antitrust regulators demanded more concessions.
“We want to pursue the transaction, but not at all costs,” Mr. Pottmeyer said. “Antitrust conditions should not be allowed to endanger the industry and economic logic of this transformational merger.”
Along with antitrust concerns, a local German regulator has also questioned how the deal would affect the companies’ future operations in Frankfurt, where Deutsche Börse is based. On Monday, the Hessian Ministry of Economy, the local regulator for the Frankfurt Stock Exchange, called for changes to the merger to protect trading activity in Frankfurt.
“We have communicated suggestions about how our concerns could be remedied,” said Wolfgang Harmz, a ministry spokesman.
Article source: http://feeds.nytimes.com/click.phdo?i=f0ae09ed56417495a1c792f858fc6e60
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