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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.

Article source: http://dealbook.nytimes.com/2011/12/22/justice-approves-merger-of-nyse-euronext-and-deutsche-borse/?partner=rss&emc=rss

European Regulators Investigate Banks for Credit Swaps

The European Commission, which acts as competition regulator for the 27-member European Union, said on Friday that it would investigate whether 16 investment banks and the market information provider Markit had colluded or abused a dominant market position.

At the same time, the commission said it had opened proceedings against 9 of the 16 banks and ICE Clear Europe, a credit default swap clearinghouse owned by the exchange operator InterContinental Exchange , to examine whether preferential tariffs granted by ICE to the banks had hurt competitors.

Credit default swaps “play a useful role for financial markets and for the economy,” the commissioner in charge of antitrust cases, Joaquin Almunia, said in a statement announcing the investigations.

“Recent developments have shown, however, that the trading of this asset class suffers a number of inefficiencies that cannot be solved through regulation alone.”

The 16 banks being examined are: JPMorgan Chase, Bank of America, Merrill Lynch, Barclays , BNP Paribas, Citigroup , Commerzbank, Credit Suisse First Boston, Deutsche Bank , Goldman Sachs , HSBC , Morgan Stanley , Royal Bank of Scotland, UBS , Wells Fargo Bank/Wachovia, Crédit Agricole and Société Générale.

The commission said the first investigation would focus on the financial information needed for trading the credit swaps, which are like insurance contracts and usually pay out when a debtor defaults, allowing a creditor to hedge risk, or, if they expect a default, to take a speculative position in the market.

The commission said it had information that the 16 banks that act as dealers in the market give most of the pricing, index information and other data only to Markit, which is the leading financial information firm in the market.

“This could be the consequence of collusion between them or an abuse of a possible collective dominance and may have the effect of foreclosing the access to the valuable raw data by other information service providers,” the commission said.

“If proven, such behavior would be in violation of E.U. antitrust rules.”

Under EU rules, those found in violation of antitrust regulations can be fined up to 10 percent of their revenues.

In the second investigation, the Commission said it was investigating a number of agreements between nine of the 16 dealer banks and ICE Clear Europe, a clearing house for the credit default swaps.

Deutsche Bank, Commerzbank and BNP Paribas declined to comment. The other banks, Markit and ICE Clear Europe were not immediately available to comment.

Article source: http://www.nytimes.com/2011/04/30/business/global/30swaps.html?partner=rss&emc=rss

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

European Regulators Investigate Banks for Credit Swaps

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