EU leaning to block NYSE-Deutsche Boerse merger

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BRUSSELS (AP) — The European Union’s antitrust regulator is moving toward blocking the $10 billion merger between stock exchanges NYSE Euronext and Deutsche Boerse, two people close to the merger said Tuesday.

The case team that has been examining the planned merger, which would create the world’s largest exchange operator, fears that the combined company would have an overly dominant position in the trading and clearing of exchange-traded derivatives in Europe, said one of the people.

Because of their concerns, the EU’s Competition Commissioner Joaquin Almunia is set to recommend blocking the deal at a meeting with his fellow Commissioners on Feb. 1, the person said.

A majority of commissioners has to back the prohibition of the merger and a final decision has to come by Feb. 9, at the latest.

A second person close to the merger confirmed that “it looks like they (the European Commission) is working toward a prohibition.”

Both people requested anonymity because the process is confidential.

The negative opinion from the case team will set off several weeks of intense lobbying in which Deutsche Boerse and NYSE Euronext will try to convince other commissioners to advocate for the merger, which they say will strengthen Europe’s position in global financial markets and cut costs for banks and other financial firms using their trading and clearing services.

Opponents of the deal, such as the London Stock Exchange Group PLC and Nasdaq, meanwhile, will push for the deal to be blocked, arguing that it threatens to destroy other companies trying to move into the trading and clearing of derivatives.

Derivatives are complex financial products that allow investors to bet on developments in areas such as interest rates, stock indexes or commodity prices.

It is rare for recommendations from the competition commissioner to be overturned, but it has happened before, most notably in the acquisition of Sun Microsystems by Oracle in 2010.

The antitrust division of the Commission has been examining the merger between NYSE and Deutsche Boerse since the early summer and its concerns have crystallized around the two companies’ strong derivative trading platforms — NYSE’s Liffe and Deutsche Boerse’s Euronext.

Together, the two exchanges are seen to control more than 90 percent of the trading of some of the most popular derivatives products.

The Commission has asked that the companies sell one of the two platforms, the first person said — a demand that the two companies rejected.

NYSE and Deutsche Boerse argue that the Commission should take into account that the vast majority of derivative trades don’t happen on regulated exchanges but bilaterally between banks and other financial firms.

They also argue that the Commission should not only focus on Europe, but see derivative trading as a global market.

NYSE and Deutsche Boerse said in a statement that they had not yet received any decision from the Commission. A spokeswoman for Almunia also said that no final decision on the merger has been taken.