Mergers & Acquisitions

Mergers & Acquisitions

January 11, 2012

NYSE-Deutsche Boerse Merger Threatened by European Union

Regulators of the European Union are hoping to block a proposed $10 billion merger between the two leading stock exchange groups NYSE Euronext and Deutsche Boerse.

Reports surfaced Tuesday after two sources close to the merger leaked information that Joaquin Almunia, European Commission’s vice president, was recommending the block in fears that the two companies would monopolize the derivatives and clearing.

The move by the case team didn’t come as a surprise for most since the commission stated last August their disapproval of the merger.

“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. The Commission needs to make sure that markets which are at the heart of the financial sector remain competitive and efficiently deliver to users,” said Almunia in the August statement.

A significant concern pointed out in the statement was that the merger would bring together the two largest derivatives exchanges in Europe.

As defined by the commission, derivatives are financial contract whose value is derived from an underlying asset or variables, such as stocks, interest rates or currencies.

After the proposed block NYSE Euronext released a statement objecting to the commission’s claim, stating, “The proposed merger aims to create a regulated, highly liquid and integrated European market for stock and derivatives trading as well as clearing and settlement, thereby contributing to the stability, integrity and transparency of the European financial market.”

In an attempt to make peace with the merger the European Commission asked both companies to sell one of their two derivative trading platforms – Liffe and Eurex.

However, the two companies declined the offer arguing that the commission’s approach ignores the bigger market for derivatives that are traded over the counter.

According to DealBook, both companies stated that within the world of exchange-traded derivatives, the market share of a combined Liffe-Eurex would be 19 percent, smaller than their main competitor, the CME Group.

Although reports are stating that the case team has rejected the merger thus far, there has been no formal approval or disapproval by the European Commission. Both companies and the commission have been quick to dispel the rumors.

“NYSE Euronext has not yet received any official decision by the European Commission regarding the requested merger of both companies. The Commission has announced that it will make its final ruling on whether to clear the proposed merger by February 9, 2012. As a matter of policy, we cannot comment on speculation.”

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Jordan Eggers has five years of writing experience and has written pieces for various print outlets and websites. Currently living abroad, she is working as a freelance writer and enjoys keeping up-to-date on everything new happening in technology.

Edited by Carrie Schmelkin

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