Plans to create the world's largest exchanges group by combining Deutsche Börse with NYSE Euronext are to be submitted to an in-depth probe after European antitrust authorities raised “significant concerns” over its dominance in derivatives trading.
The move came after Brussels launched an initial investigation in June into the planned $10bn tie-up, which would create a transatlantic group larger than the CME Group, ICE or Nasdaq OMX in the US, as well as the London Stock Exchange. It also marks the first time that exchange ownership of the crucial post-trade business of clearing in a so-called “vertical silo” has come under antitrust scrutiny in Europe. Deutsche Börse owns its own futures exchange – Eurex – and clearing house, a position that would be strengthened with the addition of NYSE Euronext’s Liffe futures exchange, based in London.
The commission said: “At this stage, [we are] mainly concerned that due to the removal of an important competitor, the merger would have a negative impact on innovation in derivatives products and technology solutions". “Moreover, the possibilities for fee competition may be reduced due to increased difficulties for competitors to enter the market. Customers who could be affected by this include pension funds, mutual funds and retail banks, as well as professional brokers and investment banks.”
Brussels said its investigation had revealed concerns that without access to the merged company’s enlarged clearing facilities – “i.e. in the presence of a closed ‘vertical silo’” – entry by rival derivatives platforms would be made more difficult in a market already characterised by high barriers to entry. Joaquín Almunia, EU competition commissioner, said: “The Commission needs to make sure that markets which are at the heart of the financial sector remain competitive and efficiently deliver to users”.
Brussels has 90 working days to complete its probe.
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