The European Commission will not include over-the-counter
derivatives in its review of Deutsche Boerse's planned takeover of NYSE
Euronext, three people familiar with the matter said on Monday.
The decision could make
getting the merger approved more difficult as defining the market narrowly is
likely to show that the combined company will be a dominant force in
derivatives.
Deutsche Boerse owns
electronic derivatives exchange Eurex, while NYSE Euronext operates the Liffe
derivatives exchange. Both parties have said the combination of their platforms
would not significantly harm competition in the derivatives markets,
given the majority of derivatives were not traded via an exchange but as part
of the over-the-counter (OTC) market.
Two sources familiar with
Deutsche Boerse's thinking said the European Union's antitrust body signaled it
would only look at the market for derivatives traded on an exchange when it
assessed the impact of the tie-up.
A person familiar with the
European Commission's thinking said it had defined the relevant product market
as exchange-listed derivatives and not the OTC market.
"At this stage, the
parties' definition of the derivatives market is quite different from what the
Commission thinks it is," said a source with direct knowledge of the
matter. The source declined to be named because of the sensitivity of the
matter.
"The Commission has
provisionally made up its mind (on the product definition)," the source
said.
NYSE Euronext declined to
comment. A spokeswoman for EU Competition Commissioner Joaquin Almunia also
declined to comment.
Deutsche Boerse agreed to
acquire the Big Board parent in February. Worth $9 billion, the deal is expected to close by year end.
To counter arguments that a
combined company would have a stranglehold on exchange-basedfutures trading in Europe, Deutsche Boerse and
NYSE Euronext have argued that Liffe and Eurex offer different interest rate
futures products and thus do not compete much.
The pair, which together
would be the world's largest exchange operator, also argue that they compete
with off-exchange markets.
Analysts said the move could
have negative implications for a deal.
"This is a potential
blow for the merger," said Simmy Grewal, an analyst at Aite group. "I
struggle to see how the Commission can let this go through and create a huge
monopolistic exchange in futures when they have spent the last five years
promoting competition in equities."
The takeover of NYSE
Euronext, announced in February, capped a wave of bourse merger plans globally.
Most other bids -- including those from LSE, Singapore Exchange Ltd, and Nasdaq OMX Group -- have since failed.
Earlier this month, Deutsche
Boerse and NYSE Euronext said they received from European Union antitrust
regulators a formal "statement of objections" against their merger.
Deutsche Boerse will now
review whether the concerns can be addressed. On Monday, it said it and the
European Commission were "at the beginning of an intense dialogue"
about the merits of a deal.
(Additional reporting by Jonathan
Spicer in New York and
Luke Jeffs in London; Editing by Dan Lalor, Hans-Juergen Peters and Martin Howell)
Source : Reuters
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