It would have been the world's largest stock-exchange company. But plans to combine Germany's Deutsche Börse with NYSE Euronext have floundered after the European Commission vetoed the merger on Wednesday.
The Commission, the EU's executive body which is also responsible for regulating competition within the bloc, argued that the combined company would have had too much power over trading in European derivatives, the term for financial instruments based on the value of an underlying asset, such as futures contracts and swaps.
"The merger between Deutsche Börse and NYSE Euronext would have led to a near-monopoly in European financial derivatives worldwide," said EU Competition Commissioner Joaquin Almunia Wednesday in a statement. "We tried to find a solution, but the remedies offered fell far short of resolving the concerns."
According to the Commission, the two companies control more than 90 percent of the trade in European exchange-traded financial derivatives through their subsidiaries the London International Financial Futures and Options Exchange (Liffe), which is part of NYSE Euronext, and Deutsche Börse's Eurex exchange.
Deutsche Börse reacted to the decision with disappointment. "This is a black day for Europe and for its future competitiveness on global financial markets," said the company's executive board in a statement. "The EU Commission's decision is based on an unrealistically narrow definition of the market that does no justice to the global nature of competition in the market for derivatives."
Legal Action Possible
The two potential merger partners had recently tried to save the $7.3 billion (5.6 billion) deal, which was originally announced in February 2011. In a bid to appease the European Commission, they offered to divest their overlapping businesses, including Liffe's single-stock derivatives business. Antitrust officials had previously said that the two companies would have to sell off an entire derivatives business, either Liffe or Eurex, but the exchanges weren't prepared to go that far.
The two companies can still appeal the decision before the European Court of Justice. The head of the New York Stock Exchange (NYSE), Duncan Niederauer, recently said that he would not rule out legal action against a veto.
It was the third attempt by Deutsche Börse and NYSE to merge. The Frankfurt-based Deutsche Börse would have owned 60 percent of the proposed new company, and the NYSE 40 percent. Since mid-February 2011, the companies had been seeking approval for the deal from around 40 competition and regulatory authorities on both sides of the Atlantic. The US Department of Justice and the Securities and Exchange Commission (SEC) had already cleared the merger.
dgs -- with wire reports
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