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Last updated: January 10, 2012 11:33 pm
European competition officials have recommended blocking the tie-up between Deutsche Börse and NYSE Euronext, the German and US exchange operators, setting in motion what could be weeks of frantic lobbying to salvage the deal.
Joaquín Almunia, the European competition commissioner, has told the merger parties that he plans to prohibit the bid to create the world’s biggest exchange group by listings unless they are willing to sell one of the groups’ main derivatives businesses – a step executives refuse to take.
The antitrust decision is a serious blow to the chances of the German and US groups being able to complete the deal, and highlights how competition concerns have helped scupper a year-long wave of attempted exchange consolidation.
Reto Francioni, Deutsche Börse chief executive, and Duncan Niederauer, the NYSE Euronext head, will discuss the future of the deal at a previously scheduled meeting on Wednesday, people familiar with their plans said. The exchanges do not plan to offer additional concessions, these people said.
The NYSE said in statement it looked forward to “pressing the case for this compelling transaction” before the entire European Commission, which is scheduled to rule on the deal by February 9.
Mr Almunia’s case team has drafted an official recommendation to disallow the deal because it would create a dominant player in European exchange-traded derivatives markets, stifling competition from potential new entrants, according to two people involved in the process.
A combination of the German and US groups would unite their two European futures exchanges, Eurex and Liffe, handing the combined entity more than 95 per cent of trading in benchmark short-term interest rate and German government bond futures.
Mr Almunia’s staff rejected arguments by Deutsche Börse and NYSE that the market for exchange-traded derivatives was global and the merged group would still face competition from CME Group in the US. They also refused to agree that off-exchange or over-the-counter derivatives competed against exchanges.
The draft decision has been sent to other Brussels departments for their comments before being submitted to a committee of competition experts from European Union member states, who can offer non-binding advice on the judgment.
There is still a slim possibility of the recommendation being overturned if the exchanges marshal enough political backing for the deal – particularly from Angela Merkel, the German chancellor – to sway opinion in Brussels.
Investors sent NYSE shares up 4.6 per cent to $27.79 in New York as news of the decision by Brussels emerged, while Deutsche Börse’s shares closed up 4.9 per cent at €42.
Deutsche Börse said the two groups had not yet received any decision from the European Commission regarding their requested merger. A spokesperson for Mr Almunia declined to comment.
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