The planned merger of Deutsche Börse and NYSE Euronext, which would create the largest exchanges company in the world, has moved a step closer after a key US regulatory body approved the $9.4bn merger without objection.
Clearance by the Committee on Foreign Investment in the US, a government panel that vets foreign takeovers of US assets, means the deal faces only one more serious hurdle – clearance from European competition authorities.
A green light from CFIUS is a notable exception for an industry that has seen nationalist sensibilities scupper other exchanges mergers around the world in recent months. A joint Nasdaq OMX- IntercontinentalExchange bid for NYSE Euronext, the London Stock Exchange’s bid for Canada’s TMX Group and SGX Group of Singapore’s bid for the Australian Stock Exchange have all failed in recent months amid vocal opposition that has viewed national exchanges as important strategic assets. CFIUS is chaired by the US Treasury and includes representatives from the justice, commerce, state, defence and homeland security departments.
The Deutsche Börse -NYSE Euronext deal has elicited muted opposition in the US. Senator Chuck Schumer of New York, an influential Democrat, has backed the deal, saying it could protect jobs and strengthen New York’s position in the derivatives markets.
However, the deal faces an in-depth probe from regulators in Brussels, who are focusing their investigation on its potential to shift market power in derivatives trading and clearing, rather than defining and protecting so-called “strategic assets”. It comes amid fierce debate in Europe over forthcoming financial markets regulation that will reshape the rules governing trading and clearing in the derivatives market
Derivatives generate substantially more profits for exchanges than share trading. Banks, inter-dealer brokers and exchanges such as the London Stock Exchange have expressed concern that the combination of Eurex and Liffe, the derivatives trading platforms of Deutsche Börse and NYSE Euronext respectively, would create an overwhelmingly dominant player in Europe.
Rival derivatives platforms have worried that they could be blocked from accessing the merged company’s enlarged post-trading facilities, which, rivals say, could prevent them from entering certain derivatives markets.
Deutsche Börse has argued that it faces competition from the off-exchange or over-the-counter markets, where banks – the exchanges’ biggest customers – are active.
“We are continuing to work with regulatory authorities to achieve the remaining approvals and deliver this compelling combination to shareholders, clients and partners,” said Duncan Niederauer, chief executive of NYSE Euronext.
A decision is expected by the European Commission by December 13. Shareholders in NYSE Euronext and Deutsche Börse both backed the deal last month.
Deutsche Börse shares closed down €1.20 at €38.73 while NYSE Euronext shares traded flat at $25.50 in morning trading.
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