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NYSE Euronext/Deutsche Boerse Deal May Be in Jeopardy

12 January 2012 - Features - Editor

While a final decision has not been made yet, it has been reported that the European Union has strong reservations about giving the go-ahead to the NYSE Euronext/Deutsche Boerse. Sources in the know have revealed that European Union antitrust regulators have made a recommendation that the deal should not be finalized, citing concerns that this may result in a European monopoly in exchange-traded futures and options. While speculation is rife, the final say on whether the deal can proceed or not lies with the twenty-seven European Union commissioners. They are scheduled to meet on February 1, with their ruling expected on or before February 9.

The two exchanges are nonetheless determined to continue with negotiations which received Deutsche Boerse shareholder approval in July last year. Executives from both exchanges met on Wednesday to discuss the matter. Chief Executive of NYSE Euronext, Duncan Niederauer, noted that the recommendation by EU antitrust examiners was flawed in that it appears they have not factored in competing markets in privately traded derivatives and international competitor exchanges.

While analysts disagree on whether approval of the deal will benefit the exchanges or not, executives of both the Deutsche Boerse and NYSE Euronext are standing by their deal as the most favorable long-term strategy for their customers and their shareholders. They anticipate saving an estimated €3 billion by combining their trade-clearing services. Prior to striking a deal with NYSE Euronext, the Deutsche Boerse had been investigating the viability of creating its own trade-clearing facility for its European markets. This would have added a new revenue source for the exchange, while at the same time reducing their reliance on London based clearing house LCH.Clearnet. The NYSE Euronext/Deutsche Boerse merger would see NYSE Euronext's trading being routed to the German exchange's existing clearinghouse. The larger clearinghouse operation created by the two entities had aimed to pick up business from swap markets currently dominated by banks. Regulators are pushing to move these trading transactions through clearinghouses and regulated trading platforms in an attempt to lessen systemic risk. As a combined entity, NYSE Euronext/Deutsche Boerse will be able to compete with entities such as the CME Group and Intercontinental Exchange.

Stock market benchmarks were generally lower on Wednesday, with NYSE Euronext shares closing down 0.9 percent at $27.55 and Deutsche Boerse shares ending the day down 1.2 percent at €41.16.

 


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