After weeks of speculation that the European Commission would block the Deutsche Börse and NYSE Euronext merger, the Commission today has confirmed the block, “as it would have resulted in a quasi-monopoly in the area of European financial derivatives traded globally on exchanges.” Although Deutsche Börse and NYSE Euronext offered divestitures and concessions to make the resulting merged company more competitive, the Commission balked at the fact that, together, the two exchanges control more than 90 percent of global trade in financial derivatives.
The Press Release covers three points in its summary of the Commission’s decision:
- The relevant market is the markets for European financial derivatives traded on exchanges.
- Given that Deutsche Börse and NYSE Euronext compete head to head, the proposed merger would remove a crucial competitive constraint. The resulting single vertical silo would create a near-monopoly in a number of asset classes, hamper innovation, and deter entry by new players.
- The offers to divest Liffe’s European single stock equity derivatives producers, where they compete with Eurex, and the offer to provide access to the clearing for some categories of “new” contracts” are both insufficient to overcome competition concerns.
Source: EC Press Release
Related content: Competition and Vertical Integration in Financial Exchanges (Craig Pirrong, Bauer College of Business, University of Houston)
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