Yesterday, Reuters reported that
NYSE Euronext Inc.
) and Frankfurt-based Deutsche Boerse have submitted another
proposal to the European Union Commission (EUC), offering to
maintain the published clearing and trading fees on the combined
entity's European derivatives transactions at the current level
over a three-year period, in the event of clearance of the
The move is widely considered to be the final attempt by the
exchanges to gain approval for the proposed $9 billion merger of
NYSE and Deutsche Boerse, an nounced in February this year. While a
final decision from the EUC is expected by February 9, 2012, there
are a handful of anti-trust concerns that need to be remedied.
The anti-trust authorities are apprehensive as the deal will put
about 90% of the European exchange-traded derivatives' market and
30% of the stock trading transactions under the umbrella of the
merged company. The EUC is worried that the huge market share and
the amalgamation of trading and clearing functions in the merged
company might put rivals at a competitivedisadvantage and also push
out new entrants .
However, NYSE and Deutsche Boerse are trying to convince the
authorities that a majority of their derivatives are traded as
over-the-counter products and not through any exchange, thereby
leaving substantial scope for competitors. Additionally, the
exchanges have been offering various concessions to address the
concerns of the authorities.
Last week, NYSE and Deutsche Boerse had offered to divest the
single-stock equity derivatives business of NYSE's Liffe in
Brussels, Paris, Lisbon, Amsterdam and London. Additionally, the
exchanges agreed to provide access to Deutsche Boerse's Eurex
Clearing to outsiders, including rivals, for some products.
The parties to the merger also agreed upon licensing Eurex
trading to third parties, who are interested in initiating interest
rate swaps on this platform.
However, the fate of the merger lies in the hands of the
anti-trust authorities and failure to convince them will likely
kill the deal. The agreement was announced at a time when eroding
market shares had led to a series of attempts by various exchanges
to make cross-border deals in the hope of diversification and cost
In fact, NYSE itself had faced a counter-bid from arch rivals
NASDAQ OMX Group Inc.
) and its commodities partner
) in April this year but the U.S. Department of Justice had
rejected it over anti-trust concerns. Another rival, London Stock
Exchange Group Plc. had attempted a tie-up with Canada's TMX Group
Inc. but nationalistic concerns had forced them to abandon the
All other deals were also either unable to gather enough
investor support or faced regulatory and political hurdles and
collapsed. The NYSE - Deutsche Boerse deal has been one of thefew
to have gone this far, along with the proposed merger between BATS
Global Markets Inc. and Chi-X Europe.
Currently, NYSE carries a Zacks #3 Rank, which translates into a
short term Hold rating.
NASDAQ OMX GRP (
): Free Stock Analysis Report
NYSE EURONEXT (
): Free Stock Analysis Report
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