European investment banks have warned that the blockbuster transatlantic merger between Deutsche Börse and NYSE Euronext could stifle competition in the sector.
Deutsche Börse and NYSE face a number of regulatory hurdles, including competition approval in Europe, where the combination of NYSE’s London-based derivatives business, Liffe, and Deutsche Börse’s Eurex, would consolidate 98 per cent of derivatives clearing in the hands of one company.
“There is a risk that mergers raise the barriers to entry for new players so competition and innovation are stifled,” a spokesman for the Association for Financial Markets in Europe said. “There are concerns about the potential limits on competition in the derivatives space.”
Deutsche Börse and NYSE formally notified the European Commission of the details of their tie-up on Wednesday, the same day as the London Stock Exchange pulled its £2.4 billion takeover bid for Canada’s TMX.
The competition regulator began to make contact with customers and competitors of the two exchanges yesterday to canvass their views on the merger. The European Commission has given interested parties seven days to respond with their concerns.
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The regulator has said that it will decide by August 4 whether to clear the combination at an initial phase. Competition Commissioner Joaquin Almunia has already warned that he is likely to take the merger to an in-depth “Phase 2” inquiry, which could last until the end of the year.
Deutsche Börse and NYSE Euronext said they remained upbeat about completing their planned merger by the end of the year.
The LSE, which is likely to file its own submission to the European Commission, would almost certainly bid for Liffe if the regulator forced NYSE to sell the exchange in return for clearing for its merger with Deutsche Börse. Market watchers trace many of the LSE’s woes to its failure to buy Liffe ten years ago.
Speculation continued to mount last night that Nasdaq, which tried and failed to break up NYSE’s merger with Deutsche Börse, is in the prelminary stages of putting together a bid for the London Stock Exchange.