EU asks Deutsche Boerse-NYSE clients, rivals for remedy response

European Union regulators asked clients and rivals of Deutsche Boerse AG and NYSE Euronext whether the revised concessions offered this week are sufficient to eliminate antitrust concerns over their planned merger.

The European Commission asked if the revised remedies package is sufficient to restore the existing competition in derivatives between the two exchanges. The questionnaire also asks whether the concessions mean there’s potential to create “a viable” business capable of competing with the merged exchange in derivatives trading and clearing in Europe, according to the document obtained by Bloomberg News.

The two exchanges are struggling to convince European regulators that their takeover, creating the world’s largest exchange, won’t stifle competition in derivatives and clearing. On December 13, Deutsche Boerse and NYSE Euronext said they offered further concessions to the European Commission in an attempt to stop it blocking the deal.

The companies are now prepared to sell all of NYSE’s London-based Liffe single-stock derivatives business, according to two people familiar with the situation who declined to be identified as the remedies are private. The companies will give any buyer the option to access Eurex Clearing for post-trade processing and said they will license the Eurex trading system to a third party interested in offering interest rate derivatives.

In the market-test document, regulators ask whether the single-stock derivatives business has “sufficient scale and scope” to be a competitor to the combined NYSE-Deutsche Boerse. It also asks if so-called “fungibility” is necessary for any buyer to develop the business.

Contracts are said to be fungible if they can be bought on one exchange and sold on another. Most futures exchanges do not allow their contracts to be fungible.

The Commission’s deadline for responses to the market test is December 19 and the last day that it can rule on the merger is February 9.

EU officials told Frankfurt-based Deutsche Boerse and New York-based NYSE at a meeting in Brussels on December 6 that their November 17 offer to divest some European single-equity derivatives units didn’t sway customers and rivals, according to people familiar with the discussions. Regulators also weren’t convinced that offering competitors limited access to Deutsche Boerse’s clearinghouse would do enough to foster competition for exchange-traded derivatives, the people said.

The meeting followed two days of talks with regulators in October where the exchanges also failed to alleviate antitrust concerns. Regulators have told the two companies that their merger would monopolise derivatives trading in the region. The EU can block a takeover or require concessions from companies to eliminate potential antitrust problems. The takeover would put more than 90 per cent of the region’s exchange-traded derivatives market and about 30 per cent of European stock trading in the hands of one organisation.