Wednesday 20 September 2017

EC shoots down stock-exchange merger amid monopoly concerns

Sarah Collins in Brussels

The European Commission claimed yesterday that it had saved the economy from the "perverse effects" of a multi-billion-euro merger that would have forged the world's largest stock exchange.

EU competition chief Joaquin Almunia said Brussels had shot down a bid by Germany's Deutsche Borse to buy out US-based NYSE Euronext because it would have created a "near-monopoly", handing the new company a 90pc share of the European derivatives market.

"That would have practically eliminated effective competition in the market, with significant harm to customers," Mr Almunia told reporters.

He described Deutsche Borse's Eurex and NYSE's Liffe as "closed virtual silos", as the companies linked the exchanges to their own clearing houses.

This is the second merger Mr Almunia has nixed since taking office in 2010. The deal has already been approved by US antitrust authorities and regulators in Luxembourg and Germany.

Both Deutsche Borse and NYSE expressed disappointment with the decision, which puts an end to a six-month probe into a takeover that was valued at almost $10bn (€7.5bn).

The companies argued that it could offer banks annual cost savings of up to €400bn.

"This is a black day for Europe and for its future competitiveness on global financial markets," Deutsche Borse said.

NYSE Euronext chairman Jan-Michiel Hessels said he "strongly" disagreed with the veto.

Competition

But Mr Almunia said that they had not offered to spin off enough of their derivative business or open their clearing houses to appease competition concerns.

The deal was sealed despite reservations from financial markets commissioner Michel Barnier, who expressed his concerns to reporters in Brussels on Tuesday, ahead of the decision.

He insisted the Commission "take into account the evolution of the financial services and markets landscape in the years to come" before making a decision.

A person familiar with Mr Barnier's views said he had voiced them at a meeting of commissioners yesterday.

Mr Barnier is steering a radical overhaul of EU derivatives markets as part of a G20 pledge to regulate over-the-counter (OTC) or off-exchange derivatives, a market worth some $707 trillion (€540trn), last year, according to the Bank for International Settlements.

Lawmakers in the European Parliament are expected to seal a deal with governments next week on a law forcing OTC traders to clear their contracts centrally and report all transactions to data centres.

Another law in the earlier stages of the legislative process suggests moving a sizeable number of OTC contracts on to regulated exchanges.

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