D. Boerse, NYSE offer more remedies to clear $ 9 b merger

Wednesday, 14 December 2011 01:19 - - {{hitsCtrl.values.hits}}

PARIS/FRANKFURT (Reuters): Exchange operators NYSE Euronext and Deutsche Boerse on Tuesday offered more divestments in a bid to assuage European authorities’ antitrust concerns over their proposed $9 billion merger.

The companies formally offered to sell the London-based equity derivatives business at NYSE Euronext unit Liffe to help persuade Brussels-based regulators that a combination of the two companies does not distort competition, a person familiar with the matter told Reuters.

In November, Deutsche Boerse and NYSE decided to offer a first batch of concessions, proposing to sell overlapping parts of their single-stock equity derivatives businesses in key markets, and to open up Deutsche Boerse’s Eurex derivatives clearing house to outsiders for certain products.

On Tuesday, the two companies went further and said they were also ready to offer rivals more extensive access to their clearing house for trading in innovative equity index and interest rate derivatives.

In addition, they said they would license the Eurex trading system to a third party interested in launching interest rate derivatives.

The European Commission is set to complete its review by Feb. 9. The companies said they expected the deal to close after that, in early 2012.

People familiar with Deutsche Boerse’s thinking told Reuters last week that the two aspiring merger partners could spin off parts of their derivatives arms to create a third-party competitor as a way to allay antitrust concerns.

EU regulators met the exchanges on Tuesday last week to discuss antitrust issues.

European competition authorities have expressed concern that the combination of Deutsche Boerse’s Eurex and NYSE Euronext’s Liffe will give the merged entity a monopoly over European listed derivatives trading.

The project is also facing close scrutiny from German authorities. A regional regulator in the state of Hessen on Monday said it had raised some objections to the exchange operators and was awaiting a reply. This year, Eurex and Liffe have accounted for 97 percent of European stock futures trading and 93.7 percent of stock options trading, Federation of European Securities Exchanges data shows.

The exchanges have argued their market share is much lower if the vast over-the-counter (OTC) market is included in the assessment of the derivatives market.

But their merger plans were dealt a blow when the European Union decided to exclude OTC derivatives from its review of the deal.