EU Court Blocks Securities Exchanges’ Merger

(CN) - Regulators properly blocked a planned merger of two financial powerhouses that would have controlled 90 percent of the global market for European exchange-traded derivatives, the EU general court ruled Monday.

In 2011, Deutsche Borse and NYSE Euronext informed the European Commission of a proposed merger involving the creation of a new Dutch company called HoldCo. The companies planned to have HoldCo acquire all outstanding shares issued by Deutsche Borse in exchange for its own shares.

Following the closure of that offer, a newly formed U.S. company - fully owned by HoldCo - would then merge with NYSE Euronext, which would become a subsidiary of HoldCo.

The commission blocked the merger as incompatible with the internal market in 2012. Regulators analyzed the effects of the proposed merger on the markets for European exchange-traded derivatives and found the new company would have a near-monopoly, trading and clearing more than 90 percent of the global transactions of European derivatives.

Deutsche Borse challenged the commission's decision before the European General Court, which dismissed the action in full on Monday.

In an opinion that was not released publicly due to the confidential nature of some information in the judgment, the Luxembourg-based court said that regulators properly found that Deutsche Borse's Eurex exchange and NYSE Euronext's Liffe exchange compete head-to-head and are each other's closest competitors.

The commission made a valid and legal finding that to allow them to merge would create a near-monopoly and make it almost impossible for other competitors to enter the market, the court said.

Furthermore, the court agreed that promises made by the companies to counteract the anticompetitive effects of the planned merger were inadequate and dismissed Deutsche Borse's claims that the merger would have improved market efficiency.

EU regulators hailed the court's decision, saying the merger would have "caused significant harm to worldwide users of European financial derivatives and to the European economy as a whole."

The companies have two months to appeal the lower court's decision to the European Court of Justice.

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