Bloomberg News

Deutsche Boerse-NYSE Merger Threatens Competition, AFME Tells EU

July 27, 2011

July 28 (Bloomberg) -- Deutsche Boerse AG’s takeover of NYSE Euronext will hurt competition in derivatives and listings, the exchanges’ biggest customers told the European Union as regulators weigh extending their probe of the deal.

The Association for Financial Markets in Europe, a group that represents banks and brokers including Goldman Sachs Group Inc., Bank of America Corp., Deutsche Bank AG and UBS AG, identified seven areas for further antitrust scrutiny in a submission to the European Commission obtained by Bloomberg News.

The companies forecast cost savings of $400 million when they announced the deal in February. AFME said it “has seen nothing to suggest that a fair share of any such savings would be passed on to end users.”

Deutsche Boerse’s rivals and customers are being asked by European Union regulators whether its bid for NYSE Euronext, valued at about $9.3 billion, would reduce competition for derivatives and equity trading and clearing. The commission, in a survey with more than 165 questions obtained by Bloomberg News, has asked what effect the deal to create the largest owner of equities and derivatives markets would have on access to market data.

“There are currently major flaws in the competitive functioning of certain of the markets in which” the companies operate, AFME said. “The proposed merger would exacerbate these competition issues as well as raising new ones.”

‘Competition Issues’

Competition in exchange traded derivatives, with the exchanges owning Europe’s two largest derivatives markets, post- trade services and Deutsche Boerse’s business model where the exchange operates all the trading and post-trade parts, are “competition issues,” AFME said.

Deutsche Boerse’s “historical behavior suggests that, post-merger, it would have both the ability and the incentive to charge higher prices and limit entry” for exchange-traded derivatives, AFME said.

There will also be increased barriers to entry and decreased competition in listing services if the combination proceeds in its current form, AFME said.

Frank Herkenhoff, a spokesman for Frankfurt-based Deutsche Boerse, declined to comment.

The commission has set an initial deadline of Aug. 4 to rule on the transaction. Joaquin Almunia, the EU’s competition chief, said in March that he expects to open an in-depth review of the “complex deal” after the initial monthlong probe. An extended review can last as long as 90 working days.

Rob McIvor, London-based spokesman for AFME, declined to comment on the group’s replies to the questionnaire, as did Amelia Torres, a spokeswoman for the commission in Brussels, and Caroline Nico, a spokeswoman for NYSE Euronext in Paris.

--With assistance from Aoife White in Brussels. Editors: Peter Chapman, Andrew Rummer

To contact the reporters on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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