European Union officials have come out against a proposed merger between the NYSE and the German exchange Deutsche Börse, promising to block the deal. According to the EU, the merging of these two exchanges would create an unfair competitive advantage to the new company, crowding out smaller exchanges, which would have a very small market share in the European derivatives market.

The details of the proposed deal
The merger was supposed to create the biggest trading platform in the world by combining the strength of the New York Stock Exchange with the European market share of Deutsche Börse. Exchange officials said that the deal would be of benefit to investors, who would get greater access to trading and enjoy a more efficient method of placing transactions. The merger is reputed to be worth as much as £7.2bn. Despite the potential antitrust issues in combining the two exchanges, NYSE Euronext and Deutsche Börse executives have stated that the deal would actually reduce the cost of derivatives trading. The proposed deal would create a single exchange that is four times larger than the London Stock Exchange.

Why the EU is protesting the merger
According to the European competition commissioner, Joaquin Almunia, the merger would absorb up to 90 percent of the derivative market share in Europe, which lead to concerns over fair competition and possible monopolisation by NYSE Euronext and Deutsche Börse. Said Almunia, “By now all of you are aware that the European Commission has raised preliminary concerns in the announced merger… in this case as in others, the Commission will seek to ensure that European markets remain fair, efficient, and therefore competitive to the advantage of their users.” While the European Commission is resisting the merger, the proposed exchange deal passed an antitrust examination by US officials in late 2011.

Will the merger ever happen?
The Commission has yet to make its final decision on the merger, but all signs point toward a rejection of the deal. In order to approve the merger, Almunia has stated that NYSE and Deutsche Börse would have to sell one of their biggest derivatives businesses to avoid absorbing too much market share. Neither NYSE or Deutsche Börse has agreed to these terms and both exchanges have pledged that they don’t need to perform the merger to remain successful.

While it is unclear if the merger would be called off should the European Commission reject the deal, the likelihood of the deal going ahead as originally planned is small. In the meantime, the exchanges have turned their attentions to highly placed government officials in Europe, including the leaders of France and Germany, lobbying for their approval to get the merger done. Generally, though, commissioners have agreed with the findings of antitrust committees. Only about 10 per cent of cases have been approved despite antitrust objections. The European Commission is scheduled to make its final decision on the NYSE Euronext Deutsche Börse merger on February 9, 2012.