February 2nd, 2012
Econintersect: Just fifty weeks ago, amidst much fanfare about the consolidation of global equity exchanges (see GEI News sources reference links), the New York Stock Exchange and the Frankfurt based Deutsche Börse announced merger plans. The new combined venture would have created the world’s largest market for both equities and derivatives. Based on 2010 numbers the derivatives volume for the new company would have been approximately 50% greater than the current world leader, The Chicago based CME Group. The merger received fairly easy review and approval in the U.S. but was questioned by European regulators. On February 1, 2012 the European Commission has rejected the requested merger.
The reason for the rejection was the monopolistic position the new firm would have had over derivatives trading in Europe. More than 90% of such trades would have been cleared through the merged company. According to Der Spiegel the EU had suggested that the merged company could divest itself of all derivatives trading to get approval but that was not acceptable to the participants.
The two companies could appeal the decision to the European Court of Justice.
Securities Technology Monitor presents an argument that the reasoning of the European Commission is wrong and that the ready availability of technology would continue to allow entrepreneurial attacks on the European derivatives business to flourish. They point to the global proliferation of electronic trading for stocks and other assets that has reduced the size of the market share for big players like the New York Stock Exchange.
Missed Opportunity in DB-NYSE ‘Monopoly’ (Securities Technology Monitor, 1 February 2012)