EU antitrust regulators opened on Thursday an in-depth probe into the proposed merger of Deutsche Boerse and NYSE Euronext (NYSE:NYX), citing concerns about the impact on derivatives and equities trading.
EU Competition Commissioner Joaquin Almunia had flagged the move several times in the past couple of months. The investigation followed a month-long preliminary review which ended on Thursday.
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Regulatory approval in Europe and the United States is the last part of the process before the companies can merge to become the world's largest exchange operator.
"The proposed merger would remove a strong competitor from the market and would give the merged company by far the leading position in derivatives trading in Europe," Almunia said in a statement.
NYSE Euronext and Deutsche Boerse said in a joint statement that they were confident the European Commission would clear the deal.
The Commission said the initial review indicated concerns in a number of areas, especially in derivatives trading and clearing.
"Due to the removal of an important competitor, the merger would have a negative impact on innovation in derivatives products and technology solutions," the European Union executive said. It said rivals may find it more difficult to enter the market which may lead to reduced fee competition affecting pension funds, mutual funds, retail and investment banks and brokers.
The Commission said the lack of access to the merged company's enlarged post-trade clearing facilities due to its vertical silo model may hinder rival derivatives platforms seeking entry.
It also expressed concerns about the deal's impact on equities trading and settlement and index licensing.
The Commission said it would decide by Dec. 13 whether to clear or block the deal.
NYSE Euronext and Deutsche Boerse said the benefits of the deal included a bigger player able to compete effectively with over-the-counter platforms, other exchanges and banks.
They also pointed to the $3 billion in capital efficiencies for customers.