EU blocks Deutsche Boerse, NYSE tie-up Wednesday, 01 February 2012 23:57

FRANKFURT:  The EU Commission vetoed yesterday a transatlantic tie-up of the Frankfurt and New York stock exchanges, a decision slammed here as “out of touch with reality” and marking a “dark day” for Europe.

“Deutsche Boerse and NYSE Euronext have been informed that the European Commission today has decided to prohibit their proposed business combination,” the German company, which operates the Frankfurt stock exchange, said in a statement.

“This is a dark day for Europe and its future competitiveness on global financial markets,” it raged. “The EU Commission’s decision is totally out of touch with reality and is based on a narrow definition of the markets which does not take into account the global nature of the competition on the derivatives markets,” Deutsche Boerse fumed.

The EU Commission had been widely expected to block the tie-up — which would have created the world’s largest market operator — even though Deutsche Boerse and NYSE Euronext had offered to separate some of their derivatives operations to allay competition concerns.

Deutsche Boerse chief Reto Francioni described the decision as “wrong”, saying it was “inconsistent with and even contradictory to the Commission’s stated aim of expanding regulation on the over-the-counter derivatives market.”

Blocking the merger would prevent the creation of a Europe-based globally competitive stock exchange that “would have contributed to standardised, transparent and stable markets in Europe,” Francioni said.

The proposed merger had similarly sparked controversy in the United States as it would have handed over the New York Stock Exchange to foreign owners, with Deutsche Boerse shareholders owning 60 percent of the new combined firm. Investors appeared a little disappointed, with Deutsche Boerse shares underperforming the overall market and gaining only 0.53 percent in Frankfurt, while the overall DAX was up more than 2.0 percent. NYSE Euronext, too, said it was “disappointed and strongly disagrees with the EU decision, which is based on a fundamentally different understanding of the derivatives market.”

“Our merger would have created a high standard for transparency, stability and efficiency in the global capital markets, and we proposed significant and tangible remedies designed to address the European Commission’s concerns with the transaction,” said NYSE Euronext chairman Jan-Michiel Hessels.

“But as we made clear throughout this process, we would not agree to any concessions that would compromise or undermine the industrial and economic logic of the proposed combination.”

Both sides insisted they would now focus on building on their successful standalone strategies. “Deutsche Boerse is well equipped and has sufficient strength to grow and be successful without the merger,” Francioni said.

“The strong underlying fundamentals of our core business... and our diversified global footprint give us unique competitive advantages to exploit in the rapidly evolving global landscape,” said Hessels at NYSE Euronext.

AFP

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