Monday, 06 February 2012 16:21
On 1 February 2012, the European Commission has announced that it has prohibited the proposed merger between Deutsche Börse which operates ‘Eurex’ and Liffe which operates ‘NYSE Euronext’ both described as the two largest exchanges in the world for financial derivatives to the extent that they are deemed to compete head-to-head and are each other’s closest competitors, on the basis of the EU Merger Regulation, as it would have resulted in a quasi-monopoly in the area of European financial derivatives traded globally on exchanges.
The proposed merger would have eliminated this global competition and created a quasi-monopoly in a number of asset classes, leading to significant harm to derivatives users and the European economy as a whole. With no effective competitive constraint left in the market, the benefits of price competition would be taken away from customers. There would also be less innovation in an area where a competitive market is vital for both SMEs and larger firms.
The two companies claimed that the merger would benefit customers through greater liquidity.
EU Commissioner Joaquin Almunia whilst addressing the first European Competition Forum on the 2 February, 2012, on the importance to maintain vigilance of the internal market, stated that “The latest proof of our continued vigilance is in today’s papers. Yesterday, the European Commission prohibited the proposed merger between Deutsche Börse and New York Stock Exchange – Euronext. We decided to block the deal because it would have established a near monopoly in the market for listed derivatives based on European interest rates or equity. Because derivatives are vital for Europe’s economy, we could not let this happen.
He further commented that “Today, the two companies control over 90% of this market globally and compete head-to-head. The merger would have eliminated this competition and – as a result – firms and investors would have had to turn to a quasi-monopolist with little or no incentive to fight for their business. I rarely have to propose the prohibition of a merger; since I took office, this is the second time. This means that I do not do so lightly; but I have done and will continue to do so whenever necessary.”
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