The blocked merger of Deutsche Börse with NYSE Euronext leaves both parties with disappointed shareholders as long term plans to achieve scale in world financial markets appears checked. An appeal is possible, but it appears both parties misjudged how narrowly competition minister Joaquín Almunia viewed the merger as anti competitive. Both DB and NYSE Euronext argued that the derivatives markets are global, not regional – as Brussels antitrust authorities have decided. Europe’s regulator also believed that the off-exchange, or over-the-counter markets did not provide significant competition for exchange-traded derivatives, despite the contention that the combined group would still compete globally with the Chicago Mercantile Exchange and other exchanges in Asia.
The biggest loser would appear to be NYSE Euronext, which generates most of its revenues from cash markets and derivatives and lacks a substantial post-trade services unit. Analysts say that with the collapse of the deal the NYSE will need to seek its own clearing strategy at a time when clearing has become a competitive weapon with rival exchanges. A major element in the drive to combine was for NYSE to move the clearing operations to Deutsche Börse’s Frankfurt clearing house. This isn’t the first time European regulators have taken a narrow view of competition. While it’s true the combination of DB’s Eurex and NYSE’s Liffe would represent 95 percent of exchange-traded derivatives, some observers point out that the listed derivatives is global and cannot be viewed as regionally North American or European.