The combination would give Nasdaq a monopoly on listing corporations in the U.S., world’s largest capital market. That is likely to raise U.S. Justice Department concerns that the deal would be anticompetitive, said Herbert Hovenkamp, a professor at the University of Iowa College of Law in Iowa City.
If antitrust regulators limit their analysis of a combined exchange to the U.S. market, the merger would be “way over the threshold of illegality,” Hovenkamp said in a phone interview. The proposed acquisition poses less of a problem should the Justice Department view the deal in the context of the worldwide market for listed stocks, he said.
Nasdaq and IntercontinentalExchange bid $42.50 in cash and stock yesterday for each NYSE Euronext share, or about $11.3 billion.
Stock exchanges around the world are consolidating to stay competitive and attract worldwide issuers. More than $20 billion in proposed acquisitions have been announced in the past five months as exchanges in North America, Europe and Asia try to cut costs and seek new revenue from trading in options, futures and derivatives.
NYSE Euronext was formed when the operator of the New York Stock Exchange bought Europe’s second-largest exchange in 2007. It now owns exchanges in Amsterdam, Lisbon, Paris and Brussels as well as London-based Liffe, Europe’s second-largest derivatives market.
Defining the Market
“If the market is worldwide or bigger than the U.S., then it’s a more open game,” Hovenkamp said.
NYSE Euronext also runs three U.S. stock exchanges: NYSE Arca, NYSE Amex and the New York Stock Exchange, two options platforms and the NYSE Liffe U.S. futures exchange.
General Motors Co., for instance, could decide to be listed on the German stock exchange if Nasdaq’s combination with NYSE allowed it to charge excessive fees, Hovenkamp said.
The Justice Department also must be convinced that the deal wouldn’t lead to fewer technological innovations, said Harry First, a professor at the New York University School of Law and a former state antitrust enforcement chief.
“When a single provider controls the whole business, it doesn’t have the incentive for innovation,” he said in an interview at a Washington antitrust conference.
First said there could be an extended review by antitrust officials because of the deal’s size and complexity.