The two exchanges are prepared to sell more assets to soothe concern about their dominance in the European single- equity derivatives market and will give any buyer the option to access Eurex Clearing for post-trade processing, the companies said in a statement today. The proposals include the sale of NYSE’s London-based Liffe single-stock equity derivatives business, according to two people familiar with the situation who declined to be identified as the remedies are private.
“The European Commission seems to be taking a fairly hard line, so I’m not sure these remedies will do it,” said Richard Perrott, exchange analyst at Berenberg Bank in London who rates Deutsche Boerse a “buy.” “More open access, not just on new and innovative products, but on existing products would have been welcome. The outcome is still too close to call.”
The companies also said they will license the Eurex trading system to a third party interested in offering interest rate derivatives. NYSE spokesman James Dunseath and a spokesman for Deutsche Boerse both declined to comment on the Liffe proposals.
European Union officials told Frankfurt-based Deutsche Boerse and New York-based NYSE at a meeting in Brussels on Dec. 6 that their Nov. 17 offer to divest some European single-equity derivatives units didn’t sway customers and rivals, according to people familiar with the discussions. Regulators also weren’t convinced that offering competitors limited access to Deutsche Boerse’s clearinghouse would do enough to foster competition for exchange-traded derivatives, the people said.
The meeting followed two days of talks with regulators in October where the exchanges also failed to alleviate antitrust concerns. Regulators have told the two companies that their deal to create the world’s largest exchange would monopolize derivatives trading in the region. The EU can block a takeover or require concessions from companies to eliminate potential antitrust problems.
Other new remedies offered today included increasing the degree to which rivals’ derivatives can mirror products offered by Deutsche Boerse and NYSE before they are excluded from using the exchanges’ clearinghouse, according to two people familiar with the situation.
The companies offered to boost the so-called correlation coefficient at which access is allowed for some index-based products to more than 90 percent, from a previous limit of no more than 85 percent. They kept the limit unchanged for Liffe’s benchmark short-term interest rate contracts.
Alternative trading venues will be offered clearinghouse use in addition to traditional exchanges and access could be allowed for an indefinite period of time, the people said. The sale of the Liffe equity-options business would be subject to regulatory approval and the equivalent Deutsche Boerse unit would be spun off if it is refused, the people said.
“NYSE shareholders should be relieved that the latest concessions remain far short of undermining the ‘industrial and commercial logic’ of the proposed transaction,” Edward Ditmire, an analyst at Macquarie Group Ltd. in New York, wrote in a note to investors. “On the other hand, the concession process has clearly become iterative, and there are no assurances that additional, more costly remedies might be demanded.”
The deadline for the European Commission to rule on the merger was extended until Feb. 9, the companies said today.
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