Deutsche Boerse-NYSE Euronext merger at risk

European competition officials have drafted a recommendation to reject the merger of exchange operators Deutsche Boerse and NYSE Euronext, the Financial Times reported.

The proposed merger would create the world’s largest exchange for stocks and derivatives, according to the Associated Press.

Competition officials led by Joaquin Almunia, the European competition commissioner, have reportedly decided that the group, which would handle more than 95 percent of trading in benchmark short-term interest rate and German government bond futures, would discourage other companies from moving into derivatives trading, the Financial Times reported.

According to the Financial Times:

The antitrust decision is a serious blow to the chances of the German and US groups being able to complete the deal, and highlights how competition concerns have helped scupper a year-long wave of attempted exchange consolidation.

A spokeswoman for Almunia said no final decision had been made yet, and NYSE and Deutsche Boerse said in a statement that the commission hadn’t sent them a formal decision, the AP reported.

Two sources told Bloomberg News that the chief executive officers of Deutsche Boerse and NYSE Euronext will meet in New York tomorrow to discuss how to persuade regulators to accept the merger.

“They could appeal to politicians to secure some pressure on the regulators,” Jamie Selway, head of liquidity management at New York-based Investment Technology Group Inc., suggested to Bloomberg News. “They could say that if European politicians are intent on setting back the financial markets in Europe substantially, preventing this deal is a good way to do that.”

A 27-member European Commission competition panel headed by Almunia will consider the recommendation to block the merger and deliver their formal decision by Feb. 9, the Street reported.

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