EU regulators are likely to take a long, hard look at Deutsche Boerse's planned takeover of NYSE Euronext, the EU's antitrust chief said, while a top NYSE executive said talks with authorities globally are so far going well.
EU Competition Commissioner Joaquin Almunia's comments on Thursday underscored the hurdles the deal faces in Europe compared with the United States, where regulators are expected to clear the $10.2 billion takeover.
The tie-up, announced last month, would give the merged company a stranglehold on European exchange-traded derivatives, and immediately raised questions over whether competition authorities would block it.
This is a complex case, Almunia told Reuters on the sidelines of an International Bar Association conference.
The NYSE Euronext deputy chief executive has recognized this before his meeting with me; it probably will require a deep investigation, he said. We are waiting for the notification.
NYSE Euronext Deputy Chief Executive Dominique Cerutti met Almunia last month. A NYSE Euronext spokeswoman said the exchanges plan to formally file the deal with regulators in due course. Recent media reports cited Cerutti as suggesting an April filing.
The merged group's dominance of securities such as swaps tied to interest rates or government bonds is expected to face intense regulatory scrutiny, antitrust experts have said.
In New York on Thursday, NYSE Euronext Chief Financial Officer Michael Geltzeiler said the U.S.-based company doesn't believe its Liffe derivatives market competes with Deutsche Boerse's Eurex platform in Europe.
The rhetoric... was pretty pronounced early on, Geltzeiler said at a conference hosted by Citigroup.
As we continue to put facts on the table and we're able to meet now that we've announced this transaction properly, with the regulators around the world the dialogues are going well.
The D.Boerse-NYSE deal is the biggest in a recent rash of planned exchange-industry deals, and it has stoked talk of a brewing counterbid for NYSE Euronext, including possibly from Nasdaq OMX Group.
Geltzeiler said that NYSE Euronext would evaluate a counterbid as one would expect, if one were to come.
There is a relatively steep 250 million euro ($346-million) termination fee attached to the blockbuster deal, which is the largest in a consolidation wave that includes Singapore Exchange, Australia's ASX and private venues BATS and Chi-X Europe.
As well, London Stock Exchange, Europe's largest stock exchange by value of daily trading, agreed to a takeover deal with Canada's TMX Group on February 9.
The Ontario Securities Commission said on Thursday the future strength and integrity of Canada's equity markets will be a key factor as it evaluates LSE's planned takeover of the Toronto Stock Exchange parent.
While nationalism appears to be playing a more central role in Canada and Australia, European regulators studying the Deutsche Boerse plan will likely focus on competition in the derivatives and clearing businesses.
Derivatives will be the main source of income for Deutsche Boerse-NYSE Euronext, accounting for 37 percent of total revenue, based on 2010 figures, with most of it from Europe.
Another area of potential concern is the link between the exchanges and Deutsche Boerse's derivatives clearinghouse, run by Eurex, and the danger that a merged group could stifle new entrants by restricting access to Eurex.
Clearing is becoming increasingly important as regulators require over-the-counter (OTC) swap deals to be cleared centrally, and as they run far more derivatives though exchange-like venues.
Taking advantage of this shift, Geltzeiler said NYSE Euronext will soon announce a number of new members for its U.S.-based rate futures market, NYSE Liffe U.S., which is to launch later this month.
The exchange has already sold a substantial minority ownership stake in NYSE Liffe U.S. to six trading firms and banks, including UBS AG and Goldman Sachs Group Inc.
(Editing by Gerald E. McCormick)