Deutsche Boerse AG's
The only time you can start saying this is not a fair function is when you have a vertical monopoly silo, where you don't have fungibility between the clearing and trading, and you're not providing access into the clearinghouse, Robert Greifeld said on Wednesday at a conference Nasdaq hosted here.
I think the NYSE-Deutsche Boerse deal puts front and center the concept, is a vertical silo good? he said.
Deutsche Boerse agreed to acquire the Big Board parent in February. Worth $9 billion, the deal was the largest in a global wave of planned deals among bourses this year -- most of which failed -- and it puts pressure on Nasdaq and others.
Although the merger is expected to close by year end, the combination of Europe's main futures venues Eurex and Liffe faces a tough antitrust review at the European Commission because it gives the combined company a virtual stranglehold on exchange-based futures trading and clearing in Europe, known as a vertical market.
Greifeld dropped a counter offer for NYSE Euronext earlier this year when the U.S. government threatened to block it. His warning on Wednesday steps up opposition from rival exchanges and even some brokers who have lobbied against the deal.
European and U.S. cash equities markets are horizontal in that securities can trade on any venue -- called fungibility -- and they are cleared on separate entities such as London-based LCH.Clearnet.
The question is can a horizontal model like LCH or others survive against the onslaught of a very large, vertically integrated silo? Greifeld said.
Deutsche Boerse and NYSE Euronext, which together would be the world's largest exchange operator, have argued that Liffe and Eurex offer different interest rate futures products and thus do not compete much. The pair also argue that they compete with off-exchange markets.
(Reporting by Jonathan Spicer, editing by Gerald E. McCormick and Matthew Lewis)