Deutsche Boerse clients fearful over merger costs

Deutsche Boerse's planned $9 billion take-over of NYSE Euronext faces growing opposition from its largest clients who fear the merger will lead to increased trading costs, a concern the exchanges reject. "I don't see clear benefits from mergers. I see increased complexity and increased complexity rarely implies increased savings," said Philippe Guillot, head of trading at broker Cheuvreux.
"Nothing has led us to believe that savings will be passed on to the end investors," Guillot told the European Exchanges Summit in London on Monday. Europe's largest share-trading firms, including the world's top investment banks, fear a merger between Deutsche Boerse and NYSE Euronext will give the combined entity an effective monopoly in some areas, which could lead to increased costs.
"They've not offered us much in the way of assurances over trading fees, our main outlay, instead they are talking up connectivity savings," said one head of electronic trading at a large investment bank. NYSE Euronext sought to allay these concerns on Monday, saying costs would come down for clients, though it did not rule out higher trading fees.
"The merger will lead to infrastructure savings. Clients will have less to do to connect to our platforms and less to do in clearing and settlement. It does not equal lower fees but it will mean overall savings," said Roland Bellegarde, group executive vice president and head of European cash and listings at NYSE Euronext. The exchange partners are keen to stress clients will make hefty savings in their technology budgets because the merger will mean they need to maintain just one set of infrastructure links to trade products which today require two sets of pipes.
The European Commission is currently studying the exchange mega-merger, particularly derivatives trading and clearing services, with a view to announcing whether it has decided to back or block the deal in December. Deutsche Boerse and NYSE Euronext hoped to avoid tricky questions over the combination of the two top European futures platforms by arguing the vast over-the-counter (OTC) futures market should be factored into any anti-trust deliberations. But three people familiar with the matter said last week the Commission told the exchanges at the start of the month it had opted not to include OTC derivatives in its review of the planned merger, a potential blow to the deal.