EU probes takeover bid to create biggest stock market

BRUSSELS: European Union anti-trust officials Thursday launched a probe into takeover plans aiming to create the world's biggest stock exchange.

The European Commission said it opened an in-depth investigation into the deal to stitch together Frankfurt's Deutsche Boerse AG and New York's NYSE Euronext Inc., warning of concerns particularly over control of high-risk derivatives trading.

The commission said an initial probe announced on June 29 "indicated competition concerns in a number of areas, in particular in the field of derivatives trading and clearing."

The announcement came on the worst day in two years for London's FTSE 100 index, which lost nearly 50 billion pounds (almost 60 billion euros, or $75 billion), with a bloodbath on the other exchanges contained in the new group's portfolio.

Covering stock exchanges in Amsterdam, Brussels, Frankfurt, New York, Lisbon and Paris, the combined group had been valued at 17.6 billion euros ($25 billion).

EU competition enforcers now have 90 working days, until December 13, "to take a final decision" on whether the deal can go through.

Pension funds, mutual funds and retail banks, as well as professional brokers and investment banks would be most affected, the commission spelled out.

"The proposed merger would remove a strong competitor from the market and would give the merged company by far the leading position in derivatives trading in Europe," said Joaquin Almunia, competition commissioner.

The commission "needs to make sure that markets which are at the heart of the financial sector remain competitive and efficiently deliver to users," he added.

The deal sparked controversy in the United States because it would hand over the 221-year-old New York Stock Exchange to foreign owners.

Deutsche Boerse shareholders are to own 60 percent of the new combined, Netherlands-incorporated firm, and the German company will dominate the new board.

Shareholders controlling more than 80 percent of German stock market operator Deutsche Boerse approved the deal on July 14, after NYSE Euronext shareholders gave their blessing.

In a joint statement, the two companies said the EU decision "was fully anticipated and does not in any way prejudge or prejudice the ultimate outcome.

"Deutsche Boerse and NYSE Euronext remain confident that their planned combination will be approved," they said, highlighting an expected "capital efficiencies for customers" worth $3.0 billion.

The commission, though, said that fees competition may be reduced due to increased difficulties for rivals wanting to enter a market "already characterised by high barriers to entry."

There were some additional worries over equities, or shares trading, they said.

Copyright AFP (Agence France-Presse), 2011