Friday

29th Sep 2023

EU blocks German take-over of US stock exchange

  • Joaquin Almunia said the merger would have created a 'quasi-monopoly' on the derivatives market (Photo: Dan Nguyen @ New York City)

The European Commission has blocked a merger between Deutsche Boerse and the New York Stock Exchange, the two largest players in trading of derivatives - a financial product said to have helped cause the 2008 financial crisis.

"The merger would have led to the worsening of conditions for companies trying to access financial instruments and would have harmed the European economy as a whole ... In the end, we had no alternative but to prohibit the merger," EU anti-trust commissioner Joaquin Almunia told press in Brussels on Wednesday (1 February).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The decision came as a surprise after EU single market commissioner Michel Barnier earlier voiced "reservations" on blocking the deal. But Almunia said it was taken by the full college of 27 commissioners without a vote.

Derivatives are complex financial products which bet on the performance of 'underlying' loans, mortgages or other financial transactions. Lack of regulation and transparency in the sector is widely seen as a cause of the financial crisis three years ago.

Almunia explained the two stock exchange operators - Eurex-DB and Liffe-NYSE - are the biggest competitors on the market, covering over 90 percent of trading in derivatives of European underlyings. The German company would have effectively taken over the New York-based one, as it would have held 60 percent of the new company after the merger.

The main concession the commission had asked for was for the companies to sell either Deutsche Boerse's Eurex or NYSE Euronext's Liffe. But the companies refused either option.

For its part, the German firm reacted furiously to Almunia's annuoncement.

"This is a dark day for Europe and its future competitiveness on global financial markets ... The EU Commission's decision is totally out of touch with reality and is based on a narrow definition of the markets which does not take into account the global nature of the competition on the derivatives markets," Deutsche Boerse said in a statement.

But its employees voiced relief because the merger was likely to cause redundancies in Frankfurt. The head of the Deutsche Boerse employee council, Irmgard Busch, told Spiegel magazine she was "happy that this mega-project failed."

The story is not over yet, with Deutsche Boerse expected to shortly make a bid for the London stock exchange.

"We'll see more of this in the coming years. It's a scale business - derivatives are a global market - so if you have big platforms, you increase the volume, reduce costs and make a profit," a market contact told this website.

Derivatives law stuck

Meanwhile, a long-awaited EU law - obliging all derivatives trades to be checked by clearing houses and registered in data bases under national and EU supervision - has hit an impasse.

The bill is stuck on a single issue - the mediation powers of the European Markets and Securities Authority (Esma), a newly created EU body based in Paris.

EU finance ministers last week agreed that Esma can intervene in disputes on the registration and authorisation of clearing houses when a two thirds majority of national regulators ask for it. MEPs say this makes no sense, because a two-third majority is anyway needed to approve or reject any decision.

"If they can't agree to it anyway, then why do they have to reach the same majority to ask for mediation? It should be just one country asking for mediation," a parliamentary source told this website.

The Danish EU presidency is seeking a compromise deal in the coming week.

It is unlikely that Britain will agree to the MEP's request however, as it has already made concessions. The UK moved from from a three-quarter to a two-third majority on mediation and accepted that Esma's decisions should be binding.

Deal sought on delayed EU derivatives law

Finance ministers meeting on Tuesday may agree on a compromise deal put forward by the Danish EU presidency on a delayed EU bill regulating trading in derivatives, but the sticking point remains much power a new EU authority can have.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  2. EU states to agree on asylum crisis bill, say EU officials
  3. Poland's culture of fear after three years of abortion 'ban'
  4. Time for a reset: EU regional funding needs overhauling
  5. Germany tightens police checks on Czech and Polish border
  6. EU Ombudsman warns of 'new normal' of crisis decision-making
  7. How do you make embarrassing EU documents 'disappear'?
  8. Resurgent Fico hopes for Slovak comeback at Saturday's election

Stakeholders' Highlights

  1. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us