The EU blocks the merger between Deutsche Börse and NYSE Euronext

The EU regulator voted against the plan of Deutsche Börse and of NYSE Euronext to create the largest stock market in the world, after concluding that the merger would hurt competition, Bloomberg reports.

The deal would have led to a "quasi-monopoly" of derivatives traded on the European market, the European Commission announced yesterday, and it went on to say: "Any return on this deal would not be enough to counter the damage caused to consumers following the merger".

The EU blocked the merger amid fears that the resulting entity - which would lead to more than 90% of the derivatives market in Europe - would make competition far too difficult for new players, according to the Chicago Tribune.

In February last year, Deutsche Börse announced it wanted to take over its New York rival in a deal valued at 9.5 billion dollars. Since then, the value of the deal fell to 7.3 billion dollars, as the stock of Deutsche Börse depreciated. The companies appealed directly to commission President Jose Barroso last month to try to salvage their merger, arguing that an EU ban would harm European exchanges and drive business to other parts of the world.

"This is dark day for Europe and for its future competitiveness on the global financial markets", the officials of Deutsche Börse said yesterday, and they went on to say: "The decision of the EC is based on an unrealistically narrow definition of the market, which does not reflect the global nature of the competition on the derivatives segment. As such, we consider the decision to be a mistake".

The acquisition of NYSE Euronext by Deutsche Börse would have put more than 90% of Europe's exchange-traded derivatives market and about 30% of stock trading in the hands of one company.

"Even though I saw the merger as a way of accelerating our plans, our existing business model was always at the core of our strategy", the CEO of NYSE Euronext, Duncan Niederauer said. "We will continue to use the advantage of our financial might in order to find new opportunities for growing derivatives, as well as NYSE Liffe and the post-trading services through new initiatives, including technology services, of".

Both companies tried to sell their common businesses and to provide their rivals with access to the post-trading services, in their struggle to convince the regulators that the merger would not affect the competition in the derivatives and clearing sector. But the Commission notified the companies, in December, that the concessions in question were not enough, according to sources close to the situation.

"We have tried to find a solution, but the concessions which were offered were insufficient to eliminate the concerns", European Competition Commissioner Joaquin Almunia said yesterday, and he explained: "These markets are the center of the financial system and it is crucial for the entire European economy that they remain competitive".

The American regulators approved the merger in December, on the condition that the two companies would sell a minor asset.

Following yesterday's decision, both companies said that they are now focusing on singular strategies and are negotiating the halting of the deal.

The NYSE said it would resume its 550 million dollars stock buyback program, once it reports its earnings on February 10th and the merger agreement is officially cancelled. Deutsche Börse will publish its financial results on February 13th.