Thursday September 29 2016

News Source: Global Exchanges

Focus: Other

Type: General




The European Commission has opened an in-depth investigation to assess, under the EU Merger Regulation, whether the proposed merger between Deutsche Börse AG (DB) and London Stock Exchange Group (LSE) would reduce competition in several financial market infrastructure areas.

The proposed merger would combine the activities of DB and LSE. By combining the exchanges of Germany, the United Kingdom and Italy, as well as several of the largest European clearing houses, it would create by far the largest European exchange operator. 

The Commission`s preliminary concerns

The Commission`s initial market investigation identified preliminary concerns in the following markets:

(a) Clearing

The Commission has preliminary concerns that the combination of the parties’ clearing houses could:

  • eliminate competition in a number of areas, including bonds, derivatives and repurchasing agreements (repos),
  • adversely affect competing trading venues that depend on clearing services provided by LSE`s clearing house (LCH.Clearnet),
  • adversely affect competitors in post-trade markets, such as collateral management, settlement and custody services.

(b) Derivatives

The Commission has preliminary concerns that their development might be put at risk by the proposed transaction.

In addition, the Commission has preliminary concerns that the proposed transaction could lead to a near-monopoly in single stock equity futures and options based on Italian underlying instruments where parties are de facto the only competitors.

(c) Repurchasing agreements (“repos”)

The Commission has preliminary concerns that competition in repo markets could be reduced.

(d) German stocks

The Commission has preliminary concerns that the proposed transaction could therefore lead to a significant loss of competition for these types of products.

(e) Exchange Traded Products (“ETP”)

The Commission has preliminary concerns that competition on ETP markets could be reduced.

(f) Other markets

The Commission will also use the in-depth investigation to further analyse the impact of the transaction on competition in other markets such as:

  1. international listing of non-EEA companies;
  2. dealer-to-dealer electronic trading of German Government bonds, where both parties are the largest players;
  3. index licensing, where the parties combine the largest European index families, namely DAX, STOXX and FTSE Russell;
  4. trading and clearing of freight derivatives;
  5. settlement and custody services;
  6. IT services; and
  7. regulatory and trade reporting.

The transaction was notified to the Commission on 24 August 2016. The Commission now has 90 working days, until 13 February 2017, to take a decision.

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