Deutsche Boerse
(BRUSSELS) – The European Commission is to investigate whether the proposed merger between the London Stock Exchange and Deutsche Boerse would reduce competition in several financial market infrastructure areas.
By combining the exchanges of Germany, the United Kingdom and Italy, as well as several of the largest European clearing houses, the LSE and DB merger would create by far the largest European exchange operator.
The Commission says it will investigate further whether the deal may reduce competition in several areas, including clearing, derivatives, repurchasing agreements, German stocks and exchange traded products.
Competition Commissioner Margrethe Vestager, in charge of competition policy, said: “Financial markets provide an essential function for the European economy. We must ensure that market participants continue to have access to financial market infrastructure on competitive terms.”
Brussels’ preliminary probe has uncovered concerns in the areas of:
- clearing – where the transaction would combine several of the largest central counterparties (CCPs) in Europe , and the merged entity would combine the largest margin pool in the world, reaching EUR 150bn.
- derivatives – DB’s Eurex is the global market leader for exchange traded long-term interest rate derivatives, while LSE’s SwapClear is by far the largest player for the clearing of interest rate derivatives traded off-exchanges, through so-called over-the-counter transactions (“OTC”).
- repurchasing agreements – the Commission has preliminary concerns that competition in ‘repo’ markets could be reduced.
- German stocks – the parties would combine two of the three largest venues that currently offer trading of German listed equities. exchange Traded Products (“ETP”) – the proposed transaction would combine two very large players in the areas of listing, trading and clearing of exchange traded products, which include exchange traded funds (“ETFs”).
- 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 international listing of non-EEA companies; dealer-to-dealer electronic trading of German Government bonds, where both parties are the largest players; index licensing, where the parties combine the largest European index families, namely DAX, STOXX and FTSE Russell; trading and clearing of freight derivatives; settlement and custody services; IT services; and regulatory and trade reporting.
The transaction was notified to the Commission on 24 August. The Commission now has 90 working days, until 13 February 2017, to take a decision.
More information will be available on the competition website, in the Commission’s public case register under the case number M.7995.
