The European Commission on Wednesday rejected the planned merger between Frankfurt-based Deutsche Börse and New York's NYSE Euronext. EU Competition Commissioner Joaquin Almunia said the merger would have created a "near-monopoly" the European financial derivatives trade.

"These markets are at the heart of the financial system and it is crucial for the whole European economy that they remain competitive," Almunia said in a statement. "We tried to find a solution, but the remedies offered fell far short of resolving the concerns."

Deutsche Börse's takeover of its rival from across the Atlantic would have created a trading giant worth $17 billion (13.03 billion euros). The merger, which would have included stock exchanges in Frankfurt, New York, Lisbon, Paris and Amsterdam, would have controlled 90 percent of Europe's listed derivatives trade.

Trans-Atlantic passions

Concerned about the company's market position, Almunia demanded that Deutsche Börse should disinvest its Eurex derivatives arm. In addition, he wanted NYSE Euronext to sell its London-based futures exchange Liffe. The exchanges, however, rejected the commissioner's demands, saying they would be prepared to sell off only a part of Liffe's derivatives business.

Almunia, however, said the offer was "too small and not diversified enough to be viable on a standalone basis."

In the United States, the deal also stirred a controversy as foreign shareholders would have owned 60 percent of the combined firm. The US Justice Department ruled in December that Deutsche Börse would have to sell its 31.5 percent stake in Direct Edge Holdings - the fourth largest exchange operator in the United States.

Analysts said the EU Commission's reservations about a tie-up were probably of a more political nature. "Europe feared ceding control and being dominated by the Americans," Christian Muschick, analyst at Silvia Quandt, told AFP news agency.

If the merger would have been approved, the two exchanges could have benefitted from vast cost synergies and become more profitable.

"It was the shareholders of NYSE Euronext who would have stood to gain more from the tie-up," LBBW analyst Martin Peter told AFP news agency, adding that Deutsche Börse was "better positioned" in the financial market than the Americans.

The two exchanges can appeal the ruling at the EU courts in Luxembourg. But a legal battle - likely to take between one and two years - could destroy the merger once and for all after two previous attempts had already failed, analysts said.

Author: Uwe Hessler (dpa, AFP, Reuters)
Editor: Sean Sinico