The European Commission has announced investigations into German stock market company Deutsche Börse and Nasdaq in the US, on suspicion of illegal derivatives trading practices. 

"We are investigating whether Deutsche Börse and Nasdaq may have colluded to avoid competing for the listing, trading and clearing of certain financial derivatives," European Commissioner Teresa Ribera, responsible for enforcing competition rules, said on Thursday.

This follows unannounced inspections by Commission investigators in September 2024 at Deutsche Börse and Nasdaq offices.

The Commission also said in a press release that it was concerned the two companies may have allocated demand, coordinated prices and exchanged commercially sensitive information. 

"If proven, this behaviour may breach EU competition rules that prohibit cartels and restrictive business practices," the Commission said, albeit also stressing that the opening of an investigation does not necessarily mean rules were broken. 

What are derivatives? 

Derivatives are not shares but are often traded via stock markets and often based on values of shares or other assets, like foreign currencies or food or oil. 

They're a financial contract between one or more parties whose value fluctuates based on the price of an underlying asset or assets. They allow traders and investors to hedge against risk, speculate on the future price of an asset (betting on a stock price that you expect to fall or rise in a given time period, for example), or leverage a position. 

Trade in derivatives is global and difficult to regulate because of their complexity, because they can also be traded over the counter rather than using stock markets, and because of the difficulty in accurately valuing them. 

According to Commission information, the Deutsche Börse group operates the largest derivatives exchange in the European Economic Area, which includes the EU's 27 member states as well as Iceland, Liechtenstein and Norway. 

US-based global financial services and technology provider Nasdaq operates stock exchanges in the US and Europe. 

Deutsche Börse spokeswoman says cooperation was meant to promote competition

The Reuters news agency quoted a spokeswoman for Deutsche Börse as saying that the company and Eurex, its derivatives exchange subsidiary that is the largest of its kind in Germany, had taken note of the European Commission announcement of an investigation. 

She said the companies were working constructively with authorities in Brussels and that the investigation was at an early stage. She said the cooperation between Deutsche Börse and Nasdaq was part of an accord struck in 1999 and discussed with the Commission at the time. 

"The cooperation should promote competition. It was aimed in particular at deepening liquidity in respective Nordic derivative markets and creating efficiency gains. It offered clear advantages for participants in the market and was publicly known," she told Reuters.

Edited by: Zac Crellin