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Brussels on Tuesday warned NYSE Euronext and Deutsche Börse that they are in danger of failing to win approval for their planned merger unless they significantly improve the concessions put forward to assuage competition concerns.
At a critical meeting at the European Commission, competition officials told the exchanges that their offer to give rivals partial access to their Germany-based clearing house fell short of what was needed to guarantee clearance for the deal.
The tough line from Brussels leaves the German and US groups just a few days to decide on whether to sweeten the package of so-called remedies for antitrust regulators, in effect giving ground that may undermine the rationale for the tie-up.
A meeting scheduled for Friday will give the exchanges a final official opportunity to make a last and best offer to the Commission, before the file is passed on to Joaquín Almunia, the competition commissioner, for a preliminary decision.
Although the final deadline for the deal is in mid-January, the process is entering a potentially decisive phase in coming weeks, where the interested parties will muster all the political power at their disposal to win over Mr Almunia.
A combination of the German and US groups would unite their two European futures exchanges, Eurex and Liffe, handing the combined entity more than 95 per cent of trading in benchmark short-term interest rate and German government bond futures.
Last month, the exchanges gambled that they could persuade competition officials to give the deal a green light by offering some divestments and giving rivals limited access to the so-called “vertical silo” structure at Deutsche Börse, where the group owns the whole chain.
DB/NYSE proposed to sell some single-stock equities and single-stock futures businesses in Europe, eliminating an overlap in their businesses. But it involves an extremely small percentage of the group’s pro forma revenues and some Commission officials doubt that the businesses are big enough to be viable once sold.
A potentially more significant concession involved giving third parties use of Eurex’s Frankfurt-based clearing house. But this only applied to “innovative products” – a condition that left the rivals of the exchanges unimpressed.
Commission officials have made clear that their ideal solution is the sale of NYSE’s London-based Liffe platform or the Börse’s Eurex operation. But the exchanges argue this seriously undermines the reason for the merger.
A less onerous alternative is to offer rivals such as the London Stock Exchange the right to copycat futures contracts such as the successful Euro Stoxx index. This would open the “vertical silo” for clearing but it is unclear whether it will give Mr Almunia enough reason to clear the deal. Competition officials tend to prefer divestment because access agreements are harder to enforce and monitor.