US gives approval for $9bn NYSE deal

DEUTSCHE Boerse won US antitrust approval to buy NYSE Euronext in a $9 billion deal to create the world’s No 1 exchange operator, but the transaction still faces serious regulatory headwinds in Europe.

The Justice Department said the deal, which was announced in February, won US approval on condition that a Deutsche Boerse subsidiary, the International Securities Exchange, divest its 31.5% interest in Direct Edge.

There have been few critics of the deal in the US, despite the NYSE’s symbolism as a bastion of American capitalism. The exc-hange was founded in 1792 when share trading began on a block now designated as Wall Street.

Deutsche Boerse and NYSE must also continue to provide some services, under Justice Department approval, to Direct Edge, the fourth-largest US stock exchange operator.

Direct Edge is run by a consortium that includes hedge fund Citadel and investment bank Goldman Sachs.

“We are very pleased to have received the approval of the [Department of Justice], an important milestone on our path to completing our compelling Trans-Atlantic combination,” Duncan Niederauer, chief executive of NYSE Euronext, said.

NYSE Euronext shareholders have already approved the deal.

Richard Repetto, an analyst at Sandler O’Neil, called the US approval “irrelevant”.

“The big issue is over in Europe, and whether the European competition commission is going to approve the deal. They expected this. They knew they would likely have to divest the ownership in Direct Edge,” he said.

Potential buyers of the stake include BATS, he said. “I don’t know whether they’d allow Nasdaq to own it because there’d be a lot of concentration again.”

In Europe, there have been weeks of negotiations with anti-trust regulators, in which staff made clear their reservations about approving a combination of Deutsche Boerse’s Eurex and NYSE Euronext’s Liffe on concerns that the merged entity would have a monopoly over European-listed derivatives trading.

Both Deutsche Boerse and NYSE Euronext have said they would not pursue the merger if they were asked to divest either Eurex or Liffe.

The European Commission has said it would make a decision on the deal by February 9.

In a bid to soothe regulatory concerns, Deutsche Boerse and NYSE Euronext have offered to cap fees on trading in their European derivatives contracts for three years, and to sell the entire single-stock equity derivatives business of Liffe.

In Germany, Deutsche Boerse’s home regulator is insisting on concessions to win European approval.


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