EU to block NYSE Euronext, Deutsche Boerse deal: sources

Antitrust regulators fear that the combined company, which would be the largest operator of stock exchanges in the world, would unfairly dominate trading of financial tools called derivatives in Europe, one of the people said Tuesday.

The European Union's competition commissioner, Joaquin Almunia, is set to recommend blocking the deal, between NYSE Euronext and Deutsche Boerse, at a meeting with fellow commissioners Feb. 1, this person said.

The second person said Tuesday that it appeared the European Commission, the executive arm of the EU, was “working toward a prohibition.” Both people spoke on condition of anonymity because the process is confidential.

The negative opinion of the regulatory team working on the deal will probably set off several weeks of intense lobbying, with the two companies trying to persuade other commissioners to support the merger.

NYSE Euronext and Deutsche Boerse say the merger would strengthen mainland Europe as a financial center and cut costs for banks and other financial firms that would use the combined exchange.

Opponents of the deal, such as the Nasdaq OMX market and the parent company of the London Stock Exchange, will seek to convince commissioners that it could destroy other companies trying to move into derivatives trading.

Derivatives are complex financial products that allow investors to place bets on bet on interest rates, stock indexes or commodity prices — or even nontraditional variables like the weather.

The two exchanges are believed to control more than 90 percent of the trading of some of the most popular derivatives products in Europe.

To stop the deal, a majority of the EU's 27 commissioners must vote to block the deal. A final decision must come by Feb. 9. It is rare for recommendations from the competition commissioner to be overturned.

European antitrust regulators have examined the planned merger since last early summer. Their concerns have crystallized around the two companies' strong derivative trading operations, NYSE's Liffe and Deutsche Boerse's Eurex.

The commission has asked that the companies sell one of the two platforms, the first person said — a demand that the two companies rejected.

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