Deutsche Börse and NYSE Euronext have admitted that they are in advanced talks to merge their operations, a move which would create the world's largest owner of equities and derivatives markets and secure a bigger slice of a booming derivatives market.
Before a meeting with the EU Competition Commissioner Joaquin Almunia yesterday (22 February), Dominique Cerutti, deputy chief executive of NYSE Euronext, said he was confident the merger would be cleared by the European Commission by the end of 2011.
The deal would see Deutsche Börse get a 60% majority stake in the company, leading some to believe that the merger would spell the end of Wall Street's dominance of global markets.
Cerutti told journalists ahead of his meeting with Almunia yesterday that the size of the new company's derivatives business and its clearing operations, like the technology and methodology used, would face the greatest scrutiny from EU regulators.
He also seemed confident that the deal would get merger approval quickly from the US Securities and Exchange Commission. The European Commission recently extended its own deadline for merger approval, buying itself more time to examine the deal.
NYSE brand 'in peril'
The deal has created some controversy among US lawmakers who fear the merger could damage the NYSE brand.
"The New York Stock Exchange is a symbol of national prestige, and its brand must not suffer under this merger," said American Senator Charles Schumer, insisting the two sides must agree on a name for the new company that does not damage the American exchange.
The exchanges are trying to cash in on a global regulatory push to get Over The Counter (OTC) derivatives onto exchanges.
Cerutti lambasted the lack of transparency in global markets and diagnosed derivatives markets as 90% opaque and equities as pushing 50% opacity.
The EU's European Market Infrastructure Regulation, which was proposed in September 2010, aims to increase stability within OTC derivative markets currently valued at $600 trillion.
"All standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest," reads the draft regulation.
Market commentators note that the deal will prop up NYSE's business which has been losing out to cheaper electronic trading platforms called Multilateral Trading Facilities (MTFs).
