Deutsche Börse and the NYSE's proposal to create the world's largest exchange operator was rejected by European anti-trust authorities yesterday (1 February), for fear that it would create "a near-monopoly" on derivatives trading.
"The merger between Deutsche Börse and NYSE Euronext would have led to a near-monopoly in European financial derivatives worldwide," EU Competition Commissioner Joaquin Almunia said in a statement.
The European Commission consulted more than 700 market participants and stakeholders during its assessment and said in a 459-page document that the combined entity would make it hard for new players to compete.
"These markets are at the heart of the financial system, and it is crucial for the whole European economy that they remain competitive. We tried to find a solution, but the remedies offered fell far short of resolving the concerns," Almunia said.
But NYSE Euronext and Deutsche Börse could try to put the disappointment of their failed €5.6-billion merger deal behind them by turning their attention to European exchange and clearing assets and a less ambitious growth path.
Now, the exchange operators need another way of facing the imperatives that led them to seek mergers in the first place: the need for scale and cost savings amid global competition.
NYSE Chief Executive Duncan Niederauer, in an interview last week in Davos, said the company had another strategy it had been pursuing even as it tried to close on the Deutsche Börse deal.
"We have a standalone strategy that was our strategy before we engaged in this. We carried out a lot of elements of that in 2011," Niederauer told Reuters on Friday. "We will continue to be primarily focused on the derivatives and technologies businesses."
Deutsche Börse and NYSE Euronext declined to comment on the possibility of bids for other assets.
Analysts said the regulatory veto on Wednesday might put a temporary brake on mergers.
"The motivation to do deals is as relevant as ever, with exchanges needing to scale up and seek cost synergies, but the failed deals over the past year will make investors and companies more cautious," said Perrott.
Among other failed deals were Nasdaq and Intercontinental Exchange's bid for NYSE Euronext which was rejected by the US Department of Justice, London Stock Exchange's takeover of TMX Group was halted by shareholders of the Toronto Stock Exchange operator, and Singapore Exchange Ltd's bid for Australia's ASX Ltd was blocked by the Australian government.