European Union Blocks Deutsche Boerse/NYSE Merger

The European Union has blocked the planned merger between the New York Stock Exchange and Germany's Deutsche Boerse. The deal, valued at $10 billion, would have created the world's largest exchange operator. The EU's executive body, the European Commission, decided to rule against the transaction because it would have created a monopoly which controlled 90% of the trading in European derivatives markets.

"The merger between Deutsche Boerse and NYSE Euronext would have led to a near-monopoly in European financial derivatives worldwide," the EU's Competition Commissioner Joaquin Almunia said in a statement. "These markets are at the heart of the financial system and it is crucial for the whole European economy that they remain competitive."

The move comes as a disappointment for both NYSE Euronext (NYSE: NYX) and the Deutsche Boerse who saw in the deal the potential to gain the upper hand in the competitive global exchange business. "This is a black day for Europe and its global competitiveness on financial markets," said Deutsche Boerse Chief Executive Reto Francioni.

Reports indicate that the two companies are now in talks to terminate the merger agreement, although an appeal to the European Court of Justice is still a possibility. "While we are disappointed and strongly disagree with the EU decision, which is based on a fundamentally different understanding of the derivatives market, it is now time to move on," NYSE Euronext Chairman Jan-Michiel Hessels said.

Last month, a case team had recommended that the merger be blocked because of the dominant position it would give the combined company in European derivatives. In order to make the deal work, the European Commission had previously asked the two companies to sell one of their derivative trading platforms, either the NYSE's Liffe or Deutsche Boerse's Eurex, but they refused.