The proposed merger would combine the exchanges of Germany, the UK and Italy, as well as several of the largest European clearing houses, and create by far the largest European exchange operator.
The investigation is expected to look in to the effects of the merger on competition in German equity trade, single stock equity futures, and options based on Italian shares.
Commissioner Margrethe Vestager, in charge of competition policy, said:
Financial markets provide an essential function for the European economy. We must ensure that market participants continue to have access to financial market infrastructure on competitive terms. Therefore, we have opened an in-depth investigation to assess the proposed merger.
A deadline of 13 February has been set by the Commission. The exchanges had hoped to complete their merger in the first half of next year, and gaining approval from the EU Commission is seen as one of the major hurdles for the deal.
The merger has a long stop date of 30 June 2017.
Both exchange shareholders have waved through the deal, that was agreed in March.
The move to take a closer look at the deal was widely expected by the market and the two exchanges. It's thought that both Deutsche Boerse and the London Stock Exchange will now offer concessions to allay the regulatory concerns.
The LSE said it would try to head off some competition concerns by exploring the potential sale of LCH.Clearnet, subject to the merger with Deutsche Borse going ahead.
Rival European exchange Euronext has been tipped as a possible buyer of LCH.
LCH.Clearnet is already one of the world's largest clearing houses for shares and derivatives, formed by a merger in 2003 of the London Clearing House and Clearnet of France.
A separate statement from Deutsche Borse said it noted the review.
The headquarters of the merged company is understood to still be set for London, despite concerns raised by German regulators and Deutsche Borse investors following the UK's shock vote to quit the European Union in June.
Earlier this month the boss Euronext claimed the merger would create a “virtual monopoly”. Chief executive Stephane Boujnah said the fusion would create a company 10 times larger than his in second place.
Meanwhile, the governments of France, Netherlands, Belgium and Portugal have all voiced opposition to the merger.
In an interview with City A.M. Boujnah noted the opposition of various governments, saying:
The point-of-views of Euronext are just one part of the equation, but you’ve seen that the government of France, the government of Portugal, the government of Belgium and, to the best of my understanding, even very recently the government of Netherlands… have expressed their views.
So it’s not a French issue, it’s not a Euronext issue.