Deutsche Boerse is to take over NYSE Euronext to create the world's largest exchange operator, the two companies have confirmed.
Though presented as a merger, the deal, which values NYSE at about $10.2bn (£6.36bn), is effectively a takeover.
Deutsche Boerse shareholders will own 60 per cent of the new company and 10 of 17 board seats are bound for the Frankfurt group's management.
The deal also dodges key concerns over competition, pricing and regulation that could yet threaten its completion.
“The merger has been rubber stamped by the respective boards today, however they may find that regulatory approval could well be harder to obtain, especially in Europe,” said Michael Hewson, market analyst at CMC Markets.
No name has yet been given to the combined group but the two parties have agreed to headquarter it in both New York and Frankfurt with NYSE head Duncan Niederauer as its chief executive and Reto Francioni of Deutsche Boerse as chairman.
The combined powerhouse will have annual trading volume of more than $20 trillion and operations in Germany, France, the UK, Amsterdam, Portugal, Belgium, and the US.
Under the terms of the deal NYSE Euronext stock will be exchanged for 0.47 shares in the new company, while Deutsche Boerse shares will be swapped on a one-for-one basis, the exchanges said in a statement.
Christian Krohn, managing director at the Association for Financial Markets in Europe, which represents capital market participants, said its members were concerned about the potential limit on competition in the derivatives space.
“In the derivatives market, competition is less likely to naturally occur for two main reasons: firstly, barriers to entry are higher and secondly, the attention of regulators has been fixed towards centrally clearing derivatives," he said.
“It is important that mergers of exchanges do not inadvertently lead to excessive risk consolidation in these systemically important services or result in the barriers to entry becoming too high and stifling competition and innovation.”
The exchanges face intense competition in their traditional stock-trading business from younger trading venues geared toward today's increasingly dominant high-speed electronic traders.
NYSE and others have responded by investing heavily in technology and moving into more profitable derivatives trading.
Together, Deutsche Boerse's Eurex unit and NYSE Euronext's London-based Liffe unit would dominate European exchange-based futures trading, with more than 90 per cent overall, raising antitrust questions among market regulators.
Regulators are paying close attention to the deals, and exchange users have also raised red flags for fear the takeovers will limit competition.
"Euronext and Deutsche Boerse are still screwing us on fees for clearing, the closing auctions and small and mid-cap trading – the areas where they still have virtual monopolies," said the head of markets at a large European bank, who declined to be named.