EC leaves out OTC derivatives in deal probe

EUROPE’S competition regulator will exclude a critical derivatives market from their investigation into the $10.2bn (£6.6bn) merger of Deutsche Boerse and NYSE Euronext, sources said yesterday.

The European Commission will not examine the market for over-the-counter (OTC) derivatives, which are traded through a dealer instead of publicly on an electronic platform such as an exchange, in its review of the merger.

Deutsche Boerse and NYSE Euronext both have large derivatives trading arms, Eurex and Liffe respectively, and a merged group would control about 90 per cent of the market for exchange-traded derivatives. But while the OTC market in Europe is huge, City A.M. understands the two exchange groups would control only about a fifth of the market.

The decision to look only at listed derivatives shows the EC’s focus on competition in Europe, but derivatives traders view their market as global and compete with the US.

The focus on listed derivatives makes the EC more likely to rule that the deal hurts competition.