NYX Nyse Euronext

The European Commission Wednesday blocked the merger of Deutsche Boerse AG (DB1.XE) and NYSE Euronext (NYX), saying the deal would create a "quasi-monopoly" in derivatives trading.

The move, widely expected for weeks, officially ends the two firms' vision of creating a global exchange operator, after months of negotiating with antitrust officials at the commission, the European Union's executive arm. The commission rejected the companies' arguments that the deal would lower trading costs more than it would harm competition. It also rejected their proposed solution to the commission's concerns about the merger's impact on competition in derivatives trading.

"These markets are at the heart of the financial system, and it is crucial for the whole European economy that they remain competitive," said Joaquin Almunia, the commission's top merger regulator after a meeting with the 26 other commissioners in the EU executive body. "We tried to find a solution, but the remedies offered fell far short of resolving the concerns."

The commission's concerns centered around Eurex and Liffe, the European exchanges operated by Deutsche Boerse and NYSE Euronext respectively. Combining the two units would give the company more than 90% market share in exchange-traded derivatives.

Moreover, both exchanges have their own clearing houses, entities that stand between buyers, absorbing losses if either side defaults. The commission worried that clearing houses can offer powerful incentives for traders to stick with incumbent exchanges rather than use other competitors.

-By Matthew Dalton, Dow Jones Newswires; +32 (0)2 741 1487; matthew.dalton@dowjones.com

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