On Wednesday 28 September, the European Commission announced that it had decided to open an in-depth investigation into the planned merger between Deutsche Börse and the London Stock Exchange, which was submitted for approval at the end of August. The Commission stresses that the merger, which will bring together the German, British and Italian stock exchanges, will lead to the creation of by far the largest European stock exchange operator.
The Commission's initial market investigation showed the potential existence of a number of problems on several markets. It explained that the merged entity would combine the largest margin pool in the world, representing €150 billion. This margin is the collateral that market participants have to provide to central counterparties, which themselves sit in between the counterparties of a trade, assuming the risk of default of each counterparty towards the other. The transaction would have the effect of combining several of the largest central counterparties in Europe.
At this stage, the Commission has concerns that the transaction would remove competition in a number of areas (bonds, derivatives and repurchasing agreements) and would harm its competitors on the post-trade markets, for instance collateral management, settlement and custody services.
As regards derivatives, the Commission fears that the transaction could also lead to the creation of a virtual monopoly on the markets for single stock equity futures and options based on Italian underlying instruments, where parties are de facto the only competitors.
Finally, the Commission fears that there will be reduced competition on the markets for repurchasing operations, German shares, exchange-traded products and listed funds.
It has until 13 February next year to reach its decision. (Original version in French by Élodie Lamer)