Commission blocks proposed merger between Deutsche Börse and London Stock Exchange

The European Commission has prohibited outright the proposed merger between Deutsche Börse (DB) and London Stock Exchange (LSE).  The proposed tie-up would have combined the German, UK and Italian exchanges, and several of the largest European clearing houses.  It would have created the largest European exchange operator by some margin.

In the Phase I investigation, the Commission identified competition concerns in several markets, including clearing, derivatives, repurchasing agreements, German stocks, and exchange traded products.

In the Phase II investigation, the parties offered to sell French clearing house LCH.Clearnet to Euronext.  However, this was not sufficient to placate the Commission’s concerns and it instead said that LSE should sell fixed income trading platform MTS. The parties refused and instead offered behavioural remedies.

This is the third attempt by both companies to create a combination of this type since 2000.  In 2012 the Commission blocked a merger between NYSE Euronext and Deutsche Börse because it would create a near-monopoly in European financial derivatives worldwide.

The latest attempt is another where acceptable remedies could not be found but raises a question about the timetabling of commitments as well as their substantive scope.  Vestager said that the remedies package was put forward with very little time for market testing.  Inevitably, behavioural elements will require more detailed probing over more clear-cut structural solutions.  It remains to be seen whether the deal could have been salvaged with more time for review of remedies.

Deutsche Borse/ London Stock Exchange Group (M.7995) Commission press release IP/17/789