The European Commission has approved IntercontinentalExchange’s (ICE) acquisition of NYSE Euronext for $8.2 billion in the biggest financial exchange merger since NYSE Euronext and Deutsche Börse’s $10 billion failed merger in 2011.
In a statement released on Monday, the EC announced that the proposed merger would not raise any competition concerns after “the market investigation revealed that they do not exert a greater potential competitive threat on each other compared to other exchanges. Any anticompetitive effects can therefore be excluded.”
ICE operates over-the-counter derivatives, derivatives clearing houses and futures exchanges in the US, Canada and Europe. NYSE Euronext is a global operator of financial markets and offers a range of products and services in cash equities, swaps, options, futures, exchange-traded products, market data, bonds, clearing operations and commercial technology solutions.
After carefully examining the effect of the merger on agricultural and soft commodity derivatives and U.S. equity derivatives, the EC declared that ICE and NYSE Euronext offer “contracts belonging to different product markets, so their activities do not overlap.” The EC also noted that the minor crossover in the two companies’ foreign exchange derivatives trading and bond trading businesses did not raise concerns.
The proposed merger will result in a company worth approximately $20 billion in value, with close to 116 million fully diluted shares, and create the third-largest exchange group globally behind world number one Hong Kong Exchanges and Clearing and CME Group. While ICE will take over the NYSE Euronext’s brand and operations, including the iconic trading floor on Wall Street and the growing London futures market, the most important effect of this merger is the creation of a multi-product exchange, exposing the parties to the premier energy futures trading business and trading of interest rate futures.
Concerns have been raised by traders on NYSE Liffe’s soft commodity markets, noting that the deal could lead to higher trading fees and give ICE a near monopoly in global cocoa, coffee and sugar derivatives trading. In 2011 the proposed merger between NYSE and Deutsche Börse failed to proceed after the EC ruled it would have led to a near monopoly in European financial derivatives worldwide. Before that, ICE and partner Nasdaq had tried to take over NYSE, but failed in the US$11 billion bid under pressure from US justice officials.
Earlier this month, the shareholders of NYSE Euronext approved the merger with ICE, with an approval of approximately 99% from the 63% of shareholders voting. ICE shareholders have also approved the merger. Although the merger was also given the go ahead by the US Department of Justice’s antitrust division in February this year, the deal still needs to be cleared by the US Securities and Exchange Commission and other national authorities.