From the December 01, 2006 issue of Futures Magazine • Subscribe!

IS DB-Euronext next?

“If Chicago can do it, why not us?” That’s a thought sure to be on the minds of Euronext shareholders voting in December on the proposed merger of Euronext and the New York Stock Exchange, if the merger between the CBOT and CME goes through as planned.

“An offer from Deutsche Boerse would then have more value, because the Chicago deal means E.U. regulators would be less likely to force DB to spin off Eurex,” says Daniel Buggert, an analyst with Bank of Cologne. “The general belief is that the Competition Commission would disallow the creation of such a major derivatives platform due to monopoly concerns.”

A Commission spokesman says, however, that the Commission itself has only ruled on the formation of a single for-profit clearing and settlement platform, and will begin reviewing the competitive consequences of the formation of a single derivatives platform after reviewing industry comments.

Euronext would not comment, citing its current negotiations with NYSE, but Deutsche Boerse issued a statement pointing out that the two exchanges are not competitors. “Almost 100% of the on-exchange trading in the benchmark European long-term interest rate futures and options takes place on Eurex and almost 100% of trading in short-term interest rate futures and options are currently traded at Euronext.Liffe,” it said.

OMX boss Magnus Bocker has openly called for the European Union’s Competition Commission to take the Chicago deal into account while making its decision.

Meanwhile, Liffe boss Hugh Freedberg has stirred up resistance to the DB offer within London by floating the idea that DB would relocate the entire operation to Frankfurt – an accusation DB quickly denied in a written statement, vowing, “Euronext.Liffe would continue to be operated and managed from London and clearing for Euronext.Liffe products would continue to be by LCH.Clearnet.”

What’s more, Eurex boss Andreas Preuss has made it clear on several occasions that Eurex operates more and more out of London and will continue to do so.

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