2ND LEAD: Brussels rejects Frankfurt, New York bourses merger

Brussels/Frankfurt/New York (dpa) - The Frankfurt and New York stock markets‘ plans to forge the world‘s biggest securities exchange collapsed Wednesday after the European Commission ruled against the plan.

In their 450-page ruling, the commission‘s anti-trust officials said they rejected the move on the grounds that it would have given the new company "a near-monopoly" in Europe‘s lucrative derivatives trading business and could have harmed the region‘s economy.

In the end, "we had no alternative but to prohibit the merger," EU Competition Commissioner Joaquin Almunia told a press conference in Brussels.

"Financial exchanges are the lifeblood of the European economy," he said. "Entrenching a monopoly that would likely lead to higher prices and lower innovation is not in the European interest."

NYSE Euronext, the operator of the New York Stock Exchange, said both the Frankfurt bourse and itself were now holding discussions to terminate their merger agreement.

"While we are disappointed and strongly disagree with the EU decision ... it is now time to move on and return our sole focus to executing our compelling existing strategy," NYSE Euronext said in a statement.

The collapse of the merger bid represented the latest failure in a long series of attempts over the last 12 years at consolidation in the global financial market business. This includes an attempt by the Frankfurt and New York exchanges to team up in 2008.

Deutsche Boerse‘s 9.6-billion-dollar acquisition offer, which was unveiled in February 2011, had already survived a hostile counterbid by US technology stock index Nasdaq, which withdrew its offer on advice from US competition regulators.

But the merger deal has also raised concerns among regional German political leaders, who had been concerned about the threat of the Frankfurt stock market moving its holding company out of the nation‘s financial capital to another nation.

Both Deutsche Boerse, which operates the Frankfurt Stock Market and NYSE Euronext lashed out the commission‘s ruling, in particular over its views of derivative trading.

"This is a black day for Europe and for its future competitiveness on global financial markets," the board said in a statement.

"The European Commission‘s decision is based on an unrealistic narrow market definition, which does not do justice to the nature of competition in the global derivatives market," the board said.

For its part, NYSE Euronext said the commission‘s decision "based on a fundamentally different understanding of the derivatives market."

But in a statement, Almunia said: "These markets are at the heart of the financial system and it is crucial for the whole European economy that they remain competitive."

"We tried to find a solution, but the remedies offered fell far short of resolving the concerns," he said.

With Deutsche Boerse‘s Eurex subsidiary and NYSE Euronext‘s Liffe offshoot, the proposed new merged entity would have controlled "more than 90 per cent of global trade" in derivatives, the commission said.

This, it said would hamper competition and cause "significant harm" to the economy.

Deutsche Boerse and NYSE Euronext had offered concessions to EU regulators late last year in a bid to win their approval, including the sale of a derivatives exchange unit operated by NYSE.

But the European Union‘s executive said a proposed sale of some of Liffe‘s derivatives business "would be too small and not diversified enough to be viable on a standalone basis." dpa amc hm hl Author: Andrew McCathie and Alexandra Mayer-Hohdahl