While the deal was announced in Dec 2012, the EU regulators scrutinizing it were apprehensive regarding the anti-competitive business model of the merger. This also includes the acquisition of Europe’s second-largest derivative exchange – NYSE Liffe.
Previously in 2011, the EU regulators had rejected the merger deal between NYSE and Frankfurt-based Deutsche Boerse based on such concerns. According to them, the merger provided ample scope for a monopolistic model in the future, primarily with the fusion of NYSE Liffe and Deutsche Boerse’s Eurex derivative markets.
Hence, to alleviate these qualms, IntercontinentalExchange laid out certain discrete allowances and plans to build product committees in March this year. The company also resolved to limit its trading fees on soft commodities such as coffee, cocoa and sugar, at least for next five years. Given the modifications, the EU regulators appear to have no objection over the merger.
The EU regulators are slated to provide the final verdict by Jun 24 and are expected to give a wholehearted green signal to the merger. With the approval in EU, IntercontinentalExchange will achieve another milestone following the receipt of approval from the shareholders of both the companies early this month. These positive turn of events could lead to timely culmination of the acquisition of NYSE, which is scheduled by the end of this year.
Post acquisition, the 220-year old NYSE will own 36% in the 12-year old IntercontinentalExchange. Moreover, the latter aims to leverage NYSE’s efficiencies and global presence productively, thereby positioning it well to tap growth opportunities and bring forth a strong competitive advantage globally.
While IntercontinentalExchange and NYSE carry a Zacks Rank #3 (Hold), other outperformers of the exchange industry include CBOE Holdings Inc. (CBOE) and MarketAxess Holdings Inc. (MKTX). Both these stocks carry a Zacks Rank #2 (Buy).
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