The European Commission has cleared the proposed $8.2 billion acquisition of Nyse Euronext by IntercontinentalExchange.
In raising the green flag on the deal, the Commission said that the proposed transaction would not raise competition concerns as NYX and ICE "are not direct competitors in the markets concerned and would continue to face competition from a number of other competitors".
The acquisition gives ICE control of London-based Liffe, Europe's second-largest derivatives market behind Eurex, as it battles for global market share with rival CME Group
The Commission says it examined in particular the effects of the proposed acquisition on competition in Liffe markets for the provision of trading and clearing services for certain exchange traded derivatives, in particular agricultural (canola and rapeseed) and soft commodities (cocoa, coffee, sugar) derivatives and US equity index derivatives.
The Commission's investigation found that the proposed transaction would not raise competition concerns in any of these fields, as NYX and ICE are offering contracts belonging to different product markets so their activities do not overlap. Moreover, the market investigation revealed that they do not exert a greater potential competitive threat on each other compared to other exchanges.
The Commission also examined minor overlaps of the activities of the two companies in the fields of agricultural ETDs (barley, corn and milling wheat), foreign exchange derivatives and bond trading. The Commission concluded that no competition concerns would arise in view of the limited presence of NYX and ICE in these markets and/or the existence of other strong players.
As regards the vertical relationship between trading and clearing of derivatives, and exchange connectivity and front-end trade execution services, the Commission again found no anti-competitive concerns.
The formal approval was welcomed by exchange heads. Duncan Niederauer, CEO of Nyse Euronext, says: "This is obviously a significant step forward in completing our compelling combination, and we now look forward to working with our regulators to obtain the final approvals necessary to close the transaction."
Completion of the combination is subject to final approval from the US Securities and Exchange Commission, the College of Regulators and other national regulators.
Investors see plenty of upsides in a takeover by ICE, which would create a powerhouse in cross-asset trading and reduce Nyse Euronext's reliance on stagnating, hyper-competitive equity markets. The combined company is expected to save up to $450 million through cost synergies in the second full year post closing.
Attention will now turn to a potential spin-off of Euronext, which could lead to a bidding war and further consolidation in the European exchange sector.