EU Commission blocks stock exchange merger

The EU Commission has vetoed the merger of the Frankfurt and London stock exchanges, explaining that the resulting mammoth stock market would hinder free competition for certain financial products. Commentators see other reasons for the decision and doubt that the Commission's response to the dominant market position of the stock exchanges is adequate.

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Il Sole 24 Ore (IT) /

Brexit claims first victim

The EU Commission's explanation for its veto is not very plausible, Il Sole 24 Ore finds:

“No sooner had the Brexit letter arrived in Brussels than the EU Commission torpedoed the merger between the London Stock Exchange and the Deutsche Börse. An odd coincidence. The LSE's refusal to sell its Italian fixed income trading platform MTS provided the Commission with a welcome reason to strike down the merger. But in reality the project has been on the rocks since the British Brexit vote in June 2016. In the short term politicians will be able to brag that the stock exchange will now remain in Frankfurt instead of moving to London as the merger plans foresaw. In the long term, however, all sides will suffer. Including the capital markets union that Europe urgently needs to reduce its distance from the US market. Because without the City the union will have a severe handicap.”

Die Tageszeitung taz (DE) /

Stock exchanges should be state-owned

Although the EU Commission imposed clear limits on the business activities of the two stock exchanges taz still isn't satisfied:

“Competition between the stock exchanges has always been severely limited. In actual fact this would have been a merger between two monopolists that expanded their zone of influence. Stock exchanges are strange businesses. They're not firms like for instance car manufacturers that have to compete and fight for each customer. Big stock exchanges don't have to look for customers - the customers come to them. ... So the big stock exchanges have a kind of monopoly, and this is reflected in their profits. ... Economic theory has long since explained how to deal with monopolies that can't be broken up simply because this is the model that works best: these companies should belong to the state so that their profits serve the common good. Antitrust legislation alone - the approach the EU Commission has adopted - certainly won't be enough.”