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Deutsche Boerse Challenges 'Black Day' Rebuff of NYSE Deal

Stocks in this article: NYX IKBR GFIG MKTX

NEW YORK ( TheStreet) -- After European antitrust regulators iced what was a $9.5 billion merger with NYSE Euronext (NYX), court filings released on Saturday show that Deutsche Boerse is challenging the ruling, which it called a "black day" for Europe in February.

Amid uncertainty over whether a Greek parliamentary vote would push the country closer to leaving the Eurozone, Deutsche Boerse's insistence on its ability to cut mergers underscores the imperative that some financial giants see in diversifying from Europe.

Meanwhile, NYSE Euronext's recent earnings - weighed by its European operations -- signal that it wasn't hard to move on after the European Commission's antitrust authority blocked the deal in February.

In court papers published on June 16, Deutsche Boerse challenged the analysis used to block its merger with NYSE Euronext in the EU's General Court in Luxembourg. The Frankfurt-based stock exchange and derivatives powerhouse said that regulators "failed to properly assess" divestiture plans and concessions in the merger that would eliminate antitrust concerns.

The proposed deal would have created the largest stock and derivatives exchange in Europe and one of the largest in the world. But EU antitrust authorities were concerned the deal would have concentrated 90% of the region's exchange-traded derivatives market and roughly 30% of stock trading into one company, raising competition concerns.

Now, Deutsche Boerse's insistence that the deal aids its competitiveness highlights its desire to diversify and consolidate its European earnings, as a government debt crisis and shaky banking system weigh on the region's growth.

"This is a black day for Europe and for its future competitiveness on global financial markets," said Deutsche Boerse in February when the European Commission's antitrust authority blocked the merger.

In its rejection, the European Commission called for the full divestiture of either NYSE Euronext's Liffe derivatives platform or Deutsche Borse's similar Eurex business. Those derivatives units - the two largest in Europe - were a key to the merger as both companies attempted to sell assets to quell authorities.

While NYSE Euronext also said that regulators were wrong in their analysis of the merger, it likely benefitted from walking from the deal, as the European trading volumes slow amid an escalating crisis.

Wells Fargo analyst Christopher Harris calculates that exchange volumes for May were up across all of the company's units, with the exception of Euronext. Sequentially, only NYSE Euronext's European stock trading volumes fell in May, with higher trading reported at the company's other derivatives, commodities and stock units.

"It is possible fund outflows and higher investor risk aversion could have contributed to lower European equity volumes," wrote Harris in a June 7 note.

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