By the Financial TimesSome of the world's biggest banks are privately expressing concern over the market power of a proposed tie-up between Deutsche Börse and NYSE Euronext. The bourses are expected on Tuesday to announce details of merger to create the world's biggest exchange group by revenues and profits, following approval by boards meeting in the US and Germany. The new entity would have a more than 90 per cent market share in European derivatives through the combination of Deutsche Börse's stake in Eurex based in Frankfurt, and NYSE Liffe in London. It would also trade some 28 per cent of European equities volume and 40 per cent of the US options market, according to analysts at Sandler O'Neill. "In the early stages, this deal doesn't appear to have great benefits to broker-dealers," a broker at a large Wall Street banks said. Other bankers said the combined group could also wield considerable power in the over-the-counter derivatives markets, and in clearing of them. "The exchanges themselves could be construed as more of a competitor to dealers now," said Bob Fitzsimmons, head of derivatives at brokerage ITG. Such concerns are emerging amid sensitivity on both sides of the Atlantic over which of the two groups will ultimately have the most power in the merged entity. They were stoked by comments yesterday by Johannes Witt, a labour representative on the Börse's supervisory board, who said: "Just like in the Euronext deal, it will be a matter of time before the Americans take control. We should be wary of this." However, people familiar with the deal said executives at the German exchange are set to get five of nine positions on the new group's board. From Deutsche Börse, Reto Francioni, chief executive, will be chairman; Andreas Preuss, deputy chief executive, will head derivatives; and Gregor Pottmeyer, chief financial officer, will carry on in that job. Jeffrey Tessler, head of Deutsche Börse's Clearstream subsidiary, will head clearing and settlement; and Frank Gerstenschläger, head of cash equities, will be head of market data in the enlarged company.
Fears of a German takeover have in part been assuaged after it was decided that Duncan Niederauer, chief executive of NYSE Euronext, will run the new group. In addition US-based shareholders will have 63 per cent of the combined entity, according to data from Thomson Reuters. Only 11 per cent of the shares would be held in Germany, along with 10 per cent in the UK. As well as Mr Niederauer, NYSE will be represented by Larry Leibowitz, who is currently chief operating office, who will become head of global equities. John Halvey from NYSE will continue as general counsel, and Dominique Cerutti will head the global technologies business. Mr Leibowitz, a former head of Americas equities at UBS, has worked with dealers in the past. "We like Larry a great deal, and there's confidence and comfort with him," said another dealer.