The European Commission will not impose serious anti-trust restrictions on the $9-billion (U.S.) merger between Deutsche Boerse and NYSE Euronext and will instead use new regulations to force the exchanges to open up, sources said.
The combination of the two dominant European futures markets in Eurex and Liffe was widely expected to face hefty remedies to ensure competition in derivatives trading.
But a deal has been struck between the EC's regulatory and anti-trust arms, allowing the merger to pass almost unscathed on the understanding new rules will force competition on the combined group, a Brussels and an exchange source told Reuters on Friday.
Documents leaked in the past week show the EC's Internal Markets division plans to tackle the dominance of the region's top exchanges by forcing them to allow competition in key areas such as clearing, indexes and data selling.
The European parliament is set to outline these principles when it proposes in October broad reforms to its 2007 markets in financial instruments directive (Mifid).
"Mifid is the compensation for the merger," one source said.
The largest trading banks in London said the flaw in the EC plan was that the merger will be sealed long before the regulatory reforms take effect, something they say is unlikely to happen before 2014.
"Mifid is going to take two years at least by which time they will have stitched up the market," said the head of trading at one large firm.
The European Commission is set to give its verdict on the Boerse-NYSE merger in December, potentially paving the way for the deal to complete in the early part of next year.
The Commission was not immediately available for comment.