In the U.S., the planned takeover of NYSE Euronext by Germany's Deutsche Boerse made waves because it means ceding the storied trading floor on 11 Wall Street to foreign control.
But in Europe, tradition has almost no role to play in reviews of the deal. Regulators are focused instead on how to handle a new company that would be the world's largest exchange and control vast but rather obscure parts of the financial system.
The deal is shining a spotlight on the sector's transforming business model. Big exchanges are no longer just the venues for trading stocks and bonds, but have turned into one-stop conglomerates that clear and settle trades in derivatives, source and sell their own data and license the use of coveted indexes like DAX or Stoxx.
Continental European countries will be eager to use the deal to boost Frankfurt's status as a financial center and compete with New York, Hong Kong and London. But regulators are also worried that they'll create a financial behemoth just as they're trying to increase oversight of the sector in the wake of the 2008 global crisis.
The $10 billion takeover is set to affect big banks, investment funds and rival exchanges around the world, making it one of the biggest regulatory cases of 2011 for the EU's competition watchdog. The first deadline for the European Commission's review is Thursday, but the regulator is widely expected to launch a deeper examination of potential competition threats that could drag on until the end of the year.
Few observers believe the Commission will block the takeover outright, but many wonder how it will deal with two key issues:
First, the creation of a potentially dominant venue for derivatives trading _ by combining Deutsche Boerse AG's Eurex and NYSE Euronext's Liffe. Second, the consequences of linking this huge derivatives exchange to Deutsche Boerse's integrated business model, in which trades are channeled to its own clearing house.
A clearing house acts as an intermediary between buyers and sellers, collecting fees and collateral to absorb losses in case one party defaults, and has traditionally been independent of the exchange.
Deutsche Boerse's integration of trading and clearing _ as well as a lucrative settlement bank and indexes business _ means it is involved in multiple aspects of a trade at the same time, streamlining a process whose profits are usually distributed among several companies.
The CME Group Inc. in the U.S. has already done this and other exchanges are working to build up their own so-called "vertical silos." But the takeover of NYSE Euronext would take that practice to a new level, extending it across the biggest exchange in the world.
"Are there a lot of monopolistic elements in this formation? Yes there are," said Diego Perfumo, an exchange analyst at Equity Research Desk in Connecticut.
However, Perfumo says, the Commission will have to look at the merger in a global context, where Europe wants to strengthen Frankfurt as a financial center in the eurozone that can successfully compete for listings from fast-growing Asia.
It will also consider that the CME Group has done exactly what Deutsche Boerse aims to do. It has dominated both derivatives trading and clearing in the United States since the company's takeover of the Chicago Board of Trade and the New York Mercantile Exchange.
Derivatives are complex financial products that allow investors to bet on developments in areas such as interest rates, stock indexes or commodity prices. The value of outstanding derivatives contracts has surpassed by many times the value of the world's stocks and bonds, a trend that has not been ignored by global regulators.
The vast majority of derivatives, some 80 percent worth about $600 trillion, are traded bilaterally between big banks and other investment firms _ over the counter, as it is known in financial jargon. The lack of transparency in this mostly unregulated market became an issue after the collapse of Lehman Brothers, when no one knew who was exposed to the failed bank's debt.
Since then, regulators around the world have worked to push derivatives trading onto exchanges and clearing houses to get a better idea of what is going on in the market and create a safety net when things turn sour.
With their merger, Deutsche Boerse and NYSE want to tap into both these trends. Together, Liffe and Eurex control around 90 percent of the market for some of the biggest exchange-traded derivatives.
But whereas U.S. authorities have accepted the CME Group's domination of the U.S. derivatives market, the European market is more fragmented and regulators are concerned the deal will lock out competitors from a lucrative and growing business.
The biggest losers would be the London Stock Exchange Group PLC and Nasdaq-OMX Group Inc., which have recently failed in their own attempts to grow through takeovers. Banks and funds, meanwhile, fear that a dominant exchange could easily raise prices.
"NYSE Euronext and Deutsche Boerse will be able to leverage their combined market power to consolidate their position of dominance," the London Stock Exchange wrote in a recent briefing on the merger. The LSE is currently trying to build up its own derivatives trading platform through its subsidiary Turquoise.
Within a day of Deutsche Boerse's and NYSE's notification of their merger to the Commission in late June, the regulator sent an extensive questionnaire to the companies' rivals and customers.
The content of this questionnaire, a copy of which was seen by The Associated Press, indicates that the Commission is concerned about more than just a potential monopoly of trading and clearing. It is also examining the control of market data _ valuable information on real-time volumes and pricing _ and indexes, such as the DAX and the pan-European Stoxx indexes, which are controlled by Deutsche Boerse.
"Of course this is a great opportunity to look into a space for the European Commission that they haven't looked into in the last decade," says Diego Valiante, a financial markets expert at the Centre for European Policy Studies in Brussels.
LSE has complained that Deutsche Boerse won't allow Turquoise to offer derivatives based on the Euro Stoxx 50, the leading index for eurozone stocks. Together with other competitors like Nasdaq, it is demanding that Deutsche Boerse start selling licenses for Euro Stoxx 50 and other indexes as part of the merger remedies.
Deutsche Boerse has defended its integrated business model, saying it works well for shareholders and customers, and argues that the new super-exchange will need its size to compete in the global derivatives market with the CME Group and over-the-counter trading.
While Deutsche Boerse and NYSE Euronext expect the Commission will demand remedies, the companies are unlikely to accept any big constraints, such as selling off either Eurex or Liffe.
Anything that significantly hurts the model of integrated trading and clearing is likely to be a no-go for Deutsche Boerse, said a person close to the merger who declined to be named, in line with the companies' public relations policy.
"That's the base on which the entire merger is built on," the person said.