Merger of two exchanges is blocked by EU Commission

London breathed a sigh of relief yesterday as the European Commission confirmed the view of EU regulators that the controversial merger of Deutsche Börse and NYSE Euronext, the owner of the New York Stock Exchange, should be blocked.

Watchdogs objected to the deal on competition grounds, not least because the merged organisation would dominate the derivatives business in Europe. The merged company would have owned both Liffe, London's futures exchange, and its Frankfurt-based rival, Eurex.

The London Stock Exchange and Michael Spencer's Icap had quietly lobbied against the deal fearing its impact on their businesses.

Deutsche Börse's board described the decision as "a black day for Europe and for its future competitiveness on global financial markets".

Deutsche's board added: "The EU Commission's decision is based on an unrealistically narrow definition of the market that does no justice to the global nature of competition in the market for derivatives."

Both exchanges had argued that a merger would enable them to compete globally with companies like America's CME Group, which dominates US derivatives.

Jan-Michiel Hessels, the chairman of NYSE Euronext, which owns several European stock exchanges including Paris, said: "We made clear throughout this process we would not agree to any concessions that would compromise or undermine the industrial and economic logic of the proposed combination."