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Analysis: Nasdaq bid for NYSE would hit antitrust stumble
WASHINGTON (Reuters) - U.S. antitrust regulators will give a hard look at any attempt by Nasdaq OMX Group Inc (NDAQ.O) to acquire NYSE Euronext (NYX.N), experts said, with some predicting a prolonged review or "serious" snags.
The Nasdaq Stock Market parent is mulling a rival bid for the operator of the Big Board, according to a source. Germany's Deutsche Boerse (DB1Gn.DE) has already struck a $10.2 billion friendly deal to buy NYSE Euronext.
In considering a Nasdaq bid for the NYSE, antitrust regulators at the Justice Department -- which is most likely to look at such a deal -- would likely focus on two issues: overlaps in U.S. equity options exchanges and U.S. equity exchanges, said antitrust expert Robert Doyle of Doyle, Barlow and Mazard PLLC who has analyzed the market.
In the growing equity options market, four major players compete head to head, with some running two venues.
NYSE has about 24 percent of the market, Nasdaq about 30 percent, the Chicago Board Options Exchange's parent (CBOE.O) 22 percent and the International Securities Exchange, owned mostly by Deutsche Boerse, about 20 percent. Smaller players BATS Options and the Boston Options Exchange, or BOX, split the remaining 4 percent, said Doyle.
"You've got four players (in the U.S. equity option exchange market) with comparable market shares," Doyle said. "That's going to be a serious antitrust problem, requiring close scrutiny by the DOJ."
"You're basically looking at a four-to-three merger with a market with two fringe players that may find it more difficult to expand after the deal," said Doyle.
NYSE and Nasdaq are also No. 1 and 2 players in U.S. stock-trading, with BATS Global Markets and Direct Edge, another alternative exchange, in the third and fourth spots.
That also "raises in my mind some serious antitrust problems," Doyle said.
The deal is one of several that Nasdaq, valued at $5.7 billion, is considering as a spate of deals shakes up an industry under intense cost pressure from new entrants such as BATS, which last week snapped up rival Chi-X.
"Everybody's afraid to be left standing alone. Everybody's looking for a partner," said Doyle.
Richard Brosnick, an antitrust expert with the law firm Butzel Long, said he did not see as much of an antitrust problem, but still predicted that such a deal would get a thorough look that would last several months.
Brosnick said that most companies that go public want to list at the exchange which is most appealing to potential investors, and a 5 or 10 percent price difference wouldn't matter much.
Evan Stewart, an antitrust expert at Zuckerman Spaeder LLP, agreed, noting that as capital has become more fluid, the need for a large number of exchanges has evaporated.
"It's hard to see any injury to consumers. If anything this would be a drive to greater efficiency," he said.
"This trend (consolidation) has been accelerating. Nasdaq has to find a place for itself in a rapidly changing environment," he said. "They're (Nasdaq) obviously talking to investor bankers about what are their options. ... This may be a viable option or they may crunch the numbers and find it doesn't really make sense for them."
(Additional reporting by Roberta Rampton, editing by Dave Zimmerman)
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