Merger Would Create Force in U.S. Options

Merger Would Create Force In U.S. Options

By BRENDAN CONWAY And CORRIE DRIEBUSCH

The anticipated tie-up between Deutsche Börse AG and NYSE Euronext would create a powerful force in the U.S.

options market and a dominant one in Europe's derivatives market, factors that analysts said are drivers of the

merger talks.

Derivatives have been an important component of exchange earnings the last several quarters, and competition

for more market share has heated up. In the U.S., NYSE Euronext's Amex and Arca options exchanges handled

23% of the U.S. options market's volume in January, and Deutsche Börse's International Securities Exchange had

17.5%.

The 40% potential combined market share would exceed that of CBOE Holdings Inc.'s Chicago Board Options

Exchange, the biggest single options exchange, as well as Nasdaq OMX Group Inc., which has rivaled CBOE the

last year for the market's top position.

"I think we've seen over the last several years the value of derivatives franchises in the global exchange

environment," with the high growth a continuing reason for buyouts and mergers, said Andy Nybo, head of

derivatives research at the Tabb Group in New York.

Deutsche Börse and NYSE Euronext said they are in advanced merger discussions. No deal has been reached,

according to the companies.

A merger was seen by market participants as likely to pressure both CBOE and Nasdaq to find their own partners

and build up market share, but the possible tie-up wasn't seen as having a big impact on other U.S. rivals.

Some in the industry viewed the CBOE as a kind of stealth winner. Unlike competitors, the Chicago