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From the moment Frankfurt-based Deutsche Börse and NYSE Euronext announced their proposed merger a year ago, their competitors began ringing the antitrust alarm. Not about stocks, mind you. Although the two companies operate six major stock exchanges across Europe and the U.S., regulatory and technological changes have made equity trading a competitive free-for-all, to the extent that the New York Stock Exchange today handles less than a quarter of the volume in NYSE-listed stocks. No, what competitors really complained about was the stranglehold that the combined company would have had on the fast-growing business of exchange-traded derivatives in Europe.

The listed derivatives market has remained extraordinarily concentrated even as it has grown dramatically over the past decade. The trading volume of European equity index futures and options reached 1.4 billion in 2010, with a notional value of $52 trillion, according to research by Hamburg-based Berenberg Bank. Both figures represented a fivefold increase from 2000. Trading in European interest rate derivatives tripled over the same period, to 1.2 billion contracts, while the notional value of those contracts was six times larger, at $730 trillion. Deutsche Börse’s Eurex subsidiary and NYSE Euronext’s London-based NYSE Liffe dominate the space, and a merger would have created a virtual monopoly. The two exchanges together control more than 95 percent of all trading in European listed interest rate futures and options, and more than 80 percent of all listed equity index futures and options, according to Richard Perrott, a London-based analyst who covers diversified financials for Berenberg.

Those numbers prompted the European Commission to block the proposed $7.4 billion deal February 1. The derivatives markets “are at the heart of the financial system, and it is crucial for the whole European economy that they remain competitive,” said Joaquín Almunia, the competition commissioner. “We tried to find a solution, but the remedies offered fell far short of resolving the concerns.”

The commission’s veto won’t be the final word on competition. A revolution is gathering force that rules out any return to the status quo. European regulators are pressing ahead with new legislation that aims to foster greater transparency and competition in both listed and over-the-counter derivatives. The moves, if adopted, threaten to shatter the lucrative duopoly enjoyed by Eurex and Liffe.