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Margrethe Vestager

FRANKFURT. — The EU’s antitrust regulator opened an investigation on Wednesday into the proposed merger of Deutsche Bourse and London Stock Exchange Group, citing concerns the deal could reduce competition in a number of financial markets. The European Commission said the merger could affect clearing functions, derivatives, repurchasing agreements, German stocks and exchange-traded products and that it would create the largest European-exchange operator “by far”.“Financial markets provide an essential function for the Euro­pean economy. We must ensure that market participants continue to have access to financial market infrastructure on competitive terms,” EU antitrust chief Margrethe Vestager said.

The LSE said it would try to head off some competition concerns by exploring the sale of its clearing unit, LCH. It said any sale of the unit would be subject to the merger with Deutsche Bourse going ahead.

The commission said it was concerned the combination of both companies’ clearing houses could hurt competing trading ­platforms that depend on LSE’s clearing house. It would create the largest collateral pool in the world, at about $219 billion, used to guard against risk when clearing transactions, the EU noted.

In merger reviews, the commission tends to prefer structural remedies, such as selling assets, to ease concerns, but a French official has previously said the sale of the LSE’s French clearing house would still fall far from what was necessary to ease France’s concerns about the deal.

The EU’s in-depth probe comes on the heels of warnings raised by various European ministers.

French Finance Minister ­Michel Sapin has said the deal would curtail competition and ­create extra risk, while Belgian ­Finance Minister Johan Van Overtveldt wrote Ms Vestager a letter warning about the impact the deal would have on the financial stability of both the European and Belgian economies. The Paris Bourse and the Brussels Stock ­Exchange are both part of the stock exchange NYSE Euronext that ­rivals Deutsche Bourse and LSE.

In its statement on Wednesday, the commission said it was also looking at the merger’s effect on clearing for repurchasing agreements as well as derivatives, where in many cases the parties are direct competitors. In addition, the EU said it would scrutinise the deal’s effect on German stocks, since the merger would combine two of the three largest trading platforms for German-listed equities.

In-depth merger reviews by the EU are common in large, complex deals. The commission can seek concessions from the parties, or if they fail to assuage the EU’s ­concerns it could block the deal. — AU.