UPDATE:Deutsche Boerse, NYSE Offer Derivatives Fee Cap In Merger Push

Deutsche Boerse AG (DB1.XE, DBOEF) and NYSE Euronext (NYX) have offered to cap fees related to derivatives transactions on their combined markets for a period of three years, the latest effort to smooth concerns of European Union antitrust officials examining the proposed merger.

The proposal came in a letter to European Union Competition Commissioner Joaquin Almunia and augments the merger candidates' standing offer to divest some markets and open up services, according to a statement from the exchanges.

"In addition to the submitted remedy proposal, both companies expressed their commitment to maintain the current level of their published standard fees for their European derivatives contracts for a period of three years," Deutsche Boerse and NYSE Euronext officials said in the statement.

A spokesman for Deutsche Boerse said that the exchanges submitted the additional proposal few days ago, and it isn't part of the official remedy proposal package. Another meeting is slated between the exchanges and antitrust regulators Wednesday, according to a person familiar with the matter.

The exchange partners last week offered to spin off all of NYSE Euronext's European single-stock derivatives business and have proposed to broaden access to the exchanges' clearinghouse to ease competitors' entry, but rivals have continued to push back against the combination, telling regulators that the measures are only peripheral.

EU competition officials opened an in-depth probe of the exchange deal in early August and formally outlined their reservations in October. Their deadline for ruling on the matter has twice been pushed back and currently is set for Feb. 9, 2012.

Almunia on Tuesday told reporters that he had reviewed the response of customers and exchange rivals to the latest raft of deal remedies submitted by NYSE Euronext and Deutsche Boerse. He said he anticipated the EU ruling on the tie-up in late January or early February.

Placing a cap on fees for trading and processing futures and options won't have much of an impact on the earnings of the combined company, which has yet to be named, according to BMO Capital Markets analyst Jillian Miller. She estimated that the merged firm would earn EUR5.50 in pro-forma earnings per share in 2013, based on the timetable the exchanges have laid out for integration.

"Even if their fee schedule is set, they likely will still have the potential to charge higher fees in a lower-volume environment," said Miller, referring to the companies' practice of awarding discounts to customers that do heavy business on their markets.

Such a fee cap could limit some flexibility for a combined Deutsche Boerse and NYSE Euronext, Miller said. Should the merged entity come under pressure to lower charges for trading certain contracts, it wouldn't be able to make up the difference by lifting levies on other instruments.

The ruling by the EU Competition Committee isn't the region's final say on the deal. Upon completion of its review, the transaction will go to a vote of 27 EU commissioners. About 10% of prior mergers subject to an in-depth review and rejected by antitrust examiners have still won approval from the full college of commissioners.

To build support NYSE Euronext and Deutsche Boerse have been lobbying political figures to back their deal, which they have positioned as a European counterweight to U.S. futures giant CME Group Inc. (CME) and other major competitors.

The merger candidates also have pitched the efficiencies of their deal, which they have estimated saving major customers EUR3 billion in trading collateral, as relief for banks facing stepped-up capital requirements and pressure from Europe's sovereign-debt crisis.

-By Jacob Bunge and Ulrike Dauer, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com

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