Notice pursuant to Article 19(3) of Council Regulation No 17 - Case COMP/37.557 - Eurex
Date: 2000-08-11
Institutions: European Commission
Subjects: EU control, European Commission, exchange of information, inter-company agreement, joint venture

C 231/2

EN

Official Journal of the European Communities

11.8.2000

Notice pursuant to Article 19(3) of Council Regulation No 17 (1)

Case COMP/37.557 (cid:151) Eurex

(2000/C 231/02)

I. The notification

(SWX)

On 1 July 1999, Deutsche B(cid:246)rse AG (DB) and the SWX
(the Parties) notified to the
Swiss Exchange
Commission the creation of their joint venture (cid:145)Eurex(cid:146), a
cross-border exchange for electronic trading in financial
derivatives. The Parties have requested negative clearance
or,
the
failing that, exemption under Article 81(3) of
Treaty. This notice does not address the compatibility of
the arrangements with Article 82.

II. The companies concerned

the holding company of

DB is
the Frankfurt Stock
Exchange (Frankfurter Wertpapierb(cid:246)rse). It offers a number
financial services such as listing of equity and debt
of
securities, settlement facilities and the supply of informati-
on.

business organisation, the alteration of obligations agreed
upon, or the establishment of branches and subsidiaries.

DB has granted to SWX an indefinite, non-exclusive licence
for the use of its software and both parties will further
develop the software and share revenue received from
third parties.

the duration of

The Parties have also agreed not to directly or indirectly
provide services for derivatives products except for Eurex
for
the shareholders agreement. This
non-compete clause will run for five years and be auto-
matically extended for another five years unless terminated
by either party subject to a notice period of one year.

SWX is a non-profit association which runs the Swiss
electronic securities exchange. It provides services similar
to DB.

IV. The relevant market

The Parties submit that Eurex is active in two areas:

Eurex has replaced Deutsche B(cid:246)rse Terminmarkt GmbH
(DTB) and the Swiss Options and Futures Exchanges
(Soffex) and now trades the derivatives contracts that
were previously traded on DTB and Soffex as well as
new derivatives contracts.

(i) Standardised derivatives trading,
opment of new products; and

including the devel-

(ii) Standardised derivatives clearing.

III. The notified arrangements

(i) Derivatives trading

Eurex consists of three legal entities: Eurex Zurich AG,
Eurex Frankfurt AG, Eurex Clearing AG.

(a) Eurex Zurich is concerned with the Swiss derivatives
operations and is jointly owned by SWX and DB;

the trade in standardised
Eurex offers a facility for
derivatives (options and futures) that are based on either
equity products, index products, money market products
or capital market products.

(b) Eurex

Frankfurt

derivatives
operations and is a fully owned subsidiary of Eurex
Zurich;

the German

runs

(c) Eurex Clearing

clearing
responsible
operations of Eurex Zurich and Eurex Frankfurt and
is a fully owned subsidiary of Eurex Frankfurt.

the

for

is

The Parties submit that there are four distinct relevant
product markets: derivatives based on (i) equities listed
(ii)
on DB, SWX or Helsinki Stock Exchange (HEX),
equity indices based exclusively on DB, SWX or HEX
listed shares, (iii) equity indices (not based exclusively on
DB or SWX listed shares), or (iv) specific interest rates (eg.
the (cid:145)Bund future(cid:146)).

The same individuals make up the management and super-
visory boards of Eurex Frankfurt and Zurich except that
DB has an extra seat on the supervisory board of Eurex
Zurich. Certain key decisions of each of the three entities
require the unanimous agreement of its shareholders: these
issues such as
decisions relate to fundamental structural

(1) OJ 13, 21.2.1962, p. 204/62.

submit

The Parties
that, although theoretically other
exchanges could switch to offering a trading facility in
the same derivatives as Eurex, they are unlikely to do so
because buyers and sellers of exchange-traded financial
derivatives always trade where there is greatest liquidity
in a given product. In the case of equity derivatives and
equity index derivatives based on DB, SWX or HEX listed
shares the liquidity is in most cases greatest on Eurex.

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In contrast, the Parties consider that in the case of interest
rate derivatives, other derivatives exchanges can compete
with Eurex because they can more easily provide the
requisite liquidity.

The Parties submit that, unlike exchange-traded derivaties,
OTC (over the counter) derivatives are not standardised
and therefore not appropriate for trading between a large
group of buyers and sellers. However, OTC derivatives are
flexible insruments that are often tailor made. For this
reason the parties
that OTC derivatives can
nonetheless be regarded as substitutes for exchange-traded
products.

submit

The Parties consider that due to the differences in time
zones, access to Eurex is restricted for those users whose
operating hours fall outside those of Eurex. It is recognised
that there is a small time overlap in which traders from
other financial centres (New York, Tokyo, Hong Kong) can
operate in Europe, this overlap is too small to provide a
reasonable alternative. Therefore the Parties consider that
the geographic market in question is limited to Europe.

(ii) Derivatives clearing

Eurex acts as a counterparty between the buyer and the
seller and bears the risk of either of these parties reneging
on their obligations. This service is only provided in
relation to products traded on Eurex.

The Parties consider that although it would theoretically be
possible for another undertaking to provide these clearing
it seems unlikely that there would be another
services,
entrant on this market.

submit

The Parties
that clearing services are linked
together with the type of derivative that is being cleared.
They consider
for
derivatives trading to be European-wide, consequently the
limited to
geographic market
Europe.

relevant geographic markets

for clearing services

the

is

V. Neighbouring relevant markets in which the parties

are active

The Parties submit that the are active in certain markets
that neighbour the markets in which Eurex is active. These
are the market for listing and trading of securities (shares
and debt
for the listing and
trading of warrants, the market for electronic exchange
systems and the market for the sale of market information.

instruments),

the market

(i) Listing and trading services for securities

such companies

The Parties consider that geographic market
for listing
services to be worldwide for blue chip shares (including
those listed on their exchanges) given that major inter-
national companies can seek to be listed on more than
one major exchange. Exchanges around the world can
easily provide
listing services
provided that
the requisite legal requirements for each
exchange are met. The Parties contend that companies
with mainly national businesses
seek listing only on
national exchanges. In these circumstances the geographic
market is national in scope. As far as German and Swiss
government securities are concerned (on which a number
of Eurex derivatives are based), the Parties consider the
market for listing services to be national.

their

The Parties submit that the geographic market for trading
services in blue chip shares (including those listed on their
is considered to be European. The Parties
exchanges)
submit that the markets for trading services in the shares
of companies with a mainly domestic business and which
are listed only on one exchange (including those listed on
their exchanges) are national. As far as trading services in
German and Swiss government securities are concerned,
the Parties consider these markets to be European-wide.

(ii) Listing and trading services for warrants

The Parties provide listing and trading facilities
for
warrants based on shares, a basket of shares or equity
their exchanges,
indices composed of shares listed at
currencies or central bank interest
rates. The Parties
consider that although warrants may be similar to stan-
dardised options (depending on the underlying) they are
not considered to be fully substitutable with derivatives.
This is because, unlike options, warrants create rights of
settlement against the issuer of the warrant as opposed to
the seller. There is, however, a small degree of substituta-
bility between standardised options and warrants based on
the same underlying.

submit

The Parties
that, although theoretically other
exchanges could switch to offering a listing and trading
those warrants handled by the Parties’
facility for
exchanges,
reasons of
they will often not do so for
liquidity in that product. As far as shares and equity
indices are concerned, liquidity is normally found on the
exchange where
listed.
Therefore for blue chip securities which have multiple
listings it is possible in principle for their warrants to be
listed and traded at the exchanges where their securities are
listed.

the underlying securities are

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Official Journal of the European Communities

11.8.2000

The Parties consider the market for warrants based on
(indices of) blue chips, listed on the Parties’ exchanges to
be European-wide. This is mainly due to the differences in
time zones around the world. As far as warrants based on
domestic stocks are concerned, the Parties submit that the
market is national.

the relevant thresholds. Accordingly, they consider that in
accordance with Article 22(1) of Council Regulation (EC)
No 4064/89 the Commission’s assessment of
the joint
venture should be limited to the possible risk of coor-
in
dination of the competitive behaviour of the Parties,
this case in neighbouring markets.

(iii) Provision of electronic exchange systems

The Parties are either actually or potentially active as
licensors of
software for electronic exchange systems
trading. The
which allow fully automated exchange
Parties submit that the relevant product market is for the
provision of software for electronic exchange systems for
derivatives. There are various products in the market
which have been developed by a number of different
companies which compete against one another.

The Parties submit that may of these systems can be used
outside national borders,
this
market to be at least European-wide.

therefore they consider

(iv) Sale of market information

The Parties are also active on the market for the sale of
stock market information to third party vendors. DB is
responsible for the sale of information from Eurex. The
delayed
price
Parties
sell
information,
historical
information,
information.

real-time
end-of-day

information,

and

that depending on the information
The Parties submit
for real-time, delayed and
content
either be European or
end-of-day
national. The
the historical
scope of
information market will depend on the information’s
content.

the product market
information will
geographical

VI. The Parties arguments concerning the inapplicability

of Article 81(1)

the finance, staff, assets,

The Parties submit that Eurex Zurich is a full function joint
venture. It is jointly controlled by DB and SWX as the
major strategic decisions have to be taken unanimously.
a management dedicated to its
Eurex Zurich has
operations,
licences and tech-
nology in order to conduct on a lasting basis its business
activities. The Parties add that Eurex Zurich will operate
independently on the market with the capabilities
to
develop its own products. However, the operation falls
outside
scope of Council Regulation (EC) No
4064/89 on the control of concentrations between under-
takings by reason of the fact that the Parties do not meet

the

In providing securities listing and trading services the
Parties are active on a market which neighbours the
markets on which Eurex is active,
for derivatives
trading services where the underlying consists of shares,
indices or government securities.

i.e.

Parties are not active in the same relevant markets as Eurex
because the products they deal with are different in their
structure and functions. The Parties deal only with shares
and government securities that provide the underlying for
certain types of derivatives,
for example equity-based
derivatives.

legally qualifying issuers

Despite the connections between the markets for listing
and trading services for securities, on which the Parties
operate, and the derivatives markt, on which Eurex
operates,
there are substantial differences between the
two markets. The most sigificant difference is that Eurex
has the capability to develop its own products unlike the
Parties. The Parties can only provide services in products
presented by third parties. The Parties are not able to
listed, nor can they
influence the type of
securities
prevent
from listing their
securities. Furthermore, the Parties do not have an inte-
grated clearing service which Eurex provides. The Parties
function as a mediaton service between buyers and sellers
of securities whereas Eurex functions as a party to the
conracts. Finally, the Parties have also agreed in a share-
holders’ agreement
indirect
provision of services for derivatives products except for
Eurex for the duration of
the shareholders agreement.
This is designed to stop any competition between Eurex
and the Parties. This will also have the effect of limiting
the possibilities of coordination between them.

the end of any direct or

the

As far as listing and trading services for warrants are
concerned,
the
competitive behaviour of the Parties appears to be very
small as the Parties have very little influence over the
terms of these warrants.

coordination

possibility

of

of

the
There is no appreciable risk of coordination of
competitive behaviour of
the Parties in the market for
electronic exchange systems as there are many providers,
and in the market for the sale of market information as the
information provided by the Parties is very different in
nature.

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Official Journal of the European Communities

C 231/5

VII. Notice

The Commission intends to adopt a favorable position on
the notified agreements. Before doing so, the Commission
invites interested third parties to submit their comments
within one month of the date of publication of this notice
the European Communities.
in the Official

Journal

of

Comments can be sent by fax (32-2) 296 98 07 or by post,
quoting the reference COMP/37.557/D-1, to:

European Commission,
Directorate-General for Competition (DG COMP),
Directorate D (cid:151) Unit D1
Rue de la Loi/Wetstraat 200,
B-1049 Brussels.

Commission notice pursuant to Article 19(3) of Council Regulation No 17 concerning case
COMP/37.462 (cid:151) Identrus

(2000/C 231/03)

(Text with EEA relevance)

A. INTRODUCTION

On 6 April 1999 the Commission received a notification of a
set of agreements pursuant to Article 4 of Council Regulation
No 17 (1) concerning the establishment of a network of
institutions which will operate as certificate auth-
financial
orities of
trans-
actions, initially only in the business-to-business (B2B) context.

trusted electronic commerce (e-commerce)

Those participants will compete with each other in the relevant
markets described below.

B. THE PARTIES

The corporate groups to which the parties of the Notified
Agreeent belong may be described as follows:

The notifying parties are ABN-AMRO Services Company, Inc.,
BA Interactive Service Holdings,
Inc., Barclays Electronic
Commerce Holdings, Inc., Bayerische Hypo- und Vereinsbank
AG, The Chase Manhattan Bank, Citibank Strategic Technology,
Inc., Deutsche Bank AG and Pyramid Ventures, Inc. ((cid:145)Parties(cid:146)).

incorporated under US law as

For the purposes of establishing and managing the network,
the Parties have formed a joint venture company, Identrus LLC
(Identrus),
limited liability
company. Identrus will provide and manage the infrastructure
required for establishing a global, interoperable network among
financial institutions offering certificate authority servces (the
(cid:145)Identrus-system(cid:146)).

While Identrus will have a limited number of equity owners
(approx. 20) (2), no single shareholder will have control over
Identrus. Participation in the Identrus System will be open to
qualified financial institutions around the world ((cid:145)Participants(cid:146)).

(1) OJ 13, 21.2.1962, p. 204/62.
(2) Since the notification was filed the following additional institutions
have become equity investors in Identrus: Banco Santander Central
Hispanola, CIBC WMC Inc., HSBC Financial Services Corporation,
NatWest Group Holdings Corporation and Sanwa Technology
Services, Inc.

ABN AMRO Services Company, Inc., is an Illinois corporation.
Its ultimate parent is ABN AMRO Holding NV, the Netherlands.

BA Interactive Services Holding Company, Inc., is a Delaware
corporation. The ultimate parent is BankAmerica Corporation,
USA.

is a Delaware
Barclays Electronic Commerce Holdings Inc.,
corporation and an indirect subsidiary of Barclays Bank plc,
UK.

Bayerische Hypo- und Vereinsbank AG (Hypo Vereinsbank);
Bayerische Hypo- und Vereinsbank AG (Hypo Vereinsbank) is
a financial group resulting from the merger in 1998 of Baye-
rische Vereinsbank AG and Bayerische Hypotheken und
Wechsel Bank, AG.

The Chase Manhattan Bank (Chase)
subsidiary of the Chase Manhatten Corporation, USA.

is a wholly-owned

Citibank NA is a wholly-owned subsidiary of Citigroup Inc.,
Delaware.