United States v. Deutsche Börse AG and NYSE Euronext; Proposed Final Judgment and Competitive Impact Statement, 81968-81978 [2011-33413]
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‘‘sixty days’’ until February 27, 2012.
This process is conducted in accordance
with 5 CFR 1320.10.
If you have comments especially on
the estimated public burden or
associated response time, suggestions,
or need a copy of the proposed
information collection instrument with
instructions or additional information,
please contact William J. Miller,
William.miller@atf.gov, Chief,
Explosives Industry Programs Branch,
99 New York Ave. NE., Washington, DC
20226.
Written comments and suggestions
from the public and affected agencies
concerning the proposed collection of
information are encouraged. Your
comments should address one or more
of the following four points:
—Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
— Evaluate the accuracy of the agencies
estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used;
—Enhance the quality, utility, and
clarity of the information to be
collected; and
—Minimize the burden of the collection
of information on those who are to
respond, including through the use of
appropriate automated, electronic,
mechanical, or other technological
collection techniques or other forms
of information technology, e.g.,
permitting electronic submission of
responses.
Summary of Information Collection
(1) Type of Information Collection:
Revision of a currently approved
collection.
(2) Title of the Form/Collection:
Records and Supporting Data: Daily
Summaries, Records of Production,
Storage and Disposition and Supporting
Data by Explosives Manufacturers.
(3) Agency form number, if any, and
the applicable component of the
Department of Justice sponsoring the
collection: Form Number: None. Bureau
of Alcohol, Tobacco, Firearms and
Explosives.
(4) Affected public who will be asked
or required to respond, as well as a brief
abstract: Primary: Business or other forprofit. Other: None. These records show
daily activities in the manufacture, use,
storage, and disposition of explosive
materials by manufacturers. The records
are used to show where and to whom
explosive materials are sent, thereby
ensuring that any diversion will be
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readily apparent and, if lost or stolen,
ATF will be immediately notified on
discovery of the loss or theft. ATF
requires that records be kept 5 years
from the date a transaction occurs or
until discontinuance of business or
operations by the licensee.
(5) An estimate of the total number of
respondents and the amount of time
estimated for an average respondent to
respond: It is estimated that 2,008
respondents will take 15 minutes to
maintain each record.
(6) An estimate of the total public
burden (in hours) associated with the
collection: There are an estimated
130,520 annual total burden hours
associated with this collection.
If additional information is required
contact: Jerri Murray, Department
Clearance Officer, Policy and Planning
Staff, Justice Management Division,
Department of Justice, Two Constitution
Square, Room 2E–508, 145 N Street NE.,
Washington, DC 20530
Jerri Murray,
Department Clearance Officer, PRA, U.S.
Department of Justice.
[FR Doc. 2011–33374 Filed 12–28–11; 8:45 am]
BILLING CODE 4410–FY–P
DEPARTMENT OF JUSTICE
Antitrust Division
¨
United States v. Deutsche Borse AG
and NYSE Euronext; Proposed Final
Judgment and Competitive Impact
Statement
Notice is hereby given pursuant to the
Antitrust Procedures and Penalties Act,
15 U.S.C. 16(b)–(h), that a proposed
Final Judgment, Stipulation and
Competitive Impact Statement have
been filed with the United States
District Court for the District of
Columbia in United States of America v.
¨
Deutsche Borse AG and NYSE Euronext,
Civil Action No. 1:11–cv–02280. On
December 22, 2011, the United States
filed a Complaint alleging that the
¨
proposed merger of Deutsche Borse AG
and NYSE Euronext would violate
Section 7 of the Clayton Act, 15 U.S.C.
18. The proposed Final Judgment, filed
the same time as the Complaint,
¨
requires Deutsche Borse AG’s subsidiary
to divest its interest in Direct Edge
Holdings LLC within two years and to
take the necessary steps to remove its
affiliates from governance of Direct
Edge.
Copies of the Complaint, proposed
Final Judgment and Competitive Impact
Statement are available for inspection at
the Department of Justice, Antitrust
Division, Antitrust Documents Group,
PO 00000
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450 Fifth Street NW., Suite 1010,
Washington, DC 20530 (telephone: (202)
514–2481), on the Department of
Justice’s Web site at https://
www.usdoj.gov/atr, and at the Office of
the Clerk of the United States District
Court for the District of Columbia.
Copies of these materials may be
obtained from the Antitrust Division
upon request and payment of the
copying fee set by Department of Justice
regulations.
Public comment is invited within 60
days of the date of this notice. Such
comments, and responses thereto, will
be published in the Federal Register
and filed with the Court. Comments
should be directed to James J. Tierney,
Chief, Networks & Technology
Enforcement Section, Antitrust
Division, United States Department of
Justice, 450 Fifth Street, NW., Suite
7100, Washington, DC 20530 (202) 307–
6640).
Patricia A. Brink,
Director of Civil Enforcement.
UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Antitrust Division
U.S. Department of Justice
450 Fifth Street NW., Suite 7100
Washington, DC 20530
Plaintiff,
v.
¨
DEUTSCHE BORSE AG,
Mergenthalerallee 61
65760 Eschborn
Germany
and
NYSE EURONEXT,
11 Wall Street
New York, NY 10005
Defendants.
Case: 1:11–cv–02280
Assigned To: Beryl A. Howard
Date: 12/22/2011
Description: Antitrust
COMPLAINT
The United States of America, acting under
the direction of the Attorney General of the
United States, brings this civil action
pursuant to the antitrust laws of the United
States to enjoin the proposed merger of
¨
Deutsche Borse AG (‘‘DB’’) and NYSE
Euronext (‘‘NYSE’’) and to obtain such other
equitable relief as the Court deems
appropriate. The United States alleges as
follows:
NATURE OF ACTION
1. DB is among the largest operators of
financial exchanges in the world. While most
of its businesses are in Europe, DB, through
various subsidiaries, is also the largest
unitholder of Direct Edge Holdings LLC
(‘‘Direct Edge’’), the fourth-largest operator of
stock exchanges in the United States. Direct
Edge competes head-to-head with NYSE and
is an exchange innovator, leading in
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technology, pricing, and in the development
of exchange models.
2. NYSE operates some of the oldest,
largest, and most prestigious stock exchanges
in the United States. It stands at the center
of American financial markets, with its
exchanges handling roughly a third of the
equities traded daily in the United States,
and considerably more for certain equities
and certain times of day. NYSE exchanges
list the vast majority of the listed exchangetraded products, including the majority of
exchange-traded funds, and they supply key
market data to customers making investment
decisions.
3. On February 15, 2011, NYSE and DB
agreed to merge in a transaction worth
roughly $9 billion. NYSE and DB propose to
combine under a new Dutch holding
company (‘‘NewCo’’), which would be the
largest exchange group in the world, with
dual headquarters in Frankfurt and New
York. NewCo would own 100% of NYSE and
31.54% of Direct Edge.
4. The proposed transaction would violate
Section 7 of the Clayton Act, 15 U.S.C. § 18,
because it would substantially lessen
competition and potential competition in at
least three lines of commerce in the United
States: (a) displayed equities trading services;
(b) listing services for exchange-traded
products (‘‘ETPs’’), including exchangetraded funds (‘‘ETFs’’); and (c) real-time
proprietary equity data products.
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JURISDICTION, VENUE AND COMMERCE
5. The United States brings this action
under Section 15 of the Clayton Act, as
amended, 15 U.S.C. § 25, to prevent and
restrain defendants from violating Section 7
of the Clayton Act, as amended, 15 U.S.C.
§ 18.
6. The Court has subject matter jurisdiction
over this action and the defendants pursuant
to Section 15 of the Clayton Act, as amended,
15 U.S.C. § 25, and 28 U.S.C. §§ 1331,
1337(a), and 1345. NYSE and DB provide and
sell displayed equity trading services and
real-time proprietary equities trading data.
NYSE also provides and sells listing services
for exchange traded products. Sales of these
services in the United States represent a
regular, continuous, and substantial flow of
interstate commerce, and have a substantial
effect upon interstate commerce.
7. This Court has personal jurisdiction over
each defendant and venue is proper in this
District under Section 12 of the Clayton Act,
15 U.S.C. § 22, and 28 U.S.C. §§ 1391(b)(1)
and (c). Defendants transact business within
the District of Columbia. DB and NYSE
acknowledge personal jurisdiction in this
District and consent to venue.
DEFENDANTS AND THE TRANSACTION
8. DB is a German Aktiengesellschaft that
operates financial exchanges and related
businesses in the United States and Europe.
It generates revenue from, among other
things, listing fees, stock trading transaction
fees, market data licensing fees, and
technology licensing arrangements. Through
its subsidiaries, DB is the largest holder of
equity in Direct Edge, a leading stock
exchange operator in the United States. DB
owns 50% of the equity and controls
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Frankfurt-based Eurex Group, a leading
European derivatives exchange operator. DB
has announced an agreement to buy the
remaining equity in Eurex after DB completes
its merger with NYSE. Eurex owns
International Securities Exchange Holdings,
Inc. (‘‘ISE’’), a leading options exchange in
New York that also owns a 31.54% equity
interest in Direct Edge. In 2010, DB’s
subsidiaries earned substantial revenues from
sales in the United States.
9. NYSE is a publicly traded Delaware
corporation with its principal place of
business located in New York, New York.
The company operates financial exchanges in
the United States and Europe. In the United
States, NYSE operates three stock exchanges:
(i) the New York Stock Exchange LLC; (ii)
NYSE Arca, Inc., an all-electronic exchange;
and (iii) NYSE Amex LLC, an exchange that
lists the stock of primarily small- and
medium-sized companies. NYSE generates
revenue from, among other things, listing
fees, stock trading transaction fees, market
data licensing fees, and technology licensing
arrangements. In 2010, NYSE earned over $3
billion in total revenues from within the
United States.
10. Direct Edge is a Delaware limited
liability company with its principal place of
business in Jersey City, New Jersey. Direct
Edge, through its subsidiary Direct Edge
Holdings, Inc., owns and operates two
leading U.S. stock exchanges, EDGA
Exchange, Inc. and EDGX Exchange, Inc.
Direct Edge is majority-owned by a group
including ISE, Goldman Sachs Group Inc.,
Citadel Investment Group LLC, and Knight
Capital Group Inc. ISE owns 31.54% of Direct
Edge and holds certain key voting and
special veto rights, such as the right to veto
entry by Direct Edge into options trading. ISE
also has the right to appoint three members
to the Direct Edge board of managers and one
member to each of the corporate boards of
EDGA Exchange, Inc. and EDGX Exchange,
Inc. Goldman Sachs, Citadel, and Knight
each own 19.9% of Direct Edge. The
remaining 8.76% is owned by a group of five
brokers, including affiliates of JP Morgan
Chase & Co. (through LabMorgan Corp.),
Bank of America (through Merrill Lynch L.P.
Holdings, Inc.), Nomura Securities
International, Inc., Deutsche Bank USA
(through DB US Financial Markets Holding
Corporation), and Sun Partners LLC. Direct
Edge’s exchanges compete head-to-head with
the NYSE exchanges. In 2010, Direct Edge
earned substantial revenues in the United
States.
11. DB and NYSE have proposed to merge
into a NewCo that will house all their current
corporate holdings. NewCo will be a Dutch
holding company, with dual headquarters in
New York City and outside Frankfurt,
Germany. Combined annual net revenues of
NewCo are expected to be over $5 billion,
with revenue sources including market data
and technology; equities trading and listings;
derivatives trading and listings; and
settlement and custody. NewCo will own
many of the world’s leading brands in
finance. Its post-merger leadership will be
split between former executives from both
NYSE and DB. The current DB Chief
Executive Officer will stay on as Chairman,
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and the current NYSE CEO will remain CEO
of the combined entity.
RELEVANT MARKETS
Displayed Equities Trading Services
12. Displayed equities trading services
comprise a relevant antitrust product market
and a ‘‘line of commerce’’ within the
meaning of Section 7 of the Clayton Act.
These services include providing
mechanisms and ancillary services to
facilitate the public purchase and sale of
exchange-traded stocks (those defined as
‘‘NMS stock’’ under Rule 600(b)(47) of
Regulation NMS, 17 C.F.R. § 200 et seq.).
These services are offered mainly by national
stock exchanges registered under Section 6 of
the Securities Exchange Act of 1934, 15
U.S.C. § 78f, and also by electronic
communications networks (‘‘ECNs’’)
regulated by Regulation ATS, 17 C.F.R.
§ 242.300 et seq.
13. Several key attributes separate
displayed from undisplayed or ‘‘dark’’
equities trading services, including the
continuous pre-trade publication of the bestpriced quotations for buying and selling
exchange-traded stocks in a national
consolidated data stream, the display of
certain customer limit orders (offers to buy
and sell stock at particular prices), and the
provision of deep and reliable liquidity for a
broad array of exchange-traded stocks.
Displayed trading venues, in particular those
operated by NYSE, The NASDAQ OMX
Group, Inc., Direct Edge, and BATS Global
Markets, Inc. form the backbone of the
American national market system and over
the past several years have accounted for
roughly 65% to 75% of the overall average
daily trading volume in the United States.
Broker-dealers, institutional investors, and
other customers rely on displayed trading
venues to provide meaningful price
discovery for exchange-traded stocks and to
act as exchanges of last resort, especially for
thinly traded stocks, in times of market
volatility or stress.
14. Undisplayed trading services account
for roughly 25% to 35% of total average daily
trading volume and serve a very different
purpose for investors: to allow for
anonymous matching of orders without
publicly revealing the intention to trade
before execution. Institutional investors and
other traders use these services to minimize
the likelihood that their trades will cause the
stock price to move against their interest.
Most of the undisplayed trading centers offer
less liquidity on most stocks (indeed, an
alternative trading system providing
undisplayed trading must account for less
than 5% trading volume in a stock or the
venue automatically becomes displayed by
regulations promulgated by the U.S.
Securities and Exchange Commission
(‘‘SEC’’)) and base their prices on those
prevailing in the displayed equities trading
centers.
15. The relevant geographic market is the
United States. Trading equities on a foreign
exchange is not an adequate substitute for
trading on an exchange in the United States.
Trading on an exchange outside the United
States exposes traders to risks like foreign
exchange risk, country risk, reputational risk,
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different or potentially lax regulatory
environments for trading, lack of analyst
coverage, different accounting standards,
time differences, and language differences,
among other things. Additionally, the
majority of American companies choose to
list on domestic exchanges. Therefore, to
trade most publicly-listed American stocks,
investors must use stock exchanges located
in the United States.
16. The market for displayed equities
trading services in the United States satisfies
the hypothetical monopolist test. A profitmaximizing monopolist in the offering of
displayed equities trading services in the
United States likely would impose at least a
small but significant and non-transitory
increase in the price of such services. Not
enough customers would switch to
alternative means of trading equities in
undisplayed trading centers or foreign
exchanges to render this price increase
unprofitable.
Listing Services for Exchange-Traded
Products
17. The provision of ETP listing services
constitutes a relevant antitrust product
market and a ‘‘line of commerce’’ within the
meaning of Section 7 of the Clayton Act. An
ETP is typically an exchange-listed equity
security instrument other than a standard
corporate cash equity, the performance of
which is designed to track another specific
instrument, asset or group of assets, such as
a market index or a selected basket of
corporate stocks. ETPs are typically
sponsored by firms that monitor and manage
the composition and performance of the ETP.
The most popular type of ETP today is an
exchange-traded fund, an equity fund with a
form of exchange-listed securities (often trust
units) that can be traded like a stock but that
is also benchmarked against another stock,
index or other asset. Buying an ETP offers a
simple way for investors to diversify their
portfolios without having to buy each
individual corporate stock or other financial
instrument directly. For instance, the SPDR
S&P 500 exchange-traded fund tracks the S&P
500 U.S. stock index, which comprises
widely held American stocks. ETFs and other
ETPs are very popular and serve as the
cornerstone of many individual investors’
portfolios.
18. The relevant geographic market is the
United States. Listing an ETP on a foreign
exchange is not an adequate substitute for
listing on an exchange in the United States.
U.S. sponsors of ETPs overwhelmingly
choose to list domestically, because it allows
them to build brand awareness and
reputation and stay close to U.S. capital
markets and investors in the United States
considering the purchase and sale of ETFs
and other ETPs, as well as the analysts that
cover ETPs and ETFs and, in many cases, the
underlying or related assets, indexes, or
products.
19. The market for ETP listing services in
the United States satisfies the hypothetical
monopolist test. A profit-maximizing
monopolist that was the only present and
future firm in the offering of ETP listing
services in the United States likely would
impose at least a small but significant and
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non-transitory increase in the price of ETP
listings. Not enough customers would switch
to alternatives to render this price increase
unprofitable.
Real-time Proprietary Equity Data
20. Real-time proprietary equity data is a
relevant antitrust product market and a ‘‘line
of commerce’’ within the meaning of Section
7 of the Clayton Act. Access to affordable,
reliable and timely data about the stock
market is essential for informed stock
trading. NYSE and Direct Edge are among
only four major competitors that aggregate
and disseminate certain market data to
brokers, dealers, investors, and news
organizations. They sell (or with little lead
time could easily sell) competing proprietary
market data products derived from trading
activities occurring both on and off their
exchanges.
21. The product market for real-time
proprietary equity data consists of what is
commonly referred to in the industry as
‘‘non-core’’ data. Market participants
generally refer to two broad categories of
critical market data: ‘‘core’’ and ‘‘non-core.’’
Core data refers to the transaction data the
SEC requires stock exchanges to report to
securities information processors for
consolidation and public distribution,
including the current best bid and offer for
each stock on every exchange and
information on each stock trade, including
the last sale. Non-core data includes trading
volume and ‘‘depth of book’’ data that certain
exchanges collect and sell, i.e., the
underlying quotation data on any given
exchange. Non-core data helps traders
determine where liquidity for a given stock
exists during the day and the depth of that
liquidity. Each exchange (or other trading
platform) owns non-core data and can
distribute it voluntarily for a profit in
competition with data from other exchanges.
Non-core data products can be made to
replicate core data and exchanges can
package and sell both core and non-core data
together.
22. The market for real-time proprietary
equity data satisfies the hypothetical
monopolist test. A profit-maximizing
monopolist in the offering of real-time
proprietary equity data likely would impose
at least a small but significant and nontransitory increase in the price of its equity
data products. Not enough customers would
switch to other products or services to render
this price increase unprofitable.
23. The relevant geographic market is the
United States. Real-time proprietary equity
data in this context relate only to domestic
trading of U.S.-listed stock. Customers
needing real-time proprietary equity data
relating to U.S.-listed stocks cannot turn to
foreign alternatives.
ANTICOMPETITIVE EFFECTS
NYSE and Direct Edge Are Head-to-Head
Competitors
24. NYSE and Direct Edge compete headto-head in displayed equities trading services
and in the provision of real-time proprietary
equity data products. Direct Edge over the
years has been a force in modernizing stock
trading with cutting edge technology, faster
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trading times, lower prices, and new market
models. Direct Edge began in 1998 as an
electronic communication network named
Attain. By 2007, it was a major trading venue
owned and supported by broker-dealers
Knight Capital, Citadel and Goldman Sachs.
These broker-dealers used Direct Edge as a
counterweight to the exchange duopoly of
NYSE and NASDAQ. In December 2008,
Direct Edge and ISE agreed that ISE would
buy part of Direct Edge and Direct Edge
would take control of the struggling ISE
Stock Exchange. In March 2010, Direct Edge
received approval from the SEC to convert its
two ECNs into national securities exchanges
under Section 6 of the Securities Exchange
Act of 1934 (‘‘Exchange Act’’).
25. Direct Edge was first to offer two
trading platforms using the same technology,
but with different pricing schemes. EDGA
historically has been operated as a lower cost
exchange, being typically free or nearly free
for many traders to make offers to buy or sell
stock at certain posted prices (i.e., ‘‘post
liquidity’’) as well as for customers to trade
against these offers and buy and sell stock
(i.e., ‘‘take liquidity’’), making EDGA
attractive to traders sensitive to execution
charges. Approximately one-third of Direct
Edge volume trades over EDGA. EDGX
historically has offered a more traditional
pricing structure whereby the exchange
normally pays customers to post liquidity
and charges a fee for them to take liquidity.
Although the two platforms have different
pricing structures and cater to different
segments, they share technology, support,
code, and data centers.
26. NYSE has responded to Direct Edge’s
aggressive tactics in part by improving its
own technology and changing its pricing. For
example, NYSE in 2009 replaced its trading
system in an effort to regain business lost
mainly to the sophisticated electronic
platforms at Direct Edge and BATS. The new
system was faster, reducing transaction
processing time to less than 10 milliseconds,
which at the time made NYSE roughly as fast
as its rivals. NYSE largely was able to
stabilize its share of trading volume by
implementing a new market model and
introducing a new pricing scheme, which
gave rebate incentives to certain designated
market makers (i.e., those market participants
that agreed to buy and sell particular stocks
at certain prices for certain amounts of time).
27. Direct Edge’s investors, mainly brokerdealers, use its exchanges to put downward
pressure on trading fees at NYSE and other
exchanges. When possible, Direct Edge’s
broker-dealer investors often send trades to a
Direct Edge exchange in order to keep their
overall transaction costs down. In this way,
Direct Edge helped spur a 2009 pricing war
that substantially reduced the cost of trading
stocks in the United States.
28. NYSE and Direct Edge also are headto-head competitors in the provision of realtime proprietary equity data. Both are wellsituated to offer new real-time equity data
products and equity data products that
replicate portions of core data offerings, but
with even faster feeds.
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Direct Edge Is a Potential Competitor to
NYSE in Listing Services for ExchangeTraded Products
29. Direct Edge is a potential competitor to
NYSE in listing services for ETPs. An ETP,
including an ETF, must be listed on a
registered stock exchange in order to be
widely-traded in the United States.
Exchanges typically compete for listings
based on market structure, market maker
incentives, marketing, and other associated
services.
30. NYSE dominates the business of
providing listing services for ETPs. NYSE’s
major competitors are NASDAQ, with a small
share, and recent entrant BATS. Direct Edge,
as a leading operator of registered stock
exchanges, is uniquely situated for entry and
already imposes competitive discipline on
NYSE: its potential entry has already affected
NYSE decisions to innovate and its pricing
decisions in its ETP listings business.
This Merger Would Substantially Lessen
Competition
31. NYSE and Direct Edge are currently
vigorous competitors and closely monitor
each other’s competitive positions in at least
two highly-concentrated markets. They are
also close potential competitors in a third
highly-concentrated market, listing services
for ETPs, in which NYSE is a dominant
player. Upon consummation of the proposed
transaction, NewCo would own NYSE and
would be able to control NYSE’s management
decisions.
32. Upon consummation of the proposed
transaction, NewCo also would become,
through ISE, the largest equity owner and
most influential member of Direct Edge.
NewCo would be able to appoint three of the
eleven Direct Edge managers, and one
representative to each of the EDGA and
EDGX exchange’s respective corporate
boards. NewCo would have important
ancillary rights at Direct Edge: veto rights
over certain major corporate actions,
representation on key committees, and
shareholder rights under corporate law, such
as the right to file shareholder derivative
lawsuits. NewCo also would have access to
Direct Edge’s non-public, competitively
sensitive information, and to the company’s
officers and employees. NewCo’s ownership
interests and associated rights would give it
influence over Direct Edge’s management
decisions.
33. NewCo’s presence on the Direct Edge
boards would also likely chill board-level
discussions of competition with NYSE.
Direct Edge was formed, in part, as a
customer-owned foil to NYSE and NASDAQ.
When NYSE or NASDAQ fails to innovate or
price competitively, broker-dealers can
encourage Direct Edge to innovate or can
shift their business to Direct Edge. If a NYSEaffiliate were sitting on Direct Edge boards,
the broker-dealer board members would
likely not want to discuss or reveal Direct
Edge’s potential innovations or other
competitive initiatives targeting NYSE.
34. NewCo would have the incentive and
ability to use its ownership, influence, and
access to information as to both NYSE and
Direct Edge to reduce competition between
the companies in markets where they are
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significant competitors or potential
competitors, resulting in an increase in prices
or a reduction in innovation and quality for
a significant number of trading, listings, and
data customers.
ENTRY
35. Supply responses from competitors or
entry of new potential competitors in the
relevant markets—displayed equities trading
services, ETP listing services, and real-time
proprietary equity data—would not prevent
the likely anticompetitive effects of the
proposed merger. The merged firm would
possess significant advantages that any new
or existing competitor would have to
overcome to successfully compete with the
merged firm.
36. Barriers to entry into each of these
markets are formidable. In the market for
displayed equities trading services, any
entrant would have to overcome hurdles of
reputation, scale and network effects to
successfully challenge the incumbents. In
ETP listing services, any entrant would have
to overcome numerous barriers to
successfully challenge NYSE, including
regulation, reputation, scale, and liquidity.
Direct Edge is in a strong position to enter
because it is already a registered stock
exchange with reputation, scale and
liquidity. Finally, competition in real-time
proprietary equity data is largely limited to
registered securities exchanges, and is closely
linked to and derived from an exchange’s
presence in trading and market data
collection. Only four exchange operators
today have large enough public trading
volume and existing facilities for collecting,
aggregating, and disseminating data to
meaningfully compete. They enjoy a
significant advantage over any possible
entrant.
VIOLATIONS ALLEGED
37. The United States incorporates the
allegations of paragraphs 1 through 36.
38. The proposed transaction between DB
and NYSE would substantially lessen
competition in interstate trade and commerce
in violation of Section 7 of the Clayton Act,
15 U.S.C. § 18.
39. Unless restrained, the transaction will
have the following anticompetitive effects,
among others:
a. Actual and potential competition
between NYSE and Direct Edge in displayed
equities trading services and real-time
proprietary equity data products in the
United States will be substantially lessened;
b. Potential competition between NYSE
and Direct Edge in ETP listing services in the
United States will be substantially lessened;
c. Prices for displayed equities trading
services, ETP listing services, and real-time
proprietary equity data products likely will
increase; and
d. Innovation in displayed equities trading
services, ETP listing services, and real-time
proprietary equity data products likely will
decrease.
RELIEF REQUESTED
40. The United States requests that:
a. the proposed merger of NYSE and DB be
adjudged to violate Section 7 of the Clayton
Act, 15 U.S.C. § 18;
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b. DB and NYSE be enjoined from carrying
out the proposed merger or carrying out any
other agreement, understanding, or plan by
which DB and NYSE would acquire, be
acquired by, or merge with each other;
c. The United States be awarded the costs
of this action; and
d. The United States receives such other
and further relief as the case requires and the
Court deems just and proper.
Dated: December 22, 2011
Respectfully submitted,
FOR PLAINTIFF UNITED STATES:
/s/Sharis Pozen
lllllllllllllllllllll
SHARIS POZEN (DC Bar #446732)
Acting Assistant Attorney General
/s/Leslie C. Overton
lllllllllllllllllllll
LESLIE C. OVERTON (DC Bar #454493)
Deputy Assistant Attorney General
/s/Patricia A. Brink
lllllllllllllllllllll
PATRICIA A. BRINK
Director of Civil Enforcement
/s/James J. Tierney
lllllllllllllllllllll
JAMES J. TIERNEY (DC Bar #434610)
Chief
Networks and Technology Enforcement
Section
/s/Scott A. Scheele
lllllllllllllllllllll
SCOTT A. SCHEELE (DC Bar #429061)
Assistant Chief
Networks and Technology Enforcement
Section
/s/Alexander P. Okuliar
lllllllllllllllllllll
ALEXANDER P. OKULIAR (DC Bar #481103)
Attorney
Networks and Technology Enforcement
Section
Antitrust Division
U.S. Department of Justice
450 Fifth Street NW., Suite 7100
Washington, DC 20530
Telephone: (202) 532–4564
Fax: (202) 616–8544
Email: alexander.okuliar@usdoj.gov
GEORGE S. BARANKO (DC Bar #288407)
MICHAEL D. BONANNO (DC Bar #998208)
TRAVIS R. CHAPMAN
HELEN CHRISTODOULOU
NINA B. HALE
RICHARD D. MOSIER
CHARLES V. REILLY
NATALIE A. ROSENFELT
Attorneys for the United States
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
¨
DEUTSCHE BORSE AG,
and
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APPA, unless the United States withdraws its
consent. Entry of the proposed Final
Judgment would terminate this action, except
that this Court would retain jurisdiction to
construe, modify, or enforce the proposed
Final Judgment and to punish violations
thereof.
COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America (‘‘United
States’’), pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act
(‘‘APPA’’ or ‘‘Tunney Act’’), 15 U.S.C.
§ 16(b)–(h), files this Competitive Impact
Statement relating to the proposed Final
Judgment submitted for entry in this civil
antitrust proceeding.
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NYSE EURONEXT,
Defendants.
Case: 1:11–cv–02280
Assigned To: Beryl A. Howard
Date: 12/22/2011
Description: Antitrust
II. Description of the Events Giving Rise to
the Alleged Violation
I. NATURE AND PURPOSE OF THIS
PROCEEDING
On February 15, 2011, NYSE Euronext
¨
(‘‘NYSE’’) and Deutsche Borse AG (‘‘DB’’),
two of the world’s leading owners and
operators of financial exchanges, agreed to
merge in a transaction valued at
approximately $9 billion. NYSE and DB are
seeking to combine their businesses and
create the largest exchange group in the
world under a new Dutch holding company
(‘‘NewCo’’). NewCo would have dual
headquarters in Frankfurt and New York.
Both NYSE and DB have substantial
operations in the United States, including
between them interests in five major
American stock exchanges. NYSE is one of
the two largest and most prestigious stock
exchange operators in the United States. It
owns the New York Stock Exchange LLC,
NYSE Arca, Inc., and NYSE Amex LLC. DB,
through a series of subsidiaries, is the largest
unitholder of Direct Edge Holdings LLC
(‘‘Direct Edge’’), which operates the EDGA
and EDGX electronic exchanges and is the
fourth largest stock exchange operator in the
United States by volume of shares traded.
Direct Edge is considered an innovator in the
exchange space and a competitive constraint
on NYSE. This transaction therefore poses a
significant risk that NewCo could use its
influence to dampen the competitive zeal of
Direct Edge. The United States brought this
lawsuit on December 22, 2011, seeking to
enjoin the proposed transaction. After a
thorough investigation, the United States
believes that the likely effect of the merger
would be to lessen substantially competition
and potential competition in displayed
equities trading services, listing services for
exchange-traded products, including
exchange-traded funds, and real-time
proprietary equity data products in the
United States in violation of Section 7 of the
Clayton Act, 15 U.S.C. § 18.
Simultaneous with the filing of the
complaint, the United States filed a proposed
Final Judgment designed to remedy the
Section 7 violation. Under the proposed
Final Judgment, which is explained more
fully below, Defendants are subject to
affirmative obligations to divest DB of its
holdings in Direct Edge and to immediately
eliminate DB’s ability, through its
subsidiaries, to influence the business and
governance of Direct Edge.
The United States and Defendants have
stipulated that the proposed Final Judgment
may be entered after compliance with the
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A. The Defendants and the Proposed
Transaction
DB is a German Aktiengesellschaft that
runs financial exchanges and ancillary
businesses in the United States and Europe.
DB generates revenue from several sources,
including fees for securities listings and
trading, fees for market data, and charges for
licensing of exchange-related technology. DB,
through its subsidiaries, is the largest holder
of equity in Direct Edge, a leading stock
exchange operator in the United States. DB
owns 50% of the equity and controls
Frankfurt-based Eurex Group, a leading
European derivatives exchange operator. DB
has announced an agreement to buy the
remaining equity in Eurex after DB completes
its merger with NYSE. Eurex owns
International Securities Exchange Holdings,
Inc. (‘‘ISE’’), a leading options exchange in
New York that also owns a 31.54% equity
interest in Direct Edge. In 2010, DB’s ISE and
Eurex subsidiaries earned substantial
revenues from sales in the United States.
NYSE is a publicly traded Delaware
corporation with its principal place of
business in New York, New York. NYSE
operates financial exchanges in the United
States and across Europe. In the United
States, NYSE operates the New York Stock
Exchange, which is the storied hybrid
exchange with both trading floor and
electronic components; NYSE Arca, which is
an all-electronic exchange; and NYSE Amex,
the former American Stock Exchange, which
targets mainly small- and medium-sized
companies. NYSE also generates revenue
from a wide range of exchange-related
businesses, including securities listings,
trading, data licensing, and technology
licensing. In 2010, NYSE earned more than
$3 billion in total revenues from within the
United States.
Direct Edge is a Delaware limited liability
company with its principal place of business
in Jersey City, New Jersey. Direct Edge,
through its subsidiary Direct Edge Holdings,
Inc., owns and operates two leading U.S.
stock exchanges, EDGA Exchange, Inc. and
EDGX Exchange, Inc. Direct Edge is majorityowned by ISE, Goldman Sachs Group Inc.,
Citadel Investment Group LLC, and Knight
Capital Group Inc. ISE owns 31.54% of Direct
Edge and holds certain key voting and
special veto rights, such as the right to veto
entry by Direct Edge into options trading. ISE
also has the right to appoint three members
to the Direct Edge board of managers and one
member to each of the corporate boards of
EDGA Exchange, Inc. and EDGX Exchange,
Inc. Goldman Sachs, Citadel, and Knight
each own 19.9% of Direct Edge. The
remaining 8.76% is owned by a group of five
brokers, including affiliates of JP Morgan
Chase & Co. (through LabMorgan Corp.),
Bank of America (through Merrill Lynch L.P.
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Holdings, Inc.), Nomura Securities
International, Inc., Deutsche Bank USA
(through DB US Financial Markets Holding
Corporation), and Sun Partners LLC. Direct
Edge’s exchanges compete head to head with
the NYSE exchanges. In 2010, Direct Edge
earned substantial revenues from within the
United States.
B. Relevant Markets
Antitrust law, including Section 7 of the
Clayton Act, protects consumers from
anticompetitive conduct, such as a firm’s
acquisition of the ability to raise prices or
reduce innovation. Market definition assists
antitrust analysis by focusing attention on
those markets where competitive effects are
likely to be felt. Well-defined markets
include both sellers and buyers, whose
conduct most strongly influences the nature
and magnitude of competitive effects.
Defining relevant markets in merger cases
frequently begins by identifying a collection
of products or set of services over which a
hypothetical profit maximizing monopolist
likely would impose at least small but
significant and non-transitory increase in
price. Defining markets in this way ensures
that antitrust analysis takes account of a
broad enough set of products to evaluate
whether a transaction is likely to lead to a
substantial lessening of competition.
Here, the investigation revealed three
relevant markets. The first is displayed
equities trading services, which includes
stock trading services offered by trading
venues that publicly disclose certain key
information about quotes and transactions.
Registered stock exchanges and electronic
communication networks offer such
displayed trading services. Displayed trading
services are accompanied by the continuous
pre-trade publication of the best-priced
quotations for buying and selling exchangetraded stocks in a national consolidated data
stream, the display of certain customer limit
orders (offers to buy and sell stock at
particular prices), and the provision of deep
and reliable liquidity for a broad array of
exchange-traded stocks. Displayed equities
trading services form the backbone of the
American national market system and
facilitate equity price discovery in the United
States. Displayed services are by their nature
very different from undisplayed equity
trading services, like dark pools, which offer
no pre-trade transparency and cater mainly to
institutional traders looking to buy or sell
large volumes of stock while minimizing
stock price movement.
A second relevant market consists of the
listing services for exchange-traded products
(‘‘ETPs’’). An ETP is typically an exchangedlisted equity security instrument other than
a standard corporate cash equity, the
performance of which is designed to track
another specific instrument, asset or group of
assets, such as a market index or a specific
basket of corporate stocks. ETPs typically are
sponsored by firms that determine the
composition of the ETP and then manage it
for investors. The most popular type of ETP
today is an exchange-traded fund (‘‘ETF’’),
which is a security traded like a stock that
is designed to replicate the returns of a stock,
index or similar asset. Exchanges compete to
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list, or offer for trading, ETPs in exchange for
listing fees and fees for ancillary services.
Exchanges compete for listings mainly on the
basis of their market structure, market maker
incentives, marketing, and other associated
services. ETP listings are a separate relevant
market because there are no reasonable
substitutes for listing an ETP if a sponsoring
firm wants a widely-traded product with
access to the liquidity offered by exchanges.
In addition to which, only registered
exchanges can offer these listing services.
A third relevant market encompasses realtime proprietary equity data products
comprised of non-core data. There are two
general types of equity data: ‘‘core’’ and
‘‘non-core.’’ Core data refers to the
transaction data the U.S. Securities and
Exchange Commission requires stock
exchanges to aggregate and distribute
publicly, including the current best bid and
offer for each stock on every exchange and
information on each stock trade, including
the last sale. Non-core data includes trading
volume and ‘‘depth of book’’ data that certain
exchanges collect and sell, i.e., the
underlying quotation data on any given
exchange. Non-core data helps traders
determine where liquidity for a given stock
exists during the day and the depth of that
liquidity. Access to market data is critical to
many market participants and followers, who
are willing to pay a premium for the best
price, quote, volume, and other data available
about exchange-listed equities being traded
on the exchanges. Each exchange (or other
trading venue) owns its non-core data and
can distribute it for a profit. Proprietary data
products can be made to replicate core data
and exchanges can package and provide both
core and non-core data together. NYSE and
Direct Edge, as registered exchange operators,
are among only four major competitors
supplying real-time proprietary equity data
products derived from trading activities.
Antitrust analysis must also consider the
geographic dimensions of competition. Here,
the relevant geographic markets exist within
the United States and are not affected by
competition outside the United States. The
competitive dynamics for each of the three
markets is distinctly different outside the
United States.
C. Competitive Effects
NewCo would have the incentive and
ability to significantly influence the
competitive conduct of Direct Edge through
ISE’s voting interest, governance rights, or
other shareholder rights under corporate law,
like the right to file shareholder derivative
suits. NewCo would likely use its influence
to induce Direct Edge to compete less
aggressively, to coordinate Direct Edge’s
conduct with the NYSE exchanges, or to
disrupt day-to-day business activities at
Direct Edge.
NewCo’s presence on the Direct Edge
boards would chill discussion of head-tohead competition with the NYSE stock
exchanges. Direct Edge was formed, in part,
by a group of broker-dealers intending to
constrain the two large stock exchange
operators in the United States, NYSE and
NASDAQ. The broker-dealer owners of Direct
Edge, and others, can and do turn their trades
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to Direct Edge when NYSE or NASDAQ fails
to compete aggressively.
Finally, NewCo also would gain access to
non-public, competitively sensitive
information about Direct Edge. This access
would likely enhance NewCo’s ability to
coordinate the behavior of the NYSE and
Direct Edge exchanges, or make the
accommodating responses of NYSE faster and
more targeted. And if Direct Edge gained
access to competitively sensitive NYSE
information, it would further elevate the risk
of coordinated effects.
Finally, even if it were unable to influence
Direct Edge, NewCo would likely have, as a
result of the partial ownership interest in
Direct Edge, a reduced incentive to direct the
NYSE exchanges to compete as aggressively
against the Direct Edge exchanges. Since
NewCo would share Direct Edge’s losses
inflicted by the NYSE exchanges, this may
lead NewCo to behave in ways that would
reduce those losses.
Supply responses from competitors or
entry of potential competitors in any of the
relevant markets would not prevent the likely
anticompetitive effects of the proposed
merger. The merged firm would possess
significant advantages that any new or
existing competitor would have to overcome
to successfully compete with the merged
firm. Entrants face significant entry barriers
including hurdles of reputation, scale and
network effects to successfully challenge the
incumbents in the markets for displayed
equities trading services, listing services for
ETPs, and real-time proprietary equity data
products.
III. EXPLANATION OF THE PROPOSED
FINAL JUDGMENT
The proposed Final Judgment is designed
to preserve competition in displayed equities
trading services, listing services for
exchange-traded products, and real-time
proprietary equity data products by
restricting NewCo’s ability to influence
Direct Edge and by eliminating NewCo’s
equity stake in Direct Edge. The proposed
Final Judgment has two principal
requirements: (1) the complete divestiture of
Defendants’ equity stake in Direct Edge, and
(2) the immediate suspension of Defendants’
ability to participate in the governance or
business of Direct Edge. The proposed Final
Judgment also has several sections designed
to ensure its effectiveness and adequate
compliance. Each of these sections is
discussed below.
Before closing the DB–NYSE transaction,
the proposed Final Judgment requires the
Defendants provide a written plan explaining
the steps they will take to render DB’s
interest in Direct Edge passive until such
time as the divestiture occurs. Defendants
must also certify that the plan complies with
all applicable laws and that all voting,
director, or other rights DB held have been
eliminated, except as otherwise been
provided for in the order. Within two
calendar days of closing the transaction, any
DB officer, director, manager, employee,
affiliate, or agent must resign from the boards
of all Direct Edge entities.
Further, from the date of the filing of the
Final Judgment, the Defendants are
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prohibited from suggesting or nominating
any candidate for election to the board of any
Direct Edge entities or having any officer,
director, manager, employee, or agent serve
as an officer, director, manager, employee
with or for any Direct Edge entities. The
Defendants are also prohibited from any
participation in a nonpublic meeting of any
Direct Edge entities or in otherwise receiving
any nonpublic information from any Direct
Edge employee or board member, except to
the extent necessary to fulfill the provisions
of the proposed Final Judgment or to fulfill
financial reporting obligations. The
Defendants are further prohibited from voting
except to the extent necessary to fulfill the
provisions of the proposed Final Judgment,
in which case they must vote their shares in
proportion to how the other owners vote.
The Defendants are also prohibited from
using their ownership interest in Direct Edge
to exert any influence over it or to prevent
it from making any necessary changes to its
corporate governance documents to comply
with the Final Judgment. The proposed Final
Judgment provides that the Defendants must
continue to provide regulatory and backup
facility services to Direct Edge pursuant to
existing contracts, and requires that the
Defendants implement a firewall to prevent
any inappropriate use of information gained
by the Defendants about Direct Edge’s
business as a result of those contracts. The
firewall requires that only the employees of
the Defendants specifically necessary to
provide the agreed upon services may receive
any information from Direct Edge under
those agreements, and those employees are
prohibited from using any such information
for any purpose other than providing the
agreed upon services. This provision will
allow Direct Edge to continue to receive its
contracted services while reducing the
opportunities for the Defendants to misuse
any information provided by Direct Edge
under the agreement. The anticipated effect
of all these provisions is to maintain Direct
Edge as an independent and viable
competitor.
The proposed Final Judgment provides a
two-year period, which the United States in
its sole discretion may extend up to three
additional years, for Defendants to divest all
equity ownership in Direct Edge. The assets
may be divested by open market sale, public
offering, private sale, private placement, or
repurchase by Direct Edge. If the assets are
divested by private sale or private placement
the United States must, in its sole discretion,
approve the buyers of the assets. This
provision ensures that the divestiture itself
does not create any competitive issues. To
maintain the complete independence of
Direct Edge after the divestiture, the
proposed Final Judgment prohibits the
Defendants from financing any part of any
purchase made pursuant to the Final
Judgment.
In the event that Defendants are unable to
take the steps required by the proposed Final
Judgment to render their Direct Edge interest
passive or create a plan demonstrating their
compliance with the proposed Final
Judgment, or do not accomplish the
divestiture as prescribed in the proposed
Final Judgment, Section VII of the Final
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Judgment provides that the Court will
appoint a trustee selected by the United
States to effect the divestiture upon the
request of the United States. If a trustee is
appointed, the proposed Final Judgment
provides that Defendants will pay all costs
and expenses of the trustee. After his or her
appointment becomes effective, the trustee
will file monthly reports with the Court and
the United States setting forth his or her
efforts to accomplish the divestiture. At the
end of six months, if the divestiture has not
been accomplished, the trustee and the
United States will make recommendations to
the Court, which shall enter such orders as
appropriate in order to carry out the purpose
of the trust, including extending the trust or
the term of the trustee’s appointment.
The proposed Final Judgment lasts for ten
years, and prohibits the Defendants from
acquiring any additional equity interest in
Direct Edge during that time. It also provides
procedures for the United States to access the
Defendants’ records and personnel in order
to secure compliance with the terms of the
Final Judgment.
The proposed Final Judgment will
eliminate the anticompetitive effects of the
acquisition by maintaining Direct Edge as an
independent and vibrant competitive
constraint in displayed equities trading
services, listing services for exchange-traded
products, and real-time proprietary equity
data products in the United States.
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IV. REMEDIES APPLICABLE TO
POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C.
§ 15, provides that any person who has been
injured as a result of conduct prohibited by
the antitrust laws may bring suit in federal
court to recover three times the damages the
person has suffered, as well as costs and
reasonable attorneys’ fees. Entry of the
proposed Final Judgment will neither impair
nor assist the bringing of any private antitrust
damage action. Under the provisions of
Section 5(a) of the Clayton Act, 15 U.S.C.
§ 16(a), the proposed Final Judgment has no
prima facie effect in any subsequent private
lawsuit that may be brought against
Defendants.
V. PROCEDURES APPLICABLE FOR
APPROVAL OR MODIFICATION OF THE
PROPOSED FINAL JUDGMENT
The United States and Defendants have
stipulated the proposed Final Judgment may
be entered by the Court after compliance
with the provisions of the APPA, provided
that the United States has not withdrawn its
consent. The APPA conditions entry upon
the Court’s determination that the proposed
Final Judgment is in the public interest.
The APPA provides a period of at least 60
days preceding the effective date of the
proposed Final Judgment within which any
person may submit to the United States
written comments regarding the proposed
Final Judgment. Any person who wishes to
comment should do so within 60 days of the
date of publication of this Competitive
Impact Statement in the Federal Register, or
the last date of publication in a newspaper
of the summary of this Competitive Impact
Statement, whichever is later. All comments
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received during this period will be
considered by the United States, which
remains free to withdraw its consent to the
proposed Final Judgment at any time prior to
the Court’s entry of judgment. The comments
and the response of the United States will be
filed with the Court and published in the
Federal Register.
Written comments should be submitted to:
James J. Tierney, Chief, Networks &
Technology Enforcement Section, Antitrust
Division, United States Department of
Justice, 450 Fifth Street, NW., Suite 7100,
Washington, DC 20530.
The proposed Final Judgment provides that
the Court retains jurisdiction over this action,
and the parties may apply to the Court for
any order necessary or appropriate for the
modification, interpretation, or enforcement
of the Final Judgment.
VI. ALTERNATIVES TO THE PROPOSED
FINAL JUDGMENT
The United States considered, as an
alternative to the proposed Final Judgment,
seeking preliminary and permanent
injunctions against Defendants’ transaction
and proceeding to a full trial on the merits.
The United States is satisfied, however, that
the relief in the proposed Final Judgment
will preserve competition in the markets for
displayed equities trading services, listing
services for exchange-traded products, and
real-time proprietary equity data products.
Thus, the proposed Final Judgment would
protect competition as effectively as would
any remedy available through litigation, but
avoids the time, expense, and uncertainty of
a full trial on the merits.
VII. STANDARD OF REVIEW UNDER THE
APPA FOR PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by the APPA,
requires that proposed consent judgments in
antitrust cases brought by the United States
be subject to a 60-day comment period, after
which the Court shall determine whether
entry of the proposed Final Judgment ‘‘is in
the public interest.’’ 15 U.S.C. § 16(e)(1). In
making that determination, the Court, in
accordance with the statute as amended in
2004, is required to consider:
(A) the competitive impact of such
judgment, including termination of alleged
violations, provisions for enforcement and
modification, duration of relief sought,
anticipated effects of alternative remedies
actually considered, whether its terms are
ambiguous, and any other competitive
considerations bearing upon the adequacy of
such judgment that the court deems
necessary to a determination of whether the
consent judgment is in the public interest;
and
(B) the impact of entry of such judgment
upon competition in the relevant market or
markets, upon the public generally and
individuals alleging specific injury from the
violations set forth in the complaint
including consideration of the public benefit,
if any, to be derived from a determination of
the issues at trial.
15 U.S.C. § 16(e)(1)(A) & (B). In considering
these statutory factors, the Court’s inquiry is
necessarily a limited one as the United States
is entitled to ‘‘broad discretion to settle with
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the Defendant within the reaches of the
public interest.’’ United States v. Microsoft
Corp., 56 F.3d 1448, 1461 (DC Cir. 1995); see
generally United States v. SBC Commc’ns,
Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public interest standard under the
Tunney Act); United States v. InBev N.V./
S.A., 2009–2 Trade Cas. (CCH) ¶ 76,736, 2009
U.S. Dist. LEXIS 84787, No. 08–1965 (JR), at
*3 (D.D.C. Aug. 11, 2009) (noting that the
court’s review of a consent judgment is
limited and only inquires ‘‘into whether the
government’s determination that the
proposed remedies will cure the antitrust
violations alleged in the complaint was
reasonable, and whether the mechanism to
enforce the final judgment are clear and
manageable’’).1
Under the APPA a court considers, among
other things, the relationship between the
remedy secured and the specific allegations
set forth in the United States’s complaint,
whether the decree is sufficiently clear,
whether enforcement mechanisms are
sufficient, and whether the decree may
positively harm third parties. See Microsoft,
56 F.3d at 1458–62. With respect to the
adequacy of the relief secured by the decree,
a court may not ‘‘engage in an unrestricted
evaluation of what relief would best serve the
public.’’ United States v. BNS, Inc., 858 F.2d
456, 462 (9th Cir. 1988) (citing United States
v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir.
1981)); see also Microsoft, 56 F.3d at 1460–
62; United States v. Alcoa, Inc., 152 F. Supp.
2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S.
Dist. LEXIS 84787, at *3. Courts have held
that:
[t]he balancing of competing social and
political interests affected by a proposed
antitrust consent decree must be left, in the
first instance, to the discretion of the
Attorney General. The court’s role in
protecting the public interest is one of
insuring that the government has not
breached its duty to the public in consenting
to the decree. The court is required to
determine not whether a particular decree is
the one that will best serve society, but
whether the settlement is ‘within the reaches
of the public interest.’ More elaborate
requirements might undermine the
effectiveness of antitrust enforcement by
consent decree.
Bechtel, 648 F.2d at 666 (emphasis added)
(citations omitted).2 In determining whether
1 The 2004 amendments substituted ‘‘shall’’ for
‘‘may’’ in directing relevant factors for a court to
consider and amended the list of factors to focus on
competitive considerations and to address
potentially ambiguous judgment terms. Compare 15
U.S.C. § 16(e) (2004), with 15 U.S.C. § 16(e)(1)
(2006); see also SBC Commc’ns, 489 F. Supp. 2d at
11 (concluding that the 2004 amendments ‘‘effected
minimal changes’’ to Tunney Act review).
2 Cf. BNS, 858 F.2d at 464 (holding that the
court’s ‘‘ultimate authority under the [APPA] is
limited to approving or disapproving the consent
decree’’); United States v. Gillette Co., 406 F. Supp.
713, 716 (D. Mass. 1975) (noting that, in this way,
the court is constrained to ‘‘look at the overall
picture not hypercritically, nor with a microscope,
but with an artist’s reducing glass’’). See generally
Microsoft, 56 F.3d at 1461 (discussing whether ‘‘the
remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall
outside of the ‘reaches of the public interest.’ ’’).
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a proposed settlement is in the public
interest, a district court ‘‘must accord
deference to the government’s predictions
about the efficacy of its remedies, and may
not require that the remedies perfectly match
the alleged violations.’’ SBC Commc’ns, 489
F. Supp. 2d at 17; see also Microsoft, 56 F.3d
at 1461 (noting the need for courts to be
‘‘deferential to the government’s predictions
as to the effect of the proposed remedies’’);
United States v. Archer-Daniels-Midland Co.,
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting
that the court should grant due respect to the
United States’s prediction as to the effect of
proposed remedies, its perception of the
market structure, and its views of the nature
of the case).
In addition, ‘‘a proposed decree must be
approved even if it falls short of the remedy
the court would impose on its own, as long
as it falls within the range of acceptability or
is ‘within the reaches of public interest.’ ’’
United States v. Am. Tel. & Tel. Co., 552 F.
Supp. 131, 151 (D.D.C. 1982) (citations
omitted) (quoting United States v. Gillette
Co., 406 F. Supp. 713, 716 (D. Mass. 1975)),
aff’d sub nom. Maryland v. United States,
460 U.S. 1001 (1983); see also United States
v. Alcan Aluminum Ltd., 605 F. Supp. 619,
622 (W.D. Ky. 1985) (approving the consent
decree even though the court would have
imposed a greater remedy). To meet this
standard, the United States ‘‘need only
provide a factual basis for concluding that
the settlements are reasonably adequate
remedies for the alleged harms.’’ SBC
Commc’ns, 489 F. Supp. 2d at 17.
Moreover, the Court’s role under the APPA
is limited to reviewing the remedy in
relationship to the violations that the United
States has alleged in its complaint, and does
not authorize the court to ‘‘construct [its]
own hypothetical case and then evaluate the
decree against that case.’’ Microsoft, 56 F.3d
at 1459; see also InBev, 2009 U.S. Dist. LEXIS
84787, at *20 (‘‘[T]he ‘public interest’ is not
to be measured by comparing the violations
alleged in the complaint against those the
court believes could have, or even should
have, been alleged.’’). Because the ‘‘court’s
authority to review the decree depends
entirely on the government’s exercising its
prosecutorial discretion by bringing a case in
the first place,’’ it follows that ‘‘the court is
only authorized to review the decree itself,’’
and not to ‘‘effectively redraft the complaint’’
to inquire into other matters that the United
States did not pursue. Microsoft, 56 F.3d. at
1459–60. Courts ‘‘cannot look beyond the
complaint in making the public interest
determination unless the complaint is drafted
so narrowly as to make a mockery of judicial
power.’’ SBC Commc’ns, 489 F. Supp. 2d at
15.
In its 2004 amendments, Congress made
clear its intent to preserve the practical
benefits of utilizing consent decrees in
antitrust enforcement, adding the
unambiguous instruction that ‘‘[n]othing in
this section shall be construed to require the
court to conduct an evidentiary hearing or to
require the court to permit anyone to
intervene.’’ 15 U.S.C. § 16(e)(2). This
language effectuates what Congress intended
when it enacted the Tunney Act in 1974, as
Senator Tunney explained: ‘‘[t]he court is
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nowhere compelled to go to trial or to engage
in extended proceedings which might have
the effect of vitiating the benefits of prompt
and less costly settlement through the
consent decree process.’’ 119 Cong. Rec.
24,598 (1973) (statement of Senator Tunney).
Rather, the procedure for the public interest
determination is left to the discretion of the
Court, with the recognition that the court’s
‘‘scope of review remains sharply proscribed
by precedent and the nature of Tunney Act
proceedings.’’ SBC Commc’ns, 489 F. Supp.
2d at 11.3
VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or
documents within the meaning of the APPA
that the United States considered in
formulating the proposed Final Judgment.
Dated: December 22, 2011
Respectfully submitted,
FOR PLAINTIFF
UNITED STATES OF AMERICA
/s/Alexander P. Okuliar
lllllllllllllllllllll
Alexander P. Okuliar (DC Bar No. 481103)
Attorney
U.S. Department of Justice
Antitrust Division
450 Fifth Street NW., Suite 7100
Washington, DC 20530
Tel: (202) 532–4564
Fax: (202) 307–9952
Email: alexander.okuliar@usdoj.gov.
UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
¨
DEUTSCHE BORSE AG,
and
NYSE EURONEXT,
Defendants.
Case:
Assigned To:
Date:
Description: Antitrust
[Proposed] Final Judgment
WHEREAS, Plaintiff United States of
America (‘‘United States’’) filed its Complaint
on December 22, 2011, the United States and
¨
Defendants Deutsche Borse AG and NYSE
Euronext, by their respective attorneys, have
consented to entry of this Final Judgment
without trial or adjudication of any issue of
3 See United States v. Enova Corp., 107 F. Supp.
2d 10, 17 (D.D.C. 2000) (noting that the ‘‘Tunney
Act expressly allows the court to make its public
interest determination on the basis of the
competitive impact statement and response to
comments alone’’); United States v. Mid-Am.
Dairymen, Inc., 1977–1 Trade Cas. (CCH) ¶ 61,508,
at 71,980 (W.D. Mo. 1977) (‘‘Absent a showing of
corrupt failure of the government to discharge its
duty, the Court, in making its public interest
finding, should * * * carefully consider the
explanations of the government in the competitive
impact statement and its responses to comments in
order to determine whether those explanations are
reasonable under the circumstances.’’); S. Rep. No.
93–298, 93d Cong., 1st Sess., at 6 (1973) (‘‘Where
the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments,
that is the approach that should be utilized.’’).
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fact or law, and without this Final Judgment
constituting any evidence against or
admission by any party regarding any issue
of fact or law;
AND WHEREAS, Defendants agree to be
bound by the provisions of the Final
Judgment pending its approval by the Court;
AND WHEREAS, the United States
requires that Defendants agree to undertake
certain actions and refrain from certain
conduct for the purpose of remedying the
loss of competition alleged in the Complaint;
AND WHEREAS, Defendants have
represented to the United States that the
actions and conduct restrictions can and will
be undertaken and that Defendants will later
raise no claim of hardship or difficulty as
grounds for asking the Court to modify any
of the provisions contained below;
NOW THEREFORE, before any testimony
is taken, without trial or adjudication of any
issue of fact or law, and upon consent of
Defendants, it is ORDERED, ADJUDGED AND
DECREED:
I. JURISDICTION
This Court has jurisdiction over the subject
matter of, and each of the parties to, this
action. The Complaint states a claim upon
which relief may be granted against
defendants under Section 7 of the Clayton
Act, as amended, 15 U.S.C. § 18.
II. DEFINITIONS
As used in this Final Judgment:
¨
A. ‘‘Deutsche Borse’’ means defendant
¨
Deutsche Borse AG, an Aktiengesellschaft
organized under the laws of the Federal
Republic of Germany with its principal place
of business in Eschborn, Germany, its
successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships, and
joint ventures, and their directors, officers,
managers, agents, and employees. This
definition expressly includes International
Securities Exchange Holdings as a subsidiary
¨
of Deutsche Borse.
B. ‘‘NYSE’’ means defendant NYSE
Euronext, a Delaware corporation with its
principal place of business in New York,
New York, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures, and their
directors, officers, managers, agents, and
employees.
¨
C. The ‘‘Deutsche Borse/NYSE Merger’’
means the transaction to be undertaken
pursuant to the Business Combination
Agreement, dated as of February 15, 2011, by
¨
and among Deutsche Borse, NYSE, Alpha
Beta Netherlands Holding N.V., and Pomme
Merger Corporation, under which Deutsche
¨
Borse and NYSE will combine their
businesses under a new holding company,
Alpha Beta Netherlands Holding N.V.
D. ‘‘Direct Edge’’ means Direct Edge
Holdings LLC, a Delaware limited liability
company with its principal place of business
in Jersey City, New Jersey, its successors and
assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, and joint
ventures, and their directors, officers,
managers, agents, and employees. Direct
Edge includes, but is not limited to, its
subsidiaries Direct Edge, Inc., EDGA
Exchange, Inc. and EDGX Exchange, Inc.
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E. ‘‘Direct Edge Equity’’ means any equity
interest, whether voting or nonvoting, of
Direct Edge that defendants own or control,
directly or indirectly, including, but not
limited to, the units of interest in the
ownership and profits and losses of Direct
Edge and such rights to receive distributions
from Direct Edge (defined as ‘‘Units’’ in the
Operating Agreement) owned by Deutsche
¨
Borse through International Securities
Exchange Holdings as of the date of the filing
of this Final Judgment.
F. ‘‘Divestiture Assets’’ means the Direct
Edge Equity required to be divested under
this Final Judgment.
G. ‘‘International Securities Exchange
Holdings’’ means International Securities
Exchange Holdings, Inc., a Delaware
corporation with its principal place of
business in New York, New York, its
successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships, and
joint ventures, and their directors, officers,
managers, agents, and employees.
H. ‘‘Mutual Services Agreement’’ means
the Mutual Services Agreement by and
between ISE and Direct Edge, dated as of
November 4, 2010, including any
modifications, amendments, restatements, or
other versions of the Mutual Services
Agreement existing at the time of this Final
Judgment or in the future.
I. ‘‘Operating Agreement’’ means the Fifth
Amended and Restated Limited Liability
Company Operating Agreement of Direct
Edge Holdings LLC, dated as of June 12,
2010, including any modifications,
amendments, restatements, or other versions
of the Operating Agreement existing at the
time of this Final Judgment or in the future.
J. ‘‘Own’’ means to have or retain any right,
title, or interest in any asset, including any
ability to control or direct actions with
respect to such asset, either directly or
indirectly, individually or through any other
party.
K. ‘‘Regulatory Services Agreements’’
means the Regulatory Services Agreement by
and between ISE and EDGX Exchange, Inc.,
dated as of January 21, 2010, and the
Regulatory Services Agreement by and
between ISE and EDGA Exchange, Inc., dated
as of January 21, 2010, including any
modifications, amendments, restatements, or
other versions of the Regulatory Services
Agreements existing at the time of this Final
Judgment or in the future.
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III. APPLICABILITY
This Final Judgment applies to Deutsche
¨
Borse and NYSE and all other persons in
active concert or participation with any of
them who receive actual notice of this Final
Judgment by personal service or otherwise.
IV. CERTIFICATION OF PASSIVE
INTEREST
A. Defendants are hereby ordered and
directed to take all necessary steps to render
the Direct Edge Equity passive and to divest
the Direct Edge Equity, consistent with the
time limits, rights and restrictions specified
elsewhere herein and in conformance with
all applicable statutes, rules, regulations, and
policies of relevant federal authorities.
B. Defendants are hereby ordered and
directed, before closing of the Deutsche
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¨
Borse/NYSE Merger, to provide a written
plan outlining the steps defendants will take
to comply with the terms of this Final
Judgment, and written certification and
supporting documentation to the United
States demonstrating that such plan complies
with this Final Judgment and that all voting,
¨
director, or other rights Deutsche Borse
enjoyed under the Operating Agreement, the
Certificate of Incorporation and By-Laws of
EDGA Exchange, Inc., the Certificate of
Incorporation and By-Laws of EDGX
Exchange, Inc., or any other organizational
documents of Direct Edge, have been
eliminated (except any such rights
specifically reserved or provided for herein).
V. DIVESTITURE OF DIRECT EDGE
EQUITY
A. Defendants are ordered and directed, in
a manner consistent with this Final
Judgment, on or before two (2) years from the
¨
date of closing of the Deutsche Borse/NYSE
Merger, to divest the Direct Edge Equity
sufficient to cause defendants to own no
outstanding equity in Direct Edge. The
United States, in its sole discretion, may
extend the two (2) year time limit in this
Section V.A for up to three (3) additional
extensions of one (1) year each upon written
application of the Defendants.
B. Defendants are enjoined and restrained
from the date of entry by the Court of the
Stipulation and Order until the completion of
the divestiture required by Section V.A from
acquiring, directly or indirectly, any
additional Direct Edge equity (including
Units, options or any other forms of equity
rights or warrants) or ownership interest or
rights, except pursuant to a transaction that
does not increase defendants’ proportion of
the outstanding equity of Direct Edge, such
as a stock split, stock dividend, rights
offering, recapitalization, reclassification,
merger, consolidation, or corporate
reorganization. Any additional Direct Edge
equity acquired by defendants as specifically
permitted in this Section V.B shall be part of
the Direct Edge Equity and be subject (1) to
the divestiture obligations of Section V.A of
this Final Judgment; and (2) to the rights and
restrictions set forth herein.
C. The divestiture required by Section V.A
may be made by open market sale, public
offering, private sale, private placement,
repurchase by Direct Edge, or a combination
thereof, subject to the restrictions outlined
herein. Such divestiture shall not be made by
private sale or private placement to any
person unless the United States, in its sole
discretion, shall otherwise agree in writing
pursuant to the procedures set out in Section
VIII.
D. Defendants shall notify the United
States no less than sixty (60) calendar days
prior to the expiration of the time period for
divestiture required by Section V.A of this
Final Judgment as to the arrangements made
to complete the required divestiture in a
timely fashion.
E. Upon completion of the divestiture
required by Section V.A, defendants may not
acquire, directly or indirectly, any additional
equity (in any form) or ownership interest or
rights in Direct Edge.
F. Defendants may not acquire debt
obligations of Direct Edge, enter into any loan
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agreements with Direct Edge, or provide any
financing to Direct Edge.
G. Defendants shall not take any action that
will impede in any way the divestiture of the
Divestiture Assets.
VI. DIRECT EDGE GOVERNANCE
A. Within two (2) business days after the
¨
closing of the Deutsche Borse/NYSE Merger,
¨
any Deutsche Borse officer, director,
manager, employee, affiliate, or agent shall
resign from the Board of Managers or Board
of Directors of Direct Edge, Direct Edge, Inc.,
EDGA Exchange, Inc., and EDGX Exchange,
Inc., and from any executive committees,
advisory committees, or other comparable
positions.
B. Except to the extent permitted elsewhere
herein, from the date of the filing of this
Final Judgment and until its expiration,
defendants are enjoined and restrained,
directly or indirectly, from:
1. Suggesting, designating or nominating,
individually or as part of a group, any
candidate for election to the Board of
Managers or Board of Directors of Direct
Edge, Direct Edge, Inc., EDGA Exchange, Inc.
or EDGX Exchange, Inc., or having any
officer, director, manager, employee, or agent
serve as an officer, director, manager,
employee, or in a comparable position with
or for Direct Edge, Direct Edge, Inc., EDGA
Exchange, Inc. or EDGX Exchange, Inc.;
2. participating in, being present at, or
receiving any notes, minutes, or agendas of,
information from, or any documents
distributed in connection with, any
nonpublic meeting of the Board of Managers
or Board of Directors of Direct Edge, Direct
Edge, Inc., EDGA Exchange, Inc., EDGX
Exchange, Inc., or any committee thereof, any
other governing body of Direct Edge, or any
nonpublic meeting of members, shareholders,
Unitholders, or any other type of equity
owners of Direct Edge in which the business,
operations, or ownership of Direct Edge are
discussed, except to the extent it is necessary
to disclose such information to the
defendants in order to implement the
provisions of this Final Judgment (the term
‘‘meeting’’ here includes any action taken by
consent in lieu of a meeting);
3. voting, causing to be voted or permitting
to be voted any Direct Edge shares, Units, or
other equity that defendants own in any
Direct Edge entity, except to the extent that
¨
Direct Edge determines that Deutsche Borse
must vote its Units in Direct Edge, in which
¨
case Deutsche Borse shall vote in an amount
and manner proportional to the vote of all
other votes cast by other Direct Edge owners;
4. using or attempting to use any
ownership interest in Direct Edge to exert
any influence over Direct Edge in the
conduct of Direct Edge’s business;
5. using or attempting to use any rights or
duties under any agreement or relationship
¨
between Deutsche Borse and Direct Edge,
including but not limited to the Regulatory
Services Agreements and Mutual Services
Agreement, to influence Direct Edge in the
conduct of Direct Edge’s business;
6. communicating to or receiving from any
officer, director, manager, member, owner,
employee, or agent of Direct Edge any
nonpublic information regarding any aspect
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of defendants’ or Direct Edge’s business,
including any plans or proposals with
respect thereto; provided, however, that
defendants shall be allowed to receive from
Direct Edge quarterly financial information,
including profit and loss information, of
Direct Edge, to the extent necessary for
defendants to comply with their financial
reporting obligations; and
7. preventing, or attempting to prevent,
Direct Edge from making any changes in any
corporate governance documents necessary
to implement the prohibitions contained in
Sections IV.A, IV.B, or in this Section VI. B.
C. Except as set out elsewhere herein,
nothing in this Final Judgment is intended to
¨
prevent Deutsche Borse from continuing to
provide services for Direct Edge under the
Regulatory Services Agreements and Mutual
Services Agreement or from agreeing with
Direct Edge to amend or terminate such
agreements.
a. During the period of any Regulatory
Services Agreement and Mutual Services
Agreement between defendants and Direct
Edge, defendants shall construct and
maintain in place a firewall that prevents any
information obtained pursuant to those
agreements from flowing to any employee of
the defendants except those necessary to
provide the services under the Regulatory
Services Agreements and Mutual Services
Agreement. Defendants shall not use
information obtained pursuant to the
Regulatory Services Agreements and Mutual
Services Agreement for any purpose other
than in connection with providing the agreed
upon services under the Regulatory Services
Agreements and Mutual Services Agreement.
To implement this provision, defendants are
required to identify those employees
necessary to provide the services under the
Regulatory Services Agreements and Mutual
Services Agreement. All identified
employees shall be prohibited from passing
on information obtained pursuant to the
Regulatory Services Agreements and Mutual
Services Agreement to non-identified
employees, and all non-identified employees
shall be prohibited from receiving any
information obtained pursuant to the
Regulatory Services Agreements and Mutual
Services Agreement. For the avoidance of
doubt, identified employees of the
defendants may become employees of a selfregulatory organization (as that term is
defined in Section 3(a)(26) of the Securities
Exchange Act of 1934) other than a selfregulatory organization owned or operated by
the defendants and such employees may
continue to receive information obtained
pursuant to the Regulatory Services
Agreements and Mutual Services Agreement
as necessary to provide the services under
the Regulatory Services Agreements and
Mutual Services Agreement.
b. Defendants shall, within ten (10)
business days of the entry of the Stipulation
and Order, submit to the Department of
Justice a document setting forth in detail its
procedure to effect compliance with
provision VI.C.a. The Department of Justice
shall have the sole discretion to approve
defendant’s compliance plan and shall notify
defendants within three (3) business days
whether it approves of or rejects the
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compliance plan. In the event that
defendant’s compliance plan is rejected, the
reasons for the rejection shall be provided to
defendants and defendants shall be given the
opportunity to submit, within two (2)
business days of receiving the notice of
rejection, a revised compliance plan. If the
parties cannot agree on a compliance plan
within an additional three (3) business days,
a plan will be devised by the Department of
Justice and implemented by defendants.
VII. APPOINTMENT OF TRUSTEE
A. In the event that the United States, in
its sole discretion, determines (a) that, upon
receipt of the notice called for in Section V.D,
defendants have not made arrangements that
will result in completion of any divestiture
within the time limits specified in Section
V.A, (b) that defendants have not completed
the divestiture required in Section V.A
within the specified time limits, or (c) the
defendants have not complied with the
requirements of Section IV herein, the Court
shall, upon application of the United States,
appoint a trustee selected by the United
States to effect such divestiture. Plaintiff may
request a trustee before any of the time
periods for divestiture specified in Section
V.A expire. After the appointment of a
trustee becomes effective, only that trustee
shall have the right to sell the Divestiture
Assets. The trustee shall have the power and
authority to accomplish the divestiture to an
acquirer(s) acceptable to the United States at
such price and on such terms as are then
obtainable upon the best reasonable effort by
the trustee, and shall have such other powers
as the Court shall deem appropriate. The
trustee may hire at the cost and expense of
defendants any investment bankers,
attorneys, or other agents, who shall be solely
accountable to the trustee, reasonably
necessary in the trustee’s judgment to assist
in the divestiture.
B. Defendants shall not object to a sale by
the trustee on any ground other than the
trustee’s malfeasance. Any such objections by
defendants must be conveyed in writing to
the United States and the trustee within ten
(10) calendar days after the trustee has
provided the notice required under Sections
VII.E and F.
C. The trustee shall serve at the cost and
expense of defendants, on such terms and
conditions as the United States approves, and
shall account for all monies derived from the
sale of the assets sold by the trustee and all
costs and expenses so incurred. After
approval by the Court of the trustee’s
accounting, including fees for its services and
those of any professionals and agents
retained by the trustee, all remaining money
shall be paid to defendants and the trust shall
then be terminated. The compensation of the
trustee and any professionals and agents
retained by the trustee shall be reasonable in
light of the value of the Divestiture Assets
and based on a fee arrangement providing the
trustee with incentives based on the price
and terms of the divestiture and the speed
with which they are accomplished, but
timeliness is paramount.
D. Defendants shall use their best efforts to
assist the trustee in accomplishing the
required divestiture. The trustee and any
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consultants, accountants, attorneys, and
other persons retained by the trustee shall
have full and complete access to all
information held by defendants relating to
the Divestiture Assets. Defendants shall take
no action to interfere with or to impede the
trustee’s accomplishment of the divestiture.
E. After its appointment, the trustee shall
file monthly reports with the United States
and the Court setting forth the trustee’s
efforts to accomplish the divestiture ordered
under this Final Judgment. To the extent that
such reports contain information that the
trustee deems confidential, such reports shall
not be filed in the public docket of the Court.
Such reports shall include the name, address,
and telephone number of each person who,
during the preceding month, made an offer
to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was
contacted or made an inquiry about
acquiring, any interest in the Divestiture
Assets by means of private sale or placement,
and shall describe in detail each contact with
any such person. The trustee shall maintain
full records of all efforts made to divest the
Divestiture Assets.
F. If the trustee has not accomplished such
divestiture within six (6) months after his or
her appointment, the trustee shall promptly
file with the Court a report setting forth: (1)
the trustee’s efforts to accomplish the
required divestiture, (2) the reasons, in the
trustee’s judgment, why the required
divestiture has not been accomplished, and
(3) the trustee’s recommendations. To the
extent such reports contain information that
the trustee deems confidential, such reports
shall not be filed in the public docket of the
Court. The trustee at the same time shall
furnish such reports to the United States,
which shall have the right to make additional
recommendations consistent with the
purpose of the trust. The Court thereafter
shall enter such orders as it deems
appropriate to carry out the purpose of this
Final Judgment, which may, if necessary,
include extending the trust and the term of
the trustee’s appointment by a period
requested by the United States.
VIII. Notice of Proposed Divestiture
A. Within two (2) business days following
execution of a definitive divestiture
agreement for private sale or private
placement, defendants or the trustee,
whichever is then responsible for effecting
the divestiture required herein, shall notify
the United States of any proposed divestiture
required by this Final Judgment. If the trustee
is responsible, it shall similarly notify
defendants. The notice shall set forth the
details of the proposed divestiture and list
the name, address, and telephone number of
each person not previously identified who
offered or expressed an interest in or desire
to acquire any ownership interest in the
Divestiture Assets, together with full details
of the same.
B. Within fifteen (15) calendar days of
receipt by the United States of such notice,
the United States may request from
defendants, the proposed Acquirer(s), any
other third party, or the trustee, if applicable,
additional information concerning the
proposed divestiture, the proposed
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Acquirer(s), and any other potential
Acquirer. Defendants and the trustee shall
furnish any additional information requested
within fifteen (15) calendar days of the
receipt of the request, unless the parties shall
otherwise agree.
C. Within thirty (30) calendar days after
receipt of the notice or within twenty (20)
calendar days after the United States has
been provided the additional information
requested from defendants, the proposed
Acquirer(s), any third party, and the trustee,
whichever is later, the United States shall
provide written notice to defendants and the
trustee, if there is one, stating whether or not
it objects to the proposed divestiture. If the
United States provides written notice that it
does not object, the divestiture may be
consummated, subject only to defendants’
limited right to object to the sale under
Section VII.B of this Final Judgment. Absent
written notice that the United States does not
object to the proposed Acquirer(s) or upon
objection by the United States, a divestiture
proposed under Section V or Section VII
shall not be consummated. Upon objection
by defendants under Section VII.B, a
divestiture proposed under Section VII shall
not be consummated unless approved by the
Court.
wreier-aviles on DSK3TPTVN1PROD with NOTICES
IX. Financing
Defendants shall not finance all or any part
of any purchase made pursuant to this Final
Judgment.
X. Compliance Inspection
A. For the purpose of determining or
securing compliance with this Final
Judgment, or determining whether the Final
Judgment should be modified or vacated, and
subject to any legally recognized privilege,
duly authorized representatives of the United
States Department of Justice, including
consultants and other persons retained by the
United States, shall, upon written request of
a duly authorized representative of the
Assistant Attorney General in charge of the
Antitrust Division, and on reasonable notice
to defendants, be permitted:
1. access during defendants’ office hours to
inspect and copy, or at the option of the
United States, to require defendants to
provide hard copies or electronic copies of,
all books, ledgers, accounts, records, data,
and documents in the possession, custody, or
control of defendants, relating to any matters
contained in this Final Judgment; and
2. to interview, either informally or on the
record, defendants’ officers, employees, or
agents, who may have their individual
counsel present, regarding such matters. The
interviews shall be subject to the reasonable
convenience of the interviewee and without
restraint or interference by defendants.
B. Upon written request of a duly
authorized representative of the Assistant
Attorney General in charge of the Antitrust
Division, defendants shall submit written
reports or responses to written
interrogatories, under oath if requested,
relating to any of the matters contained in
this Final Judgment as may be requested.
C. No information or documents obtained
by the means provided in this section shall
be divulged by the United States to any
VerDate Mar<15>2010
15:12 Dec 28, 2011
Jkt 226001
person other than an authorized
representative of the executive branch of the
United States, except in the course of legal
proceedings to which the United States is a
party (including grand jury proceedings), or
for the purpose of securing compliance with
this Final Judgment, or as otherwise required
by law.
D. If, at the time information or documents
are furnished by defendants to the United
States, defendants represent and identify in
writing the material in any such information
or documents to which a claim of protection
may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and
defendants mark each pertinent page of such
material, ‘‘Subject to claim of protection
under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure,’’ then the United States
shall give defendants ten (10) calendar days
notice prior to divulging such material in any
legal proceeding (other than a grand jury
proceeding).
XI. No Reacquisition
Defendants may not reacquire any part of
the Divestiture Assets or any other equity
interest in Direct Edge during the term of this
Final Judgment.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable
any party to this Final Judgment to apply to
this Court at any time for such further orders
and directions as may be necessary or
appropriate to carry out or construe this Final
Judgment, to modify or terminate any of its
provisions, to enforce compliance, and to
punish any violations of its provisions.
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Importer of Controlled Substances;
Notice of Application
Pursuant to 21 U.S.C. 958(i), the
Attorney General shall, prior to issuing
a registration under this Section to a
bulk manufacturer of a controlled
substance in schedule I or II, and prior
to issuing a regulation under 21 U.S.C.
952(a)(2) authorizing the importation of
such a substance, provide
manufacturers holding registrations for
the bulk manufacture of the substance
an opportunity for a hearing.
Therefore, in accordance with 21 CFR
1301.34(a), this is notice that on October
5, 2011, Mylan Pharmaceuticals, Inc.,
781 Chestnut Ridge Road, Morgantown,
West Virginia 26505, made application
by renewal to the Drug Enforcement
Administration (DEA) to be registered as
an importer of the following basic
classes of controlled substances:
Drug
Methylphenidate (1724) ................
Oxycodone (9143) ........................
Hydromorphone (9150) ................
Fentanyl (9801) ............................
Schedule
II
II
II
II
The company plans to import the
listed controlled substances in finished
dosage form (FDF) from foreign sources
for analytical testing and clinical trials
in which the foreign FDF will be
XIII. Expiration of Final Judgment
compared to the company’s own
domestically-manufactured FDF. This
Unless extended by this Court, this Final
Judgment shall expire ten (10) years from the analysis is required to allow the
company to export domesticallydate of its entry.
manufactured FDF to foreign markets.
XIV. Public Interest Determination
Any bulk manufacturer who is
Entry of this Final Judgment is in the
presently, or is applying to be,
public interest. The parties have complied
registered with DEA to manufacture
with the requirements of the Antitrust
such basic classes of controlled
Procedures and Penalties Act, 15 U.S.C. § 16, substances may file comments or
including making copies available to the
objections to the issuance of the
public of this Final Judgment, the
proposed registration and may, at the
Competitive Impact Statement, and any
same time, file a written request for a
comments thereon and the United States’s
hearing on such application pursuant to
responses to comments. Based upon the
21 CFR 1301.43, and in such form as
record before the Court, which includes the
prescribed by 21 CFR 1316.47.
Competitive Impact Statement and any
Any such written comments or
comments and response to comments filed
objections should be addressed, in
with the Court, entry of this Final Judgment
quintuplicate, to the Drug Enforcement
is in the public interest.
Administration, Office of Diversion
DATED:
llllllllllllllll Control, Federal Register Representative
Court approval subject to the Antitrust
(ODL), 8701 Morrissette Drive,
Procedures and Penalties Act, 15 U.S.C.
Springfield, Virginia 22152; and must be
§ 16.
filed no later than January 30, 2012.
lllllllllllllllllllll
This procedure is to be conducted
United States District Judge
simultaneously with, and independent
[FR Doc. 2011–33413 Filed 12–28–11; 8:45 am]
of, the procedures described in 21 CFR
1301.34(b), (c), (d), (e), and (f). As noted
BILLING CODE 4410–11–P
in a previous notice published in the
Federal Register on September 23, 1975,
PO 00000
Frm 00070
Fmt 4703
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E:\FR\FM\29DEN1.SGM
29DEN1
Agencies
[Federal Register Volume 76, Number 250 (Thursday, December 29, 2011)]
[Notices]
[Pages 81968-81978]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33413]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Deutsche B[ouml]rse AG and NYSE Euronext;
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States of America v. Deutsche B[ouml]rse AG and NYSE Euronext, Civil
Action No. 1:11-cv-02280. On December 22, 2011, the United States filed
a Complaint alleging that the proposed merger of Deutsche B[ouml]rse AG
and NYSE Euronext would violate Section 7 of the Clayton Act, 15 U.S.C.
18. The proposed Final Judgment, filed the same time as the Complaint,
requires Deutsche B[ouml]rse AG's subsidiary to divest its interest in
Direct Edge Holdings LLC within two years and to take the necessary
steps to remove its affiliates from governance of Direct Edge.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth
Street NW., Suite 1010, Washington, DC 20530 (telephone: (202) 514-
2481), on the Department of Justice's Web site at https://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court
for the District of Columbia. Copies of these materials may be obtained
from the Antitrust Division upon request and payment of the copying fee
set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to James J. Tierney, Chief, Networks & Technology Enforcement Section,
Antitrust Division, United States Department of Justice, 450 Fifth
Street, NW., Suite 7100, Washington, DC 20530 (202) 307-6640).
Patricia A. Brink,
Director of Civil Enforcement.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Antitrust Division
U.S. Department of Justice
450 Fifth Street NW., Suite 7100
Washington, DC 20530
Plaintiff,
v.
DEUTSCHE B[Ouml]RSE AG,
Mergenthalerallee 61
65760 Eschborn
Germany
and
NYSE EURONEXT,
11 Wall Street
New York, NY 10005
Defendants.
Case: 1:11-cv-02280
Assigned To: Beryl A. Howard
Date: 12/22/2011
Description: Antitrust
COMPLAINT
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action
pursuant to the antitrust laws of the United States to enjoin the
proposed merger of Deutsche B[ouml]rse AG (``DB'') and NYSE Euronext
(``NYSE'') and to obtain such other equitable relief as the Court
deems appropriate. The United States alleges as follows:
NATURE OF ACTION
1. DB is among the largest operators of financial exchanges in
the world. While most of its businesses are in Europe, DB, through
various subsidiaries, is also the largest unitholder of Direct Edge
Holdings LLC (``Direct Edge''), the fourth-largest operator of stock
exchanges in the United States. Direct Edge competes head-to-head
with NYSE and is an exchange innovator, leading in
[[Page 81969]]
technology, pricing, and in the development of exchange models.
2. NYSE operates some of the oldest, largest, and most
prestigious stock exchanges in the United States. It stands at the
center of American financial markets, with its exchanges handling
roughly a third of the equities traded daily in the United States,
and considerably more for certain equities and certain times of day.
NYSE exchanges list the vast majority of the listed exchange-traded
products, including the majority of exchange-traded funds, and they
supply key market data to customers making investment decisions.
3. On February 15, 2011, NYSE and DB agreed to merge in a
transaction worth roughly $9 billion. NYSE and DB propose to combine
under a new Dutch holding company (``NewCo''), which would be the
largest exchange group in the world, with dual headquarters in
Frankfurt and New York. NewCo would own 100% of NYSE and 31.54% of
Direct Edge.
4. The proposed transaction would violate Section 7 of the
Clayton Act, 15 U.S.C. Sec. 18, because it would substantially
lessen competition and potential competition in at least three lines
of commerce in the United States: (a) displayed equities trading
services; (b) listing services for exchange-traded products
(``ETPs''), including exchange-traded funds (``ETFs''); and (c)
real-time proprietary equity data products.
JURISDICTION, VENUE AND COMMERCE
5. The United States brings this action under Section 15 of the
Clayton Act, as amended, 15 U.S.C. Sec. 25, to prevent and restrain
defendants from violating Section 7 of the Clayton Act, as amended,
15 U.S.C. Sec. 18.
6. The Court has subject matter jurisdiction over this action
and the defendants pursuant to Section 15 of the Clayton Act, as
amended, 15 U.S.C. Sec. 25, and 28 U.S.C. Sec. Sec. 1331, 1337(a),
and 1345. NYSE and DB provide and sell displayed equity trading
services and real-time proprietary equities trading data. NYSE also
provides and sells listing services for exchange traded products.
Sales of these services in the United States represent a regular,
continuous, and substantial flow of interstate commerce, and have a
substantial effect upon interstate commerce.
7. This Court has personal jurisdiction over each defendant and
venue is proper in this District under Section 12 of the Clayton
Act, 15 U.S.C. Sec. 22, and 28 U.S.C. Sec. Sec. 1391(b)(1) and
(c). Defendants transact business within the District of Columbia.
DB and NYSE acknowledge personal jurisdiction in this District and
consent to venue.
DEFENDANTS AND THE TRANSACTION
8. DB is a German Aktiengesellschaft that operates financial
exchanges and related businesses in the United States and Europe. It
generates revenue from, among other things, listing fees, stock
trading transaction fees, market data licensing fees, and technology
licensing arrangements. Through its subsidiaries, DB is the largest
holder of equity in Direct Edge, a leading stock exchange operator
in the United States. DB owns 50% of the equity and controls
Frankfurt-based Eurex Group, a leading European derivatives exchange
operator. DB has announced an agreement to buy the remaining equity
in Eurex after DB completes its merger with NYSE. Eurex owns
International Securities Exchange Holdings, Inc. (``ISE''), a
leading options exchange in New York that also owns a 31.54% equity
interest in Direct Edge. In 2010, DB's subsidiaries earned
substantial revenues from sales in the United States.
9. NYSE is a publicly traded Delaware corporation with its
principal place of business located in New York, New York. The
company operates financial exchanges in the United States and
Europe. In the United States, NYSE operates three stock exchanges:
(i) the New York Stock Exchange LLC; (ii) NYSE Arca, Inc., an all-
electronic exchange; and (iii) NYSE Amex LLC, an exchange that lists
the stock of primarily small- and medium-sized companies. NYSE
generates revenue from, among other things, listing fees, stock
trading transaction fees, market data licensing fees, and technology
licensing arrangements. In 2010, NYSE earned over $3 billion in
total revenues from within the United States.
10. Direct Edge is a Delaware limited liability company with its
principal place of business in Jersey City, New Jersey. Direct Edge,
through its subsidiary Direct Edge Holdings, Inc., owns and operates
two leading U.S. stock exchanges, EDGA Exchange, Inc. and EDGX
Exchange, Inc. Direct Edge is majority-owned by a group including
ISE, Goldman Sachs Group Inc., Citadel Investment Group LLC, and
Knight Capital Group Inc. ISE owns 31.54% of Direct Edge and holds
certain key voting and special veto rights, such as the right to
veto entry by Direct Edge into options trading. ISE also has the
right to appoint three members to the Direct Edge board of managers
and one member to each of the corporate boards of EDGA Exchange,
Inc. and EDGX Exchange, Inc. Goldman Sachs, Citadel, and Knight each
own 19.9% of Direct Edge. The remaining 8.76% is owned by a group of
five brokers, including affiliates of JP Morgan Chase & Co. (through
LabMorgan Corp.), Bank of America (through Merrill Lynch L.P.
Holdings, Inc.), Nomura Securities International, Inc., Deutsche
Bank USA (through DB US Financial Markets Holding Corporation), and
Sun Partners LLC. Direct Edge's exchanges compete head-to-head with
the NYSE exchanges. In 2010, Direct Edge earned substantial revenues
in the United States.
11. DB and NYSE have proposed to merge into a NewCo that will
house all their current corporate holdings. NewCo will be a Dutch
holding company, with dual headquarters in New York City and outside
Frankfurt, Germany. Combined annual net revenues of NewCo are
expected to be over $5 billion, with revenue sources including
market data and technology; equities trading and listings;
derivatives trading and listings; and settlement and custody. NewCo
will own many of the world's leading brands in finance. Its post-
merger leadership will be split between former executives from both
NYSE and DB. The current DB Chief Executive Officer will stay on as
Chairman, and the current NYSE CEO will remain CEO of the combined
entity.
RELEVANT MARKETS
Displayed Equities Trading Services
12. Displayed equities trading services comprise a relevant
antitrust product market and a ``line of commerce'' within the
meaning of Section 7 of the Clayton Act. These services include
providing mechanisms and ancillary services to facilitate the public
purchase and sale of exchange-traded stocks (those defined as ``NMS
stock'' under Rule 600(b)(47) of Regulation NMS, 17 C.F.R. Sec. 200
et seq.). These services are offered mainly by national stock
exchanges registered under Section 6 of the Securities Exchange Act
of 1934, 15 U.S.C. Sec. 78f, and also by electronic communications
networks (``ECNs'') regulated by Regulation ATS, 17 C.F.R. Sec.
242.300 et seq.
13. Several key attributes separate displayed from undisplayed
or ``dark'' equities trading services, including the continuous pre-
trade publication of the best-priced quotations for buying and
selling exchange-traded stocks in a national consolidated data
stream, the display of certain customer limit orders (offers to buy
and sell stock at particular prices), and the provision of deep and
reliable liquidity for a broad array of exchange-traded stocks.
Displayed trading venues, in particular those operated by NYSE, The
NASDAQ OMX Group, Inc., Direct Edge, and BATS Global Markets, Inc.
form the backbone of the American national market system and over
the past several years have accounted for roughly 65% to 75% of the
overall average daily trading volume in the United States. Broker-
dealers, institutional investors, and other customers rely on
displayed trading venues to provide meaningful price discovery for
exchange-traded stocks and to act as exchanges of last resort,
especially for thinly traded stocks, in times of market volatility
or stress.
14. Undisplayed trading services account for roughly 25% to 35%
of total average daily trading volume and serve a very different
purpose for investors: to allow for anonymous matching of orders
without publicly revealing the intention to trade before execution.
Institutional investors and other traders use these services to
minimize the likelihood that their trades will cause the stock price
to move against their interest. Most of the undisplayed trading
centers offer less liquidity on most stocks (indeed, an alternative
trading system providing undisplayed trading must account for less
than 5% trading volume in a stock or the venue automatically becomes
displayed by regulations promulgated by the U.S. Securities and
Exchange Commission (``SEC'')) and base their prices on those
prevailing in the displayed equities trading centers.
15. The relevant geographic market is the United States. Trading
equities on a foreign exchange is not an adequate substitute for
trading on an exchange in the United States. Trading on an exchange
outside the United States exposes traders to risks like foreign
exchange risk, country risk, reputational risk,
[[Page 81970]]
different or potentially lax regulatory environments for trading,
lack of analyst coverage, different accounting standards, time
differences, and language differences, among other things.
Additionally, the majority of American companies choose to list on
domestic exchanges. Therefore, to trade most publicly-listed
American stocks, investors must use stock exchanges located in the
United States.
16. The market for displayed equities trading services in the
United States satisfies the hypothetical monopolist test. A profit-
maximizing monopolist in the offering of displayed equities trading
services in the United States likely would impose at least a small
but significant and non-transitory increase in the price of such
services. Not enough customers would switch to alternative means of
trading equities in undisplayed trading centers or foreign exchanges
to render this price increase unprofitable.
Listing Services for Exchange-Traded Products
17. The provision of ETP listing services constitutes a relevant
antitrust product market and a ``line of commerce'' within the
meaning of Section 7 of the Clayton Act. An ETP is typically an
exchange-listed equity security instrument other than a standard
corporate cash equity, the performance of which is designed to track
another specific instrument, asset or group of assets, such as a
market index or a selected basket of corporate stocks. ETPs are
typically sponsored by firms that monitor and manage the composition
and performance of the ETP. The most popular type of ETP today is an
exchange-traded fund, an equity fund with a form of exchange-listed
securities (often trust units) that can be traded like a stock but
that is also benchmarked against another stock, index or other
asset. Buying an ETP offers a simple way for investors to diversify
their portfolios without having to buy each individual corporate
stock or other financial instrument directly. For instance, the SPDR
S&P 500 exchange-traded fund tracks the S&P 500 U.S. stock index,
which comprises widely held American stocks. ETFs and other ETPs are
very popular and serve as the cornerstone of many individual
investors' portfolios.
18. The relevant geographic market is the United States. Listing
an ETP on a foreign exchange is not an adequate substitute for
listing on an exchange in the United States. U.S. sponsors of ETPs
overwhelmingly choose to list domestically, because it allows them
to build brand awareness and reputation and stay close to U.S.
capital markets and investors in the United States considering the
purchase and sale of ETFs and other ETPs, as well as the analysts
that cover ETPs and ETFs and, in many cases, the underlying or
related assets, indexes, or products.
19. The market for ETP listing services in the United States
satisfies the hypothetical monopolist test. A profit-maximizing
monopolist that was the only present and future firm in the offering
of ETP listing services in the United States likely would impose at
least a small but significant and non-transitory increase in the
price of ETP listings. Not enough customers would switch to
alternatives to render this price increase unprofitable.
Real-time Proprietary Equity Data
20. Real-time proprietary equity data is a relevant antitrust
product market and a ``line of commerce'' within the meaning of
Section 7 of the Clayton Act. Access to affordable, reliable and
timely data about the stock market is essential for informed stock
trading. NYSE and Direct Edge are among only four major competitors
that aggregate and disseminate certain market data to brokers,
dealers, investors, and news organizations. They sell (or with
little lead time could easily sell) competing proprietary market
data products derived from trading activities occurring both on and
off their exchanges.
21. The product market for real-time proprietary equity data
consists of what is commonly referred to in the industry as ``non-
core'' data. Market participants generally refer to two broad
categories of critical market data: ``core'' and ``non-core.'' Core
data refers to the transaction data the SEC requires stock exchanges
to report to securities information processors for consolidation and
public distribution, including the current best bid and offer for
each stock on every exchange and information on each stock trade,
including the last sale. Non-core data includes trading volume and
``depth of book'' data that certain exchanges collect and sell,
i.e., the underlying quotation data on any given exchange. Non-core
data helps traders determine where liquidity for a given stock
exists during the day and the depth of that liquidity. Each exchange
(or other trading platform) owns non-core data and can distribute it
voluntarily for a profit in competition with data from other
exchanges. Non-core data products can be made to replicate core data
and exchanges can package and sell both core and non-core data
together.
22. The market for real-time proprietary equity data satisfies
the hypothetical monopolist test. A profit-maximizing monopolist in
the offering of real-time proprietary equity data likely would
impose at least a small but significant and non-transitory increase
in the price of its equity data products. Not enough customers would
switch to other products or services to render this price increase
unprofitable.
23. The relevant geographic market is the United States. Real-
time proprietary equity data in this context relate only to domestic
trading of U.S.-listed stock. Customers needing real-time
proprietary equity data relating to U.S.-listed stocks cannot turn
to foreign alternatives.
ANTICOMPETITIVE EFFECTS
NYSE and Direct Edge Are Head-to-Head Competitors
24. NYSE and Direct Edge compete head-to-head in displayed
equities trading services and in the provision of real-time
proprietary equity data products. Direct Edge over the years has
been a force in modernizing stock trading with cutting edge
technology, faster trading times, lower prices, and new market
models. Direct Edge began in 1998 as an electronic communication
network named Attain. By 2007, it was a major trading venue owned
and supported by broker-dealers Knight Capital, Citadel and Goldman
Sachs. These broker-dealers used Direct Edge as a counterweight to
the exchange duopoly of NYSE and NASDAQ. In December 2008, Direct
Edge and ISE agreed that ISE would buy part of Direct Edge and
Direct Edge would take control of the struggling ISE Stock Exchange.
In March 2010, Direct Edge received approval from the SEC to convert
its two ECNs into national securities exchanges under Section 6 of
the Securities Exchange Act of 1934 (``Exchange Act'').
25. Direct Edge was first to offer two trading platforms using
the same technology, but with different pricing schemes. EDGA
historically has been operated as a lower cost exchange, being
typically free or nearly free for many traders to make offers to buy
or sell stock at certain posted prices (i.e., ``post liquidity'') as
well as for customers to trade against these offers and buy and sell
stock (i.e., ``take liquidity''), making EDGA attractive to traders
sensitive to execution charges. Approximately one-third of Direct
Edge volume trades over EDGA. EDGX historically has offered a more
traditional pricing structure whereby the exchange normally pays
customers to post liquidity and charges a fee for them to take
liquidity. Although the two platforms have different pricing
structures and cater to different segments, they share technology,
support, code, and data centers.
26. NYSE has responded to Direct Edge's aggressive tactics in
part by improving its own technology and changing its pricing. For
example, NYSE in 2009 replaced its trading system in an effort to
regain business lost mainly to the sophisticated electronic
platforms at Direct Edge and BATS. The new system was faster,
reducing transaction processing time to less than 10 milliseconds,
which at the time made NYSE roughly as fast as its rivals. NYSE
largely was able to stabilize its share of trading volume by
implementing a new market model and introducing a new pricing
scheme, which gave rebate incentives to certain designated market
makers (i.e., those market participants that agreed to buy and sell
particular stocks at certain prices for certain amounts of time).
27. Direct Edge's investors, mainly broker-dealers, use its
exchanges to put downward pressure on trading fees at NYSE and other
exchanges. When possible, Direct Edge's broker-dealer investors
often send trades to a Direct Edge exchange in order to keep their
overall transaction costs down. In this way, Direct Edge helped spur
a 2009 pricing war that substantially reduced the cost of trading
stocks in the United States.
28. NYSE and Direct Edge also are head-to-head competitors in
the provision of real-time proprietary equity data. Both are well-
situated to offer new real-time equity data products and equity data
products that replicate portions of core data offerings, but with
even faster feeds.
[[Page 81971]]
Direct Edge Is a Potential Competitor to NYSE in Listing Services
for Exchange-Traded Products
29. Direct Edge is a potential competitor to NYSE in listing
services for ETPs. An ETP, including an ETF, must be listed on a
registered stock exchange in order to be widely-traded in the United
States. Exchanges typically compete for listings based on market
structure, market maker incentives, marketing, and other associated
services.
30. NYSE dominates the business of providing listing services
for ETPs. NYSE's major competitors are NASDAQ, with a small share,
and recent entrant BATS. Direct Edge, as a leading operator of
registered stock exchanges, is uniquely situated for entry and
already imposes competitive discipline on NYSE: its potential entry
has already affected NYSE decisions to innovate and its pricing
decisions in its ETP listings business.
This Merger Would Substantially Lessen Competition
31. NYSE and Direct Edge are currently vigorous competitors and
closely monitor each other's competitive positions in at least two
highly-concentrated markets. They are also close potential
competitors in a third highly-concentrated market, listing services
for ETPs, in which NYSE is a dominant player. Upon consummation of
the proposed transaction, NewCo would own NYSE and would be able to
control NYSE's management decisions.
32. Upon consummation of the proposed transaction, NewCo also
would become, through ISE, the largest equity owner and most
influential member of Direct Edge. NewCo would be able to appoint
three of the eleven Direct Edge managers, and one representative to
each of the EDGA and EDGX exchange's respective corporate boards.
NewCo would have important ancillary rights at Direct Edge: veto
rights over certain major corporate actions, representation on key
committees, and shareholder rights under corporate law, such as the
right to file shareholder derivative lawsuits. NewCo also would have
access to Direct Edge's non-public, competitively sensitive
information, and to the company's officers and employees. NewCo's
ownership interests and associated rights would give it influence
over Direct Edge's management decisions.
33. NewCo's presence on the Direct Edge boards would also likely
chill board-level discussions of competition with NYSE. Direct Edge
was formed, in part, as a customer-owned foil to NYSE and NASDAQ.
When NYSE or NASDAQ fails to innovate or price competitively,
broker-dealers can encourage Direct Edge to innovate or can shift
their business to Direct Edge. If a NYSE-affiliate were sitting on
Direct Edge boards, the broker-dealer board members would likely not
want to discuss or reveal Direct Edge's potential innovations or
other competitive initiatives targeting NYSE.
34. NewCo would have the incentive and ability to use its
ownership, influence, and access to information as to both NYSE and
Direct Edge to reduce competition between the companies in markets
where they are significant competitors or potential competitors,
resulting in an increase in prices or a reduction in innovation and
quality for a significant number of trading, listings, and data
customers.
ENTRY
35. Supply responses from competitors or entry of new potential
competitors in the relevant markets--displayed equities trading
services, ETP listing services, and real-time proprietary equity
data--would not prevent the likely anticompetitive effects of the
proposed merger. The merged firm would possess significant
advantages that any new or existing competitor would have to
overcome to successfully compete with the merged firm.
36. Barriers to entry into each of these markets are formidable.
In the market for displayed equities trading services, any entrant
would have to overcome hurdles of reputation, scale and network
effects to successfully challenge the incumbents. In ETP listing
services, any entrant would have to overcome numerous barriers to
successfully challenge NYSE, including regulation, reputation,
scale, and liquidity. Direct Edge is in a strong position to enter
because it is already a registered stock exchange with reputation,
scale and liquidity. Finally, competition in real-time proprietary
equity data is largely limited to registered securities exchanges,
and is closely linked to and derived from an exchange's presence in
trading and market data collection. Only four exchange operators
today have large enough public trading volume and existing
facilities for collecting, aggregating, and disseminating data to
meaningfully compete. They enjoy a significant advantage over any
possible entrant.
VIOLATIONS ALLEGED
37. The United States incorporates the allegations of paragraphs
1 through 36.
38. The proposed transaction between DB and NYSE would
substantially lessen competition in interstate trade and commerce in
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
39. Unless restrained, the transaction will have the following
anticompetitive effects, among others:
a. Actual and potential competition between NYSE and Direct Edge
in displayed equities trading services and real-time proprietary
equity data products in the United States will be substantially
lessened;
b. Potential competition between NYSE and Direct Edge in ETP
listing services in the United States will be substantially
lessened;
c. Prices for displayed equities trading services, ETP listing
services, and real-time proprietary equity data products likely will
increase; and
d. Innovation in displayed equities trading services, ETP
listing services, and real-time proprietary equity data products
likely will decrease.
RELIEF REQUESTED
40. The United States requests that:
a. the proposed merger of NYSE and DB be adjudged to violate
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18;
b. DB and NYSE be enjoined from carrying out the proposed merger
or carrying out any other agreement, understanding, or plan by which
DB and NYSE would acquire, be acquired by, or merge with each other;
c. The United States be awarded the costs of this action; and
d. The United States receives such other and further relief as
the case requires and the Court deems just and proper.
Dated: December 22, 2011
Respectfully submitted,
FOR PLAINTIFF UNITED STATES:
/s/Sharis Pozen
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SHARIS POZEN (DC Bar 446732)
Acting Assistant Attorney General
/s/Leslie C. Overton
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LESLIE C. OVERTON (DC Bar 454493)
Deputy Assistant Attorney General
/s/Patricia A. Brink
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PATRICIA A. BRINK
Director of Civil Enforcement
/s/James J. Tierney
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JAMES J. TIERNEY (DC Bar 434610)
Chief
Networks and Technology Enforcement Section
/s/Scott A. Scheele
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SCOTT A. SCHEELE (DC Bar 429061)
Assistant Chief
Networks and Technology Enforcement Section
/s/Alexander P. Okuliar
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ALEXANDER P. OKULIAR (DC Bar 481103)
Attorney
Networks and Technology Enforcement Section
Antitrust Division
U.S. Department of Justice
450 Fifth Street NW., Suite 7100
Washington, DC 20530
Telephone: (202) 532-4564
Fax: (202) 616-8544
Email: alexander.okuliar@usdoj.gov
GEORGE S. BARANKO (DC Bar 288407)
MICHAEL D. BONANNO (DC Bar 998208)
TRAVIS R. CHAPMAN
HELEN CHRISTODOULOU
NINA B. HALE
RICHARD D. MOSIER
CHARLES V. REILLY
NATALIE A. ROSENFELT
Attorneys for the United States
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
DEUTSCHE B[Ouml]RSE AG,
and
[[Page 81972]]
NYSE EURONEXT,
Defendants.
Case: 1:11-cv-02280
Assigned To: Beryl A. Howard
Date: 12/22/2011
Description: Antitrust
COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America (``United States''), pursuant
to Section 2(b) of the Antitrust Procedures and Penalties Act
(``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. 16(b)-(h), files this
Competitive Impact Statement relating to the proposed Final Judgment
submitted for entry in this civil antitrust proceeding.
I. NATURE AND PURPOSE OF THIS PROCEEDING
On February 15, 2011, NYSE Euronext (``NYSE'') and Deutsche
B[ouml]rse AG (``DB''), two of the world's leading owners and
operators of financial exchanges, agreed to merge in a transaction
valued at approximately $9 billion. NYSE and DB are seeking to
combine their businesses and create the largest exchange group in
the world under a new Dutch holding company (``NewCo''). NewCo would
have dual headquarters in Frankfurt and New York.
Both NYSE and DB have substantial operations in the United
States, including between them interests in five major American
stock exchanges. NYSE is one of the two largest and most prestigious
stock exchange operators in the United States. It owns the New York
Stock Exchange LLC, NYSE Arca, Inc., and NYSE Amex LLC. DB, through
a series of subsidiaries, is the largest unitholder of Direct Edge
Holdings LLC (``Direct Edge''), which operates the EDGA and EDGX
electronic exchanges and is the fourth largest stock exchange
operator in the United States by volume of shares traded. Direct
Edge is considered an innovator in the exchange space and a
competitive constraint on NYSE. This transaction therefore poses a
significant risk that NewCo could use its influence to dampen the
competitive zeal of Direct Edge. The United States brought this
lawsuit on December 22, 2011, seeking to enjoin the proposed
transaction. After a thorough investigation, the United States
believes that the likely effect of the merger would be to lessen
substantially competition and potential competition in displayed
equities trading services, listing services for exchange-traded
products, including exchange-traded funds, and real-time proprietary
equity data products in the United States in violation of Section 7
of the Clayton Act, 15 U.S.C. Sec. 18.
Simultaneous with the filing of the complaint, the United States
filed a proposed Final Judgment designed to remedy the Section 7
violation. Under the proposed Final Judgment, which is explained
more fully below, Defendants are subject to affirmative obligations
to divest DB of its holdings in Direct Edge and to immediately
eliminate DB's ability, through its subsidiaries, to influence the
business and governance of Direct Edge.
The United States and Defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the
APPA, unless the United States withdraws its consent. Entry of the
proposed Final Judgment would terminate this action, except that
this Court would retain jurisdiction to construe, modify, or enforce
the proposed Final Judgment and to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
DB is a German Aktiengesellschaft that runs financial exchanges
and ancillary businesses in the United States and Europe. DB
generates revenue from several sources, including fees for
securities listings and trading, fees for market data, and charges
for licensing of exchange-related technology. DB, through its
subsidiaries, is the largest holder of equity in Direct Edge, a
leading stock exchange operator in the United States. DB owns 50% of
the equity and controls Frankfurt-based Eurex Group, a leading
European derivatives exchange operator. DB has announced an
agreement to buy the remaining equity in Eurex after DB completes
its merger with NYSE. Eurex owns International Securities Exchange
Holdings, Inc. (``ISE''), a leading options exchange in New York
that also owns a 31.54% equity interest in Direct Edge. In 2010,
DB's ISE and Eurex subsidiaries earned substantial revenues from
sales in the United States.
NYSE is a publicly traded Delaware corporation with its
principal place of business in New York, New York. NYSE operates
financial exchanges in the United States and across Europe. In the
United States, NYSE operates the New York Stock Exchange, which is
the storied hybrid exchange with both trading floor and electronic
components; NYSE Arca, which is an all-electronic exchange; and NYSE
Amex, the former American Stock Exchange, which targets mainly
small- and medium-sized companies. NYSE also generates revenue from
a wide range of exchange-related businesses, including securities
listings, trading, data licensing, and technology licensing. In
2010, NYSE earned more than $3 billion in total revenues from within
the United States.
Direct Edge is a Delaware limited liability company with its
principal place of business in Jersey City, New Jersey. Direct Edge,
through its subsidiary Direct Edge Holdings, Inc., owns and operates
two leading U.S. stock exchanges, EDGA Exchange, Inc. and EDGX
Exchange, Inc. Direct Edge is majority-owned by ISE, Goldman Sachs
Group Inc., Citadel Investment Group LLC, and Knight Capital Group
Inc. ISE owns 31.54% of Direct Edge and holds certain key voting and
special veto rights, such as the right to veto entry by Direct Edge
into options trading. ISE also has the right to appoint three
members to the Direct Edge board of managers and one member to each
of the corporate boards of EDGA Exchange, Inc. and EDGX Exchange,
Inc. Goldman Sachs, Citadel, and Knight each own 19.9% of Direct
Edge. The remaining 8.76% is owned by a group of five brokers,
including affiliates of JP Morgan Chase & Co. (through LabMorgan
Corp.), Bank of America (through Merrill Lynch L.P. Holdings, Inc.),
Nomura Securities International, Inc., Deutsche Bank USA (through DB
US Financial Markets Holding Corporation), and Sun Partners LLC.
Direct Edge's exchanges compete head to head with the NYSE
exchanges. In 2010, Direct Edge earned substantial revenues from
within the United States.
B. Relevant Markets
Antitrust law, including Section 7 of the Clayton Act, protects
consumers from anticompetitive conduct, such as a firm's acquisition
of the ability to raise prices or reduce innovation. Market
definition assists antitrust analysis by focusing attention on those
markets where competitive effects are likely to be felt. Well-
defined markets include both sellers and buyers, whose conduct most
strongly influences the nature and magnitude of competitive effects.
Defining relevant markets in merger cases frequently begins by
identifying a collection of products or set of services over which a
hypothetical profit maximizing monopolist likely would impose at
least small but significant and non-transitory increase in price.
Defining markets in this way ensures that antitrust analysis takes
account of a broad enough set of products to evaluate whether a
transaction is likely to lead to a substantial lessening of
competition.
Here, the investigation revealed three relevant markets. The
first is displayed equities trading services, which includes stock
trading services offered by trading venues that publicly disclose
certain key information about quotes and transactions. Registered
stock exchanges and electronic communication networks offer such
displayed trading services. Displayed trading services are
accompanied by the continuous pre-trade publication of the best-
priced quotations for buying and selling exchange-traded stocks in a
national consolidated data stream, the display of certain customer
limit orders (offers to buy and sell stock at particular prices),
and the provision of deep and reliable liquidity for a broad array
of exchange-traded stocks. Displayed equities trading services form
the backbone of the American national market system and facilitate
equity price discovery in the United States. Displayed services are
by their nature very different from undisplayed equity trading
services, like dark pools, which offer no pre-trade transparency and
cater mainly to institutional traders looking to buy or sell large
volumes of stock while minimizing stock price movement.
A second relevant market consists of the listing services for
exchange-traded products (``ETPs''). An ETP is typically an
exchanged-listed equity security instrument other than a standard
corporate cash equity, the performance of which is designed to track
another specific instrument, asset or group of assets, such as a
market index or a specific basket of corporate stocks. ETPs
typically are sponsored by firms that determine the composition of
the ETP and then manage it for investors. The most popular type of
ETP today is an exchange-traded fund (``ETF''), which is a security
traded like a stock that is designed to replicate the returns of a
stock, index or similar asset. Exchanges compete to
[[Page 81973]]
list, or offer for trading, ETPs in exchange for listing fees and
fees for ancillary services. Exchanges compete for listings mainly
on the basis of their market structure, market maker incentives,
marketing, and other associated services. ETP listings are a
separate relevant market because there are no reasonable substitutes
for listing an ETP if a sponsoring firm wants a widely-traded
product with access to the liquidity offered by exchanges. In
addition to which, only registered exchanges can offer these listing
services.
A third relevant market encompasses real-time proprietary equity
data products comprised of non-core data. There are two general
types of equity data: ``core'' and ``non-core.'' Core data refers to
the transaction data the U.S. Securities and Exchange Commission
requires stock exchanges to aggregate and distribute publicly,
including the current best bid and offer for each stock on every
exchange and information on each stock trade, including the last
sale. Non-core data includes trading volume and ``depth of book''
data that certain exchanges collect and sell, i.e., the underlying
quotation data on any given exchange. Non-core data helps traders
determine where liquidity for a given stock exists during the day
and the depth of that liquidity. Access to market data is critical
to many market participants and followers, who are willing to pay a
premium for the best price, quote, volume, and other data available
about exchange-listed equities being traded on the exchanges. Each
exchange (or other trading venue) owns its non-core data and can
distribute it for a profit. Proprietary data products can be made to
replicate core data and exchanges can package and provide both core
and non-core data together. NYSE and Direct Edge, as registered
exchange operators, are among only four major competitors supplying
real-time proprietary equity data products derived from trading
activities.
Antitrust analysis must also consider the geographic dimensions
of competition. Here, the relevant geographic markets exist within
the United States and are not affected by competition outside the
United States. The competitive dynamics for each of the three
markets is distinctly different outside the United States.
C. Competitive Effects
NewCo would have the incentive and ability to significantly
influence the competitive conduct of Direct Edge through ISE's
voting interest, governance rights, or other shareholder rights
under corporate law, like the right to file shareholder derivative
suits. NewCo would likely use its influence to induce Direct Edge to
compete less aggressively, to coordinate Direct Edge's conduct with
the NYSE exchanges, or to disrupt day-to-day business activities at
Direct Edge.
NewCo's presence on the Direct Edge boards would chill
discussion of head-to-head competition with the NYSE stock
exchanges. Direct Edge was formed, in part, by a group of broker-
dealers intending to constrain the two large stock exchange
operators in the United States, NYSE and NASDAQ. The broker-dealer
owners of Direct Edge, and others, can and do turn their trades to
Direct Edge when NYSE or NASDAQ fails to compete aggressively.
Finally, NewCo also would gain access to non-public,
competitively sensitive information about Direct Edge. This access
would likely enhance NewCo's ability to coordinate the behavior of
the NYSE and Direct Edge exchanges, or make the accommodating
responses of NYSE faster and more targeted. And if Direct Edge
gained access to competitively sensitive NYSE information, it would
further elevate the risk of coordinated effects.
Finally, even if it were unable to influence Direct Edge, NewCo
would likely have, as a result of the partial ownership interest in
Direct Edge, a reduced incentive to direct the NYSE exchanges to
compete as aggressively against the Direct Edge exchanges. Since
NewCo would share Direct Edge's losses inflicted by the NYSE
exchanges, this may lead NewCo to behave in ways that would reduce
those losses.
Supply responses from competitors or entry of potential
competitors in any of the relevant markets would not prevent the
likely anticompetitive effects of the proposed merger. The merged
firm would possess significant advantages that any new or existing
competitor would have to overcome to successfully compete with the
merged firm. Entrants face significant entry barriers including
hurdles of reputation, scale and network effects to successfully
challenge the incumbents in the markets for displayed equities
trading services, listing services for ETPs, and real-time
proprietary equity data products.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The proposed Final Judgment is designed to preserve competition
in displayed equities trading services, listing services for
exchange-traded products, and real-time proprietary equity data
products by restricting NewCo's ability to influence Direct Edge and
by eliminating NewCo's equity stake in Direct Edge. The proposed
Final Judgment has two principal requirements: (1) the complete
divestiture of Defendants' equity stake in Direct Edge, and (2) the
immediate suspension of Defendants' ability to participate in the
governance or business of Direct Edge. The proposed Final Judgment
also has several sections designed to ensure its effectiveness and
adequate compliance. Each of these sections is discussed below.
Before closing the DB-NYSE transaction, the proposed Final
Judgment requires the Defendants provide a written plan explaining
the steps they will take to render DB's interest in Direct Edge
passive until such time as the divestiture occurs. Defendants must
also certify that the plan complies with all applicable laws and
that all voting, director, or other rights DB held have been
eliminated, except as otherwise been provided for in the order.
Within two calendar days of closing the transaction, any DB officer,
director, manager, employee, affiliate, or agent must resign from
the boards of all Direct Edge entities.
Further, from the date of the filing of the Final Judgment, the
Defendants are prohibited from suggesting or nominating any
candidate for election to the board of any Direct Edge entities or
having any officer, director, manager, employee, or agent serve as
an officer, director, manager, employee with or for any Direct Edge
entities. The Defendants are also prohibited from any participation
in a nonpublic meeting of any Direct Edge entities or in otherwise
receiving any nonpublic information from any Direct Edge employee or
board member, except to the extent necessary to fulfill the
provisions of the proposed Final Judgment or to fulfill financial
reporting obligations. The Defendants are further prohibited from
voting except to the extent necessary to fulfill the provisions of
the proposed Final Judgment, in which case they must vote their
shares in proportion to how the other owners vote.
The Defendants are also prohibited from using their ownership
interest in Direct Edge to exert any influence over it or to prevent
it from making any necessary changes to its corporate governance
documents to comply with the Final Judgment. The proposed Final
Judgment provides that the Defendants must continue to provide
regulatory and backup facility services to Direct Edge pursuant to
existing contracts, and requires that the Defendants implement a
firewall to prevent any inappropriate use of information gained by
the Defendants about Direct Edge's business as a result of those
contracts. The firewall requires that only the employees of the
Defendants specifically necessary to provide the agreed upon
services may receive any information from Direct Edge under those
agreements, and those employees are prohibited from using any such
information for any purpose other than providing the agreed upon
services. This provision will allow Direct Edge to continue to
receive its contracted services while reducing the opportunities for
the Defendants to misuse any information provided by Direct Edge
under the agreement. The anticipated effect of all these provisions
is to maintain Direct Edge as an independent and viable competitor.
The proposed Final Judgment provides a two-year period, which
the United States in its sole discretion may extend up to three
additional years, for Defendants to divest all equity ownership in
Direct Edge. The assets may be divested by open market sale, public
offering, private sale, private placement, or repurchase by Direct
Edge. If the assets are divested by private sale or private
placement the United States must, in its sole discretion, approve
the buyers of the assets. This provision ensures that the
divestiture itself does not create any competitive issues. To
maintain the complete independence of Direct Edge after the
divestiture, the proposed Final Judgment prohibits the Defendants
from financing any part of any purchase made pursuant to the Final
Judgment.
In the event that Defendants are unable to take the steps
required by the proposed Final Judgment to render their Direct Edge
interest passive or create a plan demonstrating their compliance
with the proposed Final Judgment, or do not accomplish the
divestiture as prescribed in the proposed Final Judgment, Section
VII of the Final
[[Page 81974]]
Judgment provides that the Court will appoint a trustee selected by
the United States to effect the divestiture upon the request of the
United States. If a trustee is appointed, the proposed Final
Judgment provides that Defendants will pay all costs and expenses of
the trustee. After his or her appointment becomes effective, the
trustee will file monthly reports with the Court and the United
States setting forth his or her efforts to accomplish the
divestiture. At the end of six months, if the divestiture has not
been accomplished, the trustee and the United States will make
recommendations to the Court, which shall enter such orders as
appropriate in order to carry out the purpose of the trust,
including extending the trust or the term of the trustee's
appointment.
The proposed Final Judgment lasts for ten years, and prohibits
the Defendants from acquiring any additional equity interest in
Direct Edge during that time. It also provides procedures for the
United States to access the Defendants' records and personnel in
order to secure compliance with the terms of the Final Judgment.
The proposed Final Judgment will eliminate the anticompetitive
effects of the acquisition by maintaining Direct Edge as an
independent and vibrant competitive constraint in displayed equities
trading services, listing services for exchange-traded products, and
real-time proprietary equity data products in the United States.
IV. REMEDIES APPLICABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that
any person who has been injured as a result of conduct prohibited by
the antitrust laws may bring suit in federal court to recover three
times the damages the person has suffered, as well as costs and
reasonable attorneys' fees. Entry of the proposed Final Judgment
will neither impair nor assist the bringing of any private antitrust
damage action. Under the provisions of Section 5(a) of the Clayton
Act, 15 U.S.C. Sec. 16(a), the proposed Final Judgment has no prima
facie effect in any subsequent private lawsuit that may be brought
against Defendants.
V. PROCEDURES APPLICABLE FOR APPROVAL OR MODIFICATION OF THE PROPOSED
FINAL JUDGMENT
The United States and Defendants have stipulated the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding
the proposed Final Judgment. Any person who wishes to comment should
do so within 60 days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this
period will be considered by the United States, which remains free
to withdraw its consent to the proposed Final Judgment at any time
prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court and
published in the Federal Register.
Written comments should be submitted to:
James J. Tierney, Chief, Networks & Technology Enforcement Section,
Antitrust Division, United States Department of Justice, 450 Fifth
Street, NW., Suite 7100, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the
Court for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
The United States considered, as an alternative to the proposed
Final Judgment, seeking preliminary and permanent injunctions
against Defendants' transaction and proceeding to a full trial on
the merits. The United States is satisfied, however, that the relief
in the proposed Final Judgment will preserve competition in the
markets for displayed equities trading services, listing services
for exchange-traded products, and real-time proprietary equity data
products. Thus, the proposed Final Judgment would protect
competition as effectively as would any remedy available through
litigation, but avoids the time, expense, and uncertainty of a full
trial on the merits.
VII. STANDARD OF REVIEW UNDER THE APPA FOR PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a 60-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. Sec. 16(e)(1). In making that
determination, the Court, in accordance with the statute as amended
in 2004, is required to consider:
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. Sec. 16(e)(1)(A) & (B). In considering these
statutory factors, the Court's inquiry is necessarily a limited one
as the United States is entitled to ``broad discretion to settle
with the Defendant within the reaches of the public interest.''
United States v. Microsoft Corp., 56 F.3d 1448, 1461 (DC Cir. 1995);
see generally United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1
(D.D.C. 2007) (assessing public interest standard under the Tunney
Act); United States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ]
76,736, 2009 U.S. Dist. LEXIS 84787, No. 08-1965 (JR), at *3 (D.D.C.
Aug. 11, 2009) (noting that the court's review of a consent judgment
is limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanism to enforce the final judgment are clear and
manageable'').\1\
---------------------------------------------------------------------------
\1\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for a court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
Under the APPA a court considers, among other things, the
relationship between the remedy secured and the specific allegations
set forth in the United States's complaint, whether the decree is
sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the
public.'' United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir.
1988) (citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th
Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; United States
v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009
U.S. Dist. LEXIS 84787, at *3. Courts have held that:
[t]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is the one that will best serve society,
but whether the settlement is `within the reaches of the public
interest.' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\2\ In
determining whether
[[Page 81975]]
a proposed settlement is in the public interest, a district court
``must accord deference to the government's predictions about the
efficacy of its remedies, and may not require that the remedies
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp.
2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for
courts to be ``deferential to the government's predictions as to the
effect of the proposed remedies''); United States v. Archer-Daniels-
Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the
court should grant due respect to the United States's prediction as
to the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case).
---------------------------------------------------------------------------
\2\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.' '').
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In addition, ``a proposed decree must be approved even if it
falls short of the remedy the court would impose on its own, as long
as it falls within the range of acceptability or is `within the
reaches of public interest.' '' United States v. Am. Tel. & Tel.
Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted)
(quoting United States v. Gillette Co., 406 F. Supp. 713, 716 (D.
Mass. 1975)), aff'd sub nom. Maryland v. United States, 460 U.S.
1001 (1983); see also United States v. Alcan Aluminum Ltd., 605 F.
Supp. 619, 622 (W.D. Ky. 1985) (approving the consent decree even
though the court would have imposed a greater remedy). To meet this
standard, the United States ``need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, the Court's role under the APPA is limited to
reviewing the remedy in relationship to the violations that the
United States has alleged in its complaint, and does not authorize
the court to ``construct [its] own hypothetical case and then
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459;
see also InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he `public
interest' is not to be measured by comparing the violations alleged
in the complaint against those the court believes could have, or
even should have, been alleged.''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review
the decree itself,'' and not to ``effectively redraft the
complaint'' to inquire into other matters that the United States did
not pursue. Microsoft, 56 F.3d. at 1459-60. Courts ``cannot look
beyond the complaint in making the public interest determination
unless the complaint is drafted so narrowly as to make a mockery of
judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to
preserve the practical benefits of utilizing consent decrees in
antitrust enforcement, adding the unambiguous instruction that
``[n]othing in this section shall be construed to require the court
to conduct an evidentiary hearing or to require the court to permit
anyone to intervene.'' 15 U.S.C. Sec. 16(e)(2). This language
effectuates what Congress intended when it enacted the Tunney Act in
1974, as Senator Tunney explained: ``[t]he court is nowhere
compelled to go to trial or to engage in extended proceedings which
might have the effect of vitiating the benefits of prompt and less
costly settlement through the consent decree process.'' 119 Cong.
Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the
procedure for the public interest determination is left to the
discretion of the Court, with the recognition that the court's
``scope of review remains sharply proscribed by precedent and the
nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at
11.\3\
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\3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should * * * carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6
(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
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VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the
meaning of the APPA that the United States considered in formulating
the proposed Final Judgment.
Dated: December 22, 2011
Respectfully submitted,
FOR PLAINTIFF
UNITED STATES OF AMERICA
/s/Alexander P. Okuliar
-----------------------------------------------------------------------
Alexander P. Okuliar (DC Bar No. 481103)
Attorney
U.S. Department of Justice
Antitrust Division
450 Fifth Street NW., Suite 7100
Washington, DC 20530
Tel: (202) 532-4564
Fax: (202) 307-9952
Email: alexander.okuliar@usdoj.gov.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
DEUTSCHE B[Ouml]RSE AG,
and
NYSE EURONEXT,
Defendants.
Case:
Assigned To:
Date:
Description: Antitrust
[Proposed] Final Judgment
WHEREAS, Plaintiff United States of America (``United States'')
filed its Complaint on December 22, 2011, the United States and
Defendants Deutsche B[ouml]rse AG and NYSE Euronext, by their
respective attorneys, have consented to entry of this Final Judgment
without trial or adjudication of any issue of fact or law, and
without this Final Judgment constituting any evidence against or
admission by any party regarding any issue of fact or law;
AND WHEREAS, Defendants agree to be bound by the provisions of
the Final Judgment pending its approval by the Court;
AND WHEREAS, the United States requires that Defendants agree to
undertake certain actions and refrain from certain conduct for the
purpose of remedying the loss of competition alle