Not much surprise at

href="http://online.wsj.com/article/SB10001424052970203711104577198980910364756.html"

target="_blank">this week's news then, but the

rationale for blocking the deal seems odd. Firstly, and whatever

they may claim, Brussels did take an overly

Eurocentric view. Just call the CME in Chicago and ask where

Liffe and Eurex appear on its list of major competitors.

Secondly, the Commission claims that LIFFE and EUREX themselves

compete but, in fact, they are effectively two 'mini-monopolies'

operating at opposite ends of the yield curve with almost zero

overlap in their products. So it's not as if the competitive

landscape for European derivatives was particularly vibrant

anyway. But the biggest issue concerns how the Commission

calculated the potential market share for the combined entity.

How could they exclude OTC derivatives in their sums when just

along the corridor they are also introducing regulation aimed at

pushing the OTC and exchange-traded worlds together?

That is not to say that the decision was necessarily

wrong, but the reasoning behind it doesn't seem to stack up. As

one of our previous polls showed, the market was pretty evenly

divided on the issue but with a significant number of "don't

knows".

For these swing voters, maybe it's all

about capital efficiency. Ever since the financial crisis,

capital has become an increasingly valuable commodity as market

regulators around the world are steadily upping the requirements.

Would a combined entity have been able to offer more efficient

use of capital through margin offsets or otherwise netting

positions for traders? Or, would a combined entity have been able

to drive up prices and exploit its position without exchanges

like the CME or NASDAQ jumping in?

Personally,

I think Brussels might end up adding this decision to the

"Not sure we got it right" pile.