D.Boerse-NYSE deal faces antitrust snags

* European antitrust concerns over profitable derivatives

* Questions from past proposed deals ‘not yet resolved’

* Virtually no criticism from Washington lawmakers

* Regulators aim to preserve roles of Frankfurt, Paris

* Hong Kong bourse open to deals as frenzy takes hold (Adds Maloney, updates links)

By Edward Taylor and Jonathan Spicer

FRANKFURT/NEW YORK, Feb 10 (Reuters) – Deutsche Boerse AG’s (DB1Gn.DE) planned takeover of NYSE Euronext (NYX.N) faces intense scrutiny from German regulators and European antitrust authorities, potentially imperiling the blockbuster exchange tie-up.

It could also run into hurdles in Washington as U.S. lawmakers and regulators consider whether they are prepared to allow the citadel of American capitalism to fall into foreign hands, although there has been virtually no public criticism in the United States as yet.

The companies said on Wednesday they are in “advanced talks” to join forces and create an exchange operator with unprecedented global reach and — most worrisome for regulators — a dominant grip on Europe’s lucrative derivatives markets.

While executives from Frankfurt and New York have hatched a tentative agreement, there are still obstacles that must be overcome — the same ones that scuppered past attempts to combine Deutsche Boerse with Paris-based Euronext.

“These key questions are not yet resolved,” a senior German financial source told Reuters on Thursday.

A financial regulator from the German regional state of Hesse — which must approve the deal — said it would seek to preserve the interests of Frankfurt as a financial center. Likewise, French regulator AMF said it would be vigilant about preserving Paris’ status. [ID:nLDE7191TT]

Once notified, European Commission competition authorities initially have 25 days to decide whether to approve a deal but can also seek an in-depth investigation that can take some months including extensions.

“The biggest danger of a failure for the deal at this point is antitrust concerns in the derivatives market, because Eurex and Liffe would have a market share of more than 90 percent in Europe,” said Stefan Brugger, a fund manager at Union Investment in Frankfurt. “We consider these concerns as overdone,” he added.

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