A senior U.S. Treasury official said he did not see any national security concerns with Deutsche Boerse’s planned takeover of NYSE Euronext.
The deal between the German market and the iconic New York-based exchange must win approval from the Securities and Exchange Commission and the Justice Department’s antitrust division.
“I don’t have any national security concerns on this at the moment,” Deputy Treasury Secretary Neal Wolin told the Reuters Future Face of Finance Summit on Monday.
The chief executive of NYSE has said he expects the deal to also be reviewed by a U.S. Treasury-led national security panel.
Security concerns about exchanges resurfaced recently after Nasdaq said it found “suspicious files” on its U.S. computer servers and determined that hackers could have affected one of its Internet-based client applications.
After the incident, SEC Chairman Mary Schapiro said her agency sought information from all the exchanges to ensure they had adequate protections in place.
The Committee on Foreign Investment in the United States (CFIUS) reviews foreign investments to ensure they pose no threat to national security and has the power to block business deals.
Chaired by Treasury Secretary Timothy Geithner, the panel is comprised of eight other voting members, including the secretaries of state, defence, commerce and homeland security.
Experts familiar with the CFIUS process said they did not expect the NYSE and Deutsche Boerse deal to face high hurdles with the national security panel, given that in 2007 the group approved a transaction between Nasdaq OMX and Borse Dubai.
The state-owned Dubai stock exchange paid for stakes in Nasdaq and the London Stock Exchange and has since sold about half of its investments in Nasdaq because it needs to repay debts.
At the time, CFIUS was very concerned with information security and whether the Nasdaq would become more vulnerable because of its ties to the foreign exchange, said one source with knowledge of the review.
The panel wanted to make sure that the tie-up would not leave the New York-based exchange prone to computer hacking.
It is not known when the exchanges will decide to submit their deal for a CFIUS review.
The wave of consolidation among global exchanges has caught the eye of the U.S. Financial Stability Oversight Council, which was created under the Dodd-Frank legislation to monitor risks across the financial system.
Deutsche Boerse’s plan to buy the NYSE and the London Stock Exchange’s agreement to buy Canadian exchange the TMX Group has set off a merger and acquisition frenzy among exchanges.
“The council as a whole I think it is fair to say is keenly focussed on all developments in the financial services sector that are sort of bigger than a bread basket,” said Wolin.
