(185) The Notifying Parties both offer what they define as global connectivity services, meaning the provision of physical infrastructure allowing market participants to be connected to a trading venue. These include the provision of co-location services (rental of space at the data centre where a venue's matching engine is located), proximity hosting (at a data centre close to the matching engine's location)87 and network connectivity services (which are other points of access to a trading venue).88The closer a trader is to the matching engine, the lower the latency89as well as typically the higher the cost.
(186) The Notifying Parties consider that since global connectivity services supplied by an exchange are unique to that trading venue, there is by definition no overlap between the
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These products and services in this category help exchanges and other trading venues to perform trade- related actions (for instance customer access interface, trading engines, and data distribution), as well as post-trade services such as clearing and settlement. According to the Notifying Parties, trading venues either develop their own proprietary exchange solutions system (so-called “self-supply”) or contract with a third party supplier (generally either a trading venue or specialist IT company) for the provision of exchange solutions services.
85
,[…]*.
86
Chi-X Europe, response to question 153 of Q 3 – Questionnaire to competitors, [...]*.
87
As the Notifying Parties are not active in providing proximity hosting services, these will not be examined further (see Section 6.18 of IT section of the Form CO).
88
These may be provided either by the trading venue itself or by third party connectivity providers, i.e. the so-called Application Service Providers, "ASPs" and Extranet Service Providers, "ESPs", that provide customers with access to the trading venue via their own physical infrastructure networks.
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activities of the Notifying Parties within this segment as the services that are provided by DB and NYX are not substitutable.
(187) As regards the co-location services segment, whilst NYX has a large new data centre in Basildon, UK, DB uses a third party data centre operated by Equinix to host its servers and […]* – it therefore does not currently offer co-location services directly itself. Furthermore, the first phase market investigation generally indicated that customers seek access to the trading venues of both Parties, meaning that, if they make use of such services at all, they are in most cases customers to both Parties. This would tend to confirm the Notifying Parties' claim that their offerings are not interchangeable and that they are therefore complementary on the demand side. This suggests that co-location services are indeed likely to be venue specific and not substitutable.
(188) Nonetheless, the first phase market investigation revealed concerns from certain market players that, following the notified transaction, DB would change the location of its matching engine to the NYX data centre in Basildon, and that this would allow the merged entity to charge higher prices.
(189) […]* the fact that the services currently on offer by each of the Parties are not substitutes implies that there is no reason why the merger would provide the Parties with the means to increase overall prices for these services over those that prevail pre- merger. The submissions made by third parties in this regard are neither sufficiently detailed nor based on substantiated evidence and it can therefore be excluded that such effects would arise as a result of the merger.90
(190) As regards network connectivity services, DB is active in providing access to its own trading venues via Managed Network Services,91 whilst NYX is active in providing remote access points to a specific set of trading venues (mainly its own) via the platform SFTI. Network connectivity services to trading venues can also be provided by third party connectivity providers, namely so-called Application Service Providers, "ASPs" and Extranet Service Providers, "ESPs". Such players are customers of the Notifying Parties, obtaining co-location and/or network connectivity services and then providing their own customers with access to a number of trading venues via their own physical infrastructure networks.
(191) During the first phase market investigation, certain players raised concerns that, given the importance of the trading venues of the Notifying Parties, they would have an incentive to foreclose ASPs and ESPs from access to their connectivity services as the Notifying Parties would compete with those players in providing network connectivity services to third party trading venues.
(192) The Notifying Parties themselves have submitted that they do not consider themselves to compete with such ASP and ESP providers as they provide access only to their own trading venues, or to a very specific and limited set of trading venues beyond their own
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[Discussion of confidential information demonstrating that NYX and DB do not compete with respect to the provision of colocation and network connectivity services]*.
91
Given that DB provides and hosts the trading systems of the Irish Stock Exchange and of Wiener Borse AG, it also provides these two stock exchanges with network connectivity. These services account for very limited revenue.
trading venues and in any event merely as ancillary services to other main services being provided to such trading venues. On its SFTI Europe website, NYX refers to providing "comprehensive connectivity" to a "range of other trading [venues]" but according to information provided by the Notifying Parties, […]*. According to the Notifying Parties, these are services to which SFTI is connected given the prevailing business relationship with those venues and should therefore be considered as ancillary services, in particular as regards the supply of exchange solutions. In all cases, NYX argues that […]*. Finally, according to information provided by the Notifying Parties, only a very limited number of SFTI customers use these access arrangements for each of these third party trading venues, […]*.
(193) On the basis of the above, it can be concluded that NYX and DB are not currently active or competing for the provision of comprehensive network connectivity services.
(194) [Discussion on confidential information demonstrating that NYX and DB do not compete with respect to the provision of colocation and network connectivity services]*.
(195) [Discussion of confidential information demonstrating that NYX and DB do not compete with respect to the provision of colocation and network connectivity services]*, no merger-specific effect would arise.
(196) As a result, the Commission considers that the ability and incentives for the merged entity to foreclose access to DB's current trading venues, if any, will not change as a result of the merger and that therefore the concerns raised by the third parties in question have not been substantiated and are not likely to arise as a consequence of the proposed merger.
(197) In light of the fact that (a) access to one or more of the trading venues of one of the Notifying Parties does not appear to be substitutable with access to the trading venues of the other Party and (b) there is only a very limited, ancillary service offering of NYX and DB in the downstream market of network connectivity to third party venues, it is concluded that the notified transaction does not raise competition concerns with respect to the possible markets for exchange colocation and network connectivity services.
10. COLLATERAL MANAGEMENT