The EU’s competition commissioner has drawn a line in the sand, and so has the NYSE and Deutsche Bourse. Neither one appears willing to back down, which means we’re likely in for a protracted legal war. In the view of some, given the uncertain fate of the deal in European court, it would be far better for the deal to die quickly.

The big issue remains the combined futures exchange. The EU has grave concerns that the tie-up of Liffe and Eurex will deal a serious blow to competition in Europe. The NYSE, however, argues that the proper analytical framework should be expanded a nd that the future exchange industry is now global, which means that the Chicago-based CME Group will provide aggressive competition around the world. Both the NYSE and Deutsche Bourse were willing to agree some concessions. They agreed to end overlapping contracts, agree to maintain some trading fees, and allow rivals to clear via Deutsche Börse's apparatus. But the EU crossed the line when it asked both to sell portions of their derivatives exchange business. That in many ways was the whole point of the deal.

The dispute seems to be turning personal. According to Deal Book: “That issue came to a head at a meeting in Brussels on Jan. 9, when Mr. Joaquin Almunia (EU competition commissioner) asked Duncan L. Niederauer, the chief executive of NYSE Euronext, to sell a derivatives exchange known as Liffe, based in London, or withdraw from the deal. ‘Of course not,’ Mr. Niederauer told Mr. Almunia, according to a person with direct knowledge of meeting who asked not to be identified because the proceedings are still continuing. “There’s no way we’ll withdraw,”

Mr. Niederauer told Mr. Almunia that the NYSE Euronext has reason to hope, as the EU competition has suffered several setback in court in recent years, as the European Court of Justice has reversed some of its commission’s decisions to block mergers on anti-trust ground. For Neiderauer, the stakes are high. He’s all-in so to speak. The worst outcome would be for the NYSE to wage a costly, distracting legal war---only to see the deal nixed anyway.

At that point, we’ll likely hear calls for him to step down, and allow new leadership to move the company into the future. Neiderauer bet his legacy on the deal. Shareholders have certainly suffered thus far, and there is a limit to their patience. Some would no doubt like the NYSE to give up now, and focus on rebuilding shareholder value as an independent exchange operator. -Jim