Top executives at Deutsche Boerse and NYSE Euronext sent a letter to European Commissioners emphasizing the European nature of a combined company, in a bid to salvage their deal after antitrust regulators threatened to block it.

The letter was sent by NYSE Euronext Chief Executive Duncan Niederauer and Deutsche Boerse chief Reto Francioni on January 13, and was addressed to European Union Commission President Jose Manuel Barroso and also copied to the remaining 26 commissioners, a copy of the letter seen by Reuters shows.

In it, executives from Deutsche Boerse and NYSE Euronext expressed profound concern that blocking the takeover would represent a serious missed opportunity at a critical juncture for Europe.

Earlier this month, European Commission antitrust regulators signaled they would recommend blocking a merger over concerns about creating a dominant player in derivatives, a source told Reuters.

Deutsche Boerse and NYSE have now focused their efforts to convince the so-called college of 27 commissioners that EU antitrust commissioner Joaquin Almunia's conclusions are wrong, and that approving the deal would help advance EU interests.

The transaction will facilitate the effective implementation of European Union financial services regulation and offer a unique opportunity to deepen regulatory cooperation and reduce the risk of regulatory arbitrage, the letter said.

If this combination is prohibited by the College of commissioners, the global consolidation of exchanges might very well shift the balance towards countries favoring 'light touch' regulation, which would severely endanger the European Commission's agenda, the letter continued.

In the letter Deutsche Boerse Chief Reto Francioni and NYSE Euronext head Duncan Niederauer said the new company would be domiciled in the European Union and be strictly under European supervision.

Furthermore, 80 percent of the governance of the company and

70 percent of the revenues would be generated within the European Union, the letter said.

The new company would accelerate the integration of Europe's capital markets, and serve as the vanguard for the implementation of European Union and G20 regulatory reforms, the letter said.

The college of commissioners will give a formal ruling by February 9.

Both executives again emphasized that a review of the deal should look at the derivatives market from a global, rather than just European perspective, and should include the over-the-counter market.

Contrary to the views expressed by the Directorate General for Competition, effective competition will continue to exist, in particular due to over-the-counter trading, the global nature of the derivatives market, and our strong global rivals.

For instance, CME, the largest derivatives exchange in the world, competes with us directly in Europe, has more employees in Europe than NYSE Liffe and a larger interest rate derivative portfolio than our combined businesses.

The letter said Europe would be disadvantaged given that the U.S. had approved the merger of Chicago Mercantile Exchange with the Chicago Board of Trade in 2007 to create CME.

The European Commission has demanded Deutsche Boerse and NYSE sell either the Eurex derivatives arm or Liffe, a move that both exchanges have ruled out so far.

German union representatives on Wednesday said they would be pleased if the European authorities blocked the deal. We had feared there would be grave consequences for Frankfurt as a financial centre if the deal succeeded.

(This story was corrected in second paragraph, corrects number of commissioners to 26, from 27)

(Reporting By Foo Yun Chee in Brussels; writing by Edward Taylor; Editing by Helen Massy-Beresford)

NYSE Euronext