Deutsche Boerse AG and NYSE Euronext could spin off parts of their derivatives arms to create a third-party competitor as a way to allay anti-trust concerns about their $9 billion merger, two sources familiar with the Boerse's thinking said.

A spin-off would allow Deutsche Boerse and NYSE to argue they are helping to increase competition in derivatives trading, rather than creating a monopoly player, the sources said.

It would also go beyond disposal ideas they put forward last month to assuage regulatory concerns about their merger. Yet a decision has not yet been taken on whether to go ahead with the proposal, which is one of several options, they added.

Gregor Pottmeyer, Chief Financial Officer of Deutsche Boerse on Wednesday said, The industrial and economic logic of this merger should not be threatened by antitrust requirements. We want this transaction, but not at all costs.

NYSE Euronext was not immediately available for comment.

The Frankfurt-based exchange operator will decide in the next week what further steps could be made to help the merger pass regulatory hurdles, but a person familiar with the deal said European Union concerns meant it had no more than a 50/50 chance of going ahead.

EU regulators met the exchanges on Tuesday and discussed whether rivals and users felt their proposals addressed antitrust issues.

Concerns about derivatives remains a key focus of the Commission, a person familiar with the talks said.

NYSE and Deutsche Boerse will stop short of selling either Eurex or Liffe, but acknowledge further concessions could be made.

The Boerse and NYSE have not played their final hand in the poker game with the European regulators, one of the people said. There is still this ace up the sleeve.

There are however reservations within the Boerse that an established competitor could snap up his new company, potentially exacerbating pressure on margins and on the Boerse's established position in derivatives, this person said.

VIABLE BUSINESS

To meet European Union competition concerns, companies carving out businesses need to ensure the new unit will be a viable, stand-alone business and the spin-off will have to be divested once the merger is completed.

This would be a creative proposal. It remains to be seen whether the European Union is satisfied with such an idea, said

Christian Muschick, an analyst at Silvia Quandt research.

In November the Boerse and NYSE offered concessions which were designed to be proportionate to the concerns.

The two exchange operators proposed to sell significantly overlapping parts of their single-stock equity derivatives businesses in key markets, and give new, innovative rival products access to Deutsche Boerse's Eurex derivatives clearing house.

European competition authorities have expressed concern that the combination of Deutsche Boerse's Eurex and NYSE Euronext's Liffe will give the merged entity a monopoly over European listed derivatives trading.

This year Eurex and Liffe have accounted for 97 percent of European stock futures trading and 93.7 percent of stock options trading, Federation of European Securities Exchanges data shows.

The exchanges have argued their market share is much lower if the vast over-the-counter (OTC) market is included in the assessment of the derivatives market.

But their merger plans were dealt a blow when the European Union decided to exclude OTC derivatives from its review of the merger.

(Additional reporting by Andreas Kroener, Foo Yunchee and Luke Jeffs; Editing by David Holmes)

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