European competition regulators are set to focus their investigation into the proposed merger of Deutsche Börse AG and London Stock Exchange Group Plc on the tie-up's effect on the derivative clearing business, the Financial Times reported Dec. 12, citing "three people familiar with the talks."

Regulators are set to announce during the week of Dec. 12 their approach to evaluating the deal for competition concerns, with the newspaper's sources saying areas including equities trading and clearing, exchanged-traded funds, indexes and fixed-income trading are no longer a source of concern. A final competition decision is due by March 6, 2017.

Management at both firms have conceded in private that a tough regulatory stance on derivatives clearing would be a significant hurdle to a deal, according to the report. The merger proposal hinges in part on the benefits of merging LSE's LCH business with Deutsche Börse's Eurex, particularly with respect to reduced trading costs for the clearing houses' biggest customers.

The companies have offered to sell LSE's French clearing business, LCH.Clearnet SA, with Euronext NV remaining in contention to buy it, "three people familiar with the talks" told the FT. Meanwhile, interest in that business from CME Group Inc. and Nasdaq Inc. has cooled, the report added.