NYSE profit drops as trading slows
NYSE Euronext has posted a 12 percent fall in profits on slow share trading in Europe and the United States
Joseph Callaghan and Kevin Lucey investigate links between countries' credit rating changes and returns on domestic equity markets
The operator of share and derivatives trading venues earned $121 million, or 46 cents per share, in the third quarter, down from $138 million, or 53 cents. But the fall was smaller than expected on average by analysts.
“Our results in the third quarter reflect the impact of dampened transaction revenue due to slow overall industry volumes,” Chief Financial Officer Michael Geltzeiler said in a statement on Tuesday.
The sluggish trading volumes come at a time of increasing competition for NYSE Euronext’s European share trading business, which has lost market share over the past year.
Euronext has lost out to new rivals such as Chi-X Europe and Bats Europe which have eroded the French exchange’s share. It was trading 69.4 percent of French stocks in September compared with 74 percent last year, according to Thomson Reuters data.
Revenue slipped 3.5 percent to $599 million, in line with its rivals who have also shown patchy performance.
U.S. share trading revenue at Nasdaq OMX was down 21.9 percent in the third quarter, while share trading at the London Stock Exchange Group was down 2 percent for the five months to the end of September.
However, the performance of NYSE Euronext’s IT unit helped it beat analyst forecasts of 43 cents per share on $592 million in revenue, according to Thomson Reuters I/B/E/S.
“Cash volumes are down in… very challenging conditions. The technology business is doing well however and this underlines the importance of a diversified business model,” said Herbie Skeete, managing director of Mondo Visione.
NYSE Euronext shares fell 2.2 percent in Paris, where the stock traded in very light volumes. They have climbed 7 percent since September on the back of an uptick in share trading volumes and a broader market rise.
The exchange group said its equities trading and listing revenue was down 9 percent to $298 million for the three months to the end of September, while derivatives trading was off 5 percent to $188 million.
NYSE Euronext’s smaller technology business, which supplies trading systems to NYSE Euronext customers and smaller exchange groups, increased revenue 20 percent to $113 million.
But the exchange’s IT and data turnover may be under threat after a U.S. court of appeals last week quashed a NYSE Euronext request to let it continue to charge for its ArcaBook market data product.
