NYSE Euronext beat expectations with a 25 per cent rise in second-quarter profits, boosted by new initiatives to combat fierce competition in traditional share trading.
The trans-Atlantic exchange operator said a surge in derivatives trading helped it earn $184m (£115m) in the period – or 64 cents per share – up from $132m a year ago, while revenue climbed seven per cent. Analysts on average had expected NYSE Euronext to earn 59 cents per share on $659.6m in revenue.
Its derivatives segment accounted for 35 per cent of net revenues and 49 per cent of operating income, up from 28 and 32 per cent from the year-earlier period respectively, in a sign that the push into that business is paying off. However, the firm warned that it may now be January before its US futures arm can launch new interest rate products because regulators have to first approve its plans for a new clearing house. NYSE Euronext had planned to introduce the new products in the third quarter as part of its expansion of the US derivatives business.
NYSE Euronext and other established exchanges have seen profit margins for traditional share trading shrink as upstarts like BATS and Chi-X fight for market share. And the decline in the traditional bread-and-butter business of cash equities trading continued in April to June. Revenues fell 11 per cent from a year ago to $321m due to price reductions in Europe in 2009 and lower US volumes and market share in cash trading. But on a quarterly basis, the firm’s fortunes recovered. Its US cash transactions business grew on the back of a 26 per cent rise in daily volumes and larger market share.
NYSE Euronext’s results include a pre-tax gain from disposals of $54m. Revenue got a boost from a 10 per cent increase in transaction and clearing revenues, mostly related to derivatives trading. A further $26m, or 53 per cent, increase in technology services revenue also boosted quarterly activity.
City A.M. Reporter