NYSE Euronext reported a 25 per cent rise in net profit for the first quarter on Tuesday, powered by higher derivatives trading and technology revenues which offset a decline in its traditional cash equity business.
“First-quarter results were driven by strong growth from our derivatives businesses and the first full-quarter’s impact of the NYFIX acquisition,” said Duncan Niederauer, chief executive officer of NYSE Euronext.
The latest quarterly results marked the first time that the operator of the New York Stock Exchange, Euronext markets in Europe and the NYSE Liffe derivatives platform generated more than half of its operating profit from trading futures and options.
The company reported a rise in net income to $130m, or 50 cents a share, compared with $104m (40 cents) a year earlier. Net income rose to 54 cents a share, excluding pre-tax merger expenses and exit costs.
Revenue grew 7 per cent to $645m, which was shy of an expected $653.3m and at mid-morning the stock was down 3 per cent at $32.03. The stock remains 27 per cent higher so far this year.
The exchange operator also revealed it had sold its stake in India’s National Stock Exchange for gross proceeds of $175m, three years after making a $115m investment in one of Asia’s fastest-growing markets. NYSE said proceeds from the sale would be used to pay down debt.
Mike Geltzeiler, chief financial officer, told the Financial Times that the investment in the Mumbai bourse had changed over time from a strategic holding to a purely financial stake and that the company decided the best policy was to sell its stake and pay down debt.
Derivatives net revenues increased by 44 per cent to $224m in the first quarter compared with the year before, boosted by higher trading and clearing volumes in Europe and the US.
Derivatives volumes in Europe rose 28 per cent year on year and were up 19 per cent on the fourth quarter. US options trading volumes rose 63 per cent year on year and were up 9 per cent compared with the fourth quarter.
In contrast, revenue from cash trading and listings fell 15 per cent in the first quarter to $312m as competition with alternative trading platforms in Europe and the US intensified. NYSE said US cash equities volume decreased 37 per cent year on year, but were flat on the fourth quarter.
The traditional equity cash sector comprises 48 per cent of the company’s net revenues, but derivatives is the fastest-growing segment, comprising 35 per cent of revenues in the first quarter, up from 26 per cent a year ago and 31 per cent in the fourth quarter.
Analysts praised the company’s efforts at diversifying into derivatives and technology to offset the decline in cash equities, but said more work needed to be done.
“Recent results have been in a step in the right direction as management continues to realise synergies and control expenses,” said Howard Chen, analyst at Credit Suisse.
“We balance this against our outlook for a pullback in industry-wide volumes and further competitive pressures. While NYX shares have had a significant year-to-date revaluation and dividend yield offers support, we anticipate it could take a few more quarters before material earnings power realisation,” he added.
In a separate announcement on Tuesday, the Financial Industry Regulatory Authority said it would assume responsibility for performing the market surveillance and enforcement functions at the NYSE, a move designed to streamline the oversight of US markets.
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