By Whitney Kisling and Nandini Sukumar
Feb. 9 (Bloomberg) -- NYSE Euronext, the world’s largest owner of stock exchanges, posted profit of $172 million for the fourth quarter as derivatives trading buoyed revenue and the company cut expenses after a $1.59 billion writedown last year.
Net income was 66 cents a share, compared with a loss of $1.34 billion, or $5.06 a share, a year earlier, the New York- based company said today in a statement. Excluding some items, profit rose to 58 cents from 52 cents in the fourth quarter of 2008 and compared with the 48-cent average of 16 analyst estimates in a Bloomberg survey.
NYSE is lowering expenses and expanding beyond U.S. stocks after losing market share in equity trading to alternative platforms such as Direct Edge Holdings LLC and Bats Global Markets. The company plans to keep cutting jobs through this quarter and now depends on derivatives trading for a third of revenue. NYSE in 2007 purchased Paris-based Euronext NV, Europe’s second-largest stock exchange and the owner of the London-based Liffe derivatives market.
“What the numbers show is that NYSE is no longer just a stock exchange and no longer just New York-based,” said Ruben Lee, chief executive officer of the Oxford Finance Group and author of a report on market structure governance. “Most of the revenue comes from derivatives trading and Liffe, based in London, and Euronext are significant drivers.”
Derivatives Trading
The exchange made 28 percent of its revenue from derivatives trading in the quarter, 17 percent from listings and 15 percent from market data. Equity-related trading in Europe accounted for 13 percent of sales and the U.S. business contributed 9 percent.
For the full-year, fixed operating expenses fell three percent to $1.68 billion. NYSE Euronext said the number of employees fell to 3,231 as of Dec. 31, down 14 percent from a year ago.
Global derivatives trading revenue, which includes the European and U.S. businesses, rose to $182 million from $150 million in the fourth quarter of 2008. Revenue from European derivatives climbed 23 percent to $146 million and U.S. derivatives increased by $5 million to $36 million.
Options Trading
NYSE overtook the Chicago Board Options Exchange last month with the largest share of trading in U.S. options on stocks and exchange-traded funds.
Revenue from global cash markets fell 38 percent to $139 million. European cash equities trading revenue fell to $80 million. U.S. cash equities revenue slipped to $59 million in the fourth quarter and rose from the third quarter of 2009.
“The decrease in net revenue for all periods was driven primarily by declines in global cash equities trading volumes from the record levels achieved in 2008 and net pricing reductions,” the exchange said today.
In the fourth quarter, NYSE claimed about 28 percent of the U.S. equity market, down from about 34 percent for the same period in 2008. The exchange reported yesterday that its share slid to 26.5 percent in January, making it the only one of the four main stock markets to post a decline.
Segment Reporting
NYSE today said it will change the segment reporting in the first quarter of 2010 to reflect the way the business is now managed. The exchange has three global business units including Derivatives, Cash Equities & Listings and Technology & Information Solutions.
“As we move into 2010, our new initiatives are gaining traction, we are aggressively moving forward with the NYFIX integration and we expect to realize the full-year benefit from cost reduction programs launched in 2009,” Chief Financial Officer Michael Geltzeiler said in the statement.
Shares of NYSE Euronext fell 2.3 percent to $22.50 at 4 p.m. in New York yesterday. Before today, the stock has slipped 11 percent this year, compared with a 13 percent jump in the FTSE/Mondo Visione Exchanges Index that tracks 18 bourses.
Nasdaq OMX Group Inc., operator of the second-largest U.S. stock exchange, reported profit excluding some items yesterday that beat forecasts. The shares slid 4 percent after the company forecast operating expenses for 2010 that exceeded estimates from analysts including Atlanta-based Mike Vinciquerra of BMO Capital Markets.
To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.
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