2nd NYSE CEO Sees High-Speed Firms Heading For Dark Pools
First Published Monday, 30th April 2012 01:33 pm - © 2012 Dow Jones
--Net profit down 44% amid slower trading, merger-related expenses
--Transaction revenue down 25% as investors keep to sidelines
--4.3 million shares repurchased during first quarter
(Updates with CEO comments about high-speed trading, adds background.)
By Jacob Bunge
Of Dow Jones NEWSWIRES
Regulatory scrutiny around high-speed trading strategies appears to be pushing the business away from stock exchanges and into lesser-regulated platforms such as "dark pools," according to the top executive of NYSE Euronext (NYX).
So-called high-frequency trading firms' move into other asset classes and geographies also seems to be gaining momentum from growing rhetoric on the method of rapidly trading shares and other products, said Duncan Niederauer, chief executive of the Big Board's parent company.
"I do think they have shifted some of their volume," Niederauer said Monday on a conference call discussing NYSE's first-quarter financial results, referring to electronic trading firms.
High-speed traders' pullback from registered exchanges like those run by NYSE Euronext adds to headwinds facing the market operator, which on Monday reported a 44% net profit decline in the first quarter driven by a widespread drought in trading.
The company's revenue from transaction fees fell by one-quarter from the year-earlier period as investors generally stuck to the sidelines of stock markets in the U.S. and Europe, while currency losses and charges from the failed merger with Germany's Deutsche Boerse AG (DBOEF, DB1.XE) also weighed on results.
Shares of NYSE Euronext were down 1.9% to $26.55 in light pre-market trading on Monday.
Turnover in U.S. listed stocks dipped to about 6.8 billion shares traded on average each day in the first quarter of 2012, representing the market's slowest quarter in the past four and a half years. Investors have pulled out of mutual funds and trimmed their own trading amid fears driven by the European debt crisis and confidence-rattling events like last summer's dramatic market swings.
"We knew and expected this would be a challenging quarter for us, given the difficult environment," said Niederauer.
Niederauer said he saw a "more normal environment" potentially returning in 2013 or 2014.
For the first quarter of 2012, NYSE Euronext's net profit fell to $87 million from $155 million a year earlier, while revenue slipped to $601 million from $679 million. Operating earnings per share were 47 cents, below analysts' expectation of 48 cents a share.
Revenue related to information services and technological solutions increased 4% in the first quarter to $121 million. The company, which collects fees in U.S. dollars, euros and pounds sterling, took a $2 million hit from currency fluctuations over the quarter.
The company declared a cash dividend of 30 cents a share for the second quarter.
NYSE Euronext said it bought back 4.3 million shares at an average price of $29.73 a share in the first quarter.
NYSE Euronext said costs for the quarter were down 3% as it looked to "streamline" its operation. Those efforts have included exiting some investments, including a joint venture to develop U.S. and Asian carbon markets.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; email@example.com
-Noemie Bisserbe contributed to this article.
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