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The Globe and Mail

NYSE profit hit by weak trading, failed merger

Specialist Traders wear jackets with the ticker symbol for TD Ameritrade to celebrate the transfer of the company's stock to the New York Stock Exchange, April 25, 2012.


NYSE Euronext Inc. said its profits fell b y 44 per cent in the first quarter due to a slowdown in trading and costs from its failed merger with Deutsche Boerse.

The New York exchange said it earned $87-million (U.S.), as revenue fell 17 per cent to $952-million in the first quarter,

"Our first quarter results reflect the challenging operating environment which carried over into 2012 and will continue to result in near-term headwinds," said Duncan Niederauer, Chief Executive of NYSE Euronext.

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The exchange's derivatives trading unit was hardest hit, with trading activity at its London-based exchange Liffe down 28 per cent for the period, as derivatives revenue for the group fell a quarter to $176-million.

Share trading and listings was down 7 per cent to $304-million while NYSE's smaller technology and data business was up 4 per cent to $121-million for the quarter.

The New York exchange also said it incurred $31-million of merger and exit costs, including $16-million from its failed merger with Deutsche Boerse.

NYSE canned the $7.4-billion merger in early February after the deal was rejected by European antitrust authorities.

The exchange has since refocused its attention on new market opportunities such as clearing and pledged last month to create its own clearing house for futures transactions, and move away from its current provider LCH.Clearnet.

NYSE said its British futures business will move to the new clearing facility in the summer of next year while its European futures business will follow in the first quarter of 2014.

The move to launch its own clearing unit next year and switch off LCH at that point comes as NYSE's rival, the London Stock Exchange, forges ahead with its plan to buy LCH in the fourth quarter of this year.

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"Our clients have long asked for a consolidation of clearing arrangements and the strength of our European derivatives business allows us to deliver meaningful benefits for them in the form of capital efficiencies and savings," said Mr. Niederauer last month.

Clearing houses, which sit between trading firms, insulating them against the possibility of a company default, are set to take on greater importance next year when regulation will take effect forcing more asset classes to use clearing.

Policy-makers in the United States and Europe are keen to force the vast over-the-counter derivatives market to use clearing houses to tackle some of the problems exposed by the collapse of Lehman Brothers in 2008.

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