NYSE Euronext earns $184 million as derivatives revenue rises, restructuring charges drop

NYSE Euronext reports $184M profit for 2Q

PARIS — Trans-Atlantic stock exchange operator NYSE Euronext said Tuesday it earned $184 million in the second quarter as it saw a jump in revenue from derivatives trading and eliminated one-time charges recorded last year.

One-time restructuring costs fell to $32 million from $442 million a year ago, when NYSE Euronext ended a contract with rival derivatives clearinghouse. NYSE Euronext also recorded a pretax gain of $54 million from the sale of a 5 percent stake in the National Stock Exchange of India during the most recent quarter.

Net income totaled $184 million, or 70 cents per share during the quarter, compared with a loss of $182 million, or 70 cents per share, a year ago.

Adjusted earnings, which exclude one-time gains and charges, totaled $167 million, or 64 cents per share, during the quarter.

Analysts polled by Thomson Reuters, on average, forecast earnings of 59 cents per share for the quarter on revenue of $659.6 million. Analysts typically exclude special one-time costs in their estimates.

NYSE Euronext’s revenue excluding transaction-based expenses, rose 7 percent during the quarter, but still fell short of expectations. The exchange operator said revenue totaled $654 million during the quarter. Unfavorable currency translation cost the company $19 million in revenue compared with the year-ago period.

Strong growth in its derivatives trading business helped push NYSE Euronext’s profit and revenue higher during the quarter. Revenue rose primarily because of strong growth in trading of European derivatives products and U.S. options. The division has become an increasing driver of NYSE Euronext’s overall profit.

Duncan Niederauer, NYSE Euronext’s CEO, said during a conference call with analysts that the company saw record derivatives trading volume during the second quarter and had the largest U.S. equities options exchange for the second straight quarter.

The derivatives segment accounted for 35 percent of net revenue in the quarter, up from 28 percent during the second quarter last year. Operating income from the unit accounted for 49 percent of the company’s total profit, up from 32 percent during the year-ago period.

Derivatives trading has been migrating to more traditional, centralized platforms following the credit crisis in late 2008 when risky, complex financial instruments helped to nearly shut down the credit markets.

The company is developing clearinghouses in London and Paris that will handle European securities and derivatives business by the end of 2012.

Revenue from the derivatives segment has helped to offset continued weakness from traditional equities markets. Long-established exchanges like NYSE Euronext have seen the volume of trading on their platforms drop in recent years as investors migrate to new platforms. Net revenue from NYSE Euronext’s cash trading and listings business fell 11 percent to $321 million.

Trading volume handled by NYSE Euronext fell to 37 percent of total market volume in the second quarter from 39 percent during the same quarter in 2009. However, it was up from the 35 percent share seen during the first quarter, so there are some signs of stabilization as competition for market share continues to increase.

Michael Geltzeiler, NYSE Euronext’s chief financial officer, said the company cut its expense outlook for the year due to the strengthening of the dollar.

He said full-year fixed operating expenses will be between $1.69 billion and $1.73 billion, compared with a previous estimated range between $1.72 billion and $1.77 billion.

The better-than-expected results helped push NYSE Euronext’s stock higher in afternoon trading in New York. Shares rose 11 cents to $30.05.

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AP Business Writer Stephen Bernard in New York contributed to this report.