NYSE net income down

NYSE Euronext said new strategies and cost cuts should help the transatlantic exchange return to growth next year after quarterly income fell by a fifth. Chief Executive Duncan Niederauer also said his firm had not received any claims over the $440 million lost by Knight Capital Group when trading on NYSE on Wednesday, though he was monitoring the situation, which he said was a "call to action" over market reforms.
NYSE said its plan to launch a clearing house in June next year would help reduce costs and drive long-term revenue while its US futures market, called NYSE Liffe US, is making "significant headway". Michael Geltzeiler, Chief Financial Officer of NYSE Euronext, said: "Ongoing strategic initiatives, combined with our cost reduction plan and lower share count from stock repurchases, should position the company for a return to earnings growth in 2013 and beyond."
The exchange also said on Friday it had cut operating costs by $35 million, or 4 percent, in the three months to the end of June which means the group will beat its savings targets for this year. The chief executive sought to clarify events on Wednesday when a software glitch at Knight Capital flooded NYSE with unintended orders for dozens of stocks, leaving the largest US retail market maker with huge losses.
Niederauer told a conference call that NYSE's systems operated normally and helped reduce losses at Knight. "We've not received any claims over Knight but we are mindful of the fact the situation is unfolding," Niederauer said on a call to present second-quarter earnings. But he called the massive trading loss, which has cast doubt over the future of Knight, "a call to action". "This recent event is another example of the fact that the US market structure evolution has lead to inexorable fragmentation and an emphasis on speed," he said.
The exchange booked second-quarter net income of $128 million, down from $160 million in 2011, and revenue off 9 percent to $602 million from $661 million last year. Derivatives trading at the group fell 15 percent to $182 million, share trading dipped 8 percent to $300 million and technology revenue was slightly off at $119 million for the quarter. "The numbers are almost exactly in line with what we were expecting. Trading and capital raising continue to be poor but this is market-wide and well known," said Peter Lenardos, an analyst at RBC Capital Markets.
"Cost cuts and share buybacks make the achievement of full year forecasts likely." The exchange also said it had spent $304 million in its $552 million share repurchase programme, reclaiming 11 million of its shares in the year-to-date. NYSE, which failed in its planned $7.4 billion merger with Deutsche Boerse six months ago, has said it plans smaller technology deals to deliver $1 billion of tech revenues within three years.