--CEO flags volume surge in London-based futures market
--Signs of improvement seen in European financial markets
--Fourth-quarter profits fall to $28 million on slower trade
(Adds CEO comments, details on futures trading.)
By Jacob Bunge
The top executive of NYSE Euronext (>> NYSE Euronext) on Tuesday flagged signs of recovery in Europe's listed derivatives markets, a turnaround seen as key to the success of its planned $8.2 billion takeover by IntercontinentalExchange Inc. (>> IntercontinentalExchange Inc).
Increased trading by banks and investors lifted volume on NYSE's London-based Liffe futures market by nearly 50% in January from a year earlier, though sluggish equity and derivatives business still left the company nursing a 75% drop in fourth-quarter profit.
"It's been a nice turnaround," said NYSE Chief Executive Duncan Niederauer of the improvement in European derivatives volumes, which has also weighed on rivals such as Deutsche Boerse AG (>> Deutsche Boerse AG).
"But at the same time we're not yet convinced there is going to be any follow-through," he said on a call with analysts.
Recent efforts by European banks to accelerate payments on loans issued by the European Central Bank have been "viewed very positively" by investors, Mr. Niederauer said, sparking optimism that the worst of the region's financial woes were ebbing.
European countries are moving ahead with plans for a possible financial-transaction tax, after France last year implemented a levy. Since that tax was applied, Mr. Niederauer said, trading activity in Paris-listed shares has fallen 10% to 15% relative to other European markets.
A region-wide levy would be "more challenging to implement than meets the eye," Mr. Niederauer said, due to debates around exemptions and how revenues are used.
Mr. Niederauer said he remained "cautiously optimistic" that the planned deal with ICE would close by the end of 2013.
Liffe has been a key earnings driver for NYSE, with derivatives offering higher trading fees than equities. ICE aims to harness Liffe to capture some of the huge over-the-counter derivative market that's being pushed toward exchanges by regulatory initiatives on both sides of the Atlantic.
ICE Chief Executive Jeffrey Sprecher highlighted the potential of interest-rate markets when he announced the NYSE deal in December, describing the business as being at "a cyclical low."
Liffe volumes fell 21.3% last year, a larger drop than on rival platforms run by CME Group Inc. (>> CME Group Inc) and the Eurex unit of Deutsche Boerse, and were down 15% in the fourth quarter.
Net profit at NYSE Euronext fell to $28 million from $110 million in the quarter to Dec. 31, with per-share earnings falling to 43 cents. Along with the decline in volume, NYSE said deal costs and asset sales also weighed on results.
Revenue from derivatives markets fell 9% over the fourth quarter to $221 million, while revenue from securities trading and listings was down 17% at $568 million. NYSE's technology-services division saw revenue fall 6% in the fourth quarter to $120 million.
NYSE Euronext shares were recently up 0.3% at $34.98.
--Inti Landauro contributed to this article.
Write to Jacob Bunge at [email protected]
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