Financial exchanges group NYSE Euronext is banking on its nascent U.S. futures unit and technology investments to reverse a decline in trading that pushed down profit last quarter.
The group aims to tackle futures giant the Chicago Mercantile Exchange head on in a matter of weeks with a new U.S. exchange and hopes to attract more high-frequency trading firms with new data centers near New York and London.
A pick-up in trading volumes ... as well as further clarity on the firm's opportunity and progress within its technology segment would likely help to re-engage investors, Jonathan Casteleyn at Susquehanna International Group said in a note.
The initiatives are part of the NYSE Euronext's battle against trading rivals that have steadily eroded its dominant position in its main U.S. and European markets over recent years.
NYSE Euronext said on Tuesday weak trading of U.S. stocks and European derivatives drove profits 21 percent lower to $120 million in the fourth quarter on the back of a 4 percent decline in revenues to $613 million.
But the exchange said growth in 2011 would be driven by its investment in new ventures -- principally NYSE Liffe U.S. and the group's two new data centers.
Its shares were trading almost one percent lower at 24.3 euros in Paris by 1230 GMT.
NYSE LIFFE IS BORN
NYSE Liffe U.S. took a crucial step toward launch when its clearing house, New York Portfolio Clearing (NYPC), won U.S. regulatory approval to open for business last month.
NYSE Euronext said on Tuesday its U.S. futures market will go live with NYPC before the end of March 2011 -- a move that will pitch the nascent market into direct competition with the CME for the first time.
The launch late last year of the new data centers, located in Mahwah, New Jersey, and Basildon, Essex, is also crucial, according to the exchange, as it allows the group to compete more effectively to attract high-frequency trading firms (HFTs).
HFTs have emerged in the past five years as the largest single client segment for exchanges and trading platforms, which have responded by investing heavily in their systems.
But the increasing reliance of large international exchanges on technology has also led to a heightened risk of cyber attack.
NYSE Euronext rival Nasdaq OMX said on Saturday it had found suspicious files on its U.S. computer servers, adding that hackers could have affected one of its Internet-based client applications.
NYSE Euronext's main New York exchange, known as the Big Board, has lost market share to trading rivals in the United States, and last December traded 35 percent of shares listed on its own market compared with 36.5 percent a year earlier.
The firm also faces stiff competition in Europe, where the group's French, Dutch, Belgian and Portuguese exchanges traded 64.2 percent of Euronext stocks in December, down 6 percent from the previous year, according to Thomson Reuters data.
The exchange blamed slower trading in its flagship U.S. equity markets and European derivatives exchange Liffe for the 11.4 percent drop in quarterly trading revenues to $713 million from $805 million last year.
The exchange traded 142.7 billion U.S. shares in the fourth quarter of 2010, down 13.2 percent on 164.4 billion last year, and 242.9 million European contracts, a 6.5 percent fall on last year, according to its data.