NYSE Euronext Q2 Results Boast 34% Surge in Derivatives Revenue

Derivatives trading replaces lost equities revenue; 165 staff members move to FINRA

NYSE Euronext posted strong second-quarter results on Tuesday, August 3, driven by robust trading volume that included a 34% surge in derivatives revenue as well as a 29% increase in technology solutions sales.

NYSE Euronext (NYX) reported net income of $184 million, or $0.70 per diluted share, compared to a loss of $182 million, or negative $0.70 per diluted share, for the second quarter of 2009.

The results included only $32 million of merger expenses and exit costs compared to $442 million a year ago, when NYX ended its derivatives clearing arrangement with rival LCH.Clearnet, a group that merged London Clearing House Limited with Paris-based Clearnet in 2003. NYX is now focused on clearing derivatives through its NYSE Liffe exchange. Excluding these expenses and costs, diluted EPS came to $0.64 versus $0.51, up 25%.

"Our strong second-quarter results were driven by robust trading volumes, strong revenue generation from new initiatives across our segments, and continued cost discipline," said NYSE Euronext CEO Duncan Niederauer in a statement. "And building upon the initial steps taken with the creation of NYSE Liffe Clearing in 2009, we announced our new clearing strategy to develop clearinghouses in London and Paris by the end of 2012."

Derivatives net revenue of $226 million in the second quarter of 2010 increased $57 million, or 34%, compared to the second quarter of 2009 but included an $8 million negative impact from foreign currency fluctuations.

The struggle for revenue in traditional equities markets, where volume continues to migrate away from established platforms to newer trading platforms, has persistently dogged NYSE Euronext in the 21st century. Derivatives trading is seen as a replacement for that lost revenue as post-financial crisis regulators increasingly demand more control over the trade of risky and complicated securities.

Headcount as of June 30, 2010, was 2,993, down 11% from December 31, 2009, and down 15% from June 30, 2009. The recent headcount reflects 165 staff transitioned to Financial Industry Regulatory Authority (FINRA) as part of their agreement to assume market surveillance and enforcement functions previously conducted by NYSE Regulation.

Along with the second-quarter earnings release, NYSE Euronext's board declared a cash dividend of $0.30 per share for the third quarter of 2010.

Total revenues were $654 million in the second quarter of 2010, up $42 million, or 7%, compared to $612 million in the second quarter of 2009. Second quarter of 2010 net revenue compared to the second quarter of 2009 included a $19 million negative impact attributable to foreign currency fluctuations.

Cash trading and listings net revenue was $321 million in the second quarter of 2010, a decrease of $38 million, or 11%, compared to the second quarter of 2009. Information services and technology solutions revenue was $107 million in the second quarter of 2010, an increase of $24 million, or 29%, compared to 2009. The increase in revenue compared to the second quarter of 2009 was primarily driven by the impact of the NYFIX acquisition and an increase in global SFTI and software sales revenue.

NYSE Euronext's exchanges in Europe and the United States trade equities, futures, options, fixed-income, and exchange-traded products. With approximately 8,000 listed issues excluding European structured products, NYSE Euronext's equities markets represent one-third of the world's equities trading via the New York Stock Exchange, NYSE Euronext, NYSE Amex, NYSE Alternext, and NYSE Arca.

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