2nd UPDATE: NYSE Euronext Watchful On Recovery; 4Q Net Off 20%

The head of NYSE Euronext (NYX) said Tuesday that the company is monitoring top-line economic indicators such as consumer confidence and employment for signals of a rebound in trading activity on key U.S. and European markets.

The parent of the Big Board sees strengthening corporate balance sheets and rising economic output turning loose pent-up expansion in investment, which will help lift business for NYSE Euronext, which reported a 20% fall in fourth-quarter profits Tuesday.

"In short, we believe 2011 should provide a better environment for doing business," said Duncan Niederauer, chief executive of NYSE Euronext, during a conference call Tuesday. "Companies are sitting on cash and ready to invest."

NYSE Euronext recorded a 13% decline in U.S. stock turnover on its markets in the fourth quarter, after investors scaled back retail-level trading and pulled money out of equity-focused mutual funds following the May 6 "flash crash." European share-trading volume rose 6.9%, but margins continued to slide.

U.S. derivatives trading climbed 20%, helping to offset an 8% slide in European derivatives volumes fell as traders took profits and positioned for key interest rates to hold steady in the near term, according to Niederauer.

Net profit for the period was $120 million compared with $151 million in the fourth quarter of 2009, while per-share earnings fell to 46 cents. Results were weighed by a strengthening of the dollar against the euro.

Revenue in the quarter fell 4% to $613 million compared with the same quarter in 2009, following a decline in European derivatives and U.S. stock trading volumes. NYSE Euronext reported a $19 million hit from foreign-currency fluctuations, partially offset by higher technology-services revenue.

Analysts had expected earnings of 44 cents a share and $612 million in net revenue, which excludes direct transaction costs and other expenses.

Results were helped by an 11% gain in revenue from NYSE Euronext's technology division, which the company sees growing by 15% in 2011, according to Niederauer.

The CEO is emphasizing trading systems and new derivatives products as growth areas for NYSE Euronext, and said the company is "tremendously confident" that U.S. regulators will approve a delayed service for handling interest-rate futures by the end of February.

Niederauer said major financial firms have moved in recent weeks to sign on as members of the planned New York Portfolio Clearing service, a joint venture with Depository Trust and Clearing Corp. that will challenge sector-leading CME Group Inc. (CME) for business in Eurodollar and Treasury futures.

Should the project win business after its anticipated launch in March, Niederauer said the company could introduce some of its U.K.-listed interest-rate futures, linked to British bonds, in the U.S.

Though improving macroeconomic conditions may help drive trading in stocks back to levels seen before the May 6 "flash crash," NYSE Euronext again sounded an alarm on the level of stock deals now taking place away from publicly accessible markets.

Niederauer said nearly one-third of equity trading done was off-exchange in the fourth quarter, and higher levels have been seen in the first quarter of 2011.

NYSE Euronext Chief Operating Officer Lawrence Leibowitz said the company isn't against private stock-trading venues such as what are known as dark pools, or "internalized" share-trading done inside banks. But prices on exchanges could become less reliable if there is less activity behind them, he said.

"At a certain point the public markets suffer, and I think we're seeing that," said Leibowitz.

Fixed costs for full-year 2011 are expected to come in around $1.65 billion, according to Chief Financial Officer Michael Geltzeiler. Capital expenditures for the year are expected to fall to $200 million.

NYSE Euronext also said its board will recommend a cash dividend of 30 cents a share in the first quarter.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

--Elena Berton contributed to this article.

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