2nd UPDATE: Nasdaq CEO Touts Stock Trade As Profit Rises 70%

Nasdaq OMX Group Inc. (NDAQ) is prepared to spend a year pursuing its plan to acquire and split NYSE Euronext (NYX), its chief executive said Wednesday, touting a renaissance in equity-related trading.

Bob Greifeld said the exchange operator's efforts to trade cash equities and options more efficiently over the past four years has seen it outperform more diversified peers or those focused on futures, a view likely to be challenged by many in the industry.

"The much maligned cash equities business over a long period of time is definitely outperforming the much-vaunted derivatives business," said Greifeld during a conference call after reporting a 70% rise in first-quarter earnings

Nasdaq OMX shares recently were flat at $27.39.

The pursuit of NYSE Euronext in partnership with IntercontinentalExchange Inc. (ICE) would see Nasdaq drop its own much-vaunted push into the over-the-counter derivatives market that many in the industry view as a key growth driver.

Nasdaq OMX would keep its target's cash equities and U.S. options business while ICE acquires the futures and OTC operations, if the partners manage to break up NYSE Euronext's agreed merger with Deutsche Boerse AG (DB1.XE).

Greifeld on Wednesday said that he and ICE currently are prepared to jointly pursue NYSE Euronext for up to 12 months, and that overcoming U.S. antitrust concerns will be the catalyst for entering "friendly" discussions with the Big Board operator, which so far has rejected the ICE-Nasdaq overture.

Central to Greifeld's plan is a heavy bet on trading stocks and options contracts--the most competitive businesses for exchanges--that hinges on the idea of dramatically reducing the cost of electronic trading by running more platforms with fewer systems.

Taking over NYSE Euronext's exchanges would allow Nasdaq OMX to boost discounts for the busiest trading firms to the point where customers would trade "essentially for free," Greifeld said, making it harder for smaller competitors to best the combined company on price and services.

Operators of incumbent stock exchanges in the past decade have pushed further into options and futures, which carry higher trading fees and growth rates. Greifeld said Wednesday that this theory is partially flawed, and that stocks and futures on interest rates are separate businesses that "don't intertwine."

"Our investors recognize that many more businesses have gone off the tracks by moving away from the core than businesses that have gotten into trouble by focusing on the core," he said in an interview. "We're not going to move outside the cash equities business, it's who we are."

Nasdaq OMX will continue to develop ventures into power-trading and other commodities markets but these efforts run separately from the main, stock-centric operations, Greifeld said.

Wringing more profits from the largely commoditized business of trading stocks helped Nasdaq on Wednesday post first-quarter profits of $104 million, or 57 cents a share, up from $61 million, or 28 cents a share, a year earlier. Revenue, less liquidity rebates, brokerage, clearance and exchange fees, jumped 15% to $415 million.

Analysts polled by Thomson Reuters most recently forecast earnings of 61 cents on $409 million in net revenue.

Greifeld said Nasdaq OMX has submitted to the U.S. Department of Justice the names of more than 100 customers that could assess the impact of a potential combination of NYSE and Nasdaq, as the latter company aims to overcome the biggest regulatory hurdle facing its unsolicited offer for the New York Stock Exchange parent. On Tuesday the ICE-Nasdaq team stepped up their offer with a reverse breakup fee and committed financing.

NYSE shareholders currently are scheduled to vote in early July on the agreed deal to combine with Deutsche Boerse, but Greifeld said any decision should wait until regulators on both sides of the Atlantic have provided clarity on approval for either deal. The NYSE Euronext-Deutsche Boerse merger faces its own antitrust hurdles in Europe as it would combine the region's two largest derivative trading platforms.

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

--Matt Jarzemsky contributed to this article.

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