2nd UPDATE: Nasdaq CEO Touts Stock Trade As Profit Rises 70%
April 20 2011 - 11:07AM
Dow Jones News
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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