NYSE Euronext Seeks Bank Backers For Derivatives Platforms
July 30 2009 - 12:15PM
Dow Jones News
NYSE Euronext (NYX) plans to offer equity stakes in its U.S.
derivatives units to banks in a bid to boost business, a senior
official said Thursday.
The transatlantic exchange operator expects to soon announce
partnerships with unnamed major dealer banks, a move that mirrors
efforts by some rivals to win more backing for their trading
arms.
It's the same approach that has helped smaller electronic rivals
chip away at NYSE Euronext's U.S. cash equities business, according
to Michael Geltzeiler, chief financial officer at NYSE
Euronext.
"This is taken from the playbook of some of the [multi-lateral
trading facilities] like Direct Edge and BATS [Trading]," he said
in an interview with Dow Jones Newswires.
The upstart equity venues are both backed by consortiums that
include big banks, and together now account for nearly a quarter of
all U.S. stock trading thanks to volume from their bank owners.
NYSE Euronext has been pursuing similar backing for its nascent
NYSE Liffe US futures exchange for several months and expects to
announce agreements in the third quarter.
The company reported Thursday that NYSE Liffe US will post an
operating loss of up to $30 million for the year, which Geltzeiler
attributed to marketing costs and product development.
In the works are a slate of new futures based on MSCI indexes,
as well as fixed income products centered on a clearing partnership
with the Depository Trust and Clearing Corp.
Getting bank partners on board will help spread out the costs
associated with ramping up the company's U.S. futures growth,
Geltzeiler said, while driving volume and revenue that remains
"minimal."
NYSE Euronext Chief Executive Duncan Niederauer revealed on a
Thursday conference call that a similar "re-semimutualization"
approach will be taken with its two options platforms, which
account for approximately 17% of the U.S. market.
Earlier this year, Niederauer targeted a 20% to 25% market share
for options, and he said Thursday that bank partnerships would help
that effort, though no timeline was offered.
His comments came as the transatlantic exchange operator
reported a second-quarter loss, driven by a $355 million charge
related to its new U.K. clearing business, as well as costs
associated with headcount reductions.
Shares were recently 1.6% higher at $27.46.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com