NYSE hit by weak trading and failed D.Boerse deal

By Luke Jeffs and John McCrank

LONDON/NEW YORK (Reuters) - NYSE Euronext said profit plunged 44 percent in the first quarter due to a slowdown in trading and costs from its failed merger with Deutsche Boerse, sending the exchange operator's shares down nearly 5 percent on Monday.

NYSE said it earned $87 million, or 34 cents a share, down from $155 million, or 59 cents a share, a year earlier.

The New York-based company said its results included $31 million of merger expenses and other one-time costs, including $16 million from its failed deal with Deutsche Boerse.

The proposed $7.4 billion merger would have created the world's biggest exchange and helped diversify the Big Board parent's revenues, but the deal was rejected by European antitrust authorities and was canned in early February.

Stripping out one-time costs, NYSE said it earned 47 cents a share in the latest quarter. Analysts on average expected 48 cents, according to Thomson Reuters I/B/E/S.

NYSE shares were down 4.9 percent at $25.74 in morning dealings.

Trading-related revenue, which makes up about half of NYSE's overall revenue, fell 25 percent, or $88 million, from a year earlier due to a slowdown in volatility and volumes, the company said.

"Our first-quarter results reflect the challenging operating environment which carried over into 2012 and will continue to result in near-term headwinds," said Duncan Niederauer, chief executive of NYSE.

The exchange's derivatives trading unit was hardest hit, with trading activity at its London-based exchange Liffe down 28 percent as derivatives revenue for the group fell by a quarter to $176 million.

Share trading and listings revenue was down 7 percent to $304 million, while NYSE's smaller technology and data business revenue was up 4 percent to $121 million.

FORWARD FOCUS

Since the failure of the merger with Deutsche Boerse, the exchange has refocused its attention on new market opportunities such as clearing. Last month it pledged to create its own clearing house for futures transactions and move away from its current provider, LCH.Clearnet.

NYSE said its British futures business will move to the new clearing facility in the summer of 2013, and its European futures business will follow in the first quarter of 2014.

The move to launch its own clearing unit next year and switch off LCH at that point comes as NYSE's rival, the London Stock Exchange, forges ahead with a plan to buy LCH in the fourth quarter of this year.

Clearing houses, which sit between trading firms, insulating them against the possibility of a company default, are set to take on greater importance next year when regulation takes effect forcing more asset classes to use clearing.

Policy-makers in the United States and Europe are keen to force the vast over-the-counter derivatives market to use clearing houses to tackle some of the problems exposed by the collapse of Lehman Brothers in 2008.

NYSE recently launched a companywide cost-cutting program aimed at generating $250 million in annual savings by 2014.

(Reporting By John McCrank; editing by John Wallace)