August slowdown squeezes profits at US exchanges-Sandler O'Neill

* Analyst lowers forecasts for NYSE, CME, ICE, and Nasdaq

* Expects exchange shares to be under pressure as forecasts cut

NEW YORK Aug 29 (Reuters) - A steeper-than-expected drop in trading volumes in August amid low volatility, weakened investor confidence, and complacency ahead of the upcoming U.S. presidential elections is set to weigh on the profits of U.S. exchanges, Sandler O'Neill analyst Richard Repetto said on Wednesday.

The "severe" August slowdown led Repetto to cut his forecasts for NYSE Euronext, CME Group, IntercontinentalExchange (ICE), and Nasdaq OMX Group .

Markets "have remained calm in August for the first time in years," Repetto said in a note to clients. Last year, concerns over Europe's debt crisis, and the downgrading of the U.S. credit rating in August led to heightened volatility and some of the busiest days on record for some trading firms.

U.S. equity volumes, at levels not seen since at least 2004, along with even softer European volumes, prompted Repetto to cut his third quarter forecast for New York Stock Exchange parent NYSE by 6 cents to 43 cents a share. He cut his full year forecast for the transatlantic exchange operator by 12 cents to $1.86, and his 2013 forecast by 19 cents to $2.39.

At CME, biggest U.S. futures market operator, August-to-date average daily volume, excluding the seasonally slow month of December, is the lowest since July 2009, Repetto said.

He cut his forecasts for CME by 5 cents to 70 cents a share for the quarter, by 8 cents to $3.16 for the year, and by 16 cents to $3.44 for 2013.

Sandler O'Neill's earnings per share forecasts for ICE were lowered by 13 cents to $1.81 for the quarter, by 17 cents to $7.64 for the year, and by 14 cents to $8.50 for 2013. Average daily volumes at ICE futures are down 11.5 percent month-over-month in and 17.6 percent from August 2011.

Repetto trimmed his earnings per share for Nasdaq by 1 cent to 60 cents for the quarter, by 2 cents to $2.48 for the year, and by 5 cents to $2.85 for 2013. August volumes for Nasdaq's consolidated matched U.S. shares were at their lowest monthly average in nearly 7 years, offsetting strength in equity options.

Exchange shares are likely to be under pressure in the near term as analyst estimates are revised lower, Repetto added.

Shares of NYSE were down 0.1 percent at $25 in early afternoon trading. Nasdaq was down 0.6 percent at $22.96, ICE was down 0.9 percent at $137.15, and CME was up 0.6 percent at $54.35.