Nasdaq OMX Group (NDAQ.O) reported a 5.4 percent decline in quarterly profit on Wednesday, mainly due to costs from two recently completed acquisitions, but the transatlantic exchange operator said one of the deals has already begun adding to earnings.
Nasdaq now faces a large task in fully integrating the two new businesses, and it is done deal-making in the near-term, Chief Executive Robert Greifeld said in an interview.
However, if the European unit of NYSE Euronext NYX.N were to come on the market a year from now, Nasdaq would be in the mix, he said.
"If it's mid-next-year, we'd have to be in the discussion," Greifeld said. "I wouldn't know our level of interest, but I would be remiss in not being involved in the discussion."
Nasdaq in the second quarter closed a $390 million acquisition of Thomson Reuters Corp's (TRI.TO) investor relations, public relations and multimedia services businesses. It also financed a $750 million deal to buy eSpeed, the electronic Treasuries-trading platform, from BGC Partners Inc (BGCP.O), a deal that closed last month.
The company's second-quarter earnings fell to $88 million, or 52 cents a share, from $93 million, or 53 cents a share, a year earlier. Not including one-time charges, Nasdaq earned 62 cents a share, a penny shy of analysts' average expectations, according to Thomson Reuters I/B/E/S.
Revenue rose 8 percent to $451 million.
Nasdaq's stock was down 2.8 percent at $32.89 in afternoon trade, but was still up 31.6 percent year-to-date.
Greifeld said the Thomson Reuters deal, which brought it 7,000 new clients, contributed to Nasdaq's earnings in the first month after completion and said that eSpeed would begin boosting profits by the end of the year. Nasdaq originally said that both deals would add to earnings within one year of closing.
The European unit of NYSE Euronext NYX.N is drawing attention as NYSE is being bought by IntercontinentalExchange (ICE.N). Both parties have said their intention is to spin off Euronext, which operates the Paris, Amsterdam, Brussels and Lisbon stock exchanges, into a stand-alone company. Several market operators have expressed interest in the unit.
Nasdaq has been diversifying away from equities for years now, even before volumes tumbled during what has been a tepid global economic recovery.
"You see us reinventing ourselves in broad daylight," Greifeld said. "The business mix is changing, we are delivering results without a hiccup through this time of transformation and I'm proud of that."
In the second quarter, 72 percent of Nasdaq's revenue came from businesses that do not depend on transactions and have a steadier income flow. Equities made up just 11 percent of total revenue.
IN STOCK MARKET VOLUMES, SOME HOPEFUL SIGNS
Greifeld, who has headed the No. 2 U.S. stock market since 2003 and who wrote his graduate thesis on the operation of the exchange, said that while stock volumes remain soft, there have been positive signs in the market.
Around 6.6 billion shares a day were traded for the three months ended June 30, down from 6.85 billion a year earlier. But there were six days in the quarter when volumes surpassed the 8 billion mark, compared with one such day in each of the previous two quarters, Lee Shavel, Nasdaq's chief financial officer, said.
Greifeld said he is optimistic that U.S. regulators will follow the lead of Canada and Australia in placing limits on trading that takes place away from exchanges, by broker-dealers' own internal systems, and in dark pools. Off-exchange trading makes up around 40 percent of U.S. volume.
Market share on Nasdaq in the quarter fell to 25.5 percent from 27.3 percent a year earlier. Restrictions on internalizers and dark pools - trading sites that do not publicly display prices before orders are executed - would force more trading onto public markets.
More companies also chose to enter the markets in the quarter. Initial public offerings on Nasdaq-run exchanges rose to 35, from 15 a year earlier.
"This is the first time since 2007 that we've had an increase in the number of public companies. That's amazing," Greifeld said.
(Reporting by John McCrank; Editing by Lisa Von Ahn, Alden Bentley and Leslie Adler)