(Updates with decline in stock price, conference call comments)
By Tom Polansek
May 8 IntercontinentalExchange Group Inc
shares sank on Thursday on a higher cost outlook overshadowing
the exchange and clearing house operator.
Atlanta-based ICE, which owns the parent of the New York
Stock Exchange, forecast operating expenses will jump to $485
million to $495 million in the second quarter from an adjusted
$463 million in the first quarter.
The estimate for expenses was in line with expectations, the
company said, but looked high to investors. Shares were down 3.8
percent at $194 in midday trading after dropping more than 5
percent in earlier activity.
"The company's updated guidance is disappointing at first
glance, with operating expenses moving higher," said Alex Kramm,
an executive director for UBS.
Expenses were in focus following ICE's $11 billion
acquisition of NYSE Euronext in November. The deal gave ICE an
entry into the interest rate futures business through control of
Liffe, Europe's No. 2 derivatives market. It also marked the
company's first foray into equities, through ownership of the
Big Board, and through European stock market operator Euronext.
Since the acquisition, ICE has been planning an IPO for
Euronext and a sale of the NYSE Technologies unit to eliminate
Net income in the first quarter rose to $262 million, or
$2.27 a share, from $135 million, or $1.85 a share, a year ago
as ICE benefited from the acquisition. Excluding $60 million in
costs related to the deal, adjusted earnings were $2.60 a share,
beating analysts' expectations for $2.58, according to Thomson
Revenue increased to $932 million from $352 million a year
ago, above expectations for $922.9 million.
"We achieved record revenues and have taken actions that
have already allowed us to realize over 40 percent of our
expense synergy target relating to the NYSE Euronext
acquisition, increasing the efficiency of our operations
globally," Chief Financial Officer Scott Hill said.
ICE will seek to reduce the number of stock order types at
NYSE to simplify the market, Chief Executive Jeff Sprecher said,
adding the complex structure of U.S. equity markets had spooked
The structure of equity markets has come under increased
scrutiny in the past month following the release of Michael
Lewis' book "Flash Boys: A Wall Street Revolt," which claims the
U.S. stock market is rigged.
Regulators should end the "maker-taker" form of trading that
now dominates share transactions in the United States because it
creates false liquidity by attracting traders who do not truly
want to own shares but instead seek to earn rebates, Sprecher
The "maker-taker" model refers to an organized system of
rebates that large traders and brokers receive to channel their
stock transactions through the NYSE or other established
"What's saddening about the U.S. equity market is when I go
out and talk to my friends, they do not have confidence in those
markets," Sprecher said.
(Reporting by Tom Polansek; Editing by Chizu Nomiyama and