* Shares down 5.1 percent on Tuesday afternoon
* Costs fall $82 mln year-to-date
* 3rd-quarter net revenue down 21 pct to $559 mln
* Net income down 42 pct to $108 mln
By Luke Jeffs and John McCrank
LONDON/NEW YORK, Nov 6 Investor confidence in
U.S. equity markets is at an all-time low due to worries over
the global economy and greater market complexity, NYSE
Euronext's chief executive said on Tuesday after the
company reported a 42 percent drop in quarterly profit.
With equity trading levels at their weakest in years - down
in the latest quarter by 31 percent in Europe and 39 percent in
the United States - the parent company of the New York Stock
Exchange has focused on cost reductions to help offset lost
"I feel about NYSE Euronext the way I feel about the U.S.
economy: well positioned to grow under the right conditions, but
for the moment, we are still facing strong macro-economic
headwinds," NYSE CEO Duncan Niederauer told analysts on a call.
NYSE has cut $82 million in expenses so far this year,
easily surpassing its 2012 target of $63 million. The
trans-Atlantic exchange operator has pledged to cut $250 million
by 2014 and now expects to reach $100 million by year-end.
Even with the sharp drop in expenses, net revenues for the
three months ended Sept. 30 tumbled 21 percent to $559 million.
Analysts had expected $568.5 million.
Shares of NYSE were down 5.1 percent at $24.30 in New York
on Tuesday afternoon.
The move by investors to the sidelines is not a structural
shift, but a reflection of concerns over the global economy,
A series of high-profile market snafus, such as the software
error that nearly bankrupt Knight Capital Group and
Facebook's glitch-ridden market debut, have added to the
negative sentiment, Niederauer acknowledged.
"Markets appear too complex and fragmented," he said.
"We believe the right thing to do is to engage in a holistic
review of market structure with all participants to more closely
examine the unintended consequences of the framework under which
One of NYSE's big concerns has been the move by many traders
to less-regulated, off-exchange venues, where customers can
trade anonymously. Gone are the days when Nasdaq OMX
was NYSE's only competition. There are now 13 U.S. exchanges and
at least 50 alternative trading venues.
"We continue to be frustrated with this trend and are
troubled that the U.S. equity market has gotten more opaque,
while the value of the public markets continues to be
diminished," Niederauer said.
WIDESPREAD TRADING SLUMP
NYSE reported third-quarter net income, excluding merger
expenses and other items, of $108 million, versus $186 million a
year earlier, largely due to the weaker trading levels at NYSE's
main equities and futures markets in New York, London and Paris.
Earnings per share came in at 44 cents, versus 71 cents a year
Analysts expected earnings of 41 cents a share, according to
Thomson Reuters I/B/E/S. The beat was due to a
lower-than-expected tax rate and expense cuts, said Ed Ditmire,
an analyst at Macquarie Securities.
Many analysts expect NYSE rival the London Stock Exchange
and interdealer broker ICAP to report lower
profit next week due to the slow trading environment.
Analysts expect the LSE to post a 7 percent drop in
first-half net income to 120 million pounds ($192 million) on
Nov. 16, according to Thomson Reuters Starmine data.
ICAP is expected to report first-half net income down 8
percent to 117.5 pounds on Nov. 14.
"Low overall trading levels are a challenge for the LSE and
ICAP, though at least in this period the LSE should be cushioned
thanks to earnings from non-volume-related businesses like
information subscriptions and treasury income from its clearing
house," said Berenberg Bank analyst Richard Perrott.
Deutsche Boerse, the exchange with which NYSE
tried and failed to merge earlier this year, last week was
forced to cut its 2012 revenue target as lower market volatility
caused a dip in third-quarter trading.
Some of the world's top investment banks have also reported
lower third-quarter equity revenues, including UBS and