October 24, 2018 / 11:20 AM / in 22 days

Exchange operator Nasdaq's profit falls 4 percent

(This version of the Oct 24 story corrects to “announced it would buy” from “bought” in paragraph 11)

People pass by the Nasdaq Market Site in Times Square in New York City, U.S., February 7, 2018. REUTERS/Brendan McDermid

(Reuters) - U.S. exchange operator Nasdaq Inc (NDAQ.O) reported a 4.1 percent fall in quarterly profit on Wednesday, as increasing trading volumes were offset by higher expenses and one-time charges.

Stock market volatility in the third quarter due to uncertainty around the U.S.-China trade war forced investors to adjust their risk portfolios. Exchange operators make most of their money from clearing and settling trades, and an increase in trading volume means more in fees for operators like Nasdaq and NYSE-parent Intercontinental Exchange (ICE.N).

Nasdaq said total industry average daily volume rose 17 percent from the year-ago quarter.

The company has also been making efforts to diversify from its core stock-based transaction business to focus on high-growth areas such as information services and market technology, which help traders make investment decisions and trade in stocks and other exchange-traded products.

Operating expenses rose 3.8 percent to $354 million and included an $8 million loss related to a default by a Nasdaq clearing member. [nGNX2dHB1r]

The company incurred a $46 million charge from the divestiture of the company’s public relations solutions and digital media services businesses. The results also included a $7 million impact from changes in foreign exchange rates.

Net income attributable to Nasdaq fell to $163 million, or 97 cents per share, in the third quarter ended Sept. 30, from $170 million, or $1.00 per share, a year earlier.

On an adjusted basis, it earned $1.15 per share versus $1.01 in the year-ago quarter. Analysts were looking for $1.14 per share, according to Refinitiv data. It was not immediately clear if the numbers were comparable.

Most of Nasdaq’s business units showed growth, with revenue from its market services - its biggest income generator - up 1.4 percent to $222 million. The market services revenue excludes transaction-based expenses.

Revenue from its information services business rose 19.3 percent to $179 million.

Nasdaq’s newer non-trading businesses also provide technology and analytics services to other companies, such as cryptocurrency marketplaces. As part of this strategic shift, the operator announced that it would buy Swedish financial technology provider Cinnober last month. [nL5N1W00XP]

Revenue, excluding transaction-based expenses, fell to $600 million from $603 million.

Reporting by Bharath Manjesh in Bengaluru; Editing by Shailesh Kuber

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