Strong Trading Volumes Lift NYSE Earnings

November 10th, 2011 by Trefis Team
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NYSE Euronext’s (NYSE:NYX) net income increased by 56% in the third quarter of 2011 to $200 million from $128 million in the third quarter of 2010 driven by high market volatility and strong trading volumes. The company reported a 24.5% increase in its transaction and clearing fees, 7.6% increase in listing revenues and 12.2% jump in technology services revenues. The strong results came as the company awaits a decision by European regulators on the proposed merger with Deutsche Boerse that would create the world’s largest exchange operator. A decision on the deal is expected in December, and the two exchanges have stated a goal of completing the deal by the end of the year. [1] NYSE Euronext’s major competitors include Nasdaq OMX (NASDAQ:NDAQ), CME Group (NASDAQ:CME) and Intercontinental Exchange (NYSE:ICE).

We have a price estimate of $33 on NYSE Euronext’s stock, about 20% above the current market price.

See our full analysis of NYSE Euronext

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Growth in transaction volumes

NYSE posted a strong 33% increase in global derivatives trading volumes and a 40% increase in European cash trading volumes in the third quarter as market activity increased with the U.S. credit rating downgrade by S&P and the European debt situation. Though the volume jump in the third quarter is impressive, future growth in volumes is uncertain due to renewed discussions about implementing a financial transaction tax on cash and derivatives trades in the U.S. and Europe. We expect NYSE’s European trading volume to reach 1.8 billion transactions by the end of our forecast period.

Diversification continues at NYSE Euronext

While trading related revenues remain the core of NYSE Euronext’s business, non-trading related revenues continued to grow steadily  in the third quarter. Non trading revenues increased by $30 million in Q3 2011 driven by growth in technology services and increasing momentum in global listings. Diversification of revenues is important for the company as trading related revenues can be very volatile.

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Notes:
  1. NYSE Euronext Announces Third Quarter 2011 Financial Results, Company Press Release, Nov 3, 2011 [↩]