NYSE Euronext bets on cuts to offset trading losses

NYSE Euronext , the world's largest stock market, is hoping ambitious cost cuts will help offset lower trading levels, in the latest sign of growing pressure on the world's top trading firms.

NYSE Euronext said on Tuesday it smashed its 2012 cost cut target of $63 million by taking out $82 million of expenses, a third of the $250 million the exchange has pledged to cut by 2014.

But this came as the group reported net revenue down a fifth to $559 million for the third quarter, net income down 42 percent to $108 million and earnings per share off 38 percent at $0.44.

NYSE rivals the London Stock Exchange and interdealer broker ICAP are set to report next week, with analysts predicting lower profits for the largest British exchange and broker.

NYSE Euronext's results reflected weaker trading in the group's main equities and futures markets in New York, London and Paris because of ongoing concerns about the global economy and a strong third quarter last year.

NYSE said on Tuesday net third quarter revenue in its futures and options trading unit was down 27 percent to $164 million and share trading dropped 20 percent to $282 million.

The group said the average daily value of European shares traded was off 31 percent in the third quarter compared to last year while equity trading activity in the United States was down 39 percent for the period.

"Operationally NYSE Euronext was broadly in line with expectations. Project 14 seems to be moving ahead of schedule which is encouraging given the weak trading levels seen this year" Richard Perrott, an analyst at Berenberg Bank, said.

NYSE Euronext shares in Paris were trading up 1.2 percent to 19.93 euros at 1137 GMT.

LOW TRADING LEVELS

Analysts see LSE net income off 7 percent at 120 million pounds ($192 million) and earnings down 5 percent to 44.3 pence a share, according to data from Thomson Reuters, when it reports first-half results on November 16.

ICAP is expected to file net income down 8 percent to 117.5 pounds and earnings per share off 12 percent at 16.8 pence when it publishes on November 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 Perrott.

Some of the world's top investment banks also saw lower third quarter equity revenues, with UBS reporting revenue down 16 percent on the prior quarter and JP Morgan booking equities revenue down 14 percent.

Deutsche Boerse , the exchange with which NYSE tried and failed to merge earlier this year, was last week forced to cut its 2012 revenue target as lower market volatility caused a dip in third-quarter trading.

NYSE and the German exchange were forced to drop their $7.4 billion merger in February this year after European competition authorities blocked the deal over concerns it would create a monopoly in European futures trading.

($1=0.6260 British pounds)

(Additional reporting by Sarah White, Editing by Mark Potter and Mike Nesbit)