Trade imbalance
The nation's leading stock exchanges, NYSE Euronext Inc. (NYX) and Nasdaq OMX Group Inc. (NDAQ), have enjoyed solid growth and increased volume from derivatives and commodities trading, but recent tie-ups seem to be paying off quicker for the Nasdaq.
Both exchanges have expanded at breakneck speeds. Since the Euronext acquisition in 2007, the NYSE has added rival American Stock Exchange and completed deals in Asia and Qatar, among others. The Nasdaq has added Nordic exchange OMX, the Philadelphia Stock Exchange and is in the process of acquiring the Boston Stock Exchange.
NYSE’s deals have been slower to bear fruit. It missed second-quarter earnings estimates Aug. 1 primarily due to investment and acquisition initiatives, according to Credit Suisse analyst Howard Chen, who rates the shares “neutral.” Shares fell nearly 15 percent on the news. Days later, Nasdaq’s shares soared 17 percent after it said second quarter profit rose 81 percent, and it pushed up its timeline to realize cost savings from integrating acquisitions.
Standard & Poor’s analyst Royal Shepherd notes Nasdaq “has made solid progress in integrating its recent acquisitions and leveraging its advantages in electronic trading to take market share from the NYSE.” Shephard has a “hold” rating on both companies, however, saying he expects slower trading volume in the near term “reflecting deleveraging and illiquidity in the credit markets that has reduced demand for derivative products.” But long term, he thinks continued volatility will drive growth.
