Exchanges See Gains

Terry Flanagan

The third quarter was a boon for exchange operators as trading volumes surged to record levels and ancillary business components grew.

Exchange operators such as Nasdaq OMX and the Singapore Exchange were among the first to post their financial results from the preceding three months, with each seeing substantial boosts to their earnings.

Nasdaq OMX had earnings of $110 million, compared with $101 million from the same time last year and $92 million from the second quarter of 2011. Revenue increased to $438 million from $372 million last year.

“Our fourth consecutive quarter of record earnings was driven by strong growth in revenues,” said Robert Greifeld, chief executive officer of Nasdaq OMX in a statement. “And year-to-date our revenues have increased 13 percent over last year, against a 10 percent decline in U.S. equity volumes. But to truly appreciate our performance one must consider the strength and diversity of the business we’ve built and evaluate what we’ve delivered over the longer term, and that is double digit earnings growth.”

The SGX last week announced $88 million in profit on $159 million in revenue for the three months ended Sept. 30.

“SGX had record derivatives volumes and continued to see growing interest for listings and new memberships,” said Magnus Bocker, SGX chief executive officer in a statement. “We successfully rolled out a number of new initiatives, including, reduced minimum bid-ask spreads, all-day trading in our securities market and Reach, our new securities trading engine. However, we remain cautious with uncertain global financial markets and continuing macroeconomic challenges in Europe and the US.”

In recent weeks, both Nasdaq and the Singapore Exchange have taken measures to expand their businesses out of their core of just matching orders and into technology and services.

The Singapore Exchange announced that it is planning to invest in new post-trade services as it looks to expand beyond domestic equities. The move for expansion comes amid speculation that the SGX is linking up with the London Stock Exchange to make a joint bid for the London Metal Exchange. SGX’s Reach system is based on Nasdaq’s Genium Inet technology.

Nasdaq acquired technology company Glide Technologies in a move to boost its corporate solutions division. Glide is a provider of corporate communications and reputation management services and software. Last month, BM&F Bovespa came to an agreement with Nasdaq to use its Smarts Integrity market surveillance platform to provide added market monitoring capabilities.

Nasdaq acquired Smarts, an Australian market surveillance technology provider, in July 2010. Smarts develops technology which records market movements for surveillance purposes. In December 2010, Nasdaq also acquired FTEN, which provides risk management technology through the screening of the credit risk of traders before they trade. The moves were part of a strategy employed by several exchange operators, including rival NYSE Euronext, to diversify their operations.

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