Intercontinental Exchange Profit Rises 2 Percent on Cuts

Intercontinental Exchange Inc., which agreed in December to acquire NYSE Euronext, said fourth-quarter profit rose 2 percent as it cut expenses to boost earnings.

Net income increased to $129 million, or $1.76 a share, from $127 million, or $1.73, a year earlier, the Atlanta-based company said in a statement today. Excluding costs related to its purchase of NYSE Euronext and other items, profit was $1.84, beating the average analyst estimates of $1.74 per share, according to a survey conducted by Bloomberg.

Average daily volume at Intercontinental’s exchanges dropped 1 percent in the fourth quarter compared with the year-earlier period, it said in a statement last month. Offsetting that slowdown in trading was a 1 percent reduction in expenses to $131 million in the quarter, the company said today.

The 12-year-old energy and commodity futures bourse agreed on Dec. 20 to acquire NYSE Euronext for cash and stock worth about $8.2 billion, moving to take control of the world’s biggest equities market. If the deal is completed, Jeffrey Sprecher, chief executive officer of Intercontinental, will have expanded an oil exchange he bought in London in 2001 into the world’s second-biggest futures market by volume, according to data from the Futures Industry Association.

Revenue fell 1.2 percent to $323.4 million in the quarter from $327.2 million. Intercontinental shares fell 1 percent to $142.10 as of 9:49 a.m. in New York. They have gained 17 percent in the past year through yesterday.

Rate Futures

Intercontinental offers trading in futures based on crude oil, natural gas, electricity, sugar, cocoa and financial products such as currencies and equity indexes. It owns the world’s largest clearinghouse for credit-default swaps.

The NYSE purchase would give Intercontinental futures based on interest rates that trade on the Liffe exchange in London. The company will also pursue opportunities to offer clearing for interest-rate swaps, the biggest part of the $639 trillion over-the-counter derivatives market, Sprecher said today on a conference call with analysts.

Intercontinental has suggested it may spin off the European stock-trading business of the Euronext division. Sprecher said today no decision on that would be made until after the deal closes.

Sprecher, 57, said the purchase of the 220-year-old New York Stock Exchange gave him and NYSE executives “a pulpit” to “point out problems and try to be creative” in solving issues related to equity-market structure. Sprecher said the listing and data businesses at the stock exchange were impressive, though he pointed out what he considered to be some flaws in how equity markets charge customers.

‘Absurd’ Model

The equities exchange fee model known as maker-taker pricing in which providers of bids and offers get a rebate while those trading against them pay for executions is “patently absurd,” Sprecher said. It’s unclear why an exchange would give away shareholder value, he said. The pricing regime developed during the last dozen years as a way to encourage market makers and other providers of liquidity to post orders on exchanges.

Sprecher made similar comments in 2011 at a Futures Industry Association conference in Chicago.

Intercontinental’s competitor CME Group Inc., the world’s largest futures exchange, yesterday said fourth-quarter profit fell as its average daily volume in the quarter slumped 13 percent, compared with the year-ago period.

Before it's here, it's on the Bloomberg Terminal.