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Duncan Niederauer, chief executive of NYSE Euronext, said on Friday the software glitch at Knight Capital that led to erroneous trading in 140 stocks on the stock exchange was “a call to action” for US regulators.
“It highlights the need for market structure reforms in the US,” said Mr Niederauer, who said there was a crisis of confidence among customers. Knight’s 45-minute glitch, which cost it $440m and has threatened the market maker’s survival, is the latest in a series of technology-related issues that have hit the US market this year. NYSE said it had notified Knight of the problem within minutes of the open.
It was “another example of the fact that the US market structure evolution has led to inexorable fragmentation and an emphasis on speed,” Mr Niederauer said.
The group also unveiled more details of cost-cutting plans as it targets a return to earnings growth in 2013. It reported a 9 per cent year-on-year fall in second-quarter revenue to $602m, while net income in the same period fell 20 per cent to $128m as weak appetite for trading crimps earnings this year.
Similar to rival exchanges, the group has talked of weak investor confidence inhibiting trading on its main equity and derivatives exchanges in the US and Europe.
It has also faced fierce competition for market share from rival bourses, brokers, alternative trading platforms and off-exchange trading platforms that trade large blocks of shares, known as “dark pools”.
NYSE Euronext said it would not go ahead with a planned London-based contracts-for-difference business, announced only in April, which would save it $10m. It will also leave its stake in the Qatar stock exchange at 12 per cent, rather than make two final payments of $40m to lift its stake to 20 per cent as intended three years ago.
The growth plans include building its European clearing business as a key focus especially after its planned merger with Germany’s Deutsche Börse was blocked by European regulators this year. NYSE also wants to sell more technology services and launch new mid-dated derivatives products.
Investors concerned about the eurozone have shied away from trading euribor futures, which is NYSE Liffe’s biggest product and trades at the short end of the interest rate yield curve.
Turnover from derivatives fell 15 per cent to $182m compared with the same period last year, hit by lower trading volumes particularly in Europe. Revenues from share trading and company listings fell 8 per cent to $300m. Turnover from technology, last year one of its fastest-growing segments, fell 2 per cent to $119m year on year as customers delayed decisions on purchases of software and connectivity services.