Included in the results for the three months ended June 30, 2007 are $16 million in merger expenses and exit costs consisting primarily of professional and other fees incurred in connection with both the acquisition of Archipelago Holdings on March 7, 2006 and the combination with Euronext N.V. on April 4, 2007.
Giving effect to the combinations as if they had occurred at the beginning of the earliest period presented, but excluding merger expenses, exit costs and other non-recurring items, NYSE Euronext’s net income on a non-GAAP basis for the three months ended June 30, 2007 would have been $172 million, or $0.65 per diluted share, a $39 million or 29% increase as compared to net income of $133 million, or $0.50 per diluted share, for the three months ended June 30, 2006. In addition, on a non-GAAP basis, operating income grew 27% to $275 million for the second quarter of 2007 from $217 million in the year-ago period.
At constant USD/€ exchange rates, excluding acquisitions and divestitures which occurred during the period from June 30, 2006 through June 30, 2007, and on a non-GAAP basis, combined NYSE Euronext revenues, net of activity assessment fees, for the three months ended June 30, 2007 increased 12% while fixed operating expenses (defined as operating expenses, net of Section 31 fees, merger expenses, exit costs, liquidity payments, routing and clearing fees) decreased 9% compared to the three months ended June 30, 2006.
“Record revenues in our European cash and derivatives trading, as well as balanced growth in other business lines, including listings and market data, produced a strong second quarter for NYSE Euronext,” said Nelson Chai, Executive Vice President and Chief Financial Officer. “These results underscore NYSE Euronext’s growing product and geographic diversity, as well as increasing user demand for our products and services on a global scale. Our business integration efforts are progressing well, and we remain focused on strategically advancing our global leadership position for the benefit of our customers and shareholders. Moreover, giving effect to foreign currency translations and recent acquisitions, we continue to reduce our fixed expense base through aggressive cost management, which is driving further expansion of our operating margin.”
Other Second Quarter Financial and Corporate Highlights
• On April 4, the shares of NYSE Euronext, the world’s first and largest global exchange group, began trading on NYSE Euronext’s exchanges in New York and Paris.
• On June 6, NYSE Euronext declared an annual cash dividend of $1.00 per share payable quarterly; the first dividend payment of $0.25 was made on July 13.
• As of June 30, NYSE Euronext had $1.4 billion of cash, cash equivalents and short-term financial investments (excluding Section 31 fees payable to the SEC), and $3.5 billion of debt.
Second Quarter Business Highlights
• NYSE Euronext’s cash markets, which trade more shares than any other equities marketplace in the world and represent the largest pools of liquidity in their respective markets, realized record trading volumes during the three months ended June 30, 2007.
* NYSE Euronext’s European cash markets had their best quarter ever with 74.8 million trades, an increase of 27.7% compared to the three months ended June 30, 2006 and more than double the trading activity for the three months ended June 30, 2005. Through June 30, 2007, 148.7 million trades had been processed by NSC (Euronext’s cash trading platform) which represented 1.18 million trades per day on average, the highest figure ever. Year over year, the average daily number of trades increased in every product category: cash equities grew 28.3%, ETFs grew 76.8%, structured products (warrants and certificates) grew 10.8% and bonds grew 2.9%.
* NYSE Euronext’s U.S. markets comprised the largest liquidity pool in NYSE-listed cash trading with 63.7% of matched trading volume for the three months ended June 30, 2007. Total daily volume reached a new all-time record with nearly 5.2 billion shares traded on Friday, June 22, 2007, including record Crossing Session II volume of nearly 1.4 billion shares traded. NYSE Euronext’s U.S. exchanges also registered new monthly and quarterly record volumes in June 2007 with 60.7 billion shares traded during the month and 166.3 billion shares traded for the three months ended June 30, 2007.
* NYSE Arca continues to be the largest single liquidity pool for ETF trading in the U.S. with 42.3% of handled trading volume for the three months ended June 30, 2007.
• NYSE Euronext’s derivative markets, Liffe and NYSE Arca Options, continue to demonstrate solid growth in all product areas.
* With 232.6 million contracts traded for the three months ended June 30, 2007, Liffe set a record for trading activity, increasing by 13.7% compared to the same period a year ago. All of Liffe’s product categories increased compared to the three months ended June 30, 2006: interest rate contracts grew 5.4%, equity products (single stocks and indices) grew 23.0%, commodities grew 39.5%, and currency grew 13.8%.
* With 116.4 million interest rate contracts traded on Liffe, the three month period ended June 30, 2007 was the second busiest period ever. Year-to-date, interest rate contracts grew by 14% compared to the same period a year ago, establishing a new record with an average of 1.88 million contracts traded per day.
* European equity derivatives have also reached a new record of activity on Liffe with 112.8 million contracts traded for the three months ended June 30, 2007. The six months ended June 30, 2007 were by far the most active period for equity derivative contracts traded on Liffe since its inception. A large part of this growth is attributable to the success of Bclear, Liffe’s wholesale clearing service for OTC trades, which processed 43.8 million contracts for the three months ended June 30, 2007, a 71.4% increase compared to the comparable period a year ago.
* In June 2007, NYSE Arca Options submitted its detailed report and recommendations to the SEC for expanding the SEC’s successful penny pilot program. With total volume for all contracts in the penny pilot up over 50% year-to-date and average daily volume up 89% year-over-year, NYSE Arca Options has become one of the industry’s fastest growing and most efficient options trading platforms. With four new market makers (MMs) added in the quarter, NYSE Arca Options now has 29 MMs as of June 30.
• More than 3,900 issuers are listed on NYSE Euronext; listed operating companies represent over $30 trillion in total global market capitalization, greater than the next four largest equities marketplaces combined.
* The 70 new listings on NYSE Euronext’s U.S. markets for the three months ended June 30, 2007 included 24 IPOs by operating companies. Total IPO proceeds raised by operating companies in connection with listings for the three months ended June 30, 2007 were $12.8 billion, compared to $7.2 billion for the three months ended June 30, 2006.
* For the six months ended June 30, 2007, NYSE Euronext’s U.S. markets produced a total of 142 new listings, including 6 transfers from Nasdaq, 3 transfers from the Amex, and 34 IPOs by operating companies, which raised total proceeds of $16.0 billion. For the six months ended June 30, 2007, 27 closed-end fund IPOs raised a total of $23.8 billion in proceeds in connection with their listing on the NYSE. Year-to-date, U.S. domestic IPOs on NYSE Euronext’s U.S. markets raised approximately 90% of qualified IPO proceeds, while non-US offerings on NYSE Euronext’s U.S. markets represented 100% of qualified proceeds raised.
* For the six months ended June 30, 2007, NYSE Euronext’s U.S. markets listed 60 ETFs compared to 36 new ETF listings during the same period a year ago.
* For the three months ended June 30, 2007, Euronext listed 45 new issuers compared with 41 during for the comparable a year ago. Capital raised in connection with listings during the three-month period amounted to €3.3 billion. Of these new listings, NYSE Alternext listed 15 new issues, reaching 100 listed companies as of June 30, 2007. In just over two years, companies listed on NYSE Alternext have raised more than €1 billion and now represent a total market capitalization of over €5 billion.
• On April 2, 2007, NYSE Euronext announced the launch of high capacity trading services for Cash and Derivatives products trading on NSC and Liffe Connect which consist of new high-speed broadband access to users, as well as a proposed co-location service that will significantly reduce order routing time.
• NYSE BondsSM, which successfully launched on April 23, 2007 and is based on NYSE Arca’s advanced order-matching technology, provides investors with transparent and highly efficient order executions for nearly 2,500 debt securities of NYSE-listed companies.
• On April 25, 2007, NYSE TransactTools, which operates a rapidly expanding global network that connects the world’s securities markets and provides super-low latency access to trading and market information, was combined with SIAC’s Sector and SFTI businesses. NYSE TransactTools also launched the new SFTI FIX network connecting over 800 market participants, including all of the NMS markets in the United States.
• On April 26, 2007, the FINRA/NYSE Trade Reporting Facility (TRF) began processing initial trades and serving customers as a low-cost, reliable competitive alternative for reporting off-exchange transactions. In June 2007, the FINRA/NYSE TRF continued to add customers and increase volume, and currently processes more than 200 million shares daily for all NMS listed securities, including 7% of trading in Nasdaq-listed issues.
• Elkins/McSherry in its May 2007 Global Trading Cost Analysis reported that the NYSE produced the lowest all-in cost of trading in the world for the fifth consecutive quarter, based on first quarter 2007 data.
• During the first half of 2007, enhancements to NYSE trading systems and infrastructure reduced order flow latency from around 290 milliseconds (ms) to approximately 110 ms. Leveraging the high-performance TCM messaging server developed by NYSE TransactTools, the new Common Customer Gateway (CCG), scheduled to be implemented in the fourth quarter of 2007, will replace the current Common Message Switch (CMS) for interfacing with NYSE trading systems, including a 2008 expansion connecting the NYSE Arca, NYSE MatchPoint, NYSE BondsSM and NYSE Arca Options trading platforms.
