By Bradley Hope and Michael Calia
Nasdaq OMX Group Inc. said its first-quarter profit more than
doubled, exceeding analysts' forecasts, as the company posted a 27%
rise in net revenue on increased sales of investor relations and
other services to corporations.
The first quarter also benefited from a favorable year-ago
comparison, as the 2013 period included $62 million in costs
related to payments to firms affected by Nasdaq's 2012 mishandling
of the Facebook Inc. IPO.
During the earnings conference call, Nasdaq Chief Executive
Robert Greifeld addressed some of the concerns about high-frequency
trading amid questions raised in a recent book by author Michael
Lewis about whether the market is "rigged" against ordinary
investors.
"We pride ourselves in providing fair and open access to our
markets," Mr. Greifeld said.
In a follow-up interview, he declined to say whether
high-frequency trading was a net positive for the markets, but
cited viewpoints from investors, such as asset manager BlackRock
Inc., that describe some high-frequency trading strategies as
having a positive impact.
While Mr. Greifeld didn't state specifics, a recent commentary
by BlackRock found that in recent years trading costs have gone
down, while bid-ask spreads have narrowed and liquidity has
increased.
Mr. Greifeld also said during the conference call that he was in
favor of an "acceleration" of the evolution of the markets,
especially in forcing more trading from so-called dark pools back
onto the exchanges. Roughly 40% of trading takes place off
exchanges, according to Tabb Group.
"It's certainly our hope that a result of some of this
controversy is...an acceleration of efforts to bring more of the
markets into the lit and transparent world," he said.
Nasdaq also disclosed for the first time its exposure to traders
with a high number of quotes compared with actual trades--one
definition of high-frequency trading. Market makers weren't
included in the data, as they also have high quote-to-trade ratios
but are required to provide liquidity to the market.
The HFT firms accounted for between $23 million and $29 million
of Nasdaq's revenue in the first quarter, about 1% of the total
revenue, according to a presentation made during the call.
High-frequency traders are known for submitting a large number of
orders, most of which are quickly canceled as they adjust their
bids and offers to changes in the markets.
In the first quarter, Nasdaq earned $103 million, or 59 cents, a
share, compared with $42 million, or 25 cents a share, in the
year-ago period. Excluding adjustments related to mergers and
strategic initiatives, the company's earnings were 72 cents a
share. Revenue climbed to $529 million, a level the company termed
a record high. Analysts polled by Thomson Reuters expected
per-share earnings of 71 cents and $527 million in net revenue.
Nasdaq's market-services segment, its largest top-line
contributor, posted a 17% rise in revenue to $213 million. Revenue
in the technology-services segment that includes the
corporate-services offerings, grew to $135 million from $75
million.
In the first quarter, Nasdaq said, it led all U.S. exchanges for
listing initial public offerings with 47--accounting for 64% of the
industry total.
Shares of Nasdaq were off 0.9% in late morning trade at $36.28,
which puts the stock down 8.9% in 2014.
Write to Bradley Hope at bradley.hope@wsj.com and Michael Calia
at michael.calia@wsj.com
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