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Nasdaq profit tops expectations as non-trading revenues rise

A man takes a photo outside the Nasdaq Market site in New York's Times Square, July 23, 2012. REUTERS/Brendan McDermid
A man takes a photo outside the Nasdaq Market site in New York's Times Square, July 23, 2012. REUTERS/Brendan McDermid

By John McCrank

NEW YORK (Reuters) - Nasdaq OMX Group reported a higher fourth-quarter profit on Thursday, as an increase in non-transaction-based revenues outweighed an industry-wide drop in trading volumes.

Net income attributable to the transatlantic exchange operator totaled $85 million, or 50 cents a share, up from $82 million, or 45 cents a share, a year earlier.

Stripping out one-time items including restructuring, merger, and legal expenses, Nasdaq said it earned 64 cents a share. That was 3 cents above analysts' expectations, on average, according to Thomson Reuters I/B/E/S.

Revenues, not including transaction rebates, brokerage, clearance and exchange fees, were $419 million, compared to $420 million a year earlier. Analysts had expected revenue of $412.01 million.

Nasdaq's results were "driven by a significant pick-up in corporate activity coupled with solid performance in our U.S. options, U.S. proprietary data products and global index businesses," Bob Greifeld, the company's chief executive, said in a statement.

Nasdaq has been diversifying away from transaction-based revenues over the past several years, putting more of a focus on business units that provide a steadier income flow through providing services like technology and data to other companies.

In December, the New York-based company agreed to buy Thomson Reuters Corp's investor relations, public relations and multimedia services units for $390 million.

Issuer Services, which make up 24 percent of Nasdaq's total net revenues, rose by $10 million from a year earlier to $101 million, mainly due to growth in Nasdaq's corporate solutions business, which benefited from acquisitions in May 2012 and October 2011.

Nasdaq said revenues in its market services unit, which includes cash equities and derivatives, and makes up 64 percent of total net revenues, were $270 million, down $11 million from the fourth quarter of 2011.

Cash equities, which made up 11 percent of total net revenues, were down $12 million from the year-earlier quarter at $47 million, due to lower trading volumes and a slight drop in market share. Derivatives trading and clearing revenues, which made up 18 percent of total revenues, rose by $2 million to $75 million.

Access and broker services revenues were $65 million, up $4 million from the fourth quarter of 2011, while market data revenues, which make up 20 percent of total net revenues, dropped by $4 million to $83 million.

Market technology revenues, which made up 12 percent of total net revenues, were flat from a year earlier at $48 million.

Nasdaq said it expects its total operating expenses for 2013 to be in the range of $960 million to $990 million, and that it expects a 2013 effective tax rate in the range of 34 percent to 37 percent.

(Reporting by John McCrank; Editing by Jeffrey Benkoe and Chizu Nomiyama)

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