TMX quarterly profit falls as fee changes weigh

Wed Jul 29, 2009 9:35pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Quarterly profit sagged at Toronto Stock Exchange operator TMX Group Inc as expenses rose and cash equity trading revenue was weaker than the market expected, sending its shares down 4.7 percent.

The company, which also operates the small-cap TSX Venture Exchange and the Montreal Exchange derivatives market, said on Wednesday that net income fell to C$46.9 million ($43 million), or 63 Canadian cents a share, in the second quarter.

That was largely in line with analyst estimates of 62 Canadian cents, before items.

In the year-ago quarter TMX earned C$49.2 million, or 65 Canadian cents a share.

TMX shares closed down 4.7 percent at C$33.55 mainly on disappointment that cash equity trading revenues were "weaker than what the market was expecting," said John Aiken, analyst at Dundee Securities.

That weakness reflects fee cuts as TMX responds to competition from alternative trading venues, he added.

"They need to defend their turf on the trading but in the current environment, when you have much lower levels of listings coming through, the fee-cutting on the trading really gets exaggerated," added Aiken, noting however it's not a longer term concern.

Another area of focus is the impact of a greater rebates paid to so-called high frequency traders, or electronic liquidity providers, as they play a greater role in overall market activity. Currently, they account for about 15 to 20 percent of trading volume, said TMX executives.   Continued...