The head of NYSE Euronext (NYX) on Thursday criticized new trading techniques used by some rivals as a "giant step backwards" for an industry under increasing regulatory scrutiny.

Duncan Niederauer, chief executive, said the use of so-called "flash" order types "tilt the playing field toward a select group of participants," and said they mirrored practices that it had stepped away from.

His comments came as the transatlantic exchange operator reported a second-quarter loss, though it boosted its full-year forecast for cost savings.

NYSE Euronext is the only major exchange not to use flash order types, which display stock orders to off-exchange liquidity pools before they're sent out to the broader market.

Niederauer has been critical of the practice in recent weeks and acknowledged on a conference call that NYSE Euronext gave up "a percentage point or two" of market share by not following competitors' lead. But, he said, "we felt it was the right decision to make."

Flash orders have come under fire because they're perceived as giving an information advantage to certain traders. Niederauer acknowledged comparisons to the Big Board's old market model, in which specialists were criticized for the same reason.

"It's a little ironic that some of the same people who insisted we eliminate those information advantages" have now adopted flash orders, he said.

Niederauer expressed confidence that the Securities and Exchange Commission, which has been reviewing the practice, will address the issue appropriately and that any action won't affect overall market liquidity.

 
   Charges Hit 2Q

NYSE Euronext shares were recently trading little changed at $27.10, as a modest rise in revenue from the prior quarter and lower expenses year-on-year was wiped out by the $355 million paid to LCH.Clearnet Group Ltd. under a deal that sees the stock market and derivatives exchange operator taking more of its clearing in-house.

Niederauer said the clearing move "is expected to generate revenues in excess of $100 million annually and is anticipated to be accretive in 2009, and the staffing reductions we have made will result in significant future cost savings."

The cost of staff cuts in the U.S. and Europe also weighed on the quarter, though earnings were ahead of consensus excluding special charges, and the company said it would beat its target of extracting $100 million in synergies this year from the acquisition of the American Stock Exchange.

The reported net loss of $182 million, or 70 cents a share, compared with a $195 million profit in the second quarter of 2008. Excluding one-off charges, a 51-cent surplus in the latest quarter was ahead of the 45-cent consensus among analysts.

NYSE Euronext, like rivals, has been paring expenses to counter intensifying competition in the cash equities business and a slide in volume of some its core derivatives products, its largest business segment by revenue.

The company is cutting almost 300 staff, a move that helped cut fixed costs by 6% compared with a year ago.

Revenue rose to $1.125 billion from $1.03 billion a year ago and $1.1 billion in the prior quarter, with the company citing the positive impact of pricing changes for the sequential improvement.

NYSE Euronext says its U.S. futures platform is expected to make an operating loss of $25 million to $30 million this year as the transatlantic exchange operator works to build trading activity and secure equity partners for the venture.

It also plans to launch new futures contracts based on MSCI indexes in the third quarter, as well as fixed-income derivatives following a new clearing partnership with Depository Trust and Clearing Corp.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

(Doug Cameron and A.H. Mooradian contributed to this article)