3rd UPDATE: Deutsche Boerse Sees Write-Down On ISE Slowdown
19 Gennaio 2010 - 11:38PM
Dow Jones News
German exchange operator Deutsche Boerse AG (DB1.XE) warned late
Tuesday its full-year consolidated earnings for 2009 would be
burdened by around EUR200 million in writedowns because of a
slowdown in its U.S. equity options business, the International
Securities Exchange.
The warning comes on the back of analysts' concerns about lower
trading volumes at Deutsche Boerse and before it publishes
full-year earnings for 2009 on Feb. 16.
Despite the writedowns Deutsche Boerse said it plans to keep its
dividend for 2009 unchanged from the year before at EUR2.10.
A total of around EUR420 million in non-cash writedowns tied to
ISE and its U.S. equities business were offset in part by around
EUR180 million in deferred tax liabilities. The charge applies to
intangible assets other than goodwill, Deutsche Boerse said.
The surprise writedowns follow generally strong performance by
the ISE since its acquisition by Deutsche Boerse in 2007, a $2.8
billion cash deal aimed at extending the exchange's reach beyond
its German home market.
At the time, the ISE claimed about 28% of all U.S. options
trade, and has generally maintained its second-place position
behind the Chicago Board Options Exchange.
But the ISE last year saw its share of the market slip amid
growth by rival platforms operated by NYSE Euronext (NYX) and
Nasdaq OMX Group Inc. (NDAQ).
Market share fell from a peak of 29.6% in July to 20.3% in
December, the lowest level since December 2002. Pricing competition
and a move by NYSE Euronext to bring in a group of banks and
trading firms as equity owners in its NYSE Amex options exchange
has also put pressure on the ISE.
As rivals' share of the market has increased, ISE officials have
pointed toward a rise in so-called dividend spread arbitrage
trades, executed primarily on options exchanges with trading
floors, which the all-electronic ISE doesn't have.
The strategy seeks minute profits from options on companies that
are about to issue dividends, and because there's little risk
involved and a relatively small amount of money is made by both
exchanges and the parties involved in the trade, ISE has charged
that the practice distorts volume and market share figures.
Another potential factor are new rules adopted by the ISE in
October that put tighter restrictions on high-frequency trading
firms, aimed at protecting the exchange's market makers.
The CBOE has moved to follow the ISE, while platforms owned by
NYSE Euronext and Nasdaq OMX consider similar rules.
Deutsche Boerse shares closed 2.27% higher, or EUR1.22 Tuesday
at EUR54.98, leading the German DAX which closed 0.98% higher.
-By William Launder, Dow Jones Newswires; +49 69 29 725 515;
william.launder@dowjones.com and Jacob Bunge, Dow Jones Newswires;
(312) 750 4117; jacob.bunge@dowjones.com
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