NYX Nyse Euronext

Regulatory scrutiny around high-speed trading strategies appears to be pushing the business away from stock exchanges and into lesser-regulated platforms such as "dark pools," according to the top executive of NYSE Euronext (NYX).

So-called high-frequency trading firms' move into other markets and countries also seems to be gaining momentum amid continued regulatory focus on the method of rapidly trading shares and other products, said Duncan Niederauer, chief executive of the Big Board's parent company.

"I do think they have shifted some of their volume," Niederauer said Monday on a conference call discussing NYSE's first-quarter financial results, referring to electronic trading firms.

High-speed traders' pullback from registered exchanges like those run by NYSE Euronext and toward dark pools, or private markets for trading shares, adds to headwinds facing the market operator. On Monday NYSE Euronext reported a 44% net profit decline in the first quarter driven by a widespread drought in trading.

Revenues fell 11% from the year-earlier period as investors generally stuck to the sidelines of markets in the U.S. and Europe, while currency losses and charges from the failed merger with Germany's Deutsche Boerse AG (DBOEF, DB1.XE) also weighed on results.

Revenue from derivatives trading, a cornerstone of NYSE's business, dropped 25% to $176 million for the quarter. The company's U.K. franchise in futures linked to short-term interest rates has struggled as central banks are seen committed to holding rates at near-zero levels for years to come.

"We knew and expected this would be a challenging quarter for us, given the difficult environment," said Niederauer, who said he saw conditions potentially returning to normal in 2013 or 2014.

Shares in NYSE recently were down 6.2% at $25.38.

Electronic trading groups for several years have looked to trade other financial instruments and set up in overseas markets as U.S. stock market activity has slowed and volatility has declined, providing fewer opportunities for fast-moving strategies to profit.

Turnover in U.S. listed stocks dipped to about 6.8 billion shares traded on average each day in the first quarter of 2012, representing the market's slowest quarter in the past four and a half years. Investors have pulled out of mutual funds and trimmed their own trading amid fears driven by the European debt crisis and confidence-rattling events like last summer's dramatic market swings.

Regulatory scrutiny has further fueled high-speed traders' migration away from stocks, Niederauer said. The U.S. Securities and Exchange Commission is pursuing approximately 20 separate probes into computerized trading, a top official told The Wall Street Journal this month.

"Some of the rhetoric from the regulators and politicians may be leading the high-frequency community to think about a lot of other alternatives and maybe in fact accelerating their move to either other asset classes and geographies or some of the more lightly regulated liquidity pools," Niederauer said Monday.

Exchanges themselves have taken steps to curb some aspects of high-speed trading, with companies like Nasdaq OMX Group Inc. (NDAQ) and Direct Edge Holdings recently introducing new fees for firms that heavily quote prices but do not follow through with many trades.

"It seems that the countries where [high-frequency trading] has been active the longest are where the regulators are most actively trying to curb their trading," said Seth Merrin, CEO of Liquidnet Holdings Inc., which runs private stock markets but seeks to block such traders from its platform.

"I think they are going to where they are being welcomed and leaving where they are being vilified," said Merrin.

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

-Noemie Bisserbe contributed to this article.

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