NYSE Euronext (NYX) said it has shelved plans to create a
Web-based derivatives market in Europe, as the Big Board operator
continues a broad restructuring.
The company had announced plans in April to offer an electronic
market for individual investors in so-called "contracts for
difference," products that enable investors to bet on the future
prices of currencies, oil, metals and other assets. Contracts for
difference have gained popularity in Europe and elsewhere, though
they aren't allowed in the U.S. due to Securities and Exchange
Commission restrictions.
NYSE Euronext executives have decided to stop investing in the
project, opting instead to direct resources to other efforts, such
as building a derivatives clearinghouse in London, said Robert
Rendine, an exchange spokesman. Sluggish demand for financial
products in Europe also played into the company's decision.
"It was a combination of the organizational realignment and the
macro environment," Mr. Rendine said, referring to the
macroeconomic troubles that have roiled European markets.
The move follows NYSE Euronext outlining a plan in April
designed to save $250 million in annual expenses by the end of
2014. The company said it would cut staff and streamline
technology, among other measures.
As part of that effort, the company said in May that Garry
Jones, the global head of its derivatives business, would depart
and his position would be eliminated.
Contracts for difference are cash-based derivatives that
function like futures, though they have no set expiration date.
Investors can use such contracts to speculate on prices or indexes
moving higher or lower.
For example, an investor may buy a contract for difference on
crude oil at the current market price, on the belief that oil will
become more expensive following the release of an energy inventory
report. Should the price of crude oil rise after the report, the
investor can settle the contract at the higher price of the
commodity and pocket the difference between the two prices.
NYSE Euronext had planned to spend about $11 million developing
the market this year, aiming to roll out the first contracts in the
first quarter of 2013, according to company documents.
Mr. Rendine declined to comment on how much money the company
had spent on the project.
NYSE Euronext will report earnings Aug. 3.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com