The London Stock Exchange (LSE) expects challenging conditions in the remainder of its financial year following a reduction in trading volumes, values and revenues in the first nine months.
In an interim management statement released today, the LSE revealed that total trading revenue fell 26% to £137.5 million in the nine months to 31 December 2009. Cash equities trading revenue, the largest contributor to the LSE’s overall trading revenue, was down 32% to £101 million over that period while derivatives revenue was down 22% to £15.2 million. However, fixed income trading revenue increased 2% to £21.3 million.
The LSE’s overall revenues, which include its information and technology, post trade and primary markets, were down 13% to 165.8 million for the nine months to December.
For the three months ending 31 December alone, total trading revenues were down 23% to £42.4 million, while total revenues fell 9% to £154.9 million.
“Market conditions have not been easy in the last quarter, particularly in cash equities, though the Group has benefited from the breadth of its activities, with good performances in primary markets and fixed income trading, and the Information & Technology Services division has also proven resilient,” said Xavier Rolet, CEO of the LSE, in a statement. “Market conditions are expected to remain testing in the current quarter.”
Although the LSE’s Q3 revenues were down on last year’s third quarter, its quarter-on-quarter performance has beaten some analysts’ expectations. The exchange’s overall revenue figure of £154.9 million, for example, beat Citi analyst Daniel Garrod’s forecast of £149.3 million by 3.7%.
Rolet added that the LSE continues to focus on improving the business, highlighting the exchange’s efforts to cut costs, improve efficiency and enhance its competitive position. He described the LSE’s pending acquisition of multilateral trading facility (MTF) Turquoise, scheduled for completion in February, and last year’s purchase of Sri-Lankan technology firm MillenniumIT, which will develop a new trading platform for the exchange, as “good steps to enhancing our trading offering.”
Like Europe’s other traditional exchanges, the LSE has suffered from a combination of falling equity trading volumes and values during 2009 and increasing competition for equity trading market share from MTFs. The exchange also cut its fees in September 2009, which contributed to the overall revenue decline in Q3.
The LSE reported that total equity value traded across all its platforms fell 34% to £1.35 trillion in nine months to December, while the average daily number of trades declined 16% 848,000.
According to figures from data vendor Thomson Reuters, the LSE’s market share of trading turnover in the UK’s FTSE 100 index fell to 57.3% in December 2009 from 73.3%. Meanwhile, the corresponding FTSE 100 market share of Chi-X Europe, the largest displayed MTF by traded value, increased to 24.2% from 13.9% over the same period.