NYSE Euronext hit by delays to IT merger plan

In its maiden full year results, NYSE Euronext said its fourth-quarter profit more than tripled as trading volume surged and more companies listed themselves on the exchange. But its shares tumbled as the trans-Atlantic exchange operator delayed some planned cost cuts.


NYSE Euronext will be slower to deliver IT-driven revenue synergies arising from the merger of NYSE and Euronext than the group originally forecast, the exchange has admitted.

The delay is partly down to the group’s decision, announced in December, to bring its European trading platforms back in-house.

The exchange now expects annual technology cost savings of about $200m by the first quarter of 2010 – nine months later than originally forecast. It also said it expects to realise the full $250m of merger-related technology savings by the end of 2010.

NYSE Euronext has already embarked on unwinding Atos Euronext Market Solutions, a joint venture originally set up in 2005 by Euronext and Atos Origin. The rationale for insourcing, according to NYSE Euronext, is to bring “the expertise of a large number of highly skilled IT personnel back in-house [to] enable us to better deliver on our commitments to provide our customers with more efficient trading services.”

But the news that savings will now be slower to arrive than expected has dented shareholder confidence, and shares fell back 14% yesterday despite the group announcing sharply higher fourth-quarter profits on record trading volumes.

Duncan L. Niederauer, chief executive of NYSE Euronext, said the record trading volumes recorded reflected the group’s "strong technology,” but admitted, "while we've accomplished quite a lot, we have a lot more to do.”

When plans for the merger were originally announced back in June 2006, big cost savings through IT consolidation were trumpeted by both sides, but IT experts immediately raised doubts about the ambitious integration timescales.

At that time, Atos Euronext Market Solutions was still charged with delivering the systems integration, including several trading platforms undergoing transition.

The New York Stock Exchange has spent much of the past 18 months integrating the Windows-based platforms it acquired when it bought Archipelago Holdings in 2006. And Euronext.liffe, the derivatives arm of Euronext, only recently completed a switch from 1,500 Sun Solaris servers to HP servers running Linux and Intel.

Other planned IT synergies include three cash trading systems used by the exchanges being replaced by a single global platform. Originally this was slated to happen by 2009.

There are also plans for the group’s three derivatives trading systems to be migrated to a single platform, 10 datacentres to be reduced to four, and four networks to be rolled into a single global network.

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