(TRIL.L) Thomson Reuters PLC Buy/Sell

By Jennifer Kwan

TORONTO, Oct 28 (Reuters) - Exchange operator TMX Group Inc , which is aggressively diversifying as smaller rivals erode its market share, reported a lower quarterly profit on Wednesday as revenue fell and expenses rose.
TMX, whose share price closed down 8 percent at C$31.05, said net income fell 18 percent to C$41.7 million ($38.6 million), or 56 Canadian cents a share, in the third quarter.
That compares with a profit of C$50.9 million, or 66 Canadian cents a share, in the year-before period.
Analysts, on average, had expected TMX, which operates the Toronto Stock Exchange, the small cap TSX Venture Exchange and Montreal derivatives market, to earn 61 Canadian cents per share, according to Thomson Reuters I/B/E/S.
A key element driving profit lower was weak cash equity trading revenue on the senior Toronto exchange, which fell because of a new pricing program that came into effect at the beginning of the year.
One aspect of the program targeted high frequency traders, referred to as electronic liquidity providers (ELPs), and it successfully boosted volumes, but also eroded average revenue per trade.
"(It) missed estimates as the exchange offered higher rebates to protect market share," said Diego Perfumo, an analyst at Equity Research Desk in Greenwich, Connecticut.
Recognizing the problem, TMX announced changes to its pricing model in August, including a fee reduction on some orders for stocks trading at less than C$1, and lowering rebates for ELPs trades. Those changes took effect Oct. 1.
TMX executives said on a conference call the pricing change is expected to have a neutral impact if the mix of trading remains the same. However, if the mix changes, average revenue per trade could erode further, or could rise.
Other sources of revenues weakness included market data and issuer services.
Perfumo said higher technology costs also hurt TMX's profit as the company invested in co-location and data centers. Co-location essentially allows clients to place their computer services next to TMX's trading engines to cut response times.
"We are operating in a hyper-competitive market, one that requires strategic investments in key parts of the business, particularly with regard to technology," TMX Chief Executive Thomas Kloet said in a conference call.
Kloet said there were reductions in revenues in certain areas of the business, but he was encouraged by the improving market conditions pointing to increases in the value of initial public offering and secondary financing activities.
Total revenue fell 6 percent to C$130.2 million, missing analysts' average forecast of C$134.7 million. Operating expenses in the quarter rose 10 percent to C$68.4 million, boosted by expenses related to the company's May 2008 acquisition of the Montreal Exchange, as well as technology investments.
The drop in profit was partly offset by higher revenue from energy trading, cash markets equity trading revenue on the TSX Venture Exchange and fixed income trading, TMX said.

Increased competition has cut TMX's market share by 15 percentage points to 83 percent in September, down from 98 percent for the same period in 2008.

"There's been this shift to equity trading becoming a commodity and that's really hurting a lot of the businesses," said Jennifer Radman, vice-president at Caldwell Investment Management, which has holdings in exchanges including TMX.
She said, however, that TMX has done a good job in trying to recapture lost revenue.
"The big advantage they have is that they do still have control of the derivatives market," she said. "That's a pretty big asset."
There are currently seven alternative trading venues in Canada but TMX's main competitor is Alpha Group, which is backed by the dealer arms of the country's biggest banks.
It has made several moves recently to encroach on TMX's turf, including the announcement of a new pricing program to boost volumes, as well as teaming up with Thomson Reuters Corp to offer consolidated market data.
On Wednesday, Alpha announced it will offer co-location services.
($1=$1.08 Canadian)

(Reporting by Jennifer Kwan; editing by Rob Wilson) Keywords: TMX/ (jennifer.kwan@thomsonreuters.com; +1 416 941 8178; Reuters Messaging: jennifer.kwan.reuters.net@reuters.com)

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Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

By Jennifer Kwan

TORONTO, Oct 28 (Reuters) - Exchange operator TMX Group Inc , which is aggressively diversifying as smaller rivals erode its market share, reported a lower quarterly profit on Wednesday as revenue fell and expenses rose.
TMX, whose share price closed down 8 percent at C$31.05, said net income fell 18 percent to C$41.7 million ($38.6 million), or 56 Canadian cents a share, in the third quarter.
That compares with a profit of C$50.9 million, or 66 Canadian cents a share, in the year-before period.
Analysts, on average, had expected TMX, which operates the Toronto Stock Exchange, the small cap TSX Venture Exchange and Montreal derivatives market, to earn 61 Canadian cents per share, according to Thomson Reuters I/B/E/S.
A key element driving profit lower was weak cash equity trading revenue on the senior Toronto exchange, which fell because of a new pricing program that came into effect at the beginning of the year.
One aspect of the program targeted high frequency traders, referred to as electronic liquidity providers (ELPs), and it successfully boosted volumes, but also eroded average revenue per trade.
"(It) missed estimates as the exchange offered higher rebates to protect market share," said Diego Perfumo, an analyst at Equity Research Desk in Greenwich, Connecticut.
Recognizing the problem, TMX announced changes to its pricing model in August, including a fee reduction on some orders for stocks trading at less than C$1, and lowering rebates for ELPs trades. Those changes took effect Oct. 1.
TMX executives said on a conference call the pricing change is expected to have a neutral impact if the mix of trading remains the same. However, if the mix changes, average revenue per trade could erode further, or could rise.
Other sources of revenues weakness included market data and issuer services.
Perfumo said higher technology costs also hurt TMX's profit as the company invested in co-location and data centers. Co-location essentially allows clients to place their computer services next to TMX's trading engines to cut response times.
"We are operating in a hyper-competitive market, one that requires strategic investments in key parts of the business, particularly with regard to technology," TMX Chief Executive Thomas Kloet said in a conference call.
Kloet said there were reductions in revenues in certain areas of the business, but he was encouraged by the improving market conditions pointing to increases in the value of initial public offering and secondary financing activities.
Total revenue fell 6 percent to C$130.2 million, missing analysts' average forecast of C$134.7 million. Operating expenses in the quarter rose 10 percent to C$68.4 million, boosted by expenses related to the company's May 2008 acquisition of the Montreal Exchange, as well as technology investments.
The drop in profit was partly offset by higher revenue from energy trading, cash markets equity trading revenue on the TSX Venture Exchange and fixed income trading, TMX said.

Increased competition has cut TMX's market share by 15 percentage points to 83 percent in September, down from 98 percent for the same period in 2008.

"There's been this shift to equity trading becoming a commodity and that's really hurting a lot of the businesses," said Jennifer Radman, vice-president at Caldwell Investment Management, which has holdings in exchanges including TMX.
She said, however, that TMX has done a good job in trying to recapture lost revenue.
"The big advantage they have is that they do still have control of the derivatives market," she said. "That's a pretty big asset."
There are currently seven alternative trading venues in Canada but TMX's main competitor is Alpha Group, which is backed by the dealer arms of the country's biggest banks.
It has made several moves recently to encroach on TMX's turf, including the announcement of a new pricing program to boost volumes, as well as teaming up with Thomson Reuters Corp to offer consolidated market data.
On Wednesday, Alpha announced it will offer co-location services.
($1=$1.08 Canadian)

(Reporting by Jennifer Kwan; editing by Rob Wilson) Keywords: TMX/ (jennifer.kwan@thomsonreuters.com; +1 416 941 8178; Reuters Messaging: jennifer.kwan.reuters.net@reuters.com)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

By Jennifer Kwan

TORONTO, Oct 28 (Reuters) - TMX Group Inc, operator of the Toronto Stock Exchange, reported a lower quarterly profit on Wednesday, hurt in part by weaker revenue from cash equity trading.
TMX, which also operates the small-cap TSX Venture Exchange and the Montreal Exchange derivatives market, said net income fell 18 percent to C$41.7 million ($38.6 million), or 56 Canadian cents a share, in the third quarter.
That compares with profit of C$50.9 million, or 66 Canadian cents a share, in the year-before period.
Analysts, on average, had expected earnings per share of 61 Canadian cents, according to Thomson Reuters I/B/E/S.
A key element driving profit lower was weak cash equity trading revenue on the Toronto exchange, which fell because of a new pricing program that came into effect at the beginning of the year.
The program targeted high frequency traders, referred to as electronic liquidity providers (ELPs), and it successfully boosted volumes, but also eroded average revenue per trade.
"(It) missed estimates as the exchange offered higher rebates to protect market share," said Diego Perfumo, analyst at Equity Research Desk in Greenwich, Connecticut.
Recognizing the problem, TMX announced changes to its pricing model in August, including a fee reduction on some orders for stocks trading at less than C$1, and lowering rebates for ELPs trades. Those changes took effect Oct. 1.
Perfumo said that higher technology costs also hurt TMX's profit as the company invested in co-location and data centers. Co-location essentially allows clients to place their computer services next to TMX's trading engine to cut response times.
Total revenue fell 6 percent to C$130.2 million, missing analysts' average forecast of C$134.7 million.
The drop was offset partly by higher revenue from energy trading, cash markets equity trading revenue on the TSX Venture Exchange and fixed income trading, TMX said.

"While we experienced reductions in revenues in certain areas of the business, due in part to the global economic slowdown, we are encouraged by the improving market conditions," said Thomas Kloet, TMX's chief executive, pointing to increases in the value of initial public offerings and secondary financings.

Increased competition has cut TMX's market share by 15 percentage points from last September to 83 percent this September.

"There's been this shift to equity trading becoming a commodity and that's really hurting a lot of the businesses," said Jennifer Radman, vice president at Caldwell Investment Management, which has holdings in exchanges including TMX.
She said, however, that TMX has done a good job in trying to recapture lost revenue.
"The big advantage they have is that they do still have control of the derivatives market," she added. "That's a pretty big asset."
TMX's main competitor is Alpha Group, which is backed by the dealer arms of Canada's biggest banks. It has made several moves recently to encroach on TMX's turf including the announcement of a new pricing program to boost volumes on its trading system, as well as teaming up with Thomson Reuters Corp to offer consolidated market data.
On Wednesday, Alpha announced it will offer co-location services.
TMX's operating expenses in the quarter rose 10 percent to C$68.4 million, boosted by expenses related to the company's May 2008 acquisition of the Montreal Exchange derivatives market, as well as technology investments.
TMX shares were down C$1.76, or 5.2 percent, at C$32.00 on the Toronto Stock Exchange at midday on Wednesday.
($1=$1.08 Canadian)

(Reporting by Jennifer Kwan; editing by Peter Galloway) Keywords: TMX/ (jennifer.kwan@thomsonreuters.com; +1 416 941 8178; Reuters Messaging: jennifer.kwan.reuters.net@reuters.com)

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Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

By Robert MacMillan

NEW YORK, Oct 14 (Reuters) - Thomson Reuters Corp said on Wednesday it will buy business commentary service Breakingviews, a move by the news and financial data provider to significantly increase its production of commentary written by columnists.
The Breakingviews board has recommended that shareholders in the privately held company accept the offer, Thomson Reuters said, adding that the transaction should close within eight weeks. A price has not been disclosed.
The decision to buy Breakingviews pushes Reuters News further into the world of commenting on business and financial news. That arena includes players such as Lex, the commentary service run by Pearson Plc's Financial Times newspaper, and Heard on the Street, part of News Corp's Wall Street Journal.
Breakingviews chief Hugo Dixon will run the commentary service, which will operate separately from Reuters' news reports. Thomson Reuters said it is talking to Jonathan Ford, who was hired last year to start the Reuters commentary service, about taking on other roles at Thomson Reuters.
Reuters decided to buy Breakingviews even after starting its own service because the deal was at an attractive price and will accelerate the company's push into commentary, Reuters Editor-in-Chief David Schlesinger said.
When asked whether there would be layoffs as a result of the deal, Schlesinger said no decision has been made.
"There may be a few people who end up leaving," he said. "But the point of the deal is not to have a small team."
Breakingviews distributes its columns to about 400 clients such as financial institutions, and reaches about 15,000 users, said its U.S. editor, Rob Cox.
It also distributes its articles in newspapers such as The New York Times, and Thomson Reuters said it expects to develop syndication relationships with other papers.
Thomson Reuters premium clients will have access to all the columns.
The deal comes a day after Bloomberg LP, a Thomson Reuters competitor in providing news and financial data, said it will buy BusinessWeek magazine from McGraw-Hill Companies Inc .

(Reporting by Robert MacMillan; Editing by Martin Howell and Ted Kerr) Click on http://blogs.reuters.com/category/themes/mediafile/ to see Reuters MediaFile blog Keywords: THOMSONREUTERS BREAKINGVIEWS/ (robert.macmillan@thomsonreuters.com; +1 646 223 6012; Reuters Messaging: robert.macmillan.reuters.com@reuters.net)

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Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.