Shares of exchanges fall with downgrades, market

Shares of exchanges fall as analyst predicts increased competition, issues downgrades

• On 12:24 pm EDT, Friday October 16, 2009

DES MOINES, Iowa (AP) -- Shares of exchange and trading platform providers mostly fell Friday as the broader markets trended downward and an analyst downgraded or lowered estimates on several companies.

GFI Group Inc. fell 54 cents, or 7 percent, to $7.15 after Keefe, Bruyette & Woods analyst Niamh Alexander downgraded the inter-dealer broker, which specializes in derivatives and related products.

The analyst cut the stock to "Market Perform" from "Outperform" saying there's more upside potential in other stocks in the sector that are better prepared in a changing derivatives trading landscape.

Alexander said proposed legislation could force changes in over-the-counter trading could result in lighter volumes for the company.

Other exchange stocks that fell in midday trading included Nasdaq OMX Group Inc., down 56 cents, or 2.7 percent, to $19.85; NYSE Euronext, down 54 cents to $29.40; and Interactive Brokers Group, which fell 72 cents, or 3.4 percent, to $20.21.

Alexander downgraded Nasdaq to "Market Perform" from "Outperform" and lowered his 2010 earnings estimate to $2.12 from $2.32. He concluded the business mix, market position and extent of cost cutting leaves the company with "fewer positive catalysts ahead and room for more downside risk to estimates."

The analyst lowered earnings estimates for NYSE to $2.32 from $2.43.

The rating for Interactive Brokers remained at "Market Perform" as Alexander said he expects steady growth in the options industry and a more normalized competitive environment.

Industry trends will likely help companies like Investment Technology Group and Knight Capital Group Inc., which Alexander said are smart electronic brokers that help customers find liquidity in a fragmenting market.

He reiterated his "Outperform" rating on ITG and raised estimates for this year and next to $1.67 from $1.64 for this year. He also raised estimates for Knight Capital to $1.68 from $1.59 for this year.

Other companies in the sector saw shares climb.

CME Group Inc. rose $8.25, or 2.7 percent, to $317.15 and Intercontinental Exchange climbed $4.50, or 4.6 percent, to $102.75.

Both companies were upgraded to "Outperform" from "Market Perform."

Alexander concluded that they have potential for earnings power because of improving interest rates, resilience in trading volume across energy commodities and the resurgence of agricultural commodity volume, global expansion and carbon emissions trading.

Buzz up!