NYSE Euronext, Inc



| NYSE Euronext, Inc. |(NYX-NYSE) |$41.59 |

Note: FLASH REPORT; more details to come; changes are highlighted. Except where noted, and highlighted, no other sections of this report have been updated.

Reason for Report: Flash Update: NYSE to House LIBOR from 2014

Prev. Ed.: Flash Update: NYSE to Launch Bourse in Brazil, Jun 19, 2013.

Flash Update (earnings update to follow)

On Jul 9, 2013, NYSE announced that it has become the first exchange to be appointed to administer the benchmark interest rate for short-term unsecured loans – London Inter-Bank Offered Rate (LIBOR). The achievement would solidify its fundamental base through diversification.

NYSE has won this esteemed contract on a nominal token money of £1 ($1.49) and is expected to manage LIBOR by early 2014. The company will manage LIBOR through a new division – NYSE Euronext Rate Administration Ltd. – by implementing a competitive bidding process.

While the new proposition raises commercial and growth opportunities for NYSE, setting up a new LIBOR platform could cost NYSE about £1.6 million ($2.38 million), along with an estimated operational cost of £1 million ($1.49 million) annually.

On Jun 19, 2013, NYSE announced the submission of request to the Securities and Exchange Commission (CVM) to build a new exchange in Brazil. Initially, ATS Brasil has slated the launch of cash equities and exchange traded funds (ETFs) on the Brazil platform. Gradually, the list will be expanded to cover derivative and other securities. The enterprise may commence by the first half of 2014, subject to regulatory approval.

The equity exchange will be launched under the JV with Rio de Janeiro-based Americas Trading Group (ATG) – Americas Trading System Brasil (ATS Brasil), which is 20% owned by NYSE and 80% by ATG. ATS Brasil is also mulling over the sale of 24% of its stake to about 6–8 investors, which include a diverse group of global bank and asset management firms.

On Jun 3, 2013, NYSE and IntercontinentalExchange announced that the shareholders of both the companies have given their approval for the proposed merger. Accordingly, 99% of the voters, who account for 64% of the shares outstanding of NYSE, approved of the merger deal.

On the other hand, 99.7% of the voters, who account for 85.1% of the shares outstanding of IntercontinentalExchange, approved of the merger. Consequently, the 13-year old IntercontinentalExchange has moved one step ahead to take over 220-year old NYSE through the shareholder approval.

On Apr 30, 2013, NYSE announced its 1Q13 earnings results. EPS of $0.57 surpassed the Zacks Consensus Estimate by a penny but were modestly ahead of $0.47 recorded in the year-ago quarter. Consequently, operating net income improved 14.9% year over year to $139 million from $121 million in the year-ago quarter.

NYSE reported GAAP net income of $126 million or $0.52 per share compared with $87 million or $0.34 per share in the prior-year quarter. These primarily included the impact of merger expenses, exit costs as well as stock-based compensation charge during the reported quarter.

Top Line Levels Up

Gross revenues inched up 1% year over year to $963 million in the reported quarter. Meanwhile, net revenues (defined as gross revenues less direct transaction costs consisting of Section 31 fees, liquidity payments and routing and clearing fees) stood at $600 million, at par with $601 million in the prior-year quarter.

Total net revenue also edged past the Zacks Consensus Estimate of $598 million. While trading volumes improved slightly, unfavorable currency fluctuations and lower average revenue per contract in Europe added to the woes.

Top line reflected improvement in transaction and clearing fees that climbed 4.1% year over year to $634 million, while listing and other revenues remained flat at $110 million and $56 million, respectively. However, deterioration was witnessed in market data revenue that declined 8.8% year over year to $83 million. Moreover, technology service revenue decreased 7% to $80 million.

Conversely, revenue from derivatives jumped 14.2% year over year to $201 million, although cash trading and listings’ revenue decreased 5.6 % year over year to $287 million. Even revenue from information service and technology solutions fell 7.4% year over year to $112 million.

During the reported quarter, NYSE raised $12.1 billion in total global proceeds from 26 initial public offerings (IPOs) on its European and US markets, more than any global exchange group. In prior-year quarter, the company had initiated 45 IPOs globally, raising $9.8 billion.

Tight Lid on Expenses

Meanwhile, adjusted fixed operating expenses dipped 8.1% year over year to $372 million, whereas, operating margin improved to 37% from 33% recorded in the year-ago quarter. The effective tax rate was 24% as compared with 25% in the year-ago period.

During the reported quarter, NYSE generated savings worth $147 million from Project 14, which represented 59% of the total $250 million estimated to be saved by the end of 2014.

NYSE exited the reported quarter with a total headcount of 3,171, marginally up from 3,079 in the year-ago quarter.

Financial Update

As of Mar 31, 2013, NYSE’s total debt of $2.5 billion was at par with 2012-end level. Total debt includes $0.4 billion remaining from the 4.8% June 2013 notes, which is slated to be retired in the second quarter of 2013.

At the end of Mar 2013, cash and cash equivalents, investments and other securities were $0.5 billion while net debt was $2 billion. However, total capital expenditure decreased to $27 million from $43 million recorded in the year-ago quarter.

As a result of flattened debt and lower capital expenditure, NYSE’s debt-to-EBITDA ratio improved to 2.3x at the end of Mar 2013 from 2.5x recorded at 2012-end.

Guidance for 2013

Management reiterated total operating expenses to be around $1.525 billion in 2013. Including the savings from Project 14, expenses are expected to about $1.465 billion.

Previously, NYSE disclosed that the debt-refinancing executed in Oct 2012 should help save an annualized interest expense of $15 million in 2013 and $24 million in 2014. Subsequently, the company anticipated debt-to-EBITDA ratio to improve to 2.0x in 2013 from 2.5x in 2012.

Total capital expenditures are expected to be approximately $150 million in 2013, lower than 2012 levels. Meanwhile, effective tax rate is expected to be between 24% and 25%.

Additionally, NYSE is progressing well with its proposed merger with IntercontinentalExchange Inc., announced in Dec 2012. The shift to ICE Clear Europe and the proposed merger are to culminate in the second half of 2013.

Dividend Update

Concurrently, the board of NYSE declared a regular quarterly dividend of $0.30 per share, which is payable on Jun 28, 2013, to the shareholders of record as on Jun 14, 2013.

Furthermore, on Mar 28, 2013, NYSE had paid a quarterly cash dividend of $0.30 a share to shareholders of record as on Mar 14, 2013.

MORE DETAILS WILL COME IN THE IMMINENT EDITIONS OF ZACKS RD REPORTS ON NYX.

Portfolio Manager Executive Summary [Note: Only highlighted material has been changed.]

NYSE Euronext Inc. (NYX) is a global operator of financial markets and provider of innovative trading technologies. The company's exchanges in Europe and the United States brings together six cash equity exchanges in five countries and six derivatives exchanges in six countries. With more than 8,000 listed issues, NYSE Euronext's equities markets -the New York Stock Exchange, NYSE Euronext, NYSE Amex and NYSE Alternext as well as NYSE Arca - represent one-third of the world's equities trading; the maximum liquidity of any global exchange group. NYSE Euronext also operates NYSE Liffe, the leading European derivative business and the world's second-largest derivative business by value of trading. The company offers comprehensive commercial technology, connectivity and market data products, and services through NYSE Technologies.

Almost 39% of the firms covering the stock provided positive ratings, while 54% assigned neutral ratings. Only 7.7% of the firms rated the stock negatively. Of the thirteen firms covering the stock, eleven provided target prices ranging from $24.00 (6.1% upside from current price) to $35.00 (54.8% upside from the current price).

Recently NYSE Euronext announced that Intercontinental Exchange intends to buy it for $8.2 billion. The deal is expected to culminate by the first half of 2013, subject to the fulfillment of regulatory compliances in the U.S. and Europe.

Neutral Outlook – 5/13 firms or 53.8%: The cautious firms are of the opinion that revenue headwinds would offset the benefits from cost cuts. The firms anticipate that though expenses have been lowered, it will not be enough to help the company recover from revenue disappointments. Technology revenues will continue to decline owing to their shift of focus from technology outsourcing to internal cost cutting

Moreover, the firms remain skeptical regarding any possibility of new buyback authorization by 2013. The firms believe that in the first half of 2013, deleveraging would take priority over buybacks.

Positive Outlook – 7/13 firms or 38.5%: The bullish firms expect NYSE Euronext to report escalated earnings in the upcoming year driven by cost cutting practices and sound capital management, although revenue growth seems to be unlikely. Due to lower revenue from technologies, lower derivatives trading fees, weak European volume and dearth of near term catalysts, the bullish firms expect a decline in the Euro derivatives complex in 2013. The expectation in low volume across all businesses is slightly offset by lower expense run rate and a lower tax rate expectation. They expect operating leverage to magnify trading volume in the long term.

The positive firms also expect NYSE Euronext to post better numbers in the future owing to decline in interest expenses from high-cost debt refinancing and operating expenses.

They remain skeptical regarding any dividend alteration in future and expect buybacks to reduce in 2013.

Negative Outlook – 1/13 firms or 7.7%

December 24, 2012

Overview [Note: Only highlighted material has been changed.]

The firms identified the following issues for evaluating the investment merits of NYX:

|Key Positive Arguments |Key Negative Arguments |

|Premier Brand Name – Given NYSE Euronext’’s dominance in total market |Intensifying Competition – NYSE Euronext’s acquisition of Archipelago, |

|capitalization and total value traded, the analysts regard it as the |Amex, and the Nasdaq acquisition of the Instinet Group could create a |

|premier brand name amongst the financial exchanges. |duopoly in the U.S. equities markets, and the reduced competition for |

|New Products – NYSE Euronext launched a host of new products via which |volume could result in higher trading costs. |

|it seeks to diversify its income. The upcoming retail derivative market|Debt Structure – NYSE Euronext has been making constant efforts to reduce |

|and clearing house in London should be strong growth as well as |its debt obligation since the last year but with little success. The |

|expansion drivers. |company again took up a new debt to refinance its previous ones. |

|Synergies – The analysts expect NYSE Euronext to reduce costs and |Integration Risks – The combination of NYSE Euronext and other companies is|

|report revenue growth with acquisitions. |subject to potential integration issues. |

|Integration – The NYSE Euronext Group is aggressively entering into |Regulatory Obstacles – The much awaited proposed merger between Euronext |

|agreements with foreign exchanges as it works to be the pre-eminent |and Deutsche Boerse was blocked by the European Commission citing reason of|

|global exchange. |unhealthy competition. |

|Market Share – The company’s enhancement of its options platform has |Expense – Failure to deliver the expense savings goals can act as a |

|resulted in increased market share. |potential threat to future earnings. |

NYSE Euronext is a leading global operator of financial markets and provider of innovative trading technologies. The company's exchanges in Europe and the United States trade in cash equities, futures, options, swaps, exchange-traded products, bonds, carbon trading, clearing operations, market data and commercial technology products and solutions. With more than 8,000 listed issues, NYSE Euronext's equities markets - the New York Stock Exchange, Euronext, NYSE Arca and NYSE Amex - represent one-third of the world's equities trading; the maximum liquidity of any global exchange group. NYSE Euronext also operates NYSE Liffe and is in the S&P 500 index, the only exchange operator in the S&P 100 index and Fortune 500. Beginning with the 1Q10 results, NYSE Euronext has changed its segment reporting to reflect how NYSE Euronext’s primary businesses are managed. The new reportable segments are focused on three global business units: Derivatives, Cash Trading and Listings, and Information Services and Technology Solutions. For more information on the Company, please visit its website at .

Recently NYSE Euronext announced that Intercontinental Exchange intends to buy it for $8.2 billion. The deal is expected to culminate by the second half of 2013, subject to the fulfillment of regulatory compliances in the U.S. and Europe.

Note: The company’s fiscal year coincides with the calendar year.

December 24, 2012

Long-Term Growth [Note: Only highlighted material has been changed.]

Management believes the shift from NYSE Group into the newly-formed NYSE Euronext, the world’s largest and most diverse exchange group will enhance the listings and equity trading operations, and support the growing initiatives in derivatives, bonds, options, and ETFs. NYSE Euronext is committed to providing exceptional shareholder value while expanding its position in the global marketplace. The firms stated that although the competitive market environment will likely remain intense for NYSE’s U.S. cash equity business, they are positive on NYSE as the merger with Euronext makes both financial and strategic sense. They believe NYSE Euronext will be one of the long-term winners in the exchange space, given its strong brand, solid management team, financial strength and established liquidity in cash equities, futures, and options.

The new market centers are already attracting new volume from a variety of market participants in particular, from automated black-box trading companies that were not able to participate in the incumbent exchanges to the same degree, either because of prohibitive pricing structures or due to the lack of adequate technology. The firms believe that comparisons of turnover velocity rates between markets in the U.S. and Europe, as well as developments following the previous market structure changes in the U.S., suggest that volume could increase significantly in Europe.

Following the termination of its proposed merger with DeutscheBoerse, management declared a two-year target plan in April 2012. The plan is projected to drive accelerated earnings growth through a blend of top-line growth initiatives, which includes diversification of growth into non-core space of information and technology.

On March 28, 2012, the company announced its intention of building clearinghouse – NYSE Liffe Clearing – in London that should be operational between 2Q13 and 3Q13. This is a significant attempt to erect an exchange entity on a vertical clearing model.

Initially, NYSE Euronext projects hope to commence the clearing of derivative contracts, while the equity trades will still be cleared by LCH.Clearnet, which cleared all of the company’s trades. Besides, management also aims to transfer all the derivative trades from Amsterdam, Brussels, Lisbon and Paris to London by the first quarter of 2014.

Moreover, NYSE Euronext’s 3-year cost reduction program worth $250 million has started well and is expected to exceed the target cost savings run-rate of 25% in 2012. Most firms project that the company is on-track to achieve 60% of its cost-synergies by 2013 and 100% by 2014.

December 24, 2012

Target Price/Valuation [Note: Only highlighted material has been changed.]

|Rating Distribution |

|Positive Ratings |38.5%↓ |

|Neutral Ratings |53.8%↑ |

|Negative Ratings |7.7%↑ |

|Maximum Target Price |$35.00↑ |

|Minimum Target Price |$24.00↑ |

|Average Target Price |$29.59↑ |

|No. of Analysts with Target Price/Total |11/12 |

Risks to the target price include regulatory risks, intense competition and peer pressure, unfavorable trading environment, poor economic environment and others.

Recent Events [Note: Only highlighted material has been changed.]

On December 20, 2012, NYSE Euronext announced that Intercontinental Exchange intends to buy it for $8.2 billion. The deal is expected to culminate by the first half of 2013, subject to the fulfillment of regulatory compliances in the U.S. and Europe.

Accordingly, the $8.2 billion deal is based on $33.12 per NYSE Euronext share, which represents a 37.7% premium on NYSE Euronext’s closing price on December 19, 2012. Meanwhile, Intercontinental Exchange plans to fund the transaction by letting out 67% in shares and 33% in cash, which will be raised through cash and credit facilities.

Moreover, the investors at NYSE have the option of taking cash payment of $33.12 a share or receive 0.2581 shares of IntercontinentalExchange for each NYSE share. A third option includes a mix of $11.27 in cash along with 0.1703 IntercontinentalExchange shares per NYSE share, although this funding is restricted to a maximum cash outlay of $2.7 billion and a maximum stock outlay of 42.5 million shares of IntercontinentalExchange.

Post acquisition, the 220-year old NYSE will own 36% in the 12-year old IntercontinentalExchange, while four members of the former will share the latter’s board.

The merger is expected to generate more than 15% of earnings accretion within the first year of completion of the deal. Going ahead, management projects run-rate expenses synergies of about $450 million, which will be reaped in the second year of the merger startup. Further, NYSE Liffe’s both trading and clearing operations will be merged into ICE Clear Europe. IntercontinentalExchange will also initiate annual dividends of about $300 million, the current dividend payout of NYSE, post merger.

On November 6, 2012, The Company announced its 3Q12 financial results. Operating EPS of $0.44 were $0.03 higher than the Zacks Consensus Estimate of $0.41 but were significantly lower than $0.71 recorded in the year-ago quarter. Consequently, operating net income nosedived 41.9% year over year to $108 million from $186 million in the year-ago quarter.

Gross revenues plummeted 28.3% year over year to $902 million in the reported quarter. Meanwhile, net revenues (defined as gross revenues less direct transaction costs consisting of Section 31 fees, liquidity payments and routing and clearing fees) stood at $559 million, sliding 20.6% from $704 million in the prior-year quarter. It also fell short of the Zacks Consensus Estimate of $570 million.

Financial Update

As of September 30, 2012, NYSE Euronext’s total debt of $2.5 billion was higher than $2.1 billion at 2011-end. At the end of the reported quarter, cash and cash equivalents, investments and other securities were $0.4 billion while net debt was $2.1 billion. However, total capital expenditure lowered to $41 million from $49 million recorded in the year-ago quarter.

As a result of higher debt and capital expenditure, NYSE’s debt-to-EBITDA ratio deteriorated to 2.4x from 1.6x recorded at the end of 2011, which was the lowest level since the inception of this organization in April 2007.

On October 5, 2012, NYSE Euronext raised $850 million from the sale of notes that are slated to mature in October 2017 and bear an interest of 2%. The net proceeds were utilized to pre-redeem $336 million of the outstanding $750 million 4.80% notes that were due in June 2013, €80 million of the €1 billion 5.375% notes due in June 2015, reduction in outstanding commercial paper and for other business operations.

Management believes this debt-refinancing will help save an annualized interest expense of $15 million in 2013 and $24 million in 2014.

Stock Repurchase Update

During the reported quarter, NYSE Euronext bought back 4.7 million shares at an average price of $25.46 per share for about $120 million, thus buying back 15.9 million shares for $424 million in the first nine months of 2012. Accordingly, the company had $128 million of stock available for repurchase at the end of September 2012. Management is also committed to complete this sanctioned $1.0 billion share repurchase program by the end of 2012.

Growth Outlook

While management laid out a detailed long-term growth plan in the first quarter of 2012, NYSE Euronext believes that its ongoing strategic initiatives coupled with its cost reduction plan and lower share count from stock repurchases should aid in achieving higher earnings growth in 2013 and beyond. Effective tax rate is expected to be 24% in 2012.

Dividend Update

Concurrently, the board of NYSE Euronext declared a regular quarterly dividend of $0.30 per share, which is payable on December 28, 2012, to the shareholders of record as on December 14, 2012.

Revenue [Note: Only highlighted material has been changed.]

Gross revenues plummeted 28.3% year over year to $902 million in 3Q12. Meanwhile, net revenues (defined as gross revenues less direct transaction costs consisting of Section 31 fees, liquidity payments and routing and clearing fees) stood at $559 million, sliding 20.6% from $704 million in the prior-year quarter. It also fell short of the Zacks Consensus Estimate of $570 million.

The deteriorating performance was primarily due to the poor transaction and clearing fees that plunged 36.9% year over year to $570 million as well as market data revenue that declined 8.6% year over year to $85 million. Together, these constitute about 73% of the gross revenue. While listing revenue slipped 0.9% year over year to $112 million, technology service revenue deteriorated 12.0% to $81 million and other revenue slipped 3.6% year over year to $54 million.

Overall, top-line results reflected drastic decline in volumes across all global derivatives and cash trading venues. Alongside, unfavorable currency fluctuations and lower average revenue per contract added to the woes. The financial services technology sales are also experiencing a challenging period.

Provided below is a summary of revenue as compiled by the Zacks Research Digest:

|Total Revenue |3Q11A |

|($ in M) | |

|Copy Editor |Tanuka De |

|Content Ed. |Tanuka De |

|Lead Analyst |Meenakshi Sharma |

|QCA |Tanuka De |

|No. of brokers reported/Total | |

|brokers | |

|Reason for Update |Flash Update |

| | |

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July 10, 2013

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