(Adds stock price, details on volumes and new trading platform)
By Tom Polansek
CHICAGO, May 1 (Reuters) - CBOE Holdings Inc, operator of the largest U.S. stock options market, will cut expenses in response to weak trading volumes, the company said on Friday as it reported a decline in quarterly earnings.
Shares rose 1.7 percent to $57.23 after dropping to their lowest in more than three weeks on Thursday.
The owner of the Chicago Board Options Exchange has suffered because investors have not been worried about the potential for a sustained downturn in the stock market, Chief Executive Officer Ed Tilly said.
Tilly told analysts on a conference call that volumes will return when investor sentiment changes. So far, though, trading has not recovered in the second quarter, analysts said.
“There is still downside risk to near-term earnings estimates as volumes have continued to be weak,” UBS analyst Alex Kramm said in a note.
Net income allocated to common stockholders fell to $42.1 million, or 50 cents per share, in the first quarter, from $48.5 million, or 56 cents, a year ago. Adjusted earnings were also 50 cents a share, beating analysts’ estimates for 47 cents, according to Thomson Reuters I/B/E/S.
Operating revenue fell to $142.8 million from $157.9 million a year earlier.
Total trading volume in the quarter was 290.7 million contracts, down from 342.8 million contracts a year earlier. The average rate paid per contract was 34 cents, up about a penny from the first quarter of 2014.
The company lowered its outlook for core expenses for the 2015 fiscal year to a range of $190 million to $194 million from $195 million to $199 million.
The company has made temporary cuts to expenses when volumes dropped. “While we don’t like them, we expect them,” Tilly told analysts about such downturns.
The market operator has talked with customers about the latest pullback and did not hear complaints about structural problems or flaws in CBOE contracts, Tilly said. The most commonly cited reason for weak volumes was “just overall complacency in the market,” he added.
Separately, the company said it is developing a new trading platform, called CBOE Vector, to provide customers with faster processing speeds and increased stability. The company did not disclose the cost of the platform, which is set to make a limited debut next year. (Editing by Jeffrey Benkoe and Alden Bentley)