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ISE Shares Decline

They lose value after an earnings miss.

Shares of the

International Securities Exchange


tumbled 5% on Wednesday after the options exchange fell short of analysts' earnings expectations.

During the first quarter, earnings rose to $16.7 million, or 42 cents a share, from the year-ago $12.4 million, or 32 cents a share.

Total revenue rose 18.6% to $56.4 million. ISE's gross margin -- revenue minus the cost of revenue -- was $50.4 million.

Analysts were predicting that the exchange would earn 45 cents a share on $55.3 million of revenue.

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ISE's average daily trading volume of equity and index options contracts -- its main products -- rose 16.3% to 2.8 million contracts.

Transaction revenue rose 19% to $43.9 million.

The ISE's stock exchange subsidiary, which it launched in September, recorded a gross margin of $400,000, it says.

Edward Ditmire, an analyst at Fox-Pitt Kelton, says that "a lot of little things" contributed to the exchange's earnings miss.

"At least for our expectations, nontransaction revenues -- member fees and market data -- came in a little bit light of what we expected," Ditmire says. "Compensation expense included a higher stock-based compensation portion than what we were expecting," while investment income was lower than expected.

"Aside from that, they showed pretty strong growth," he added.

Shares were down $2.41 to $46.54.