( LAB) reported Wednesday a 68% drop in first-quarter profit, another indication of the tough times for

New York Stock Exchange

specialist trading firms.

In the quarter, LaBranche earned $2.2 million, or 4 cents a share, compared to $6.9 million, or 11 cents a share, a year ago. Revenue declined 16% to $67.3 million.

But in a world of diminished expectations for specialists, which once were profit-making machines, LaBranche surpassed Wall Street expectations. The handful of analysts who follow LaBranche had expected the trading firm to report 3 cents a share in earnings and revenues of $64.8 million.

LaBranche shares were recently up 2 cents, or 0.3%, to $7.35.

Of course, LaBranche's penny-per-share beat comes just weeks after the firm warned Wall Street that earnings would fall short of earlier predictions.

The lackluster profit report comes amid speculation by many observers that the specialist system is in its waning years and eventually will give way to faster and cheaper electronic trading systems.

In the long run, LaBranche could be one of the losers in the NYSE's proposal to merge with the

Archipelago Exchange

(AX) - Get Report

, an all-electronic stock market. The proposed merger is being opposed by some on Wall Street, including former

Home Depot

founder Kenneth Langone, who claim the Big Board's 1,300 member seat holders are getting short-changed.

Langone, a controversial former NYSE board member who is close friends with former Big Board Chairman Richard Grasso, is trying to line up support on Wall Street for a rival bid to buy the NYSE and block the deal. But most do not expect Langone's plan to gain much traction, although it is generating much media coverage.

LaBranche and the other four big specialist firms that drive much of the trading in Big Board stocks also have been involved a slew of scandals the past few years. Most recently, federal prosecutors indicted 15 specialists, claiming they engaged in manipulative trading on behalf of their firms.

The charges stem from a four-year period, beginning in 1999. Prosecutors and regulators contend the firms violated their obligation to give investors the best possible price on a stock. In allegedly violating this obligation, the specialists made their own trades and profited at their customers' expense, say prosecutors.

The indicted specialists included employees of LaBranche;

Van der Moolen

( VDM);

Bank of America's

(BAC) - Get Report

specialists division;

Goldman Sachs'

(GS) - Get Report

Spear, Leeds & Kellogg; and

Bear Stearns'

( BSC) Bear Wagner.