(Recasts, adds details from presentation, analyst's comments, share movement)
By Sweta Singh
BANGALORE, May 1 (Reuters) - Investment Technology Group (ITG.N), an agency brokerage and technology firm, reported a 34 percent rise in quarterly profit, beating Wall Street estimates, helped by increased revenue and trading volumes in its domestic market, sending shares up as much as 10 percent.
However, the shares reversed their early gains and fell more than 3 percent after the company did not raise its 2008 margin forecast for its U.S. operations in a conference call.
The company said it expects U.S. margins to remain slightly above 30 percent for 2008, well below pre-tax margins of 35 percent reported in the first quarter.
Revenue in the U.S. was strong, which is surprising, because the company has largely benefited from international markets in the last few quarters, Keefe, Bruyette & Woods analyst Niamh Alexander told Reuters.
Lower trading costs, partly due to exchanges lowering their trading fees, also benefited the company in the quarter, Alexander said.
The New York-based company said first-quarter net income was $33.0 million, or 75 cents a share, compared with $24.7 million, or 55 cents a share, in the year-ago quarter.
Analysts expected the company to earn 70 cents a share, before items, according to Reuters Estimates.
Total revenue rose 21 percent to $204.3 million, slightly above analysts' view of $203.7 million.
Non-U.S. revenue rose 33 percent to $49.9 million in the quarter.
Average daily volume in the U.S. increased 18 percent to 225 million shares, the company said in a conference call with analysts.
PRICING & EXPANSION
The company said it expects the commission rates in 2008 to be similar or fall slightly from 2007.
Total commission revenue for the quarter was $131.6 million, an increase of 20 percent from the year-ago quarter.
ITG, the bulk of whose clients are institutional traders such as hedge funds, said internationally it was focusing on North American, Western European and Asia Pacific markets. In July, ITG had announced plans to roll out trading platform products across Asia, a move expected to more than double its Asia-Pacific sales to 10 percent of total revenue in the next three to five years.
Revenue from Asia rose by $1 million to $4.7 million.
Besides traditional players such as UBS UBSN.VX and Goldman Sachs (GS.N), ITG's competitors include closely held rival Liquidnet, which is also planning an Asian expansion.
ITG also offers trading products that allow clients to analyze potential trades, manage and execute orders and evaluate them.
Shares of ITG, which hit a year high of $53.35 earlier in the day, were trading down 9 cents at $48.17 in afternoon trade on the New York Stock Exchange. (Editing by Anil D'Silva)