UPDATE 1-Australia's ASX first-half profit up, costs rising

* H1 profit rises to A$189.6 mln v A$187 mln consensus

* Expenses seen rising 5 pct, capex up as much as 16 pct

(Adds ASX CEO comment, rivals)

SYDNEY, Feb 13 (Reuters) - Australian Securities Exchange Ltd ASX.AX reported a 10.8 percent rise in first-half profit on Thursday, slightly ahead of market forecasts, buoyed by a jump in share floats over the past six months, but it warned that costs were climbing.

Australia's dominant bourse operator said it expects its operating expenses to rise by about 5 percent for the full year to June, and capital spending could increase by as much as 16 percent, as it looks to expand services and fight off rivals.

"We will work with our clients to plan the next round of investments necessary to maintain Australia's position as an attractive and globally competitive financial market," ASX Chief Executive Elmer Funke Kupper said in a statement.

Net profit for the six months ending December rose to A$189.6 million ($171.3 million) from A$171.1 million a year earlier. That compared with a market consensus of A$187 million.

ASX benefited from a strong recovery in initial public offerings in the December half, with a total A$17.8 billion raised, or more than four times the previous year and the highest since 2010. Most of the listings came in November and December.

Revenue from its biggest business, derivatives and over-the-counter markets, grew 5.9 percent to A$99.8 million.

"While trading activity was fairly soft in the half, activity trends in M&A (mergers and acquisitions) and capital markets should support an improvement in cash turnover into the second half of 2014," UBS said in a note ahead of ASX's results.

The IPO activity and new over-the-counter services helped offset weaker trading activity and competition from Chi-X in the first half.

ASX faces a new market entrant, Asia Pacific Exchange (APX), which plans to launch by June, aiming to list small and medium-sized companies based in Australia and China.

Looking to expand its turf, ASX last July launched services to clear over-the-counter Australian dollar interest rate swaps, a A$15 trillion market, which is among the largest in the world.

That move prompted ASX, which has a roughly 85 percent market share in terms of total traded value in Australia, to raise A$553 million to meet tougher international standards for the amount of capital held to support clearing operations.

As a result, it won approval last week from U.S. regulators to clear Australian and New Zealand dollar-dominated interest rate swaps for U.S. banks in Australia, which followed European regulators' nod for European banks to use ASX Clear.

ASX shares closed at A$35.69 on Wednesday, down nearly 2 percent over the past year, against a 7 percent rise in the broader market. The stock was poised to open roughly unchanged on Thursday.

($1 = 1.1070 Australian dollars)

(Reporting by Maggie Lu Yueyang and Sonali Paul; Editing by David Gregorio and Leslie Adler)

((maggie.luyueyang@thomsonreuters.com)(+61 2 93731819)(Reuters Messaging: maggie.luyueyang.thomsonreuters.com@reuters.net))

Keywords: AUSTRALIA ASX/EARNINGS