Stock Exchanges

Stock Exchanges

Brief Excerpt from Industry Overview Chapter:

Companies in this industry operate physical or electronic marketplaces to facilitate the buying and selling of stocks, stock options, bonds, or commodity contracts. Major companies include the CBOE Global Markets, Nasdaq OMX Group, and New York Stock Exchange (owned by Intercontinental Exchange) (all based in the US), as well as Japan Exchange Group (formed by the merger of the Tokyo Stock Exchange and Osaka Securities Exchange), Euronext (Netherlands), and London Stock Exchange. Regardless of their location, major securities exchanges are global in scope.

COMPETITIVE LANDSCAPE

Demand is driven by investor confidence and companies seeking access to public capital. The profitability of individual exchanges depends on maximizing transaction and clearing fees while keeping transaction-based expenses low. Large companies have advantages in volume of shares traded, their ability to attract large company listings, and access to public capital in foreign markets. Smaller exchanges can compete effectively by specializing in smaller companies, sectors, such as technology stocks, regions, or specialty financial instruments. Most companies ultimately chose to list on their domestic stock exchanges. The industry in the US is highly concentrated: the four largest firms account for about 85% of revenue.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major services are trade execution, clearing, and settlement services for securities and commodity contracts (about two-thirds of industry revenue). Major services of stock exchanges also include listing services as well as trading and clearing systems services. Other sources of revenue may include data products, financial indexes, and...