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, and New York Stock Exchange (all based in the US), as well as Japan Exchange Group, 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 almost all of the total revenue.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major services are support services for financial and commodity markets, accounting for about 60% of revenue; followed by trade execution, clearing, and settlement services (25%), and support services for financial market (about 15%), and listing services for security and commodity contracts (less than 5%). Other sources of revenue include payment clearing and settlement, and trading and clearing system settlement.