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In One Chart - November 7, 2018

In One Chart: Volatility, Data Fees Drive Exchange Owners Higher in 2018

While volatility has been a persistent, negative theme in 2018, it has pushed exchange owners’ share prices higher on the backs of increased trade volume and data fees. Intuitively, as more investors seek to protect themselves from market swings, they trade more (and pay more fees) to do so.

Intercontinental Exchange Inc (ICE): Q3 of 2018 was the 22nd consecutive quarter of YoY revenue growth for the New York Stock Exchange owner. In particular, futures, cash equities, listings, and data services boosted top line performance.

According to ICE’s Form 10Q, Transaction and Clearing revenues for the nine months ending September 30, 2018 grew 6.3% to $2.52B compared to $2.37B for the same period in 2017. Additionally, Data Services revenue grew by 1.1%.

Nasdaq Inc. (NDAQ): Nasdaq’s Information Services revenue grew 22.2% to $528M for the first three quarters of 2018 as compared to the same period in 2017. This growth is due to increased data prices as well as the investors’ emphasis placed on the use extensive data sets during volatility. Additionally, the Nasdaq Stock Market welcomed 85 new listings, 52 of which were IPOs.

Cboe Global Markets Inc. (CBOE): While Cboe’s share price is down nearly 2.5% year-to-date, it’s revenues have been markedly higher this year. Transaction Fees revenues for the first nine months of 2018 climbed to $1.42B, a 25.6% increase compared to 2017. Similarly, Market Data revenue was up 31.5% over that period.

CME Group Inc (CME): For quarters 1 to 3 in 2018, revenues from Clearing and Transaction Fees rose to $2.6B, representing a 12.5% increase as compared to 2017. Market Data & Information Services revenue also climbed 10.2%.

This year-over-year gain is mainly due to higher trading volumes on interest rate products, equities, and metals. CME has also exhibited expense discipline that greatly contributed to their bottom line. Since CME deals in options and futures, the rising interest rate environment should benefit performance moving forward.

It’s important to note that the SEC issued a ruling in October against Nasdaq and Intercontinental Exchange concerning price increases for proprietary market data, such as depth of book and order imbalances, that could apply downward pressure on data prices moving forward. The ruling stated not that the prices were too high, but that exchange owners failed to adequately justify the price increases.

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