Industry revenue grew due to excessive trading during the financial crisis.
Los Angeles, CA (PRWEB) December 04, 2013
While the role of the Stock and Commodity Exchanges industry in the financial sector has remained essential, falling trade volume over the five-year period, particularly among the industry's major players, has damaged the industry's performance. Industry operators act as intermediaries and provide physical trading floors or electronic marketplaces where buyers and sellers arrange trades in securities, commodities and related contracts. Exchanges aid the transfer of financial assets, real assets and risk between market participants in a myriad of locations on differing timeframes.
Trade volumes for the industry's largest players, NYSE Euronext and NASDAQ OMX, are anticipated to decline at annualized rates of 16.6% and 4.9%, respectively, over the five-year period. According to IBISWorld Industry Analyst Stephen Hoopes, “As a result of fluctuations in transaction and clearing fees, the largest source of revenue for stock and commodity exchanges, industry operators have pursued aggressive merger and acquisition activity.” The two most important examples include IntercontinentalExchange's purchase of NYSE Euronext, which was completed on November 13, 2013, and BATS Global Market's merger with Direct Edge, which is anticipated to be completed in the first half of 2014.
Largely a result of declining trade volume, industry revenue is expected to decrease at an annualized rate of 3.0% over the five years to 2013 to $11.0 billion. Moreover, persistent investor uncertainty is anticipated to cause industry revenue to decline an additional 1.2% in 2013. However, cost savings associated with mergers and acquisitions and an increasing penchant for high-margin derivatives has caused the industry's average profit margin to increase over the five-year period. Moreover, despite consolidation among the industry's major players, rapid advancements in industry-specific technology allow smaller operators that focus on algorithmic trading to thrive.
Rising trade volume is anticipated to cause clearing and transaction fees to increase, while growing corporate profit is forecast to increase demand for the provision of market data. However, “regulatory change initiated in 2010, particularly the Volcker Rule, has the potential to limit forecast increases in trade volume,” says Hoopes. Moreover, dark pools and over-the-counter markets are anticipated to provide mounting competitive threats to traditional securities exchanges. The Stock and Commodity Exchanges industry operates with a high level of market share concentration, with the top companies being NYSE Euronext Inc., The Nasdaq Stock Market Inc., CME Group Inc., BATS Global Markets Inc. and IntercontinentalExchange Inc.
For more information, visit IBISWorld’s Stock & Commodity Exchanges in the US industry report page.
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IBISWorld industry Report Key Topics
The Stock & Commodity Exchanges Industry is composed of financial intermediaries that provide physical trading floors or electronic marketplaces where buyers and sellers arrange trades in securities, commodities and related contracts. This report includes discussion of exchanges and alternative trading systems, as well as broker-dealers who match trades of securities in off-exchange transactions. It excludes discussion of the trading of debt securities, currencies, real assets and physical commodities.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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