A compelling and diversified product portfolio helps drive revenues of the Zacks Securities and Exchanges industry players. A rise in trading volumes, product expansion through prudent acquisitions and the increased adoption of a greater number of crypto assets are expected to benefit Intercontinental Exchange ICE, CME Group CME, Nasdaq Inc. NDAQ and Cboe Global Markets CBOE. Increased focus on accelerating their non-trading revenue base, which comprises market technology, listing and information revenues, infuses dynamism in the business profile of the industry players. Given his crypto favoritism, the industry is expected to get an impetus from Trump’s election for a second term. However, alterations in investment patterns and priorities and compliance with regulations pose challenges

About the Industry

The Zacks Securities and Exchanges industry comprises companies that operate electronic marketplaces, which facilitate the buying and selling of stocks, stock options, and bonds or commodity contracts. They facilitate trading across a diverse range of products in multiple asset classes and geographies. It generate revenues from fees received from the listed companies on their exchanges. They also provide a range of data and listing services to global financial and commodity markets, including pricing and reference data, exchange data, analytics, feeds, index services, investments, risk management, desktops, and connectivity solutions, as well as corporate and ETF listing services, on the cash equity exchanges of the industry players. The industry is witnessing increased adoption of crypto assets. Yet, they have to comply with a number of regulations, resulting in challenges.

3 Trends Shaping the Future of the Securities and Exchanges Industry

Volatility Fueling Trading Volume: The players in the industry are largely dependent on product and service portfolios for revenues. Major services include trade execution, clearing, settlement services for securities and commodity contracts, listing services plus trading, and clearing systems services. Sustainable trading volume growth, driven by trading volatility, fuels transaction and clearing fees (a major component of the top line of industry players). With Trump’s second term, a pro-crypto environment and easing regulatory control, trading is expected to increase, which should drive higher fees. The maximization of transaction and clearing fees and the lowering of transaction-based expenses drive profits. Other revenue sources include data products and financial indexes, along with information and public company services. Increasing focus on accelerating the non-trading revenue base, which includes market technology, listing and information revenues, infuses dynamism in the business profiles of the industry participants. Per technavio, the securities exchanges market in 2028 is expected to expand at a five-year CAGR of 12.1% to $49.6 billion, given increasing demand for various investment opportunities. Also, the increased adoption of cryptocurrencies like Bitcoin and Ethereum, among others, is a boon.

Mergers and acquisitions:  The industry continues to witness mergers and acquisitions, with companies evaluating opportunities to supplement their internal growth story by forging strategic alliances or acquiring businesses or technologies. These enable them to penetrate untapped markets, offer new products or services and enhance the value of their platforms and existing trade-related operations. Additionally, strategic buyouts lead to a diversified product portfolio (the primary growth catalyst) and help industry participants maintain their domestic market share, as well as fortify their global footprint. Also, exchanges are pursuing consolidations and mergers with technological, legal, and competitive changes, per Deloitte.  

Continuous Investment in Technology: Industry players continue to invest heavily in technological development. Focus on building a strategic economic market model via technological advancements and upgrades of products and services, AI in particular, will help all exchanges stay afloat amid changing industry dynamics. In recent years, the players have launched a number of innovative technologies that rely on machine learning, automation and algorithms designed to improve trading decisions while reducing trading inefficiencies, cyber threats and human errors, thus accelerating trading frequency. Players are also investing in automating non-trading operations that play an important part in revenue generation for the companies.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Securities and Exchanges industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #89, which places it in the top 36% of the 251 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, reflects encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have been gaining confidence in this group’s earnings growth potential. Estimates for 2025 have increased 4.5% in a year.

Before we present a few securities and exchanges stocks worth considering for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms Sector and S&P 500

The Zacks Securities and Exchanges industry has outperformed the broader Zacks Finance sector as well as the Zacks S&P 500 composite year to date. The industry has gained 23.2% compared with the broader sector and the Zacks S&P 500 composite’s increase of 22.5% and 18.3%, respectively, in the said time frame.

One-Year Price Performance

Industry's Current Valuation

On the basis of trailing 12-month price-to-book (P/B), which is commonly used for valuing finance stocks, the industry is currently trading at 3.94X compared with the S&P 500’s 8.35X and the sector’s 4.2X.

Over the last five years, the industry has traded as high as 4.01X, as low as 2.38X and at the median of 3.27X, as the chart below shows.

Price-to-Book (P/B) Ratio (TTM)

Price-to-Book (P/B) Ratio (TTM)

4 Securities and Exchanges Stocks to Keep an Eye On

We are presenting two Zacks Rank #2 (Buy) and two Zacks Rank #3 (Hold) stocks from the Securities and Exchanges industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nasdaq: Headquartered in New York, Nasdaq is a leading provider of trading, clearing, marketplace technology, regulatory, securities listing, information, and public and private company services. Its strategy of accelerating its non-trading revenue base, successfully maximizing opportunities as a technology and analytics provider, and growing core marketplace businesses, as well as intensifying its focus on Market Technology and Information Services businesses, should continue to drive this Zacks Rank #2 stock. 

The Zacks Consensus Estimate for 2025 and 2026 earnings per share indicates an increase of 12.8% and 13.6%, respectively, year over year. NDAQ came up with a four-quarter average earnings surprise of 3.33%. The expected long-term earnings growth rate is pegged at 12.3%, better than the industry average of 9.1%. The consensus mark for 2025 and 2026 has moved 1 cent and 3 cents north, respectively, in the past 30 days.

Price and Consensus: NDAQ

CME Group: Headquartered in Chicago, IL, CME Group boasts the largest futures exchange in the world in terms of trading volume as well as notional value traded. Efforts to expand future products in emerging markets, non-transaction-related opportunities, OTC offerings, cross-selling through alliances, strong global presence and solid liquidity should drive this company’s growth.

The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2025 and 2026 EPS indicates a year-over-year increase of 2.6% and 4.4%, respectively.  It came up with a four-quarter average earnings surprise of 2.5%. The expected long-term earnings growth rate is pegged at 3.3%. The consensus mark for 2025 and 2026 has moved 1.9% and 1.7% north, respectively, in the past 30 days.

Price and Consensus: CME

Intercontinental Exchange: This Atlanta, GA-based company is a leading global operator of regulated exchanges, clearing houses and listings venues and a provider of data services for commodity, financial, fixed-income and equity markets. Its compelling portfolio, expansive risk-management services, strategic buyouts and a solid balance sheet bode well. It is the second-largest global fixed-income provider. This Zacks Rank #3 company, with the largest mortgage network across the United States, remains well poised to benefit from accelerated digitization in the U.S. residential mortgage industry.

The Zacks Consensus Estimate for Intercontinental Exchange’s 2025 and 2026 EPS indicates a year-over-year rise of 10.9% and 11.7%, respectively. The expected long-term earnings growth rate is pegged at 12.2%, better than the industry average. The consensus mark for 2025 and 2026 has moved 1.5% and 2% north, respectively, in the past 30 days.

Price and Consensus: ICE

Cboe Global Markets: Based in Chicago, IL, Cboe Global is one of the largest stock exchange operators by volume in the United States and globally for ETP trading. This Zacks Rank #3 stock is poised for growth, given an expanding product line across asset classes, broadening geographic reach and a diversifying business mix with recurring revenues and technology.

The Zacks Consensus Estimate for the company’s 2025 and 2026 EPS indicates a year-over-year increase of 4.1% and 7.9%, respectively. The expected long-term earnings growth rate is pegged at 13.4%, better than the industry average. The consensus mark for 2026 moved 0.7% north in the past 30 days.

Price and Consensus: CBOE



 

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Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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