Will NASDAQ End The Year On A High Note?
NASDAQ OMX Group (NASDAQ:NDAQ) is one of the most well-diversified global stock market operators, with trading products ranging from equities, derivatives, exchange traded funds and fixed income products. The exchange operator announced its monthly volume report for November, with a decline in trading volumes after a surge in activity observed in October. Here’s a quick roundup of trading metrics across various products for the month of November.
We have a $45 price estimate for NASDAQ OMX’s stock, which is slightly below the current market price. NASDAQ OMX’s stock price has risen by over 10% since the company released its Q3 earnings in late October.
See our full analysis for NASDAQ OMX Group
Equity Trading
The company witnessed a surge in equity trading volumes in the U.S. in October, with the number of shares traded rising by 34% y-o-y to 37.4 billion shares traded during the month. Trading volumes declined in November, as the number of shares traded fell by nearly 40% to 23.2 billion shares. [1] However, November had fewer trading days owing to the Thanksgiving holiday, and the days around the holiday are generally slow as well. The sequential decline in shares traded per day was relatively lower at about 20% from October levels. Despite a sequential decline, the shares traded during the month were about 4% higher than the prior year period. The matched market share executed on NASDAQ’s platform in 2014 thus far has improved by almost 2 percentage points over the prior year level to over 30% of the U.S. cash equity trading market. We forecast the figure to stay at over 30% through the end of our forecast period.
A similar spike in trading activity was observed in NASDAQ’s Nordic and Baltic exchanges. The total value of shares traded on these platforms combined was $87 billion in October, 23% higher than the year ago period. This figure declined to $62 billion in November, although it was over 3% higher than November 2013 levels. In the first three quarters of this year, the number of shares traded on all of NASDAQ’s European exchanges combined stood at 339,000 trades per day, which is over 9% higher than the comparable year-ago period. We currently forecast full year average trades per day to be 9% higher than 2013 levels at 338,000 trades per day. Management mentioned that the company faces pricing pressure due to increased competition; we forecast the transaction fee per trade to remain nearly flat compared to the prior year period at just over a dollar per transaction.
Derivatives Trading
Similar to equity trading, the number of equity options traded in the U.S. rose by 6% over the year ago period and 17% sequentially to 101 million contracts in October. Trading activity subsided in November, as the number of equity options traded fell to 81 million contracts, but still about 4% higher than November last year. The industrial daily average of derivatives trades in the U.S. through the first three quarters of 2014 was nearly flat over the prior year period at 15 million contracts traded per day. NASDAQ has ceded share to competition in this market in the last few years. The combined share of the NASDAQ Options market, NASDAQ OMX Boston Exchange and NASDAQ OMX Philadelphia Exchange (PHLX) through the first three quarters of 2014 was almost a percentage point lower than the comparable 2013 period at 27%. NASDAQ PHLX has lost market share over the last few years, from over 23% in 2011 to just about 16% in 2014 thus far. Management attributed the decline in market share to intense competition in this market leading to significant pricing pressure. [2] We forecast NASDAQ’s combined market share in the derivatives trading market in the U.S. to gradually decline to under 26% through the end of our forecast period.
European derivatives trading volumes rose during the month of October, with the number of options and futures traded on NASDAQ’s European platforms rising by 20% month-over-month and 14% annually to 9.4 million traded contracts in the month. In keeping with the trend observed across other trading products, this figure declined sequentially to 7 million contracts traded in November. [1] The number of European options and futures combined stayed flat over the year-ago period. We forecast, NASDAQ’s European average daily options volume to be 13% lower than 2013 levels at about 450,000 trades per day through the end of the year.
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More Trefis Research
- NASDAQ OMX Monthly Trade Metrics For November, NASDAQ OMX Investor Relations, December 2014 [↩] [↩]
- Federal Regulations Self-Regulatory Organizations; NASDAQ OMX PHLX LLC, Justia Regulations, September 2014 [↩]