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Investment Overview for NYSE Euronext (NYSE:NYX)
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NYSE Euronext is a global operator of financial markets and provider of trading strategies. NYSE Euronext offers products and services in equities, futures, options, swaps, exchange-traded funds (ETFs), bonds, market data and commercial technology solutions. NYSE Euronext has more listed issues than any other exchange group trading on NYSE Euronext's equity market. NYSE is the largest exchange in the world. It has nearly twice the transaction volume as NASDAQ, its main competitor, and approximately four times the combined market capitalization of its listed companies.
Business Divisions
For our analysis, we have split NYSE Euronext into three primary divisions
Cash Trading and Listings
This consists of NYSE Euronext's cash trading and listings businesses and includes the New York Stock Exchange, Euronext, NYSE Amex, NYSE Arca, NYSE Alternext, NYSE Arca Europe and SmartPool, as well as BlueNext and Interbolsa, and related cash trading market dataDerivatives Trading
This division is comprised of NYSE Euronext's derivatives trading and clearing businesses and includes NYSE Liffe, NYSE Liffe Clearing, NYSE Liffe U.S., NYSE Amex Options, NYSE Arca Options, New York Portfolio Clearing and related derivatives market data.Information Services and Technology Solutions
This refers to commercial technology transactions, data and infrastructure businesses.
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Derivatives Trading is the most valuable division for NYSE Euronext
NYSE Liffe offers a number of derivatives products, including interest rate contracts, equity futures and options, index products and commodity derivatives. NYSE Arca and NYSE Amex operate marketplaces for trading options on exchange-listed securities.
Cash Trading and Listings is the second most valuable division
This division contributes over 25% of the company's value, according to Trefis estimates. The NYSE's main business is executing trades across its exchanges. The NYSE has been the most active exchange in the U.S. with the greatest number of listed companies.
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Economic recovery to drive volumes
2008 and 2009 witnessed turmoil in the global economy and upheaval in the credit markets. Market volatility and uncertainty regarding the capital markets dampened investor confidence and led to lower trading volumes and a deterioration in the financial condition of listed companies. It also impacted the number of new listings on the exchange. As economic conditions gradually improve, we expect that these trends will reverse and listings and volumes will increase going forward.
Intense competition among exchanges
There is intense competition among exchanges, such as NYSE, NASDAQ and CME Group, for trading volumes, listings and technology services customers. Newer entrants have tried to offer discounted fees in order to attract volumes, which could force NYSE to follow suit. This could impact revenues and in turn margins.
Trefis Forecast Rationale for Total US Listed consolidated volume
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${forecast} represents the total trading volume of all US listed cash products across all exchanges in the US
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${forecast} increased from 2.6 trillion in 2008 to 2.9 trillion in 2009 largely due to increased volatility during the economic crisis. It decreased to 2.5 trillion in 2010. Going forward, we expect a gradual increase in ${forecast}.
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- Evolution of Algorithmic Trading Techniques set to drive volumes in the future
- In the past, the economic downturn has not been able to dampen the total volume transacted on the US Equity markets. This was primarily due to the shift in the trading techniques, with more institutional investors following new trading techniques like the algorithmic trading.
- Direct market Access smart order routing (DMA) has seen a decline, giving way to the Algorithmic trading. Algorithmic trading techniques continued to evolve during the downturn and are becoming more comprehensive with the time. This will add to the confidence of institutional investors and it is expected that by 2012, 33% of all the equity cash trades occuring in the US wil be based on Algorithmic Trading.
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- Downturns are unpredictable
- The volumes are largely dependent on the macro economic factors. During the recession, the migration to newer trading techniques supported higher volumes. However the same cannot be said in case of a similar downturn in the near future.
Back to Company OverviewHow Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
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