Growth Momentum Persists For NASDAQ OMX Despite Low Trade Volumes In October
Global exchange operator NASDAQ OMX Group (NASDAQ:NDAQ) has seen mixed trends in trading volumes throughout this year. While equity derivatives in the U.S. have seen subdued volumes in 2015 thus far, derivative trade volumes in Europe have outperformed compared to last year. On the other hand, U.S. cash equities surged in Q3 after trade volumes were suppressed in the first half of the year. With a relatively good Q3 in terms of trade volumes across both cash equities and equity derivatives, NASDAQ’s market service segment saw 6% year-on-year growth to $542 million. Excluding the negative impact of foreign exchange, NASDAQ’s market services revenues were up by about 11% on a y-o-y basis. [1]
Trade volumes fell on a year-over-year basis in October across all product categories. The decline in trade volumes in October can be attributed to tough year-on-year comparisons, since the comparable prior year period witnessed a surge in trade volumes due to highly volatile markets and speculation regarding U.S interest rates and oil prices. Below we take a look at some key trading metrics for NASDAQ OMX for the month of October.
We have a $50 price estimate for NASDAQ OMX’s stock, which is over 10% lower than the current market price. NASDAQ’s stock price has fluctuated between $53 and $60 in the last one month.
See our full analysis for NASDAQ OMX Group
Cash Equity Trading
Cash equity trading in the U.S. was solid through the September quarter, with trade volumes rising by 24% y-o-y to 88.2 billion shares traded. Despite the rise in total trade volumes, NASDAQ lost share in the market to competing exchange operators such as Intercontinental Exchange Group (NYSE:ICE). NASDAQ’s combined cash equity trading revenues for the U.S. and Europe were up by 18% y-o-y to $349 million. Although the company sustained high trade volumes for October with 29.2 billion shares traded through the month, it was a 22% annual decline. [2] The annual decline in trade volumes was mainly due to a surge in trade volumes in October last year, with the company reporting a massive 37.4 billion shares traded.
Similarly, NASDAQ’s Nordic and Baltic exchanges have performed consistently over the last couple of quarters. In the most recent quarter, the total value of shares traded on NASDAQ’s European platforms combined rose by 11% annually to $204 billion. However, a tough year-over-year comparison in October led the total value of shares traded in October to fall by 11% y-o-y to $77 billion. Moreover, the revenue captured per 1000 shares has been marginally lower in 2015 thus far, compared to the previous year. [3]
Derivatives Trade Volumes
Equity derivative trade volumes on NASDAQ’s U.S. platform have dropped in every month this year (except August) relative to the comparable prior year period due to increased competition and mounting pricing pressure. As a result, NASDAQ’s market share in the U.S. equity derivatives market for the nine-month period ended September stood at 25% – about 2 percentage points lower than the year-ago period. The trend continued in October, with the total number of contracts traded on NASDAQ’s U.S. platforms falling by over 15% y-o-y to 85 million through the month.
Comparatively, derivative trading volumes in Europe have remained robust in 2015 thus far. Total contracts traded in Europe for the first nine months of 2015 were up by about 8% y-o-y at 71.2 million contracts. However, the rise in European derivative trading volume wasn’t enough to offset the decline in the U.S. marketplace. Combined equity derivative trading and clearing revenues in Q3 were down by over 13% y-o-y to $109 million, while revenues through the first three quarters were down by over 17% to $322 million. Moreover, trade volumes in Europe declined in October as the total number of contracts traded fell by 16% y-o-y to 7.9 million contracts.
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- Nasdaq Reports Record Third Quarter 2015 Non-GAAP Results, NASDAQ Press Release, October 2015 [↩]
- NASDAQ OMX Monthly Metrics, NASDAQ Investor Relations, November 2015 [↩]
- NASDAQ Form 10Q, SEC, November 2015 [↩]