Volumes Rebound In November For NASDAQ OMX Group

+7.12%
Upside
63.10
Market
67.60
Trefis
NDAQ: Nasdaq logo
NDAQ
Nasdaq

NASDAQ OMX Group (NASDAQ:NDAQ) has seen mixed volumes this year for both cash equities and equity derivatives. After a disappointing October across products in Europe and the U.S, November saw year-over-year improvement in cash equity volumes in Europe and the U.S., while derivative volumes declined slightly in the U.S. [1] Below we take a look at NASDAQ’s metrics across various products for November and our full year forecasts.

We have a $50 price estimate for NASDAQ OMX’s stock, which is approximately 10% lower than the current market price.

Relevant Articles
  1. Nasdaq Stock Likely To Edge Past The Street Expectations In Q4
  2. What To Expect From NASDAQ Stock?
  3. What To Expect From Nasdaq Stock In Q3?
  4. Is Nasdaq Stock Attractive At The Current Levels?
  5. What To Expect From Nasdaq Stock Post Its Stock Split?
  6. NASDAQ Stock Gained 9% In One Week, What’s Next?

See our full analysis for NASDAQ OMX Group

Cash Equity Trading

After a slow start to the year, NASDAQ’s cash equity trade volumes for the American markets picked up in Q2 and Q3. As a result, the total shares traded on NASDAQ’s platforms from January through October was roughly flat over the comparable prior year period at about 275 billion shares traded. However, NASDAQ’s matched share in the U.S. equities market fell from over 20% in 2014 to about 19% in the first three quarters of 2014. [1] Trade volumes picked up in November, with the total number of shares rising by 5% y-o-y to 24.4 billion shares. We forecast NASDAQ’s market share for cash equity trading in the U.S. to stand at just under 19% for 2015, and subsequently stabilize at around 18-19% through the end of our forecast period.

Derivatives Trade Volumes

NASDAQ continues to face increasing competition from peers in the U.S. equity derivatives market, resulting in pricing pressure. The combined matched market share of equity derivative trades executed on NASDAQ’s exchanges including NASDAQ Philadelphia Exchange, NASDAQ Boston Exchange and The NASDAQ Options Market stood at 27.9% in 2013, and fell to about 26.9% in 2014. It further declined to about 25% in the first three quarters of 2015 thus far. NASDAQ’s trade volumes for equity options have remained repressed this year, except for a spurt of growth in the month of August, as economic uncertainty in China created ripples globally. The total number of contracts traded on NASDAQ’s exchanges stood at 701 million from January through October, an 8% annual decline in trade volumes. Continuing the trend, trade volumes fell by approximately 4% on a year-on-year basis to 78 million contracts traded in November. We currently forecast NASDAQ’s share in the equity derivatives market in the U.S. to stand at just under 25% for the full year. Subsequently, we forecast a gradual decline in NASDAQ’s market share to about 24% through the end of our forecast period.

In contrast, the Nordic and Baltic exchanges have been solid growth drivers for the company this year, with derivative trade volumes rising by 6% from January through October to 79.1 million contracts traded. This continued in November, as trade volumes rose by over 7% y-o-y to 7.5 million contracts. [1] We currently forecast a 6% annual growth in European derivatives trade volumes to 379,000 contracts traded per day for the full year, or a total of 95 million contracts traded.

Revenues From Trading Activity

Total equity derivative and trading revenue in the U.S. and Europe fell by 17% to $322 million in the first nine months of 2015. Despite the impressive volume growth seen in Europe, combined revenues fell on a y-o-y basis due to weakness in NASDAQ’s U.S. marketplaces. On the other hand, combined cash equity revenues in the U.S. and Europe grew by about 3% y-o-y to $985 million as volumes rebounded after a weak start to the year. Strength in NASDAQ’s cash equities trading business going forward could help the company register robust top line growth, despite a challenging environment for its derivatives business in the U.S.

View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. NASDAQ OMX Monthly Metrics, NASDAQ Investor Relations, December 2015 [] [] []