Acknowledging the growth potential in the Asian market, NYSE Euronext (NYSE:NYX) recently opened a liquidity center in Tokyo to better link traders to the Japanese market. The facility will help customers access equity markets in Japan and will offer market connections and technology services such as market data, risk management and algorithm back-testing. Apart from Japan, NYSE has similar liquidity centers in the U.S. and the U.K., with plans to add facilities in Hong Kong, Singapore, Canada and Brazil.  NYSE Euronext competes with other stock exchanges such as Nasdaq OMX (NASDAQ:NDAQ) and CME Group (NASDAQ:CME).
We have a price estimate of $33.2 on NYSE Euronext’s stock, about 20% above the current market price.
The Japanese center is part of the New York Stock Exchange’s (NYSE) bigger plan to open as many as 40 liquidity centers at major financial markets around the globe. The NYSE is also looking to diversify from the highly volatile trading and stock listings business into higher-margin and stable hardware and systems business.
A billion dollar revenue target
The New York Stock Exchange expects the Tokyo hub to link up with 50 to 60 broker dealers and other large trading clients in its first year of operation. The company has set a target of reaching $1 billion in revenues in next five years from technology solutions and services, but our estimate is $480 million for the same period. However, if the company achieves its target of a billion dollar revenues in five years, our $33.20 price estimate for NYSE Euronext would jump by 10%.Notes:
- NYSE Opens Tokyo Center Allowing Customers to Trade in Japan, Business Week, December 15, 2011 [↩]