VALUATION HIGHLIGHTS

1. Market Technology & Corporate Services constitute 27% of the Trefis price estimate for Nasdaq OMX Group's stock.
2. Broker and Access Services constitute 24% of the Trefis price estimate for Nasdaq OMX Group's stock.
3. Market Data constitutes 18% of the Trefis price estimate for Nasdaq OMX Group's stock.

WHAT HAS CHANGED?

Stock Split

Latest Earnings

Impact of coronavirus outbreak

NASDAQ is an exchange holding company that engages in trading, clearing, exchange technology, regulatory, securities listing, information, and public & private company services. It drives more than 62% of its revenues from market services, including Equity Derivative Trading and Clearing, Cash Equity Trading, FICC, and Trade Management Services businesses. Due to the coronavirus pandemic and economic uncertainty, securities markets are witnessing high trading activity. This, in turn, means that the exchange would generate more revenue in clearing and transaction fees. While the company’s results for each of the four quarters of 2020 were on similar lines, the same trend followed FY2021.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are some key drivers of NASDAQ's value with potential upside or downside to our price estimate for the company's stock.

• Daily Volume of U.S. Listed Options Contracts The daily volume of options contracts traded across all exchanges in the U.S. has reached over 37.2 million in 2021, and we estimate that it will be around 36.5 million by the end of our forecast period.
• Market Share of U.S. Listed Shares Since the past couple of years, NASDAQ has been losing market share in U.S. cash equities due to increasing competition from electronic exchanges like BATS Global Markets and Direct Edge NASDAQ. NASDAQ's share in the U.S. market decreased from 21% in 2011 to 17.4% in 2016. However, 2017 saw the market share increase to around 18%. This value rose further to 19.43% in 2018. The figure was around 17.4% in 2021. We expect NASDAQ's market share to increase gradually in the near term and stabilize at about 20.6% throughout our forecast period. If NASDAQ gains another 10% market share by the end of our forecast period, this will present an upside of about 2% to our price estimate.

BUSINESS SUMMARY

Nasdaq OMX Group ("NASDAQ") is a global exchange group that provides trading, exchange technology, securities listing, and public company services globally. The company's financial services include equity and derivatives trading, market data products, index services, financial services, and market technology products.

SOURCES OF VALUE

NASDAQ Stock Market

On December 31, 2021, the NASDAQ Stock Market had 5,413 listed companies. The company also operates a second equity market in addition to options and futures markets and a derivative clearinghouse. The NASDAQ market is the company's most well-known brand, and U.S. listing and cash-equity trading (which we present as two separate divisions) account for under 20% of the company's value, according to Trefis estimates.

Europe Operations

In Europe, NASDAQ operates the NASDAQ OMX Nordic, NASDAQ OMX Baltic, and NASDAQ OMX Europe, in addition to NASDAQ OMX Commodities and NASDAQ OMX Armenia. According to Trefis estimates, European Cash & Options trading and European Listings account for around 4% of the company's value. However, this doesn't include the market data, market technology, and access services provided to European customers.

KEY TRENDS

Economic recovery to drive volumes

Over the past couple of years, recovery in economic conditions and a positive outlook of the capital markets have heightened investor confidence and improved the financial condition of listed companies. Consequently, the company saw strong growth in the number of new listings on the exchange. Further, enhanced volatility has resulted in greater trading volumes. As economic conditions continue to improve, we expect these trends to sustain in the near term and drive growth in trading volumes and listings.

Intense competition among exchanges

There is intense competition among exchange operators such as IntercontinentalExchange Group (which owns NYSE), NASDAQ OMX Group, and CME Group for trading volumes, listings, and technology services customers. Newer entrants have tried to offer discounted fees to attract volumes, which could force NASDAQ to follow suit. This could impact revenues and, in turn, margins.