NASDAQ’s Growth In Equity Options Trading Volumes Should Propel Its Q4 Earnings

by Trefis Team
Nasdaq OMX Group
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After a strong performance in the previous three quarters, NASDAQ (NASDAQ:NDAQ) sustained its growth trend in equity options trading volumes in Q4, with around 399 million contracts traded in the U.S. market, about 12% more than the prior year period and 10% ahead of the previous quarter. This was primarily due to a substantial gain in market share to over 41%, driven by the acquisition of ISE in 2016. Moreover, we believe the strengthening of the U.S. dollar and other macro factors contributed to increased volatility in the market, and consequently drove trading volumes.

We have a $92 price estimate for NASDAQ’s stock, which is significantly ahead of the current market price.

NASDAQ generates around 18% of its revenues from this asset class. With a strong growth in volumes, we expect significant top line growth from this segment.

After a slight improvement in the previous quarter, NASDAQ’s cash equity trading volumes remained under pressure in Q4, with around 72.7 billion shares traded in the U.S. market, in comparison to previous Q4’s 76.4 billion shares. We attribute that to the decline in the overall U.S. cash equity market.  This will partially offset the revenue growth from the rise in equity options volumes. However, the volumes were slightly better in comparison to the previous quarter.

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