A Closer Look At NASDAQ’s Q1 Equity Trading Volumes

After a strong performance in the previous year, NASDAQ (NASDAQ:NDAQ) sustained its growth trend in equity options trading volumes in Q1, with around 474 million contracts traded in the U.S. market (or 7.5 million contracts daily), about 23% more than the prior year period. This was primarily due to the overall growth in U.S. trading volumes by nearly 32% y-o-y. 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. With the acquisition of ISE in 2016, the company has continued to occupy a leading position in the equity options market, with a market share to nearly 40%. 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 in Q1.

NASDAQ’s cash equity trading volumes continued to see strong growth, with around 88.6 billion shares traded in the U.S. market (or 1.4 billion shares daily), in comparison to previous Q1’s 74.7 billion shares (1.2 billion shares daily). We attribute that to the growth in the overall U.S. cash equity market as well NASDAQ’s gain in market share.  This will add to the revenue growth from the rise in equity options volumes.

We have a $118 price estimate for NASDAQ’s stock, which is significantly ahead of the current market price. Our interactive dashboard shows our expectations for the company’s FY’18 equity trading volumes; you can modify the key value drivers to see how they impact the company’s revenue.

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