GLOBAL EXCHANGES ENJOY BUMPER YEAR.
A surge in trading and strong demand for information services drove global exchange revenues to a record high in 2017, according to a report by Burton-Taylor International Consulting. Overall, total revenue rose 8.1% last year to $30.7bn with Intercontinental Exchange retaining the top spot in terms of revenue, followed by CME Group and Deutsche Börse. Meanwhile, the LSE edged ahead of Nasdaq to nab the fourth spot with $2.52bn revenues while Nasdaq managed $2.43bn.
Margins were strong across the industry with an average 53.6 % EBIT (earnings before interest and tax). Their performance combined with rising trading volumes helped boost revenues by 6.4% in trading, clearing and settlement (TC&S) – the largest segment. It generated $18.1bn in industry and 63.4% of all exchange revenues.
CME remained the largest exchange for TC&S followed by Deutsche Börse and ICE which had the biggest market share in the US. Deutsche Börse dominated the Europe, the Middle East and Africa (EMEA) region while Hong Kong Stock Exchange was the strongest in the Asian market.
In terms of regional market share, the Americas accounted for 38.9% of global revenues in 2017 with EMEA comprising 36.6% and Asia 24.5 %.
‘Market data & index’, which is the second largest industry sector, accounted for 19.18% of total global exchange revenues, and saw a compounded annual growth rate of almost 12% since 2011. Market technology and access revenues totalled $1.5bn in 2016, rebounding 4.97% after two years of revenue declines. Nasdaq led the segment in terms of both total revenues and year on year growth, with an 11.8% hike to $541m.
By contrast, listing and issuer service revenues stagnated as the weak IPO environment resulted in a mere 1.29% increase to $2.3bn. Deutsche Börse and the Japan Exchange Group bucked the trend, reporting revenue rises of 7.75% and 6.98%, respectively.
“The global exchange industry continues to undergo a steady transformation, as exchanges evolve their models to diversify away from a dependency on transactional businesses. The combination of weak trading volumes and emerging competition is forcing incumbent exchanges to dramatically expand their focus on new business segments,” says Andy Nybo, Director at Burton-Taylor.
“Market data and index businesses are the current target of these expansion efforts but exchanges are constantly searching for new opportunities to expand their offerings, especially as new competition threatens to erode existing operating margins and profitability.”