Zacks Industry Outlook Highlights Intercontinental Exchange, CME Group, Nasdaq and Cboe Global Markets
Chicago, IL – May 28, 2025 – Today, Zacks Equity Research discussesIntercontinental Exchange ICE, CME Group CME, Nasdaq Inc. NDAQ and Cboe Global Markets CBOE.
Industry: Securities & Exchanges
Link: https://www.zacks.com/commentary/2477748/4-stocks-to-watch-from-the-prospering-securities-and-exchanges-industry
A compelling and diversified product portfolio helps drive the revenues of Zacks Securities and Exchanges industry players. A rise in trading volumes, product expansion through prudent acquisitions and the increased adoption of a greater number of crypto assets are expected to benefit Intercontinental Exchange, CME Group, Nasdaq Inc. and Cboe Global Markets. Increased focus on accelerating their non-trading revenue base, which comprises market technology, listing and information revenues, infuses dynamism in the business profile of the industry players.
Given his crypto favoritism, the industry is expected to get an impetus from Trump's second term. The sector is also witnessing increased retail trading. However, alterations in investment patterns and priorities and compliance with regulations pose challenges. With the increasing digitization of financial markets, cyber threats and data breaches continue to pose serious risks.
About the Industry
The Zacks Securities and Exchanges industry comprises companies that operate electronic marketplaces, which facilitate the buying and selling of stocks, stock options and bonds or commodity contracts. The companies facilitate trading across a diverse range of products in multiple asset classes and geographies. The companies generate revenues from fees received from the listed companies on their exchanges.
They also provide a range of data and listing services to global financial and commodity markets, including pricing and reference data, exchange data, analytics, feeds, index services, investments, risk management, desktops, and connectivity solutions, as well as corporate and ETF listing services, on the cash equity exchanges of the industry players. The industry is witnessing increased adoption of crypto assets. Yet, industry players have to comply with a number of regulations
3 Trends Shaping the Future of the Securities and Exchanges Industry
Volatility Fueling Trading Volume: The players in the industry are largely dependent on product and service portfolios for revenues. Major services include trade execution, clearing, settlement services for securities and commodity contracts, listing services plus trading, and clearing systems services. Sustainable trading volume growth, driven by trading volatility, fuels transaction and clearing fees (a major component of the top line of industry players).
With Trump's second term, a pro-crypto environment and easing regulatory control, trading is expected to increase, which should drive higher fees. The maximization of transaction and clearing fees and the lowering of transaction-based expenses drive profits. Other revenue sources include data products and financial indexes, along with information and public company services. Increasing focus on accelerating the non-trading revenue base, which includes market technology, listing and information revenues, infuses dynamism in the business profiles of the industry participants.
Per technavio, the securities exchanges market in 2028 is expected to reach $49.6 billion at a five-year CAGR of 12.1%, given increasing demand for various investment opportunities. Also, the increased adoption of cryptocurrencies like Bitcoin and Ethereum, among others, is a boon.
Mergers and acquisitions: The industry is witnessing a continued surge in mergers and acquisitions, as companies aim to boost their organic growth through strategic partnerships or the acquisition of complementary businesses and technologies. These initiatives enable organizations to break into untapped markets, launch new products or services and enhance the value of their platforms and trade-related activities.
Reports indicate that stablecoin issuer Circle is exploring a possible sale to either COIN or Ripple. In a recent move, COIN agreed to acquire Deribit, reinforcing its foothold in the derivatives segment. Such strategic buyouts are instrumental in broadening product portfolios—an essential driver of growth—and support companies in maintaining domestic market share while extending their global reach. Deloitte notes that exchanges are also turning to consolidation in response to shifting technological, legal, and competitive dynamics.
Continuous Investment in Technology: Industry players continue to invest heavily in technological development. Focus on building a strategic economic market model via technological advancements and upgrades of products and services, AI in particular, will help all exchanges stay afloat amid changing industry dynamics. They are increasingly integrating artificial intelligence (AI) and blockchain technology.
In recent years, the players have launched a number of innovative technologies that rely on machine learning, automation and algorithms designed to improve trading decisions while reducing trading inefficiencies, cyber threats and human errors, thus accelerating trading frequency. Players are also investing in automating non-trading operations that have an important part in revenue generation for the companies.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Securities and Exchanges industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #10, which places it in the top 4% of the 251 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, reflects encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have been gaining confidence in this group's earnings growth potential. Estimates for 2025 have increased 8.5% in a year.
Before we present a few securities and exchanges stocks worth considering for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms Sector and S&P 500
The Zacks Securities and Exchanges industry has outperformed the broader Zacks Finance sector as well as the Zacks S&P 500 composite year to date. The industry has gained 17.3% compared with the broader sector's increase of 3.9%. In contrast, the Zacks S&P 500 composite has declined 1.8% in the said time frame.
Industry's Current Valuation
On the basis of trailing 12-month price-to-earnings (P/E), which is commonly used for valuing exchange stocks, the industry is currently trading at 24.69X compared with the S&P 500's 21.36X and the sector's 16.03X.
Over the last five years, the industry has traded as high as 27.94X, as low as 19.02X and at the median of 22.45X.
4 Securities and Exchanges Stocks to Keep an Eye On
We are presenting three Zacks Rank #2 (Buy) stocks and one Zacks Rank #3 (Hold) stock from the Securities and Exchanges industry. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Intercontinental Exchange: This Atlanta, GA-based company is a leading global operator of regulated exchanges, clearing houses and listings venues and a provider of data services for commodity, financial, fixed-income and equity markets. Its compelling portfolio, expansive risk-management services, strategic buyouts and a solid balance sheet bode well. It is the second-largest global fixed-income provider. This Zacks Rank #2 company, with the largest mortgage network across the United States, remains well-positioned to benefit from accelerated digitization in the U.S. residential mortgage industry.
The Zacks Consensus Estimate for Intercontinental Exchange's 2025 and 2026 EPS indicates a year-over-year rise of 14.3% and 10.7%, respectively. The expected long-term earnings growth rate is pegged at 13.3%, better than the industry average of 9.8%. The consensus mark for 2025 and 2026 earnings has moved 3 cents north each in the past seven days.
CME Group: Headquartered in Chicago, IL, CME Group is the largest futures exchange in the world in terms of trading volume as well as notional value traded. Efforts to expand future products in emerging markets, non-transaction-related opportunities, OTC offerings, cross-selling through alliances, strong global presence and solid liquidity should drive this company's growth.
The Zacks Consensus Estimate for this Zacks Rank #2 company's 2025 and 2026 EPS indicates a year-over-year increase of 8.7% and 3.3%, respectively. It came up with a four-quarter average earnings surprise of 1.7%. The expected long-term earnings growth rate is pegged at 6.6%. The consensus mark for 2025 has moved 0.6% north in the past 30 days, while the same for 2026 earnings has witnessed no movement.
Cboe Global Markets: Based in Chicago, IL, Cboe Global is one of the largest stock exchange operators by volume in the United States and globally for ETP trading. This Zacks Rank #2 stock is poised for growth, given an expanding product line across asset classes, broadening geographic reach and a diversifying business mix with recurring revenues and technology.
The Zacks Consensus Estimate for the company's 2025 and 2026 EPS indicates a year-over-year increase of 9.8% and 6.2%, respectively. The expected long-term earnings growth rate is pegged at 10.5%, better than the industry average. The consensus mark for 2025 and 2026 earnings has moved 1.1% and 0.5% north in the past 30 days. It came up with a four-quarter average earnings surprise of nearly 2%.
Nasdaq: Headquartered in New York, Nasdaq is a leading provider of trading, clearing, marketplace technology, regulatory, securities listing, information, and public and private company services. Its strategy of accelerating its non-trading revenue base, successfully maximizing opportunities as a technology and analytics provider, and growing core marketplace businesses, as well as intensifying its focus on Market Technology and Information Services businesses, should continue to drive this Zacks Rank #3 stock.
The Zacks Consensus Estimate for 2025 and 2026 earnings per share indicates an increase of 13.1% and 11.7%, respectively, year over year. NDAQ came up with a four-quarter average earnings surprise of 3.33%. The expected long-term earnings growth rate is pegged at 12.1%, better than the industry average. The consensus mark for 2025 and 2026 earnings has moved 1 cent and 3 cents north, respectively, in the past 30 days.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Intercontinental Exchange Inc. (ICE): Free Stock Analysis Report
CME Group Inc. (CME): Free Stock Analysis Report
Nasdaq, Inc. (NDAQ): Free Stock Analysis Report
Cboe Global Markets, Inc. (CBOE): Free Stock Analysis Report
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