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The 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. They facilitate trading across a diverse range of products in multiple asset classes and geographies. Industry players generate revenues from fees received from the listed companies on their exchanges.
Within the Financials sector, the Zacks-defined Securities and Exchanges industry is currently within the top 4% of the Zacks Industry Rank. Since the computer storage devices industry is ranked in the top half of the Zacks Ranked Industries, we expect it to outperform the market over the next three to six months.
At this stage, we recommend three U.S. securities and exchanges stocks with a favorable Zacks Rank to strengthen your portfolio. These are CME Group Inc. CME, Cboe Global Markets Inc. CBOE and Intercontinental Exchange Inc. ICE.
U.S. Securities and Exchanges Industry Thriving
Industry players 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).
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 see a five-year CAGR of 12.1% to $49.6 billion, given increasing demand for various investment opportunities. Also, the increased adoption of cryptocurrencies like Bitcoin and Ethereum, among others, is a boon.
The chart below shows the price performance of our three picks in the past three months.
Image Source: Zacks Investment Research
CME Group Inc.
CME Group’s strong market position, driven by varied derivative product lines, bodes well. CME’s efforts to expand and cross-sell through strategic alliances, acquisitions, new product initiatives and a stable global presence are encouraging.
While higher electronic trading volume adds CME’s scalability, product innovation and a growing proportion of volume from customers outside the United States have been driving results. Solid liquidity supports wealth distribution to its shareholders.