Zacks Industry Outlook Highlights CME Group, Intercontinental Exchange, Nasdaq and Cboe Global Markets

Industry: Securities & Exchanges

Link: https://www.zacks.com/commentary/2961412/4-securities-exchanges-stocks-to-watch-despite-intense-competition

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 CME Group, Intercontinental Exchange, 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. The industry 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.

Mergers and acquisitions are gaining momentum across the industry, with companies leveraging strategic partnerships and acquisitions to fuel growth and innovation. These initiatives help unlock new markets, protect domestic market share, diversify product offerings and reinforce trading platforms. Deloitte observes that exchanges are increasingly embracing consolidation to adapt to rapidly changing technological, regulatory and competitive environments.

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. They 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. The industry is witnessing increased adoption of crypto assets. Yet, industry players have to comply with a number of regulations, resulting in challenges

4 Trends Shaping the Future of the Securities and Exchanges Industry

Volatility Fueling Trading Volume: Industry revenues primarily come from trade execution, clearing and settlement, listings and trading technology. Elevated volatility typically increases trading volumes and transaction-based fees. A supportive cryptocurrency backdrop, driven by broader adoption and lighter regulation, could further strengthen activity. Exchanges are also investing in tokenization, stablecoins and digital payments to connect traditional finance with blockchain markets. Technavio expects the global securities exchanges market to reach $49.6 billion by 2028, reflecting a 12.1% CAGR. However, declining volatility could reduce trading activity and pressure transaction revenues. 

Intense Competition: Traditional exchanges face growing competition from alternative trading systems, off-exchange market makers, newly launched exchanges and digital-asset platforms. These rivals compete aggressively through lower fees, liquidity incentives, faster execution and specialized products. As trading activity spreads across more venues, liquidity fragmentation can reduce the market share and pricing power of established exchanges while increasing the cost and complexity of maintaining competitive technology and connectivity. 

Diversification Into Other Recurring Revenue Sources:  Securities exchanges are increasingly focusing on recurring revenues to lower reliance on unpredictable trading-driven income. With market volumes often fluctuating, stable revenue streams from data services, listings, clearing, and technology platforms offer consistent cash flows and stronger earnings stability. These revenues also support growth by addressing rising demand for market data, compliance, ESG offerings and digital asset infrastructure. 

The players are strengthening their presence in the evolving landscape and thereby enhancing scalability and margins. Increasing focus on accelerating the non-trading revenue base also infuses dynamism in the business profiles of the industry participants. In fact, exchanges are focusing on market data monetization and earning more from data feeds and analytics.

Continuous Investment in Technology, AI in Particular: Industry players are intensifying technology investments to enhance competitiveness and adaptability. There is growing emphasis on creating strategic market models through advanced tools, especially AI, while continually upgrading products and services. Exchanges are increasingly leveraging AI and blockchain to strengthen efficiency and resilience. 

Recent advancements use machine learning, automation and algorithms to improve trading accuracy, reduce cyber threats and limit human errors, thereby accelerating trading speed. Moreover, industry players are focusing on automating non-trading operations, which significantly contribute to revenue generation and support sustainable long-term growth.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Securities and Exchanges industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #208, which places it in the bottom 16% of the 247 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, reflects dull 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 bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have been losing confidence in this group’s earnings growth potential. Estimates for 2026 have decreased 1.7% since April.

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 Underperforms Sector and S&P 500

The Zacks Securities and Exchanges industry has underperformed the broader Zacks Finance sector as well as the Zacks S&P 500 composite year to date.

The industry has lost 11.5% against the broader sector’s increase of 6.1%  and the Zacks S&P 500 composite’s rise of 7.6% 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 20.08X compared with the S&P 500’s 20.22X and the sector’s 16.58X.

Over the last five years, the industry has traded as high as 29.62X, as low as 17.59X and at the median of 24.19X.

4 Securities and Exchanges Stocks to Keep An Eye On

We are presenting one Zacks Rank #2 (Buy) stock and three Zacks Rank #3 (Hold) stocks from the Securities and Exchange industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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, growing core marketplace businesses and intensifying its focus on Market Technology and Information Services businesses should continue to drive this Zacks Rank #2 stock. 

The Zacks Consensus Estimate for 2026 and 2027 earnings per share indicates an increase of 15.8% and 13.2%, respectively, year over year. NDAQ came up with a four-quarter average earnings surprise of 5.67%. The expected long-term earnings growth rate is pegged at 16%, better than the industry average of 12.7%. The consensus mark for 2026 and 2027 earnings has moved 3.9% and 4.8% north, respectively, in the past 30 days.

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 #3 stock is poised for growth, given its 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 2026 and 2027 EPS indicates a year-over-year increase of 28% and 5.8%, respectively. The expected long-term earnings growth rate is pegged at 18.9%, better than the industry average. The consensus mark for 2026 and 2027 earnings has moved 1.6% north each, respectively, in the past 30 days. It came up with a four-quarter average earnings surprise of nearly 5.35%.

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. Its efforts to expand future products in emerging markets, non-transaction-related opportunities, OTC offerings, cross-selling through alliances, global presence and liquidity should drive growth.

The Zacks Consensus Estimate for 2026 and 2027 EPS indicates a year-over-year increase of 9.6% and 4.7%, respectively. This Zacks Rank #3 company came up with a four-quarter average earnings surprise of 1.27%. The expected long-term earnings growth rate is pegged at 6.7%. The consensus mark for 2026 and 2027 earnings has moved 0.8% and 0.3% north, respectively, in the past seven days.

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 #3 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 the company’s 2026 and 2027 EPS indicates a year-over-year increase of 15.3% and 8.9%, respectively.  It came up with a four-quarter average earnings surprise of 3.44%. The expected long-term earnings growth rate is pegged at 12%.

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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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