Think back a few years to the excitement that surrounded the exchanges. There was a sense that the intermediaries at the center of the trading world would continue to benefit from increasing volumes. In addition, there were the supportive trends of globalization and consolidation, plus the continuing move to the democratization of trading, with individuals being able to tap into new markets at relatively low cost.
The stocks reflected that excitement.
As always, where you start a chart matters a lot. This one begins with the listing of NYSE Group (now NYSE Euronext, NYX) in March of 2006. Therefore, the chart only shows the last part of the stupendous run of CME Group (CME), which came public in December of 2002 at $35. It marched ever higher to a peak of $705 and change five years later, before falling almost 80% in 2008. Also on the chart is the NASDAQ OMX Group (NDAQ).
Not shown is CBOE Holdings (CBOE). Since its debut in June of 2010 it has a return of about -18%, identical to CME over that time and lower than the other two exchanges.
Now what do you have? The competitive and regulatory landscape has shifted, volumes from humans have declined (but the computers are doing their thing with abandon), and it’s an open question what kind of business the exchanges are or should be in. On this weekend, attention will be drawn to the functioning of the exchanges in times of disaster, just as it was that fateful September day ten years ago. They will likely pass with flying colors, as they did then, but after the winds die down, the question will still remain as to what the businesses should and will be going forward. (Chart: Bloomberg terminal.)