A Look At Stock Exchange Stocks

With the enormous increase in the trading of stocks, investors have been looking at publicly traded stock exchanges to invest in. The number of trades that took place on the NYSE Group ((NYX) on the NYSE) exchanges in 2004 was 440,393,314 (please note: this is the number of trades, not the number of shares). This year, the number of trades is 773,640,472 just through the end of November. This is an increase of 76% in two years without including the trades for the month of December.

The NYSE Group owns the New York Stock Exchange [also known as the NYSE] and NYSE Arca. Although the New York Stock Exchange was founded in 1792, it became a public company on March 7, when the exchange merged with Archipelago Holdings, Inc. to become NYSE Group.

On December 20, NYX announced that its shareholders approved the purchase of the Euronext stock exchange, which is based in Paris but has locations in London, Brussels, Lisbon, and Amsterdam. This would turn NYX into an almost global exchange, with Asia being the last area of expansion. Although the trailing P/E is atmospheric at 109, the forward P/E is a more reasonable 41. Quarterly revenue growth is in excess of 73%.

The biggest American competitor to NYX is NASDAQ Stock Market, Inc. ((NDAQ) on NASDAQ). Although NASDAQ was founded in 1971, it went public in 2002 [trading on its own exchange, of course]. It is actually larger than the New York Stock Exchange based on number of securities traded and average number of shares traded per day. The stock has a forward P/E of 20 with a quarterly revenue growth of over 82%. NDAQ is trying to go global also with the pursuit of the London Stock Exchange.

The International Securities Exchange Holdings Inc. ((ISE) on NYSE) is an electronic exchange for stock options and index options. It was founded in 1997 and went public last year. It has a forward P/E of 27. The quarterly revenue growth is 30%.

Related investments are the derivative exchanges. The Chicago Mercantile Exchange Holdings, Inc. company ((CME) on NYSE) and CBOT Holdings, Inc. ((BOT) on NYSE) are futures and options exchanges that trade futures contracts and options on futures contracts on interest rates, stock indexes, and other investments.

Comments

[Ron Coleman:]

I am a huge fan of the stock exchange stocks and have been following them for awhile. I think you put a great article together showing the sheer growth in the industry. Thanks for your research, it will be very useful.

2006 Dec 28 10:24 AM

[Stockerblog:]

Thanks for your compliments. In the interest of full disclosure, I own shares in NYX.

2006 Dec 28 11:20 AM

[Ron Coleman:]

As well, I personally own NYX, in interest of full disclosure.

2006 Dec 29 11:24 AM