Nasdaq OMX Group (
) is a leading global exchange group that delivers trading,
exchange technology, securities listing, and public company
services across six continents. Their global offerings are diverse
and include trading across multiple asset classes, market data
products, financial indexes, capital formation solutions, financial
services and market technology products and services. The biggest
competitor to Nasdaq is NYSE Euronext (
) with 3 major exchanges in the U.S. - NYSE, NYSE Arca, NYSE
Amex. NASDAQ also faces competition from BATS Global Markets
and other regional exchanges.
We have a price estimate of
$26.59 on Nasdaq's stock
which is almost 10% above market price.
Nasdaq derives almost 22% of its value from U.S. cash equity
trading. The Nasdaq Stock Market is the largest single pool of
liquidity for trading U.S.-listed cash equities, with approximately
21% of all U.S. equities volume for 2009. But NYSE has outpaced
Nasdaq for the lead in initial public offerings and new listings
for the U.S. market in 2010, both in total capital raised as well
as the number of transactions.
Potential Large Tech IPOs Around the Corner
With a lot of media attention now centered around potential tech
IPOs like Facebook, LinkedIn, Groupon and Zynga, NYSE is looking to
attract new companies to its exchange. Previously, Nasdaq has been
the preferred exchange for listing tech company with
large tech IPOs like Google (
), Amazon (
) and Ebay (
) choosing Nasdaq over NYSE.
Last year, NYSE won 40% of the tech IPO listings including
China's Youku.com, which is regarded as the best performing IPO of
2010. Winning upcoming tech IPOs will not be an easy task for NYSE
as Nasdaq is still the preferred venue for new U.S. tech
listings. Nasdaq has already won listings from Skype and
Kayak, whose IPOs are anticipated later this year.
Nasdaq's Market Share of U.S.-Listed Equity Trading
Nasdaq has been successful in capturing a good share of the U.S.
cash equities trading market due to continuous technological
innovation and improvement in order execution techniques, but new
players in the market like BATS Global Markets and Direct Edge have
threatened Nasdaq's market share in recent years. We estimate that
further improvement in trading technologies will help Nasdaq gain
market share over its competitors. Also, increasing prospects for
algorithmic trading, which is expected to account for 33% of all
the equity cash trades occurring in the U.S. by
2012, should lift Nasdaq. We anticipate that Nasdaq's
market share of U.S.-listed equity trading volume will grow from
25% in 2010 to about 29% by 2014.
However, much of our forecast for Nasdaq's market share is
dependent on its ability to maintain a hold on tech IPOs. With
several high profile IPOs impending, a new precedent could be for
future tech IPOs set should another exchange receive these
listings. If upcoming offerings like Facebook and LinkedIn decide
to list on NYSE, Nasdaq's market share of U.S.-listed equity
trading could disappoint in regard to our base estimates.
Drag the trend line in the modifiable chart above to see the
affect of various market share scenarios on Nasdaq OMX Group's
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