Nasdaq OMX Group (
) is a leading global exchange group that delivers trading,
exchange technology, securities listing, and public company
services across six continents. It is the largest electronic
screen-based market place for equity securities in the US and
competes with other established exchanges such as NYSE Euronext (
) and BATS Global Markets.
Nasdaq is reportedly in discussion with Osaka Securities
Exchange Co. (OSE) to re-enter the Japanese market. Nasdaq
currently provides data for OSE-listed stocks and current
discussions are centered around the idea of creating a new market
that could trade stocks after-hours (including those listed on the
Tokyo stock exchange). The new exchange could reportedly open in
Nasdaq and OSE earlier had previously teamed up in 2000 to open
Nasdaq Japan for emerging companies, but Nasdaq pulled out of the
partnership in 2002 due to low trading volumes. Nasdaq is now
looking to re-enter the Japanese market as the competition among
exchanges in the US has increased. Newly opened exchanges have
gained market share in the US, with BATS Global Markets, for
example, becoming the third largest equity exchange at the expense
of established players like Nasdaq.
We have a
price estimate of $26.59 for Nasdaq OMX Group
which is about 10% above the current market price.
We estimate that US cash and derivatives trading accounts for
almost 42% of Nasdaq's stock value, while another 15% comes from
services that provide market data.
Rise in Electronic Trading to Boost Volumes
Advancements in information and communication technology has led
to a global expansion of electronic trading, including automated
order placement and trade execution. Although electronic trading
has been around since the 1990s, its global application and
acceptance has gained added momentum in recent years. Electronic
trading has changed the market micro-structure of the
financial world. Many algorithmic trading strategies slice bulk
orders into small orders to avoid price changes often caused by
bulk order execution, therefore reducing market impact. The orders
are accordingly smaller but more numerous than before.
We estimate that rise in electronic trading will raise US
average daily trading volume of equity securities to nearly 19
billion by the end of our forecast period, from its current level
of below 10 billion.
Electronic trading makes up about 60%-70% of the currency and
equity trading in the US, vs. an estimated 50% in Europe and 20-30%
in Japan. Electronic trading is growing rapidly in Japan, which has
provoked Nasdaq to consider re-entry into the Japanese market.
Rather than acquiring and integrating a Japanese exchange,
partnering with OSE would provide a clean entry for Nasdaq to
participate in the growth and evolution of trading markets in
To see the impact of US average daily cash equity trading
volume trends on Nasdaq OMX's stock value, drag the trend line in
the modifiable chart abov
See our full analysis of Nasdaq OMX Group