NYSE May Be Bigger, But Nasdaq Is Growing Faster

NYSE and Nasdaq (NASDAQ: NDAQ) are the two largest stock exchanges in the world, with a cumulative market capitalization* of roughly $28.5 trillion and $11.1 trillion for stocks listed on them, respectively. After NYSE’s acquisition by the Intercontinental Exchange (NYSE: ICE) in 2013, both companies have intensified their tussle to gain market share across multiple service categories. Trefis compares the key operational parameters as well as revenue sources for NYSE vs. NASDAQ in an interactive dashboard, parts of which are highlighted below.

ICE operates its equity markets prominently through the New York Stock Exchange, which has five cash equity exchange venues and two options exchange venues in the U.S. On the other hand, Nasdaq operates multiple venues for cash equities and equity options in the U.S., besides operating a transaction-reporting facility for FINRA and a couple of venues in Nordic and Baltic regions. The analysis here only pertains to ICE and Nasdaq’s U.S. equity market operations.

Classification of Revenue Sources

Intercontinental Exchange and Nasdaq’s total revenues can be broadly classified into four categories:

  • Trading and Clearing Revenues: It represents electronic trading fees, private transaction surcharge, and other volume-related charges received by the exchange.
  • Data Services & Market Technology Revenues: It represents charges for data distribution, connectivity, analytics services, and other technology solutions. (NASDAQ reports both these revenue streams separately)
  • Listing Revenues: A listing fee is charged on an annual basis along with a fee related to other corporate actions such as stock splits and initial public offerings.
  • Other Revenues: It includes interest income on margin deposits, facility usage fee, market maker service fee, public relations solutions, etc.

NYSE is the undisputed leader but, Nasdaq has comparable operational metrics

  • In 2018, NYSE and Nasdaq reported market capitalization* of $28.5 trillion and $11.1 trillion of the U.S. listed stocks, respectively.
  • However, despite the vast difference in market capitalization, capital raised through IPOs on NYSE and Nasdaq was nearly the same at $30 billion and $28 billion in 2018, respectively.
  • Moreover, Nasdaq’s market capitalization has grown at a CAGR of 6% – higher than the figure of around 3% for the NYSE since 2015.
  • Also, capital raised through IPOs on Nasdaq has grown at a CAGR of 18.6% as compared to NYSE’s 16.4%.
  • In cash equity markets, both the exchanges have maintained their matched market share (matched volume refers to total shares traded on the exchange) since 2015, with NYSE consistently being 2-percentage point higher than Nasdaq. (Note: Nasdaq reports FINRA TRF volume separately).
  • However, in the equity options market, Nasdaq’s share has been considerably higher than NYSE.
  • That said, the low U.S. equity options daily trading volumes of just 18.2 million as compared to the U.S. cash equities daily trading volumes of 7.3 billion in 2018 gives NYSE the edge overall when it comes to trading.
  • The trade execution charges (RPC) for cash equities and equity options have been similar for both NYSE and Nasdaq.

Higher Trading Revenues Generated By Nasdaq

  • In 2018, Intercontinental Exchange and Nasdaq reported total revenues of $6.2 billion and $4.2 billion, respectively. Moreover, Intercontinental Exchange’s cash equities and equity options trading revenue was $1.6 billion (primarily from NYSE venues).
  • As Nasdaq does not report its trading revenues separately for its U.S and European exchanges, we estimate that Nasdaq generates nearly 90% of its $2.3 billion cash equity and equity options revenue from the U.S. (As market capitalization of Nasdaq’s European exchanges was just $1.3 trillion as compared to $11.1 trillion of its U.S. venues in 2018).
  • Considering the above assumption, we estimate that Nasdaq generates higher trading revenues from its U.S. equities business than the NYSE.
  • In 2018, revenues from market data for ICE and Nasdaq was $670 million and $390 million, respectively, which could be largely attributed to ICE’s commodities business and higher market capitalization. (Due to the differences in product offerings under data services, only the charges for market data have been compared.)
  • Similarly, ICE and Nasdaq’s listings revenues were $444 million and $290 million in 2018, respectively, possibly due to higher market capitalization of NYSE.

(*Note: Market capitalization is referred from 10-K filing for Nasdaq and December’s market capitalization for NYSE from For 2018, June’s market capitalization is considered for NYSE. Also, market capitalization refers to the market value of stocks listed on the exchange and should not be considered as the market value of ICE and Nasdaq stock)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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