US exchanges saw double-digit year-on-year (YoY) growth in Q3 2024, with equity revenues rising in kind. However, during earnings calls only one of the giants shared their thoughts on the Securities and Exchange Commission’s (SEC) September decision to reduce minimum tick sizes and access fee caps.
The impact of these changes for the US equity market was addressed by Nasdaq, where CEO Adena Friedman argued that reduced access fees “make it so it’s much harder for markets to incentivise lit orders. And so if we are not able to incentivise the market makers to put their capital into the lit markets, it will widen spreads, it could spin out the book”. This is an issue the exchange is “definitely focused on”, she assured.
Exchanges have previously raised concerns about the change and the impact it will have both on their revenues and the wider market. Previously, a Nasdaq representative told Global Trading that the rules “will impose serious harm to the long-term strength of the US equity market, weaken the NBBO (National Best Bid and Offer), and ultimately increase costs for investors and listed companies”.
READ MORE: Exchanges weigh impact of lower fee caps, transparency
As of Q3, the exchanges are seeing healthy results. ICE led the group, reporting US$2.3 billion net revenues in Q3 2024, up 17% YoY and setting a record for the exchange. Exchange revenues made up US$1.3 billion of this, 8% (US$109 million) of which came from cash equities and equity options. This marked a 15% YoY increase for the segment.
Looking ahead during the results call, chief financial officer Warren Gardiner shared that “in light of the strong performance in our cash equities business, where revenues are up 15% year-to-date, we are providing customers with a regulatory fee holiday which we expect will reduce over-the-counter and other revenues by US$15 million to uS$20 million in the fourth quarter.”
Nasdaq saw the most considerable growth in net revenue in Q3, recording a YoY increase of 22% to US$1.1 billion. Market services revenue was up 13% YoY to US$266 million, which the organisation attributed to a 16% (US$15 million) increase in US equity derivatives and a 15% increase (US$11 million) in US cash equities.
The former was the result of higher overall industry volumes and higher capture, it said, noting however that it saw a dip in market share here. The latter benefited from an increase in market share for on-exchange volume, higher industry volumes and strong capture, it added. European cash equities also recorded a 10% jump to US$25 million, thanks to higher value traded.
At Cboe, equities revenue was US$98 million; up 3% YoY, and making up 18% of the exchange’s US$532 million in net revenue (+11% YoY). This was the result of higher net transaction and clearing fees, elevated industry volumes, and improvements to net capture rates, access and capacity fees, the exchange said. The quarter’s results were dominated by options, which grew by 10% YoY to US$320.9 million.
As the US election looms, amid other global turmoil, David Howson, president of Cboe Global Markets, noted increased use of volatility products over the quarter. “Higher vol-of-vol regime continued into September, extending demand for VIX options of VIX ADV totaled 945,000 contracts for the month, the second highest level of demand for VIX options in over two years. Similar to past election cycles, the VIX term structure is pricing in increased uncertainty as we move through next week’s elections.”
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