The revenue of the global exchange industry grew by almost 7% in 2016, driven by strong growth in revenue from market data, according to a new report.
Global exchange revenue totalled a record US$28.3 billion in 2016, up 6.8% from the previous year, according to a report from Jersey City, N.J.-based Burton-Taylor International Consulting LLC. A 29.2% increase in revenue from market data, to a record level of US$5.4 billion, drove the headline gain.
The firm reports that the exchange industry is enjoying average operating margins of 51.6%. Trading, clearing and settlement revenue remains the largest business segment, accounting for almost two-thirds (63.4%) of all exchange revenue. Market data now contribute 19.2% of total revenue. Listing and issuer service revenue gained just 1.29% to US$2.3 billion during the year. Market technology and access revenue rose by slightly less than 5%, to US$1.5 billion in 2016.
“The global exchange industry continues to undergo a steady transformation, as exchanges evolve their models to diversify away from a dependency on transactional businesses,” says Andy Nybo, director at Burton-Taylor, in a statement. “The combination of weak trading volumes and emerging competition is forcing incumbent exchanges to dramatically expand their focus on new business segments.
“Market data and index businesses are the current target of these expansion efforts,” he adds, “but exchanges are constantly searching for new opportunities to expand their offerings, especially as new competition threatens to erode existing operating margins and profitability.”
Burton-Taylor’s report notes that the U.S.-based Intercontinental Exchange tops the industry, generating 15.9% of total industry revenue, driven by a 127.1% surge in market data revenue. CME Group ranks second, at 12.7% of total industry revenue.
In Europe, the Deutsche Boerse is the region’s largest exchange, accounting for 25.1% of revenue, followed by the LSE Group PLC, at 16.8% of the total.
The Hong Kong Exchange Group was the largest exchange in Asia, with a market share of 15.8%, followed by the Japan Stock Exchange at 13.6%.