“During a year when stock markets across the globe have been falling fast, some investors have found a new way to mitigate the pain: Buy shares in the exchanges themselves,” writes Craig Karmin in today’s Wall Street Journal.

“While the global market rout has been bad news for investors, it has been mostly good news for nearly a dozen publicly traded stock markets world-wide. Big trading volumes that have accompanied this year’s market drops have translated into better-than-expected profits for some of the major exchanges, which collect fees whether stocks trade up or down.”

” ‘If you want to play increasing capital-market volatility without taking credit risk, this is a way to do it,’ says Rupal Bhansali, an international fund manager for MacKay Shields in New York.”

“While share prices of the London and Hong Kong stock exchanges have fallen with their broad market indexes, other major publicly traded stock exchanges have done better than their own markets, though many still are down. In Singapore, shares of the stock exchange are down just 5%, or about a third that of the Straits Times Index. Euronext, the primary trading platform for French stocks, is down just 1.4% this year, compared with a 32% decline for the Paris CAC 40.”

“Now, for the first time, U.S. investors will have a chance to test their appetites for stock-exchange shares. Friday, shares in Chicago Mercantile Exchange Holdings, parent of the big Chicago Merc futures market, are slated to being trading for the first time, on the New York Stock Exchange. The offering, which was intended to raise about $150 million for 15% of the exchange was priced late Thursday at $35 a share, $1 above the top of the intended price range. The higher-than-anticipated price raises the amount of cash that will be raised to about $165 million.”

“The CME offering has gone ahead even as other plans by U.S. markets to go public have stalled. In 1999, the New York Stock Exchange announced plans to go public on its own exchange. But after a series of subsequent delays, those plans have been postponed indefinitely. NYSE Chairman Dick Grasso said in a briefing Thursday that taking the market public and having to answer to shareholders could create an unnecessary distraction from the company’s mission of serving investors. In addition, now that the tech boom has removed the likelihood of tough competition from online auctioneers, he said, additional cash was no longer needed.”

“But while many stock markets have withstood the market slump, they aren’t immune from a broader downdraft. The Nasdaq Stock Market, for instance, has long been interested in a public offering, but Nasdaq Chairman Wick Simmons has said that a combination of poor market conditions and other delays are pushing the IPO plans back to 2003 at the earliest. Since the tech-stock boom’s peak in early 2000, Nasdaq — owned by the National Association of Securities Dealers — has lost about 1,200 of its listed companies, or an astounding 24% of its total, largely due to delistings. The lack of initial public offerings, which have dwindled to a crawl in the same time period, has hurt as well.”

“In London, meanwhile, the stock exchange’s shares are down 25% so far this year — worse than the 23% drop in the benchmark FTSE 100 index.”

“Stock exchanges as publicly traded companies didn’t exist even a few years ago. Growing competition from alternative trading systems like electronic communications networks motivated many exchanges to upgrade their platforms and to raise money for those upgrades by issuing shares. Toronto became the latest exchange to go public; its share price has jumped 20% to 21.65 Canadian dollars (US$13.88) since it began trading Nov. 6, while the broad market was up only 2% over that time. Exchanges in Tokyo, Bombay, India, Milan and Madrid have indicated plans to sell shares publicly sometime soon.”

“For investors, stock exchanges are attractive because they are in the envious business position of being natural monopolies. As much as 98% of German blue-chip stock transactions take place on the Deutsche Boerse, for instance, while nearly the same amount of British stock trading occurs on the London Stock Exchange, according to Emmanuel Bolland, a credit analyst at Standard & Poor’s in London.”