5 Securities and Exchanges Stocks to Watch Amid Market Volatility

Core Viewpoint - The Zacks Securities and Exchanges industry is experiencing growth driven by increased trading volumes, product diversification, and the adoption of crypto assets, although it faces challenges from regulatory compliance and market volatility [1][2]. Industry Overview - The industry consists of companies that operate electronic marketplaces for trading stocks, options, bonds, and commodity contracts, generating revenue from fees and providing data and listing services [2]. - There is a notable increase in the adoption of crypto assets, but regulatory compliance presents challenges for industry players [2]. Trends Shaping the Industry - Volatility Fueling Trading Volume: Trading volatility is essential for revenue growth, as it increases transaction and clearing fees, which are significant revenue components [3]. - Mergers and Acquisitions: Companies are actively pursuing mergers and acquisitions to enhance growth, diversify product offerings, and strengthen market positions [4]. - Continuous Investment in Technology: Heavy investments in technology, particularly in AI and automation, are crucial for improving trading efficiency and reducing risks [5]. Industry Performance - The Zacks Securities and Exchanges industry ranks 158 out of 251, indicating it is in the bottom 37% of Zacks industries, reflecting a negative earnings outlook [6][7]. - Over the past year, the industry has underperformed compared to the broader Zacks Finance sector and the S&P 500, with a gain of 20.5% versus 25.7% for the sector and composite [9]. Valuation Metrics - The industry currently trades at a trailing 12-month price-to-book (P/B) ratio of 3.6X, lower than the S&P 500's 8.55X and the sector's 3.75X [10]. - Historical P/B ratios for the industry range from a high of 4.01X to a low of 2.38X over the past five years [10]. Company Insights - Nasdaq: Focused on maximizing non-trading revenue and expanding its technology and analytics services, with a consensus estimate indicating a 12.8% increase in EPS for 2025 [13][14]. - Intercontinental Exchange (ICE): A leading global operator with a strong portfolio and expected EPS growth of 7.5% and 10.5% for 2024 and 2025, respectively [15][16]. - Cboe Global Markets: Positioned for growth with an expanding product line and expected EPS increases of 10.5% and 5.5% for 2024 and 2025 [17][18]. - CME Group: The largest futures exchange globally, with a focus on expanding product offerings and expected EPS growth of 6.4% for 2024 [19]. - MarketAxess: A leading trading platform with expected EPS growth of 3.1% and 12.8% for 2024 and 2025, respectively [21][22].