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Stock Strategist Industry Reports

The Stock Exchanges and Possible Industry Game Changers

The potential upside might outweigh the downside risk.

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We see at least three current developments that will influence the long-term profitability of equity trade execution companies: a prolonged decrease in trading volumes following the bear market that started in 2007, regulatory changes, and increased competition. We will look at each issue and then gauge the potential impact on  NYSE Euronext (NYX) and  Nasdaq OMX (NDAQ).

Decreased Trading Volumes
Historically, equity trading volumes decrease while a bear market is ending or after it is over. There were two prolonged periods of depressed equity trading where it took quite a few years to make a new trading volume high: the bear market of 1929, which took until 1963 for equity trading volumes to hit a new high, and the bear market of 1987, which took till 1992 to reach a new high.

Michael Wong does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.