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Moody's Sees Positive Outlook for US Exchanges and Other Venue Operators
Traders Magazine Online News, December 20, 2017
Moody’s shared it 2018 outlook for US Securities Firms including exchanges and other trading venue operators, retail brokers and market makers with Traders Magazine and found the following:
The outlook for US exchanges and other trading venue operators and retail brokers is positive, owing to increased profitability and steady to lower debt leverage for the collective group.
- Moody’s says exchange operators’ financial strength will continue to benefit from diversification, and consolidation has reinforced scale at major US exchange operators while profitability and margins are expected to remain strong in 2018.
- Increasing demand for propriety data, the development of differentiated products as well as an eventual increase in trading volumes, which will further improve profitability.
- Key drivers of US retail brokers’ positive outlook include rising interest rates coupled with higher average interest-earning assets. The 2017 price war drove average commission per trade downward, however, trading activity maintained an upward trajectory, which alleviated the negative impact on trading revenue for retail brokers.
The 2018 outlook for US market makers and advisory boutiques is stable amid improving profitability but a challenging operating environment, which will continue to impede revenue.
- Moody’s notes that in 2017, US market makers experienced tepid volumes and client activity amid subdued volatility. The stable outlook for 2018 reflects the continuation of firms’ reengineering and managing expenses to offset lackluster revenues.
- A challenging operating environment persists for US market makers and advisory boutiques, which will hinder meaningful revenue growth. Low volatility and added transparency are key headwinds for market makers in 2018 as market volatility, which can drive growth, remains low.
Contact Moody's for the full report.
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