4 Stocks to Watch From the Prospering Securities and Exchanges Industry

The Zacks Securities and Exchanges industry is expected to benefit from rising trading volumes, product expansion via acquisitions, and increased crypto asset adoption, particularly for companies like Intercontinental Exchange (ICE), CME Group (CME), Nasdaq Inc. (NDAQ), and Cboe Global Markets (CBOE). The industry is also seeing increased retail trading and a focus on non-trading revenue, with the securities exchanges market projected to reach $49.6 billion by 2028, representing a 12.1% CAGR; however, firms face challenges from evolving investment patterns, regulatory compliance, and cybersecurity threats.

Analysis

The Securities and Exchanges industry exhibits a strong near-term outlook, evidenced by its Zacks Industry Rank #10, placing it in the top 4% of 251 industries, and a positive aggregate earnings estimate revision with 2025 estimates up 8.5% over the past year. Key growth drivers include anticipated increases in trading volumes fueled by market volatility and crypto asset adoption, product portfolio expansion via strategic M&A such as Coinbase's (COIN) acquisition of Deribit, and a concerted effort by industry players to enhance non-trading revenue streams like market technology and data services. The securities exchanges market is projected by Technavio to reach $49.6 billion by 2028, reflecting a 12.1% five-year CAGR. Year-to-date, the industry has significantly outperformed the broader Zacks Finance sector and the S&P 500 composite, gaining 17.3% compared to the sector's 3.9% rise and the S&P 500's 1.8% decline. Currently, the industry trades at a trailing 12-month P/E of 24.69X, above both the S&P 500's 21.36X and its own 5-year median of 22.45X. Specific companies poised to benefit include Intercontinental Exchange (ICE), with projected 2025 EPS growth of 14.3% and a 13.3% long-term earnings growth rate; CME Group (CME), expecting 8.7% EPS growth in 2025; Cboe Global Markets (CBOE), with anticipated 9.8% EPS growth in 2025 and a 10.5% long-term growth rate; and Nasdaq (NDAQ), projecting 13.1% EPS growth in 2025 and a 12.1% long-term growth rate. Despite these positive indicators, the industry faces challenges from evolving investment patterns, regulatory compliance, and persistent cybersecurity threats.

Key Decisions for Investors

• Consider overweighting exposure to the Securities and Exchanges industry given its strong fundamental drivers, including robust trading volumes, crypto adoption, M&A activity, and favorable analyst earnings revisions.
• Focus on specific names like Intercontinental Exchange (ICE), CME Group (CME), and Cboe Global Markets (CBOE), which carry a Zacks Rank #2 (Buy) and exhibit strong earnings growth forecasts, while also evaluating Nasdaq (NDAQ) (Zacks Rank #3 - Hold) for its non-trading revenue growth potential, though be mindful of the industry's current premium valuation relative to the broader market and its historical levels.
• Monitor potential headwinds such as shifts in regulatory landscapes, particularly concerning digital assets, the impact of evolving investment patterns on trading volumes, and the persistent risk of cybersecurity incidents, which could moderate the sector's growth trajectory.