Exchange Stocks Rally on Volatility in Markets --Update
18 September 2019 - 6:50AM
Dow Jones News
By Jessica Menton
There is one group benefiting from the pickup in market
volatility this week: exchange operators.
Shares of CME Group Inc., Intercontinental Exchange Inc., Nasdaq
Inc., MarketAxess Holdings Inc. and S&P Global Inc. each have
climbed at least 2.4% so far this week and are all up by
double-digit percentages in 2019.
One possible reason for this week's gains, some analysts say, is
that the Intercontinental Exchange and CME both trade oil futures
and have had a direct impact on their volumes from the attack on
Saudi oil infrastructure over the weekend.
Analysts and investors also attribute the strong performance
among exchange operators this year to large swings in the stock,
bond and currency markets. Lower borrowing costs this summer have
spurred a rise in trading volumes, the analysts said.
Oppenheimer initiated coverage on several of the stocks with
"outperform" ratings Monday. The firm said Intercontinental
Exchange with could serve as a hedge to investors' portfolios amid
a recent rise in volatility.
"When there is an unexpected change in oil prices, airlines and
[exploration-and-production] companies use futures contracts to
lock in energy prices," Oppenheimer analysts said in a research
note. "When there is an unexpected change in interest rates, banks
and corporations use interest-rate derivatives to hedge against
adverse interest-rate movements."
ICE focuses on Brent, the global benchmark for crude oil, which
accounts for two-thirds of all oil pricing, according to
Oppenheimer. The firm estimated that ICE's revenue from energy grew
7.6% from 2009 to 2018, compared with 2% for CME, which is focused
on U.S. oil futures and has a more limited market size.
The firm also said CME could benefit from the recent gyrations
in oil prices and interest rates.
(END) Dow Jones Newswires
September 17, 2019 16:35 ET (20:35 GMT)
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