U.S. exchanges will this week start reporting results, which will see a boost from volatility-driven trading volumes, but analysts are likely to weigh that against worries over the regulatory environment and potential higher competition from newer entrants.
The U.S.-Iran war, a muddied interest-rate outlook and shifting sentiment around the AI trade have powered a rise in volumes, reflecting the need to reposition portfolios. A rebound in IPO activity is also set to bolster Nasdaq NDAQ.O and NYSE-parent Intercontinental Exchange ICE.N.
Mixed quarter expected across the group
While analysts have dismissed a full-blown shakeout in the industry, the green light has raised questions about whether the CFTC's decision indicates a shift in positioning for a regulator that has typically been more measured in its approach.
"It seems like the CFTC is open to things that in the past they might have been slower to move on," said Barclays analyst Benjamin Budish.
Executives at the exchanges are likely to field questions on conference calls about the shift in the regulator's stance, alongside the outlook for volumes and the sustainability of a capital markets resurgence.
"We expect a lot of questions on the competitive risks from perpetual futures and other new products being launched. Investors are interested in how the products differ, what customers they appeal to, and how the incumbent exchanges may react to new competition," said Alex Kramm, an analyst at UBS.
Nevertheless, analysts say the product's limited adoption from institutional clients shields the industry from competitive disruption.
Analysts say exchanges are poised for a mixed quarter from tougher comparisons with last year, when the Trump administration's "Liberation Day" tariffs whiplashed markets and spurred significant volatility.
"We expect results to be more mixed on a year-over-year basis as trading businesses faced tough comps... Non-transaction-driven business lines, such as market data, should remain strong," Kramm said.
Exchanges have relied on their data businesses to drive recurring revenue and mitigate the impact of fluctuations in trading volume.
CME, the first of the lot to disclose its earnings on Wednesday, is likely to post a marginal decline in revenue and profit from a year ago, according to analysts polled by LSEG.
Meanwhile, Nasdaq is expected to report record quarterly revenue and profit on Thursday, data compiled by LSEG showed, propelled by high-profile listings including SpaceX's SPCX.O record-breaking IPO, and strong demand for its data services.
Cboe and ICE, set to report next week, are likely to post higher revenue and profit, helped by strong trading volumes and demand for proprietary data.
Regulatory questions over perpetual futures
The sector, however, is navigating investor concerns over the Commodity Futures Trading Commission's decision to allow Kalshi and Coinbase COIN.O to offer perpetual futures for cryptocurrencies posing as a threat to the incumbents' market share.
Perpetual futures, or "perps", are contracts without an expiry date that are tied to the price of an underlying asset and generally allow traders to use high levels of leverage.
Exchanges typically benefit during times of high volatility. Despite the surge in volumes, these worries have dragged three of the four exchange stocks down year-to-date, with Nasdaq, CME CME.O, and ICE falling between 5.4% and 12.6%, while Cboe CBOE.Z is up about 11%.
"The majority of the multiple compression year to date has come from a combination of a shift in regulatory posture and the perceived threat of perpetual futures," Piper Sandler analyst Patrick Moley told Reuters.
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