What’s next for exchanges

Established stock and derivatives exchanges around the world have prospered mightily in recent years, thanks to record trading volumes and a proliferation of new products. So have new alternative trading venues and clearinghouses.
But a range of forces—more laissez-faire regulation in Europe and the United States, centralization and rationalization of post-trading infrastructure, new technologies, and savvy entrepreneurs—are making exchanges and their investors vulnerable to more challenging times ahead.
Since further consolidation is inevitable, leading exchanges should continue to examine opportunities to make acquisitions. But to preserve profitability as conditions change, they should also seek to refine their product and service offering, as well as explore sources of growth in other products, geographies, and parts of the trading value chain.

Exhibit 1: In terms of capital productivity, exchanges have done better than the rest of the financial sector and much better than other traditional industries.
Exhibit 2: Growth has propelled margins in the exchange industry.
Exhibit 3: The next stage for the core business of the exchanges—Asia, Europe, and United States—will involve one of four possible scenarios.