How Nasdaq Makes Money: Capital Markets, Services, Fees

Nasdaq Inc. (NDAQ) is a worldwide expertise firm offering knowledge, analytics, software program, and providers to the capital markets trade. The corporate is greatest often called the operator of the Nasdaq Inventory Market, the biggest single venue of liquidity for buying and selling U.S.-listed money equities. On the finish of 2020, a complete of three,392 firms traded shares on the Nasdaq within the U.S. As of Could 2022, these firms had a mixed market capitalization of greater than $22.4 trillion.

Apart from the Nasdaq Inventory Market, Nasdaq additionally offers quite a lot of different services and products together with fairness spinoff buying and selling and clearing, money fairness buying and selling, FICC and commerce administration providers, funding intelligence, and market knowledge providers, each within the U.S. and overseas. A number of the firm’s prime opponents embrace Cboe World Markets Inc. (CBOE), Miami Worldwide Holdings Inc., or MIAX, and the Intercontinental Alternate, Inc. (ICE), proprietor of the New York Inventory Alternate (NYSE).

Nasdaq’s Financials

For its most just lately quarterly interval, Q1 2022, Nasdaq reported web earnings attributable to the corporate of $284 million on complete income of $1.5 billion. Internet earnings attributable to Nasdaq shrank by 4.7% year-over-year (YOY). These figures have been positively impacted by the June 2021 sale of the corporate’s U.S. Fastened Revenue enterprise for a pre-tax acquire of $84 million. For Q2 2021, Nasdaq stated its efficiency was pushed by sturdy capital markets exercise and increasing company and investor demand for monetary expertise options. The corporate has additionally expanded its choices in anti-financial crime providers and buyside workflow options, amongst others.

Revenue Breakdown

Nasdaq’s Enterprise Segments

Nasdaq divides its enterprise throughout 4 working segments: Market Companies, Company Platforms, Funding Intelligence and Market Know-how. The corporate breaks down these segments in a number of methods, together with by income and working earnings.

Market Companies

Nasdaq’s Market Companies phase costs for transactions from money fairness buying and selling, derivatives buying and selling, foreign money and commodity buying and selling, clearing providers, dealer providers and securities administration options. Relying on the placement, the corporate presents buying and selling for derivatives, commodities, money fairness, debt, index, choices, futures, and alternate traded funds (ETFs). Nasdaq offers market providers within the U.S., Canada, and all through Europe.

In Q2 2021, Nasdaq’s Market Companies reported $202 million in working earnings, up 14.8% YOY. Market Companies working earnings accounted for 44.5% of consolidated working earnings. For a similar interval, the phase reported income of $878 million, down about 10% YOY. Market Companies is the biggest of the corporate’s segments, with roughly 62.2% of complete income for the quarter.

Company Platforms

Nasdaq’s Company Platforms phase contains each its Itemizing Companies and IR & ESG Companies companies. Nasdaq presents capital elevating options to international firms via its company, or itemizing providers. Company Platforms generates income from itemizing charges, charges for upcoming IPOs, and to change from different exchanges to Nasdaq. By means of its IR & ESG Companies enterprise, Nasdaq offers company investor relations, company governance, and sustainability-related consulting and different providers.

In Q2 2021, Nasdaq’s Company Platforms phase reported working earnings of $65 million, a rise of 32.7% YOY. This phase accounted for 14.3% of Nasdaq’s consolidated working earnings for the quarter. It additionally reported income of $154 million, up 22.2% YOY. This phase accounted for 10.9% of the corporate’s complete quarterly income.

Funding Intelligence

This phase contains the info merchandise, index licensing and providers companies of Nasdaq. Information services and products embrace the dissemination of proprietary Nasdaq knowledge and third-party knowledge, together with trade-related info to assist clients’ analysis, buying and selling, and investing actions. Nasdaq costs a licensing charge from companies that use its index (or any constituent knowledge). If a buying and selling agency desires to launch a brand new ETF on the favored Nasdaq 100 Index, it must pay a licensing charge to Nasdaq. The corporate operates greater than 46,000 indexes.

The corporate’s Funding Intelligence phase reported working earnings of $170 million for Q2 2021, up 28.8% YOY. This accounted for 37.4% of consolidated working earnings for the quarter. Nasdaq’s Funding Intelligence phase reported Q2 2021 complete income of $263 million, up 23.5% YOY. That represented 18.6% of complete quarterly income.

Market Know-how

The Market Know-how phase presents providers to over 130 market infrastructure operators in 50 international locations. The phase offers services and products to exchanges, clearing organizations, central securities depositories, regulators, banks, brokers, buy-side companies and company companies. Nasdaq’s market expertise merchandise could be utilized to create new asset courses.

Nasdaq’s Market Know-how phase is the corporate’s smallest, measured by each working earnings and income. The phase reported Q2 2021 working earnings of $17 million, up 13.3% YOY. Market Know-how made up 3.7% of working earnings. The phase reported Q2 2021 income of $117 million, up 39.3% YOY. Whereas it’s the smallest of Nasdaq’s 4 reportable segments, it’s also the fastest-growing by income development. The phase made up 8.3% of complete income in Q2.

Nasdaq’s Latest Developments

In Feb. 2021, Nasdaq accomplished the acquisition of Verafin, a supplier of anti-financial crime options using a cloud-based platform to assist detect, examine, and report cash laundering and monetary fraud. The worth of the transaction was $2.75 billion. The acquisition is prone to bolster the corporate’s Market Know-how phase, which posted the quickest income development within the newest reported quarter.

In June 2021, the corporate bought its U.S. Fastened Revenue enterprise, beforehand a part of its FICC enterprise inside the Market Companies phase to Tradeweb Markets Inc. The sale generated pre-tax features of $84 million.