Value Investing Forum

I guess my concern was whether or not they had to hold stock as inventory to facilitate trading. It appears that they have $375m "investments" at cost. I don't know if that is trading inventory or something else. But that only amounts to less than 3% of their total assets.

They also had $178m "Equity method investments" but I'm not sure what those are.

Most of their balance sheet looks pretty vanilla.

The merger potential is interesting.

Quick valuation update with CME added (thanks somrh!) and croic as new attribute:

From a valuation point i would prefer NYX, but cash return on invested capital (croic)

shows that NYX is not efficient (clear preference for CBOE – croic 54%!). This might

 be a reason why they are involved in a merger with DeutscheBoerse (which is more

 efficient – ROE 24%). Now it gets interesting as one could argue that this merger

makes perfect sense and could allow investors not just a short term value play

in a merger context, but even better a longterm value play on synergies.

@somrh:

Stock exchanges make their money with a fee for service model. If you take a quick

look into NYSE price list (table of contents, http://www.nyse.com/about/publ…..7645.html),

you can see a diversified fee stream.

Price List 2010

Transaction Fees……………………………………………………………………………………..3
Fees and Credits applicable to Designated Market Makers …………………………4
Credit Applicable to Supplemental Liquidity Providers………………………………..5
Crossing Session II ……………………………………………………………………………….6
NYSE MatchPointSM System………………………………………………………………………7
New York Block ExchangeSM (“NYBX” SM) ………………………………………………..7
NYSE BONDSSM SYSTEM …………………………………………………………………….7
Risk Management Gateway (“RMG” SM)……………………………………………………8
Listing Fees …………………………………………………………………………………………….9
Next Generation Trading Floor Reservation Fee …………………………………………10
Equipment Fees……………………………………………………………………………………..11
Radio Paging Service…………………………………………………………………………..11
Financial Vendor Services…………………………………………………………………….11
Member Telephone Service ………………………………………………………………….11
Cellular Phones…………………………………………………………………………………..11
Booth Telephone System……………………………………………………………………..11
Service Charges………………………………………………………………………………….11
Broker Subscriber Service…………………………………………………………………….11
Signature Guarantee Service………………………………………………………………..12
Online Comparison System (OCS)…………………………………………………………12
Merged Order Report…………………………………………………………………………..12
Off-Hours Trading………………………………………………………………………………..12
Market Data Fees …………………………………………………………………………………..13
Registration & Regulatory Fees………………………………………………………………..17
Registration Fees………………………………………………………………………………..17
Regulatory Fee……………………………………………………………………………………17
Minimums…………………………………………………………………………………………..17
Other…………………………………………………………………………………………………17
Arbitration Fees…………………………………………………………………………………..17
Trading Licenses…………………………………………………………………………………….18

Furthermore stock exchanges offer a natural monopoly like railroads.

Definition:

A natural monopoly is a distinct type of monopoly that may arise when there are extremely high fixed costs of distribution, such as exist when large-scale infrastructure is required to ensure supply. Examples of infrastructure include cables and grids for electricity supply, pipelines for gas and water supply, and networks for rail and underground. These costs are also sunk costs, and they deter entry and exit.

-  Large-scale infrastructure to ensure supply –> Liquidity

Some more data points on NYX..

Last insider trades:

Aug 18, 2011 MCFARLAND DUNCAN M Director 10,000 Direct Purchase at $25.50 per share. 255,000
Aug 8, 2011 NIEDERAUER DUNCAN L Officer 25,000 Direct Purchase at $27.07 – $27.56 per share. 683,0002

Merger bids:

"Nasdaq OMX and ICE said they are proposing to buy NYSE Euronext for $US42.50 in cash and stock per NYSE Euronext share, or about $US11.3 billion ($10.88bn), based on the respective Nasdaq OMX and ICE closing share prices on Thursday. This compares with the $US35-a-share value of the Deutsche Borse plan."