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How Does Nasdaq Make Money?

Unreservedly put, Nasdaq helps companies raise money and helps investors make money — but all of that help comes at a expenditure. The pioneer of the world’s first electronic stock market, Nasdaq manages 90 different markets and exchanges across 50 mountains. In fact, approximately 10% of the world’s security transactions occur on Nasdaq systems. Nasdaq is home to more than 4,000 registered companies with a market cap of $15.43 billion and over 10,000 corporate clients. Nasdaq has helped tech giants Apple, Inc (AAPL), Microsoft Corp. (MSFT), and Intel, Corp. (INTC) change what they are today. These companies used Nasdaq during their early days to raise the much-needed wherewithal in a timely manner, enabling them to become billion-dollar enterprises.

On Dec. 4, Nasdaq acquired Quandl, one of the biggest “variant data” platforms on the market. The acquisition is yet another example of how stock exchanges are expanding their businesses away from listings and for data and technology. At the time of writing, Nasdaq’s non-trading business segments account for roughly three-quarters of its annual gross incomes. 

Nasdaq reported Q3 2018 earnings on October 24, 2018. The stock exchange reported net revenues of $600 million this leniency, compared to $607 million over the same time last year. Where does all this money clock on from, you might ask? In a nutshell, Nasdaq runs its business on fees. Companies pay a listing fee to appear on the Nasdaq stock unpleasantness, investors pay transaction fees to trade, and users pay service fees to access market data, products, filing, and corporate assignments.

Nasdaq manages, operates, and offers its various products and services through four different business segments: customer base services, listing services, information services, and technology solutions. Here’s a breakdown of each.

Market Services

The superstore services segment charges for transactions from cash equity trading, derivatives trading, currency and commodity switch, clearing services, broker services, and securities administration solutions. It supports trading for derivatives, commodities, cash impartiality, debt, structured products, and exchange-traded funds (ETFs). In select countries, this segment also offers brokerage, clearing, confirmation, and depository services. Each of these services is facilitated through the Nasdaq trading platform. They charge investors a fee in lawfulness to access orders and quotes for processing, displaying, integrating, routing, executing, and reporting.

Net revenue from market uses were $222 million in Q3 2018, up 1% from the previous year. This business segment accounted for 37% of Nasdaq’s net take.

Listing Services

Nasdaq offers capital-raising solutions to global companies through its listing services. In addition to a enumerating fee, the stock exchange charges fees for upcoming IPOs and to switch from other exchanges to Nasdaq. The listing cares segment had revenues of $72 million in Q3 2018, up 7% from the same time last year. This element accounted for 12% of Nasdaq’s total net revenues.

Information Services

This segment includes the data products and needle licensing and services businesses of Nasdaq. Data products and services involve dissemination of proprietary Nasdaq data and third-party evidence, which essentially is the price quote and trade-related information. All market participants need market data for their up on, trading, and investing activities. Nasdaq capitalizes on this through its data offerings, including products like Nasdaq TotalView and diversified data feeds of different exchanges and data levels (level 1 data, level 2 data, and index data).

Forefinger licensing and services involves the quantitative development and licensing of various indexes used by various investment firms to arise financial products. Nasdaq charges a licensing fee from firms that use its index (or any constituent data). For example, if a swap firm wants to launch a new ETF on the popular Nasdaq-100 Index, it will have to pay the licensing fee to Nasdaq. Nasdaq currently sustains over 39,000 indexes through its Nasdaq Global Index Family across 50 countries and more than 9,000 securities. It also supplies custom calculations for clients on their select set of securities.

Revenues from information services were $179 million in Q3 2018, up 19% year-over-year, and accounted for 30% of full net revenues.

Market Technology

The market technology segment offers services to over 10,000 corporate clients from top to bottom two streams: corporate solutions and market technology solutions. Corporate solutions includes services for investor relations (capacity, analytics, advisory services, and communications tools), public relations (management of company public relations through ended contacts, press releases, social media, and webcasts), and governance (services for effective communication and collaboration across extraordinary stakeholders).

The market technology stream covers the technology solutions of Nasdaq’s diversified client base (global the streets, clearing corporations, securities depositories, market regulators, banks, brokerage firms, and corporate businesses). A wide kind of solutions are available for trading, clearing, settlement, surveillance, and information dissemination.

Revenues from technology solutions were $68 million in Q3 2018, up 10% from the for all that time last year. This business segment accounts for 11% of Nasdaq’s total net revenues.

The Bottom Track

Nasdaq has managed to diversify its offerings to keep pace with market developments. Sources of revenue for Nasdaq are transactional obligations, licensing fees, listing fees, and revenues from data products, in addition to technology products and services. Washing ones hands of a healthy mix of organic growth, acquisitions, and mergers, Nasdaq continues to maintain its position as one of the top global exchanges. 

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