Industry Primer: Exchanges & Financial Market Infrastructure, Part Two: The Deep Dive

This is Part Two of the Industry Primers audio program on exchanges and financial market infrastructure, published by Latticework from MOI Global. It is the deep dive, made for professional investors and for anyone who analyzes these companies for a living. It assumes the vocabulary of investing and explains only what is specific to this industry. By the end a listener should be able to explain how the industry makes money, use its language, read its filings without being misled, appraise its companies the way specialists do, and recognize the managers and business models that compounded value. (Part One told the story of the industry, for a general audience of lifelong learners. An in-depth industry research report is also available.)

This program follows the written primer in fifteen sections. It opens with the toll the industry charges and with what the record of shareholder returns since demutualization shows, including a median of about 16.7 percent a year and a spread of roughly eighty times between the best and worst performers inside one industry. It then works through the life of a single trade and the six places it pays; the four regimes the industry has passed through and what each one proved; what anchors a pool of liquidity, and why some franchises have never been taken while others fell in a year; volume, capture and operating leverage; the three groups of listed companies and the unlisted institutions at the center of the system; the two capital allocation philosophies of Jeffrey Sprecher at Intercontinental Exchange (NYSE: ICE) and Terry Duffy at CME Group (Nasdaq: CME); the accounting that defeats comparison; the sequence a specialist runs on a single name; where the multiples sit, and where entry price rather than franchise quality decided the outcome; where long-run returns actually came from; what is countable in the industry’s newer businesses and what is still narrative; the six ways investors in this industry have lost money; and the due diligence checklist, spoken.

Ten examples are worked aloud, with the inputs stated in order and the arithmetic done one step at a time. They are the life of one E-mini S&P 500 futures trade in dollars; Cboe Global Markets (Cboe: CBOE) from gross revenue to the revenue it keeps; an estimate of a CME quarter built from the monthly volume releases; what a move of twenty percent in volume does to CME’s earnings; a reading of the quarterly clearinghouse disclosures at CME and at LCH; the bridge from ICE’s adjusted earnings to its reported earnings; a sum of the parts for London Stock Exchange Group (LSE: LSEG); MarketAxess (Nasdaq: MKTX) from its record close of $590.32 in December 2020 to the $167.00 a share in cash that ICE agreed to pay in July 2026; a decomposition of CME’s and ICE’s returns since listing; and the ladder of prices paid in past acquisitions.