The largest equity options exchange in the U.S based on volumes, International Securities Exchange Holdings (ISE), reported that March trading volumes were up 32% YoY, at 2.8 million daily contracts to 2006’s level of 2.1 million contracts. Aggregate volume for the month of March was 62.3 million, a gain of 27% YoY.
Market share was down, however, from 30% last year to 27.3% in March. In the company’s press release they identified certain arbitrage trades known as dividend trades that may artificially skew market share data. According to ISE, if the volume from these largest dividend trades was excluded from volume totals, the company’s market share would have risen slightly in March, from 30.2% to 30.8%.
On raw data alone, ISE seems to have maintained its share (up 10 basis points) in the rapidly-growing index options space, where avg. daily volumes were up 106% YoY to just under 50 million contracts.
Current analyst estimates for revenue growth at ISE is about 18% for the upcoming quarter. Given the upside seen in the monthly volume figures, it looks more like revenue will be growing in the 25-30% range. We could see a rash of earnings upgrades for the stock as it appears volumes were well above expected ranges throughout the first quarter. Earnings estimates already call for a 35% jump in the first quarter, so this is the time for the company to show what kind of operating leverage can really be had out of their all-electronic trading systems.
Co-Founder and CEO David Krell also announced his retirement today, effective Jan 1, 2008. This move is not a big surprise, as COO Gary Katz (the other Co-Founder) has been known to be the successor all along. Krell will eventually become Chairman and remain on the board. The overall negative trend of the day has ISE stock down 46 cents at $48.34, as of 11:00 EST.
Ryan Barnes
April 2, 2007
Ryan Barnes can be reached at [email protected]; he does not own securities in the companies he covers.
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