Shares of Nasdaq OMX Group Inc. (NDAQ) rose 0.4% in the last two trading sessions, following the announcement of a strategic alliance with Japan Exchange Group (JPX). Per the agreement, Nasdaq will offer its valued support services for derivative trading to JPX’s operating subsidiary – Osaka Exchange.
JPX was formed out of the amalgamation of Tokyo Stock Exchange Group Inc. and Osaka Securities Exchange Co. Ltd. in 2013.
Additionally, the deal inked between the two parties entails Nasdaq to provide its renownedGenium INET, TradeGuard and SMARTS Market Surveillance technologies to the derivative trading platform in Japan. Through this upgraded technology, Osaka Exchangeis expected to reap the benefits of flexible connectivity, real-time market scrutiny, pre-trade risk management and ensure low latency processes.
Notably, JPX is the 42nd such exchange platform to have tapped Nasdaq’s SMARTS Market Surveillance technology, while its other technology-suite is now operational in over 100 global exchanges across the US, Europe, Australia as well as the developing economies of Asia, Africa and Middle East.
Last year, Nasdaq had also partnered with Borse Stuttgart in Germany and Borsa Istanbul in Turkey, among others, to expand their trading and clearing infrastructure, and build them as leading integrated multi-asset exchanges.
Nasdaq’s upgraded market technology will also help Osaka Exchange to control costs, enhance price discoveryand eliminate trading risks, thereby further strengthening its roots in Asia-Pacific. The technology upgrade is also expected to boost the confidence of the investors in these marketplaces. On the other hand, the deal is projected to enhance Nasdaq’s non-transaction-based revenue sources, while generating incremental cash synergies.
Given the competitive concerns and changing dynamics of the global stock exchange industry, we believe that Nasdaq’s business efforts are well-timed and crucial for its long-term growth, particularly, when the company’s core derivative trading has not been strong. Such strategic alliances will likely raise the outlook for 2015, going forward.
Currently, Nasdaq carries a Zacks Rank #3 (Hold). Investors interested in this exchange sector may also consider stocks like CME Group Inc. (CME), CBOE Holdings Inc. (CBOE) and MarketAxess Holdings Inc. (MKTX), all of which carry a Zacks Rank #2 (Buy).
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