By Pritam Biswas and Arasu Kannagi Basil
(Reuters) -Major U.S. stock exchanges are expected to report higher second-quarter profits, driven by increased fee collection from record-breaking trading volumes as investors rushed to reposition portfolios hit by tariff-related volatility.
Periods of heightened market volatility usually drive up trading volumes, and with it, transaction and clearing fees, which translate into better earnings for exchanges.
In the second quarter, uncertainty sparked by U.S.
President Donald Trump's sweeping tariffs triggered volatility, exacerbated by tensions in the Middle East.
The prolonged period of macroeconomic uncertainties has supported strong performance in average daily volumes, RBC analysts said.
Trading was elevated across asset classes, including rates, energy, equities, as well as futures and options.
Average daily volume (ADV) jumped 16% to a quarterly record of 30.2 million contracts at CME Group. At New York Stock Exchange-owner Intercontinental Exchange, ADV surged 26% to record 10 million contracts.
Trading in Cboe Global Markets' S&P 500 index options hit a quarterly record of 3.7 million contracts. Nasdaq also saw robust gains in U.S. equities and options trading.
Retail engagement also remained resilient as investors continued to "buy the dip" even through the tariff saga and the rebound in risk assets, brokerage Morgan Stanley said in a note.
Some exchanges are also dabbling in crypto offerings like bitcoin index futures as digital assets get increasingly meshed with traditional finance.
Cryptocurrency ADV jumped 136% at CME in the quarter, underpinned by record growth of ether futures.
Looking ahead, trading volumes are set to moderate as uncertainty eases. Still, volatility in expectations on the magnitude of future interest rate cuts is anticipated to support rates trading.
An improving capital markets backdrop also benefits exchanges.
IPO market activity ground to a halt in the first half of the second quarter, with several companies postponing plans amid the volatility.
However, progress on trade talks have revitalized the market, with companies such as digital bank Chime and stablecoin issuer Circle debuting in June.
The total deal value of U.S.-listed IPOs on Nasdaq in the second quarter nearly tripled to $13.2 billion versus a year earlier, according to data by Dealogic. The number of new U.S.-listings also almost doubled in the quarter.
CME starts the earnings season for U.S. exchanges on Wednesday, while Nasdaq reports on Thursday. Cboe and Intercontinental Exchange report results next week.
Exchange stocks have outperformed the S&P 500 so far this year. For the first six months, CME and Cboe gained nearly 19% each while Intercontinental Exchange and Nasdaq rose 23% and 16% respectively, versus a 5.5% gain in the S&P 500 index.
Exchange Q2 EPS estimates
CME Group $2.91
Nasdaq $0.81
Intercontin $1.77
ental
Exchange
Cboe Global $2.42
Source: LSEG
(Reporting by Pritam Biswas and Arasu Kannagi Basil in Bengaluru; Editing by Noor Zainab Hussain and Leroy Leo)
