The closer we get to 2021, the more convinced I am that exchange EPS estimates are too low. Explanations below:
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Even at current projections, 2021 exchange multiples look attractive: VIRT: 12x CBOE: 18x ICE: 21x NDAQ: 21x CME: 24x MKTX: 56x
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Bottom line - while it's hard to predict volatility, 2021 has enough catalysts for market activity to stay elevated for the foreseeable future. 2020 chaos won't suddenly go back to normal on 1/1/2021. I'm betting exchange EPS estimates are currently underpriced.
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I feel like VIRT is pretty cheap given the dividend, and place in the market. The common knock is vol normalizes. How can they combat that/do they need to?
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Long term they combat it by moving into new products/markets over time. Most of their market making $ comes from US equities - they can expand further into options, ETFs, futures, Asia markets, etc...
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