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I spent a number of years on Wall Street in close proximity to exchanges, where I witnessed first hand how much power they control & how attractive they are as an asset class. Many are unaware how much of the financial system relies heavily on just a few exchange companies.

As an investor I view exchanges as: A cheap call option on surprise volatility Counter-cyclical, asset-light financial toll-roads Clear winners of the global "analog-to-digital" transition I've been a happy owner of exchange stocks for many years now.

In your substack (which we'll link later) you call exchanges the "new financial kings." What makes them great businesses? What are they key metrics to comp them?

Exchanges are the new kings of finance bc they're picking up what banks dropped after GFC regs forced them to de-risk & surrender valuable business. For example, MarketAxess & Tradeweb both are taking the bond market away from bank dealers via electronic trading platforms.

A key metric to compare exchanges to each other is the size of their market data businesses. Exchange transaction revenue can be cyclical & volatile, but market data is a recurring, stable revenue stream that allows exchanges to put up consistent growth.

Love it! Can you give us a sense of the history of these businesses as public companies and what it means for the monetization of data?

Good question. Pre-early 2000s, exchanges were owned by their largest customers (banks, brokers, big traders). When exchanges demutualized & became public companies from 2002 - 2006ish, they now needed to satisfy public shareholders with consistent growth.