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Brian D. Butler
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"how do you value a publicly traded stock market?
In a world of publicly -traded exchanges...what is it exactly that makes one exchange more valuable than another. I would have assumed that the one with the highest volume of daily trades would have been the most valuable, but thats not necessarily true....
why is it that the market value of BOVESPA + BM&F is worth more than the NYSE Euronext? which is worth more than NASDAQ? what is it that drives the value of the stock exchange to traders?
If the BOVESPA / BMF deal goes through (merger of Brazils two major exchanges), it is said to have a market value of $20.34 billion USD, which is more than the market value of the NYSE of $17.919 billion USD. But, the volume of shares traded on the NYSE dwarfs the tiny Bovespa. So, what is it that drives the lofty valuation? Is it because the commissions per trade on the BOVESPA are higher? (Im guessing).....or, is it because the valuation is based on some future expectation of value? other ideas?"
read more about the merger (Portuguese): http://www.terra.com.br/istoedinheiro/edicoes/543/artigo73294-2.htm
Using "Fees" to Value a Stock Exchange
BMV in Mexico recently went public, following the trend set by the Brazilian BOVESPA, which went public earlier this year
Now, with the flotation, there is rumors that they will increase the cost of trading: will likely increase to one basis point of trades from their present average of 0.7bp....this would bring fees to European levels while leaving them considerably below those of Brazil’s BOVESPA
The BMV offers volume discounts on the fees, but with large institutional investors, most qualify for discounts, so even though volume of trades has gone up, the revenues for BMV has not followed suit. In the past, since brokerages owned the exchange, that was not a problem...but now that the exchange is publicly owned, the discounts will need to be renegotiated...
Volume of trades doesnt seem to be the driving factor of valuations
If you look at the value of Brazil's BOVESPA + BM&F....the public stock market will be more valuable than the NYSE. But, there is less trading volume. Much less. The total volume traded on BOVESPA + BMF will be less than the total traded on just one stock (Apple) on any given day.
Another example: BOVESPA is valued more (and its companies have a higher total market capitalization) than Mexico;s BMV....but Mexico's BMV also has a higher daily trading volume (see chart below). (on the other hand, BOVESPA had higher # of IPO's)
See Economist.com article
How to value Stocks:
One have to consider a whole slew of factors before making a stock purchase. For the beginning investor, some basic things to look for are:
Links from KookyPlan
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