The credit rating outlook for global securities exchanges, clearing firms and other components of market infrastructure is strong heading into 2025, says Fitch Ratings.
In a new report, the rating agency said that it has a “neutral” outlook on the global financial market infrastructure sector, including exchanges, central counterparties (CCPs) and securities depositories.
The outlook, “reflects expectations of continued robust performance, supported by resilient business models with countercyclical features and solid franchises,” Fitch said.
Additionally, it said that the sector will enjoy increased revenue diversification — with growth in recurring revenue sources that are not volume dependent — boosting the sector’s already-sound profitability.
“Global exchanges will benefit from growth in non-trading revenue, higher trading volumes across both equities and derivatives, and an increase in IPO volumes,” the report said. “This will be supported by stronger capital-market activity, due to improved macroeconomic conditions and lower interest rates.”
Robust trading activity, coupled with regulators’ efforts to promote central clearing, will drive volumes for CCPs, central securities depositories and fund platforms, it also noted.
For securities depositories, “Net interest income is set to decline, but will remain a meaningful revenue contributor, due to only gradual declines in interest rates,” it said.
Strong profits will also help firms reduce leverage, following a string of acquisitions in recent years.
“Appetite for further large-scale transactions will likely be limited, but Fitch expects firms to continue to seek opportunities to scale up and diversify their data, analytics and technological capabilities,” it said.
Fitch added that it, “views regulation, including enhancements to margining processes and resolution frameworks, as supportive of CCPs’ credit profiles.”