📈 High quality stock exchange operators

Stock exchanges are some of the highest quality companies on paper. The main strengths of exchanges are:

1. Monopoly: There's typically one main exchange per country, creating a natural monopoly.
2. Network effects: They benefit from network effects, which are one of the hardest barriers to entry to disrupt . The network effect is when a service becomes more valuable as more people use it. The more companies that list on an exchange and the more traders who use it, the more valuable the exchange becomes for everyone involved. This makes it difficult for alternative exchanges to compete.
3. Recurring revenue: Stock exchanges earn money primarily through listing fees, trading and clearing charges, the sale of market data, index licensing, and technology services such as co-location and connectivity. Much of this revenue is recurring, especially from data and clearing.
4. Capital efficient: Stock exchanges are highly capital efficient because they operate digital platforms that require little reinvestment to grow listings and trading volume. Once their core infrastructure is in place, revenue can scale with a minimal growth in expenditure, allowing a large share of revenue to become profit and free cash flow.

Fortunately for investors, many of the stock exchange operators are publicly listed companies. The main exchanges that I follow are: