· CME and NYSE Remain Top on the Back of Stable Brand Value and Strong Revenue Expectations
· Big Exchange Brands Dominated by Revenues, not Market Capitalisation
· SIX and CBOE Brand Values Surge with Branding Focus
Chicago Mercantile Exchange (CME) remains the world’s most valuable exchange brand despite its brand value dropping 1% to US$1.3 billion, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy. This achievement comes on the back of their huge business volumes, with steady growth delivering the highest revenues amongst global asset exchanges.
The second-most-valuable exchange brand in global asset exchanges is the New York Stock Exchange (NYSE, down 10% to US$1.1 billion) which dropped significant brand value as revenue forecasts fell slightly from last year’s very high expectations. Despite this, it remains the exchange brand with the highest brand strength rating.
Brand values across the sector have dropped slightly as a result of increased technological competition causing greater future uncertainty.
David Haigh, CEO of Brand Finance, commented:
“In a world where decentralised, peer-to-peer exchange platforms are beginning to arise in the form of cryptocurrencies, the brands of the big global financial exchanges are under threat. The big incumbents will increasingly need to work hard to retain the trust of their key stakeholders when there are new technology options which aspire to end the need to trust middle-men such as these exchanges to conduct financial transactions.”
Big Exchange Brands Dominated by Revenues, not Market Capitalisation
HKEx (down 5% to US$1.0 billion) and NASDAQ (down 1% to US$0.8 billion) retained their third and fourth rankings respectively, but suffered from similarly stagnant brand values for many of the same reasons as CME and NYSE. While NASDAQ – in addition to NYSE and the London Stock Exchange (down 24% to US$0.4 billion) – are amongst the world’s largest in terms of listed market capitalisation, their business models do not typically leverage this listed market capitalisation into revenue with such relative effectiveness as CME or ICE (up 24% to US$0.8 billion).
CBOE Brand Value Surges with Branding Focus
CBOE Global Markets (up 52% to US$0.4 billion) enjoyed strong brand value growth as the world’s fastest growing exchange brand. This growth was largely in connection with the acquisition of BATS Global Markets and the consequential rebranding from BATS to CBOE Global Markets. While this means that the CBOE brand is now worth more, the termination of the BATS brand caused a significant amount brand value to be lost. The former BATS brand value of US$327 million, which has been incorporated into the new brand entity, has been lost in the merger and associated rebranding.
London and New York Stock Exchanges Remain Strongest
In addition to measuring overall brand value, the Brand Finance Exchanges 10 2018 report also measures brand strength. Brand strength is calculated using financial and non-financial metrics measuring the perceptions of a range of stakeholders, and is used to benchmark brands against their competitors in the sector. This year’s strongest exchange brands were the New York Stock Exchange and the London Stock Exchange, which both obtained AA+ ratings. NYSE maintained this rating from last year, but the London Stock Exchange’s brand benefited from strong capital raising performance, raising £15bn from 106 initial public offerings in 2017, the highest level for three years.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 10 most valuable exchange brands in the world are included in the Brand Finance Exchanges 10 2018 league table.
Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand.
More information about the methodology as well as definitions of key terms are available in the Brand Finance Exchanges 10 2018 report.
Data compiled for the Brand Finance league tables and reports is provided for the benefit of the media and is not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.