CME Group Inc. (NASDAQ:CME) and Intercontinental Exchange, Inc. (NYSE:ICE) have declined by 6.75% and 3.03%, respectively, over the last six months, compared to a gain of over 42% by the Insider Monkey Billionaire Index.
Both companies operate in the same broad industry, but their moats are built around different things.
CME has built its position around futures and options, where institutions come to manage risks around interest rates, currencies, commodities, and equities. ICE has taken a broader approach. Along with exchanges, it owns financial data businesses and mortgage technology, and it has spent years bringing fragmented markets onto electronic networks.
Both businesses are difficult to displace. But for very different reasons.
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CME’s moat is liquidity
The easiest way to understand CME is to ask a simple question: Where do you go when you need to hedge a large financial risk? You go where everyone else is.
That creates a powerful advantage. The more traders, banks, and institutions use a market, the easier it is for everyone to buy or sell at a competitive price. That attracts even more participants, making it very difficult for a new exchange to start from scratch.
CME Group Inc.’s moat is therefore not really its technology. Other exchanges can build trading systems. The hard part is getting the world’s biggest institutions to move their risk to a different marketplace.
That is why the recent debate around crypto perpetuals may be less important than it looks. Perpetual futures are popular with retail traders, but 94% of CME’s volume came from institutional customers in the first half of 2026. Those customers need contracts that provide reliable pricing and a way to hedge exposure, not simply high leverage. CME’s crypto futures business has also grown more than sevenfold over the past three years despite the presence of perpetual products.
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ICE is playing a bigger game
ICE’s moat is harder to describe because it keeps expanding.
The company has spent years taking markets that were fragmented, inefficient, or still largely analog and putting them onto electronic networks. ICE has also built businesses around fixed-income data, clearing, mortgage technology, and financial connectivity.
The MarketAxess acquisition is a good example of where this strategy is heading.
Intercontinental Exchange, Inc. already has a large fixed-income data and trading business. MarketAxess brings a major institutional bond-trading network with more than 2,100 participating firms. ICE wants to connect that network with its own retail and wealth trading business, then layer data, pricing, and analytics across the combined system.
That is interesting because the moat becomes bigger than the exchange itself.
More trading creates more data. More data makes the analytics better. Better analytics attract more customers. And those customers create more trading.
That is a different kind of moat from CME’s.
So which one is harder to break?
CME seems to have the stronger moat in its core markets.
Its futures contracts are deeply embedded in how institutions manage risk, and liquidity is incredibly difficult for a competitor to recreate. CME’s role becomes even more valuable when markets are volatile because that is when customers most need to hedge. Open interest was up 8% year over year in Q2, while first-half volumes were 10% above the previous year.
But ICE may have the more interesting long-term strategy.
Its opportunity is not limited to getting people to trade on an exchange. It wants to control more of the infrastructure around the trade: pricing, data, analytics, execution, and clearing. Its mortgage business shows how powerful that can become. Roughly nine out of ten U.S. mortgages touch ICE’s network at some point, meaning the same loan can generate activity across different stages of its life.
That kind of network can become difficult to replace for a completely different reason.
There is a downside to both
CME’s concentration is also its weakness. If trading activity shifts toward new products or competitors find a better way to serve institutional customers, the company has less diversification than ICE.
ICE has the opposite problem. The broader its empire becomes, the more investors have to trust management to integrate acquisitions without making the company too complicated. The MarketAxess deal will cost $5.7 billion and is expected to push leverage temporarily higher, even though ICE expects significant synergies.
The Valuation Favors ICE
CME trades at 21.93x forward earnings, compared with 18.08x for ICE. Their trailing P/Es are 22.97x and 22.05x, respectively. The gap is interesting because both companies have strong competitive advantages and Wall Street expects high-single-digit earnings growth over the next couple of years. At these multiples, neither stock looks particularly expensive for the quality of its business.
Between the two stocks, CME deserves a premium because its futures and options markets are difficult to compete with. Institutions go where the liquidity is, and CME already has that advantage. A competitor can build a trading platform, but getting institutions to move their trades to a new market is much harder. CME also generates strong margins and cash flow. Investors are paying for a business with a strong moat and relatively predictable earnings.
ICE is cheaper, even though its business extends beyond exchanges into financial data and mortgage technology. The company has more ways to grow, but it also has more to prove. Its MarketAxess acquisition, for example, could strengthen its fixed-income trading network and create opportunities to combine trading with data and analytics. But ICE still needs to show that these investments can translate into stronger earnings. Integrating acquisitions and managing higher debt also introduce risks that CME does not face to the same extent.
The difference in valuation does not look large enough to make CME unattractive, but ICE offers an interesting opportunity. It trades at a lower multiple despite having several businesses that could benefit from stronger connections across its financial networks. If management executes well, ICE could grow into a more valuable business without investors having to pay a premium valuation upfront.
Conclusion
CME’s moat seems the better one today.
Its liquidity advantage in institutional derivatives is extremely difficult to replicate, and customers have little reason to leave markets that already work.
But ICE may be building something even broader. It is trying to connect more pieces of the financial system and then use the resulting data and networks to deepen its position.
At 18.08x forward earnings, ICE appears to have the more interesting risk-reward. CME is the stronger franchise, but ICE may have more room to make its moat bigger.
Market Sentiment
Hedge fund sentiment toward CME Group weakened in the second quarter. According to Insider Monkey’s database, 88 hedge funds held CME in Q2, up from 70 in Q1, while the value of their positions declined from $4.96 billion to $4.71 billion.
Hedge fund sentiment toward ICE was mixed in the second quarter. The number of hedge funds holding ICE increased from 86 in Q1 to 89 in Q2, but the value of their positions fell from $4.79 billion to $4.51 billion.
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This article is originally published at Insider Monkey.
