JPMorgan Raises Rating on CBOE Holdings (CBOE) to 'Overweight'; Analyst Thinks Bats Technology Will Drive Greater Trading Activity

(Updated - December 2, 2016 9:00 AM EST)

JPMorgan upgraded CBOE Holdings (NASDAQ: CBOE) from Neutral to Overweight with a price target of $84.00 (from $78.00). CBOE Holdings and Bats agreed to merge in September, and analyst Kenneth B. Worthington thinks adoption of Bats technology could drive greater trading activity.

Worthington explained, "We see the merger of the two companies having the potential to generate meaningful revenue synergies, particularly from a migration at CFE and C2 to Bats technology, which has a reputation of being fast, reliable and consistent. Given a substantial portion of CBOE's revenue comes from pit trading, we see better technology driving substantially more growth of electronic trading in CBOE’s proprietary products. We expect cost savings likely coming more quickly and somewhat greater than mgmt. guidance. Longer term, we also see great opportunity for product development given Concannon’s market structure expertise in an exchange that combines prop.products, ETPs and futures."

The analyst added, "We see potential for higher volumes with the rollout of Bats trading technology to CBOE products, which we expect will improve latency and throughput. We see particular opportunity for the greater electronificiation of CBOE’s proprietary options products, which remain largely pit-traded. We also see potential for better volumes at C2, for CBOE’s equity and ETF options and particularly for its futures exchange CFEwith the rollout of Bats technology."

For an analyst ratings summary and ratings history on CBOE Holdings click here. For more ratings news on CBOE Holdings click here.

Shares of CBOE Holdings closed at $69.48 yesterday.

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