Despite volatility remaining high, trading volume is showing signs of returning to the depressed levels seen for most of 2011. In light of this, exchange operators are looking toward alternative means of generating income.

One of the increasingly more common ways exchanges try to garner revenue outside of their traditional trading operations is with the proliferation of co-location facilities, which allow proprietary trading firms with near-instant access. “You’ve got exchanges that are looking to get (firms) inside their co-location facilities,” said Andrew Actman, chief strategy officer of Lightspeed Financial. “They’re offering rack space with their technology, and then offer support for that technology.”

Offering compliance technology is also a road that some exchanges have gone down. Nasdaq OMX now offers pre-trade risk management technology, or PRM, which allows member firms to monitor and manage risk when it comes to servicing trades and orders. “Exchanges are now getting more involved in the process so they can obtain more order flow, including meeting those 15c35 (market access) requirements,” said Actman.

Many exchanges have gone out of their traditional core business of trading, with some taking very different measures. NYSE Euronext has built data centers with cloud-type solutions, offering services to broker-dealers, hedge funds and other market makers. Nasdaq now has a corporate solutions business, which provides advisory services for corporate customers. Deutsche Borse is now operating a news and data business.

In addition to venturing into new businesses, exchanges continue to improve upon their existing trading business in order to stand out from the pack and maximize market share in a tightening marketplace. Increasing speed and minimizing latency is a continual process, with each trading system looking for ways to shave microseconds off transaction times. Some exchanges, including CME Group, offer pricing incentives, such as the reduction of fees for asset managers that handle more than a certain amount of assets.

After peaking at nearly 18 billion shares on Aug. 8, equity trading volume has been on the decline, falling to about 7.3 billion shares on Aug. 17, back in line with the year-to-date averages.