Tradings With the Big Boys (And Winning)

Sometimes the best trades happen when nobody's watching. While most investors obsess over Nvidia or chase the latest meme stock, a scrappy options exchange operator quietly went public and started eating market share like it's going out of style. Miami International Holdings—ticker MIAX—just posted a record 2.4 billion options contracts traded in 2025, up a whopping 41% from the prior year. For a company that barely registers on most investors' radars, that's the kind of growth that makes compounders sit up and pay attention.

The Business: Where Wall Street's Money Actually Changes Hands

MIAX operates the plumbing of modern finance. Think of exchanges as toll booths on the highway of capital markets—every time someone buys or sells an option, MIAX collects a small fee. The company runs four options exchanges (MIAX, Pearl, Emerald, and Sapphire), plus equities and futures platforms, and has expanded internationally through the Bermuda Stock Exchange and The International Stock Exchange.

The beauty of exchange businesses lies in their operating leverage. Once you build the technology infrastructure, each incremental trade costs almost nothing to process while generating consistent revenue. MIAX has built its own proprietary trading technology from scratch, differentiated by speed, performance, and scalability. This isn't a company licensing someone else's system—they own the whole stack.

Is This Essential or Nice-to-Have?

Financial exchanges sit at the core of capital markets infrastructure. Without them, there's no price discovery, no liquidity, no functioning markets. However, MIAX competes against giants like CBOE and Nasdaq, making it a challenger rather than the incumbent. The options market itself has been on a tear—industry ADV grew at an 11% CAGR from 2012 to 2025, driven by retail participation, volatility, and increasingly sophisticated hedging strategies.

Rating: 7/10 — Essential infrastructure, but MIAX is one of several players serving this function.

Moat Assessment: What Keeps Competitors Out?

Exchange businesses possess natural moats from network effects. Liquidity begets liquidity—market makers and traders gravitate toward venues with the tightest spreads and deepest order books. MIAX has captured 17.1% annual market share in U.S. multi-listed options, up from 15.1% the prior year. Their proprietary technology platform provides a speed advantage, and regulatory licenses create barriers to entry that take years and significant capital to overcome.

Current Moat Rating: 7/10 — Strong competitive position with multiple moat sources, though not impenetrable.

Moat Expansion Rating: 8/10 — Market share consistently growing, Bloomberg partnership launching proprietary index products, and international expansion through acquisitions signal widening advantages.

Balance Sheet: From Leveraged to Fortress

Here's where the story gets interesting. MIAX raised $397 million in its August 2025 IPO and immediately paid off its $30+ million term loan. As of September 2025, the company held $401 million in cash against just $6.5 million in total debt. That's a net cash position of nearly $395 million—remarkable for a company that was private and leveraged just months earlier.

Rating: 9/10 — Clean as a whistle. This balance sheet could survive multiple stress scenarios.

Earnings Acceleration: The Numbers That Matter

Adjusted earnings exploded 383% year-over-year in Q3 2025, reaching $40 million for the quarter alone. Year-to-date adjusted earnings hit $108 million versus $25 million in the prior year period. Adjusted EPS came in at $0.42 for Q3. While some of this reflects the IPO creating a cleaner capital structure, the underlying operating performance is genuinely impressive—options ADV grew 56% YoY while revenue per contract increased 8%.

Rating: 8/10 — Genuine acceleration driven by both volume and pricing power.

Margin Profile: Operating Leverage on Display

This is where exchange economics really shine. Adjusted EBITDA margin expanded from 27% to 44% year-over-year in Q3. When your adjusted net revenue grows 57% but your adjusted operating expenses only rise 20%, profits compound faster than revenue. The fixed-cost nature of exchange infrastructure means incremental volume drops almost straight to the bottom line.

Rating: 8/10 — Margins expanding rapidly with clear operating leverage.

ROIC and Reinvestment

With total equity around $832 million and annualized adjusted earnings approaching $150+ million, MIAX is generating returns on equity in the high-teens to low-twenties. The company continues reinvesting aggressively—launching the MIAX Sapphire trading floor, rolling out MIAX Futures Onyx platform, and planning Bloomberg 500 and Bloomberg 100 index futures for 2026.

ROIC Rating: 7/10 — Solid returns, though still scaling the business.

Reinvestment Rate: 8/10 — Heavy reinvestment in new products and platforms.

Capital Return and Valuation

Fresh off an IPO, MIAX hasn't initiated dividends or buybacks. Capital is being deployed into growth initiatives rather than returned to shareholders—appropriate for a company at this stage.

Capital Return Rating: 4/10 — Growth phase, not yet returning capital.

Valuation Analysis: At roughly $42 per share and a $3.5 billion market cap, MIAX trades at approximately 23-25x annualized adjusted earnings. Running a reverse DCF assuming 10% discount rate and 3% terminal growth, the current price implies roughly 12-15% annual earnings growth for the next decade. Given the company just grew earnings 383% YoY and operates in a market growing at 11% annually, that implied growth rate seems achievable but not conservative.

Valuation Rating: 6/10 — Fair but not cheap; growth expectations are embedded.

Conclusion

MIAX represents a high-quality compounder hiding in plain sight. The business model generates recurring transaction fees on essential financial infrastructure, operating leverage drives margin expansion as volumes grow, and the balance sheet has been transformed into a fortress. The management team has demonstrated execution through consistent market share gains.

The risks? Competition from larger incumbents, potential volume normalization if options activity cools, and execution challenges on new product launches. The valuation demands continued growth, leaving limited margin of safety if momentum stalls.

For investors seeking exposure to financial market infrastructure with genuine growth characteristics, MIAX warrants serious consideration.

MIAX Overall Score: 72/100

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