U.S. stock exchange operators are set to report quarterly earnings this week, with high trading volumes expected to support results. But investors will also be watching the evolving regulatory landscape and the risk of increased competition from new trading venues.

During the quarter, investors rebalanced their portfolios, lifting trading volumes, amid market volatility stirred by geopolitical tensions involving the United States and Iran, uncertainty about interest rates and a shift in investor sentiment toward stocks related to artificial intelligence. A rebound in the initial public offering (IPO) market is also expected to help results at Nasdaq and the Intercontinental Exchange (ICE), parent company of the New York Stock Exchange.

While trading is growing, the industry is under increasing regulatory scrutiny as the Commodity Futures Trading Commission (CFTC) has now ruled to allow Kalshi and Coinbase to offer perpetual contracts for cryptocurrency futures.

A perpetual future is a derivatives contract that never expires and is based on the price of an underlying asset. They are widely used in the cryptocurrency markets and can enable traders to use significant leverage.

The move has raised concerns that new entrants could gradually eat into the market share of existing exchange operators.

In general, exchange operators thrive in periods of high market volatility. But this year, concerns among investors about regulatory changes have weighed on share prices. CME Group, Nasdaq and Intercontinental Exchange are down between 5.4% and 12.6% this year. Cboe Global Markets is up about 11%.

“A lot of the devaluation in the sector this year has to do with changing regulatory expectations and concerns about the long-term impact of perpetual futures,” said Patrick Moley, an analyst at Piper Sandler.

Analysts don’t expect an immediate disruption to the industry, but they say the CFTC’s decision indicates a potentially more flexible regulatory approach than in previous years.

“The regulator appears more willing to green-light products that may have had to wait longer in the past,” Barclays analyst Benjamin Budish said.

Investors will likely grill executives when companies report earnings on the changing regulatory environment, the sustainability of recent trading activity and whether capital markets will continue to recover.

Investors are looking to see if perpetual futures can draw customers away from traditional exchanges and how the incumbents will fight back, said UBS analyst Alex Kramm.

However, many analysts don’t expect institutional investors to have much appetite yet for perpetual cryptocurrency futures, suggesting there won't be much competitive disruption in the near term.

Budish said he does not expect the demand for the products from institutions to rise to the level that it would pose a material threat to traditional exchanges.

Kramm also expects earnings performance to differ across the sector. Trading-related businesses face tough comparisons versus a year ago, but he said recurring revenue from market data and other non-transaction businesses should prove resilient.

These higher-margin data services have become an increasingly important source of stable revenue for exchange operators, helping to offset volatility in trading activity.

CME Group, the first major exchange operator to report earnings Wednesday, is projected by analysts polled by LSEG to post a small decline in revenue and profit from the same quarter a year ago.

Nasdaq is expected to report record quarterly revenue and earnings on Thursday, driven by higher data-services revenue and increased listing activity.

Intercontinental Exchange and Cboe Global Markets are also expected to report higher revenue and profit next week, helped by higher trading volumes and persistent demand for proprietary market data.