James Davolos is a portfolio manager at Horizon Kinetics, where he has spent nearly 21 years studying exchanges and what the firm calls croupier businesses. These are companies that earn fees on trading volume without putting their own capital at risk. One of his first projects at the firm was the New York Stock Exchange’s reverse merger into Archipelago, and his team later bought exchange seats ahead of demutualizations at the CBOE, the Minneapolis Grain Exchange and others.
This discussion took place live on October 16th, 2026, on the MicroCapClub Community. Join MicroCapClub and unlock the ability to listen and participate live in these discussions - https://microcapclub.com/#join
In this episode, James explains why exchanges have outperformed their local markets over 20 years, why derivatives are the strongest moat in the industry and why inflation and volatility work in exchanges’ favor. He also breaks down MIAX: how it took close to 17% of the multi-listed options market, whether perpetual futures threaten the business and what the Bloomberg futures bet could be worth. The conversation closes with James’s reflections on Horizon Kinetics founder Murray Stahl.
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Chapters
00:00 Intro
02:42 The croupier model
06:30 Why exchanges beat their local markets
08:28 How exchanges make money
13:34 What drives trading volume
17:20 Why inflation helps exchanges
18:29 The worst decade for exchanges
21:29 Buying exchange seats for equity
24:51 Why traders leased their seats
27:41 What MIAX does
31:43 Why traders pay for data
34:50 MIAX’s speed edge
39:59 Can competitors catch up?
43:57 Why MIAX fell from $57
50:32 Can MIAX keep taking share?
52:11 How to value MIAX
54:40 The Bloomberg futures bet
57:30 When we’ll know if it works
59:23 What would prove him wrong
1:02:10 Remembering Murray Stahl
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