The standard investor playbook says that if you think we are heading toward a recession or a crash, you should sell financials, consumer discretionary stocks, and cyclicals and buy defensive stocks. The most classic defensive plays are consumer nondiscretionary stocks. As the name implies, these are companies that make products that people will buy regardless of the economy. Good examples of consumer nondiscretionary stocks would be supermarkets or consumer products companies like Unilever or Procter & Gamble

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Financials and market crashes generally don't mix

Finding a financial stock that will perform well during an economic disaster like a market crash is tougher. Crashes cause the economy to slow, credit to deteriorate, and banks to call in loans. Bank stocks will generally underperform. So will real estate investment trusts (REITs) as the economy deteriorates.

Insurance stocks will see the value of their assets deteriorate as credit problems pile up. Even fintech stocks will get hit, if only because they will correlate with the market.

About the only type of financial stock that will have a chance of holding up in a crash is one of the exchanges, particularly a stock-market-driven exchange like Nasdaq (NASDAQ:NDAQ)

Falling markets mean increased trading volume

When you think of a market crash, the first thing that should come to mind besides falling prices is increased trading volume. Increased volume increases revenue.

We have already seen the Nasdaq exchange perform during the COVID-19 pandemic. During the second quarter of this year, when markets were in absolute turmoil, Nasdaq saw a 12% increase in revenue and a 39% increase in earnings per share. This was driven by a 22% increase in market services revenue, which comes from trading and clearing.

The stock is up 21% this year, easily outperforming the financial sector. 

Nasdaq does have some diversification

Besides the namesake exchange, Nasdaq also operates the Swedish OMX stock exchange and has a few other lines of business. Corporate services provides outsourced investor relations functions as well as corporate governance solutions. Companies that are looking to cut costs might find these services attractive. Information services provides data to end-users, while market technology provides infrastructure services to various stakeholders including banks and other exchanges.

Certainly, during a market crash there will be increased demand for data and perhaps infrastructure services. 

Why Nasdaq over the other exchanges?

What about some of the other exchanges? CME Group (NASDAQ:CME) probably won't benefit much from a market crash in equities. Yes, CME Group has some equity exposure, but the main drivers are its interest rate products. With interest rates already at rock-bottom levels, volatility has been sucked out of that market, which is depressing earnings. The Intercontinental Exchange (NYSE:ICE) will benefit from a market crash with its holding of the New York Stock Exchange, but the mortgage arm probably won't see much of an impact. Rates are already at 0%. Finally, the Chicago Board Options Exchange, owned by Cboe Global Markets (NYSEMKT:CBOE), should hold up as well, by virtue of its VIX products. The VIX (aka the Volatility Index) spikes during market crashes, which will drive trading in the product. 

Nasdaq trades at 22 times estimated 2020 earnings per share and has a dividend yield of 1.5%. Unlike traditional consumer nondiscretionary stocks, which have been around for decades and generally grow at the overall speed of the economy, Nasdaq has a bit more growth, which is a plus. Of course, in a market crash, you generally want to avoid the financial sector to begin with. But if you are worried about a crash, and don't want to completely eliminate the financial exposure in your portfolio, an exchange like Nasdaq could be a good choice.