CME profits climb on busier markets and cost cuts

Chicago Mercantile Exchange centre

The Chicago-based futures market – the world’s biggest – generates most of its revenues from transaction fees, which rise and fall with trading volume. Like other exchange operators, including CBOE Holdings and Intercontinental Exchange, CME saw record trading volume in 2015.

After a rough end to last year that was dogged by concerns over China, rising recession fears in the US and whipsawing financial markets, trading volume has clawed back.

CME said total volume in the quarter climbed 13% from a year earlier, matching the first quarter’s clip. A surge in energy trading – volume rose 33% from last year’s quarter – and in equity markets, where average daily volume increased 25%, drove the increase.

As trading activity turned higher, CME booked a similar 13% gain in clearing and transaction fees. Such fees make up 85% of the firm’s top line.

Exchanges including CME have worked to diversify their businesses, with some focusing on data provision as a source of steady revenue to lean on when turbulent markets result in lower trading fees. For CME, data revenue growth has been slowing in recent quarters and was flat in the latest quarter, resulting in overall revenue that fell short of expectations. In the first quarter, data revenue rose 5.5% after having climbed at the end of 2015.

Chief executive Terry Duffy on July 28 reiterated CME’s focus on expense management, partially crediting those efforts for lifting second-quarter earnings. The company’s operating margin rose to 62.1% from 60.4% a year earlier.

In all, CME reported a profit of $ 320.1 million, or 95 cents a share, up from $ 265 million, or 78 cents a share, a year earlier. Excluding amortisation costs, the effects of foreign-exchange fluctuations and other items, per-share profit rose to $ 1.14 from 99 cents.

Revenues increased 11% to $ 906.4 million.

Analysts had projected $ 1.11 in earnings per share and $ 911.9 million in revenues, according to Thomson Reuters.

Shares in the company, up 13% in 2016, were inactive pre-market.

Write to Lisa Beilfuss at

This story was first published by The Wall Street Journal

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