CME Group’s Q4 profit beats as interest-rate products lift trading volume

By Thomson Reuters Feb 14, 2024 | 6:15 AM

(Reuters) -CME Group reported a better-than-expected fourth-quarter profit on Wednesday, as strong demand for its interest-rate products bolstered trading volumes at the derivatives exchange.

The U.S. Federal Reserve’s interest-rate hikes last year helped CME’s average daily volume (ADV) hit a record-high as customers increasingly hedged to manage their rate exposures and navigate uncertainty.

That helped CME’s interest rate ADV surge 35.8% to 13.3 million contracts in the quarter, driven by record U.S. Treasury futures and options volumes.

The company has continued to benefit even amid a pause in rate hikes as customers needed to manage risk against the backdrop of diverging views about where the rates were heading.

CME’s total ADV surged 17% to 25.5 million contracts in the quarter. For 2023, it rose 5% to an annual record of 24.4 million contracts.

The demand for CME’s hedging products has remained steady, driven by increased geopolitical and economic uncertainty, even as expectations grow for a soft landing for the U.S. economy.

ADV for CME’s agricultural commodities products rose 25.5% from a year ago, while energy products volume jumped 18%.

Clearing and transaction fees, which make up the largest chunk of its revenue, jumped 20.7% to $1.18 billion, while total revenue surged 19.2% to $1.44 billion.

On an adjusted basis, CME’s net income attributable to common shareholders rose to $853.8 million, or $2.37 per share, for the three months ended Dec. 31, compared with analysts’ expectation of $2.28, according to LSEG data.

This was the tenth consecutive quarter of double-digit percentage growth in adjusted earnings, CME said.

(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur)