Bloomberg News

CME Group Profit Rises as Volatility Boosts Trading Volume

November 02, 2011

(Updates with analyst comment in third paragraph.)

Nov. 1 (Bloomberg) -- CME Group Inc., the world’s largest futures market, said third-quarter profit rose 29 percent as market volatility boosted trading in interest-rate and equity index contracts.

Net income climbed to $316.1 million, or $4.74 a share, from $244.3 million, or $3.66 a share, a year earlier, Chicago- based CME said today in a statement distributed by PR Newswire. The average estimates of 19 analysts surveyed by Bloomberg was for the company to earn $4.69 a share. Daily futures and options volume in the quarter averaged 14.7 million contracts, up 27 percent from a year ago, according to CME Group.

Market volatility, bond traders’ anticipation of the Fed’s move to buy longer-dated and sell shorter-dated Treasuries and declining forecasts of U.S. gross domestic product growth “increased trading activity in interest rate products” in the third quarter, Niamh Alexander, an analyst at KBW Inc. in New York, wrote in a note to clients last month.

The Federal Open Market Committee said in September it would swap $400 billion of short-term debt in its portfolio for longer-term securities to bring down interest rates, a strategy dubbed Operation Twist. Investors can make bets on or hedge against interest-rate movements with futures contracts on CME Group’s Chicago Board of Trade and Chicago Mercantile Exchange.

“Trading activity in interest rate products could decline to more normalized levels for the next four quarters before recovering by end of 2012 in anticipation of the Fed raising the benchmark rate,” Alexander said in the Oct. 6 note.

Interest-rate trades rose 30 percent to an average 6.5 million a day in the quarter, CME Group said last month.

CME Group revenue rose 19 percent to $874 million last quarter, from $733 million a year ago, the company said.

CME Group shares have fallen 4.9 percent over the past year through yesterday. They fell 1.6 percent, to $275.56 yesterday in New York trading.

(CME Group will hold a conference call for analysts and investors at 8:30 a.m. New York time. To listen, access the company’s Web site at www.cmegroup.com)

--Editors: John Parry

CME US <Equity> CN <GO> ICE US <Equity> CN <GO>

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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