07.29.2011

Derivatives Buoy CME

07.29.2011
Terry Flanagan

Although trading in financial markets broadly remains down, increased on-exchange futures volume helped CME Group deliver strong second-quarter earnings.

CME reported 13.5 million in average daily contracts traded during the second quarter, little changed from a year earlier. Decreased equities options trading during the quarter was largely offset by a spike in interest rate, Eurodollar, metals and commodities trading, which was spurred by the ongoing macroeconomic unrest in Europe and the approaching deadline for increasing the U.S. debt limit.

“In June we saw very strong volume growth of more than 50 percent from both the bank and proprietary trading customer segments, which I think is very encouraging,” said Craig Donohue, its chief executive officer, during a Thursday conference call.

As some investors shy away from complex swap products as regulation moves forward, Donohue noted a migration toward interest-rate futures trading and a blurring of the lines between products. He also noted that 15 percent of its trading volume occurred outside of the typical U.S. trading hours, signifying growing investor interest from overseas.

For the quarter, CME had net income of $293.7 million on revenue of $838.3 million, which was higher than analysts expected, Reported numbers rose from $270.7 million and $813.9 million, respectively, in 2010.

Yesterday, equity exchange Nasdaq OMX posted second-quarter earnings of $92 million on $416 in revenue, which was off from $96 million in income on $390 in revenue in the same period last year. NYSE Euronext will be the next major exchange operator to announce its earnings on Aug. 2, followed by Chicago Board Options Exchange on Aug. 4.

As announced last week, CME also plans to roll out a new Euribor futures product by the end of the third quarter, which it expects will bolster its futures volumes.

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