CME Group beats profit estimates on lower expenses

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FILE PHOTO: The CME Group offices in New York

(Reuters) – Futures exchange operator CME Group Inc on Wednesday reported first-quarter profit that beat Wall Street estimates, driven by lower expenses, while trading levels for some of its top products rebounded to pre-pandemic levels.

Excluding one-time items, such as M&A costs, CME earned$1.79 per share in the quarter, 4 cents above analysts’expectations, according to IBES data from Refinitiv.

Lower spending on licensing and other agreements helpeddrive the profit beat, analysts from Jefferies and Piper Sandlersaid in research notes.

CME’s proprietary futures contracts, which investors use tohedge against price moves in things such as interest rates,equity indexes, and agriculture products, averaged 22 millioncontracts per day in the first three months of 2021, ChiefExecutive Officer Terry Duffy said on a conference call.

That marked the CME’s third-most active quarter ever, withthe highly volatile first quarter of 2020, as the pandemicbegan, the most active at 27 million contracts per day.

Clearing and transaction fee revenue, CME’s largest incomestream, dropped nearly 22% to $1 billion, versus the strongyear-ago comparison.

Chicago-based CME said its bitcoin futures rose 43%, to arecord average daily volume of 13,545 contracts in the quarter,as the cryptocurrency’s price surged above $50,000.

CME plans to launch micro bitcoin futures on May 3, aimed atsmaller, sophisticated, active traders. The micro contract willrepresent 1/10 of a bitcoin, versus the more pricey regularcontract, which represents 5 bitcoins.

“Obviously, the massive increase we’ve seen in the price ofthe cryptocurrency in and of itself lends to a smaller contractfor more participants to manage their risk,” Duffy said.

Attracting retail business has been a focus for CME, whichsaid March was its third-strongest month ever for retailrevenue, behind March and April 2020.

Total revenue fell nearly 18% to $1.25 billion.

(Reporting by John McCrank and Niket Nishant in Bengaluru; Editing by Shinjini Ganguli and David Evans)

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