CME Group profit jumps on record rates trading
Escalating uncertainties fuel demand for CME's hedging products
Record quarterly ADV of 28.3 mln contracts in Q3
Strong double-digit growth across all CME's asset classes in Q3
Q3 2024 best quarter in CME history
Recasts lead, updates CEO comment in paragraphs 6 and 17
By Arasu Kannagi Basil and Laura Matthews
Oct 23 (Reuters) -CME Group CME.O reported a rise in third-quarter profit on Wednesday, as uncertainty around U.S. monetary policy and geopolitical events sentinvestors into the derivatives markets to manage risks, bolstering trading volumes for the exchange.
Trading volumes at exchanges tend to jump during periods of heightened uncertainty as clients increase their hedgingactivities. This drove double-digit growth across all CME asset classes in the reported quarter.
The company's total average daily volume (ADV) jumped 27% from a year earlier to a quarterly record of 28.3 million contracts.
The ADV of interest rate products, used to hedge against volatility stemming from changes in benchmark interest rates, jumped 36% to a quarterly record of 14.9 million contracts.
"Our record-breaking performance in the third quarter demonstrated the continued growing need for risk management globally," said Terry Duffy, chief executive officer, at CME Group on an analyst call. "We achieved this growth without lowering any fees or introducing any new incentive programs for these products."
CME shares were up 0.3% in early trading following the results.
Equities trading was another bright spot as volatility sparked by a sell-off in August, following a weaker-than-expected July jobs report, bolstered volumes. CME's equities ADV jumped 17% to 7.4 million contracts in the quarter.
Meanwhile, CME's energy ADV jumped 21% to 2.6 million contracts. Mounting tensions in the Middle East have increased volatility in commodity and energy markets.
Clearing and transaction fees, CME's chief source of revenue, jumped 19.5% to $1.30 billion, while market data revenue rose 6.3% to $178.2 million.
Total revenue jumped 18.4% to record $1.6 billion, beating analysts' expectations of $1.58 billion.
Net income attributable to common shareholders rose to $901.3 million from $740.8 million, a year earlier.
CME shares have risen 7.4% so far this year, underperforming the 22.7% jump in the benchmark S&P 500 .SPX index.
Duffy said opposing views on Fed policy should provide further tailwinds for interest-rate trading, while continued uncertainty around the U.S. election and geopolitics will drive liquidity and risk management needs across rates and other asset classes.
CME stock has underperformed rivals and broader markets YTD https://reut.rs/40ms32i
A glance at CME's Q3 trading volumes https://reut.rs/3Yke4Yx
CME's trading volumes hit all-time quarterly record https://reut.rs/4fiKtWd
Reporting by Arasu Kannagi Basil in Bengaluru and Laura Matthews in New York; Editing by Shinjini Ganguli and Sharon Singleton
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