CME second quarter earnings fall as hedging demand slows

NEW YORK (Reuters) – CME Group (CME.O), the world’s biggest futures exchange operator, on Wednesday reported lower second-quarter profits as fiscal and monetary steps taken to ease the economic impact of the coronavirus pandemic slowed hedging demand for some of its products.

Net income attributable to the company fell to $503.3 million, or $1.40 per diluted share, in the quarter ended June 30, from $513.8 million, or $1.43 per diluted share, a year earlier.

Stripping out one-time items, such as acquisition costs, the Chicago-based company earned a profit of $1.63 per share, beating the mean estimate of analysts by a penny, according to IBES data from Refinitiv.

The coronavirus pandemic has led to market volatility, which has benefited some exchange operators, like Nasdaq Inc (NDAQ.O), which last week reported better-than-expected earnings as stock and options trading volume soared.

But CME’s volumes were mostly down, as the U.S. Federal Reserve flooded the markets with liquidity in response to the pandemic and said interest rates would stay near zero for the foreseeable future, reducing the demand for hedging through futures for things like rates, commodities and currencies.

Clearing and transaction fees, CME’s biggest revenue stream, fell to $940.2 million from $1.05 billion a year earlier as the company’s average daily volume (ADV) fell to 17.6 million contracts from 20.9 million contracts.

CME, which owns the Chicago Board of Trade, said revenue from the market data and information services business, which helps investors to make trading decisions and minimize risk, rose to $134.7 million from $128.3 million a year earlier.

Total revenue fell to $1.18 billion, from $1.27 billion in the second quarter of 2019.

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