CME Group beats profit estimates on lower expenses

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 helped drive the profit beat, analysts from Jefferies and Piper Sandler said in research notes.

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

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

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

Chicago-based CME said its bitcoin futures rose 43%, to a record 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 at smaller, sophisticated, active traders. The micro contract will represent 1/10 of a bitcoin, versus the more pricey regular contract, which represents 5 bitcoins.

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

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

Total revenue fell nearly 18% to $1.25 billion.