CME reports First-Quarter profit decline

CME Group reported first-quarter 2012 revenues of $775 million and operating income of $451 million. First-quarter net income attributable to CME Group was $267 million and diluted earnings per share were $4.02.

"During the first quarter, global trading volumes were impacted by low levels of Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term, particularly in financial instruments," said CME Group Executive Chairman Terry Duffy. "The uncertainty about market direction has led to a greater focus on the release of economic data that measures the overall health of the economy. While concerns remain, there are some positive signs that an improving economy would bode well for our product set as the trading community responds to better news."

"We have accomplished a great deal during the first 90 days of the year as we build our business by investing in our product, technology and clearing offerings," said CME Chief Executive Officer Craig Donohue. "Our over-the-counter clearing momentum has continued, as customers have utilized our multi-asset class platform well ahead of the regulatory mandate. To date, more than 1,800 buy side accounts have cleared more than $515 billion in total notional value in interest rate Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term and credit default swaps, with $283 billion cleared during the first quarter."

"We continue to successfully execute in a number of key areas, which includes deepening and strengthening our partnerships, enhancing our capital return policy and maintaining strong expense discipline," said CME President Phupinder Gill. "Areas of focus have included launching our co-location facility, increasing our stake in the Dubai Mercantile Exchange and announcing several innovative new products. The strengths that are embedded in this company provide a foundation that allows us to continue to lead the industry with the breadth of our product innovation and our global relationships."

First-quarter 2012 average daily volume was 12.3 million contracts, up 5 percent from fourth-quarter 2011, but down 11 percent compared with 13.8 million contracts during the first quarter of 2011. Average daily volume in first-quarter 2011 was exceptionally strong driven by the impact of significant unrest in the Middle East and a natural disaster in Japan.

Clearing and transaction fee revenues of $621 million were up 4 percent from fourth-quarter 2011, but down 10 percent from the strong first quarter in 2011. First-quarter market data and information services revenue was $114 million, up 8 percent from fourth-quarter 2011 and up 7 percent compared with the same quarter last year. First-quarter total average rate per contract was 81.1 cents, in line with fourth-quarter 2011, and up slightly from first-quarter 2011.

First-quarter 2012 operating expense was $323 million, up 5 percent from first-quarter 2011, and down 7 percent sequentially. During the first quarter the effective tax rate was 38.6 percent, which included a one-time adjustment. The company expects the effective tax rate to be 41 percent for the remaining quarters of the year, representing the lower end of the original guidance range. As of March 31, the company had $1.1 billion of cash and marketable securities and $2.1 billion of long-term debt.

CME offers currency futures on a diverse range of instruments, it has an average daily trade volume of $110 billion. CME was promoting micro FX contracts in a bid to compete with the fierce OTC market.