Volatility Supports Earnings Growth at Derivatives Giant CME, Q4 Revenues in the Green

CME, the world's largest derivatives exchange, reports strong trading metrics for the last quarter of 2014, the venue saw an

CME_Group_logoUS-based, CME Group, a leading multi-asset financial derivatives bourse was on the right side of trading activity in the last quarter of 2014. The firm reported its fourth quarter and full-year financial earnings figures, with overall operating metrics in the green. The CME saw its fourth-quarter revenues increase 22%, its fourth-quarter diluted earnings per share increased more than 50%, additionally its annual average daily trading volume crossed 13.7 million contracts in 2014, with records seen in its interest rates and options segment.

In a detailed notification, the venue reported revenues of $841 million and operating income of $472 million for the fourth quarter of 2014. Net income attributable to CME Group was $306 million and diluted earnings per share were $0.91. Excluding the items noted in the reconciliation, adjusted earnings per share would have been $0.951.

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Terry Duffy, CME Group’s Executive Chairman and President, commented about the results in a statement: “During the fourth quarter, we saw a pickup in volatility that helped drive broad-based growth across all our major product offerings.”

The firm benefited from a post-summer revival in international markets. Its fourth-quarter 2014 average daily volume was 14.8 million contracts, up 31% from fourth-quarter 2013, and the highest quarterly average daily volume since the first quarter of 2008.

Mr. Duffy added: “Average daily volume reached nearly 15 million contracts, up more than 30 percent and representing the second highest quarterly volume in our history.  This strong performance also reflects the success of our investments to spur organic growth by attracting trading from customers outside the United States.”

Trading volumes were up across the board as financial markets were volatile on the back of the ongoing Russia-Ukraine conflict, coupled by the ECB’s quantitative easing programme. Mario Draghi’s proposal in September was a key turning point in the EUR/USD market with analysts predicting a low of 1.13. Energy markets were taking a beating with geopolitical issues impacting the price, followed by the US Shale gas dilemma which could dictate how the world’s largest economy manages its energy demands

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Trading volumes boosted earnings the firm receives in trading fees. CME stated that it generated $71 million in clearing and transaction fee revenues. As of December 31, 2014, the company had $1.4 billion of cash and marketable securities and $2.1 billion of long-term debt.

Phupinder Gill. CME Group Chief Executive Officer, said: “We saw significant growth in every product area during the fourth quarter, ranging from 14 percent in metals to 41 percent in interest rates.

Total options rose 38 percent and futures grew 29 percent compared with the same period last year, while electronic options increased more than 50 percent. International volumes also grew by nearly 50 percent, reaching a record 3 million contracts per day in the fourth quarter. We also reached our highest level of open interest ever and broke the record for highest daily volume. Further, we restructured the business during the quarter, positioning ourselves to generate higher margins and earnings going forward.”

Shareholders of CME have benefited from consistent dividend payments, In the latest findings, the company declared dividends during 2014 of $1.3 billion, including the annual variable dividend for 2014 of $671 million, which was paid in January 2015.  The firm added that it had returned more than $4 billion to shareholders in the form of dividends since the implementation of the variable dividend policy in early 2012.

CME has been battling with BGC as both firms look to acquire GFI Group.

 

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