Record daily volumes
Today, CME Group (CME) reported that it benefitted from heightened volatility across equities, rates, currencies, commodities, and alternatives in 1Q18. The exchange giant managed 19% growth in revenues to $1.1 billion, helped by record daily volumes in five out of six asset class offerings and increased total options trading. The stock opened at -2.5%, mainly due to an expectation of lower volatility and a sequential decline in 2Q18.
CME posted earnings per share or EPS of $1.86, compared to estimates of $1.83 and the prior year’s EPS of $1.22. Its average daily volumes rose to an all-time high of 22.2 million contracts, marking growth of 30% from 1Q17.
CME Group posted clearing and transaction fees of $974 million, growth of 23%, helped by higher trades and partially offset by the lower average rate per contract—which declined to $0.706 in 1Q18 from $0.736 in 1Q17. This decline was mainly due to higher volumes in lower-priced asset classes, which saw growth of 49%. Market data revenues declined 2% on a YoY basis.
Exchanges (XLF) including Intercontinental (ICE) are expected to post strong numbers in 1Q18, helped by lower taxes and higher volatility. Investment bankers Goldman Sachs (GS) and Morgan Stanley (MS) have also benefited from higher volatility and managed higher fees.
NEX Group acquisition
CME group announced that it would acquire the UK-based NEX for ~$5.5 billion in a bid to rev up Treasuries, fixed income, and other over-the-counter products and services. CME has set aside $491 million in an escrow account for an acquisition. Excluding this account, the company had cash and equivalents of $875 million as of March 31.
CME group paid out $1.4 billion in dividends in 1Q18, including a variable dividend of $1.2 billion of 2017.