CME Group Inc. (CME) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Record Quarterly Revenue: CME Group achieved its highest ever quarterly revenue at over $1.5 billion, a 13% increase from the second quarter of 2023.
• Growth Across All Asset Classes: For the first time since 2010, there was year-over-year growth in average daily volume and open interest across every asset class.
• Physical Commodities Portfolio Success: The overall Commodities portfolio generated record revenue year-to-date in 2024, up 16% versus the first half of last year.
• Partnership with Google Cloud: Announced a significant step forward in partnership with Google Cloud to build a new private Google Cloud region and a co-location facility in Aurora, Illinois.
• Efficient Risk Management Products: Continued to offer unmatched capital efficiencies for customers, resulting in margin savings of nearly $20 billion per day.

Pessimistic Highlights

• Market Uncertainty: Highlighted the uncertainty around the US political landscape and ongoing geopolitical tensions, emphasizing the need for risk management products.

Company Outlook

• Positive Outlook: Despite market uncertainties, CME Group is optimistic about its ability to provide liquid and efficient markets for risk management, supported by record results and innovative partnerships like the one with Google Cloud.

Q & A Highlights

• Q: Can you elaborate on the daily margin savings of $20 billion? (Patrick Moley, Piper Sandler)

  A: The rough split is around $12 billion for futures and options, $7 billion for swaps with futures and options, and $1 billion including cash. Competitors cannot provide any efficiencies relative to options either. (Sunil Cutinho and Terrence Duffy)

• Q: Update on pricing increases announced at the beginning of the year? (Patrick Moley, Piper Sandler)

  A: Tracking very well with the guidance, consistent with 1.5% to 2% on clearing and transaction fees, and 3% to 5% on various data products. (Lynne Fitzpatrick)

• Q: Update on the DTCC cross-margining program? (Benjamin Budish, Barclays)

  A: 10 clearing participants taking advantage, with a few more in the pipeline. Savings have grown to about $1 billion. (Sunil Cutinho and Terrence Duffy)

• Q: Impact of increasing use of WTI in setting the price of Brent? (Benjamin Budish, Barclays)

  A: Significant growth in WTI business, especially from European customers, with energy volume across EMEA up 53%. (Derek Sammann)

• Q: How do you respond to competition and signals from competitors? (Simon Clinch, Redburn Atlantic)

  A: CME Group has made investments over years to be in a strong position to compete, emphasizing the unmatched capital efficiencies provided to clients. (Terrence Duffy)

• Q: Impact of Fed rate cuts on rates franchise and capture rate? (Michael Cyprys, Morgan Stanley)

  A: Hard to predict the exact impact on capture rate due to various factors, including the mix between stories and lectures, member and non-member participation, and the growth of additional non-members. (Tim McCourt and Lynne Fitzpatrick)

• Q: Details on CME's treasury clearing plans? (Ken Worthington, JP Morgan)

  A: Working towards SEC approval, planning to be ready to test in the second half of next year to meet the January '26 deadline for US Actives and the June '26 deadline for Repo. (Tim McCourt and Terrence Duffy)