CME Reports Profit Surge, Thanks Partly To More Cattle, Hog Futures Trading
07/29/2010 01:49PM
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CME Group Inc., the Chicago-based futures exchange operator, said second quarter profit surged 22 percent, partly behind increased trading in cattle, hogs and other agricultural commodities.
Trading in CME’s agricultural commodities averaged 855,000 contracts a day during the quarter, up 4.5 percent from 818,000 a day during the same period in 2009. Interest rate- and equities-based trading was even stronger, up 38 percent and 16 percent, respectively.
There were “positive volume trends across all asset classes,” Craig Donohoe, CME’s chief executive officer, said during a conference call with analysts today following the release of financial results.
Agriculture, energy and foreign exchange products had record quarterly revenue, Donohoe said.
Global market turmoil fueled CME’s profit surge, as banks and other investors increasingly used the exchange’s financial contracts, such as Eurodollar and Treasury bond futures, to offset risk.
Financial contracts account for more than three-fourths of CME trading. But grain and livestock trading grew in recent years as commodities drew attention from speculators.
Earlier this year, shrinking animal inventories sent CME cattle and hog futures rallying to multi-year highs. Hedge funds and other speculators piled into cattle and hog markets amid expectations commodities in general were heading for an inflationary period.
Cattle futures and options trading reached an all-time high in May. Through the first six months of 2010, an average of 53,258 cattle futures and options contracts changed hands each day, up 32 percent from the same period a year earlier, according to CME reports.
Lean hog futures and options trading averaged 34,190 contracts a day during the first six months of the year, up 15 percent.
Trading in Class III milk, the CME’s most-active dairy product, averaged 1,772 contracts a day the first six months of 2010, up 2.9 percent.
CME, which bought the Chicago Board of Trade for $12 billion in 2007, generates revenue through transaction and clearing fees charged to brokers and traders. During the second quarter, the cost to buy and sell an agricultural contract averaged $1.28, up from $1.13 a year earlier.
Net income during the quarter ended June 30 rose to $270.7 million from $221.8 million in the same period a year earlier, CME said in today’s statement. Revenue increased 26 percent, to $813.9 million.
Source: Bruce Blythe, Business Editor