By Lisa Beilfuss
CME Group Inc., the world's biggest futures-market operator,
said second-quarter profit edged slightly higher, lifted by higher
trading volume in some products and reigned-in expenses.
The company's results beat Wall Street expectations.
Total average daily volume improved steadily after a slow April,
said Chief Executive Terry Duffy, and executives said on a call
with analysts that certain products saw heightened activity ahead
of a Federal Reserve interest rate increase expected later this
year. As the so-called Fed liftoff approaches, volatility may pick
up and lift trading volume, say analysts. CME said Thursday that
growth across products has continued into July.
The company, which recently closed most of its trading pits in
New York and Chicago as traders increasingly execute buy and sell
orders electronically, said contract volume grew 6% in the latest
quarter. Increases in agricultural commodities, foreign exchange
and energy volume--each grew 20% or more--offset declines in
interest rate and equity volume.
Trading in interest rate contracts, which make up about half of
CME's overall volume, fell 1.3% from a year earlier and 13% from
the first quarter. The declines came despite a trifecta of
factors--threats of a Greek exit from the eurozone, a potential
Puerto Rican default and a sharp selloff in Chinese stock
markets--that sent investors back to safe-haven assets.
Equity contract volume, meanwhile, fell 4.1% from a year
ago.
The exchange operator said the total average rate per contract
rose 3.2% to 77.7 cents, thanks to a higher proportion of total
volume coming from commodities products. Commodities products have
higher average fees.
CME, which has been working to cut costs, said that in addition
to closing trading pits it reduced head count and consolidated data
centers. Gross margin during the quarter expanded to 60.4% from
56.3% a year earlier. The company said it now expects $1.3 billion
in adjusted expenses this year, $10 million lower than earlier
estimated and down 1% from 2014.
At the same time, the exchange operator has been growing its
international presence. Volumes grew 22% in Asia and 10% in Europe
last quarter, led by metals contracts.
In all, second-quarter profit rose to $265 million from $263.8
million in the year-ago period. On a per-share basis, earnings
slipped a penny to 78 cents. Excluding one-time items, per-share
profit rose to 95 cents from 77 cents.
Revenue grew 12% to $820 million.
Analysts projected 92 cents in earnings per share on $807.2
million in revenue, according to Thomson Reuters.
Market-data revenue rose 15% to $103 million, higher than some
analysts expected, and Chief Financial Officer John Pietrowicz said
quarterly market data revenue will hold at about $100 million for
the rest of the year. Transaction fee revenue, meanwhile, grew 12%
to $682 million.
CME shares, up about 28% over the past year, were little changed
in midday trading.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com