CME Group’s Q4 Profit Hit by Declining Trading Volumes

CME Group (NASDAQ:CME) reported its fourth quarter and full year 2011 results. The company’s fourth quarter operating income declined 15% to $390.4 million compared to $458.4 million in the same quarter prior year due to a decline in trading volumes. On a yearly basis, its operating income increased to $2.02 billion in 2011 compared to $1.83 billion in 2010. CME Group is the largest futures exchange in the U.S. and offers a range of products, including those based on interest rates, equities, foreign exchange, commodities, energy and metals. It competes with Nasdaq OMX (NASDAQ:NDAQ), NYSE Euronext (NYSE:NYX) and Intercontinental Exchange (NYSE:ICE).

See our full analysis of the CME Group here

Slowing Growth in Trading Volume

After an extremely robust third quarter, CME Group saw a decrease in trading volumes and open interest in November and December due to the Eurozone crisis, the failure of MF Global and normal seasonal patterns. In Q4 2011, the average daily volume (ADV) in interest rate products declined 15% to 4.7 million. Volumes in metal, foreign exchange and agricultural commodities declined by 15.3%, 7.5% and 5.3%, respectively. Trading volumes in equity and energy products, however, posted an increase of 23.3% and 7.8%, respectively. Overall, the average daily volume declined from 12.02 million in Q4 2010 to 11.7 million in Q4 2011.

Growth in Non-Trading Related Revenues

CME Group has significantly increased its exposure to non-transaction fee-based revenue streams in recent years. Its revenues from market data and information services increased 8% in 2011 and from access, communication and other services increased 16% in 2011. We expect continued growth in CME Group’s market data subscribers will fuel the growth in the company’s non-trading related revenues.

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