CME Group: Trading Activity Slows Down in December, But Sets Volume Record For The Year
After a sustained period of high trading activity through the year, CME Group (NASDAQ:CME) witnessed a slowdown in the fourth quarter of 2015. Average daily volumes (ADVs) declined by 4% on a year on year (y-o-y) basis to 13 million trades per day in December and by 11% y-o-y to 13.2 million trades per day in the fourth quarter. However, despite slow trading activity in the last quarter, the first nine months helped CME Group average a record 14 million trades per day in 2015, a growth of 2% annually. [1] Below we take a look at CME’s December performance across key asset classes.
We have a $91 price estimate for CME, which is slightly higher than the current market price. CME’s stock price fluctuated between $85 and $100 in 2015.
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Trading Activity By Asset Class
According to our estimates, interest rate contracts are responsible for around a quarter of CME’s stock value. The company experienced a mixed year in terms of trade volumes for interest rate derivatives. After growth in the first two quarters, daily volumes for interest rate contracts started declining. Although volumes picked up in November on the back of speculation regarding ECB’s monetary policy, the downtrend beginning in Q3 was sustained through December, with a fall of 14% y-o-y to 5.7 million trades per day. Correspondingly, 2015 finished at a relatively smaller loss of 4% y-o-y in average daily volumes.
The energy sector has been one of the high points for CME Group this year, with gains in average daily volumes every quarter. Oil prices experienced high volatility in Q4’15, owing to developments in Iran, the lifting of the oil export ban in the U.S. and OPEC’s decision to maintain the status quo in oil production. As a result, energy contracts saw 20% y-o-y growth to 2 million trades per day in December. For the quarter, the rise in trade volumes for energy contracts was the biggest at 13%.
The gains made by foreign exchange (FX) contracts in the first nine months of the year 2015 eroded in the last quarter. The rise in ADVs of FX derivatives from late 2014 to the end of Q3 this year was largely caused by speculation around the ECB’s monetary policy, debt concerns in Europe and the subsequent strengthening of the U.S. dollar. However, daily trade volumes for foreign exchange derivatives declined by 8% y-o-y to 884,000 in December and by a massive 19% y-o-y in Q4. Despite the decline, the full year volumes were 9% higher on an annual basis, owing to the progress made in the first nine months.
Among other products traded, while most witnessed growth for the full year (except interest rate contracts), only agriculture commodities (+9%), energy (+20%) and equity index (+1%) contracts were up in December. Metals (-10%), FX (-8%), and interest rate (-14%) derivatives all registered a fall. ((CME Group Volume Averaged A Record 14 Million Contracts per Day in 2015, Up 2 Percent from 2014, CME Press Release, January 2016))
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- CME Group Volume Averaged A Record 14 Million Contracts per Day in 2015, Up 2 Percent from 2014, CME Press Release, January 2016 [↩]