The CME Group operates some of the most important derivatives and commodities exchanges in the world. On average, every year, the CME Group exchanges handle some 3 billion contracts that are roughly worth $1 quadrillion. The four main exchanges that the CME Group operates include the New York Mercantile Exchange, the Commodity Exchange, the Chicago Board of Trade, and the Chicago Mercantile Exchange. The CME Group also operates a clearing provider by the name of CME Clearing. It is one of the leading clearing providers for over-the-counter products.
More Volatility Equals More Fees
CME Group charges a transaction fee for every trade that is conducted in its exchanges. These fees vary by the product type, the volume, and other factors. However, given that the CME Group handled transactions worth $1 quadrillion annually, these fees can add up to a substantial number. Whenever volatility levels rise, there tends to be more trading on CME’s exchanges. More trading equals more transaction fees. This is exactly what happened during the COVID pandemic. The last few months saw record trading levels on CME exchanges. The company recorded revenues of $1.1 billion for the third quarter of 2020. Net income per share was $1.38 on a diluted basis. However, these numbers were below those recorded during the same quarter the prior year.
If you are looking to add financial stocks to your portfolio, then you may want to consider exchange stocks like the CME Group. The stock closed at $178 on 29th December 2020, up about 2% for the preceding 30 days. CME Group’s stock currently trades at a 1.9% dividend yield. On a longer-term 5-year horizon, the stock has grown by more than 100%.
For comparison, S&P Global Inc’s stock is down 8% over the past month having closed at $321 on 29th December 2020. The stock is up 263% over a 5-year period and it currently trades at a 0.83% dividend yield.