The CME Group is one of the largest operators of important exchanges. It operates the New York Mercantile Exchange, the Chicago Board of Trade, the Chicago Mercantile Exchange, and the Commodities Exchange. The CME Group has a strong moat in terms of its scale, which allows it to execute billions of transactions every year at a low cost. The company is also a great cash generating system since it earns transaction fees on every trade that goes through its exchanges. Pandemics, financial crises, and other disruptions do not halt trading activity. In fact, more volatility generally translates to more trading. This is a positive for exchanges like the CME Group. Other well-known exchange stocks are the S&P Global and the Intercontinental Exchange.
CME Group Reports 3Q2020 Earnings
The CME Group reported its third quarter 2020 earnings in October 2020. Revenues were down from $1.2 billion in Q32019 to $1.1 billion in Q32020. Net income per share was down to $1.15 per share as opposed to $1.78 in the same quarter the prior year. The equity indices average daily volume was up while the agricultural commodities volume was also marginally up. All other volumes were down on a year-on-year basis.
Company CEO Terrence Duffy said, “During the third quarter we saw strength in our equity business, our higher rate per contract metals and agricultural products delivered volume growth in Q3 and FX volume recovered, an average of 100,000 contracts per day, higher in Q3 than Q2.”
The CME Group’s stock has gained a healthy 2% over the past month. Its price last closed at $178 on 29th December 2020. S&P Global’s stock closed at $321 on 29th December 2020. It has dropped about 8.5% over the preceding 30 days. Meanwhile, Intercontinental Exchange’s stock closed at $112 on 29th December 2020. It is up about 7% over the past 30 days.