Last updated: May 2, 2013 3:52 pm

CME hits out at futures trading taxes

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CME Group Executive Chairman Terry Duffy poses for a portrait

CME’s Terry Duffy says the tax will hurt liquidity

The head of CME Group, the world’s largest futures exchange operator, said proposed tax increases on futures trading in the US are unlikely to become law, the latest main market participant to come out against financial transaction taxes similar to those currently being considered in Europe.

“I believe that most people on [Capitol Hill] understand that this would be a detrimental tax” that would hurt liquidity, Terry Duffy, executive chairman and president, told analysts on a conference call. “I do think that will not prevail.”

A similar taxation effort in Europe has come under fire by investors there, including the continent’s largest institutional investors.

Mr Duffy’s comments came as CME reported a near 12 per cent drop in first-quarter net income as volumes growth remained sluggish.

The Chicago-based company reported net income of $235.8m, or 71 cents per share, compared with a split-adjusted $266.6m, or 80 cents per diluted share, during the same period last year. Revenues for the first quarter fell 7 per cent, from $774.6m to $718.6m. Last May, the company announced a 5-for-1 stock split.

CME took a $12m charge due to foreign currency losses. Excluding one-time charges, it reported earnings of 73 cents per share, meeting analysts’ expectations, on $714.6m in revenues.

“We have made progress so far this year as we continue to implement our global strategy,” Mr Duffy said. “Looking ahead, we will keep investing in the company’s growth while also continuing to consistently return capital to shareholders in the most efficient way.”

CME reported clearing and transaction fee revenues of $593m, down 4.5 per cent from the same period last year.

Lower trading activity took a toll on exchange operators and the wider securities industry last year, though that began to change as markets picked up in 2013.

Average daily contract volume in the three months to March rose 1 per cent to 12.5m compared with the same period a year ago. In 2012, volumes fell 15 per cent year-on-year to 11.4m per day.

This marks the fourth consecutive quarter CME has seen net income fall. During the three months to December, profits fell more than 75 per cent.

But Asia was a bright spot during the quarter. The company reported record volume and revenue from its Asia operations, up 24 per cent and 31 per cent respectively.

The company’s main rival, IntercontinentalExchange, on Wednesday reported an 8 per cent drop in earnings, to $135.4m, or $1.85 per share, on revenues of $351.9m. Average daily contract volume at ICE fell nearly 4 per cent, to 3.64m, during the quarter.

Shares closed 0.5 per cent higher to $60.40.

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