CME Group, the world’s biggest futures exchange, reported on Thursday that its profits in the third quarter fell by one-fifth, as the hangover from the financial crisis continued to impact trading volumes and regulatory uncertainty weighs on the industry.
The company said that, excluding extraordinary charges, its net income in the quarter was $223m or $3.35 per share, down from $278m or $4.13 per share in the same period last year but in line with analysts’ expectations.
The CME dominates the US listed futures sector, with a market share of about 98 per cent. The sector has seen trading volumes fall by about one-quarter from last year, both as a result of deleveraging by big financial institutions and because trading houses have adopted a “wait and see” approach as Washington debates how it will overhaul the regulation of the US financial sector in the wake of the crisis.
The company’s reported results included a $19m writedown related to its 15 per cent stake in Imarex, a Norwegian-based freight and energy exchange and interdealer broker, which the CME acquired last year as part of its $7.6bn purchase of the New York Mercantile Exchange. Nymex had bought the Imarex stake the previous year for $52m.
As with many other companies that have reported earnings in recent weeks, the results also reflected cost-cutting, with expenses down to $244m from $272m last year.
Terry Duffy, CME chairman, said volumes this month had grown strongly, particularly for foreign exchange and energy products. “As the economy continues to stabilise, there is room for further organic growth in our core business,” he said.
Mr Duffy has argued in recent weeks that politicians on Capitol Hill need to make quick progress in passing financial regulation legislation so as to give clarity to the futures industry. “We are actively working to ensure that the benefits our business model brings to the financial system are communicated to the legislators and regulators who are charged with regulatory reform,” he said.
The CME hopes to benefit from the sentiment in Washington to push private over-the-counter derivatives through central clearing counterparties, such as the CME’s clearing house, that will guarantee both sides of the trade. The CME aims to establish a clearing platform for credit default swaps by December.
Craig Donohue, chief executive, said the company was also focused on global growth and had hired marketing and sales staff with that aim in mind.
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