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CME Group (CME) Reports Lower December Volumes, Stock Down

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Zacks Equity Research
·3 min read
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CME Group Inc. CME reported soft average daily volume (ADV) for December 2020. Average daily volume of 14.2 million contracts per day was down 8% year over year, attributable to lower volumes in four of the six product lines. There were 22 trading days in December this year versus 21 days in December 2019.  Shares of the company lost 1% in the day’s trading in response to the soft volumes.

Interest rate volume of 5 million contracts per day decreased 29%. Energy volume of 1.8 million contracts decreased 15% year over year while Foreign exchange volumes dropped 3% to about 1 million contracts per day. Metals volume of 0.5 million contracts per day decreased 9%. However, Equity index volume of 4.7 million contracts per day increased 30% and Agricultural volume of 1.3 million contracts per day improved 13%.

Though December volumes decreased, we expect the company’s operating leverage and compelling suite of products to help CME Group to record higher volumes going forward. CME Group maintains a solid market share of about 90% in global futures trading and clearing services.

Concurrently, this Zacks Rank #2 (Buy) largest futures exchange in the world in terms of trading volume as well as notional value traded has also reported lower volumes for fourth quarter as well as full year 2020. ADV for fourth quarter was 16.2 million, down 4% attributable to lower volumes in four of the six product lines. For the full year, ADV was 19.1 million, down 1% attributable to lower volumes in two of the six product lines.

Expansion of futures products in the emerging markets plus an increase in non-transaction related opportunities as well as OTC offerings should continue to contribute modestly to its top-line growth in the years ahead.

Increasing electronic trading volume adds scalability and hence leverage to CME Group’s operating model. Efforts to expand and cross-sell through strategic alliances, acquisitions, new product initiatives and a strong global presence should also drive growth.

Shares of CME Group have underperformed the industry in a year. The stock has lost 9.8% against the industry’s increase of 7.8%. Nevertheless, its solid fundamentals will likely help the stock regain its growth momentum.

Recently, MarketAxess Holdings MKTX reported December volumes of $472.3 billion, comprising $203.5 billion in credit volume and $268.7 billion in rates volume.

Other Stocks to Consider

Investors interested in the same space can look at Cboe Global Markets CBOE and Nasdaq NDAQ, each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cboe Global delivered earnings surprise of 3.74% in the last reported quarter.

Nasdaq delivered an earnings surprise of 5.52% in the last-reported quarter.

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