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CME profits rise as micro futures lure retail investors

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FILE PHOTO: Men enter the CME Group offices in New York
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By John McCrank

(Reuters) -CME Group Inc, the largest futures exchange operator, reported higher second-quarter profit on Wednesday, spurred by lower expenses, a rise in hedging and micro futures, including in oil and bitcoin, that lured retail interest.

Trading volume for the exchange operator's interest rate futures and agricultural futures, used for hedging against price moves, were both up nearly 25% from a year earlier when the COVID-19 pandemic hit demand.

Overall average daily volume was up 5%.

CME has also been rolling out micro-futures, aimed at smaller, sophisticated, active traders, that are a fraction of the size of its regular contracts, including micro WTI crude oil contracts at one-tenth the size of the its benchmark WTI futures contract.

"We had a highly successful launch of our micro WTI, which was the most successful commodity product launch in the history of CME Group," Chief Executive Officer Terry Duffy said on a call with analysts.

CME said 6,200 unique users traded 450,000 micro WTI contracts in the first 11 trading days, and that more than 2,600 of those participants had never traded a crude product with CME in the past.

The exchange also launched micro bitcoin futures, which are worth one-tenth of a bitcoin, versus the regular contract worth 5 bitcoins. CME previously said more than 100,000 micro bitcoin futures were traded within six days of the contract's launch.

"We have built $100 million a year business so far that didn't exist just a couple of years ago with our micro product," Chief Financial Officer John William Pietrowicz said of the micro contracts.

On an adjusted basis, CME earned $1.64 per share, 3 cents more than analysts had expected, according to IBES data from Refinitiv, helped by lower-than-expected expenses.

Quarterly revenue dipped 0.26% to $1.18 billion.

(Reporting by John McCrank in New York and Niket Nishant in Bengaluru; Editing by Shounak Dasgupta and Barbara Lewis)