Average daily volume was 3.9 million contracts for first-quarter 2005, a 39 percent increase from first-quarter 2004. Trading on the CME® Globex® electronic trading platform grew 95 percent from 1.3 million contracts per day in first-quarter 2004 to 2.6 million per day in first-quarter 2005. Electronic volume represented 66 percent of total CME volume in the quarter. In March, electronic trading averaged a record 2.8 million contracts per day, up 78 percent from March 2004.
“CME delivered the highest quarterly volume and revenue ever in each of our financial product lines, in the quarter with the fewest trading days,” said CME Chairman Terry Duffy. “We are off to a great start in the second quarter, averaging 5 million contracts per day, up from 3.9 million contracts per day in the first quarter. We are continuing to benefit from secular trends, including increased investor sophistication and more active investment strategies that are driving a shift toward exchange-traded derivatives to manage risk. Furthermore, with the rise in economic uncertainty in April – due to factors such as fluctuating interest rates, energy costs and weakened consumer confidence – more market users are turning to CME.”
“CME’s volume growth in the first quarter outpaced that of our peers, and so far in April, we are trading more volume than any derivatives exchange in the world,” said CME Chief Executive Officer Craig Donohue. “First-quarter growth was driven by record average daily volumes from members, customers and special programs. We are continuing our strategic efforts to expand our worldwide customer base and broaden our electronic product offerings, which resulted in additional cash flow by increasing the number of transactions handled through our scalable infrastructure. First-quarter results – including increased operating margin, earnings per share growth of more than 50 percent and significant free cash flow – indicate that our strategy is working.”
Clearing and transaction fee revenue from CME products increased 31 percent to $161 million, up from $123 million for first-quarter 2004. Revenue from clearing and transaction processing services rose 35 percent to $17 million, compared with $12 million. Quotation data fees were up 15 percent to $18 million, versus $15 million. While net revenues increased 29 percent, expenses increased 8 percent to $96 million, compared with $89 million in the year-ago quarter.
Full-year operating expenses are anticipated to rise 11 to 13 percent for all of 2005, in line with historical expense growth rates. The increase is due primarily to spending for technology and expanded communications bandwidth to accommodate additional volume growth.
First-quarter income before income taxes was $118 million, an increase of 53 percent from $77 million for the year-ago period. The company’s operating margin, defined as income before income taxes expressed as a percentage of net revenues, was 55 percent, compared with 47 percent for the same period last year.
Capital expenditures, including capitalized software development costs, were $16 million in first-quarter 2005. In order to further increase trade matching and clearing capacity to accommodate additional volume, CME expects capital expenditures to range between $80 million and $90 million in 2005. CME’s working capital increased by approximately $66 million during the first quarter, to $739 million at March 31, 2005.
CME will hold a conference call to discuss first-quarter results at 8:30 a.m. Eastern Time today. A live audio Webcast of the call will be available on the Investor Relations section of CME’s Web site at www.cme.com. An archived recording will be available for up to two months after the call.
All references to volume and rate per contract information in the text of this document exclude our non-traditional TRAKRS™ products, for which CME receives significantly lower clearing fees than other CME products.
Chicago Mercantile Exchange Holdings Inc. became the first publicly traded U.S. financial exchange on Dec. 6, 2002. The company was added to the Russell 1000® Index on July 1, 2003. It is the parent company of Chicago Mercantile Exchange Inc. (www.cme.com), the largest futures exchange in the United States. As an international marketplace, CME brings together buyers and sellers on its CME Globex electronic trading platform and on its trading floors. CME offers futures and options on futures primarily in four product lines: interest rates, stock indexes, foreign exchange and commodities. The exchange moved about $1.5 billion per day in settlement payments in first-quarter 2005 and managed $44.4 billion in collateral deposits at March 31, 2005, including $4.3 billion in deposits for non- CME products.
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