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CME Group stock slump amid disappointing volumes, revenue fell

CME stock

CME Gropu (NASDAQ: CME) stock price plunged more than 6% after missing revenue and earnings estimates for the third quarter by $10 million and $0.06 per share, respectively. The substantial decline in average daily volumes negatively impacted investor’s sentiments.  

The Chicago-based exchange blames pandemic related challenges for the significant drop in volumes and transactions fee. CME stock is currently trading at the lowest level in the last six months while shares are down close to 25% in the past twelve months.

CME CME Group Inc. daily Stock Chart
CME stock performance. Finviz chart

Lower fee and volumes impacted CME stock performance

The company’s third-quarter revenue of $1.1 billion dropped 14% from the past year period, marking the second consecutive quarter of revenue drop. Its revenue fell mainly due to lower clearing and transaction fees.

Its clearing and transaction fee, the biggest revenue source, slumped to $835.4 million from $1.04 billion in the year-ago quarter. The double-digit drop in clearing and transaction fees was only due to lower daily average volume. The average daily volume came in at 15.6 million contracts, down from 17.6 million in the previous quarter and 20.2 million in the year-ago period.

The company says the drop in interest rate products volume along with low daily averages for energy products negatively impacted overall volumes.

On the positive side, equity index products along with agricultural commodities and metals generated robust growth in the third quarter.

CME Gropu is also the second-largest bitcoin future market. CME’s Chief Economist, Bluford Putnam has previously said in a video that Bitcoin can fit into a portfolio without compromising stability due to its volatility. However, CME has deleted the video the next day after Finbold has identified the Chief Economist pro stance.   

New product launches could offset lower interest products volume     

The company has aggressively been introducing new products to improve the trading volume. The latest launches include Nasdaq Veles California Water Index futures and Micro E-mini options.

“In Q4, we remain focused on adding new value through the migration of BrokerTec onto CME Globex later this year, as well as providing risk management tools to help our global clients as they continue to navigate through this difficult economic environment,” said CME Group (CME) Chairman and Chief Executive Officer Terry Duffy.  

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