Exchange operator CME's quarterly profit slumps 35%

FILE PHOTO: Men enter the CME Group offices in New York, U.S., October 18, 2017. REUTERS/Brendan McDermid

(Reuters) – CME Group CME.O, the world’s biggest futures exchange operator, on Wednesday said its third-quarter profit plunged 35% as decreased trading volumes resulted in lower fees for clearing and settling transactions.

Net income for the three months ended Sept. 30 came in at $411.5 million, or $1.15 per share, compared with $636.3 million, or $1.78 per share, last year.

Revenue from clearing and transaction fees – the company’s biggest source of income – fell nearly 20% to $835.4 million in the quarter, while average daily volumes dropped about 23% to 15.6 million from last year.

On an adjusted basis, the company reported earnings per share of $1.38, compared with Refinitiv IBES estimates of $1.41. It was not immediately clear if the numbers were comparable.

Ultra-low interest rates in the United States, along with an accommodative stance from the Federal Reserve curbed hedging demand for many of CME’s products.

The U.S. Fed’s measures to stymie the economic impact of the coronavirus flushed the market with liquidity. Their plans to keep interest rates at near-zero levels reduced demand for hedging through futures on rates, commodities and currencies.

Recent volatility in financial markets had benefited most exchange operators due to increased volumes, with Nasdaq Inc NDAQ.O marking a better-than-expected third-quarter profit.

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