Q4 2024 Earnings Summary
- CME's commodities business is experiencing strong, secular growth, driven by increased participation from the buy-side community, especially global multi-strategy hedge funds. This has led to record volumes and revenues in commodities, with agricultural products up 32%, energy up 25%, and metals up 14% at the start of 2025. This trend is expected to continue, providing a significant growth opportunity for CME.
- CME is seeing significant growth in retail participation, expanding beyond traditional products like micro equity indices into commodities and cryptocurrencies. With technology enabling more participants and a focus on education and awareness, CME is well-positioned to capitalize on the growing retail market segment. This diversification in retail interest supports future growth prospects.
- CME's cryptocurrency derivatives market is experiencing record growth, with the largest trading day reaching almost 700,000 contracts on February 3. The company is well-positioned in this space, focusing on Bitcoin and Ether products, and is cautiously exploring further expansion as regulatory clarity improves. This positions CME to benefit from the growing interest and institutional adoption of cryptocurrencies.
- Limited expansion into cryptocurrency derivatives due to regulatory uncertainty may hinder growth in this segment. CME executives stated they will not introduce new cryptocurrency products beyond Bitcoin and Ether until there is clear regulatory guidance, potentially missing out on opportunities in emerging digital assets.
- Lower clearing and transaction fee increases indicate potential limitations in pricing power. The company adjusted its clearing and transaction fees by 1% to 1.5% for 2025, which is lower than the 1.5% to 2% increase in the previous year. This may reflect challenges in implementing higher fees without impacting trading volume.
- Revenue per contract (RPC) could face pressure due to volume tiering and changes in trading patterns. Executives acknowledged that RPC is influenced by product mix and customer trading behavior, and any significant changes could negatively impact RPC. Assumptions for fee adjustments are based on trading patterns remaining similar to 2024, indicating risks if patterns change.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Expense Guidance | Q4 2024 | $1.585 billion | no current guidance | no current guidance |
Cloud Migration Expenses (2024) | Q4 2024 | $90 million | no current guidance | no current guidance |
Adjusted Effective Tax Rate | Q4 2024 | 22.5% to 23% | no current guidance | no current guidance |
Revenue Growth (Clearing & TX Fees) | Q4 2024 | 1.5% to 2% | no current guidance | no current guidance |
Revenue Growth (Total Revenue) | Q4 2024 | 2.5% to 3% | no current guidance | no current guidance |
Adjusted Operating Expenses | FY 2025 | no prior guidance | $1.65 billion | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | $90 million | no prior guidance |
Adjusted Effective Tax Rate | FY 2025 | no prior guidance | 22.5% to 23.5% | no prior guidance |
Transaction Fee Adjustments | FY 2025 | no prior guidance | increase of 1% to 1.5% | no prior guidance |
Market Data Fees | FY 2025 | no prior guidance | Increased by 3.5% | no prior guidance |
Noncash Collateral Surcharge | FY 2025 | no prior guidance | 10 basis point surcharge | no prior guidance |
Aggregate Fee Changes Impact | FY 2025 | no prior guidance | Adds 2% to 2.5% to pretax income | no prior guidance |
Cloud Migration Expenses (2025) | FY 2025 | no prior guidance | $115 million | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Clearing & Transaction Fees YoY Growth | Q4 2024 vs Q4 2023 | 1.5% to 2% growth | 4% YoY growth from 1,184.5To 1,232.3 | Beat |
Total Revenue YoY Growth | Q4 2024 vs Q4 2023 | 2.5% to 3% growth | 6% YoY growth from 1,439.3To 1,525.3 | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Growing energy business | Consistently mentioned in Q1 through Q3 with year-over-year growth ranging from 16% to 21%, strong market share in WTI, and robust growth in natural gas. | Grew 17% year-over-year, named one of the three fastest-growing asset classes, buoyed by buy-side expansion and record commodities revenue. | Remains a core growth driver across all quarters, sentiment stays positive |
Increasing retail participation | First noted in Q2 with a 70% rise in metals retail volume and new broker offerings. Expanded in Q3, but executives were cautious about its exact revenue impact and potential lower rate per contract. | No specific mention in Q4 | Showed momentum in Q2 and Q3, but no further Q4 commentary |
Crypto derivatives growth | Not mentioned as a key theme in Q1 and Q2. In Q3, crypto ADV rose 285% year-over-year, fueled by Micro Bitcoin and Micro Ether. | Continues in Q4 but now constrained by regulatory caution; CME cited the need for SEC clarity despite record single-day trading volumes. | Newly emergent growth in Q3, remains bullish but tempered by regulation in Q4 |
Commodities expansion | Q1 and Q2 highlighted robust metals/agricultural gains (e.g., metals up 42% in Q2, strong agricultural demand). Not distinctly highlighted in Q3. | Emphasized as the third fastest-growing asset class in 2024; contributed to record $1.7 billion in commodities revenue, up 16% year-over-year. | Increasingly important, gaining momentum in Q4 |
Interest rate futures prominence | Q1 and Q2 calls underscored record volumes and open interest (e.g., 17.2 million ADV in February), major contributor to overall growth. Q3 still noted strong year-over-year gains but attention shifted to other assets. | Mentioned only as part of broad-based annual records, with less specific focus on outstanding interest rate product performance. | Prominence faded after Q2, overshadowed in Q3 and Q4 |
Competition | Repeatedly acknowledged in Q1 and Q2 (e.g., ICE in energy, FMX in rates). In Q3, CME noted competing SOFR launches but cited strong network effects and no fee reductions. | Not explicitly discussed in Q4, though prior quarters referenced ongoing market share considerations and pricing strategy. | Previously a consistent concern, not singled out in Q4 |
Margin and capital efficiency | Featured in Q1 and Q2 (about $7–8B daily savings, expanding cross-margining programs). Q3 also cited ~$20B/day in offsets, supporting interest rate and FICC cross-margining. | Q4 mentioned cross-margining with FICC and potential $60B in daily margin efficiencies; new collateral surcharge also discussed. | Consistently referenced throughout all quarters, a key strategic focus |
Regulatory and macro uncertainties | Discussed in all quarters, touching on crypto classification (e.g., SEC vs. CFTC) and global energy markets (e.g., geopolitical tensions, supply chain risks). | Emphasized again, especially around crypto product expansion and energy market volatility; executives stress the need for regulatory clarity and strong risk management. | Persistent theme across quarters, seen as having significant future impact |
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Activity Outlook for 2025
Q: What's the activity outlook for 2025 after recent growth?
A: Terry Duffy expects continued active markets across all six asset classes, driven by economic uncertainties, geopolitical issues, and high levels of global debt. He believes risk management will remain a priority as factors like the $36.5 trillion U.S. debt and political issues necessitate market participants to mitigate and manage risk. He is optimistic about participation across all asset classes due to these ongoing uncertainties. -
Capital Allocation and Buybacks
Q: Any updates on buybacks and capital allocation plans?
A: Lynne Fitzpatrick states that CME raised its dividend from $1.15 to $1.25 and paid out a variable dividend in January. The company views dividends as an important use of capital. Regarding the new $3 billion share repurchase program, Fitzpatrick describes their approach as opportunistic, using it as a third lever to return capital to shareholders alongside regular and variable dividends. -
Securities Clearing Build-Out
Q: What's the status and potential of the securities clearing build-out?
A: Suzanne Sprague reports that CME's application for a securities clearing house has been published in the Federal Register as of January. CME is engaging with the SEC toward approval and is excited about opportunities to generate additional value for customers. They are also partnering with the Fixed Income Clearing Corporation (FICC) to expand cross-margining programs, aiming to deliver significant margin efficiencies. Terry Duffy emphasizes the potential $60 billion in margin efficiencies and $20 billion in rate efficiencies, highlighting the benefits for participants in freeing up capital. -
Retail Strategy and Robinhood Partnership
Q: Expectations for retail engagement with Robinhood and overall retail strategy?
A: Julie Winkler notes that retail remains a strong driver of new customer acquisitions, with retail contributing two-thirds of the $1 billion in new client acquisition over the last five years. Robinhood launched futures trading to its 24 million customers, and while it's in a phased rollout, CME is excited about the opportunity. The retail business saw the number of traders up 6% and new client acquisition up 23% year-over-year in Q4. Products like micro equity futures, crypto, and commodities are attracting retail traders globally. -
Pricing Changes and Fee Adjustments
Q: Could you clarify the fee adjustments and their impact?
A: Lynne Fitzpatrick explains that CME implemented fee adjustments on trading, with an expected increase of 1% to 1.5% in transaction fees, including incentives. Additionally, changes to collateral fees and cash minimums could lead to an additional 1% impact on pretax earnings, totaling 2% to 2.5%. The exact impact depends on customer choices regarding collateral. Fee changes were made in crypto, metals, natural gas, and grains. -
Expansion into Crypto Derivatives
Q: Will CME expand crypto derivatives beyond Bitcoin and Ether?
A: Terry Duffy states that CME is cautious about listing new crypto products and will consult with the SEC to gain clarity on what constitutes a security. Tim McCourt adds that CME will continue to innovate within Bitcoin and Ether products, such as Bitcoin Friday futures, while awaiting regulatory certainty before introducing products on additional tokens. CME aims to be a trusted and transparent regulated venue in the crypto space. -
Product Opportunities Around Climate Events
Q: How is CME addressing opportunities related to climate events?
A: Derek Sammann explains that severe weather patterns drive increased participation in CME's agricultural and energy markets. Agricultural products saw volumes up 33% year-to-date, with energy products like natural gas also seeing growth due to their role in heating and cooling. CME's weather derivatives market has open interest of 90,000 contracts, with 70% in options. The company is exploring new products tailored to industries affected by climate risks. -
BrokerTec Market Share Trends
Q: What's the status of BrokerTec's market share and outlook?
A: Mike Denis notes that BrokerTec's overall revenues were up 7% in Q4. While market share versus FINRA TRACE fell slightly in Q2, January saw ADV up 29% month-over-month, with market share ticking up 0.5% versus December. BrokerTec is viewed as a strategic asset that helps drive CME's core futures and options business, with strong growth in U.S. and EU repo markets and adoption of new trading modalities. -
Impact of Multi-Strat Hedge Funds on Commodities
Q: How are multi-strat hedge funds impacting commodities volumes?
A: Derek Sammann states that buy-side participation from multi-strat hedge funds has been the fastest-growing client segment in commodities over the past 12 to 15 months. This contributed to record revenues in 2024, with agricultural volumes up 32%, energy up 25%, and metals up 14% year-to-date in 2025. The trend is seen as secular, with hedge funds adding commodities as an alternative income stream. -
Market Data Business Growth
Q: What's driving growth in the market data business?
A: Julie Winkler reports that the data business had a strong quarter with revenues of $182 million, up 9%. Growth is driven by professional subscribers accessing real-time data, with non-professional device usage up 40% from Q3 to Q4. There's also increased interest in derived data products as institutional clients create financial products like indices and benchmarks. CME implemented a 3.5% price increase effective January 1. -
Regulatory Backdrop on Interest Rate Contracts
Q: What's the regulatory stance on U.S. interest rate contracts and competition?
A: Terry Duffy emphasizes the importance of U.S. regulatory authority over U.S. sovereign debt futures. He notes concerns about clearing U.S. Treasury futures through non-U.S. entities like LCH, as default resolution would fall under the Bank of England, potentially posing risks to the U.S. financial system. Duffy is encouraged that regulators are recognizing the differences and stresses the need for U.S. oversight in default and resolution processes.