The paragraph outlines the agenda for the CME Group's First Quarter 2025 Earnings Call. Adam Minick begins the call, introducing Terry Duffy, who mentions that detailed executive commentary has been released. Duffy explains the nature of forward-looking statements and directs participants to the company's website for detailed information and financial reconciliations. He notes that the quarter saw record volumes and financial performance for CME Group. After his brief remarks, Duffy will introduce Suzanne and Sunil to discuss market operations, and Lynne will provide an overview of the financial results. Other management team members will be available for questions after the prepared remarks.

In the first quarter, CME Group achieved record-breaking financial performance with over $1.6 billion in revenue and more than $1 billion in adjusted net income, driven by a 13% increase in average daily volume to 29.8 million contracts. The growth spanned all asset classes, with significant increases in interest rates, equities, agricultural commodities, and foreign exchange. International business also reached new heights with a 19% increase in daily contracts. CME Group continues to innovate, announcing new offerings like BrokerTec Chicago and FX SPOT Plus to enhance market liquidity and risk management. Looking ahead, strong volumes are expected in the second quarter due to global geopolitical and economic factors.

The paragraph highlights the growth in open interest at CME Group, which is 7% higher than last year, indicating active market participation despite high volatility. Suzanne Sprague discusses increased margin requirements implemented in April to ensure adequate collateral coverage amid volatility, and notes a record single-day movement of $32 billion related to mark-to-market cycles on April 9th. Sunil Cutinho will address the company's resiliency amid unprecedented times. The paragraph emphasizes the importance of risk management and real-time monitoring by CME Group.

The paragraph discusses the performance of CME Group during a period of high market activity and volatility. Despite this, their systems handled record volumes effectively. Terry Duffy emphasizes the importance of understanding daily operations at CME Group and introduces Lynne Fitzpatrick to present financial results. Lynne reports a 10% revenue increase in the first quarter compared to the previous year, with strong contract rates contributing to record clearing and transaction fees of $1.3 billion. Market data revenue also reached a record $195 million. The company's cost discipline resulted in adjusted expenses of $475 million, and their adjusted operating income hit a record $1.2 billion, with an increased operating margin of 71.1%.

The paragraph discusses CME Group's financial performance, highlighting a 23.1% adjusted effective tax rate and record-high adjusted net income and earnings per share at $1 billion and $2.80 per share, respectively, both up 12% from the previous year. The first-quarter adjusted net income margin was over 62%, with $12 million in capital expenditures and $1.6 billion in cash. CME Group paid dividends of $2.6 billion for the quarter and $3.8 billion over the past year. The company emphasizes its focus on risk management products and earnings growth. During a Q&A session, Kyle Voigt from KBW questions the operating environment, noting that despite previous periods of market volatility leading to deleveraging, current open interest data suggests otherwise, although there are significant declines in agricultural futures open interest in April.

In the paragraph, Terry Duffy and Kyle Voigt discuss the current state of the market regarding agricultural products. Despite some declines in open interest for certain futures, such as feeder cattle, the overall environment in agriculture is described as "risk-on," with record levels of open interest in both options and futures. The business has seen significant growth, particularly in options, which offset declines in some futures markets, leading to multiple records in open interest. Overall, it reflects a strong performance in the agricultural sector, continuing positive trends from the previous year.

The agricultural markets are currently experiencing a risk-on environment with record open interest and high levels of activity, particularly from non-U.S. participants. Despite market uncertainties, including significant tariffs and unprecedented levels of global debt, many participants are not deleveraging due to the necessity of managing risks and maintaining participation in a volatile market. The paragraph emphasizes the challenges of navigating these uncertain times and the rapid pace at which market conditions can change.

The paragraph features a discussion between Terry Duffy and Dan Fannon about how raising margin requirements affects market volumes historically and during the current unique conditions. Duffy explains that the impact of margin changes can vary greatly depending on the situation; for instance, the circumstances differ between the 2008-09 financial crisis and the current geopolitical events like the Russia-Ukraine conflict and tensions in the Middle East. Therefore, predicting specific outcomes following margin adjustments is challenging due to the distinct nature of each situation.

The paragraph discusses the importance of carefully managing margins in financial markets to avoid disruptions. The speaker emphasizes the need for a proactive and deliberate approach to margins, rather than a reactive one, to maintain market stability. Suzanne Sprague adds that during times of increased volatility, people rely on central counterparties for risk management and collateralization. She notes record levels of margin requirements and collateral, which align with recent activity increases. The speaker also mentions investing in SPAN two technology to aid in decision-making, highlighting that managing margins is more of an art than a science.

The paragraph discusses a recent announcement regarding the sale of the Aastra joint venture with S&P Global for $3.1 billion, with an expectation that the proceeds will be split equally between the partners. Lynne Fitzpatrick mentions that the transaction's closure is likely about six months away due to regulatory reviews. While the company is not committing to specific plans for the use of the proceeds at this time, they will provide updates as the closing approaches. Terry Duffy adds that there are no expected regulatory hurdles that would prevent the transaction from closing, but it is a time-intensive process.

In this paragraph, Ken Worthington inquires about CME's decision to sell Aastra and their post-trade strategy following the sale. Terry Duffy responds by explaining that acquiring Aastra in 2018 and forming partnerships with entities like IHS Markit and later S&P made the business more attractive. Duffy states the decision to sell Aastra was strategic, allowing CME to monetize gains for shareholders without losing access to services they might still need. The focus then shifts to Ben Budish from Barclays, who asks about the impact of pricing changes on collateral types. Lynne Fitzpatrick provides some data, indicating $79 billion in average cash balances and $173 billion in non-cash collateral for the quarter.

In April, the average cash balance and fee-eligible non-cash amounts have increased to $131 billion and $140 billion, respectively. There is heightened activity and margin, with a new soft cash minimum in effect. Most participants meet this 30% minimum. Terry Duffy acknowledges this trend and shifts focus to Bill Katz's question about non-U.S. growth. Julie Winkler explains international growth, reporting a record Q1 average daily volume of 8.8 million contracts, a 19% increase driven by strong performance across energy, agriculture, and foreign exchange asset classes.

The article's paragraph discusses CME Group's widespread international growth, particularly noting a significant increase in commercial participants and a record quarter for non-U.S. options growth. The growth is attributed to strategic initiatives, strong performance in the Asia-Pacific (APAC) and Europe, Middle East, and Africa (EMEA) regions, and increased activity from the buy-side community and quant funds in APAC. Student resources and customer engagement are highlighted as factors driving growth. The paragraph then transitions to a Q&A session where Owen Lau from Oppenheimer asks about the retail sector's growth, specifically regarding micro equity index and micro FX ADV, and its connection to a partnership with Robinhood. Julie Winkler addresses the retail performance and the role of micros and new futures brokers.

In Q1, the company experienced a record-breaking quarter for its retail segments, with significant growth across key metrics, including a 10% increase in revenue and a 44% surge in new client acquisition, reaching over 83,000 new traders. Global participation rose by 17% to over 350,000 traders. Growth was consistent across all regions, highlighting the effectiveness of global partnerships and the importance of the micro suite, with total micro volume and average daily volume both increasing. There was strong demand for micro equities, metals, and cryptocurrencies, indicating a diverse product base. New strategic partnerships with firms like Robinhood and eToro played a key role in customer education and onboarding. The company plans to focus on product innovation and recently launched new offerings like micro agriculture products.

The paragraph discusses the factors contributing to strong revenue growth in market data. A 3.5% price increase implemented in January significantly contributed to this growth. Additionally, there was an increase in professional subscribers to real-time market data, driven by higher demand and the aforementioned price hike. The company also saw notable growth from nonprofessional, retail users who needed market data access. Growth in derived data instruments contributed as well. On the nonrecurring revenue side, an uptick over previous quarters was recorded, including $3.5 million from audits and other true-ups.

The paragraph is part of a discussion during a financial earnings call, where executives are addressing questions about their company's performance and strategy. An unidentified speaker begins by highlighting the challenges in predicting certain trends but notes significant growth in demand from retail and nonprofessional subscribers in their retail business. Craig Siegenthaler from Bank of America then asks about their competitive positioning against international futures exchanges, citing concerns about emerging trade conflicts. Lynne Fitzpatrick responds by emphasizing their unique product offerings and the liquidity available through their markets, which operates 24/7, as advantages over local exchanges.

The paragraph discusses the CME Group's international market presence and growth, emphasizing the unique diversity and depth of its products, such as the treasury and U.S. rate curves and energy products. Julie Winkler highlights the significant year-on-year growth in equities trading, driven by buy-side and sell-side activities, particularly in EMEA and LATAM. Despite market volatility and tariff issues, clients value their partnership with CME Group for its reliability and liquidity access. Terry Duffy points out that record volumes from outside the U.S., at 8.9 million contracts a day, serve as a key performance metric, showcasing CME Group's success and ongoing expansion. The paragraph concludes with the transition to a question from Brian Bedell of Deutsche Bank.

In the paragraph, Brian Bedell asks about the role of micro futures in retail trading, the use of other contracts by retail users, and the impact of volume tiers on revenue per contract (RPC). Lynne Fitzpatrick responds by explaining that volume tiering applies to individual asset classes rather than across all products. She notes that high volumes, especially during volatile periods, result in significant tiering impacts. The record overall volume has positively affected interest rates, equities, agriculture, and FX markets. This increase in trading volume is profitable for the company due to high operating leverage and incremental margins.

The paragraph discusses the strategic introduction of micro contracts to cater to diverse retail customers with varying account sizes. While micros suit those with smaller accounts, larger retail accounts also exist, and traders engage in substantial contracts like e-minis and full-size gold or cryptocurrency contracts. This reflects the diverse product offerings and changing market dynamics, as seen with the historical evolution of contract sizes, such as the transition from smaller S&P 500 contracts to e-minis. The choice of contract size depends heavily on the individual trader's account size and market participation.

The discussion revolves around the trading of gold contracts, emphasizing that they vary in size to cater to different participants' needs. It's noted that the value of gold contracts depends on the current price of gold, which affects their risk and cost. The commentary highlights the growing participation in micro gold contracts, particularly from retail and small institutional investors, as gold prices have risen significantly. In response, fees for these smaller products have been increased starting February 1st, reflecting their importance and the strategic exercise of pricing power, similar to adjustments made historically in the equity market.

In the conversation, Terry Duffy discusses the evolving nature of retail trading and its sustained engagement in the market, especially in April. While he doesn't provide a specific breakdown of retail revenue from market data or trades, Duffy attributes the durability and growth of retail participation to advancements in technology and the expanded role of retail brokers, such as offering futures trading, which was not prevalent in the past. He mentions that tools and access to global markets, like those provided by the CME, have enabled a broader and more diverse retail market. Duffy sees this trend of increased retail engagement continuing due to technological advancements.

In the paragraph, Ashish Sabadra from RBC Capital Markets inquires about the energy sector's performance and the distinction between WTI and Brent, as well as natural gas. Derek Sammann responds by highlighting the record-breaking year in 2024, with revenues exceeding $800 million from clearing activities. He notes a strong start to the current year, with significant growth in volumes and open interest, particularly in energy options and futures. Sammann emphasizes the widespread growth across various client segments and regions, with energy contributing to record revenues outside the US. He also discusses the positive structural shift positioning Henry Hub and WTI as global benchmarks, evidenced by increased client participation and regional growth.

The paragraph discusses the expansion of net new energy customers in Europe and Asia due to the U.S. producing and exporting products at record levels. The CME Group believes it is well-positioned with benchmark products to manage these trends, citing steady market shares in WTI and Henry Hub futures and an increase in options market share. The focus is on global client adoption of their benchmarks due to liquidity and infrastructure benefits. The paragraph concludes with a question from Chris Allen of Citi about the potential implications for the energy and agriculture markets if there is a resolution to the Russia-Ukraine conflict.

The paragraph discusses the uncertainty surrounding the resolution of geopolitical issues affecting the Russian market and its impact on global energy prices. While expressing hope for a peaceful resolution, it emphasizes the potential delay in Russia's reintegration into the global market. The speaker mentions that the supply and demand dynamics will influence energy prices, with notable energy production in the U.S. playing a role. Derek Sammann adds that businesses have been adapting by redeploying supply chains, leading to record revenues in commodities, particularly in agriculture, energy, and metals.

The paragraph discusses how customers are responding to economic uncertainty by shifting to more stable sources of energy, particularly from the US, which has become a major exporter of WTI and natural gas. It highlights the growth in energy markets in the Middle East, Europe, and Asia, with a focus on risk management. Stephanie, speaking for Morgan Stanley, asks about cross-marketing benefits and future enhancements. Suzanne Sprague responds by noting progress in a cross-margin program with a fixed income clearing corporation, indicating that they are expanding to new participants and aiming for operational readiness by year-end, pending regulatory approval.

The paragraph highlights the interest from clients in taking advantage of offsets, leading to increased clearing membership. The company has delivered significant savings, upwards of a billion dollars, in their house program and aims to extend these benefits to customers. Terry Duffy emphasizes the scale of margin offsets they achieve daily, at $60 billion across asset classes, with $20 billion in rates alone, contributing to significant efficiencies for participants. The relationship with FICC is important, but the focus remains on creating cost-effective solutions across all asset classes. The discussion then shifts to Lynne Fitzpatrick addressing expense control, noting strong discipline this quarter, with expectations for continued growth due to several factors, including spending on Google.

The paragraph discusses increasing technology expenditures due to migration to the Google Cloud, with expectations of continued growth as more applications move there. Professional fees were lower this quarter but are expected to increase with larger projects. Higher marketing spending is anticipated in Q4 for large events. Merit increases will show half the impact in Q1 and the full impact for the rest of the year. The total Google spend in Q1 was nearly $20 million, with $19 million in technology and under $1 million in professional fees. The paragraph ends with a segue to a separate discussion about the launch of BrokerTec in Chicago, highlighting ambitions and potential benefits for competitive positioning.

The paragraph discusses the launch of a new central limit order book located near the core futures and options market, aimed at enhancing trading between cash and futures, especially for clients interested in relative value strategies. Set to launch in Q3 2025 with client testing starting around April, it aims to attract new clients and explore innovative trading methods within the interest rate complex. The new order book will complement the existing New York club venue, providing varied execution tools to meet different trading needs. Overall, this strategic development intends to ensure a broader client base by accommodating different trading preferences.

The paragraph discusses the importance of futurizing the marketplace, particularly in cash markets and the rates business, and how having operations set up in Chicago benefits CME's futures franchise. The discussion highlights the goal of ensuring that all participants feel comfortable and have access to the marketplace, with a specific focus on facilitating basis trading between treasuries and futures. The recent growth of BrokerTec and the aim to optimize practices around basis trading are mentioned, along with a reference to high trading volumes in April compared to more recent trends. Additionally, there is mention of a housekeeping question regarding Aastra's contribution in Q1 and the interest rate spreads on collateral balances.

In the paragraph, Terry Duffy and Lynne Fitzpatrick from CME Group address questions from Brian Bedell regarding their operations and financials. Terry Duffy clarifies that the decision to bring BrokerTec Chicago to Aurora was not influenced by basis trading but to offer participants flexibility in trading locations for cash and futures. Lynne Fitzpatrick discusses the earnings contribution of Aastra, noting it brought in $89 million in 2024 and typically ranges between $20 to $22 million per quarter. They mention that the collateral spread was 35 basis points this quarter, and 10 basis points on the non-cash side, consistent with previous quarters. Finally, Terry Duffy thanks participants and offers to follow up on any further questions.

This summary was generated with AI and may contain some inaccuracies.