Industry Overview - The cryptocurrency market is driven by blockchain technology, which offers a decentralized payment system and enhanced security for users [2][3] - Recent positive developments, such as the repeal of an accounting rule by the SEC and the dropping of lawsuits against Coinbase and Robinhood, are favorable for investors [3] - The liberal policies of the U.S. government, particularly under President Trump, are seen as beneficial for the cryptocurrency sector, including the creation of a crypto reserve [4] Cryptocurrency Performance - Bitcoin is currently trading below $84,000, down from $106,000 in early February, reflecting a 6.2% decline over the past week [5] - Other cryptocurrencies like Ethereum, Solana, and Dogecoin have also seen declines of 13.5%, 2.6%, and 6.3% respectively, while XRP and Cardano have increased by 7.6% and 22.9% [5] Company Highlights - Coinbase is the largest registered crypto exchange in the U.S. and is well-positioned to generate improved revenues through USDC, staking, and international expansion, which accounted for 19% of its revenues in Q4 2024 [9][10] - Cipher Mining, a low-cost Bitcoin producer, has increased its self-mining hash rate to 13.5 EH/second and expects it to reach at least 23 EH/second by Q3 2025 [11][12] - CME Group, the largest futures exchange globally, reported a 9% year-over-year increase in average daily volume to 26.9 million contracts in 2024, benefiting from record volumes in various products [13][14] Strategic Initiatives - Coinbase is investing heavily in infrastructure and foundational platforms to enhance its service offerings and reduce transaction fees [10] - Cipher Mining is expanding its operations by acquiring additional land and planning to build a new 500-megawatt data center [12] - CME Group's investments in marketing and client education have generated approximately $1 billion in revenues over the past five years, with expectations for strong trading volumes in 2025 [14][15]

Core Viewpoint - The Zacks Securities and Exchanges industry is expected to benefit from increased trading volumes, product expansion, and the growing adoption of crypto assets, with a focus on enhancing non-trading revenue sources [1][6][4]. Industry Overview - The industry consists of companies that operate electronic marketplaces for trading stocks, options, bonds, and commodity contracts, generating revenue from fees charged to listed companies [2][3]. - Companies in this sector provide various data and listing services, including pricing data, analytics, and risk management solutions [3]. Trends Influencing the Industry - **Volatility and Trading Volume**: Trading volatility is driving sustainable growth in transaction and clearing fees, which are crucial for revenue [4]. - **Pro-Crypto Environment**: A potential second term for Trump may create a favorable environment for crypto trading, leading to increased fees and profits [5]. - **Mergers and Acquisitions**: The industry is experiencing ongoing mergers and acquisitions, allowing companies to enhance their product offerings and market reach [7][8]. Financial Outlook - The securities exchanges market is projected to grow at a CAGR of 12.1% to reach $49.6 billion by 2028, driven by rising demand for diverse investment opportunities [6]. - The Zacks Securities and Exchanges industry has outperformed the broader finance sector and the S&P 500, with a year-to-date gain of 23.2% [14]. Current Valuation - The industry is currently trading at a trailing 12-month price-to-book ratio of 3.94X, lower than the S&P 500's 8.35X and the finance sector's 4.2X [15]. Company Highlights - **Nasdaq**: Focused on maximizing non-trading revenue and technology services, with a consensus EPS growth of 12.8% and 13.6% for 2025 and 2026, respectively [17][18]. - **CME Group**: The largest futures exchange globally, with a projected EPS growth of 2.6% and 4.4% for 2025 and 2026 [20][21]. - **Intercontinental Exchange**: A leading operator of regulated exchanges, expected to see EPS growth of 10.9% and 11.7% for 2025 and 2026 [22][23]. - **Cboe Global Markets**: Positioned for growth with an expanding product line, anticipating EPS growth of 4.1% and 7.9% for 2025 and 2026 [24][25].

Core Insights - CME Group reported a record average daily volume (ADV) of 33.1 million contracts in February 2025, marking a 12% increase year-over-year [1] - The interest rate complex achieved a record monthly ADV of 19.2 million contracts, driven by significant activity in U.S. Treasury futures and options [1][2] - February 2025 also saw record ADV in international markets, agricultural products, and cryptocurrency [2] Volume Statistics - Interest Rate ADV reached 19.2 million contracts, with U.S. Treasury futures and options at 13 million contracts [3] - Equity Index ADV was 7.2 million contracts, with Micro E-mini Nasdaq-100 futures increasing by 30% to 1.6 million contracts [3] - Energy ADV totaled 2.8 million contracts, with a record in Energy options at 552,000 contracts [3] - Agricultural ADV was 2.1 million contracts, with corn futures up 28% to 586,000 contracts [3] - Foreign Exchange ADV increased by 25%, with Canadian Dollar futures rising by 55% to 115,000 contracts [3] - Metals ADV increased by 33%, with Micro Gold futures up 183% to 147,000 contracts [3] - Cryptocurrency ADV surged by 234%, with record monthly Ether futures at 15,000 contracts [3] International Activity - Record monthly international ADV reached 9.5 million contracts, with EMEA ADV up 17% to 7 million contracts and Asia ADV up 22% to 2.1 million contracts [3] Additional Metrics - BrokerTec European Repo average daily notional value increased by 20% to €331.3 billion, while U.S. Repo ADNV rose by 8% to $323.8 billion [6] - EBS Spot FX ADNV increased by 15% to $70.1 billion, with FX Link ADV up 93% to 41,000 contracts [6] - Customer average collateral balances for performance bond requirements were $76.7 billion for cash collateral and $178.0 billion for non-cash collateral [6]

Core Insights - CME Group, the leading derivatives marketplace globally, will have its Global Head of Fixed Income, Mike Dennis, and Executive Director of Investor Relations, Adam Minick, present at the 46th Annual Raymond James Institutional Investors Conference on March 4, 2025 [1] - The presentation will be available for livestreaming on CME Group's Investor Relations website, with a replay available approximately 24 hours after the conference [2] Company Overview - CME Group enables clients to trade a variety of financial instruments including futures, options, cash, and OTC markets, allowing market participants to manage risk and seize opportunities effectively [3] - The company offers a wide range of global benchmark products across major asset classes such as interest rates, equity indexes, foreign exchange, energy, agricultural products, and metals [3] - CME Group operates the CME Globex platform for futures and options trading, BrokerTec for fixed income trading, and EBS for foreign exchange trading, in addition to being a leading central counterparty clearing provider through CME Clearing [3]

Financial Performance - Total revenues for 2024 reached $6,130.1 million, an increase of 9.8% from $5,578.9 million in 2023[333]. - Net income for 2024 was $3,525.8 million, up 9.3% compared to $3,226.2 million in 2023[335]. - Earnings per share attributable to common shareholders increased to $9.69 in 2024, a rise of 9.3% from $8.87 in 2023[333]. - Operating income for 2024 was $3,931.5 million, representing a 14.5% increase from $3,435.7 million in 2023[333]. - Comprehensive income for 2024 was $3,475.9 million, an increase from $3,303.9 million in 2023, reflecting a growth of 5.2%[335]. - Cash provided by operating activities for 2024 was $3,690.5 million, compared to $3,453.8 million in 2023, reflecting a growth of 6.8%[347]. - Cash dividends declared for 2024 were $3,584.2 million, an increase from $3,235.5 million in 2023[349]. - Total revenues for 2024 reached $6,130.1 million, an increase of 9.8% from $5,578.9 million in 2023[391]. - Clearing and transaction fees totaled $4,988.2 million in 2024, up from $4,588.5 million in 2023, reflecting a growth of 8.7%[391]. - Interest rates revenue increased to $1,659.6 million in 2024, a rise of 6.5% compared to $1,558.4 million in 2023[391]. - Market data revenue grew to $710.2 million in 2024, representing an increase of 7.0% from $663.7 million in 2023[391]. Assets and Liabilities - Total assets as of December 31, 2024, were $137,447.0 million, compared to $129,706.1 million in 2023, reflecting a growth of 5.3%[331]. - Total liabilities increased to $110,960.1 million in 2024, up from $102,968.2 million in 2023, marking a rise of 7.7%[331]. - Total cash, cash equivalents, and restricted cash at the end of 2024 amounted to $101,794.1 million, up from $93,109.7 million at the end of 2023[349]. - The balance of accumulated other comprehensive income (loss) was $(105.5) million at the end of 2024, compared to $(55.6) million at the end of 2023[344]. - The balance of contract liabilities was $15.6 million as of December 31, 2024, compared to $13.2 million in 2023[391]. - Cash performance bonds increased to $96,036.4 million in 2024 from $87,285.5 million in 2023, representing an increase of 10.0%[407]. - Total letters of credit decreased to $7,760.7 million in 2024 from $8,548.1 million in 2023, a decline of 9.2%[410]. - The net book value of property decreased to $386.2 million in 2024 from $409.5 million in 2023, a decrease of 5.7%[411]. - The carrying amount of the company's investment in GME Holdings was $11.6 million at December 31, 2024, following a net gain of $9.2 million from a share transaction[417]. - The carrying amount of the company's investment in OSTTRA was $1.2 billion at December 31, 2024[418]. Debt and Credit Facilities - The company's long-term debt is rated investment grade by two major rating agencies, with a current outstanding amount of $3.4 billion[168][307]. - The company maintains a $7.0 billion multi-currency line of credit, with the option to increase it to $10.0 billion, to provide liquidity in case of clearing firm defaults[313]. - Long-term debt outstanding decreased to $2,678.2 million in 2024 from $3,425.4 million in 2023, a reduction of 22.0%[423]. - The company has a committed facility of up to $750.0 million for foreign currency conversions, which is subject to annual renewal[315]. - The company maintains a 364-day multi-currency line of credit of up to $7.0 billion, with $10.1 billion in guaranty fund contributions available to collateralize the facility[403]. - CME has a committed facility of up to $750.0 million for foreign currency conversions, currently with no outstanding trades under this facility[405]. Expenses and Compensation - Compensation and benefits expenses rose to $850.3 million in 2024, a slight increase from $828.6 million in 2023[333]. - Stock-based compensation for 2024 was $89.5 million, slightly higher than $82.9 million in 2023[347]. - The total compensation expense for stock-related awards in 2024 was $90.4 million, an increase from $83.7 million in 2023[477]. - The total unrecognized compensation expense related to employee stock-based compensation arrangements as of December 31, 2024, was $139.6 million, expected to be recognized over a weighted average period of 2.2 years[477]. - Aggregate expenses for defined contribution savings plans amounted to $20.8 million in 2024, up from $19.7 million in 2023 and $18.3 million in 2022[444]. Taxation - Income before income taxes for 2024 was $4,541.4 million, an increase of 9.3% from $4,153.6 million in 2023[426]. - The total income tax provision for 2024 was $1,015.6 million, up from $927.4 million in 2023, reflecting a 9.5% increase[426]. - The effective tax rate for 2024 was 22.4%, slightly higher than 22.3% in 2023[426]. - Deferred income tax assets increased to $142.0 million in 2024 from $134.4 million in 2023[428]. - The company reported gross unrecognized tax benefits of $251.6 million in 2024, a decrease from $264.1 million in 2023[430]. Pension and Employee Benefits - The balance of the projected benefit obligation for the pension plan increased to $364.0 million in 2024 from $351.5 million in 2023[434]. - The fair value of pension plan assets rose to $367.5 million in 2024, exceeding the pension benefit obligation by $3.5 million[436]. - The net pension expense for 2024 was $17.0 million, compared to $18.3 million in 2023[438]. - The discount rate used to determine the end-of-year projected benefit obligation increased to 5.70% in 2024 from 5.20% in 2023[438]. - The asset allocation for the pension plan as of December 31, 2024, was 45.7% in fixed income, 4.3% in money market funds, 37.4% in U.S. equity, and 12.6% in foreign equity[440]. - The actuarial loss balance for the pension plan decreased from $33.0 million at the beginning of 2024 to $20.8 million by the end of the year[443]. - Anticipated benefit payments from the pension plan for 2025 are projected at $34.9 million, increasing to $38.4 million by 2029, with total payments of $196.2 million expected from 2030 to 2034[443]. Market Data and Trading - In 2024, 85% of the derivatives contract volume was derived from exchange members, indicating a strong reliance on member trading activities[170]. - Aggregate performance bond deposits for clearing firms amounted to $291.5 billion as of December 31, 2024, which includes cash and non-cash deposits[316]. - The average rate per contract for the derivatives business is subject to fluctuations, making it difficult to predict future rates[169]. - Revenue from clearing and transaction fees is recognized upon successful execution of trades, with minimal remaining revenue recognized over the short-term period[386]. - Market data and information services revenue is recognized monthly as customers receive and consume the benefit of the services[389]. Shareholder Information - The company has authorized a share repurchase program of up to $3 billion for Class A common stock, with no shares repurchased as of December 31, 2024[474]. - As of December 31, 2024, there were 1,087,358 shares of restricted stock and restricted stock units outstanding, with a weighted average grant date fair value of $219[479]. - The total fair value of restricted stock, restricted stock units, and performance shares that vested in 2024 was $61.4 million[480]. - The Employee Stock Purchase Plan (ESPP) allowed employees to purchase 37,466 shares of Class A common stock in 2024, with an annual expense of $0.8 million recognized for the purchase discount[481]. - As of December 31, 2024, CME Group has approximately 4.6 million shares of Series G Non-Voting Convertible Preferred Stock outstanding, which is convertible into Class A common stock at a 1:1 rate[463].

Group 1 - CME Group achieved a new single-day volume record of 67,124,571 contracts traded on February 25, 2025, surpassing the previous record of 66,256,756 contracts set on March 13, 2023 [1] - The company reported new daily volume records in its interest rate complex, indicating increased market activity amid heightened uncertainty [1] - CME Group's Chairman and CEO, Terry Duffy, highlighted that investors are seeking to protect their portfolios, leading to a focus on innovative risk management solutions and $60 billion in capital efficiencies across asset classes, including $20 billion in daily margin savings in interest rates [1] Group 2 - CME Group provides a wide range of tools for managing risk across the yield curve, including U.S. Treasuries, SOFR, Fed Funds, €STR, and credit products [1] - The company enables clients to trade futures, options, cash, and OTC markets, optimizing portfolios and analyzing data to manage risk and capture opportunities [2] - CME Group operates one of the world's leading central counterparty clearing providers, CME Clearing, and offers trading through various platforms including CME Globex, BrokerTec, and EBS [2] Group 3 - On February 25, 2025, the volume breakdown included 50,924,122 contracts for interest rate futures and options, and 40,664,890 contracts for U.S. Treasury futures and options [4] - Specific contract volumes included 6,543,368 for 2-Year U.S. Treasury Note futures, 4,076,504 for Ultra 10-Year U.S. Treasury Note futures, and 2,831,906 for U.S. Treasury Bond futures [4]

Group 1 - CME Group has launched new financially settled options on Bitcoin Friday futures, which are now available for trading [1][2] - The first trade of these options occurred on February 23, executed between Cumberland DRW and Galaxy, and cleared by Marex [1][2] - Giovanni Vicioso, Global Head of Cryptocurrency Products at CME Group, highlighted that these smaller sized, cash-settled contracts will enhance traders' ability to manage short-term bitcoin price risk [2] Group 2 - The new options products are designed to provide increased liquidity, flexibility, and optionality for market participants, as stated by Roman Makarov from Cumberland DRW [2] - Marex Capital Markets expressed excitement over clearing the first block trade, emphasizing that these contracts will improve visibility into short-term volatility [2] - Mike Harvey from Galaxy noted that the low notional value of the contracts makes them accessible to a wide range of market participants, with a settlement time of 4 p.m. New York adding precision to trading strategies [2] Group 3 - The new options on Bitcoin Friday futures will complement CME Group's existing offerings, which include physically-settled options on Bitcoin, Ether, Micro Bitcoin, and Micro Ether futures, thereby providing additional risk management flexibility [2]

Core Viewpoint - CME Group and DTCC are expanding their cross-margining arrangement to enhance margin savings and capital efficiencies for end users by December 2025 [1][2]. Group 1: Cross-Margining Arrangement - The proposed enhancement will allow eligible end user clients at CME Group and DTCC's Fixed Income Clearing Corporation to access capital efficiencies when trading U.S. Treasury securities and CME Group interest rate futures with offsetting risk exposures [2][3]. - Clients must use the same dually registered Futures Commission Merchant and broker/dealer at both CCPs to participate in end-user cross margining [2][3]. - The arrangement aims to encourage greater utilization of central clearing, thereby reducing systemic risk in the market [2][3]. Group 2: Benefits and Goals - The collaboration between CME Group and DTCC focuses on extending cross-margin benefits to more customer accounts and potentially to other products, enhancing efficiency, cost reduction, liquidity, and risk management in U.S. Treasury markets [3]. - The arrangement will designate cross-margin accounts, allowing eligible positions to offset with CME Group interest rate futures, and participants can direct futures to these accounts throughout the day [3]. Group 3: Company Background - CME Group is the leading derivatives marketplace, enabling clients to trade various financial instruments and manage risk effectively [4]. - DTCC, with over 50 years of experience, serves as the premier post-trade market infrastructure, automating and standardizing financial transaction processing to enhance efficiency and transparency [6][7]. - In 2023, DTCC processed securities transactions valued at U.S. $3 quadrillion and provided custody for securities valued at U.S. $85 trillion [7].

Group 1 - CME Group is one of 870 individual stocks in the Finance sector and is currently ranked 1 in the Zacks Sector Rank [2] - CME Group has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook with a 1.7% increase in the consensus estimate for full-year earnings over the past quarter [3] - CME has gained about 8% year-to-date, outperforming the Finance sector's average return of 6.4% [4] Group 2 - CME Group belongs to the Securities and Exchanges industry, which includes 7 companies and is currently ranked 144 in the Zacks Industry Rank, with an average gain of 8.4% this year [5] - Main Street Capital, another Finance stock, has also outperformed the sector with a year-to-date return of 7.7% and has a Zacks Rank of 2 (Buy) [4][6] - The Financial - SBIC & Commercial Industry, which includes Main Street Capital, is ranked 44 and has returned 7.4% so far this year [6]

Group 1 - CME Group operates a global marketplace for trading futures and options and is the dominant player in this sector [1] - CME Group has been publicly traded since 2002, transitioning from a mutually owned model to a public company [1] Group 2 - The article reflects an independent analysis and investment perspective focused on the intersection of value and growth, particularly in small-cap companies [1]