(Recasts with comments from conference call)
By Tom Polansek
CHICAGO, July 31 CME Group Inc will cut
costs by reducing hiring and employee travel to help compensate
for weak trading volumes, the chief financial officer said on
Thursday after the world's largest futures market operator
posted lower-than-expected earnings.
Shares fell 2.7 percent after CME Group said trading
volumes, along with clearing and transaction fees, dropped 12
percent in the second quarter as volatility levels slumped while
expenses were up 3.7 percent.
"We have refocused our teams on wringing out discretionary
expenses where possible for the remainder of the year," CFO
Jamie Parisi told analysts on a conference call to discuss
Net profits for the owner of the Chicago Board of Trade and
Chicago Mercantile Exchange fell to $263.8 million, or 79 cents
a share, from $311.2 million, or 93 cents a share, a year
Excluding a $14.5 million settlement of CME's claim against
bankrupt brokerage MF Global and other special items, earnings
were 77 cents a share. That was below analysts' expectations of
79 cents, according to Thomson Reuters I/B/E/S.
Revenue dropped 10 percent to $731.6 million
"The miss was driven by lower revenues as well as higher
expenses," said Richard Repetto, a principal for Sandler
The average rate per contract was 74.9 cents, up slightly
from a year earlier. Repetto said he had expected 75.9 cents.
Geopolitical uncertainty from conflicts in Israel, Ukraine
and other hot spots has kept energy traders on the sidelines,
Executive Chairman Terry Duffy told analysts on the conference
"I think these are all confusing signals to any energy
trader, and I would be afraid a little bit right now to trade it
also," Duffy said.
Energy volumes were down 19 percent in the quarter.
CME has looked overseas to boost business. The Chicago-based
company plans to launch European natural gas futures this year
and make a bid to administer the global price benchmark for
"We have confirmed our intention to tender for the London
gold benchmark," Chief Executive Phupinder Gill said on the
CME previously said it would be happy to administer, with
Thomson Reuters Corp, the gold price benchmark, known
as the "fix". The companies this month won a battle to
administer the silver benchmark.
European expansion has been a focus for CME after the
delayed launch of its first overseas exchange in London in
On Wednesday, the Chicago-based company said it will pay
about $655 million for two units of derivatives broker GFI Group
Inc in an attempt to expand its reach in the European
energy and global foreign exchange markets.
CME's stock was down 2.7 percent at 73.75 by 10 a.m. CDT and
is off 6 percent this year. Shares of rival
IntercontinentalExchange are down 13 percent this year.
(Editing by Lisa Von Ahn, Nick Zieminski and David Gregorio)