10-KPeriod: FY2008

CME GROUP INC. Annual Report, Year Ended Dec 31, 2008

Filed March 2, 2009For Securities:CME

Summary

CME Group Inc.'s 2008 10-K report details a year marked by significant strategic expansion through the acquisition of NYMEX Holdings, which broadened its product offerings into energy and metals. Despite facing a challenging macroeconomic environment characterized by credit market volatility and economic recession, CME Group demonstrated resilience, with total revenues growing by 46% to $2.56 billion, primarily driven by a 48% increase in clearing and transaction fees. The company's robust electronic trading platform, CME Globex, processed a significant majority of its trading volume. Key financial highlights include a strong operating income of $1.58 billion and net income of $715.5 million. However, the company also incurred a substantial non-cash impairment charge of $274.5 million on its investment in BM&F Bovespa due to market declines. CME Group emphasized its commitment to technological advancement, global reach, and serving over-the-counter markets as core growth strategies.

Financial Highlights

46 data points
Beta

Revenue

$2.56B

Net Income

$715.50M

27.9% Net Margin

EPS (Diluted)

$2.43

Total Assets

$48.16B

Cash & Equivalents

$297.90M

Free Cash Flow

$997.10M

Financial Statements
Beta
Revenue$2.56B
Operating Expenses$978.80M
Operating Income$1.58B
Net Income$715.50M
EPS (Basic)$2.44
EPS (Diluted)$2.43
Shares Outstanding (Basic)293.69M
Shares Outstanding (Diluted)294.83M

Key Highlights

  • 1CME Group completed the significant acquisition of NYMEX Holdings in August 2008, expanding its product portfolio to include energy and metals.
  • 2Total revenues increased by 46% to $2.56 billion in 2008, primarily driven by a 48% increase in clearing and transaction fees, reflecting higher trading volumes.
  • 3The company recorded a substantial non-cash impairment charge of $274.5 million on its investment in BM&F due to market downturns, impacting non-operating income.
  • 4CME Group's revenue streams are diversified, with clearing and transaction fees accounting for the majority (83%), followed by quotation data fees (11%).
  • 5The company highlighted its strong technological infrastructure, particularly the CME Globex electronic trading platform, which handled 79% of its average daily trading volume in 2008.
  • 6Despite an overall increase in trading volume, interest rate product volume declined due to the credit crisis, while equity and commodity product volumes showed growth.
  • 7The company maintained a robust financial position with $116.1 billion in performance bond collateral and a $6.6 billion financial safeguards package, underscoring its commitment to market integrity during a volatile period.

Frequently Asked Questions

CME Group's revenue grew significantly in 2008, primarily driven by the acquisition of NYMEX Holdings, which added energy and metals products to its portfolio. This, combined with organic growth and increased trading volumes across various product lines, particularly in equities due to market volatility, led to a 46% increase in total revenues to $2.56 billion. The clearing and transaction fees segment saw a substantial 48% increase, reflecting the higher volume of contracts traded and cleared.

The challenging economic environment, marked by credit market volatility and recessionary pressures, did impact CME Group. While increased volatility in some markets, particularly equities, drove higher trading volumes, the interest rate product segment experienced a decline due to factors like firm deleveraging and reduced credit availability. This economic turbulence also led to a significant non-cash impairment charge of $274.5 million on its investment in BM&F Bovespa due to market value declines.

CME Group's strategy for future growth is multi-faceted, focusing on growing its core business through product diversification and customer base expansion, globalizing its operations by targeting international customers, and expanding into over-the-counter (OTC) markets. The company aims to leverage its integrated clearing house, scalable infrastructure, and technological advancements to offer comprehensive trading and clearing solutions across a broader range of products and asset classes. It also seeks to capitalize on the increasing need for counterparty risk mitigation and clearing services.

Owning its clearing house (CME Clearing) is a core strategic advantage for CME Group. It allows the company to ensure the safety and soundness of its markets by acting as the central counterparty to all trades, thereby mitigating credit risk for its customers. This integrated model also enables CME Group to retain revenue from both trading and clearing, control its cost structure and technology development, and more efficiently introduce new products and services without reliance on external entities. The financial safeguards provided by the clearing house were particularly crucial during the 2008 financial crisis, ensuring no customer financial loss due to counterparty failure.