CME GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2008

Summary

CME Group Inc. reported strong revenue growth in the second quarter and first six months of 2008, driven primarily by an increase in clearing and transaction fees, significantly boosted by the inclusion of CBOT (Chicago Board of Trade) products following their merger in July 2007. Total revenues surged by 71% and 80% respectively for the quarter and year-to-date periods compared to the prior year. This growth was supported by increased trading volumes across various asset classes, including equity and foreign exchange, spurred by market volatility related to the credit crisis and inflationary expectations. Expenses also rose, largely due to integration costs, higher compensation and benefits, and increased amortization of acquired intangibles. Despite rising expenses, the company maintained a strong operating margin. Financially, CME Group ended the period with substantial cash and cash equivalents. The company is actively pursuing a significant strategic acquisition of NYMEX Holdings, Inc., which is expected to close in the third quarter of 2008, and has secured substantial bridge financing to support this transaction. Additionally, a new share buyback program and a special dividend were announced, indicating a focus on returning capital to shareholders. The company's financial position remains robust, though it faces ongoing integration efforts and strategic growth initiatives.

Key Highlights

• 1Total revenues increased significantly by 71% for the quarter and 80% for the six-month period ended June 30, 2008, compared to the same periods in 2007, largely due to the inclusion of CBOT revenues and strong trading volumes.
• 2Clearing and transaction fees saw substantial growth, increasing by 81% and 92% for the quarter and six months respectively, driven by higher trading volumes and an increased average rate per contract.
• 3Equity product trading volume experienced a significant surge (31% for the quarter, 48% for the six months) due to increased market volatility, while foreign exchange products also saw robust growth (26% for the quarter, 21% for the six months).
• 4Operating expenses increased by 61% and 66% for the quarter and six months respectively, reflecting increased compensation and benefits, higher amortization of purchased intangibles, and depreciation and amortization costs related to the CBOT merger.
• 5The company ended the period with $1.07 billion in cash and cash equivalents, providing significant liquidity.
• 6CME Group is proceeding with the acquisition of NYMEX Holdings, Inc., expected to close in Q3 2008, and has secured a $3.2 billion bridge financing commitment.
• 7A new share buyback program of up to $1.1 billion and a special dividend of $5.00 per common share were announced, signaling a commitment to shareholder returns.

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