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CME Group (CME)
Q4 2013 Earnings Call
February 04, 2014 8:30 am ET
John C. Peschier - Managing Director of Investor Relations
Phupinder S. Gill - Chief Executive Officer, Director, Member of Executive Committee and Member of Strategic Steering Committee
James E. Parisi - Chief Financial Officer and Senior Managing Director of Finance & Corporate Development
Terrence A. Duffy - Executive Chairman, President, Chairman of Executive Committee and Member of Strategic Steering Committee
Bryan T. Durkin - Chief Operating Officer
Jillian Miller - BMO Capital Markets U.S.
Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division
Kyle Voigt - Keefe, Bruyette, & Woods, Inc., Research Division
Christopher J. Allen - Evercore Partners Inc., Research Division
Kenneth Hill - Barclays Capital, Research Division
Michael Carrier - BofA Merrill Lynch, Research Division
Daniel Thomas Fannon - Jefferies LLC, Research Division
Alex Kramm - UBS Investment Bank, Research Division
Christopher Harris - Wells Fargo Securities, LLC, Research Division
Alexander Blostein - Goldman Sachs Group Inc., Research Division
Kenneth B. Worthington - JP Morgan Chase & Co, Research Division
Gaston F. Ceron - Morningstar Inc., Research Division
Robert Rutschow - CLSA Limited, Research Division
Previous Statements by CME
» CME Group Management Discusses Q3 2013 Results - Earnings Call Transcript
» CME Group Management Discusses Q2 2013 Results - Earnings Call Transcript
» CME Group Inc. (CME) Management Discusses Q2 2013 Results (Webcast)
John C. Peschier
Good morning, and thank you all for joining us today. Gill and Jamie will spend a few minutes outlining the highlights of the quarter, and then we'll open up the call for your questions.
Terry and Bryan are on the call as well and will participate in Q&A. Before they begin, I'll read the Safe Harbor language.
Statements made on the call and in the slides on the website that are not historical facts are forward-looking statements.
These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. For detailed information about the factors that may affect our performance may be found in our filings with the SEC, which are available on our website.
With that, I'd like to turn the call over to Gill.
Phupinder S. Gill
Thank you. Good morning, and thank you for being with us this morning. I'd like to take the opportunity to highlight 2013 results focusing on Q4 and then discuss the big picture environment for CME Group in 2014. Afterwards, Jamie will review our Q4 financial results.
During 2013, there were signs that the U.S. economy had regained some traction following its slowdown in late 2012 and early 2013. Fundamentally, deleveraging is behind us and the rebalancing that has taken place, positions the economy for growth. In addition, the annual budget deficit is expected to further tighten over the next few years, reflecting a healthy recovery of the private sector. The tone of the Fed is also positive and this, together with the continued energy boom, all bode very well for our benchmark products across all fixed asset classes.
Given all the fluctuations and uncertainty we have faced, our job has been to work on behalf of the industry from a regulatory perspective and to provide innovative ways for clients to manage risk. Our response to these challenges on many fronts have been exceptional and we are very proud of what we have accomplished and the way we have positioned our company. With that as a backdrop, our fourth quarter ADV growth was in line with what we have seen over the last few quarters. Average daily volume for our call futures and options complex was up 11% compared to fourth quarter 2012, driven primarily by continued strong growth in interest rates, which rose 29% during the fourth quarter compared to the prior year peak period. Eurodollar futures and options grew 48%, while treasury volumes rose 15%. In January compared to the same period last year, interest rate volume increased 18% and our Eurodollar business remains elevated, up 45% during the month which is a great sign for us.
Innovative product expansions launched in the last 3 years accounted for 4.5% of fourth quarter interest rate activity. Within our energy franchise, we have experienced a strong pickup during the winter months. In particular, we have seen strength in natural gas. December volume was up 40% year-over-year and January was very strong as well, up 30%. We drove strong growth in coal in Europe, up 90% in the fourth quarter compared to the same period of the prior year. In addition, volume in our Dubai Omani product grew 36% during the year to more than 6,000 contracts per day, and January activity continues to grow up around 54% to 8,200 contracts per day, including a record day a few weeks ago.
Our other product areas had lower volatility during the year including equities, FX and agricultural products. The steady rise in equity market value during 2013 was not conducive for driving equity volume growth, although we outperformed our primary U.S. peer. However over the last month, there has been a decent pickup in volatility impacting several product and the volume across the board has responded accordingly. Our global focus continues to drive outside growth in volumes overseas.
During the fourth quarter, Latin America volumes were up 36%; Asia and Europe volumes were up 12%; with North America up 8%. In addition, we look to expand our global presence by adding new clearing members in key areas. During the quarter, we added China merchants futures as our fifth Asian clearing member, which allows us to better address the needs of our increasing client base in the region. We will continue to enhance and expand our network of clearing members there, allowing us to bring our wide range of global benchmark products to new Asian client segments.