CME Group Inc. (CME)

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CME Group, Inc. (CME)

Q4 2009 Earnings Call

February 4, 2010 8:30 am ET


John Peschier – Managing Director, Investor Relations

Craig Donohue – Chief Executive Officer

James Parisi – Managing Director and Chief Financial Officer

Kim Taylor – Managing Director & President, Clearing House Division

Rick Redding – Managing Director, Products and Services

Terry Duffy – Executive Chairman


Roger Freeman – Barclays Capital

Mike Vinciquerra – BMO

Howard Chen – Credit Suisse

Rich Repetto – Sandler O'Neill

Niamh Alexander – KBW

Dan Fannon – Jefferies & Company

Michael Carrier – Deutsche Bank

Ken Worthington – JP Morgan

Jonathan Casteleyn – Susquehanna



Good day everyone, and welcome to the CME Group fourth quarter 2009 earnings conference call. As a reminder, today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. John Peschier.

John Peschier

Thank you all for joining us today. Craig Donohue, our CEO, and Jamie Parisi, our CFO, will spend a few minutes outlining the highlights of the fourth quarter; and then we will open up the call for your questions. Also joining us for participation in Q and A today are Terry Duffy, our Executive Chairman; Rick Redding, our head of Products and Services; Phupinder Gill, our President; and Kim Taylor, our head of Clearing.

Before they begin, I will read the safe harbor language. Statements made on this call and in the accompanying slides on our website that are not historical facts are forwardlooking statements. These statements are not guarantees of future performance that 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 forwardlooking statements.

More detailed information about factors that may affect our performance may be found in our filings with the SEC, including our most recent Forms 10K and 10Q, which are available on the CME website.

During this call, we will refer to GAAP and nonGAAP pro forma results. A reconciliation is available in the press release, and there is an accompanying file on the investor relations portion of the site that provides detailed quarterly information on a GAAP and pro forma basis. With that, I'd like to turn the call over to Craig.

Craig Donohue

Thank you for joining us this morning. There has been much said about the challenges of 2009, and CME Group certainly wasn't exempt from those challenges. However, looking back at the year, we are pleased with the progress CME Group has made and the platform we've built for the future.

From the start of the year through the end, we sought opportunities amongst the challenges; and we were steadfast in pursuing and executing on those opportunities. I'm tremendously excited about how CME is currently positioned to pursue future growth.

To highlight a few of our key accomplishments over the past year, we successfully integrated NYMEX and COMEX into CME Group. In addition to the strong recent growth trends in energy and metals volumes, which I will discuss in greater detail in a moment, we've been working on several strategic fronts to leverage these businesses.

We've implemented global sales and marketing plans that include increased education and sales outreach to energy and metals customers, crossselling across asset classes, and extending our international incentive programs to these customers.

We've completed the clearing and technology integration of NYMEX and COMEX and achieved the full $60 million in run rate synergies.

We've built on the success of the CME ClearPort platform by launching 332 new products in 2009, and we have plans under development to continue adding new asset classes.

We've also scaled our technology for future growth. While exercising great expense discipline, we continued our ongoing focus on providing bestinclass technology by bringing on line a new state of the art data center. As part of this effort, we migrated the FX and equities complexes to new match engines; and customers have benefited from significant performance improvements.

We will migrate other asset classes over the next year. The flexibility of the new data center positions us well for future volume growth, ongoing performance improvements, and enhanced customer services. We see technology as helping us deliver better performance to our existing customers, as well as helping to attract new customers

As we have identified in the past, we are actively pursuing a broader global customer base. Over 2009, we made progress on several fronts in moving towards this goal. We worked on extending our global relevance by increasing the breadth of products we offer on Globex and developing key relationships with local regulators and market participants in several emerging geographies around the world.

We continue to strengthen our BM&FBOVESPA partnership, launched the Kospi 200 on Globex during nonKorean hours, and signed an agreement with Bursa Malaysia to provide global order routing and matching services for their derivatives business, which will also provide us with a license to use their crude palm oil settlement prices for future product development.

We are very pleased with the success we've seen with these partnerships, and we believe they provide us away strong base to aggressively market the full suite of CME Group products in those geographies. We are focused on positioning ourselves around the world to serve the customers of today as well as the customers of tomorrow.

As a measure of our global penetration, we increased our nonU.S. trading hours volume to 19% in the fourth quarter, up from 17% in the third quarter. While it is difficult to track precisely, we attribute much of this growth to targeted sales efforts in Europe and Asia.

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