2nd UPDATE:International Volume Rise Fuels Trade Revival At CME

CME Group Inc.'s (CME) chief executive on Thursday outlined a continued effort to capture more international business as the exchange operator reported a surge in non-U.S. trade.

Contract volume during European trading hours rose 75% during the first quarter of 2010 alongside a 55% lift in activity during Asia's trading day, helping CME's overall business return to double-digit volume growth as it reported that first-quarter earnings rose 21%.

"If you looked at average daily volume growth among the exchange market in Asia and Latin America, they were considerably in excess of those in North America and Europe," said CME CEO Craig Donohue. "That's going to continue to be the case."

CME, the biggest derivatives exchange operator in the world, looks to tap this growth via an array of partnerships with foreign bourses as a U.S. economic recovery takes shape, with trading activity on the rise in CME's interest-rate, foreign exchange and commodities markets.

A new trading hub in China, along with new products developed in conjunction with international exchange partners, are expected to bolster growth in trade at CME, said officials.

First-quarter profits of $240.2 million, or $3.62 a share--deemed the best quarterly results since 2008 by executives--topped year-ago results of $199.1 million, or $3 a share, as revenue jumped 7.1% to $693.2 million.

Analysts polled by Thomson Reuters had expected earnings of $3.60 a share on $702 million in revenue.

Shares were down 0.5% in early trading at $328.78.

CME, the biggest futures exchange operator in the world, has seen traders return to its markets over the past six months after the financial crisis drove banks and hedge funds to scale back investing activity.

The exchange has seen open interest rebound to pre-crisis levels, with average daily volume for the year to date rising 16% over 2009 levels, putting CME back on a path toward a compound annual growth rate of 18% seen from 2000 to 2009, according to the company.

New legislation aimed at tightening rules for off-exchange derivatives trading, expected to be debated on the floor of the U.S. Senate Thursday, are expected to provide a "positive catalyst" for CME's growth opportunities, though Executive Chairman Terry Duffy warned Thursday that too-onerous rules could drive the business offshore.

Duffy said that dealer banks will retain a strong position in the OTC market regardless of any new rules, and that for the time being CME remains focused on providing clearing services for the instruments, rather than listing them for trading.

The company continues to seek backers for a new service to clear foreign exchange swap products.

Duffy also saw progress for CME's goal of applying potential regulatory caps on speculative commodities trade to over-the-counter and foreign markets alongside domestic exchanges.

CME reported Thursday that the average rate per contract traded slipped to 82.1 cents in the first quarter from 83.9 cents a year earlier as more customers are trading interest-rate futures, which carry a lower trading fee.

Company officials said CME expects a $607 million deal to take over the Dow Jones index products to be neutral to slightly accretive over the next three quarters. (The indexes were owned by Dow Jones & Co., a subsidiary of News Corp. (NWS) and the publisher of this newswire and The Wall Street Journal.)

The company forecast full-year 2010 expenses to come in between $1.13 billion and $1.14 billion.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com

(Nathan Becker contributed to this article.)

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