CME Group Inc. (CME) on Monday reported a 22% fall in December
trading volume, leaving the world's largest futures exchange
operator with its lowest annual increase since 1999.
Reduced activity in its core interest-rate complex left the
Chicago-based company with year-on-year declines in four of the
last 12 months.
CME and other global exchanges have seen their share prices
tumble as five years of double-digit growth gives way to an
investor focus on new product development such as clearing and
listing over-the-counter products.
The Chicago-based group has spent $22 billion over the past two
years buying the Chicago Board of Trade and the owner of the New
York Mercantile Exchange to diversify its product offerings.
Volume rose 4% in 2008, including trades through Nymex, but were
up just 2% including legacy CME and CBOT business.
CME shares reversed an early decline to trade up 3.2% at $219.30
but have lost about two-thirds of their value over the past 12
months.
IntercontinentalExchange Inc. (ICE) shares were down 8.8% at
$77.11 after it reported a 21% gain in December futures volume,
bringing its 2008 total 21% higher than 2007 levels.
Trading activity in CME's interest rate futures, which
historically have accounted for 60% of CME volume, fell 12% in
2008. CME officials have attributed the decline to a gap between
the federal funds rate and the London Interbank Offered Rate, a
benchmark for global floating rate lending.
Volume gains in equity index, foreign exchange and commodity
products helped offset 2008's drop-off in the interest-rate
complex.
For the third straight month, average daily trading volume for
CME's equity-index complex outpaced its core interest rate product
line.
An average of about 2.9 million electronically traded mini-sized
Standard & Poor's 500 index contracts were traded last month,
up 15% from December 2007.
Total interest rate volume for Eurodollar, federal funds and
Treasury futures averaged about 2.7 million contracts per day, down
49% from the year-ago period.
For the year, an average 6.1 million contracts were traded each
day in the interest rate complex, down 12% from 2007. The stock
index complex was up 37% over the same period, with daily volume
averaging about 3.5 million contracts.
Equity index products have thrived on volatility, and traders of
stock index contracts are not tied to mortgage activity, which fell
sharply last year.
The lack of mortgage players due to the credit crunch
contributed to reduced activity in Treasury futures and options.
CME Treasury volume was down 59% in December, averaging about
983,000 contracts per day.
Eurodollar futures, considered CME's benchmark interest rate
product, sustained volume losses because of the still-abnormally
wide spread separating the underlying London Interbank Offered Rate
and the U.S. federal-funds rate. While that spread has narrowed in
recent weeks, it remains difficult to utilize Eurodollar futures as
a measurement of U.S. funds rate expectations.
Eurodollar futures and options volume fell 40% in December, with
average daily volume at almost 1.7 million contracts.
Prior to the credit crunch, the three-month dollar Libor was
about 10 to 15 basis points above the funds rate. Monday morning,
that spread was at about 132 basis points.
Separately, the Federal Open Market Committee's decision on Dec.
16 to reduce its funds rate target to a record low range of 0.25%
to 0% greatly reduced volatility in fed-funds futures and options,
as the FOMC hinted that the funds rate target would stay at
historically low levels for a long time. CME said its fed-funds
volume was down 49% in December, with an average of almost 49,000
contracts per day.
CME remains the largest derivatives exchange by volume, trading
3.3 billion contracts in 2008 and topping Deutsche Boerse's
(DB1.XE) Eurex unit, where 2.17 billion derivatives contracts
changed hands last year, the Frankfurt-based exchange company
reported Monday.
ICE's total 2008 futures volume came in at 237.2 million
contracts.
Like CME, trading activity in Eurex's equity index products
outpaced interest rate futures, which declined 15.3% for the year;
equity index products gained 28%.
December trading activity on Eurex was off about 1%. Strength in
equity index derivatives, particularly futures on the Dow Jones
Euro STOXX 50 index, helped balance out a 29% year-on-year decline
in interest rate volumes.
Deutsche Boerse shares were up 2.3% at EUR55.50 in late-session
trading in Frankfurt.
Atlanta-based ICE benefited from a 53% gain in U.S. commodity
trading for December, though average daily commissions for OTC
energy products fell 4.6% in the fourth quarter.
ICE's three-month rolling average rate per contract rose for its
European futures business, while revenues fell in U.S. index and
currency products and held stable for U.S. soft agriculture
products.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com;
-By Howard Packowitz, Dow Jones Newswires; (312) 750 4132;
howard.packowitz@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.