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

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