By Jaiveer Shekhawat and Laura Matthews
(Reuters) -CME Group Inc reported a rise in second-quarter profit on Wednesday, as traders turned to the world's largest derivatives exchange to hedge against market volatility triggered by recession fears.
Demand for CME's risk-hedging investment products held steady as investors navigated a market riddled with worries of a looming recession and high interest rates.
"Given ongoing uncertainty in both macroeconomic and geopolitical environments, market participants continued turning to CME Group (NASDAQ:CME) risk management products and services in Q2," CME Group Chief Executive Officer Terry Duffy said.
The company, known mainly for its futures products mostly used for commodities trading, posted a roughly 10% rise in revenue in the quarter ended June 30 to $1.4 billion.
Clearing and transaction revenue rose 9% to $1.1 billion, while revenue for market data and information services climbed 8% to $163 million over the same period.
Daily volume averaged 22.9 million contracts.
Options, whose average daily volume rose 20% to 4.7 million contracts, played a critical role in the second quarter, attracting new participants seeking to protect their portfolios from market uncertainty.
CME's equity options on futures grew 1.3 million contracts per day while short-dated options, including zero days to expiry options volume rose 33% from 2022, making up 27% of its equity options volume.
CME said last week it had eliminated 100 jobs or 3% of its workforce, and reallocated some positions.
On an adjusted basis, net income rose to $836 million, or $2.30 per share, from $717 million, or $1.97 per share, in the year-ago quarter. The 17% EPS rise marks CME's eighth consecutive quarter of double-digit earnings growth.
"A whole host of factors" will provide a "tailwind" for CME, Duffy told analysts on a call, noting that risk management cannot be neglected.
"We have multiple examples of failure, whether it's in small bank failures and others that continue to not manage risk," Duffy said. "They are going to potentially have to manage that risk if they are going to stay in business."
As of June 30, CME had about $2 billion in cash and $3.4 billion of debt.