(Reuters) -CME Group Inc on Wednesday reported higher-than-expected second-quarter profit, as an uncertain global backdrop of high inflation, weakening economic data and the war in the Ukraine led investors to boost their use of the exchange operator's hedging tools.
Stripping out one-time items, such as M&A costs, CME earned $1.97 per share in the quarter ended June 30, versus the consensus expectation of analysts of $1.93, according to Refinitiv IBES data.
Much of the beat came from better-than-expected earnings on cash balances in CME's clearinghouses, as well as income from recent joint ventures the exchange operator entered in to with OSTTRA and S&P DJI Indices, Goldman Sachs (NYSE:GS) analyst Alexander Blostein said in a note to clients.
Demand for CME's interest rate hedging tools has surged this year against the backdrop of rapidly rising interest rates as the U.S. Federal Reserve tries to tame runaway inflation by tightening monetary policy and dialing back pandemic-era stimulus.
"Several macroeconomic factors continue to contribute to an extremely complex market landscape, and the importance of risk management is accelerating," CME Chief Executive Officer Terry Duffy said on a call with analysts.
Wild swings in global markets during the quarter drove a 25% increase in the average daily volumes (ADV) of CME's contracts, led by double-digit growth in interest rate futures, equity index futures and foreign exchange futures, as investors hedged against future price moves.
Chicago-based CME's futures on options ADVs jumped 23%, cryptocurrency futures ADVs rose 89%.
Total revenue in the quarter rose nearly 5% to $1.24 billion.