By Niket Nishant and Laura Matthews
(Reuters) - BGC Group's first-quarter profit nearly doubled, it said on Tuesday, as investors looking to navigate the uncertainty around monetary policy pushed trading volumes higher in the brokerage's rates and energy businesses.
The strong report comes less than a week after the company's FMX exchange, which is looking to take on derivatives trading giant CME Group (NASDAQ:CME), secured a minority investment from 10 financial market giants including Bank of America, Goldman Sachs and JPMorgan Chase (NYSE:JPM).
"We have built the fastest growing U.S. Treasury platform and now with the support of our partners, FMX is the only competitor to CME," BGC Chief Executive Howard Lutnick told analysts on a call.
The partners invested $172 million, valuing FMX at $667 million. Lutnick said the move will help to increase market share in Treasury and foreign exchange as the investment is a validation of "our technology and our vision to reshape the U.S. interest rate markets."
BGC's shares fell 3.5% to $7.90 on a day of weakness in the broader markets as caution prevailed among investors ahead of the Federal Reserve's interest rate decision.
"The stock has done quite well relative to other exchanges over last 6 months so (there) maybe just some profit taking as the broader market sells off today," said Andrew Bond, managing director and senior fintech analyst at Rosenblatt Securities.
Investors are hotly debating the trajectory of rate cuts after discouraging signs in the latest inflation and gross domestic product data, which have raised fears that the Federal Reserve may have to keep monetary policy tighter for longer.
The uncertainty has prompted traders to actively rejig portfolios across asset classes to maximize returns and hedge against risk.
Revenue in BGC's rates unit jumped 6.3%, while that of the energy, commodities and shipping business rose 32.1% from a year ago.
Foreign exchange revenue also rose 4.8% to $84 million, boosted by higher volumes across emerging market currencies and options.
Net income jumped to $46.4 million, or 10 cents a share, for the three months ended March 31, from $24.2 million, or 5 cents per share, last year.
(This story has been refiled to fix a typo in the CEO's name to 'Lutnick,' not 'Lutnik,' in paragraphs 3 and 4)