CME GROUP INC. CME

Management strongly reiterated its stance against perpetual futures for institutional clients, citing their function as leverage spot products, reliance on funding rate adjustments, high leverage, and automated liquidations. They emphasized that these products do not provide the price or time certainty required for institutional hedging and are significantly more expensive than traditional futures. CME highlighted its crypto futures volume growth of over sevenfold in the past three years despite the existence of crypto perpetuals, underscoring the preference for its established products among its 94% institutional client base.

CME Group is actively expanding its product offerings, including the recent introduction of 24/7 crypto futures and 1-ounce gold contracts. Upcoming launches include single stock futures next week, Treasury Link in Q4 2026, and a pioneering compute futures market later this year. These innovations are aimed at enhancing risk management and capital efficiency for clients, building on the company's record-breaking performance in the first half of 2026.

Market Data revenue achieved a record $238 million, up 20% year-over-year, marking 33 consecutive quarters of growth and the eighth consecutive record quarter. This growth was driven by pricing adjustments, a 3.5% quarter-on-quarter growth in professional subscribers, and expansion in derived data and simulation trading device accounts. These simulation environments are acting as incubators, fostering a robust pipeline of traders who eventually become professional data subscribers.

The company highlighted compute futures as a significant innovation addressing an unmet need in risk management for data centers and AI. Partnering with Silicon Data, the product will be the first daily benchmark tracking the spot rental cost of GPUs. This will provide price discovery, procurement planning, and budgeting mechanisms for a wide range of commercial end-users, including AI labs, cloud providers, asset managers, and banks, effectively allowing customers to hedge a data center.

Management expressed optimism for the relaunch of single stock futures, noting that current market conditions, particularly the appreciation and volatility in equity markets, create a strong demand for efficient hedging tools. The new financially settled contracts are designed for broader accessibility to institutional and retail traders globally. Over 35 retail partners are targeting readiness for launch, viewing it as a significant retail growth catalyst.

The CFTC's stay on CME's 24/7 crude oil contract, contrasted with the approval of other novel contracts like the Nathan's Hotdog Eating Contest, raised concerns about regulatory consistency. Management views perpetual futures as swaps, not futures, due to their funding rate mechanism, and warned of potential systemic risks if equity perps were introduced with current designs, particularly due to auto-liquidation models in a market the size of U.S. equities.

CME's prediction markets, intentionally focused on economic outcomes rather than sports gambling, saw over 140,000 trading accounts this quarter, up 13% from last quarter. Average daily volume exceeded 4 million contracts, up about 40% versus Q1. While growing, the company noted that market data monetization from these markets is considered a longer-term opportunity, given the current level of volume.