CME Group (CME) Q4 FY25 earnings call: guidance and Q&A

How is the customer base performing amidst volatility, especially given margin requirement increases in metals?

Management stated the customer base is very healthy across all asset classes, citing the silver market's new historic high despite margin changes as an example of resilience. Institutional base is growing double digits, and open interest is steady to increasing.

“I would say, overall, the customer is very healthy throughout all the different asset classes, but I wanted to call out your example of silver.”

asked by Daniel Fannon · answered by Terrence Duffy

What is the engagement like for prediction markets, especially from market makers, and what are the updated thoughts on the legal/regulatory environment, particularly regarding CFTC's stance?

New individual and institutional participants are engaging with prediction markets, including market makers new to CME. Terry Duffy emphasized CME's focus on market-based contracts, not sports gambling litigation, and confirmed the CFTC views these as legal swaps, which CME will continue to offer under their oversight.

“We are not going to get bogged down in a bunch of litigation over whether this is sports gambling or swaps markets. Today, they are called swaps markets, which we participate in, and we will do so.”

asked by Patrick Moley · answered by Terrence Duffy

Can management elaborate on recent pricing changes, particularly for market data, and provide context on the thought process for this year's adjustments?

Julie Winkler detailed a 3.5% rack rate increase for most market data products effective January 1, driven by new user expansion, product innovation, and pricing integrity, contributing to record market data revenue. Lynne Fitzpatrick added that transaction fee changes primarily impact metals, micro, crude oil, and grains, with incentive program revisions for rates. The company will move to more frequent, real-time fee adjustments.

“We did in January 1, institute a 3.5% rack rate increase across most of our market data products. And this was really a continuation of our price-to-value adjustments in ensuring that our data business certainly remains resilient.”

asked by Benjamin Budish · answered by Julie Winkler

Given the shift from annual December pricing announcements, will future increases be smaller, and what drove this change, as the old method provided transparency?

Terry Duffy stated that CME will make pricing changes as needed throughout the year, not necessarily adhering to an annual December schedule. He emphasized running the business in real-time to deliver value and grow the business, implying flexibility in the size and timing of future increases.

“I think what you're hearing us say is we're running this business on a real-time basis, and we are going to continue to do what's in the best interest of our clients and our shareholders going forward to grow the business.”

asked by Craig Siegenthaler · answered by Terrence Duffy

What is the interest from other distribution partners for prediction markets, and how is CME thinking about future product rollout, including financial KPIs and political contracts?

Tim McCourt noted robust pipeline with existing and new distribution partners, working to onboard them for event contracts. Terry Duffy clarified that CME is open to listing large-scale political contracts (e.g., presidential elections) but not smaller, localized ones, and is cautious about "cultural" contracts. The focus remains on risk-based contracts within the CFTC framework.

“We are not suggesting that we would not list political contracts. We are suggesting that we would not list certain political contracts. And I think there's a big difference there.”

asked by Brian Bedell · answered by Terrence Duffy

How should investors think about CME's prospective approach to capital allocation, especially regarding OSTTRA proceeds, and the durability of market data given AI disintermediation risk?

Lynne Fitzpatrick confirmed OSTTRA proceeds will be used for share repurchases over time. Julie Winkler stated market data's durability is strong due to recurring subscription revenue and its critical input role for clients' trading strategies, which AI enhances rather than disrupts. Terry Duffy clarified CME's data is proprietary and used for risk management, unlike other businesses potentially disrupted by AI.

“This is proprietary data that people need for risk management protocols and everything else that they do. So we're not in some of those other ancillary businesses that could be potentially disrupted by AI.”

asked by William Katz · answered by Terrence Duffy

How does CME view tokenized collateral, stablecoins, tokenized deposits, and tokenized money funds, and what steps are being taken to tokenize collateral?

Terry Duffy explained CME is rolling out an initiative with Google for tokenized cash with a depository bank. He stated that acceptance of other tokens depends on the issuer's reliability and associated risk, with a preference for tokens from systemically important financial institutions. CME is also exploring its own coin on a decentralized network for industry participants.

“So right now, we are looking at different forms of margin, but we are not going to put the enterprise at risk by taking something that we can't get our arms around on a token.”

asked by Michael Cyprys · answered by Terrence Duffy

What cross-margining programs are launching for client accounts, what adoption is anticipated, and how will treasury and repo clearing impact collateral balances?

Sunil Cutinho clarified that CME FICC cross-margining for clients is operationally ready and has generated $1.5 billion in savings for 18 firms, but SEC approval is still pending. Lynne Fitzpatrick noted that broader clearing mandates could add to collateral, and CME's offerings reinforce capital efficiencies by allowing offsets across futures, options, swaps, and FICC. Terry Duffy emphasized the growing value of the FICC arrangement, which has seen an uptick of several hundred million in offsets recently.

“The CFTC has, the SEC has not yet. We're hoping that comes shortly.”

asked by Ken Worthington · answered by Terrence Duffy