Cme - Income Collapses 42% -

haha - thats what happens when you let algos run your exchange.

let me get this straight.

volume down 11 per cent.

profits down 42 per cent.

that really adds up.

thats what u get when fee rebating, no liquidity providing, cheating, front running scum own your exchange.

ohno lets blame the locals instead.

do i hear adapt or die anywhere yet ? ? ? ? ? ?


CME Group Inc. (CME), the world’s largest futures market, reported a 42 percent drop in profit from a year earlier and said its new chief executive officer could take over formal duties next month.

Net income fell to $266.6 million, or $4.02 a share, from $456.6 million, or $6.81 a share, a year earlier, Chicago-based CME said today in a statement. The year-ago earnings included a $164.4 million tax adjustment. The first-quarter per-share profit beat the average estimate of $4 per share in a Bloomberg survey of analysts. Daily futures and options volume in the quarter dropped 11 percent to average 12.3 million contracts, the company said earlier this month.

Trading slowed in the first quarter across all financial asset classes as European banks sought less risk, hedge funds scaled back their investments, and interest rates held near zero, Jillian Miller, an analyst with BMO Capital Markets Corp., wrote in an April 12 note to clients. Futures contracts at CME Group tied to equity indexes and interest rates, two of its largest product groups, fell 18 percent and 13 percent, respectively, during the quarter, CME said April 3.
‘We See Risk’

“We believe the stock could under-perform today as we see risk to near-term and forward estimates,” Niamh Alexander, an analyst at KBW Inc., wrote in a report after the earnings were released. The exchange’s average daily volume in the current quarter of 10.6 million contracts is down 15 percent from the same period a year ago, she said. “Though April is typically the weakest month of the quarter with potential for higher volume as the quarter progresses, we still see downside risk” to earnings estimates of $4.41 a share, she said.

CME Group shares rose 0.3 percent to $274 in New York. The company has fallen 11.8 percent over the past year.

Chief Executive Officer Craig Donohue, 50, said today that the transition to promote President Phupinder Gill to chief executive is going faster than planned, with a formal hand-off possible by the May 23 annual shareholder meeting. Donohue, CEO for the past eight years, announced last month his plan to retire in December when his contract expires.

“This is my last earnings call,” Donohue said on a conference call with analysts and investors today to discuss the company’s performance.
Revenue Declines

Revenue dropped 6.9 percent to $775 million last quarter, from $832 million a year ago, the company said.

“CME’s core trading markets have been struggling for the past few months given its exposure to financial products, particularly rates,” Miller said in the April 12 note. She said she expected CME Group to earn $4.03 per share on an adjusted basis.

The company’s ClearPort service, which guarantees swap contracts with its clearinghouse, reported an 11 percent increase in volumes in the quarter. ClearPort generates the highest fees per contract at CME Group.

The exchange earned about $2 million in revenue in the first quarter from guaranteeing interest-rate and credit-default swaps with its clearinghouse, said Jamie Parisi, CME Group’s chief financial officer. The exchange charges $5 to $6 per million of notional value to clear rate swaps and between $7 to $8 per million for credit swaps, he said.

http://www.bloomberg.com/news/2012-...ome-drops-says-ceo-switch-accelerates-1-.html

 

The reason for the rise of CME and futures since 1998 was the repealment of the volker rule which allowed banks to participate in the futures,options, forex, and stock markets and banks tradin g their own account.

The volker rule prohibits banks from participating in the futures,stock, options or even forex markets for their own account. they can only take orders from clients or some market making but no trading own accounts like overnight or position trading or no speculation or no market manipulation or be neutral only.

the retail investors/trader is very small.

just look at the CME volume dramatic parabolic rise from small volume in 2000 to rapid volume in 2007 peak of CME volume.

Less participants making bets with each other. The CME is just casino. The more players the more money it makes. The big players like banks,broker/dealer prop desk have left. What you have is real hedgers(farmers,producers) and retail local traders.

the volker rule.

The banks were all responsible for the rise in futures and options market activity.

The banks were bascially trading with free money in their daytrading operations with the fed money. These banks have privilleges and lots of leverage that is not available to retail traders or hedge funds or prime broker clients. that was the main reason for hte liquidity. they couldn't lose with such low borrowing cost of free capital. these bank sponsored hedge funds don't even want or need outsider investors since they have more than enough capital

soros quantum hedge fund doesn't want any client since their fund is so big they don't accept any client investors. they have too much capital and the market is not big enough for their fund.they are overcapitalized. the options market is only 1 billion/year that is how much money is on the table.

 

CME announcement after the close? Some rumors. Some denials.

CME Group says no announcement on ag trading hours.
http://af.reuters.com/article/commoditiesNews/idAFL1E8FU8D120120430

"Any change in hours would appear aimed at fending off competition from the upstart IntercontinentalExchange Inc , which earlier this month announced plans to launch five grain and oilseed futures contracts in mid-May."

 

The cme didn't even have afterhours trading for futures before 2000. There is no market reason to even have afterhour trading. In some exchanges, the market is open for 4 hours per day 5 days per week. There is no reason to have 24 hour trading other than taking bets or getting volume and commissions for speculators. CME is a business like a casino. For the actual economic purpose of the market or exchange 4 hours is more than enough time for anyone who wants to buy or sell contracts. tjhere is no real volume afterhours. that is why the market is joke.

 

CME is not alone.

http://www.bloomberg.com/news/2012-04-30/nyse-profit-falls-44-on-merger-charges-trading-decline.html

It still baffles me that the exchanges haven't figured out that volumes are now falling due to the nature of business they encourage.

__________________
"Success is the ability to go from one failure to another with no loss of enthusiasm"

 

The nature of the business has now changed, and has done since around 2006.Many of the ex locals ( point and click style) have either left the business to more lucrative fields or are now just doing a few trades per day off the back of a fundamental/economic release data.I used to do 1000's spins a day ( 1998-2005). However, I have now changed my style to maybe doing as little as 5 trades per week with a view to taking 20- 50 ticks per trade.

I certainly have adapted and as of yet not died.

 

If you run a business where you were responsible for the bottom line, or if you give it some thought, you realize that it is entirely possible, and in fact common that small incremental changes in revenue can have large impacts on profitability.

A business with profits of $10 on $100 in sales would see a 50% drop in profits (if not more) with a mere 5% drop in revenue.

Business is a game of margins...

 

Play is down at all "casinos", but the "hold" is increasing to offset the loss in revenue:

http://www.hartfordbusiness.com/news20981.html

I'm sure the CME will figure out a way to increase their "hold", just as the real casions have. Less can sometimes be more, if managed properly.

 

The MF Global debable isn't going to help them either.

The Chicago exchanges lost a lot of trust over that. Thrust as we all know can takes years to build up and a day to come crumbling down...

 

Do you find that your profitability has remained similar to your higher-frequency trading years, while your stress level has decreased?

I now trade about ten percent of the volume I traded 5-7 years ago, but am focussed on making better quality trades. I find I don't get the "rush" that I used to feel, and corresponding stomach pains.