# CME Group Inc. (CME) — Business, Risks and Management Discussion

## Business

*From the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (accession 0001156375-26-000009), unless noted.*

CME Group operates futures and options exchanges and the clearing house that stands behind them, and it earns most of its money from a fee on every contract traded and cleared. Its four U.S. exchanges — CME, CBOT, NYMEX and COMEX — list benchmark contracts across six asset classes (interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals), plus cryptocurrency futures. The customers are professional traders, banks and other financial institutions, institutional and individual investors, corporations, producers, governments and central banks. In 2025, clearing and transaction fees were $5.28 billion of $6.52 billion in total revenue. Market data and information services added $803.1 million (12% of revenue), and other revenue, mostly connectivity, co-location and collateral-management fees, added $436.4 million. Because fees are charged per contract or on notional value, revenue moves with trading volume. Volume in turn tends to rise when economic and geopolitical uncertainty pushes clients to hedge or speculate.

The business has five parts:

- **Derivatives exchanges.** Futures and options trade mainly on the CME Globex electronic platform, which handled 93% of contract volume in 2025. SOFR options still trade by open outcry in Chicago, and some volume comes through privately negotiated trades. Key products include SOFR, U.S. Treasury and Fed Funds futures; E-mini S&P 500, Nasdaq-100 and Russell 2000 contracts; WTI crude and natural gas; corn, soybeans and wheat; gold, silver and copper; and Bitcoin, Ether, Solana and XRP. Members, who pay lower fees, generated 85% of contract volume in 2025.
- **Derivatives clearing.** CME's clearing house becomes the buyer to every seller and the seller to every buyer. It marks positions to market at least twice a day for futures and options. CME is designated a systemically important financial market utility. One clearing firm accounted for 12% of clearing and transaction fees in 2025.
- **Securities clearing.** In December 2025 the SEC approved CME Securities Clearing Inc. as a securities clearing agency. CME intends it to serve the SEC's mandate for central clearing of U.S. Treasury trades (from December 31, 2026) and repo trades (from June 30, 2027), and expected to launch it later in 2026. Here it competes with FICC, the incumbent, and with ICE Clear Credit.
- **Cash markets (BrokerTec and EBS).** These came with the 2018 NEX acquisition. BrokerTec runs electronic trading in cash U.S. Treasuries, European government bonds and repo. EBS runs spot FX, spot precious metals and non-deliverable forwards. Together they generated $283.7 million of transaction fees in 2025. New in 2025 were BrokerTec Chicago, a second cash-Treasury order book located alongside the Treasury futures, and FX Spot+.
- **Data services.** CME sells real-time and historical market data, both directly and through resellers. The two largest resellers accounted for about 30% of market data revenue in 2025, and about 53% of market data revenue came from outside the U.S. Through its UK-regulated subsidiary CME Benchmark Administration, CME also administers and licenses CME Term SOFR and Term €STR reference rates.

**Partnerships and joint ventures.** CME owns part of S&P Dow Jones Indices LLC with S&P Global. That stake carries a long-term exclusive license to list futures and options on the S&P 500; the license lasts until one year after CME's interest falls below 5%. CME also holds exclusive licenses on certain Nasdaq indexes through 2039 and Russell indexes through 2037. In December 2025 it formed FanDuel Prediction Markets Holdings LLC with FanDuel, part of Flutter Entertainment. CME owns 51% and accounts for the stake under the equity method; it contributed $10.2 million in cash. The venture offers retail customers simplified event contracts on financial and economic benchmarks and on sports. In October 2025 CME and S&P Global completed the sale of OSTTRA, the post-trade venture in which CME owned 50%, to funds managed by KKR. CME booked a $306.1 million net gain on the sale.

**Strategy.** Management lists three priorities. The first is growing futures and options globally, through micro-sized contracts, options, new products such as credit, Treasury bill and TBA mortgage futures, 24/7 crypto trading (planned from Q2 2026) and more international distribution. About 31% of electronic volume came from outside the U.S. in 2025. The second is diversifying revenue, through data, benchmarks and the cash markets. The third is capital efficiency for clients. CME estimates the average daily margin saving from offsets and cross-margining, including with FICC and OCC, at about $72 billion in 2025. A 10-year partnership with Google Cloud, signed in 2021, is moving CME's applications to the cloud. The migration of the clearing applications was due by the end of Q1 2026, and Google is building a private cloud region and co-location facility in Aurora, Illinois, to host the markets.

**Competition.** Rival exchanges include ICE, Cboe, Euronext, HKEX and Deutsche Börse. Newer entrants include FMX Futures Exchange, digital-asset platforms and prediction markets. In clearing, competitors include ICE, LCH, OCC, Cboe Clear, DTCC, Eurex Clearing and others. In the cash markets, rival venues often compete on price, offering rates well below BrokerTec's and EBS's.

CME had about 3,875 employees at December 31, 2025, 58% of them in the U.S.

## Risk factors

*From Item 1A of the FY2025 10-K (accession 0001156375-26-000009). The Q3 2026 Form 10-Q (accession 0001156375-26-000068) reports no material changes to these risk factors.*

The risks management treats as material fall into the following groups:

- **Volume depends on conditions CME does not control.** Revenue comes mainly from transaction fees, so it tracks trading volume, and volume tracks volatility, monetary policy, geopolitics, weather and clients' appetite for risk. Uncertainty usually lifts volume, but a long stretch of calm prices could cut it. Costs are largely fixed, so a drop in revenue would fall mostly through to net income.
- **Heavy regulation, and threats to the vertical model.** CME is regulated mainly by the CFTC, SEC, Federal Reserve and UK and EU authorities. If it failed to comply, it could lose its designations as an exchange and clearing house. Some of the largest clearing firms argue that exchanges should not own clearing houses, and they have sought rule changes that would let them clear CME-traded positions elsewhere. That would undercut CME's model of owning both trading and clearing. Other pending issues are proposed financial transaction taxes or CFTC user fees, proposals to repeal the 60/40 tax treatment of futures, rules for spot digital-asset markets, litigation over the legality of sports event contracts, and a Financial Stability Board proposal that clearing houses hold separate resources for resolution.
- **Competition and pricing pressure.** Competitors and new entrants, including crypto and prediction-market platforms that face lighter regulation, may undercut CME on fees, technology or product. Some rivals have used aggressive rebates in the past. Losing customers or cutting fees would reduce revenue and margins.
- **Clearing-house credit risk.** CME guarantees the trades its clearing firms submit. During 2025 it moved an average of about $6.7 billion a day between clearing firms in settlement. A default larger than the defaulting firm's margin and guaranty fund deposits could put CME's own capital at risk. BrokerTec Americas carries matched-principal counterparty risk and must keep its FICC membership and meet FICC margin calls. CME notes that running a securities clearing house will be new to it.
- **Technology, cyber and third-party dependence.** CME's role in markets makes it a target for cyberattacks and terrorism. An outage could cost it customers and expose it to liability. On November 27, 2025, a cooling failure caused by human error at its largest data center, owned and operated by CyrusOne, led CME to halt its markets temporarily. They reopened on a delayed basis the following day, and CME describes the impact as limited and not material. Moving its markets to Google Cloud adds execution risk.
- **Concentration and licensed intellectual property.** One clearing firm generates 12% of clearing fees, and two resellers generate about 30% of market data revenue. Much of CME's volume rests on indexes and price benchmarks licensed from S&P, Dow Jones, Nasdaq, FTSE Russell and price reporting agencies. Losing exclusivity, or renewing on worse terms, would hurt volume and revenue.
- **Growth, acquisitions and joint ventures.** Acquisitions and partnerships may not deliver the expected results. CME does not control some of its ventures, and deals could require impairments, dilutive equity issuance or more debt.
- **Member influence.** Nine directors own trading rights or are tied to firms that do. Class B shareholders elect six directors regardless of their economic ownership, and members have rights that protect their trading privileges and fees. Past attempts to remove the Class B board seats did not win the required votes, which limits some pricing and governance decisions.
- **Other risks.** CME carries about $3.4 billion of debt, and a ratings downgrade would raise its funding costs. Its average rate per contract swings with product, venue and customer mix. Its use of artificial intelligence carries risks, including errors, bias and intellectual property problems. Its foreign operations are exposed to currency moves.

## Management's discussion — fiscal 2025

*From Item 7 of the FY2025 10-K (accession 0001156375-26-000009).*

Fiscal 2025 was a record year. Total revenue rose 6% to $6.52 billion, and net income rose 15% to $4.07 billion, or $11.16 per diluted share, up from $9.67. Operating margin widened to 64.9% from 64.1%. Operating cash flow rose 16% to $4.28 billion.

- **Volume drove the revenue gain.** Average daily volume reached a record 28.1 million contracts, up 6%. Metals rose 34%, with gold up 58%. Equity indexes, energy and agriculture each rose 8%, and interest rates rose 4%. Foreign exchange fell 5% as central-bank policy became more predictable. Management cited tariffs, mixed inflation data, Federal Reserve rate cuts and geopolitical tension. CME estimates that higher volume added $261.2 million of futures and options fees, and a slightly higher average rate per contract ($0.696 against $0.692) added $28.5 million. The rate rose mainly because of a fee increase on February 1, 2025.
- **Market data and cash markets also grew.** Market data revenue rose 13% to $803.1 million on price increases and higher usage. Cash markets fees rose to $283.7 million from $276.7 million, helped by a 21% rise in U.S. repo average daily notional value after the debt-ceiling increase.
- **Expenses grew more slowly than revenue.** Operating expenses rose $92.5 million (4%) to $2.29 billion. The main drivers were salaries and headcount (+$41.6 million), technology support for the Google Cloud migration (+$27.5 million), fees for the OSTTRA sale (+$22.1 million), license fees (+$17.2 million) and legal costs for the Class B member lawsuit (+$15.0 million). Lower Google Cloud consulting fees and occupancy gains partly offset them.
- **Non-operating income rose 81% to $1.10 billion.** CME earned $5.25 billion on reinvested cash margin and guaranty fund deposits and passed $4.84 billion of it back to clearing firms. The non-operating total also included the $306.1 million gain on OSTTRA. The effective tax rate rose to 23.6% from 22.4% because of changes in state apportionment.
- **Capital and liquidity.** At year-end CME held $4.4 billion in cash and owed $3.4 billion in fixed-rate notes. It had an unused $2.3 billion revolving facility and a $7.0 billion 364-day secured facility for the clearing house. Its ratings were AA-/Aa3. The company targets a regular dividend of 50% to 60% of prior-year cash earnings and adds an annual variable dividend. In February 2026 it declared a $1.30 quarterly dividend and a $6.15 variable dividend. It expected about $85.0 million of capital expenditures in 2026, and $2.7 billion remained under its $3.0 billion buyback authorization.

## Current quarter — Q3 2026 (quarter ended September 30, 2026)

*From the Form 10-Q for the quarter ended September 30, 2026 (accession 0001156375-26-000068) and the Q3 2026 earnings release furnished as Exhibit 99.1 to the Form 8-K filed October 21, 2026 (accession 0001156375-26-000065).*

Higher volume drove the third quarter. Revenue rose 13% to $1.74 billion, which the company calls its highest third-quarter revenue on record. Net income rose 14% to $1.04 billion, and diluted EPS rose 16% to $2.89 from $2.49. Adjusted diluted EPS was $3.02, against $2.68 a year earlier; the largest adjustment is amortization of purchased intangibles. Operating margin widened to 65.7% from 63.3%. For the first nine months, revenue rose 9% to $5.32 billion, net income rose 12% to $3.23 billion, and diluted EPS was $8.96, up from $7.92.

- **Every asset class grew.** Average daily volume rose 16% to a third-quarter record of 29.4 million contracts, with growth in all six asset classes. Equity indexes rose 23%, led by E-mini Nasdaq-100, which was up 73% on what management calls skepticism about AI spending. Foreign exchange rose 19%, with Japanese yen contracts up 50%. Agriculture rose 18% (wheat +55%, corn +36%), energy 16% (WTI +32%) and interest rates and metals 13% each. Management cites persistent inflation, which it believes led the Federal Reserve to make its first rate increase in over three years. That pushed Treasury yields to multi-year highs, and 2-year and 10-year Treasury contract volume rose 35% and 27%. Management also cites the conflict in the Middle East, which disrupted energy supply routes, the Russia-Ukraine war's effect on wheat, and poor crop yields. Crypto was weaker: Ether volume fell 70%.
- **The rate per contract fell.** The average rate per contract fell 3% to $0.679 from $0.702. Micro contracts, which carry lower fees, made up more of the volume in equities, energy and metals, and members did a larger share of trading. A shift toward energy and a fee increase on April 1, 2026 partly offset the decline. CME estimates that volume added $179.1 million to futures and options fees and the lower rate took away $37.3 million. Clearing and transaction fees rose 12% to $1.38 billion.
- **Market data hit a record.** Market data revenue rose 20% to a record $243.1 million on higher usage, demand from new customer segments and price increases. Cash markets fees rose to $74.0 million from $69.8 million.
- **Expenses grew more slowly than revenue.** Operating expenses rose 5% ($30.9 million) to $595.9 million. License fees rose $22.6 million on higher equity volume, salaries rose $10.0 million, Google Cloud technology support rose $7.1 million, and rent rose after a new data center lease began in Q2 2026. Legal fees fell $7.3 million because the 2025 quarter carried the Class B lawsuit trial.
- **Interest on margin deposits fell.** Earnings on reinvested margin and guaranty fund cash fell to $1.39 billion from $1.51 billion because returns were lower, although balances were higher. The amount passed back to clearing firms fell to $1.27 billion from $1.40 billion. Equity earnings from unconsolidated ventures rose 7% to $102.8 million, as higher S&P Dow Jones Indices income more than offset the OSTTRA income lost after the sale. The effective tax rate was 23.5%, against 22.9% a year earlier.
- **Shareholder returns ran ahead of earnings.** Over nine months CME declared $10.05 per share in dividends, $3.64 billion in total, including the $6.15 variable dividend. It also bought back 6.4 million shares for $1.8 billion at an average $272.89. In Q3 alone it bought 2.0 million shares at $255.81 for about $0.5 billion and declared $465.9 million in regular dividends. The nine-month dividends and buybacks together exceeded nine-month net income, so shareholders' equity fell to $26.56 billion from $28.73 billion at year-end. Cash and equivalents fell to $2.2 billion from $4.4 billion, and $1.0 billion remains under the buyback authorization. Debt was unchanged at $3.4 billion of fixed-rate notes, and the ratings remain AA-/Aa3, both with stable outlooks.
- **Litigation.** In the class action brought in 2014 by certain Class B shareholders and CBOT members, the court denied the plaintiffs' post-trial motions on June 15, 2026, following the July 2025 jury verdict for CME on all counts. The plaintiffs have filed a notice of appeal. CME has recorded no accrual for legal matters.

## Subsequent events

*From Note 14 of the Q3 2026 Form 10-Q (accession 0001156375-26-000068) and the Form 8-K filed September 9, 2026 (accession 0001193125-26-386091).*

The Q3 2026 10-Q reports that no subsequent events required recognition or disclosure in the financial statements. It discloses no acquisitions, divestitures, new borrowings or debt issuance after September 30, 2026, and no dividend declared after quarter-end. The FY2025 10-K likewise reported no subsequent events.

The one post-quarter change disclosed in these filings is in management, and it was announced before quarter-end. On November 2, 2026, Chief Accounting Officer Jack Tobin becomes Deputy Chief Financial Officer, ahead of becoming CFO in March 2027, and Matthew Render succeeds him as Chief Accounting Officer.