The Chicago Mercantile Exchange Holdings Inc. reported record revenues and earnings for 2004, driven by strong volume growth, including a 71 percent increase in electronic trading.
Net revenues climbed 37 percent to $733.8 million for 2004, compared with $536.0 million for 2003. Net income rose 80 percent to $219.6 million, versus $122.1 million a year ago. Diluted earnings per share increased 77 percent to $6.38 from $3.60 per diluted share in 2003. Yesterday, the company declared a regular quarterly dividend of 46 cents per share, representing a 77 percent increase compared with the prior year, payable on March 28, 2005, to shareholders of record on March 10, 2005.
Average daily volume was more than 3.1 million contracts in 2004, up 26 percent from 2.5 million contracts in 2003. Volume on the CME Globex electronic platform averaged 1.8 million contracts per day in 2004, a 71 percent increase from the prior year. During the year, CME Globex trading increased from 48 percent of total volume in the first quarter to 67 percent in the fourth quarter.
“Record volumes across all our major product groups, spurred in large part by the phenomenal growth of electronic trading, led to record revenues and earnings for the year,” said CME Chairman Terry Duffy. “An upsurge in our interest rate and foreign exchange volume and our expanded global reach drove these results. Our financial performance also reflected the significant first-year contribution generated from clearing Chicago Board of Trade transactions. These achievements show how effectively our strategic initiatives are attracting new customers and creating the momentum for continued growth.”
For the fourth quarter of 2004, net revenues increased 42 percent to $188.0 million from $132.6 million for the same period of 2003. Clearing and transaction fees rose 35 percent to $139.2 million from $102.8 million a year ago. Average daily volume of 3.1 million contracts was up 33 percent during the fourth quarter compared with the same quarter a year ago. The first three quarters of 2004 were up 19 percent, 25 percent, and 29 percent, respectively, compared with the same quarters in 2003. The fourth-quarter growth was led by a 79 percent increase in foreign exchange product volume, to more than 250,000 contracts per day and a 42 percent increase in interest rate products, to 1.65 million contracts per day. The average rate per contract was 70.3 cents, compared with 68.8 cents a year ago, due to a higher proportion of electronic trading. The rate per contract in the fourth quarter was down 2 percent, from 71.7 cents in the third quarter of 2004, primarily due to a higher percentage of the volume coming from members, who pay a lower average rate.
Clearing and transaction services generated $14.9 million in the fourth quarter, including $14.6 million from the clearing processing agreement with the Chicago Board of Trade. Quotation data fees were $15.7 million, versus $14.2 million in the fourth quarter of 2003.
For 2004, revenue from clearing and transaction fees increased 29 percent, to $553.0 million, from $428.8 million for 2003. The 2004 average rate per contract was 70.2 cents, versus 69.1 cents in 2003, due in part to a higher percentage of trades executed on the CME Globex electronic platform. In 2004, quotation data fees rose 15 percent to $60.9 million, from $53.2 million in 2003, primarily due to a change in pricing and an increase in screen count.
Total expenses were $366.1 million for 2004, compared with $329.9 million for 2003. This increase is due primarily to higher compensation-and-benefits expense, resulting from additional headcount and higher incentive bonus. The incentive bonus is tied to certain cash-flow targets, which the company exceeded in 2004.