UPDATE 2-CME Group beats Wall St estimate as trading climbs
By Ann Saphir
Aug 1 (Reuters) - CME Group Inc, the world's biggest futures exchange operator, reported a 27 percent rise in quarterly profit, beating expectations, as trading jumped both at home and abroad.
Net income rose to $311.2 million or 93 cents a share, in the second quarter, from $244.9 million, or 74 cents a share, a year earlier, the Chicago-based exchange operator said Thursday. Analysts, on average, expected net income of 89 cents a share, according to Thomson Reuters I/B/E/S.
The rise in profits was driven in large part by renewed market speculation over when the U.S. Federal Reserve will exit its bond-buying stimulus program, which helped buoy trading of CME's flagship interest-rate futures contracts.
The results suggested Chief Executive Phupinder Gill's focus on international markets was paying off, as trading from Asia and Latin America rose to new records.
Gill and other top executives have redoubled overseas sales efforts, focusing on energy trading as they visited London, Geneva, Shanghai and Tokyo on a recent trip.
CME Group is trying to attract new global customers to all three oil benchmark contracts, and Gill said the effort is paying off, citing a rise in trades of energy futures and options, among its most profitable contracts.
A pipeline of brokers in China is eager to sign on to CME Group as full members, he said, further boosting prospects overseas.
CME Group, which operates the Chicago Board of Trade and the New York Mercantile Exchange, plans to open its first exchange abroad, in London, later this year.
A rise in payments from Brazilian strategic partner BM&F Bovespa boosted revenue as well, said Wells Fargo analyst Christopher Harris.
CME Group is a frequent critic of increased regulation, but on Thursday's call, top executives suggested the exchange operator is benefiting from recent rule changes.
Regulator scrutiny of Wall Street's trading in physical commodities, a major headache for some of its biggest customers, could be a "net positive" for the company if they turn to futures markets to replace bets in the cash markets, CME Executive Chairman Terrence Duffy told analysts on a conference call.
New government mandates for clearing of over-the-counter swaps drove an increase in the company's cleared swaps business. The volume of rates contracts tripled from the prior quarter to $41 billion in notional value each day, Gill said.
Daily volume so far this quarter has climbed to $62 billion, he said, as more asset managers, insurance companies and government-backed entities used the service.
Total revenue rose to $816.1 million from $795.9 million a year earlier as trading at its exchanges rose 16 percent to a daily average of 14.3 million contracts.
Expenses fell to $308.3 million from $326.7 million.
CME ended the quarter with cash and marketable securities on hand of $2 billion.
The stock rose 0.3 percent to $74.25 on Nasdaq.
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