Exchange operator CME's quarterly profit tops views as hedging demand soars

By Sohini Podder and John McCrank

(Reuters) -CME Group Inc on Wednesday reported quarterly profits that topped Wall Street expectations as investors turned to the futures exchange operator's products to hedge against market volatility spurred by rising interest rates and Russia's invasion of Ukraine.

Demand for CME's interest rate futures surged in the quarter, with average daily volumes up 21% from a year earlier, as the U.S. Federal Reserve in March hiked its benchmark rate for the first time since 2018, with a raft of further rate increases in the cards due to soaring inflation.

With Russia's war on Ukraine roiling markets during the quarter, CME's equity index average daily volumes jumped 30%, options volumes were up 32%, energy futures volumes rose 6%, and forex futures increased 6%.

"We're seeing what can happen when people need to manage risk in a real-time basis," CME Chief Executive Officer Terry Duffy said on a call with analysts. "We've seen, and no one saw coming," some unprecedented events over the last 6 to 12 weeks around the world, he said.

CME earned $2.11 per share in the first quarter, 11 cents above analysts' mean estimate, according to Refinitiv IBES data.

Higher-than-anticipated revenues due to price increases drove the beat, Piper Sandler analyst Rich Repetto said in a note to clients.

Total revenue rose 7.4% to $1.3 billion.

Shares of Chicago-based CME were up 6% at $226.05 early on Wednesday.

Net income attributable to the company rose to $711 million, or $1.95 per share, in the quarter ended March 31, from $574.4 million, or $1.60 per share, a year earlier.

(Reporting by Sohini Podder in Bengaluru and John McCrank in New York; Editing by Amy Caren Daniel and Bernadette Baum)