CME Group Inc. (CME) Earnings Call Transcript & Summary

Welcome to the CME Group Second Quarter 2026 Earnings Call. [Operator Instructions] I will now turn the call over to Adam Minick. Please go ahead.

Good morning, and I hope you're all doing well today. Earlier this morning, we released our earnings commentary, which provides extensive details on the second quarter 2026, which we will be discussing on this call. I'll start with the safe harbor language, and then I'll turn it over to Terry. Statements made on this call and in the other reference documents on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement. Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website. Lastly, in the earnings release, you will see a reconciliation between GAAP and non-GAAP measures following the financial statements. With that, I'll turn the call over to our Chairman and CEO, Terry Duffy.

Thank you, Adam, and thank you all for joining us this morning. I'll make a few comments about our strong quarter and then -- before I turn it over to Lynne to provide an overview of our financial results. In addition to Lynne, we have other members of our management team present to answer questions after the prepared remarks. The second quarter average daily volume of 29.8 million contracts represented the second highest Q2 in our history and was within 1% of our record second quarter a year ago with May and June, particularly strong following the tough April comparison. Open interest ended the quarter up 8% over the past year and up 16% since the beginning of this year. Additionally, we delivered a record level of capital efficiencies, saving our customers an average of over $95 billion in margin per day. Recently, this strong business performance has been overshadowed by discussions surrounding perpetual futures. While this product may be do the futures, they function much more like leverage spot products. They may appeal to certain retail traders seeking high leverage, but they are not appropriate for the institutional risk managers who comprise the vast majority of our business. Perpetual futures are highly engineered instruments that rely on frequent funding rate adjustments that revert the decision back to the spot price. They are known for high leverage and automated liquidations. They offer limited investor protections and introduce heightened market risk, particularly for retail participants. These products do not appeal to our core customers. Through the first half of 2026, 94% of our volume originated from institutional customers. Perpetual futures are in no way substitutes for the institutional hedging tools that these customers rely on. Perpetuals do not provide price or time certainty to necessary components for hedging exposures. Furthermore, when taking into an account both of the transaction fee and the daily funding costs, the total cost to trade perpetual futures is typically orders of magnitude more expensive than our highly efficient futures contracts. We have the full technical and operational capabilities to launch perpetual futures. In fact, we have contract specifications and are prepared to bring these products to market should evolving demand or structural shifts make it appropriate to do so. However, we have not heard demand from our customers for these products. Crypto perpetuals are not new and existed before we even launched our crypto futures complex in 2017. We have built that business over the past -- last 9 years because our futures fill a market need that was not met by traditional crypto products, including perpetuals. Our crypto futures volume is up over sevenfold in the past 3 years despite the existence of crypto perpetuals. We remain deeply committed to ensuring market integrity, and we'll never sacrifice core protections in the name of innovation. Instead, we continue to launch innovative products while preserving the safety and soundness of our marketplace. In the second quarter, we successfully introduced 24/7 trading of crypto futures. And this weekend, we are launching 24/7 trading of our 1-ounce gold contract. Next week, we will be launching single stock futures, which will simplify directional trading with exceptional capital efficiency. In the fourth quarter, we plan to launch Treasury Link to link our U.S. treasury futures and cash treasury liquidity pools. We're also partnering with silicon data to launch a pioneering compute futures market later this year. We expect our innovation -- we expect our innovative new offerings to further accelerate our growth as we build on our record-breaking performance in the first half of 2026. Our robust product pipeline and ongoing investments in our technology evolution position us well to drive continued value for both clients and shareholders. With that, I will turn the call over to Lynne to review our financials, and I look forward to your questions.

Thanks, Jerry, and thank you all for joining us this morning. As Terry mentioned, CME Group delivered strong financial results in the second quarter. Our revenue of over $1.7 billion was up 1% from the second quarter in 2025. This marks a record for second quarter revenue and the second highest all-time quarterly revenue behind Q1 of this year. The average rate per contract for the quarter was $0.678, a $0.026 increase from Q1. Market Data revenue achieved another record quarter, up 20% to $238 million, continuing our trend of 33 consecutive quarters of year-over-year market data revenue growth and our eighth consecutive quarter of record revenue. Adjusted expenses were $521 million for the quarter and $412 million, excluding license fees. Our adjusted operating income was $1.2 billion or 69.5% adjusted operating margin. Adjusted net income and adjusted diluted earnings per share were $1.1 billion and $2.99 per share, 1% higher than Q2 2025. This represents an adjusted net income margin for the quarter of 63.4%. We returned $1.2 billion to shareholders during the quarter with $468 million in regular quarterly dividends and $695 million in shares repurchased. CME Group continued to build on its record 2025 performance through the first half of 2016. Volume through the first half was 10% ahead of last year with open interest growing 8%. Revenue increased 8% and adjusted diluted earnings per share come 10% in the first half of the year. Further, we set new records for our large open interest holders in interest rates, equity index and FX since the start of this year. Third quarter volume has started out strong with July to date, tracking 18% ahead of last year. Our strong financial performance this year reflects CME Group's established role as the world's severe risk management destination in times of uncertainty, our robust market infrastructure and deep liquidity pools allow participants to manage exposure with confidence. As the market landscape continues to evolve, we remain committed to driving innovation and delivering the capital efficiencies that our clients rely on. With continued strong demand for our risk management products, we look forward to continuing this momentum in the second half. We'd now like to open up the call for your questions.

[Operator Instructions] Your first question in the queue is from Dan Fannon with Jefferies.

Terry, I was hoping you could expand upon your comments on perpetuals. Clearly, the market is focused on this topic. Can you expand upon what you're hearing from customers, if anything, around the potential innovation that might be coming fromperpetuals?

Yes, Dan, it's a great question. I've spent a lot of time over the last several weeks going through each and every one of our asset classes talking to the highest levels of those institutions who participate in our business under the great benefits of being in my role for the last 30 years as I've booked a lot of good relationships, and they put me in the right direction with the participants. So I'll give you an example, the largest -- second largest energy participant in the world of commercial participation. So there's been a lot of talk about oil as it relates to perks and other -- and of course, it's in the headlines today as it relates to the Iranian war. I have had conversations with the CEO of this firm and his derivative participants from different parts of the world, and they reassured me 19 times I ask them that they want to meet with this product. They do not want this product. They do not know how they would possibly risk manage the exposures that they have on their books with a perpetual contract. It does not work for them. They made it quite clear to me that this product that we have today and other energy products that are available to them, whether it's at ICE or somewhere else are critically important to what they do to manage their business. So that is one example. And I've also know the same thing as it relates to our other products such as rates and equities and have had very similar conversations. So when these products have end dates associated with them on the cash market side and you have a product as I said in my opening comments, that trade around a leverage spot price that does absolutely nothing for them in order to risk manage their product. Now it might do something for the retail participant who wants to just trade back and forth. And -- but it does nothing for the 94% of the business that I outlined earlier in my comments. And I think anybody on this call knows me. I'm pretty forward straight shooter, and I even mentioned that in my opening comments, if I thought we needed to list these, we would do so. And I said that we were prepared to do it if we needed to do it. But that's not what we are hearing. We are hearing quite the contrary to how business and commerce gets done by the institutional participants. And I want to be careful about the names that I use, but I will tell you that these are significant players. These are not third or fourth tier players. These are top-tier players who are the open interest in CME.

The next question is from Alex Kramm with UBS.

I guess I'll stay on the same topic, even though you brought it up twice already, Terry, that if there's demand, you would meet it. So maybe just talk a little bit more philosophical why on the retail side, you don't think there's demand yet because clearly, you've been expanding into retail aggressively. And I know that's not your core market, but it's been a nice growth area. And clearly, it seems like there is interest from retail. So just maybe can you give us some more detail what the retail participation is saying and why you're not ready -- or why you're not willing to do this right now? Or -- and what really has to change for you to expand there on the retail side?

I'm going to ask -- so the comparison, Alex, and thank you for the question. Comparison for the retail right now in the United States would be the crypto franchise because that's the only other perps that are out there competing with our products today. So Tim is going to walk through some of the statistics around what the retail is doing in that particular asset class. But I want to make a point, and I think this is really important as it relates to perpetuals. I want to ask anybody or it's a rhetorical question. How many people have been talking about the funding rate and the cost of the funding rate as it relates to a perpetual? And how many people have been talking about the auto liquidation, risk management model on the back end of the market? The answer to that because it was rhetorical is zero. The only thing we're talking about, about a perpetual is there is no exploration data associated with it. I will tell you that we are not seeing anybody nor do we hardly ever see anybody in the retail division hold on to these products long enough to ever go to an expiration. So that is not the issue. And then I clearly outlined, if they did, the cost associated with going to roll the product versus paying the funding rate and the cost to trade the product, which is sevenfold higher than CME's execution cost would way overshadow the cost that it would be to roll your position. So that demand is still not there. But just to reinforce that, I'm going to ask Tim to walk through an apples-to-apples comparison on the crypto side because that's what we've seen to date that's been approved. Tim?

Thanks, Terry, and thanks, Alex, for the question. As Terry said in his opening remarks, our cryptocurrency business at CME Group has continued to grow year-over-year in 9 years we've been in it along aside thesis perpetuals in the crypto-native ecosystem outside the U.S. And when we look at the growth we had, if we look at the suite of crypto products at CME Group, that grew 32% compared to Q2 2025. Our suite of cryptocurrency futures and options is up 44% for H1 '26 versus H1 '25, and is up 76% in June versus June of 2025, despite slightly more muted volatility environment we're seeing to and that is in place with perpetuals being introduced the last 2 weeks. Now as Terry said, if we look at some of the numbers at CME Group, we're doing between $4.5 billion and $6.5 billion per day of trading in our Cryptocurrency complex versus about $270 million at the Bitcoin Perk introduced by [ Kalshi ] in the month of July. And then if you look at open interest, again, which as Terry is saying, is a proxy for risk management and access to these markets, we have between $9 billion and $10 billion of average daily open interest for June and July versus $10 million of open interest in the perpetual product that was introduced at the end of May beginning. So I think these numbers speak for themselves and are long year -- almost 9-year growth trajectory of serving this community, along with the introduction of additional cryptocurrency futures, the introduction of 24/7 trading, where we've seen over $1.5 billion traded over the first 8 weekends with a significant participation of retail we think the retail community in cryptocurrency is adequately served alongside the institutional community of clients at CME.

Thanks, Tim. Lynne, do you want to add?

Yes, if I could just add one thing. Tim highlighted at the end, the launch of the 24/7 crypto. We have those metals products also going live this began, and we've talked about the single stock features so in line as well. So we continue to innovate our products and add what we are seeing as demand coming from that retail customer. So we're certainly hearing interest in our products and continuing to expand our suite both in terms of availability and product to meet that need.

So Alex, hopefully that gives you some more color about what we are really seeing versus what is being written upon or potentially propaganda coming out of other entities or what they are may or may not be doing.

The next question is from Chris Allen with KBW.

Maybe if you could switch gears a little bit and talk about compute futures. It seems like a really interesting product opportunity. I wonder if you could give us any color on customer demand here? And how do you think CME as part of the construction will be differentiated versus other competing launches?

That's a great question, Chris, and thank you for that. when this was originally introduced I found it fascinating that this market was really underserved as far as a risk management asset for the growth of not only data centers but just compute in general. And working with some of our -- and this is the beauty of CME Group having the business partners with our FCMs and our clients and working together to bring products together to go forward and serve the interest of many, many participants. So compute futures, whether you're a believer in AI or not or whether you're a believer in the proliferation of data centers or not, some things have just become undeniable, and I think this might be one of those scenarios because the artificial intelligence serves so many different industries outside of finance and the benefits there it can derive. So -- but you need to have the risk because you've seen some of these compute stocks or AI stocks, the volatility that can be inherent in them, the multiples they trade at. So I think this will give them a massive risk management tool to use going forward. And I am really excited by the growth of this product, and we're going to do it and do it properly with our partners. And for me, I think this is another innovative concept idea as the world continues to evolve. We're reintroducing single stock futures, as we said in our earlier comments. I'm probably the only one that's old enough to remember that when we first introduced in the first time they failed measurably. Sometimes, timing is really important when you list products. And I will say timing is massively critical right now when we get ready to list future. So just as I do with single stock futures, the time is right for that product as well. So I'm going to ask Derek Sammann, who's kind of falls under his business line a little bit and can we make a comment as well. Derek?

Yes. I think as Terry and Lynne both mentioned, we continue to innovate products based on client demand and client need and those continue to evolve every single day despite the headlines of what the flavor of the month is in retail. When we look at the compute future specifically, there is certainly an unmet need in the world in which we operate where data centers are front and center of driving economic growth in AI is in the middle of every conversation right now. We are going to be the first daily benchmark tracking to spot out the rental cost as in video, each one that are GPUs. And what that means is that we're going to be partnering with silicon data as the price reported agency, as Jerry referenced, for these rental indices. And what this means is it allows customers to be able to manage the risk and price certainty and price curves around the input cost in managing their data center business is going to provide a mechanism for financing for a lot of these companies. There's no real price discovery mechanism today, that's the business that we are in, whether it's ag, whether it's equities, whether it's energy, this falls right under our price discovery mechanism. It allows customers to manage the procurement planning process, which they can't do now with a forward curve and allows for clear budgeting as well. When you think about how we think the users of these products are, it's not just the commercial end users, AI labs, cloud providers, asset managers looking to get exposure to growth drivers of the AI economy, banks, energy firms, hedge funds and professional trading houses -- and when you take a step back, this actually sits vessels well inside our commodities portfolio because when you think about what this allows us to do, it allows customers to effectively hedge a data center. Think about that for a minute. We've got our copper contract. We've got our aluminum contract. We've got our nat gas, which is typically the energy it in the most data centers. We've got a power business. We've got compute futures. So we think about what that portfolio product means to our commercial end users as well as asset managers and bioscience firms and loan exposure. This is the next evolutionary step in product innovation that continues to expand our portfolio based on customer need and our ability to innovate in a rapidly change the environment.

Ken, hopefully, that gives you a little bit of -- Chris, a little bit of color on the compute futures.

The next question in the queue is from Ken Worthington with JPMorgan.

So Trump has launched a project fault in minerals and metals with copper, silver, aluminum, lithium and some others on the list. Are there positive implications for Comex from Project Vault or other Trump metals and neural initiatives?

Thanks, Ken. Appreciate the question. Derek, do you want to address that?

Yes. And I can appreciate the question. There's certainly a lot of discussion around what it means for reinforcing U.S. missile supply chains. I think -- let me take a step back, Project Vault is out in the market alongside a lot of other growth drivers that have led to our record first half revenues and volumes in our metals business and our second best second quarter ever in our metals business. When you look at what Project Vault is focused on, it's really about reinforcing U.S. supply chains. And that means is reinforcing the value of U.S. benchmark which exactly what CME Group is all about, whether it's our copper business, whether it's our battery metals business, where we are single largest venue for risk management and price discovery in battery metals. This is contributing all to the focus on U.S. benchmarks, the products we run. And if you follow that value, what's happening, we see our copper volumes up 4% this year, we see record amounts of physical copper in COMEX warehouses just under 700,000 short tons of copper in U.S. warehouses directly responding to the focus on U.S. supply chains and onshoring the ability for customers and U.S. infrastructure to enable access to this critical minerals and battery metals. That is exactly the business that we are in the middle of. We are the #1 exchange for battery metals globally, and this is bringing new interest into this part of the industry from buy side and banks alongside commercials, which is the original driver for our entry into the battery metals business. And the last data point I'd tell you is that we're seeing record open interest in our steel context right now. That is directly tied to focus on U.S. supply chain. So overall, I think we're well positioned for this. We continue to innovate in this space. And as I mentioned before, we continue to respond to customer need. And as those needs evolve, we'll continue to grow this business.

The next question in the queue is from Patrick Moley with Piper Sandler.

So Terry, earlier this month, the CFTC stayed your 24/7 crude oil contract the day before launch, while the 24/7 gold contract went forward and Chairman Selig was fairly pointed about the self-certification timing. So what do you make of the commission drawing the line between those 2 products? And do you see any read through there on how they're maybe approaching the perpetual futures question and allowing 24/7 trading in those products potentially?

Yes. Thanks, Patrick. I appreciate the question. I think that when you look at the stay on our 40.2 is what Patrick is referring to, there's 2 ways to certify contracts, 40.2 is cell certification, 40.3 as a full review. We actually filed both as everybody may know. But the contract we filed was not novel or complex. It was an existing contract, there's sort of smaller size to it. So we felt -- we announced the date the 40.2 was the right approach for us to do, which, by long, we have the ability to file either one. We're not compelled to file of 40.3 or 40.2, but we did file the multiple. So my read on that is that they stayed the contract. I guess that's their priority to do so. I guess I don't want to give in too much of the idiosyncrasies of some of the products they have not stayed, but it is kind of interesting how some of the 40.2 filings that have gone through the agency. And I guess I can go through an example of the ridiculous and others, but let's just talk about the fourth of July contract that they did not stay in a 40.2, which was [Kalshi] Nathan's Hotdog Eating Contest that was actually a contract that went through. And I guess that had an economic interest to somebody, I'm not sure who, but 24/7 needs to be stayed on his existing contract. So that, to me, is a little concerning about readily benefit, susceptible to manipulation under core principle 3, which we have been very adamant about of these contracts. So we didn't see anything novel or complex as it relates to our small oil contract. We have talked to, as I said earlier in my comments, some of the largest producers in the commercial side of the energy they understood what we were trying to effectuate. We have 24/7 oil being traded today by entities that are supposedly not allowed to have U.S. participants into it, but yet we've yet to see how the federal government is policing U.S. participants from not participating in these 24/7 markets or how they're not having an influence on the weekends certain markets, I'm not suggesting they are, but how they're not. So -- then we also have prediction markets that have prices of oil that trade 24/7. So I was a little surprised by that, but I guess I shouldn't be because there's certain other contracts that take priority when you're in the hot dog business. So there's a lot of things going on right now, Patrick, and surprised by it. And I'm not trying to be too flippant about it, but I am trying to point out that we are trying to run contracts here that are meaningful for commerce that we think are critical for commerce. And there are other participants that are listing this, and we are being held up by the agency, but they are not telling us or the world how they are policing U.S. participants from not participating in 24/7 oil today or how they can square up that predictions on oil prices were down the road that trade 24/7 are any different from our small contracts. So a little surprised by it, but not really.

The next question in the queue is from Brian Bedell with Deutsche Bank.

Maybe just to switch back to perpetuals and really focusing on the retail side and maybe a futuristic scenario. And that would be, Terry, what would your view be on any potential, down the road, CFTC approval of equity perps, particularly S&P? What kind of process do you think that ought to go through given that market is multiples? Many multiple sites of the crypto market and could have systemic issues. So if you could talk about that. And then if you were to launch those, I would assume they would not be risk margin with your existing clearinghouse. They would be separate. So I mean, could you theoretically launch those for retail at lower leverage? And would you view yourself as having the exclusive right to the S&P license in a perp future -- or I shouldn't say future, but a perp contract, which I guess is a CFTC-regulated swap as opposed to the future?

Ryan, great question. A lot in here to unpack. Let me unpack it. First of all, your last comment was the right comment. We still believe and our litigation will show that these are swaps not futures. Anytime 2 parties exchange payments as they do in the funding rate, under the Dodd-Frank Tech, which I had the distinct pleasure of testifying 20 to 30 times on in 2010, long before anybody at the CFTC was up there, I know what Dodd-Frank says. That is a swap contract. So we feel very confident that, that is a swap contractor start. Let's fast forward though, you asked another question. would we lift those contracts on equities, I believe, as you said, in a separate entity. No, we would never -- we would not need to list them in a separate entity of clearing. We can list them in our existing clearing because it doesn't mean if you list a perp that you have to have in other liquidation margin methodology in order to have a perpetual. So we would not need to do that if, in fact, you went down that path. But that's a long way from even having a discussion. Your third question was as it relates to our relationship with S&P Global. Anything that is considered a future and cleared by our agreement is the exclusive right under the index of CME Group. So no one else could be able to list that contract. That is the intellectual property that is owned in partnership with S&P Global. So we would be the only ones that could list a perpetual. If we went down that path, on equities on the indices of the S&P of the Dow Jones, and we have the agreements with NASDAQ and with Russell that they have the understanding that those are intellectual property products if they're deemed futures, they are -- they fall under the scope of our agreement. So we're the only ones that could participate in that particular asset class on the indices. I don't know if I touched on 3 of the 4 or all 4?

Is it just the systemic risk of potentially approving in equity perp given that market equities are obviously massively larger than crypto about...

Yes, Brian, I'm sorry, I don't mean to cut it off, but the systemic risk of an equity perp, if you were to try to list an equity per the way they are designed today and listed today in crypto, I think it could be a systemic issue for the marketplace because of no one understands full well how that funding rate would work and how it would be calculated because as we said earlier, it's technically not a future. It's a spot leverage product. So that right away has a problem for that particular asset class. And secondly, on the auto liquidation of a market the size of the U.S. equity, other equity markets and the participants thereof could be very systemically risky as they auto liquidate on a whole host of mathematical equations and how they liquidate those products, how much percent does each entity want to preserve, to liquidate and what would happen in a cascading market up or down on liquidation on both sides of the market. And would they have to introduce tariffs as their first line of defense, not their last line of defense? And that, to me, would be a systemic risk, not just to the participants, that would be a systemic risk to the U.S. equity market. And if we have a systemic risk to the U.S. equity market, there's a systemic risk to the world. Yes.

Next question is from Alex Blostein with Goldman Sachs.

Terry, I was hoping to go back to the point you were making around single stock features and the fact, obviously, that's been tried before. You think the time is sort of right now for us to be more successful. Why now, I guess, what makes it different? And maybe talk through how you're planning to partner with various retail distribution platforms to perhaps make this a more successful product now? And again, ultimately, competition from some of those platforms directly to launch other of sort of leverage bets on underlying equities?

Yes. Thanks, Alex. Interesting question. So why timing now? I've been around, like I said earlier, a long time, and I've seen a lot of products come and go. And I like to tell people that when you've seen a lot of things, you're seeing a lot of people make money being wrong and you're seeing a lot of people losing money being right, and it's all about timing. Right now, the world has evolved since 2000 when the single stock futures on Chicago joint venture was put forward with 3 separate entities with 3 separate agendas under 2 separate regulators being in the SEC and CFTC. It was destined kind of for failure because of the timing and where we're at the evolution of finance. That doesn't mean that the product is not a good concept or an idea for risk management protocols as we continue to evolve. And it's not too dissimilar to where T-bills were dead forever, and all of a sudden when the rates started to do what they did, T-bills actually became in favor again throughout a process, and we relisted T-bills for and we did quite well with them. And that can happen in different times in the world of economic finance. I think that single stock futures with proliferation the markets itself. And I'm not suggesting markets are going higher or lower, but when you see that the appreciation in the equity markets today, I think people are now looking for other tools on how to hedge out that product, where they may not be looking at that with the valuation of the S&P then 50 much lower as it was in 2000 or the Dow it was at and the Russell and NASDAQ. So now of these different levels, I think people are looking at different tools in order to efficiently hedge certain stocks, and you don't need to read the daily paper to know that people like to talk about the MAG 7, the MAG 9, whatever the MAG is of the day, what is invoked. So there's people that are looking to hedge out those risks in a liquid marketplace where they feel comfortable doing so. We think CME is the right place for that. We think with the products that we're going to offer them will be the right products for them to mitigate and manage that risk. And the reason why I feel so compelled about it is because of the participation levels, not only the institutions, but all the different cohorts and the valuation of the indexes in of themselves need to have tools to manage risk, and this is just another tool for them to do so, and we think it's efficient. You asked another question, which I'm going to ask Tim and then Julie Winkler on the retail partner side or the partner side in general, how we're going to move that forward? So Tim, do you want to make a comment or touch on that?