CME Group reported record financial results for 2023, with revenue of $5.6 billion, up 11% from the previous year.
Average daily volume (ADV) reached a record high of 24.4 million contracts in 2023, driven by strong performance in agriculture and interest rate products.
The company expects continued uncertainty in 2024 due to factors such as inflation, geopolitical tensions, and supply chain disruptions, which will drive demand for risk management tools.
CME Group's interest rate volume grew even after the Federal Reserve stopped raising rates, indicating that uncertain rate environments are favorable for trading volumes.
The Argus Gulf Coast contract has attracted significant commercial participation, with over 500,000 open positions, solidifying CME Group's position as the global leader in West Texas Intermediate.
The DTCC cross-margining arrangement has seen positive initial feedback, with some portfolios already experiencing savings of 75% to 80%. The potential impact on trading volumes is difficult to forecast but could provide capital efficiencies for clients.
No information was provided regarding dividends or buybacks.
Current Fair Value
Undervalued by 2.5% based on the discounted cash flow analysis.