By Pritam Biswas
July 22 (Reuters) - CME Group beat Wall Street's second-quarter profit estimates on Wednesday, fueled by strong hedging demand, sending the derivatives exchange's shares up 6.1%.
Meanwhile, the company's outgoing CEO, Terry Duffy, reiterated his criticism of perpetual futures, which are listed derivatives without an expiration date. These contracts allow traders to maintain positions indefinitely without the need to roll them over.
"Strong business performance has been overshadowed
by discussions surrounding perpetual futures," Duffy said in a post-earnings call with analysts.
The company's second-quarter adjusted profit of $2.99 per share beat analysts' estimates of $2.91 per share, according to data compiled by LSEG.
It was also higher than the $2.96 per share it recorded for the same period last year, when U.S. President Donald Trump announced his Liberation Day tariffs, helping the derivatives exchange post record average daily volumes, or ADV.
In the current quarter, developments around the U.S.-Israeli war with Iran and the wider Middle East conflict kept markets volatile, which helped the exchange, but to a lesser extent.
The company's total ADV was down 1% from last year, largely as volumes in interest rate and energy contracts were down and that for metals trading was flat.
However, its ADV for equity indexes jumped 13% during the quarter, as investors showed interest in these products due to a 14.9% rise in the benchmark S&P 500 index.
Agricultural and cryptocurrency ADV also rose in the second quarter.
Revenue in its market data and information services segment increased 20.2%, while its clearing and transaction fees fell 2.6%.
"Overall we view this as a solid quarter for CME on the back of tough 1Q26 & 2Q25 comparisons," Piper Sandler analysts said in a note.
CME CUSTOMERS HAVE NOT SOUGHT PERPETUAL FUTURES
Despite the strong earnings, the company's stock is down 8% so far this year, partly as investors worry that the so-called "perps" — which secured regulatory approval on May 29 — would eat into traditional exchange operators' market share.
Duffy said the exchange has full technical and operational capabilities to launch perps, but has not seen any demand from its customers for the product.
"These products do not appeal to our core customers."
The stock has underperformed most of its major peers except New York Stock Exchange-parent Intercontinental Exchange as of last close.
"We believe the bear case related to perpetual futures will prove to be a non-event for CME, but in the meantime it has created an attractive entry point for CME's shares," said analysts at Raymond James in a note.
Duffy, who took over the role of CEO about a decade ago at the derivatives exchange, will make way for insider Lynne Fitzpatrick, who will take over as CME's first female CEO on March 1 next year, the company announced in June.
(Reporting by Pritam Biswas in Bengaluru; Editing by Leroy Leo)
