CME Group's Q3 2025 Earnings Call: Contradictions Emerge on Retail Strategy, Capital Deployment, Market Data Pricing, and 24/7 Trading Plans

The above is the analysis of the conflicting points in this earnings call

Date of Call: October 29, 2025

Financials Results

• Revenue: $1.5B, down 3% YOY (vs very strong Q3 2024)
• EPS: $2.68 adjusted diluted EPS, slightly above prior year (third-highest quarter in company history)
• Operating Margin: $1.1B adjusted operating income; 68.4% adjusted operating margin for the quarter

Guidance:

• Total adjusted operating expenses for 2025 (excluding license fees) expected to be approximately $1.625B (~$10M below prior guidance; ~$25M below start-of-year expectation)
• 24/7 trading of cryptocurrency futures and options planned to begin early next year
• Tokenized cash go-live targeted for 2026 to support extended-hours trading and risk management
• Other guidance remains unchanged

Business Commentary:

• Revenue and Earnings Growth:
• CME Group generated $1.5 billion in revenue for Q3 2025, down 3% from the previous year, with an average rate per contract of $0.702.
• The adjusted operating income was $1.1 billion, representing a 68.4% operating margin, with adjusted net income and adjusted diluted earnings per share both slightly above the previous year.

• Growth was driven by strong customer demand despite a general pullback in volatility across asset classes.

• Market Data Revenue:

• Market data revenue reached a record level of over $203 million, up 14% to quarterly revenue for the first time.

• The growth was attributed to an increase in demand from both professional and non-professional subscribers, particularly in APAC and EMEA regions.

• Record Open Interest and Volume in Cryptocurrencies:

• CME's cryptocurrency complex traded a record 340,000 contracts per day in Q3, up over 225% year-on-year.

• This growth was accelerated by the success of recently launched products like Solana futures and XRP futures, as well as credit futures, one-ounce gold futures, and agricultural weekly options.

• Innovative Product Offerings and Retail Strategy:

• CME Group announced a partnership with FanDuel to develop and distribute event-based contracts, aiming to expose CME's products to 13 million potential accounts.
• The focus on distribution and efficiencies continues to be a key driver of growth, allowing CME to leverage its credibility to attract both institutional and retail participants in newer asset classes.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted record and near-record metrics (25.3M avg daily contracts, highest recent open interest, crypto daily avg +225% YOY, market data revenue $203M up 14%), delivered $978M adjusted net income, and reiterated growth/innovation initiatives (FanDuel JV, FTSE license extension, 24/7 crypto), while trimming expense guidance modestly.

Q&A:

• Question from Dan Fannon (Jefferies): Can you talk about your long-term retail strategy? With the FanDuel partnership and the micro complex, can you scale organically or is M&A likely?
  Response: CME views retail as a growing, evolving opportunity focused on distribution and credibility; FanDuel expands access to ~13M accounts and management prefers organic/partnership growth today though M&A isn't ruled out.

• Question from Patrick Mulle (Piper Sandler): The FanDuel announcement didn’t mention sports but there are reports you’re considering sports event contracts — is that in the cards?
  Response: CME may list sports events if federal regulators permit self-certification (i.e., not treated as swaps/gambling); final decision will be made with FanDuel and hinges on government stance.

• Question from Patrick Mulle (Piper Sandler): Given parlays' prominence on sportsbooks, are parlays feasible in prediction markets and what operational/structural considerations apply?
  Response: Unclear regulatory and commercial fit for parlays; CME is not speculating operationally yet and has not seen enough regulatory clarity to pursue parlays now.

• Question from Ben Budish (Barclays): Do event/prediction contracts require different infrastructure, higher spend, more advertising, or different operating margins than traditional products?
  Response: CME believes its existing scale, ops and clearing infrastructure can support frequent intraday event contracts without materially higher promotional spend from CME, leveraging ~130 distribution partners who bear much of retail customer acquisition.

• Question from Bryan Durkin (Deutsche Bank): Will contracts listed with FanDuel/its FCM be open to all retail platforms and how will economics/fees flow?
  Response: Yes — CME contracts are open to all FCMs; trading and clearing fees are consistent across participants and any FCM will charge commissions to its clients; the FanDuel JV does not grant exclusivity.

• Question from Ken Worthington (J.P. Morgan): Energy volumes pulled back this quarter — what's the outlook for crude and natural gas, and drivers of share shifts?
  Response: Volumes moderated as WTI traded in a tighter range, but CME regained share in WTI futures (76% in Q3) and saw continued growth in natural gas (complex +2% in Q3, NACS options +12%); growth driven by globalization of US energy into Europe/APAC and continued LNG demand.

• Question from Chris Allen (Citi): What were proceeds from the Oyster sale and how will capital be deployed versus buybacks/dividends?
  Response: Proceeds were about $1.55B; management will present recommendations to the board on capital deployment and emphasized low leverage and multiple return-of-capital levers but will not pre-announce board decisions.

• Question from Michael Cypress (Morgan Stanley): What hurdles for 24/7 crypto trading, potential to expand 24/7 to other products, and the role of tokenization?
  Response: Crypto 24/7 is targeted for early next year; tokenized cash (with Google partnership) is planned to go live in 2026 to support extended hours and risk management; expansion to other asset classes will depend on client demand, cash-market reference pricing, and costs to FCMs/participants.

• Question from Alex Blostein (Goldman Sachs): Update on collateral balances and impact of the 30% cash minimum — Q3 and current levels?
  Response: Q3 average cash collateral was $135B (46% cash), non-cash $156B; early October averages ~$134B cash and $164B non-cash, with cash share steady in mid-40s and potential future optimization by clients.

• Question from Kyle Voit (KBW): Update on Google-related investment spend in 2025 and implications for 2026 expense growth; other notable expense items?
  Response: Google-related spend was ~$27M in Q3 and ~$71M YTD; guidance embeds ~$100M total (down from ~$115M) due to cloud and professional-fee savings; overall 2025 cost growth is low versus history and further 2026 guidance will be provided in February.

• Question from Simon Clinch (Ross Chilton Co.): BrokerTec Chicago — can this revive BrokerTec and how does it compete across protocols?
  Response: BrokerTec Chicago (launched Oct 6) enables cash fixed income and futures side-by-side, attracted 25+ firms, >$1B notional traded since launch, and offers liquidity/pricing points that complement BrokerTec New York, supporting new client acquisition and choice.

• Question from Craig Siegenthaler (Bank of America): Market data up 14% — drivers and any pricing opportunity next year; and early mix between BrokerTec Chicago vs Secaucus?
  Response: Market data growth was broad-based with strong international subscriber growth (APAC/EMEA); CME announced a 3.5% data price increase effective Jan 1, 2026; BrokerTec Chicago is early (two weeks) so mix is uncertain, but Chicago may attract certain strategies while New York remains for large/volatile trades.

• Question from Ashish Sabhadra (RBC): RPC movement — how much was driven by shift from micros to full-size and did that change retail behavior?
  Response: Shift from micros to full-size drove the largest RPC impact (notably in equities where micros fell from 47% to ~43% of volume); mix shifts plus customer type (member vs non-member) both affected RPC and made disaggregation challenging.

• Question from Michael Cypress (Morgan Stanley): Progress and use cases for credit futures and steps to broaden user engagement; how does tighter cash-futures connectivity help?
  Response: Credit futures are gaining traction with record open interest and ~300 sales opportunities in pipeline; clients appreciate liquidity and margin offsets to Treasuries/S&P, and stronger cash-futures connectivity (e.g., BrokerTec, FX Spot Plus) enhances utility and adoption.