Results roundup: Derivatives exchanges post Q2 revenue increases amidst macroeconomic uncertainty

CME Group, Intercontinental exchange (ICE) and Eurex Exchange all made headway with updates to their offerings during the second quarter.

Overall, CME, ICE and Eurex posted solid quarterly results, driven in large part by the demonstrably positive correlation between an uncertain macroeconomic backdrop and risk management opportunities. 

Exchange and clearing house operator ICE posted a 4% year on year increase in net revenue for Q2 2023, while derivatives marketplace CME reported a double digit increase of 10%. Further, CME’s operating income was up 14% compared to the same time last year, while ICE’s operating income rose by 10%.

For Eurex, the strongest performance came from its OTC clearing, and repo volumes, posting a 23% increase in OTC and nearly double the repo volumes in June at €379 billion.

Both CME and ICE referred to the uncertain macro environment over the last quarter and highlighted the continuing appetite of clients for risk management services from the businesses.

Speaking to this, Jeffrey C. Sprecher, chair and chief executive of ICE, said: “Amidst an uncertain macro environment, customers continue to access our networks to manage risk, consume data and drive workflow efficiencies.” 

For CME, in the face of a “substantial” decline in equity market volatility, the exchange delivered strong equity index average daily volume (ADV) of 6.2 million, and its equity index futures reached a new all-time high Large Open Interest Holders (LOIH) “as market participants continued to embrace Equity Index futures to manage risk during uncertain times”.

The business also posted the second highest quarterly SOFR futures and options ADV, up 154% in Q2. Elsewhere, CME reported that “a flight to liquidity late in the quarter drove Treasury futures OI [open interest] to reach a record 18 million during June,” which it linked to deep and resilient liquidity. 

As well as the macroeconomic factor, Terry Duffy, chair and chief executive of CME, also highlighted the relevance of geopolitical uncertainty and stated that “market participants continued turning to CME Group risk management products and services in Q2, with particularly noteworthy volume increases across [our] interest rate, commodity and options contracts.

“[…] Looking ahead, we will remain focused on delivering value to our clients by helping them navigate through what has become an increasingly unpredictable world.”

Recently, CME and The Depository Trust & Clearing Corporation (DTCC) enhanced their existing cross-margining arrangement to increase capital efficiencies for clearing members which trade and clear both CME Group interest rate futures and US treasury securities.

Earlier in the quarter, The TRADE spoke to Michel Everaert, head of EMEA at CME Group about the impact of market volatility, how best to manage risk exposures, and trends expected to develop within the derivative space.

Read more: Fireside Friday with… CME Group’s Michel Everaert

For ICE, the quarter ended strong with a consolidated net income of $799 million (up from $555 million in 2022) on $1.9 billion of consolidated revenues (minus transaction-based expenses), while the adjusted net income came to $802 million.

Overall, ICE’s exchanges segment revenue increased year on year by 9%, despite the ‘cash equities and equity options’ and ‘OTC and other’ segments both decreasing by 3%.

Additionally, the business reported a 17% increase in its fixed income execution net revenue, whilst its credit default swaps (CDS) clearing increased 26%, and the fixed income data and analytics revenue also rose slightly, by 1%.

Going forward, Sprecher asserted that driving innovation will be a key focus for the exchange to continue to deliver value to stockholders.

In June, ICE integrated its ETF Hub with LiquidityBook’s order and execution management system (OEMS) LBX to offer efficient access to the primary market and more recently, the exchange relaunched the ICE Risk Matching Auction (RMA) product – part of the ICE Bonds’ suite of trading protocols – expanding its fixed income liquidity offering, in response to market demand.

Speaking to the second quarter results, Warren Gardiner, chief financial officer at ICE, said: “This performance is a clear testament to the strength of our strategically diversified business model and to our ability to successfully execute amidst a dynamic macro-economic environment.”

Eurex’s second quarter results demonstrated an overall decrease in total trading volumes, in June a 14% decrease was posted, in May 9% and in April 15%.

The exchange posted decreases in equity derivates, interest rate derivatives, and index derivatives throughout the second quarter.

In equity derivatives the largest drop came in April with a 20% decrease, whilst May was stronger with no difference year on year and a lesser an 11% decrease in June.

Interest rate derivatives decreased by 12% compared to 2022 for June – going from 82 million to 72.1 million traded contracts, while index derivatives decreased by 16% the same month, trading 15.6 million less contracts.

Lee Bartholomew, head of FIC Exchange Traded Derivatives (ETD) product design at Eurex, recently addressed the decline in results for the second quarter of 2023: “In my humble opinion, the numbers do not accurately reflect the overall performance and the hard work put in by the team, our colleagues, the support of our clients, liquidity providers and stakeholders.

“[…] In short, Q2 has had its challenges which I feel the team has done a tremendous job of managing. At the same time, I am not overly cautious about the outlook in H2. I think the business will benefit from the foundations laid in H1, and I am confident that 2024 will reap the benefits.”

It was a busy Q2 for Eurex’s business, with various developments, including the US Commodities Futures Trading Commission (CFTC) approving the Eurex FTSE bitcoin index futures in May, with the business becoming the first exchange to offer bitcoin index futures in Europe.

More recently, Eurex announced its intention to include short-term interest rate (STIR) derivatives into its partnership programme in June, aiming to establish an EU-based viable alternative liquidity pool for trading and clearing EURIBOR futures and options.