CME Stands to Benefit From Rising Interest Rates as Volatility Returns to Its Markets

While CME’s top and bottom lines remained stable during 2020, trading volume for the company’s various lines of futures products saw significant fluctuations. The most significant headwind for the company in recent years has been the impact low short-term interest rates has had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME’s trading volume. However, with interest rates now rising this drag has been removed and we expect the company to enjoy a recovery in trading volume at its interest rate futures complex. After a couple years of meager revenue growth, CME is well positioned for 2022 with market conditions becoming more favorable for the company.