CME Has Benefited From Rising Interest Rates as Volatility Returns to Its Markets

CME Group has enjoyed favorable market conditions in 2022 and 2023 as volatility across multiple asset classes drove increased trading volume, leading to strong revenue growth. Prior to 2022, the most significant headwind for the company had been the impact that low short-term interest rates had on its interest rate futures, which are 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. With interest rates now well above the 0% rate we saw during much of the past decade, the drag has been removed, benefiting the company's growth. That said, this was a one-time benefit, and we expect CME's revenue growth to return to the low to midsingle digits going forward, particularly as 2023 featured unusually large price increases from CME.