Volumes Give Back the Record, but a Firmer Rate Per Contract, Record Market Data and Cost Discipline Hold EPS Flat

Results vs. Consensus

Year-over-Year Comparison

Sequential (QoQ) Comparison

Revenue — the volume air-pocket, cushioned

Total revenue of $1.54B fell 3% year-over-year and 9% sequentially. The decline is entirely a clearing-and-transaction-fee story ($1.23B, down 5.3%), driven by the 10.5% drop in ADV against the record Q3 2024 comp, when an August-2024 volatility spike had pushed volumes to an all-time third-quarter high. Two things kept the fee erosion to roughly half the volume decline: the blended RPC rose to $0.702, and the highest-RPC books (energy, ags, FX) held up better in the mix than the low-RPC rates book. Market data at a record $203M (+14%) and Other at $107M provided the non-fee ballast that limited total-revenue downside.

Margins — leverage cuts both ways, but held near 68%

The adjusted operating margin of 68.4% slipped modestly from 69.2% a year ago, the natural consequence of operating leverage working in reverse on lower revenue. That the margin held within a point of the prior year on a 3%-lower revenue base is a credit to the cost discipline: adjusted expenses of $487M were actually down year-over-year, and management cut the full-year expense guide again. This is the reassuring half of the quarter: even as the top line normalized, the earnings power did not crack, because the cost base is being actively managed lower (Google Cloud savings, less consulting, lower depreciation and occupancy).

EPS — flat, and honestly earned

Adjusted diluted EPS of $2.68 was flat year-over-year and level with the exceptionally strong Q3 2024, the third-highest quarter in company history. Holding EPS flat through a double-digit volume decline is the single most important fact of the print: it demonstrates the resilience of a diversified fee base plus a rate-sensitive float kicker plus cost discipline. The honest caveats are that the non-operating tailwind (float income up ~34% YoY) flattered the comparison and will fade as rates fall, and that year-to-date adjusted EPS growth of 9% is decelerating from the H1 pace as the volume comps harden.

Segment Performance

The quarter's segment story is uniform: nearly every asset class stepped down from the elevated H1 levels as volatility subsided, but the higher-RPC commodity and FX books held their rate, and the smaller/newer complexes (metals, crypto, credit futures) continued to grow. The contrast with Q2, when every book was setting records, is the clearest evidence that the record H1 was partly volatility-driven.

Average Daily Volume by Product Line

Rate Per Contract by Product Line

Interest Rates — the engine idles against a tough comp

Rates ADV of 13.4M fell 10% year-over-year and 13.5% sequentially as the summer volatility lull suppressed hedging activity across the Treasury and SOFR complexes. RPC held firm at $0.487. The important context is directional, not level: open interest across the firm ended September at 126M contracts, the highest end-of-September in five years, and set records among large open-interest holders in rates. That is the signal that matters, because held positions, not churned volume, are the leading indicator. Rates volume follows rate volatility, and a quiet quarter is not a broken franchise.

Assessment: This is the cyclical low-point of a structural grower. The record open interest and the record large-holder count say demand for the product is intact; the volume simply tracked a low-volatility window. We would expect rates volume to re-accelerate on any renewed rate-path uncertainty, which the fiscal backdrop (record issuance) makes more a question of when than if. No thesis change.

Equity Indexes — the biggest sequential give-back

Equity ADV of 6.3M fell 15% year-over-year and 18% sequentially, the softest of the six books, as a calmer equity tape reduced both institutional and retail activity. The Micro mix fell (equity Micros dropped from 47% to 43% of equity volume), which actually lifted the equity RPC to $0.652. Management extended the exclusive FTSE Russell index-derivatives license through 2037, adding to the 10-year NASDAQ extension secured in Q2 and locking down the index franchise for the long run.

Assessment: The sequential decline is a volatility story, not a share story, and the license extensions remove multi-year overhangs. The RPC uplift from the Micros mix-shift is a mechanical positive but a demand negative (fewer retail contracts), a reminder that retail engagement is pro-cyclical with market excitement. Neutral this quarter; the franchise is secured.

Energy — normalizing, but share moving back to CME

Energy ADV of 2.3M fell 11% year-over-year and 25% sequentially as WTI settled into a roughly $10 trading range and the H1 tariff-driven volatility faded. The offset the commodities lead emphasized is share: WTI futures share rose back to 76% (from 74%), WTI options share held near 91%, and Henry Hub natural-gas share is ~79% into a multi-year US LNG-export ramp (15–16 Bcf/day today, toward ~25 Bcf/day within three years). Year-to-date crude and refined and natural-gas complexes are each up ~10–11%.

Assessment: The sequential decline is cyclical (low WTI volatility), but the structural case is intact and arguably strengthening: US energy exports index more global flow to CME's benchmarks, and share is moving toward CME, not away. Natural gas is the multi-year growth vector here. We view the quarter as a pause in a structural uptrend, not a top.

Metals and Agriculturals — the resilient commodity books

Metals ADV of 825k grew 13% year-over-year (though down sequentially) on continued gold interest, and agriculturals of 1.7M grew 6% year-over-year with record open interest and a new record in ag weekly options. Both books carry high RPC ($1.5 and $1.4 respectively), so their relative resilience helped the blended rate. New products (1-ounce gold futures, ag weekly options) set records.

Assessment: The commodity complex continues to prove it can grow independently of the financial books, which is the diversification the bull case relies on. Small in the mix but high-RPC and structurally supported by physical-supply-chain realignment. A quiet positive.

Foreign Exchange — volume soft, RPC surges, Spot+ scaling

FX ADV of 834k fell 23% both year-over-year and sequentially, the weakest book by volume, but the RPC jumped to $0.841 on a higher member/institutional mix. The offsetting bright spot is FX Spot+, which set new volume records in every month of the quarter (single-day record $5.6B on September 11, over 70 entities including 40 banks, most new to CME's FX futures).

Assessment: Core FX futures volume is cyclically weak, but Spot+ is doing exactly what it was designed to do: pull spot-first bank participants into the CME liquidity pool. The RPC surge cushions the volume decline this quarter. We continue to assign Spot+ option value as it scales the FX funnel.

Key KPIs

Key Topics & Management Commentary

Overall Management Tone: Management was confident and heavily forward-looking, spending far more airtime on the new-product roadmap (prediction markets, crypto, 24/7 trading, BrokerTec Chicago, credit futures) than on defending a softer volume quarter, which it framed as a natural give-back from a record comp. The CEO was noticeably careful and precise on the FanDuel/prediction-market opportunity, repeatedly separating "prediction markets on markets" (allowed everywhere, uncontested) from "prediction markets on sports" (a government-approval question he would not pre-judge), and candid that the economics are still a work in progress. The posture on the softer volumes was matter-of-fact rather than defensive.

1. The Volume Give-Back Against a Record Comp

"The third quarter average daily volume of 25.3 million contracts represented the second highest third quarter average daily volume in our history, following the record quarter a year ago… we set records in large open interest holders and interest rates, equity indices and cryptocurrencies in September despite a general pullback in volatility across asset classes during the quarter." — Terry Duffy, Chairman & CEO

The framing is important: the year-over-year decline is against the strongest Q3 in company history, and the sequential decline is off the strongest quarter ever. Open interest at 126M contracts (a five-year September high) and record large-holder counts say the demand base is intact even as churned volume dipped with volatility. This is the difference between "the customers left" (they did not) and "the tape was quiet" (it was).

Assessment: This is the volume-unpredictability bear point we flagged at initiation, playing out. It is contained rather than escalating: the franchise held EPS flat through the air-pocket, and the leading indicator (open interest) is at a multi-year high. It validates our caution on comps without changing the structural thesis. The record H1 was, as we suspected, partly volatility-amplified.

2. FanDuel and the Prediction-Market Opportunity

"I don't think that a lot of people would have seen what we saw happen over the last 5 to 7 weeks as it relates to prediction market in the NFL with retail… the announcement with FanDuel is very important for CME. We're looking at 13 million potential accounts that will have access to CME's products." — Terry Duffy, Chairman & CEO

CME announced a partnership with FanDuel to develop and distribute event-based (prediction market) contracts, positioned squarely as a distribution play: access to ~13 million retail accounts and a shop window for CME's broader product suite. Management introduced hourly and intraday event contracts on its benchmark products and Bitcoin/Ether, leveraging existing operational and clearing scale and 130+ retail distribution partners. Crucially, the CEO drew a sharp line between prediction markets on markets (allowed in all states, uncontested) and prediction markets on sports (contingent on federal approval that these are swaps rather than gaming), declining to pre-commit on sports while stating CME would be "operationally ready" if approved.

Assessment: This is genuine new optionality with a credible distribution logic, but it is early and the economics are explicitly undecided ("still a work in progress"). The sports-events piece carries regulatory tail risk the CEO was careful not to own. We credit prediction markets as a real call option on a new retail revenue stream, not as a near-term earnings driver, and we like the discipline of separating the clean (markets) from the contested (sports).

3. Crypto: Record Volume, 24/7 Trading Coming

"Our crypto complex traded a record 340,000 contracts per day in the third quarter and was up over 225% relative to a year ago. This growth was aided by the early success of Solana and XRP futures, which were launched earlier this year." — Terry Duffy, Chairman & CEO

Crypto set a volume record (340k ADV, +225%), broadened beyond Bitcoin and Ether with Solana and XRP futures, and management confirmed 24/7 trading of crypto futures and options beginning early 2026, the natural asset class to lead given its already-continuous cash market and CME's reference-rate infrastructure. The 24/7 build rests on the Google Cloud transformation (which enables trading and clearing to run while maintenance continues) and the tokenized-cash initiative for weekend collateralization.

Assessment: Crypto is compounding fast and 24/7 is a sensible, contained first step (one asset class where the demand and infrastructure already exist). Management's "fast follower, not leader" discipline on other asset classes is the right posture given the FCM cost of round-the-clock staffing. Real growth, still small in the mix; option value on the tokenization/24/7 build.

4. Rate Per Contract: A Mix-Driven Uplift

"Where you're going to see the largest impact on the shift in micros, that's really going to impact the equity portion of our RPC… In equities, it went from 47% last quarter down to about 43% this quarter. So you saw an uplift in our equity RPC largely due to that shift from micros to full size in the mix." — Lynne Fitzpatrick, CFO

The blended RPC rose to $0.702 (from $0.690), but the CFO was candid that this is a mix effect, not pricing power: fewer retail Micros in the equity book (and a similar dynamic in metals) shifted the mix toward full-size, higher-RPC contracts. Customer mix (member vs. non-member) was the other moving part. It is, in other words, the mirror image of the Q2 RPC dilution: when retail leans in, RPC falls; when retail leans out, RPC rises.

Assessment: The RPC uplift is genuine ballast for the fee line this quarter, but investors should read it correctly, it reflects softer retail participation, which is a demand negative even as it is a rate positive. It reinforces our modeling stance: treat blended RPC as mix-driven and roughly range-bound, and do not extrapolate either the Q2 dilution or the Q3 uplift.

5. Collateral Float: Still a Tailwind, but Watch the Rate Path

"Our averages in the third quarter for cash, we averaged $135 billion, and we earned 33 basis points on that. On noncash collateral, we averaged $156 billion, earning 10 basis points… this third quarter, we were at about 46% in cash." — Lynne Fitzpatrick, CFO

Average cash collateral of $135B earning ~33bps, plus non-cash of $156B earning ~10bps, drove a net non-operating line up ~34% year-over-year. Cash remained at ~46% of the required amount, above the 30% soft minimum, and the CFO reiterated the expectation that balances may optimize lower over time. This line is the quiet swing factor: it was a tailwind this quarter, but its yield component falls as the Fed cuts and its balance component can drift toward the 30% floor.

Assessment: This is the model's most under-appreciated variable, and this quarter it worked in CME's favor, helping hold EPS flat. Precisely because it flattered the comparison, we keep a conservative posture on it into 2026: rate cuts plus balance normalization should turn it from tailwind to modest headwind. It does not change the quality of the franchise, but it tempers the forward earnings glide-path.

6. Market Data: A Record, With Pricing Power Intact

"It was our 30th consecutive quarter of revenue growth, a quarter of record… up over 14%… we have already announced and did so in August about the price increases for next year of 3.5%." — Julie Winkler, Chief Commercial Officer

Market data crossed $200M for the first time (a record $203M, +14%), its 30th straight quarter of growth, with broad strength across professional and non-professional subscribers and notable international demand (APAC, EMEA). Management has already announced a 3.5% rack-rate price increase effective January 1, 2026.

Assessment: Market data is the quiet compounder inside CME: a high-margin annuity that grows with the value of the markets and carries genuine pricing power (a 3.5% increase pushed through without friction). International subscriber growth is a leading indicator for future transaction revenue. This line is exactly the kind of non-volume ballast that lets EPS hold flat in a soft-volume quarter. Clear positive.

7. BrokerTec Chicago: Cash and Futures, Side by Side

"BrokerTec Chicago went live on October 6… the first time in CME Group history that we have our cash fixed income markets sitting side by side with our core futures and options markets… over 25 firms have connected to the new central limit order book… 66% of the volume is traded at price points not available on the BrokerTec New York Club." — Mike Dennis, Head of Fixed Income

BrokerTec Chicago, launched October 6 and co-located with the futures complex in Aurora, lets participants trade cash Treasuries and futures side by side, with over $1B notional in its first two weeks, 25+ firms connected, and 66% of volume at finer tick increments than the New York venue. Named dealers (Morgan Stanley, Citi, JPMorgan) were cited as pushing for the offering, and management framed it as a cash-franchise catalyst that in turn feeds the futures franchise via cross-margining potential.

Assessment: Strategically sound and demand-pulled (dealer-driven), BrokerTec Chicago tightens the link between CME's cash and futures Treasury franchises and gives clients tick-increment choice. It is early, and the volume split with the New York venue is unknowable yet, but the client-acquisition angle (new-to-BrokerTec firms already trading) is the right kind of early signal. A credible incremental positive for the fixed-income franchise.

8. Expense Discipline: Guide Cut a Third Time

"We expect total adjusted operating expenses for the year, excluding license fees, to be approximately $1.625 billion. That's $10 million below our prior guidance and a total of $25 million below our expectation to start the year." — Lynne Fitzpatrick, CFO

Management lowered the full-year expense guide again to ~$1.625B ex-license, now $25M below the start-of-year plan, on Google Cloud savings (full-year Google spend now ~$100M vs. ~$115M expected), less consulting (professional fees down from $4–5M/quarter to ~$1M), and lower depreciation and occupancy. The CFO framed this year's low cost growth as partly opportunistic (specific savings found) and set expectations that 2026 would build off this lower baseline.

Assessment: The repeated expense-guide cuts are the mechanical reason EPS held flat on lower revenue, and the Google Cloud migration continuing to deliver savings rather than surprises removes a real overhang. The CFO's honesty that some savings are one-time-in-nature is a useful caution against extrapolating the trend. Clearly the reassuring half of the quarter and a core support for the Hold.

9. OSTTRA Sale and Capital Return

"The proceeds from the sale were about $1.5 billion. The net proceeds are going to be very similar… we are bringing a recommendation to our Board in the coming weeks… our debt-to-EBITDA is the lowest in the sector." — Lynne Fitzpatrick, CFO and Terry Duffy, Chairman & CEO

CME agreed to sell its stake in OSTTRA (the post-trade JV) for ~$1.5B, with net proceeds similar, and will bring a capital-deployment recommendation to the Board within weeks. The CEO emphasized the sector-low leverage, the organic-and-partnership growth model (Google, FanDuel) that avoids multi-billion-dollar acquisitions, and an explicit reluctance to sit on excess cash.

Assessment: The OSTTRA proceeds add a discrete capital-return catalyst (likely a special/variable dividend or buyback flexibility) on top of the standing return machine. The messaging, sector-low leverage, disciplined organic growth, no interest in hoarding cash, is exactly what a quality compounder should say. It underpins the total-return case that supports the Hold; you are paid to wait.

10. Credit Futures and the Cash-to-Futures Bridge

"We saw strong growth this quarter in credit futures. OI hit a record in September… we have about 300 sales opportunities in the pipeline for credit futures." — Derek Sammann, Global Head of Commodities, Options & International Markets

Credit futures set a September open-interest record, with margin offsets against Treasury and S&P 500 futures making them capital-efficient for asset managers managing credit exposure, and a ~300-opportunity sales pipeline across client types. Together with FX Spot+ and BrokerTec Chicago, credit futures are part of a deliberate strategy to build stronger links between cash and futures markets across rates, FX and now credit.

Assessment: Credit futures are a small but strategically interesting new book: they extend CME's capital-efficiency moat (cross-margining) into corporate credit, a large adjacent market. The record OI and deep sales pipeline are encouraging early signals, though onboarding is slow. Another modest new growth vector that, in aggregate with Spot+ and BrokerTec Chicago, broadens the fixed-income franchise. Option value.

Guidance & Outlook

CME again declined to guide volumes, per policy, and the only revised number was the expense line, trimmed a third time. The forward drivers are now less about the mature core (whose volume tracks unforecastable volatility) and more about the widening slate of initiatives: prediction markets (FanDuel, from later in 2025), 24/7 crypto (early 2026), BrokerTec Chicago, credit futures, FX Spot+, and a 3.5% market-data price increase for 2026. Management set expectations that 2026 cost growth would build off this year's lower baseline, with formal guidance in February.

Implied setup: The near-term earnings path is more about the non-volume ballast (market data pricing, expense discipline) and the capital-return catalyst (OSTTRA proceeds) than about a volume re-acceleration, which is possible but unforecastable. The float-income tailwind narrows into 2026 as rates fall. Our base case is low-single-digit revenue growth off the normalized Q3 base, with EPS supported by cost discipline and capital return rather than volume.

Guidance style: Unchanged and consistent: guide only the controllable (expenses, capex, tax), decline to forecast volume, return the cash. The repeated expense-guide cuts show management is genuinely conservative on the controllable lines. The new-product roadmap is the source of catalysts, but each is early-stage and none is yet a guided number.

Analyst Q&A Highlights

Whether the Retail Strategy Can Scale Organically or Needs M&A

The opening question probed whether CME can scale its retail ambitions, newly amplified by the FanDuel deal and the Micro complex, without acquisitions. The CEO argued the retail strategy is fundamentally about distribution and efficiency, and that CME's institutional credibility is the asset that lets it partner with new retail entrants rather than buy them.

Q: "Terry, can you talk about your long-term retail strategy? This quarter, you announced the partnership with FanDuel. You obviously have your micro complex… do you think you can scale this offering organically to where you want it to be? Or is this an area where we could see potential M&A?"
— Dan Fannon, Jefferies

A: "Our strategy is one, and I've talked a lot about it, is distribution and efficiencies… We're looking at 13 million potential accounts that will have access to CME's products… I think we're in a strong position to grow our retail business with or without having to do M&A. And I would suggest right now, we would probably be more inclined to do it without M&A."
— Terry Duffy, Chairman & CEO

Assessment: The preference for partnerships over acquisitions is capital-discipline-positive and consistent with the sector-low leverage message. It also signals that the retail build is a distribution overlay on the existing product suite rather than a costly new business to buy, which protects margins. The strategy is credible, but it leans on third-party partners for customer acquisition, so the pace is partly outside CME's control. Reassuring on capital allocation; the retail upside remains an option, not a modeled number.

Prediction Markets on Sports vs. on Markets

A pointed line of questioning pressed on whether sports-event contracts are in the cards after media reports suggested so. The CEO drew a firm distinction and refused to pre-judge the sports question, which hinges on federal approval that such contracts are swaps rather than gaming.

Q: "We have seen pretty explosive growth in event contracts. A lot of that growth has come from sports-related event contracts… there's maybe been some media reports that suggest that you're looking at sports. So to the extent you could comment on whether that's in the cards would be much appreciated."
— Patrick Moley, Piper Sandler

A: "When they are prepared to move forward with events on sports, I would be prepared on day 1 in order to offer that to them on my DCM. As long as the United States government is not going to object to the self-certification of these and consider these swaps and not gaming… that is yet to be decided… most of these are sports events contracts. And for us, to say that we're going to list them or not is a decision yet to be made."
— Terry Duffy, Chairman & CEO

Assessment: The careful separation of "operationally ready" from "regulatorily approved" is exactly right, and it keeps the sports-events tail risk off CME's own P&L narrative while preserving the upside. It signals real optionality (day-one readiness) without over-promising on a contested regulatory question. The honest read: prediction markets are a genuine new retail option, but the largest piece (sports) is gated on a government decision management explicitly will not forecast.

Whether Event Contracts Change the Margin/Cost Structure

An analyst asked whether prediction markets, with more frequent events, different data feeds, and heavier retail-marketing needs, might carry a structurally different (lower) operating margin or require more spend. Management argued the opposite: CME's existing operational and distribution scale absorbs event contracts without a step-change in cost.

Q: "Is there anything structurally different about this market that might necessitate like a higher or lower operating margin, higher spend? Does it require more advertising to reach retail customers? Does it require more frequent listing of new contracts…?"
— Ben Budish, Barclays

A: "We have a tremendous amount of scale, both on the operational and technological front… the ability to list these event contracts intraday… we have with over 130 retail partners, this is something we tap into with every new product launch… So the way we approach building markets is to leverage the scale we've built over the last several decades." (Tim McCourt) … "We don't see a demonstrable change in that spend going forward to be able to offer these products." (Julie Winkler)
— Tim McCourt, Global Head of Equity & FX Products; Julie Winkler, Chief Commercial Officer

Assessment: The scale-leverage answer is the crux of why prediction markets could be accretive rather than dilutive: contracts run on existing matching, clearing and distribution infrastructure, and the retail-partner network (not CME) carries the customer-acquisition cost. If true at scale, event contracts are high-incremental-margin volume. The caveat is that this is management's framing of an unproven business; we will want to see the actual unit economics before crediting margin-neutral growth.

Energy Volume Normalization and Share

A question asked about the energy volume decline after a long growth run, and what is driving share shifts in oil and gas. The commodities lead acknowledged the cyclical (low-volatility) softness but emphasized share gains and the structural natural-gas/LNG story.

Q: "Energy volumes were down this quarter after a long run of really strong growth… With geopolitical risk stabilizing or moderating, what is the outlook for growth for energy…? And what are the factors that might be driving share shifts in oil and gas markets?"
— Ken Worthington, JPMorgan

A: "WTI futures shift back to CME. I think we're at 76% for Q3. That's up from 74% last quarter. We are maintaining our roughly 91% share in our WTI options markets… the continued record amount of liquefaction and export of U.S. LNG today at 15 or 16 Bcf, that will go to almost 25 in the next 3 years… the market that we've got 79% share of continuing to globalize."
— Derek Sammann, Global Head of Commodities, Options & International Markets

Assessment: The share data reframes a soft-volume quarter as cyclical, not competitive, share moved toward CME, not away, and the LNG-export ramp is a multi-year structural tailwind for Henry Hub. This is the right kind of answer to a volume-decline question: acknowledge the cycle, point to the structural drivers and the share gains. It supports our view that energy is pausing, not topping. Constructive.

Collateral Balances and the 30% Cash Minimum

An analyst asked whether the 30% cash minimum is affecting client allocation and for the latest balances. The CFO gave precise figures and reiterated that cash remains above the floor but may optimize lower.

Q: "I wanted to hit on collateral balances and to what extent maybe you're seeing the 30% cash minimum affecting client allocation decisions? And if you could give an update on what that looked like in the third quarter and what that stands at now?"
— Multiple analysts incl. Anthony Corbin (on for Alex Blostein), Goldman Sachs

A: "In the third quarter for cash, we averaged $135 billion, and we earned 33 basis points on that. On noncash collateral, we averaged $156 billion, earning 10 basis points… this third quarter, we were at about 46% in cash… I wouldn't be surprised if there's a little bit more optimization going forward."
— Lynne Fitzpatrick, CFO

Assessment: The disclosure is the most model-relevant of the call: it quantifies the float engine (~$135B cash at 33bps) and confirms both that it was a tailwind this quarter and that balances may drift toward the 30% floor. Combined with the coming rate cuts, this is the clearest guide that the non-operating line turns from tailwind to headwind into 2026. It is why we hold a conservative forward EPS posture even as this quarter's EPS held flat.

Google Cloud Spend and the 2026 Cost Baseline

A question asked where Google-related investment spend lands in 2025 and how it trends into 2026, plus any other 2026 expense puts and takes. The CFO detailed the savings and framed this year's low cost growth as partly opportunistic.

Q: "Can you just give us an update on where you expect that [Google spend] to ultimately shake out in 2025? And then remind us how you expect that component to trend into 2026… any other notable puts and takes on the expense side we should be aware of?"
— Kyle Voigt, KBW

A: "Expenses related to Google this quarter were about $27 million… year-to-date, we're running at about $71 million… Our guidance embeds within that about $100 million… At the beginning of the year, we were expecting more like $115 million… I would view this as kind of the baseline that we will be building off, but… these aren't necessarily annual type events where we'll have that level of cost offset."
— Lynne Fitzpatrick, CFO

Assessment: The candor that some 2025 savings are one-time is the important nuance: investors should not extrapolate this year's unusually low cost growth into 2026. The Google migration flipping from cost worry to savings source is a genuine positive, but the CFO is signaling a more normal expense-growth cadence next year. This tempers the "margins keep expanding" bull case and is consistent with our view that EPS growth relies increasingly on capital return and non-volume revenue rather than perpetual cost leverage.

What They're NOT Saying

1. No forward economics on prediction markets: Management was explicit that the FanDuel/event-contract economics are "still a work in progress" and "may not be a one-size-fits-all" pricing model. The upside is real but entirely unquantified, so any near-term revenue contribution is guesswork.
2. The float tailwind is peaking quietly: The CFO quantified $135B of cash at 33bps but only hinted that balances "may optimize" lower. Left unsaid is how much the combination of rate cuts and balance normalization subtracts from 2026 earnings, a line that helped hold EPS flat this quarter.
3. 2026 expense growth reverts higher: The message that 2025's low cost growth is "partly opportunistic" and "not annual" is a soft warning that 2026 expenses step up, but no number was given, leaving the margin trajectory ambiguous.
4. Sports-event regulatory timeline: With the government shut for three of the prior four weeks, management could not say when the swaps-vs-gaming question on sports contracts gets resolved. The largest piece of the prediction-market opportunity is gated on a decision with no timeline.
5. OSTTRA proceeds use undecided: ~$1.5B is coming, but the specific return mechanism (special dividend, buyback, reinvestment) awaits a Board decision "in the coming weeks," so the catalyst is announced but unshaped.

Market Reaction

• Pre-print setup: CME closed at $268.61 on October 21, entering the print up 15.7% year-to-date and 18.8% over the trailing twelve months, already off the Q2 highs (the stock had printed ~$276 at the July report). The 52-week closing range was $221.17–$290.71.
• Reaction session (October 22, before-open report): The stock gapped down ~1.8% at the open ($263.68) on the revenue-light, lower-volume headline, traded a $262.34–$273.34 range, then recovered through the session to close at $267.81, down just 0.3% (−$0.80) on 2.1M shares (1.1x the 30-day average). The S&P 500 fell 0.5% the same day.

The intraday round-trip is instructive: the market's first read of a 3%-lower-revenue, 16%-lower-volume quarter was a ~1.6% pre-market drop, but the EPS beat, the record market data, the third expense-guide cut, and the widening product roadmap pulled the stock back to roughly flat by the close. A quarter that gives back a volume record but holds EPS flat is, correctly, neither a beat nor a miss in the market's eyes.

The modest de-rating since Q2 (from ~$276 to ~$268) reflects the market recalibrating from the record H1 run-rate toward a more normalized volume base, which is exactly the recalibration our initiation anticipated. It is a healthier setup than the priced-for-perfection tape at the Q2 print, but at ~$268 and ~25x forward it is not yet the discounted entry that would justify paying up.

Street Perspective

Debate: Is the Q3 Volume Softness Cyclical or a Peak?

Bull view: The decline is purely a low-volatility give-back against a record comp; open interest at a five-year September high and record large-holder counts prove the demand base is intact and poised to convert to volume on any return of volatility.

Bear view: The H1 records were volatility-amplified, and a normalized run-rate implies materially slower growth than the market extrapolated; with the float tailwind fading, forward EPS growth could stall.

Our take: The bulls are right that this is cyclical, not structural, but the bears are right that the through-cycle base is below the H1 peak. Both can be true. We read the normalized base as higher than two years ago but below H1 2025, which supports a Hold: the business is fine, the extrapolation was too high.

Debate: Do Prediction Markets and New Products Move the Needle?

Bull view: FanDuel (13M accounts), crypto (+225%), credit futures, FX Spot+ and BrokerTec Chicago together represent a step-change in the growth surface, layered onto CME's scale at near-zero incremental cost, an underappreciated optionality stack.

Bear view: Each is small, early, and either regulatorily gated (sports events) or economically undefined (prediction-market pricing "a work in progress"); none contributes materially to 2026 earnings.

Our take: We side closer to the bears on timing and closer to the bulls on direction. The optionality is real and cheap, but it is a multi-year story, not a 2026 earnings driver. Correctly valued as free upside on top of a fully-priced core, which is why the core valuation still decides the rating.

Debate: Does the OSTTRA Sale and Sector-Low Leverage Justify a Premium?

Bull view: ~$1.5B of proceeds plus sector-low leverage plus a variable-dividend machine gives CME unmatched capital-return firepower and downside support; the quality deserves its premium.

Bear view: Capital return is already the base case for a capital-light monopoly, so the OSTTRA proceeds are a one-time top-up, not a re-rating catalyst, and the premium already embeds the balance-sheet strength.

Our take: The capital-return firepower is a genuine support that keeps this a Hold rather than anything lower, you are paid to wait, but it is not a catalyst for outperformance from here. The stock re-rates on a volume acceleration or a de-rating, not on a known capital-return story.

Model Update Needed

Valuation impact: A lower normalized volume base and a fading float tailwind roughly offset the OSTTRA capital-return top-up and continued cost discipline. Net, fair value remains near the current ~$268 on a 12-month view, consistent with a Hold. The de-rating since Q2 improves the setup modestly but not enough to upgrade; a move toward the low-$250s or a genuine volume re-acceleration would.

Thesis Scorecard Post-Earnings

Overall: Unchanged. The quarter is a clean confirmation of the thesis set at initiation. The one status change is Bear-2 moving from CONTAINED to EMERGING as the volume normalization we warned about arrived, though it is offset by the franchise's demonstrated ability to hold EPS flat through it. Bull-2 steps to Neutral for the quarter, a low-volatility test rather than a break, with open interest signaling the demand base is intact.

Action: Maintain Hold. The business performed exactly as a wide-moat compounder should through a soft-volume window, and the growth optionality keeps widening, but the multiple is still full and the modest de-rating to ~$268 is not yet the entry we want. We upgrade on a move toward the low-$250s or on evidence the through-cycle volume base is stepping up rather than normalizing down.