The Volume Record Is Real, but the Discount Is Gone: Downgrading CME to Hold

Results vs. Consensus

Q3 2026 Scorecard

Year-over-Year Comparison

Quarter-over-Quarter Comparison

Revenue

Revenue of $1,737.3M rose 13.0% to the highest third-quarter total in company history and the second-highest quarter ever, behind only Q1 2026's record. The mechanics are straightforward: futures and options volume rose 16.3% while the blended rate per contract fell 3.3%, which per the company's own bridge added $179.1M from volume and subtracted $37.3M from rate. Market data added $40.6M of growth on its own (+20.0%), and other revenue grew 8.3%. The cash markets businesses, BrokerTec and EBS, contributed $74.0M of transaction fees, up 6.0%. Nine-month revenue of $5,323.6M is up 9.3%, and with October tracking +17% the full year will be the fifth consecutive record.

Margins

Adjusted operating margin of 69.4% expanded 100bps year-over-year and was essentially flat sequentially (69.5% in Q2). The year-over-year gain is operating leverage on a 13% revenue increase against a 5.6% increase in adjusted expenses excluding license fees. License fees are the line growing far faster than revenue (+27.7%), because they scale with equity index activity, and the E-mini Nasdaq-100 complex grew 72.7%. That is a margin drag of the best kind, since the revenue behind it arrives first, but it is a reminder that CME's incremental margin on equity volume is structurally lower than on rates volume. The adjusted net margin of 62.4% fell about 120bps year-over-year because non-operating income grew far slower than the operating line.

EPS

Adjusted diluted EPS of $3.02 beat the ~$2.99 consensus by 1.0% and grew 12.7%, the latest in a run of beats of 2% or less. The build is operational: adjusted operating income contributed +$154.5M year-over-year, non-operating income +$9.0M, and the diluted share count fell 0.5% after $524M of buybacks. The adjusted effective tax rate of 23.8% sat at the low end of the 23.5–24.5% guide, and the only tax item excluded from adjusted results was a modest $4.3M benefit. GAAP EPS of $2.89 rose 16.1%, helped by the absence of last year's $8.5M litigation charge. Nine-month adjusted EPS of $9.38 is up 11.3%.

Segment Performance

Revenue Mix — Q3 2026

Average Daily Volume by Product Line — Q3 2026

Average Rate per Contract by Product Line — Q3 2026

The rate-per-contract story has two halves. Sequentially, the blended RPC held at $0.679, confirming last quarter's read that Q1's dip was a volume-tiering artifact rather than price erosion. Year-over-year, RPC fell 3.3%, and the company attributes the decline to micro-contract growth in equities, energy and metals plus a higher member share of volume. Total micro ADV grew 50% to 4.8M contracts, so the dilution is the visible cost of the retail strategy working. Within the mix, the rates RPC actually rose, which matters because rates is 51% of volume.

Product-Level Drivers — Q3 2026 vs. Q3 2025

Interest Rates

Rates ADV of 15.1M rose 13.0% year-over-year and 4.1% sequentially, and the composition is the macro story of the quarter. Persistent inflation pushed the Fed to its first rate hike in more than three years, Treasury yields climbed to multi-year highs, and the Treasury futures complex lit up across the curve: 2-year contracts +35.5%, 10-year +26.8%, the bond +25.4%. SOFR futures inside two years grew a more modest 6.9%, and SOFR options fell 18.1%, which suggests traders repriced the policy path through outright futures rather than through options structures. Large open interest holders in rates set a record in September, but rates open interest overall finished up just 1.2% year-over-year.

Assessment: A hiking cycle that nobody positioned for is close to the ideal environment for CME's largest fee pool, and the cash-futures plumbing (Treasury Link, FICC cross-margining, CME Securities Clearing) lands just as the Treasury clearing mandate approaches. The caveat is that hiking-cycle volume is front-loaded: the repricing trade happens once, and the open-interest data says participants traded the move far more than they built new positions around it.

Equity Indexes

Equity ADV of 7.7M rose 22.9% year-over-year but fell 10.6% from Q2's elevated level. The growth was narrow and thematic: E-mini Nasdaq-100 volume rose 72.7% as skepticism about AI capital spending rippled through the index, while the E-mini S&P 500 complex grew only 5.2%. Micro E-mini Nasdaq-100 futures doubled to a record 2.6M contracts per day, and the new E-nano contracts reached 66,000 ADV through mid-October. Equity margin savings of nearly $47B a day are up substantially from prior quarters, and management said about 60% of the 2026 increase came from new positions rather than higher index levels.

"If we look at all of 2026, about 60% of the increase is coming from new positions established at CME Group and about 40% from rising index levels or rising asset levels and margin being posted at CME." — Tim McCourt, Global Head of Equities, FX & Alternative Products

Assessment: Equity is where the retail strategy and the volatility regime overlap, and it is also where license fees and micro dilution take the biggest bite of each incremental contract (equity RPC -7.2%). Equity open interest up just 0.2% year-over-year is the cleanest evidence that this complex's growth is trading intensity around an AI narrative, not a new layer of held exposure.

Commodities: Energy, Agriculture, Metals

Commodities volume grew 16% in aggregate, matching the financial complex. Energy ADV of 2.7M rose 16.1% on WTI (+31.4%) and Brent as the Middle East conflict disrupted supply routes, while natural gas was flat. International participation is the structural thread: non-U.S. energy ADV rose 40%, lifting the non-U.S. share of energy volume to 37% from 30% a year ago. Agriculture rose 18.1% on corn (+35.9%) and wheat (+54.9%). Metals rose 13.3%, with gold +16.8% and silver +18.1% despite falling precious-metals prices, supported by micro-contract adoption; 24/7 trading in the 1-ounce gold and 100-ounce silver contracts went live during the quarter.

Assessment: The commodity complexes are delivering exactly what a geopolitical-risk regime should deliver, and the international share gain in energy is durable franchise-building. But energy open interest fell 3.6% year-over-year, and an energy RPC down 5.6% on micro mix means each incremental contract earns less. These are good quarters, not a new base.

Foreign Exchange

FX ADV of 988,000 rose 18.5% year-over-year, led by the Japanese yen (+50.0%) on currency intervention and the Canadian dollar, and RPC rose 1.3%. FX set a record for large open interest holders in September, after a similar record in the first half, so the participant base in the smallest complex keeps widening. EBS spot FX notional rose 18% to $66.7B a day.

Assessment: Small and cyclical, but the participant-count records in a low-volatility FX tape are a quiet positive for the cross-margining story, where FX Link served as the template for Treasury Link.

Market Data & Other Revenue

Market data revenue of $243.1M rose 20.0%, an all-time quarterly record and the 34th consecutive quarter of year-over-year growth. Management broke the growth into thirds: professional real-time subscribers, retail and simulated-trading (non-professional) subscribers, and a remainder of data-feed demand, Term SOFR licensing, pricing and policy changes. Audit catch-up payments were $4.7M, below Q2's level, and more than half of market data demand comes from outside the U.S. Other revenue rose 8.3% to $116.1M.

"One-third has been from our expanding professional subscriber base, and that's for our real-time market data. One-third coming from our retail and sim platforms, so that's our non-professional subscribers." — Julie Winkler, Chief Commercial Officer

Assessment: This is now the highest-quality growth line in the company. Net of the audit payments, the run-rate is about $238M a quarter, or roughly $950M annualized, and the retail third ties it directly to the same client-acquisition engine that drives micro volume. At 14% of revenue and growing high-teens, it is the line most likely to hold up when volatility fades.

Key KPIs

Key Topics & Management Commentary

Overall Management Tone: Management was confident and noticeably less combative than in July, when the call was built as a rebuttal to the perpetuals narrative. The record quarter carried the prepared remarks, while regulatory questions drew shorter, process-oriented answers that deferred to the courts and the agency rather than relitigating them. The assurance was thinnest on open interest, where the answer was structural rather than quantitative, and on prediction markets, which drew no volume disclosure at all after three consecutive quarters of detailed metrics.

1. A Record Built on Velocity, With Every Asset Class Participating

All six asset classes grew by double digits year-over-year in the same quarter, and financial and commodity products each grew 16%. The drivers were macro and broad: an inflation-driven Fed hike, Middle East supply disruption in energy, war and weather in grains, AI-spending skepticism in the Nasdaq-100, and currency intervention in the yen. The Q3 record of 29.4M also lands squarely inside the 29–30M range we projected from July's +18% start, against the softest comp of 2025.

"Against a backdrop of shifting central bank policies, geopolitical uncertainty, and persistent market volatility, global participants continue to turn to CME Group in record numbers." — Terry Duffy, Chairman & CEO

September alone averaged 31.8M contracts (+22%), a record for the month, and year-to-date volume through October 20 averages 31.6M (+12%).

Assessment: The breadth is the bull case: a franchise that grows in every complex at once is not dependent on any single trade. The composition is the bear case: every driver management cited is an event, and events end. The quarter confirms the volume base held, but it does not tell us the base is independent of the current volatility regime.

2. Open Interest: The Durability Tell Goes Quiet

In April we upgraded partly because open interest was rising with volume, which we argued distinguished held risk from churn. Q2 extended that pattern (+8% year-over-year, +16% year-to-date). Q3 broke it: quarter-end open interest of 128.2M was still a September record and still 16% above year-end 2025, but that is the same year-to-date gain as at June 30, it sits below the ~130M open positions management cited on the July call, and data raised in Q&A showed equity open interest up just 0.2%, rates up 1.2% and energy down 3.6% year-over-year. Management's explanation is that the growth of weekly and short-dated options expirations mechanically suppresses open interest relative to five years ago.

"So as impressive as the open interest is, and I will talk about it all the time, I think you have to look at it in the light that we do have many different expirations that we did not have just a couple of years ago." — Terry Duffy, Chairman & CEO

Management also noted open interest climbed above 133M by the morning of the call, and that large open interest holders set records in rates and FX in September.

Assessment: The weekly-expiry argument is valid as a reason open interest grows slower than volume, but it does not explain why open interest stopped growing between June and September in the year's most active macro environment. We take the explanation at partial value. The step-up thesis now rests on the persistence of volatility rather than on accumulating positions, and that is a weaker foundation than the one we upgraded on.

3. The Fourth Quarter Starts Even Faster

The forward data point was emphatic: fourth-quarter volume to date runs 17% ahead of last year's record fourth quarter, at 29.7M contracts a day through October 20. The CFO framed the year as "firmly on track" for another record.

"As we enter the fourth quarter, volume is surpassing last year's record fourth quarter by 17%, and we are tracking 12% ahead of last year's record volume year-to-date." — Lynne Fitzpatrick, President & CFO

Assessment: Fourth-quarter consensus of ~$2.96 looks too low. If volume holds near 30M with a ~$0.68 rate per contract, Q4 adjusted EPS lands near $3.05–3.10. The near-term earnings trajectory is not the reason for our downgrade; the price already reflects it.

4. Capital Efficiency Crosses $100 Billion a Day

Average daily margin savings exceeded $100B for the first time, up from more than $95B in Q2 and roughly $40B "not too long ago," per the CEO. The build is broad: equity offsets near $47B (including about $5B from the OCC cross-margin arrangement), swaps portfolio margining at a record $14B on September 30 (+58% year-over-year on the September average), and FICC cross-margining for clients at $2.3B a day in September with a record day of $2.7B, up from about $1.5B earlier in the year. Twenty-four clearing members have registered for the FICC program, and many target full readiness in Q4, ahead of the Treasury and repo clearing mandate.

"September average daily savings in the program was $2.3 billion a day, and we saw a record day in Q3 of $2.7 billion." — Mike Dennis, Global Head of Rates & OTC Markets

The OTC swap-alternative products in equities (dividend futures and adjusted interest rate total return futures) grew open interest 30% to 2.6M contracts, worth just under $500B.

Assessment: This is the moat metric, and it strengthened on every axis. It also partly answers the open-interest concern: the positions migrating to CME are the capital-intensive, offset-generating kind. Last quarter we flagged that FICC uptake went undisclosed; this quarter management disclosed it in detail, and the ramp is real.

5. Market Data: Three Engines, One Record

The detail is above in the segment section; the strategic point belongs here. Market data growth is now evenly split between institutional subscribers, retail and simulation subscribers, and product and pricing changes, which makes it the most diversified growth line in the company. Management declined to frame a normalized growth rate but described data as a "leading indicator" for the markets themselves.

"Data business is almost always a first-to-customer asset for us and solution for them." — Julie Winkler, Chief Commercial Officer

Assessment: A ~$950M recurring line growing high-teens is the best argument for paying a premium multiple through a volume downturn. It is also the reason a Hold on CME is a valuation call rather than a business call.

6. Pricing Moves From an Annual Event to a Continuous Lever

Fee changes effective October 1 (crypto, grains, interest-rate tiers and micro equities) should add 0.5–1% to clearing and transaction fees on an annualized basis, on top of the April 1 changes and January market data increases, which together were guided to add 1.0–1.5% to total revenue. More important than the size is the policy shift: the company is abandoning its practice of a single annual pricing window in favor of mid-year adjustments when market conditions and value delivered warrant.

"We are moving away from having that annual pricing freeze, and we are looking at doing it more spread out over the course of the year when we see changes in marketplaces, when we see value creation at that point." — Lynne Fitzpatrick, President & CFO

Assessment: Continuous pricing is a quiet but meaningful upgrade to the earnings algorithm, and it partially offsets the structural RPC dilution from micros. It also signals confidence: exchanges raise prices mid-year only when they believe clients have nowhere else to go.

7. Costs: License Fees Rise With the Equity Boom, Core Budget Holds

Adjusted expenses of $531.8M rose 9.3%, but excluding license fees the increase was 5.6% to $427.6M, driven by Google Cloud migration support, salary and headcount growth, rent on the new data center lease, and marketing. License fees rose 27.7% to $104.2M on equity volume. The full-year guide for adjusted expenses excluding license fees remains ~$1.695B; nine-month spend of $1,244.6M is 73.4% of it, implying about $450M in Q4, and management cautioned that continued volume outperformance would lift performance-linked variable costs.

"The strong growth in volume this quarter, led by our equity complex, up 23%, resulted in an increase in license fees, which are primarily related to equity activity." — Lynne Fitzpatrick, President & CFO

Assessment: Cost discipline is intact, and the guide has now held for three quarters through a record year. The implied Q4 step-up to ~$450M (+5.3% sequentially) is the normal year-end pattern plus variable compensation; a modest overrun on a volume beat would be a high-quality miss.

8. The Perpetuals Fight Moves to the Courtroom

The late-August CFTC response we flagged as the binary catalyst arrived on September 2 as a motion to dismiss, arguing that CME lacks standing because it has shown no competitive injury and remains free to list the same perpetual contracts itself. CME opposed, and its new General Counsel, John Marchese, said the substance should be fully before the judge in December. On the call, management stuck to the legal argument (a funding-rate exchange fits the Dodd-Frank definition of a swap) and declined to say whether CME would list perpetuals if it lost. The prepared remarks reframed the debate as one of systemic risk.

"Innovation without real risk management is not progress. It has the potential to create systemic risk." — Terry Duffy, Chairman & CEO

Assessment: The catalyst passed without fundamental damage, and the stock rallied roughly 40% off its June 29 low as the perpetuals panic faded. The standing argument is a real litigation risk for CME, but losing the case would not change CME's economics; it would leave the status quo in place. We now treat the lawsuit as a hedge on market structure rather than a driver of the stock.

9. The Regulatory Queue: Compute Futures Wait, 24/7 Crude Retreats

Two pieces of the innovation slate are now explicitly stalled by the regulator. Compute futures, the NVIDIA H100 rental-rate benchmark we highlighted in July as an H2 launch, were filed under the full 40.3 review process, and the CFTC extended the comment period by 45 days to about November 9, with no decision timeline. The 10-barrel 24/7 crude contract, stayed by the CFTC the day before its July launch, has been withdrawn after commercial participants said they did not want to staff another desk. The CEO then set a structural ceiling on the 24/7 ambition: primary products cannot move to round-the-clock trading until the banking system does.

"As I've said, the U.S. equity market alone is $76 trillion. Nobody can prefund that on a Friday." — Terry Duffy, Chairman & CEO

Assessment: This is an important reset of expectations. The 24/7 rollout will stay confined to smaller, retail-oriented contracts (crypto, 1-ounce gold, 100-ounce silver); in gold and silver, weekend volume runs 20–30% of those contracts' ADV. The CFTC relationship now costs CME launch timing, not just headlines. None of these products moves 2027 earnings, but the "dense launch calendar" we cited in July has thinned.

10. Retail: Single Stock Futures and E-nano Build Slowly, Acquisition Accelerates

Single Stock futures, launched July 27, have traded about 350,000 contracts and ~$3.5B of notional, with September average daily open interest of 16,000 contracts, across a 100-share contract on 55 names and a 10-share contract on 22. That is roughly 5,700 contracts a day over the first three months, a rounding error against 29.4M total ADV, and distribution reaches 25 top retail partners rather than the 35-plus brokers targeted at launch. The broader retail engine is stronger: more than 100,000 new retail traders joined in the quarter (+40% year-over-year), the tenth consecutive quarter of double-digit retail client acquisition growth, and the E-nano equity contracts set a single-day record above 121,000 contracts the day before the call.

"We welcomed well over 100,000 new retail traders into our markets in this past quarter, and that was a 40% increase of where we were a year ago." — Julie Winkler, Chief Commercial Officer

Assessment: Retail acquisition is working, and it feeds both micro volume and the non-professional market data third. Single Stock futures are tracking the slow build management promised; we continue to model zero revenue contribution and treat the product as an option.

11. The Plumbing: Treasury Link, Securities Clearing and the Cloud

Treasury Link, the atomic spread-trading link between Treasury futures and BrokerTec cash Treasuries, went live in CME's new-release environment and entered client testing the week of the call, on track for its Q4 launch. CME Securities Clearing launches December 7, ahead of the SEC's Treasury clearing mandate. On technology, the Dallas disaster-recovery cloud region opened for client testing in June with latency as good or better than on-premises, the primary Chicago migration starts in late 2027, and the interim relocation of livestock markets to Dallas is no longer needed.

"Happy to say that over the weekend, Treasury Link is live now in our new release environment, and clients have been testing the functionality this week." — Mike Dennis, Global Head of Rates & OTC Markets

Assessment: These are the launches that matter most to the moat, and unlike Compute futures and 24/7 crude they are on schedule. A late-2027 cloud cutover also means duplicate infrastructure costs persist through next year, which we expect to show up in the February 2027 expense guide.

12. Capital Return Completes the OSTTRA Redeployment; the S&P License Pays Off From 2027

CME returned $989M in the quarter ($465M of dividends and $524M of buybacks) and said the redeployment of the OSTTRA proceeds is now complete. The buyback timing was good: the company repurchased 2.0M shares at an average of $255.81, and July (1.1M shares at $243.33) was the heaviest month, bought into the perpetuals panic. About $1.0B of authorization remains. Management called itself "a lot more choosy" on M&A, and the CEO described the debt load as "probably the lowest in our sector." Separately, the 25-year extension of Cboe's S&P 500 options license, announced September 29, benefits CME through its stake in the S&P Dow Jones Indices joint venture, with fee escalations beginning in 2027.

"We benefit starting in 2027 on potential increases, not 2032 because their agreement, the escalation of the pricing starts in 2027." — Terry Duffy, Chairman & CEO

Assessment: Capital allocation remains disciplined and opportunistic. With the OSTTRA proceeds spent, the open question is the 2027 mix between buybacks and the annual variable dividend, which management has not addressed. The S&P escalator adds to equity-method income from 2027, though management said the size of the escalations is not yet disclosed.

Guidance & Outlook

CME does not guide volume or revenue, and the controllable lines were reaffirmed without change: expenses, capex, and a tax rate now pointed to the low end of the range. The forward content again came through operating data. Fourth-quarter volume to date is 29.7M (+17%), the first full quarter of the October fee changes will add a modest rate tailwind, and management called the company "firmly on track" for a fifth straight record year.

Implied Q-over-Q ramp: None required. Q4 2025's record 27.4M ADV is now the comp, and October's pace already clears it by 17%. Our Q4 estimate of ~$3.08 assumes ADV near 30M, an RPC of ~$0.68, and expenses in line with the implied guide.

Street at: Consensus sits near $2.96 for Q4, $12.33 for FY2026 and ~$13.0–13.2 for FY2027. The Q4 number embeds a sequential decline that October's data does not support, so near-term revisions should keep drifting up. Our FY2026 estimate is ~$12.45.

Guidance style: Consistent: precise on controllable costs, silent on volume, and generous with high-frequency operating data. The new wrinkle is the warning that variable costs would rise with outperformance, which is honest expectation-setting rather than a soft guide-up on expenses.

Analyst Q&A Highlights

Why Open Interest Did Not Grow in a Record Volume Quarter

The sharpest question of the call put numbers on the open-interest concern: in equities, rates and energy, open interest finished roughly flat year-over-year despite double-digit volume growth, meaning velocity rather than positions drove the quarter. Management answered with market-structure history, arguing that weekly expirations prevent the open-interest build-up that quarterly cycles once produced, and called flat-to-single-digit open interest under weekly expiries "a good problem to have."

Q: "It appeared to be a very strong environment for all 3 asset classes, and volumes were up low to mid-teens across the board in 3Q, as you highlighted, but it is velocity that is driving volume, not OI. The question is, why didn't OI really grow in the quarter in these products, and how big a factor is this in the outlook for volumes as we start to think about 2027?"
— Ken Worthington, J.P. Morgan

A: "We didn't have weekly options expirations. We had quarterly options expirations, semi-quarterlies, and we had different types of products with different instruments where you would see the open interest build up significantly... But again, I think that is a good problem to have to maintain levels in these single digits when you are having expirations on a weekly basis versus either a monthly or a quarterly basis."
— Terry Duffy, Chairman & CEO

Assessment: The answer explained the level of open interest but not its trajectory, and it skipped the 2027 half of the question entirely. This is the exchange that moved us: a volume base that is velocity-led is more exposed to a calmer 2027 than one built on accumulating positions, and the company offered no counter-evidence beyond the October open-interest uptick.

The Perpetuals Lawsuit and Whether CME Would List Its Own

A question pressed the apparent tension between suing over perpetuals and insisting clients do not want them, and asked whether CME would list equity-index perpetuals under its exclusive licenses if the court treated perps as futures. The General Counsel laid out the schedule (CME opposed the motion to dismiss; the substance should be before the judge in December), and the CEO refused to commit either way.

Q: "How should we weigh the perpetuals lawsuit against your earlier comments that clients aren't asking for perpetuals? If the case is dismissed and perps are deemed futures in the U.S., would CME list its own perpetuals given its exclusivity in equity index futures?"
— Craig Siegenthaler, Bank of America

A: "Whatever the court decides, we will abide by the court's decisions, and we will move forward. The question is, would we list perps or not? That question has yet to be asked and answered yet publicly."
— Terry Duffy, Chairman & CEO

Assessment: The non-answer is strategically sensible, since committing to list perps would undercut the litigation, and the July disclosure that specifications are already drafted means the option stays open. Read together with July's claim of index-license exclusivity, the downside scenario remains manageable.

Why Net Interest Income Fell Faster Than Balances

A modeling question noted that clearing-house balances fell a couple of percent sequentially while net interest fell about 8%. The answer was mechanical: average clearing-house cash fell to $147B from about $150B, the retained spread held near 33bps, corporate cash earned about $27M, and joint-venture income and flat interest expense accounted for the rest.

Q: "I think the clearing house assets went down, I think a couple of percent quarter-over-quarter, but I think the net interest went down 8%."
— Alex Kramm, UBS

A: "So if you look at the cash at the clearing house, the average balances for the quarter were $147 billion in Q3. That was down from about $150 billion in Q2, with a similar return of about 33 basis points that we earned."
— Lynne Fitzpatrick, President & CFO

Assessment: The important fact is the stable ~33bps retained spread, which means the float line is now a balance story rather than a rate story. With the Fed hiking rather than cutting, the rate-cut fade we carried as a bear point has inverted; the residual risk is collateral balances drifting lower as clients optimize margin.

The October Fee Changes and the S&P License Read-Through

A two-part question asked for detail on the October 1 price changes and the read-through from Cboe's S&P licensing renewal to CME's joint-venture stake. The CFO quantified the pricing and described the move to rolling price changes; the CEO said the joint venture benefits from license escalations starting in 2027 rather than 2032.

Q: "If you could talk to the changes that went into effect here in early October in more detail, as well as the potential implications to you from the changes in the Cboe S&P licensing deal through your JV ownership."
— Dan Fannon, Jefferies

A: "We are expecting, if you look at an annualized basis, those to have an impact of somewhere in the range of 0.5%-1% of the clearing and transaction fees."
— Lynne Fitzpatrick, President & CFO

Assessment: Two small, durable positives. The pricing move adds perhaps $28–55M of annualized revenue on the current fee base, and the S&P escalator adds to equity-method income from 2027. Neither changes the rating math, but both lift the floor under 2027 estimates.

Compute Futures and the CFTC Clock

The opening question asked whether anything stood in the way of the Compute futures launch, given a comment record without visible pushback. Management said the timing is entirely in the agency's hands under the full-review process, then described early demand from neocloud operators, data-center owners, banks with AI-infrastructure lending exposure, and proprietary traders.

Q: "I know the CFTC extended the comment period. Just wondering if you see any hurdle to launching this product."
— Chris Allen, KBW

A: "As far as the timing of the agency goes, that is still unknown. As you know, they extended the comment period another 45 days, which ends, I believe, on November 9. Then they have to make a decision on what they want to do."
— Terry Duffy, Chairman & CEO

Assessment: The July framing of an H2 launch has become an open-ended regulatory wait. The demand description is credible and the strategic logic (hedging the full data-center cost stack) is intact, but the product now carries regulatory timing risk that management cannot control.

Why 24/7 Crude Was Withdrawn

A question asked what the commercial objections to 24/7 crude were and when energy might return to round-the-clock trading. The CEO answered that the large commercial hedgers did not want to staff weekend desks and that CME would defer to them, while again questioning why offshore 24/7 oil venues reached by U.S. participants go unpoliced.

Q: "You did withdraw the 10-Barrel WTI filing after the CFTC stay and the industry pushback that you cited. Could you just walk us through maybe what the key constituents' concerns actually were there and what the path and timeline is to maybe bringing 24/7 energy back?"
— Patrick Moley, Piper Sandler

A: "Commercials are looking to make sure that they have the big contract where they want it, and we support that. They did not want to staff up another desk... For now, we heed the advice of the commercial participants, and we will hold off on listing that contract till people are more comfortable."
— Terry Duffy, Chairman & CEO

Assessment: This is the incumbent's dilemma in miniature. CME's best clients protect the existing benchmark's market hours, and CME listens to them. That is good for the core franchise and a structural limit on how fast CME can match always-on competitors.

Will Retail Platforms Internalize the Flow?

The last question asked how the relationship with retail brokers evolves if they launch their own prediction markets, perpetuals or options to keep more of the economics. The CEO's answer rested on the liquidity ecosystem: retail carries little open interest, 94% of CME's business is institutional, and a retail-only market has never sustained itself.

Q: "How do you expect the relationship between CME and those partners develop where the economic incentive becomes more prevalent for them to steer volume towards their in-house products where they earn more of the economics?"
— Simon Clinch, Rothschild & Co Redburn

A: "Retail traditionally does not carry much open interest. As you know, we have said this historically, 94% of CME's business is institutionally driven... Just to think that retail trading against retail with a prop is a long-term proposition for a successful market, I have not seen one in my 46 years in the business."
— Terry Duffy, Chairman & CEO

Assessment: The ecosystem argument is right about institutional risk transfer and less complete about retail economics. The fastest-growing parts of CME's volume and market data are retail-driven, so internalization by distribution partners is a margin-at-the-edge risk rather than an existential one, which is how we continue to carry it.

Prediction Markets on Single Stocks

A question asked whether CME, which already runs a prediction market, would extend event contracts to single stocks. The CEO rejected the premise that every market needs a prediction-market version, said Single Stock futures would launch without one, and left the door open for later.

Q: "Given you already have a prediction market today, I guess what's the scope to potentially introduce prediction markets on single stocks, kind of equivalent to maybe a Single Stock future, but more of a prediction market contract?"
— Michael Cyprys, Morgan Stanley

A: "I don't think you can draw the conclusion that every single market has to have a prediction market associated with it... This contract will go forward without predictions to start with, for sure."
— Terry Duffy, Chairman & CEO

Assessment: Prediction markets came up on the call only in passing (in analyst questions and in one callback to this answer), and never with a metric. After three quarters of volume disclosures, the complex disappeared from the prepared remarks entirely, which reads as deliberate de-emphasis.

What They're NOT Saying

1. Prediction markets went dark: In Q2, management disclosed 525M cumulative event contracts, 140,000+ quarterly traders and 4M+ daily volume. This quarter, the release carried no event-contract metrics (only a footnote on joint-venture amortization), the prepared remarks did not mention the business, and the topic came up only in passing during Q&A, with no metrics. Moving from volume-without-economics to no disclosure at all suggests either slowing momentum or a deliberate step back while sports-contract legality is litigated elsewhere.
2. Crypto volume fell, and nobody said so: The July call cited crypto growth of 32% as proof of coexistence with perpetuals. This quarter's 10-Q shows crypto contract volume declined year-over-year, with Ether futures and options down 69.9% against a volatile 2025 comp while Bitcoin rose 19.8%. The call mentioned crypto only in the context of 24/7 trading and the October price increase.
3. Total open interest growth year-over-year: The company presented open interest against year-end 2025 (+16%) and as a September record, not as a year-over-year growth rate, although the July prepared remarks led with exactly that comparison (+8%). The complex-level data surfaced only through Q&A.
4. The CFO succession, four months out: Lynne Fitzpatrick becomes CEO on March 1, 2027, and she still holds the CFO role. The call named no successor and did not address the transition at all. For a company this dependent on capital-allocation discipline, the finance seat matters.
5. Single Stock distribution narrowed: At launch, 35-plus retail brokers targeted day-one readiness. This quarter management cited 25 top retail partners, and the deck counted 12-plus retail platforms. Nobody explained the gap, though additional clearing firms are due to go live in Q4.
6. The 2027 capital-return mix: With the OSTTRA redeployment complete and ~$1.0B of authorization left, management offered no framework for 2027 buybacks versus the annual variable dividend. Much of this year's buyback pace was funded by the one-time OSTTRA proceeds.

Market Reaction

• Pre-print setup: CME closed at $295.31 the session before the print, up 8.1% year-to-date against an S&P 500 up 12.7%, up 9.9% over the trailing twelve months, and up 7.2% over the trailing 30 days. The stock had rallied 18.5% from its $249.24 close after our Q2 note and traded 9.5% below its 52-week closing high of $326.46 (52-week closing low: $218.58 on June 29).
• Reaction session (October 21): Shares dipped about 1% in premarket trading before opening at $295.77 (+0.2%), traded between $290.19 and $299.00, and closed at $295.79, up 0.2% ($0.48), against an S&P 500 that rose 0.6%. Volume of 2.0M shares ran 1.1x the 30-day average.
• Next-day session (October 22): The stock rose 3.45% to $305.98 on 2.3M shares as a prominent sell-side upgrade from a bearish rating and a round of price-target increases reframed the hiking cycle as a volume tailwind. It closed the week at $305.71 on October 23, 22.7% above the Q2 reaction close and 6.4% below the 52-week high.

Priced In on the Day. The flat reaction-day tape is what a well-telegraphed beat looks like. CME publishes volume monthly, so the Q3 record, the double-digit growth in every complex and the strong September were all public before the release, and the stock had already risen 24.4% from its July 21 close of $237.38, through the Q2 rally and three months of strong monthly volume reports. The 1.0% EPS beat and in-line expense guide gave the market nothing new to price, and the stock lagged the S&P 500 by about 0.4 points on the day.

Re-Rated by Revisions the Next Day. The second-day move came from the sell side catching up to the fundamentals: estimate revisions toward October's +17% pace and a narrative shift that treats Fed hikes as a structural velocity tailwind for rates volume. That framing is reasonable for 2026 and early 2027. Our concern is that it extrapolates a volatility regime into the multiple at precisely the point where the open-interest data stopped corroborating it. Since our July note the stock has moved from roughly 20x to 24.5x our FY2026 estimate, and the year-to-date gap to the S&P 500, more than 22 points going into the July print, was under 5 entering this one.

Street Perspective

Debate: Is a Hiking Cycle a Structural Volume Tailwind or a Volatility Spike?

Bull view: The bull camp argues that the first Fed hike in more than three years opens a multi-quarter repricing of the entire curve, layered on record Treasury issuance, an approaching Treasury clearing mandate and persistent geopolitical risk. On that view, volume estimates for 2027 are too low and the 36M-contract Q1 2026 record is a comp CME can approach again.

Bear view: The bear camp contends that the quarter's volume was velocity in response to events (a surprise hike, a Middle East supply shock, an AI-spending scare), that open interest in the three largest fee pools was flat year-over-year, and that 2027 faces the hardest first-quarter comp in company history.

Our take: Both are right on different time horizons. The hiking cycle supports volume through the next two or three quarters, but the absence of open-interest growth means the base is more volatility-dependent than it looked in July. We model 2027 volume roughly 2% above 2026, which supports mid-single-digit EPS growth, not the low-double-digit pace of 2026.

Debate: After a 40% Rally Off the June Low, What Is Left?

Bull view: Optimists point to a fourth-quarter consensus that looks too low, upward revisions to 2027, pricing power now exercised continuously, and a recurring market data line growing high-teens. At roughly 23x 2027 earnings, a wide-moat franchise with these attributes deserves to trade at or above its historical mid-20s multiple.

Bear view: Skeptics note that the stock has gone from a perpetuals-panic discount to its historical premium in four months, that each of the last four quarters beat by 2% or less, and that a trailing multiple above 25x leaves no room for a calmer 2027.

Our take: The bulls have the better business argument and the bears have the better price argument. At $305.71 the stock trades about 3% below the floor of our raised fair-value range, so the expected return is roughly the market's. That is the definition of a Hold, not a call that anything has gone wrong.

Debate: Is the CFTC Conflict a Cost or a Hedge?

Bull view: One camp sees the litigation as a free hedge: if CME wins, perpetuals are restricted as swaps; if it loses on standing, nothing changes for CME's economics, and its exclusive index licenses keep it positioned for any legitimized equity perpetual.

Bear view: The other camp argues the adversarial relationship is now costing CME tangible launches (Compute futures in open-ended review, 24/7 crude withdrawn) while a permissive agency approves faster-moving rivals.

Our take: We side with the hedge view on the lawsuit and the cost view on the product calendar. The friction has not touched the core franchise, which just set a record, but it has slowed the innovation optionality that formed part of our upgrade case.

Model Update Needed

Valuation impact: At the $305.71 close on October 23, CME trades at 25.2x trailing adjusted EPS of $12.14, 24.5x our FY2026 estimate and 23.2x our FY2027 estimate. Applying the same mid-20s multiple we have used throughout our coverage (24–25x) to FY2027E of ~$13.20 gives a fair value of $315–330, up from the low-$300s, with the increase coming entirely from higher earnings. The midpoint of $322.50 implies ~5.5% upside, plus a ~1.7% dividend yield. We would turn constructive again near $270 (roughly 20x FY2027E) or on evidence that open interest has resumed growing with volume.

Thesis Scorecard Post-Earnings

Overall: The business thesis is unchanged to modestly stronger: record volume, record capital efficiency, record market data, wider margins and pricing power used more often. Two things weakened: the open-interest corroboration that made us believe the volume base was durable, and the new-product slate, where regulatory timing has replaced launch dates. The decisive change is price. The valuation bear point that inverted in July has re-emerged, because the market has paid for the step-up we identified.

Action: Downgrade to Hold from Outperform, with fair value raised to $315–330. The April upgrade worked as designed (shares are up about 7% from the upgrade-day close and about 23% from our July reiteration), and the stock has reached the low-$300s, where our July note said we would revisit the rating on a move through them. With the open-interest signal weaker, we act now rather than wait for the last few points. We would revisit Outperform on a pullback toward $270 or on renewed open-interest growth alongside volume, and would consider Underperform only if volume mean-reverts toward 26–27M while the multiple stays in the mid-20s.