CME CME Group
A widening liquidity network and disciplined capital returns, but the current valuation demands more than conservative growth.
The business
CME Group operates marketplaces and clearinghouses for futures and options spanning interest rates, equities, commodities, foreign exchange, and cryptocurrencies. It earns transaction, clearing, and market-data fees, with revenue benefiting from trading activity, open interest, and modest pricing increases.
Quality gate · 78/100
Moat & management
| Moat | wide moat |
| Source | network effect |
| Trajectory | widening |
| Management | excellent |
Benchmark contracts, deep liquidity, and portfolio-margin efficiencies attract participants and reinforce one another. Replicating this liquidity, trust, regulatory standing, and clearing ecosystem would be exceptionally difficult.
Management maintains modest leverage, requires little capital expenditure, and returns surplus cash primarily through dividends. Avoiding material repurchases at elevated valuations demonstrates discipline.
Owner-earnings inputs
| Owner earnings (TTM) | 4.27B |
| Owner-earnings yield | 4.9% |
| Free-cash-flow yield | 4.9% |
| Growth used (normalized) | 6.0% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 6.9% |
Key risks
- Regulatory changes that reduce derivatives activity, pricing power, or market-data revenue
- Trading internalization or competing venues fragmenting liquidity in important contracts
- A cyberattack, prolonged outage, or clearing failure causing permanent reputational damage
Catalysts
- Global participation and new products expand volumes across the existing fixed-cost platform
- Treasury clearing, cryptocurrency trading, and cross-asset margin efficiencies deepen the network
Recent news
score · 8 articles
- CME Group (CME) Launches Treasury Link And A New Agriculture Index
- Kalshi Ramps Up Effort to Build Markets for AI Computing Power
- Inflation, Warsh, and War Stoke Treasury Yields, Putting Bond Markets On Edge
- Traders Dial Up Bets on Rate Increases
- 2 Profitable Stocks with Solid Fundamentals and 1 We Turn Down
- Is AI making markets more or less efficient?
- 1 of Wall Street’s Favorite Stocks to Research Further and 2 Facing Challenges
- Sector Update: Financial Stocks Rise Thursday Afternoon
⚠ financial — owner earnings ≈ net income · financial — valued by residual income (ROE vs cost of equity on book equity) · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.