CME profit falls short on thinner margins

22/04/2008 - 16:39

CHICAGO (Reuters) - CME Group Inc , parent of the world's largest derivatives exchange, on Tuesday posted a lower-than-expected profit on thinner margins, and shares declined 3.5 percent in pre-market trading.

The company said first-quarter net income rose to $284 million, or $5.25 per share, from $130 million, or $3.69 per share, a year ago.

Excluding a benefit from a change in tax laws, the exchange posted a profit of $4.67 a share, compared with the average Wall Street estimate of $4.83 a share as compiled by Reuters Estimates.

Revenue rose to $625 million, missing the average analysts' forecast of $630 million.

CME shares fell to $506.44 in pre-market trading from Monday's close on the New York Stock Exchange of $523.50.

"The earnings shortfall versus expectations should pressure shares, but the heavy non-operating component of the miss, coupled with bullish management commentary, should limit downside," said Edward Ditmire, analyst at Fox-Pitt Kelton in New York.

CME said results reflected operations of both the Chicago Mercantile Exchange and the Chicago Board of Trade, which merged in July 2007 to form CME Group.

Clearing and transaction fees, CME's biggest revenue item, rose by 28 percent to $525 million.

First-quarter derivatives trading volume was previously reported at 13.7 million contracts per day, up 32 percent.

However, CME's average rate per contract, a key measure of margins, fell sequentially by 2.7 percent to 63.0 cents from 64.8 cents in the fourth quarter of 2007 and 64.0 cents a year earlier.

The decline reflected higher interest rate trading in CME's product mix, which have a lower rate per contract.

CME is set to acquire NYMEX, the energy and precious metals mart, for about $9.4 billion, subject to shareholder and regulatory approval.

(Reporting by Ros Krasny; Editing by Derek Caney)

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