Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is provided as a supplement to, and should be read in conjunction with, the accompanying unaudited consolidated financial statements and notes in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023.

References in this discussion and analysis to “we” and “our” are to CME Group Inc. (CME Group) and its consolidated subsidiaries, collectively. References to “exchange” are to Chicago Mercantile Exchange Inc. (CME), the Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX), and Commodity Exchange, Inc. (COMEX), collectively, unless otherwise noted.

RESULTS OF OPERATIONS

Financial Highlights

The following summarizes significant changes in our financial performance for the periods presented.

																		Quarter Ended March 31,
(dollars in millions, except per share data)																								2023						2022						Change
Total revenues																								$	1,441.6					$	1,346.6					7		%
Total expenses																								527.9						487.5						8
Operating margin																								63.4		%				63.8		%
Non-operating income (expense)																								$	243.2					$	57.2					n.m.
Effective tax rate																								23.6		%				22.4		%
Net income																								$	883.8					$	711.0					24
Diluted earnings per common share																								2.43						1.95						25
Cash flows from operating activities																								902.4						799.1						13

n.m. not meaningful

Revenues

																		Quarter Ended March 31,
(dollars in millions)																								2023						2022						Change
Clearing and transaction fees																								$	1,200.2					$	1,138.1					5		%
Market data and information services																								165.8						151.7						9
Other																								75.6						56.8						33
Total Revenues																								$	1,441.6					$	1,346.6					7

Clearing and Transaction Fees

Futures and Options Contracts

The following table summarizes our total contract volume, revenue and average rate per contract for futures and options. Total contract volume includes contracts that are traded on our exchange and cleared through our clearing house and certain cleared-only contracts. Volume is measured in round turns, which is considered a completed transaction that involves a purchase and an offsetting sale of a contract. Average rate per contract is determined by dividing total clearing and transaction fees by total contract volume. Contract volume and average rate per contract disclosures exclude trading volume for the cash markets business and interest rate swaps volume.

																		Quarter Ended March 31,
																								2023						2022						Change
Total contract volume (in millions)																								1,666.1						1,607.1						4		%
Clearing and transaction fees (in millions)																								$	1,105.6					$	1,034.3					7
Average rate per contract																								$	0.664					$	0.644					3

We estimate the following net change in clearing and transaction fees based on the change in total contract volume and the change in average rate per contract for futures and options during the first quarter of 2023 when compared with the same period in 2022.

(in millions)												Quarter Ended
Increase due to a change in total contract volume												$	39.2
Increase due to a change in average rate per contract												32.1
Net increase in clearing and transaction fees												$	71.3

Average rate per contract is impacted by our rate structure, including volume-based incentives; product mix; trading venue; and the percentage of volume executed by customers who are members compared with non-member customers. Due to the relationship between average rate per contract and contract volume, the change in clearing and transaction fees attributable to changes in each is only an approximation.

Contract Volume

The following table summarizes average daily contract volume. Contract volume can be influenced by many factors, including political and economic conditions, the regulatory environment and market competition.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
Average Daily Volume by Product Line:
Interest rates																								14,490						12,484						16		%
Equity indexes																								7,303						7,950						(8)
Foreign exchange																								969						904						7
Agricultural commodities																								1,379						1,474						(6)
Energy																								2,083						2,515						(17)
Metals																								649						593						9
Aggregate average daily volume																								26,873						25,920						4
Average Daily Volume by Venue:
CME Globex																								24,170						24,060						—
Open outcry																								1,623						1,030						58
Privately negotiated																								1,080						830						30
Aggregate average daily volume																								26,873						25,920						4
Electronic Volume as a Percentage of Total Volume																								90		%				93		%

Market volatility increased within certain financial markets throughout the first quarter of 2023, following lower overall volatility in the first quarter of 2022. Interest rate and foreign exchange volatility were higher as result of higher inflation levels and market uncertainty following the collapse of two U.S. regional banks. However, volatility was lower within our equities, agricultural commodity and energy markets. These markets experienced higher volatility in early 2022 due to geopolitical uncertainty as a result of the conflict between Russia and Ukraine. We believe these factors led to the changes in contract volume during the first quarter of 2023, when compared with the same period in 2022.

Interest Rate Products

The following table summarizes average daily contract volume for our key interest rate products.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
Eurodollar futures and options:
Futures expiring within two years																								325						1,869						(83)		%
Options																								137						1,489						(91)
Futures expiring beyond two years																								82						811						(90)
SOFR futures and options:
Futures expiring within two years																								3,001						1,043						n.m.
Options																								2,429						39						n.m.
Futures expiring beyond two years																								907						156						n.m.
U.S. Treasury futures and options:
10-Year																								2,921						2,855						2
5-Year																								1,896						1,742						9
2-Year																								828						711						16
Treasury Bond																								560						557						1
Federal Funds futures and options																								601						414						45

n.m. not meaningful

In the first quarter of 2023, overall interest rate contract volume increased when compared with the same period in 2022. We believe this increase was due to higher interest rate volatility as a result of higher inflation levels and market uncertainty following the collapse of two U.S. regional banks. The Federal Open Market Committee's decision to increase the Federal Funds rate in the first quarter of 2023 also contributed to additional interest rate volatility. In addition, the increase in Secured Overnight Financing Rate contract (SOFR) volume was also due to more market participants transitioning to the new reference rate away from Eurdollar contracts, which are based on LIBOR. The LIBOR rate will conclude in the second quarter of 2023.

Equity Index Products

The following table summarizes average daily contract volume for our key equity index products.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
E-mini S&P 500 futures and options																								4,601						4,477						3		%
E-mini Nasdaq 100 futures and options																								1,896						2,381						(20)
E-mini Russell 2000 futures and options																								332						452						(26)

Equity index contract volume decreased in the first quarter of 2023 when compared with the same period in 2022, which we believe was due to lower overall volatility within the equity indexes in the first quarter of 2023 when compared with the same period in 2022. Significant market uncertainty in the first quarter of 2022 was due to higher than expected inflation, as well as rising tensions and geopolitical uncertainty with Russia and Ukraine. We believe these factors led to lower overall equity contract volume in the first quarter of 2023 when compared with the same period in 2022.

Foreign Exchange Products

The following table summarizes average daily contract volume for our key foreign exchange products.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
Euro																								268						249						8		%
Japanese Yen																								173						134						29
British Pound																								112						118						(5)
Australian dollar																								104						102						2

Overall foreign exchange contract volume increased in the first quarter of 2023 when compared with the same period in 2022. Market volatility was higher in the first quarter of 2023 due to market uncertainty surrounding the financial health of regional and global banks in the U.S. and Europe. As a result, Japanese Yen contract volume increased as investor demand for safe haven currencies increased amid market uncertainty. We believe these factors led to an overall increase in foreign exchange contract volume.

Agricultural Commodity Products

The following table summarizes average daily contract volume for our key agricultural commodity products.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
Corn																								409						487						(16)		%
Soybean																								296						323						(8)
Wheat																								185						224						(17)

In the first quarter of 2023 when compared with the same period in 2022, overall commodity contract volume decreased due to lower overall market volatility. Volatility in the first quarter of 2022 was higher as a result of global trade uncertainty due to the conflict between Russia and Ukraine. We believe these factors contributed to lower overall commodity volume.

Energy Products

The following table summarizes average daily contract volume for our key energy products.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
WTI crude oil																								1,067						1,438						(26)		%
Natural gas																								599						542						10
Refined products																								328						408						(20)

Overall energy contract volume decreased in the first quarter of 2023 when compared with the same period in 2022. Market volatility was higher in the first quarter of 2022 as a result of the Russia and Ukraine conflict, which we believe led to the overall decrease in energy contract volume.

Metal Products

The following table summarizes average daily volume for our key metal products.

																		Quarter Ended March 31,
(amounts in thousands)																								2023						2022						Change
Gold																								398						390						2		%
Copper																								123						89						38
Silver																								94						86						9

In the first quarter of 2023, overall metal contract volume increased when compared with the same period in 2022. Market uncertainty following the collapse of two U.S. regional banks led to an overall increase in demand for gold and other precious metals as safe-haven investments. In addition, copper contract volume increased largely due to an increase in demand for copper in China following the lifting of restrictions from the COVID pandemic. We believe these factors led to the overall increase in metal contract volume.

Average Rate per Contract

The average rate per contract increased in the first quarter of 2023, when compared with the same period in 2022. The increase in the average rate per contract was primarily due to an increase to our fee structure that went into effect on February 1, 2023.

Cash Markets Business

Total clearing and transaction fees revenues in the first quarter of 2023 include $75.0 million of transaction fees attributable to the cash markets business, compared with $86.7 million in the first quarter 2022. This revenue primarily includes BrokerTec Americas LLC's fixed income volume and EBS's foreign exchange volume.

																		Quarter Ended March 31,
(amounts in millions)																								2023						2022						Change
BrokerTec fixed income transaction fees																								$	39.2					$	44.4					(12)		%
EBS foreign exchange transaction fees																								35.8						42.3						(15)		%

The related average daily notional value for the first quarter of 2023 and 2022 were as follows:

																		Quarter Ended March 31,
(amounts in billions)																								2023						2022						Change
European Repo (in euros)																								$	354.7					$	320.8					11		%
U.S. Treasury																								123.7						147.4						(16)
Spot FX																								64.4						68.1						(5)

Overall average daily notional values for the cash markets business remained relatively flat in the first quarter of 2023 compared with the same period in 2022. We believe the decrease in U.S. Treasury and Spot FX average daily notional value was due to overall lower volatility in the first quarter of 2023 when compared with the same period in 2022. Volatility within the U.S. Treasury and spot FX markets was higher in the first quarter of 2022 as a result of the conflict between Russia and Ukraine and uncertainty around the Federal Reserve's interest rate policy in early 2022. The slight increase in European Repo average daily notional value was largely due to increased volatility as a result of a change in market expectations regarding the European Central Bank's interest rate policy. Despite the overall average daily notional value remaining flat, transaction revenue for BrokerTec and EBS decreased slightly in the first quarter of 2023 when compared with the same period in 2022, due to the tiered pricing structure and incentive rate programs.

Concentration of Revenue

We bill a substantial portion of our clearing and transaction fees directly to our clearing firms. The majority of clearing and transaction fees received from clearing firms represent charges for trades executed and cleared on behalf of their customers. No one individual firm represented 10% of our clearing and transaction fees in the first quarter of 2023. Should a clearing firm withdraw, we believe that the customer portion of the firm’s trading activity would likely transfer to another clearing firm of the exchange. Therefore, we do not believe we are exposed to significant risk from the ongoing loss of revenue received from or through a particular clearing firm.

Other Sources of Revenue

Market data and information services. During the first quarter of 2023, overall market data and information services revenues increased when compared with the same period in 2022, largely due to price increases for certain products.

The two largest resellers of our market data represented approximately 31% of our market data and information services revenue in the first quarter of 2023. Despite this concentration, we consider exposure to significant risk of revenue loss to be minimal. In the event that one of these vendors no longer subscribes to our market data, we believe the majority of that vendor’s customers would likely subscribe to our market data through another reseller. Additionally, several of our largest institutional customers that utilize services from our two largest resellers report usage and remit payment of their fees directly to us.

Other revenues. In the first quarter of 2023, the increase in other revenues when compared with the same period in 2022 was largely attributable to higher custody fees as well as an increase in co-location and other connectivity fees.

Expenses

																		Quarter Ended March 31,
(dollars in millions)																								2023						2022						Change
Compensation and benefits																								$	204.5					$	185.2					10		%
Technology																								51.3						45.9						12
Professional fees and outside services																								38.3						31.8						21
Amortization of purchased intangibles																								56.8						58.4						(3)
Depreciation and amortization																								31.9						33.5						(5)
Licensing and other fee agreements																								84.7						80.9						5
Other																								60.4						51.8						17
Total Expenses																								$	527.9					$	487.5					8		%

Operating expenses increased by $40.4 million in the first quarter of 2023 when compared with the same period in 2022. The following table shows the estimated impacts of key factors resulting in the change in operating expenses:

												Quarter Ended March 31, 2023
																		Amount of Change						Change as a Percentage of Total Expenses
(dollars in millions)
Non-qualified deferred compensation																		$	11.0					2		%
Salaries, benefits and employer taxes																		8.0						2
Professional fees and outside services																		6.6						1
Technology support services																		5.8						1
Currency fluctuation																		5.0						1
Building maintenance																		(4.5)						(1)
Other expenses, net																		8.5						2
Total increase																		$	40.4					8		%

Increases in operating expenses in the first quarter of 2023 when compared with the same periods in 2022 were as follows:

• An increase in our non-qualified deferred compensation liability during the first quarter of 2023, the impact of which does not affect net income because of an equal and offsetting change in investment income, contributed to an increase in compensation and benefits expense.

• Salaries, benefits and employer taxes were higher during the first quarter of 2023 when compared with the same period in 2022, due to an increase in headcount during the year, which is primarily attributable to additional headcount in workforce in the company's international locations.

• Professional fees and outside services expenses increased due to a greater reliance on consultants, specifically for the Google Cloud transformation project as well as an increase in legal fees related to our business activities and product offerings. The increase in professional fees was partially offset by a decrease in NEX integration fees, which have steadily declined since the second half of 2021.

• The increase in expense related to technology support services was primarily driven by higher software license fees and third party services to support the ongoing Google Cloud transformation project.

• In the first quarter of 2023, we recognized a net loss of $0.7 million, compared with a net gain of $4.3 million during the same period in 2022, due to currency exchange rate fluctuations. Gains and losses from exchange rate fluctuations are recognized in the consolidated statements of net income when subsidiaries with a U.S. dollar functional currency hold certain monetary assets and liabilities denominated in foreign currencies.

Decreases in operating expenses in the first quarter of 2023 when compared with the same period in 2022 were as follows:

◦The decrease in building maintenance expense in the first quarter of 2023 was driven by a decline in construction and relocation expenses related to the development of the SOFR options trading floor, which was completed in 2022.

Non-Operating Income (Expense)

																		Quarter Ended March 31,
(dollars in millions)																								2023						2022						Change
Investment income																								$	1,357.7					$	73.1					n.m.
Interest and other borrowing costs																								(39.9)						(42.5)						(6)		%
Equity in net earnings of unconsolidated subsidiaries																								78.2						73.3						7
Other non-operating income (expense)																								(1,152.8)						(46.7)						n.m.
Total Non-Operating																								$	243.2					$	57.2					n.m.

n.m. not meaningful

Investment income. Earnings from cash performance bond and guaranty fund contributions that are reinvested increased in the first quarter of 2023 when compared with the same period in 2022, due to a higher rate of interest earned in the cash accounts at the Federal Reserve Bank of Chicago following multiple interest rate hikes in 2022 and early 2023. In the first quarter of 2023 and 2022, earnings from cash performance bond and guaranty fund contributions were $1,256.3 million and $73.6 million, respectively. We also recognized higher net realized and unrealized gains on investments in the first quarter of 2023.

Other income (expense)**. We recognized higher expenses related to the distribution of interest earned on performance bond collateral reinvestments to the clearing firms in conjunction with higher interest income earned on our reinvestment during the first quarter of 2023 when compared with the same period in 2022. This was due to a higher Federal Funds rate in 2023 compared to the prior year period. In the first quarter of 2023 and 2022, expense related to the distribution of interest earned on collateral reinvestments was $1,163.5 million and $48.4 million, respectively.

Income Tax Provision

The following table summarizes the effective tax rates for the periods presented:

						2023						2022
Quarter ended March 31						23.6		%				22.4		%

The overall effective tax rate increased in the first quarter of 2023 when compared with the same period in 2022. In the first quarter of 2022, we recognized a benefit related to the settlement for various tax audits.

Liquidity and Capital Resources

Sources and Uses of Cash*.* Net cash provided by operating activities increased in the first quarter of 2023 when compared with the same period in 2022, largely due to an increase in revenue resulting from higher volume and fee increases. Net cash used in investing activities remained relatively flat during the first quarter of 2023 when compared with the same period in 2022. Cash used in financing activities was higher during the first quarter of 2023 when compared with the same period in 2022, due to a decrease in cash performance bonds and guaranty fund contributions.

Debt Instruments*.* The following table summarizes our debt outstanding at March 31, 2023:

(in millions)			Par Value
Fixed rate notes due May 2023, stated rate of 4.30%			€	15.0
Fixed rate notes due March 2025, stated rate of 3.00% (1)			$	750.0
Fixed rate notes due June 2028, stated rate of 3.75%			$	500.0
Fixed rate notes due March 2032, stated rate of 2.65%			$	750.0
Fixed rate notes due September 2043, stated rate of 5.30% (2)			$	750.0
Fixed rate notes due June 2048, stated rate of 4.15%			$	700.0

---

(1)We maintained a forward-starting interest rate swap agreement that modified the interest obligation associated with these notes so that the interest payable on the notes effectively became fixed at a rate of 3.11%.

(2)We maintained a forward-starting interest rate swap agreement that modified the interest obligation associated with these notes so that the interest payable effectively became fixed at a rate of 4.73%.

We maintain a $2.3 billion multi-currency revolving senior credit facility with various financial institutions, which matures in November 2026. The proceeds from this facility can be used for general corporate purposes, which includes providing liquidity for our clearing house in certain circumstances at CME Group's discretion and, if necessary, for maturities of commercial paper. As long as we are not in default under this facility, we have the option to increase it up to $3.3 billion with the consent of the agent and lenders providing the additional funds. This facility is voluntarily pre-payable from time to time without premium or penalty. Under this facility, we are required to remain in compliance with a consolidated net worth test, which is defined as our consolidated shareholders' equity at September 30, 2021, giving effect to share repurchases made and special dividends paid during the term of the agreements (and in no event greater than $2.0 billion in aggregate), multiplied by 0.65. We currently do not have any borrowings outstanding under this facility, but any commercial paper balance if or when outstanding can be backstopped against this facility.

We maintain a 364-day multi-currency revolving secured credit facility with a consortium of domestic and international banks to be used in certain situations by the clearing house. The facility provides for borrowings of up to $7.0 billion. We may use the proceeds to provide temporary liquidity in the unlikely event a clearing firm fails to promptly discharge an obligation to CME Clearing, in the event of a liquidity constraint or default by a depositary (custodian for our collateral), in the event of a

temporary disruption with the domestic payments system that would delay payment of settlement variation between us and our clearing firms, or in other cases as provided by the CME rulebook. Clearing firm guaranty fund contributions received in the form of cash or U.S. Treasury securities as well as the performance bond assets (pursuant to the CME rulebook) can be used to collateralize the facility. At March 31, 2023, guaranty fund contributions available to collateralize the facility totaled $7.4 billion. We have the option to request an increase in the line from $7.0 billion to $10.0 billion. Our 364-day facility contains a requirement that CME remain in compliance with a consolidated tangible net worth test, defined as CME's consolidated shareholder's equity less intangible assets (as defined in the agreement), of not less than $800.0 million. We currently do not have any borrowings outstanding under this facility.

The indentures governing our fixed rate notes, our $2.3 billion multi-currency revolving senior credit facility and our 364-day multi-currency revolving secured credit facility for $7.0 billion do not contain specific covenants that restrict the ability to pay dividends. These documents, however, do contain other customary financial and operating covenants that place restrictions on the operations of the company that could indirectly affect the ability to pay dividends.

At March 31, 2023, we have excess borrowing capacity for general corporate purposes of approximately $2.3 billion under our multi-currency revolving senior credit facility.

At March 31, 2023, we were in compliance with the various covenant requirements of all our debt facilities.

CME Group, as a holding company, has no operations of its own. Instead, it relies on dividends declared and paid to it by its subsidiaries in order to provide the funds which it uses to pay dividends to its shareholders.

To satisfy our performance bond obligation with Singapore Exchange Limited, we may pledge irrevocable standby letters of credit. At March 31, 2023, the letters of credit totaled $360.0 million. We also maintain a $350.0 million line of credit to meet our obligations under this agreement.

The following table summarizes our credit ratings at March 31, 2023:

						Short-Term						Long-Term
Rating Agency						Debt Rating						Debt Rating						Outlook
Standard & Poor’s Global Ratings						A1+						AA-						Stable
Moody’s Investors Service, Inc.						P1						Aa3						Stable

Given our cash flow generation, our ability to pay down debt levels and our ability to refinance existing debt facilities if necessary, we expect to maintain an investment grade rating. If our ratings are downgraded below investment grade within certain specified time periods due to a change of control, we are required to make an offer to repurchase our fixed rate notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest. No report of any rating agency is incorporated by reference herein.

Liquidity and Cash Management. Cash and cash equivalents totaled $1.6 billion and $2.7 billion at March 31, 2023 and December 31, 2022, respectively. The balance retained in cash and cash equivalents is a function of anticipated or possible short-term cash needs, prevailing interest rates, our corporate investment policy and alternative investment choices. A majority of our cash and cash equivalents balance is invested in money market mutual funds that invest only in U.S. Treasury securities, U.S. government agency securities and U.S. Treasury security reverse repurchase agreements and short-term bank deposits. Our exposure to credit and liquidity risk is minimal given the nature of the investments. Cash that is not available for general corporate purposes because of regulatory requirements or other restrictions is classified as restricted cash and is included in other current assets or other assets in the consolidated balance sheets.

Regulatory Requirements*.* CME is regulated by the CFTC as a Derivatives Clearing Organization (DCO). DCOs are required to maintain capital, as defined by the CFTC, in an amount at least equal to one year of projected operating expenses as well as cash, liquid securities, or a line of credit at least equal to six months of projected operating expenses. CME was designated by the Financial Stability Oversight Council as a systemically important financial market utility under Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As a result, CME must comply with CFTC regulations applicable to a systemically important DCO for financial resources and liquidity resources. CME is in compliance with all DCO financial requirements.

CME, CBOT, NYMEX and COMEX are regulated by the CFTC as Designated Contract Markets (DCM). DCMs are required to maintain capital, as defined by the CFTC, in an amount at least equal to one year of projected operating expenses as well as cash, liquid securities or a line of credit at least equal to six months of projected operating expenses. Our DCMs are in compliance with all DCM financial requirements.

BrokerTec Americas LLC is required to maintain sufficient net capital under Securities Exchange Act of 1934, as amended (Exchange Act), Rule 15c3-1 (the Net Capital Rule). The Net Capital Rule focuses on liquidity and is designed to protect securities customers, counterparties, and creditors by requiring that broker-dealers have sufficient liquid resources on hand at all

times to satisfy claims promptly. Rule 15c3-3, or the customer protection rule, which complements Rule 15c3-1, is designed to ensure that customer property (securities and funds) in the custody of broker-dealers is adequately safeguarded. By law, both of these rules apply to the activities of registered broker-dealers, but not to unregistered affiliates. The firm began operating as a (k)(2)(i) broker dealer in November 2017 following notification to the Financial Industry Regulatory Authority and the SEC. A company operating under the (k)(2)(i) exemption is not required to lock up customer funds as would otherwise be required under Exchange Act Rule 15c3-3.