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, 2023, filed with the SEC on February 28, 2024.

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)																								2024						2023						Change
Total revenues																								$	1,487.9					$	1,441.6					3		%
Total expenses																								528.3						527.9						—
Operating margin																								64.5		%				63.4		%
Non-operating income (expense)																								$	153.8					$	243.2					(37)
Effective tax rate																								23.2		%				23.6		%
Net income																								$	855.2					$	883.8					(3)
Diluted earnings per common share																								2.35						2.43						(3)
Cash flows from operating activities																								892.7						902.4						(1)

Revenues

																		Quarter Ended March 31,
(dollars in millions)																								2024						2023						Change
Clearing and transaction fees																								$	1,208.9					$	1,200.2					1		%
Market data and information services																								175.4						165.8						6
Other																								103.6						75.6						37
Total Revenues																								$	1,487.9					$	1,441.6					3

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,
																								2024						2023						Change
Total contract volume (in millions)																								1,608.0						1,666.1						(3)		%
Clearing and transaction fees (in millions)																								$	1,117.8					$	1,105.6					1
Average rate per contract																								$	0.695					$	0.664					5

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 2024 when compared with the same period in 2023.

(in millions)												Quarter Ended
Decrease due to a change in total contract volume												$	(40.4)
Increase due to a change in average rate per contract												52.6
Net increase in clearing and transaction fees												$	12.2

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)																								2024						2023						Change
Average Daily Volume by Product Line:
Interest rates																								13,839						14,490						(4)		%
Equity indexes																								6,856						7,303						(6)
Foreign exchange																								984						969						1
Agricultural commodities																								1,595						1,379						16
Energy																								2,411						2,083						16
Metals																								675						649						4
Aggregate average daily volume																								26,360						26,873						(2)
Average Daily Volume by Venue:
CME Globex																								23,986						24,170						(1)
Open outcry																								1,332						1,623						(18)
Privately negotiated																								1,042						1,080						(3)
Aggregate average daily volume																								26,360						26,873						(2)
Electronic Volume as a Percentage of Total Volume																								91		%				90		%

Market volatility within certain financial markets declined throughout the first quarter of 2024 following very high volatility in the first quarter of 2023. Interest rate and equity volatility were elevated due to significant market uncertainty in the first quarter of 2023 following the collapse of two U.S. regional banks as well as uncertainty surrounding the United States Federal Reserve’s (Federal Reserve) interest rate policy decision. The Federal Open Markets Committee (FOMC) raised the federal funds rate multiple times throughout 2023 but has initially signaled the potential for future rate cuts, as a result of easing inflation. Energy and agricultural commodities markets were more volatile in the first quarter of 2024 mainly as a result of uncertain weather conditions, which led to higher volumes within those markets. We believe these factors contributed to total volumes decreasing slightly in the first quarter of 2024 when compared with the same period in 2023.

Interest Rate Products

The following table summarizes average daily contract volume for our key interest rate products. We no longer offer Eurodollar contract trading as of June 2023.

																		Quarter Ended March 31,
(amounts in thousands)																								2024						2023						Change
Eurodollar futures and options:
Futures expiring within two years																								—						325						(100)		%
Options																								—						137						(100)
Futures expiring beyond two years																								—						82						(100)
SOFR futures and options:
Futures expiring within two years																								2,661						3,001						(11)
Options																								2,004						2,429						(17)
Futures expiring beyond two years																								926						907						2
U.S. Treasury futures and options:
10-Year																								3,138						2,921						7
5-Year																								1,954						1,896						3
2-Year																								967						828						17
Treasury Bond																								671						560						20
Federal Funds futures and options																								414						601						(31)

In the first quarter of 2024, overall interest rate contract volume decreased slightly when compared with the same period in 2023. The first quarter of 2023 saw significant interest rate volatility following interest rate hikes by the FOMC as well as market uncertainty following the collapse of two U.S. regional banks. U.S. Treasury volume increased in the first quarter of 2024 when compared with the same period in 2023 due to a shift in market expectations regarding the Federal Reserve's interest rate policy following the FOMC's indication of fewer rate cuts in the near future than previously anticipated.

Equity Index Products

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

																		Quarter Ended March 31,
(amounts in thousands)																								2024						2023						Change
E-mini S&P 500 futures and options																								4,075						4,601						(11)		%
E-mini Nasdaq 100 futures and options																								2,036						1,896						7
E-mini Russell 2000 futures and options																								337						332						1

In the first quarter of 2024, equity index contract volume decreased when compared with the same period in 2023, which we believe was due to lower overall equity volatility. The first quarter of 2023 saw significant market volatility as a result of the regional banking crisis as well as continued uncertainty surrounding the Federal Reserve's interest rate policy decisions. We believe these factors led to lower overall equity contract volume in the first quarter of 2024.

Foreign Exchange Products

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

																		Quarter Ended March 31,
(amounts in thousands)																								2024						2023						Change
Euro																								257						268						(4)		%
Japanese Yen																								184						173						6
British Pound																								114						112						2
Australian dollar																								110						104						6

In the first quarter of 2024, overall foreign exchange volume increased slightly when compared with the same period in 2023. Continued uncertainty surrounding monetary policy expectations from the Federal Reserve and global central banks resulted in slightly higher volume compared with the same period in 2023.

Agricultural Commodity Products

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

																		Quarter Ended March 31,
(amounts in thousands)																								2024						2023						Change
Corn																								473						409						16		%
Soybean																								351						296						19
Wheat																								214						185						16

Overall commodity contract volume increased in the first quarter of 2024 when compared with the same period in 2023. We believe this increase is due to higher overall market volatility as a result of a change in market expectations regarding grain supplies as well as weather conditions for 2024. In addition, the first quarter of 2023 saw lower overall volatility within the commodities markets due to risk aversion by market participants following price increases and global trade uncertainty resulting from the conflict between Russia and Ukraine. We believe these factors contributed to higher overall commodity volume in the first quarter of 2024.

Energy Products

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

																		Quarter Ended March 31,
(amounts in thousands)																								2024						2023						Change
WTI crude oil																								1,084						1,067						2		%
Natural gas																								848						599						42
Refined products																								376						328						15

Energy contract volume increased in the first quarter of 2024 when compared with the same period in 2023, which we believe was due to higher overall market volatility. Natural gas volatility was higher as a result of uncertain weather conditions in the U.S., which impacted prices throughout the quarter. In addition, crude oil volatility was slightly higher as a result of ongoing geopolitical issues in the Middle East as well economic uncertainty between the U.S. and China.

Metal Products

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

																		Quarter Ended March 31,
(amounts in thousands)																								2024						2023						Change
Gold																								394						398						(1)		%
Copper																								137						123						11
Silver																								95						94						1

In the first quarter of 2024, overall metal contract volume increased when compared with the same period in 2023, which we believe is due to higher market volatility within the copper market due to increased demand along with supply shortages. We believe this market volatility led to the overall increase in metal contract volume.

Average Rate per Contract

The average rate per contract increased in the first quarter 2024, when compared with the same period in 2023. The increase in the average rate per contract was primarily due to increases in our fee structure that went into effect on February 1, 2024. The increase is also due to a change in product mix. In the first quarter of 2024, equity index and interest rate contract volumes decreased by 3 percentage points as a percent of total volume, while all other products collectively increased by 3 percentage points. In general, equity index and interest rate products have a lower rate per contract compared with the remaining contracts.

Cash Markets Business

Total clearing and transaction fees revenues in the first quarter of 2024 include $69.1 million of transaction fees attributable to the cash markets business, compared with $75.0 million in the first quarter of 2023. This revenue primarily includes BrokerTec Americas LLC's fixed income volume and EBS's foreign exchange volume.

																		Quarter Ended March 31,
(amounts in millions)																								2024						2023						Change
BrokerTec fixed income transaction fees																								$	37.8					$	39.2					(4)		%
EBS foreign exchange transaction fees																								31.3						35.8						(13)		%

The related average daily notional value for the first quarter 2024 and 2023 were as follows:

																		Quarter Ended March 31,
(amounts in billions)																								2024						2023						Change
European Repo (in euros)																								$	282.3					$	354.7					(20)		%
U.S. Treasury																								102.2						123.7						(17)
Spot FX																								51.9						64.4						(19)

Overall average daily notional values and transactions revenue for the cash markets business and spot FX business was lower in the first quarter of 2024 when compared with the same period 2023. We believe the decrease in U.S. Treasury, European Repo, and spot FX volumes were due to lower overall volatility when compared to the first quarter of 2023. The first quarter of 2023 saw higher volatility as a result of the regional banking crisis in the U.S. as well as uncertainty surrounding the Federal Reserve's interest rate policy decision. We believe these factors led to the overall decrease in cash market contract volume.

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. One individual firm represented at approximately 10% of our clearing and transaction fees in the first quarter of 2024. 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 2024, overall market data and information services revenues increased when compared with the same period in 2023, largely due to price increases for certain products.

The two largest resellers of our market data represented approximately 30% of our market data and information services revenue in the first quarter of 2024. 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 2024, the increase in other revenues when compared with the same period in 2023 was largely attributable to higher custody fees due to a fee increase as well as increases in co-location and other connectivity fees.

Expenses

																		Quarter Ended March 31,
(dollars in millions)																								2024						2023						Change
Compensation and benefits																								$	206.0					$	204.5					1		%
Technology																								59.4						51.3						16
Professional fees and outside services																								33.1						38.3						(14)
Amortization of purchased intangibles																								55.2						56.8						(3)
Depreciation and amortization																								30.1						31.9						(6)
Licensing and other fee agreements																								87.9						84.7						4
Other																								56.6						60.4						(6)
Total Expenses																								$	528.3					$	527.9					—		%

Operating expenses increased by $0.4 million in the first quarter of 2024 when compared with the same period in 2023. The following table shows the estimated impacts of key factors resulting in the changes in operating expenses:

												Quarter Ended March 31,
																		Amount of Change						Change as a Percentage of Total Expenses
(dollars in millions)
Technology support services																		$	8.3					2		%
License fees																		3.2						1
Stock-based compensation																		3.2						1
Occupancy and building operations																		(3.4)						(1)
Bonus																		(4.6)						(1)
Professional fees and outside services																		(5.2)						(1)
Other expenses, net																		(1.1)						(1)
Total increase																		$	0.4					—		%

Increases in operating expenses in the first quarter of 2024 when compared with the same period in 2023 were as follows:

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

• License fees were higher during the first quarter of 2024 when compared to the same period in 2023 primarily due to an increase in volume for certain equity products.

• Stock-based compensation expense increased largely due to the acceleration of expense related to certain restricted stock and performance award grants.

Decreases in operating expenses in the first quarter of 2024 when compared with the same period in 2023 were as follows:

• Occupancy and building operations expense decreased during the first quarter of 2024 due to lower rent and real estate taxes compared to the first quarter of 2023.

• Bonus expense decreased largely due to our performance relative to our 2024 cash earnings target when compared with the same period in 2023.

• The decrease in professional fees and outside services in the first quarter of 2024 is largely due to a decrease in costs associated with the Google Cloud Migration, which began in late 2021, as well as lower professional services and legal fees during the period.

Non-Operating Income (Expense)

																		Quarter Ended March 31,
(dollars in millions)																								2024						2023						Change
Investment income																								$	1,071.3					$	1,357.7					(21)		%
Interest and other borrowing costs																								(39.9)						(39.9)						—		%
Equity in net earnings of unconsolidated subsidiaries																								87.2						78.2						12
Other non-operating income (expense)																								(964.8)						(1,152.8)						(16)
Total Non-Operating																								$	153.8					$	243.2					(37)

Investment income. Earnings from cash performance bond and guaranty fund contributions that are reinvested decreased in the first quarter of 2024 when compared with the same period in 2023, due to lower average reinvestment balances. In the first quarter of 2024 and 2023, earnings from cash performance bond and guaranty fund contributions were $1,036.7 million and $1,256.3 million, respectively. We also recognized lower net realized and unrealized gains on investments in the quarter of 2024.

Equity in net earnings (losses) of unconsolidated subsidiaries. Higher income generated from our S&P/Dow Jones Indices LLC (S&P/DJI) business venture contributed to an increase in equity in net earnings of unconsolidated subsidiaries in the first quarter of 2024 when compared with the same period in 2023.

Other income (expense)**. We recognized lower expense related to the distribution of interest earned on performance bond collateral reinvestments to the clearing firms in conjunction with lower interest income earned on our reinvestment during the first quarter of 2024 when compared with the same period in 2023. This was due to a lower reinvestment balance in the first quarter of 2024 compared with the same period in 2023. In the first quarter of 2024 and 2023, expenses related to the distribution of interest earned on collateral reinvestments were $967.4 million and $1,163.5 million, respectively.

Income Tax Provision

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

						2024						2023
Quarter ended March 31						23.2		%				23.6		%

The overall effective tax rate remained relatively consistent in the first quarter of 2024 when compared with the same period in 2023. On April 15, 2024, we filed our court case with the U.S. Court of Federal Claims related to our Section 199 deduction.

Liquidity and Capital Resources

Sources and Uses of Cash*.* Net cash provided by operating activities and used by investing activities remained consistent in the first quarter of 2024 when compared with the same period in 2023. Cash provided by financing activities was higher during the first quarter of 2024 when compared with the same period in 2023 due to an increase in cash performance bonds and guaranty fund contributions.

Debt Instruments*.* The following table summarizes our debt outstanding at March 31, 2024:

(in millions)			Par Value
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, 2024, guaranty fund contributions available to collateralize the facility totaled $9.7 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, 2024, 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, 2024, 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, 2024, the letters of credit totaled $285.0 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, 2024:

						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 $1.4 billion and $2.9 billion at March 31, 2024 and December 31, 2023, 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.