Adam Gault
CME Group (NASDAQ:CME) stock slid 2.3% in Tuesday morning trading after Bank of America downgraded the exchange operator to Underperform from Neutral as a three-front market share battle takes shape.
BGC Group’s (BGC) FMX Futures Exchange is expected to start up within weeks, adding to competition from Cboe Global Markets (CBOE) and Intercontinental Exchange (ICE), BofA analyst Craig Siegenthaler said. “The intensifying competition could lead to market share losses and pricing headwinds,” he said.
In its Q2 earnings call, BGC Group (BGC) Chair and CEO Howard Lutnick said FMX and LCH have all the approvals needed to open in September with SOFR futures.
The analyst estimates that Cboe’s index options volume will increase 15% CAGR through 2026 as options are increasingly used as a substitute for CME’s equity futures. “Finally, we expect ICE to continue to take share in energy futures due to its superior growth strategy, innovation track record, and product mix,” he added.
CME (CME) benefited from the VIX (VIX), or volatility index, surge in August. Thus, its stock outperformed the S&P 500 as well as BofA’s coverage verticals. While the index is expected to stay relatively high through the November election, Siegenthaler expects the VIX to normalize downward through 2025, “suggesting that 2H24 represents an opportune moment to initiate an Underperform.”
The Underperform rating contrasts with the SA Quant rating of Hold and the average SA Analyst rating and average Wall Street rating, both at Buy.
