CME Group Downgraded: Analyst Sees Cutthroat Competition From BGC Group, Cboe Global & Intercontinental Exchange

BofA Securities analyst Craig Siegenthaler downgraded CME Group Inc CME to Underperform from Neutral, lowering the price target from $212 to $177.

The company now faces competition on three fronts from BGC Group, Inc. BGC, Cboe Global Markets, Inc. CBOE, and Intercontinental Exchange Inc. ICE. This intensifying rivalry could result in market share losses and pricing pressures, the analyst cautions.

The analyst projects CME to reduce its pricing on interest rate futures by over 10% as a defensive strategy, given the imminent launch of BGC’s FMX Futures Exchange.

Additionally, the analyst forecasts a 15% CAGR for CBOE’s index options volume through 2026, predicting that options will increasingly replace CME’s equity futures.

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Due to its defensive nature, CME significantly benefited from the VIX surge in August, presenting a compelling entry point.

After weak U.S. employment data reignited fears of a hard landing, the VIX spiked 34% to an average of 19 in August, up from 14 the previous month. This drove CME’s strongest trading volumes since the start of the COVID-19 pandemic, with August volumes rising 28% month-over-month, particularly in financial futures.

Consequently, CME’s stock outperformed all sectors in our coverage as well as the S&P 500. While the analyst projects that volatility will stay relatively high through the U.S. election season, the analyst sees downward normalization throughout 2025, making the second half of 2024 an ideal time to consider an Underperform rating.

Price Action: CME shares are trading lower by 1.77% to $211.92 at last check Tuesday.

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