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 endedDecember 31, 2021 , filed with theSEC onFebruary 25, 2022 . References in this discussion and analysis to "we" and "our" are toCME Group Inc. (CME Group ) and its consolidated subsidiaries, collectively. References to "exchange" are toChicago Mercantile Exchange Inc. (CME), theBoard of Trade of theCity of Chicago, Inc. (CBOT),New York Mercantile Exchange, Inc. (NYMEX), andCommodity 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 Six Months Ended
June 30, June 30,
(dollars in millions, except per
share data) 2022 2021 Change 2022 2021 Change
Total revenues $ 1,237.2 $ 1,179.2 5 % $ 2,583.8 $ 2,432.5 6 %
Total expenses 487.5 504.5 (3) 975.0 1,032.7 (6)
Operating margin 60.6 % 57.2 % 62.3 % 57.5 %
Non-operating income (expense) $ 117.0 $ 51.4 128 $ 174.2 $ 78.6
122
Effective tax rate 23.6 % 29.7 % 23.0 % 26.6 %
Net income attributable to
30$ 1,373.5 $ 1,084.7
27
Diluted earnings per common share attributable to CME Group 1.82 1.42 28 3.78 3.02
25
Cash flows from operating activities 1,416.7 1,102.5 28
Revenues
Quarter Ended Six Months Ended
June 30, June 30,
(dollars in millions) 2022 2021 Change 2022 2021 Change
Clearing and transaction fees $ 1,024.6 $ 929.9 10 % $ 2,162.7 $ 1,936.9 12 %
Market data and information
services 151.7 145.2 4 303.4 289.4 5
Other 60.9 104.1 (41) 117.7 206.2 (43)
Total Revenues $ 1,237.2 $ 1,179.2 5 $ 2,583.8 $ 2,432.5 6
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 Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Total contract volume (in millions) 1,429.4 1,161.6 23 % 3,036.5 2,493.0 22 %
Clearing and transaction fees (in
millions) $ 925.4 $ 807.3 15 $ 1,959.8 $ 1,682.9 16
Average rate per contract $ 0.647 $ 0.695 (7) $ 0.645 $ 0.675 (4)
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We estimate the following net changes in clearing and transaction fees based on
changes in total contract volume and changes in average rate per contract for
futures and options during the second quarter and first six months of 2022 when
compared with the same periods in 2021.
Quarter Six Months
(in millions) Ended Ended
Increases due to changes in total contract volumes $ 173.4 $ 350.7
Decreases due to changes in average rate per contract (55.3) (73.8)
Net increases in clearing and transaction fees $
118.1
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 Six Months Ended
June 30, June 30,
(amounts in thousands) 2022 2021 Change 2022 2021 Change
Average Daily Volume by Product Line:
Interest rates 10,630 8,581 24 % 11,558 9,450 22 %
Equity indexes 7,751 4,926 57 7,851 5,512 42
Foreign exchange 950 769 24 927 810 14
Agricultural commodities 1,308 1,631 (20) 1,391 1,552 (10)
Energy 1,932 1,963 (2) 2,223 2,160 3
Metals 484 568 (15) 538 621 (13)
Aggregate average daily volume 23,055 18,438 25 24,488 20,105
22
Average Daily Volume by Venue: CME Globex 21,531 17,223 25 22,796 18,803 21 Open outcry 725 646 12 878 662 33 Privately negotiated 799 569 40 814 640 27 Aggregate average daily volume 23,055 18,438 25 24,488 20,105
22
Electronic Volume as a Percentage of Total Volume 93% 93 % 93% 94 % Overall market volatility increased throughout the second quarter and first six months of 2022 following lower overall volatility in the same periods in 2021. In the first half of 2022, interest rate volatility was higher as result of a change in market expectations regarding theFederal Reserve's interest rate policy following higher than expected inflation levels. InJune 2022 , theFederal Open Market Committee raised the Federal Funds rate by three-quarters of a percentage point and has indicated that it intends to further raise interest rates in the near future. In addition, geopolitical uncertainty due to the conflict betweenRussia andUkraine also continues to result in additional market volatility within the equity and foreign exchange markets. However, the geopolitical uncertainty betweenRussia andUkraine also led to risk aversion and reduced trading by market participants within the agricultural commodity and energy markets due to global commodity trade uncertainty and low supplies of crude and refined products. We believe these factors led to the changes in contract volume during the second quarter and first six months of 2022, when compared with the same periods in 2021. 26 -------------------------------------------------------------------------------- Table of Contents Interest Rate Products The following table summarizes average daily contract volume for our key interest rate products. Quarter Ended Six Months Ended June 30, June 30, (amounts in thousands) 2022 2021 Change 2022 2021 Change Eurodollar futures and options: Futures expiring within two years 1,142 1,165 (2) % 1,506 1,213 24 % Options 852 968 (12) 1,171 1,036 13 Futures expiring beyond two years 467 1,011 (54) 639 1,209 (47) SOFR futures and options: Futures expiring within two years 1,388 110 n.m. 1,216 106 n.m. Futures expiring beyond two years 241 8 n.m. 198 9 n.m. Options 223 - n.m. 131 - n.m.U.S. Treasury futures and options: 10-Year (1) 2,466 2,431 1 2,661 2,682 (1) 5-Year (1) 1,586 1,182 34 1,664 1,328 25 2-Year (1) 750 426 76 730 464 57 Treasury Bond (1) 536 542 (1) 546 614 (11) Federal Funds futures and options 300 91 n.m. 357 96 n.m. _______________ (1)U.S. Treasury futures and options now include respective weekly treasury options that were previously separated under a unique product category. Prior period amounts have been revised to conform to the current period presentation.
n.m. not meaningful
In the second quarter and first six months of 2022, overall interest rate contract volumes increased when compared with the same periods in 2021. We believe these increases were due to higher interest rate volatility as a result of a change in market expectations regarding theFederal Reserve's interest rate policy. This was due to higher than expected inflation levels, which led to theFederal Open Market Committee decision to increase the Federal Funds rate by three-quarters of a percentage point inJune 2022 . The increases in Secured Overnight Financing Rate contract (SOFR) volumes were due to more market participants transitioning to the new reference rate and incentive programs designed to encourage market participation in SOFR options trading.
Equity Index Products
The following table summarizes average daily contract volume for our key equity
index products.
Quarter Ended Six Months Ended
June 30, June 30,
(amounts in thousands) 2022 2021 Change 2022 2021 Change
E-mini S&P 500 futures and options
(1) 4,494 2,840 58 % 4,486 3,160 42 %
E-mini Nasdaq 100 futures and
options (1) 2,324 1,391 67 2,352 1,555 51
E-mini Russell 2000 futures and
options (1) 394 313 26 423 363 16
_______________
(1) E-mini S&P 500 and Nasdaq 100 futures and options now include respective
weekly Micro E-mini options that were previously separated under a unique
product category. Prior period amounts have been revised to conform to the
current period presentation.
In the second quarter and first six months of 2022, equity index contract volumes increased when compared with the same periods in 2021. Volatility within the broad-based indexes increased as a result of the rising tensions and geopolitical uncertainty withRussia andUkraine as well as theFederal Reserve's increases to the Federal Funds rate due to higher than expected inflation levels in 2022. In addition, a market repricing of certain technology-based stocks contributed to the increases in the E-mini Nasdaq 100 contract volumes. We believe these factors led to the overall increases in equity contract volumes. 27
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Foreign Exchange Products
The following table summarizes average daily contract volume for our key foreign
exchange products.
Quarter Ended Six Months Ended
June 30, June 30,
(amounts in thousands) 2022 2021 Change 2022 2021 Change
Euro 239 208 15 % 244 218 12 %
Japanese Yen 170 112 53 152 112 36
British Pound 120 99 21 119 99 20
Australian dollar 108 99 9 105 109 (4)
Overall foreign exchange contract volumes increased in the second quarter and
first six months of 2022 when compared with the same periods in 2021. Market
volatility increased in 2022 following low foreign exchange volatility in 2021
as a result of the rising tension and geopolitical uncertainty with Russia and
Ukraine as well as changes in the Federal Reserve's interest rate policy due to
higher than expected inflation in 2022. We believe these factors led to the
overall increases in foreign exchange contract volumes.
Agricultural Commodity Products
The following table summarizes average daily contract volume for our key
agricultural commodity products.
Quarter Ended Six Months Ended
June 30, June 30,
(amounts in thousands) 2022 2021 Change 2022 2021 Change
Corn 466 604 (23) % 476 558 (15) %
Soybean 266 322 (17) 295 325 (9)
Wheat 167 230 (27) 196 214 (8)
Overall commodity contract volumes decreased in the second quarter and the first
six months of 2022 when compared with the same periods in 2021. These decreases
were largely due to risk aversion by market participants following price
increases and global trade uncertainty due to the conflict between Russia and
Ukraine . We believe these factors led to the overall decrease in commodity
contract volumes.
Energy Products
The following table summarizes average daily contract volume for our key energy
products.
Quarter Ended Six Months Ended
June 30, June 30,
(amounts in thousands) 2022 2021 Change 2022 2021 Change
WTI crude oil 975 1,069 (9) % 1,207 1,166 4 %
Natural gas 554 467 19 548 517 6
Refined products 319 318 - 364 349 4
Overall energy contract volume decreased slightly in the second quarter of 2022
and increased slightly in the first six months of 2022 when compared with the
same periods in 2021. Participant trading activity slowed in the second quarter
of 2022 following a more active trading period in early 2022 largely due to very
low levels of supply for crude and refined products throughout the world caused
mainly by the ongoing geopolitical conflict with Russia and Ukraine . There were
periods of higher trading and volatility in the first quarter of 2022 when the
geopolitical conflict between Russia and Ukraine began. Natural gas volume
increased largely due to higher demand as result of sanctions placed on Russia .
Metal Products
The following table summarizes average daily volume for our key metal products.
Quarter Ended Six Months Ended
June 30, June 30,
(amounts in thousands) 2022 2021 Change 2022 2021 Change
Gold 288 327 (12) % 339 365 (7) %
Copper 89 119 (25) 89 119 (25)
Silver 82 100 (18) 84 114 (26)
In the second quarter and first six months of 2022, metal contract volumes
decreased when compared with the same periods in 2021 due to lower overall
market volatility within the gold and silver markets. Volatility was higher in
2021, as investors were using gold and other precious metals as safe-haven
investments following the COVID-19 pandemic.
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Average Rate per Contract
The average rate per contract decreased in the second quarter and first six months of 2022 when compared with the same periods in 2021. The decreases in the average rate per contract were primarily due to changes in product mix. In the second quarter of 2022, equity index contract volume increased by 7 percentage points as a percent of total volume, while all other products collectively decreased by 7 percentage points. In the first six months of 2022, equity index and interest rate contract volumes increased by 5 percentage points as a percent of total volume, while all other products collectively decreased by 5 percentage points. In general, equity index and interest rate products have a lower rate per contract compared with the remaining contracts. In addition, the average rate per contract decreased due to higher volume-based incentives and discounts on certain contracts. Cash Markets Business Total clearing and transaction fees revenues in the second quarter and the first six months of 2022 include$81.9 million and$168.6 million of transaction fees attributable to the cash markets business compared with$105.7 million and$220.9 million in the second quarter and first six months of 2021, respectively. This revenue primarily includesBrokerTec Americas LLC's fixed income volume and EBS's foreign exchange volume. InSeptember 2021 , we contributed the net assets of our optimization business to OSTTRA, our new joint venture with IHS Markit (now a part of S&P Global). Quarter Ended Six Months Ended June 30, June 30, (amounts in millions) 2022 2021 Change 2022 2021 Change BrokerTec fixed income transaction fees$ 42.1 $ 42.8 (2) %$ 86.4 $ 88.3 (2) % EBS foreign exchange transaction fees 39.8 41.4 (4) % 82.2 86.7 (5) % Optimization transaction fees - 21.5 n.m. - 45.9 n.m.
The related average daily notional value for the second quarter and first six
months of 2022 were as follows:
Quarter Ended Six Months Ended
June 30, June 30,
(amounts in billions) 2022 2021 Change
2022 2021 Change
European Repo (in euros)$ 345.7 $ 300.9 15 %$ 333.2 $ 294.0 13 % U.S. Treasury 134.1 105.9 27 140.8 120.7 17 Spot FX 65.4 61.7 6 66.7 67.1 (1) Overall average daily notional value for the cash markets business increased in the second quarter and the first six months of 2022 compared with the same periods in 2021. The increases in European Repo andU.S. Treasury transactions were largely due to increased volatility as a result of a change in market expectations regarding theFederal Reserve's interest rate policy, following higher than expected inflation levels in 2022. Despite the increase in average daily notional value, transaction revenue for BrokerTec and EBS decreased slightly 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. One individual firm represented approximately 10% of our clearing and transaction fees in the first six months of 2022. 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
During the second quarter and first six months of 2022, overall market data and
information services revenues increased when compared with the same periods in
2021, largely due to price increases for certain products and increases in
certain device counts.
The two largest resellers of our market data represented approximately 33% of
our market data and information services revenue in the first six months of
2022. 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
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institutional customers that utilize services from our two largest resellers
report usage and remit payment of their fees directly to us.
In the second quarter and first six months of 2022, the decrease in other revenue when compared with the same periods in 2021 were largely attributable to the deconsolidation of the optimization business inSeptember 2021 as part of the contribution of the business's net assets to OSTTRA, our joint venture with IHS Markit. In the second quarter and first six months of 2021, the optimization business generated$44.4 million and$86.9 million in other revenue. Expenses Quarter Ended Six Months Ended June 30, June 30, (dollars in millions) 2022 2021 Change 2022 2021 Change Compensation and benefits$ 185.3 $ 211.7 (13) %$ 370.5 $ 436.7 (15) % Technology 45.9 49.3 (7) 91.8 97.5 (6) Professional fees and outside services 32.0 36.8 (13) 63.8 74.2 (14) Amortization of purchased intangibles 57.1 59.4 (4) 115.5 120.0 (4) Depreciation and amortization 33.0 37.1 (11) 66.5 74.7 (11) Licensing and other fee agreements 83.1 54.2 53 164.0 118.9 38 Other 51.1 56.0 (9) 102.9 110.7 (7) Total Expenses$ 487.5 $ 504.5 (3)$ 975.0 $ 1,032.7 (6) Operating expenses decreased by$17.0 million and$57.7 million in the second quarter and first six months of 2022 when compared with the same periods in 2021. The following table shows the estimated impacts of key factors resulting in the change in operating expenses: Quarter Ended, Six Months Ended, June 30, 2022 March 31, 2022 Change as a Change as a Amount of Percentage of Amount of Percentage of (dollars in millions) Change Total Expenses Change Total Expenses Salaries, benefits and employer taxes$ (19.1) (4) % $ (44.1) (4) % Non-qualified deferred compensation (17.4) (3) (25.7)
(2)
Foreign currency exchange rate fluctuation (9.9) (1) (16.5)
(2)
Professional fees and outside services (4.7) (2) (10.4)
(1)
Employee separation and retention costs (0.9) - (11.2)
(1)
Licensing and other fee agreements 28.9 6 45.1 4 Bonus 9.8 2 15.2 1 Other expenses, net (3.7) (1) (10.1) (1) Total decrease$ (17.0) (3) % $ (57.7) (6) %
Decreases in operating expenses in the second quarter and first six months of
2022 when compared with the same periods in 2021 were as follows:
•Salaries, benefits and employer taxes were lower during the second quarter and first six months of 2022 when compared to the same periods in 2021 due to a net decrease in headcount throughJune 30, 2022 , including the contribution of employees from CME Group's optimization businesses to the new OSTTRA joint venture with IHS Markit inSeptember 2021 . •A decrease in our non-qualified deferred compensation liability during the second quarter and first six months of 2022, the impact of which does not affect net income because of an equal and offsetting change in investment income, contributed to a decrease in compensation and benefits expense. •In the second quarter and first six months of 2022, we recognized a net gain of$8.9 million and$13.1 million , compared with a net loss of$1.0 million and$3.4 million in the same periods in 2021, due to currency exchange rate fluctuations. Gains and losses from exchange rate fluctuations are recognized in the consolidated statements of income when subsidiaries with aU.S. dollar functional currency hold certain monetary assets and liabilities denominated in foreign currencies.
•Professional fees and outside services expenses decreased due to a greater
reliance on consultants for platform integrations, information security and
systems enhancements in the second quarter and first six months of 2021 as well
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as a reduction in legal fees related to our business activities and product
offerings. The decrease in professional fees was partially offset by an increase
in
partnership with
•Employee separation and retention costs were lower during the second quarter and first six months of 2022 due to a lower reduction in workforce compared to the same periods in 2021.
Increases in operating expenses in the second quarter and first six months of
2022 when compared with the same periods in 2021 were as follows:
•An increase in licensing and other fee agreements expense was due to higher volumes for certain equity products in the second quarter and first six months of 2022 compared to the same periods in 2021.
•Bonus expense increased in the second quarter and first six months of 2022
largely due to performance relative to our 2022 cash earnings target when
compared with the same periods in 2021.
Non-Operating Income (Expense)
Quarter Ended Six Months Ended
June 30, June 30,
(dollars in millions) 2022 2021 Change 2022 2021 Change
Investment income $ 286.9 $ 62.4 n.m. $ 360.0 $ 93.3 n.m.
Interest and other borrowing costs (39.9) (41.7) (5) (82.4) (83.2) (1)
Equity in net earnings of unconsolidated
subsidiaries 87.3 55.7 56 160.6 111.9 43
Other non-operating income (expense) (217.3) (25.0) n.m. (264.0) (43.4) n.m.
Total Non-Operating $ 117.0 $ 51.4 128 $ 174.2 $ 78.6 122
n.m. not meaningful
Investment income. In the second quarter and first six months of 2022 when
compared with the same periods in 2021, there were increases in earnings from
cash performance bond and guaranty fund contributions that are reinvested due to
higher average reinvestment balances as well as higher rates of interest earned
in the cash account at the Federal Reserve Bank of Chicago following interest
rate hikes in the first half of 2022. These increases in income were partially
offset by decreases in net realized and unrealized gains on investments and
decreases in earnings on our deferred compensation plan, the impact of which
does not affect net income because of an equal and offsetting change in
compensation and benefits expense.
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 second quarter and first six months of 2022 when compared
with the same periods in 2021. We also recognized our share of net earnings on
our investment in OSTTRA, our new joint venture with IHS Markit that was formed
in September 2021 .
Other income (expense). In the second quarter and first six months of 2022 when
compared with the same periods in 2021, we recognized higher expenses related to
the distribution of interest earned on performance bond collateral reinvestments
to the clearing firms caused by higher interest income earned on our
reinvestment during the period due to a higher Federal Funds rate in early 2022.
Income Tax Provision
The following table summarizes the effective tax rates for the periods
presented:
2022 2021
Quarter ended June 30 23.6 % 29.7 %
Six months ended June 30 23.0 % 26.6 %
The overall effective tax rate decreased in the second quarter and first six
months of 2022 when compared with the same periods in 2021. In the second
quarter of 2021, we recognized additional deferred tax expense related to the
impact of the United Kingdom tax rate increase from 19% to 25%, which is
effective April 1, 2023 .
Liquidity and Capital Resources
Sources and Uses of Cash. Net cash provided by operating activities increased in
the first six months of 2022 when compared with the same period in 2021 largely
due to an increase in trading volume and revenue as well as an overall decrease
in operating expenses. Net cash used in investing activities was higher during
the first six months of 2022 when compared with the same period in 2021 largely
due to the investment in S&P/DJI in the first six months of 2022. Cash used in
financing
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activities was higher during the first six months of 2022 when compared with the same period in 2021 due to a decrease in cash performance bonds and guaranty fund contributions.
Debt Instruments. The following table summarizes our debt outstanding at
(in millions) Par Value Fixed rate notes dueMay 2023 , stated rate of 4.30% €
15.0
Fixed rate notes due
Fixed rate notes due
$ 500.0 Fixed rate notes due March 2032, stated rate of 2.65%$ 750.0
Fixed rate notes due
Fixed rate notes due
$ 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 inNovember 2026 . The proceeds from this facility can be used for general corporate purposes, which includes providing liquidity for our clearing house in certain circumstances atCME 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 atSeptember 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 orU.S. Treasury securities as well as the performance bond assets (pursuant to the CME rulebook) can be used to collateralize the facility. AtJune 30, 2022 , guaranty fund contributions available to collateralize the facility totaled$8.0 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
purposes of approximately
credit facility.
At
of all our debt facilities.
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. AtJune 30, 2022 , the letters of credit totaled$330.0 million . We also maintain a$350.0 million line of credit to meet our obligations under this agreement. 32
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The following table summarizes our credit ratings at
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$1.9 billion and$2.8 billion atJune 30, 2022 andDecember 31, 2021 , 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 inU.S. Treasury securities,U.S. government agency securities andU.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 aDerivatives 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 theFinancial 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 inNovember 2017 following notification to theFinancial Industry Regulatory Authority and theSEC . 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.
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