Feb 4 (Reuters) - Derivatives exchange CME Group beat Wall Street estimate for fourth-quarter profit on Wednesday, as investors increased hedging activity to manage market risks.
Growing uncertainty around the broader economic outlook, including the pace of interest-rate cuts, and escalating geopolitical and trade tensions prompted investors to hedge their portfolios more aggressively. That shift has supported higher demand for equity products and metals trading.
Gold and silver hit record highs in December, fueled by mounting bets on lower U.S. interest rates that pushed investors toward the metals as preferred stores of value.
Metals average daily volume (ADV) more than doubled to a record 1.4 million contracts, while equity ADV climbed 22%.
Total ADV at the world's largest derivatives marketplace rose about 7.5% from a year earlier to a record 27.4 million contracts.
"In a risk-always-on environment, client demand for our products and services generated record average daily volume," said CME Chief Executive Terry Duffy.
Market data revenue rose 14.5% to $208 million during the quarter, while clearing and transaction fees -- the exchange's main source of income -- increased 7.8% to $1.33 billion.
Duffy said CME was focusing on expanding access through initiatives such as U.S. Treasury clearing, 24/7 cryptocurrency trading and prediction markets.
CME and sports betting firm FanDuel announced the launch of their prediction markets platform in five U.S. states in December.
Prediction markets, which allow users to wager on the outcome of real-world events, have gained popularity since the 2024 U.S. presidential election cycle.
Excluding one-time items, profit attributable to CME shareholders stood at $997.7 million, or $2.77 per share, for the three months ended December 31. Analysts on average estimated $2.74 per share, according to data compiled by LSEG.
(Reporting by Pragyan Kalita and Prakhar Srivastava in Bengaluru; Editing by Shilpi Majumdar)
