CME Group Annual Report 2008

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FY2008 Annual Report · CME Group

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The value of confidence

CME GROUP 2008 ANNUAL REVIEW

It’s an uncertain world.

CO NtENts

2 Executive Chairman’s Letter

4 Message from CEO

and President

8 2008 Accomplishments

and Financial Highlights

10 CME Group Overview

16 Strategic Profiles

30 CFO Report

32 Financial Information

38 Board of Directors

41 Management

42 Company Information

Risks can lurk even where least expected. CME Group is here to help
you manage them. For more than 160 years, we’ve given customers
the confidence to move forward in good times and bad. By providing
benchmark products and risk-management services across all major
asset classes, and the safety and soundness of centralized clearing,
we offer the security that market participants around the globe need
to operate confidently, invest and grow.

That’s why CME Group is where the world
comes to manage risk.

TERRENCE A. DUFFY
Executive Chairman

The value of confidence

“We are proud of our performance during
what many consider the worst financial
crisis since the Great Depression.
We believe that it speaks to the attributes
of our business model and the safety
and soundness of our markets.”

Our ability to manage risk is not limited to

futures markets. We are successfully applying

our central counterparty model in the over-
the-counter (OTC) market. There is increasing
interest from OTC market participants in clear-

ing solutions that mitigate counterparty risks

and provide credit efficiencies. CME Group can

work with the banking community and institu-

tional, or buy-side, participants to facilitate their

current hedging, trading and dealing activities

while providing them with capital efficiencies

and the benefit of central counterparty clearing.

In 2008, we continued to position CME

Group in the marketplace to deliver significant

value for customers around the world. The ac-

quisition of the New York Mercantile Exchange

DEAR
SHAREHOLDERS:

Our world experienced unprecedented chal-

created an even stronger international company

lenges in 2008. The subprime market melt-

as we continue to grow our business globally,

down and ensuing credit crisis are just two

compete with other exchanges and expand

examples of the forces that had an impact on

services to the OTC market.

financial markets. We are proud of our perfor-

Looking forward, I believe we are entering

mance during what many consider the worst

a new era in financial markets where central-

financial crisis since the Great Depression. We

ized clearing will take on even greater impor-

believe that it speaks to the attributes of our

tance. Regulators are calling with new vigor for

business model and the safety and soundness

increased market transparency and efficiency,

of our markets.

which our central counterparty model offers.

Against this backdrop, CME Group per-

Our customers are more focused on credit lines

formed well. Total revenues grew to $2.6 billion

and capital deployment, which also will make

and net income to $715 million, while volume

our clearing model more attractive to financial

increased to an average of 13 million contracts

market participants.

per day. Contracts traded electronically in 2008

As new financial market models evolve,

accounted for nearly 80 percent of total volume

it is important that we not forget the lessons

as traders from around the world participated

we have learned from the dramatic events of

in our markets through the CME Globex elec-

2008. Markets follow liquidity. Markets follow

tronic trading platform.

technology. Now, given current economic con-

The world increasingly is realizing the im-

ditions, markets will migrate to platforms that

portance of risk management, and that is what

are designed to provide safety and security.

we do at CME Group. For more than a century,

These trends bode well for CME Group.

our company has provided competitive, trans-

parent and liquid markets, which help our cus-

tomers manage their risks across all major asset

classes. In our history, no clearing member

has ever defaulted and no customer has ever

lost funds due to counterparty failure. Now

more than ever, CME Group is where the world

TERRENCE A. DUFFY
Executive Chairman

comes to manage risk.

March 2, 2009

CME GROUP 2008 ANNUAL REVIEW

CRAIG S. DONOHUE
Chief Executive Officer

The value of confidence

“As one of the best functioning business
models, our transparent and regulated
markets made us a safe haven for
customers involved in managing volatile
risks across all major asset classes.”

Trade (CBOT) and achieved our annual synergy

targets. We further strengthened our company’s

competitive position and extended its global

reach through our acquisition of the New York
Mercantile Exchange (NYMEX) in August 2008.
The addition of NYMEX energy and COMEX

metals products, as well as ClearPort – which

provides services for the OTC energy and metals

markets – has enabled us to further diversify our

revenue mix, making us less dependent on U.S.

financial markets. In the fourth quarter, $169

million, or 29 percent of our clearing and trans-

action fees, was derived from energy and metals

products and OTC transactions. These new busi-

ness lines are among our fastest growing.

GROW THE CORE BUSINESS CME Group’s ability

TO OUR
SHAREHOLDERS:

The year 2008 presented extraordinary chal-

to continue to grow our core business demon-

lenges to the world economy and placed tre-

strates the effectiveness of the diversified prod-

mendous stress on global financial markets.

uct model that we have pursued over the past

Throughout the economic crisis, CME Group

few years. Trading in E-mini equity index con-

distinguished itself as one of the best function-

tracts exceeded our expectations, with average

ing business models – providing deep liquidity

daily volume increasing by 36 percent to 3.5 mil-

and hedging opportunities in financial, energy

lion contracts per day. Foreign exchange aver-

and commodity markets around the world. Our

aged 623,000 contracts per day, up 10 percent,

liquid, transparent and regulated markets made

reflecting a notional value of $85 billion. Com-

us a safe haven for customers involved in manag-

modity and alternative investment product vol-

ing volatile risks across all major asset classes.

ume averaged 848,000 contracts per day, up

The emergence of significant concerns

16 percent. NYMEX volume averaged 1.7 million

about counterparty credit risks in the over-the-
counter (OTC) markets highlighted the extraor-
dinary value of our centralized clearing services.

contracts per day. Cyclical pressures had a neg-

ative impact on interest rate and fixed-income

markets. As a result, volume in our interest rate

Our financial safeguards package, valued at

product group declined 14 percent, averaging

approximately $7 billion as of year end, elimi-

6.1 million contracts per day.

nates third-party credit concerns. In this diffi-

cult environment, the strengths of our business

GLOBALIZE THE BUSINESS CME Group’s global

model made it possible for us to grow, achieving

strategy is multi-faceted. We continued to deve-

record revenues and net income.

lop globally relevant products and to provide our

In addition to delivering strong results, we

overseas customers with increased resources. It

significantly advanced our global strategy of

is noteworthy that 17 percent of our electronic

growing our core business, expanding our cus-

volume is now transacted outside of U.S. trading

tomer base and trading activity in our products

hours, up from only 9 percent in 2007. Also,

around the world, serving the OTC markets

we furthered our efforts to expand our strate-

with centralized clearing and ach ieving opera-

gic relationships with the leading exchanges in

tional excellence. We completed the integration

emerging markets in Latin America, Asia and

of our historic merger with the Chicago Board of

the Middle East.

CME GROUP 2008 ANNUAL REVIEW

In Latin America, we are excited about the

venture company with Citadel Investment Group.

potential of our order routing agreement with
BM&FBOVESPA (BM&F), Latin America’s largest
exchange. Our customers now have access to

CMDX will combine CME Group’s proven central

counterparty clearing, settlement and risk

manage ment capabilities with Citadel’s state-

BM&F’s products via our CME Globex electronic

of-the-art technology. The services we will offer

trading platform. CME Group products are listed

will help reduce gross exposures, decrease bilat-

on the BM&F electronic distribution system for

eral credit risk, and provide increased efficien-

customers in Brazil.

cies that will improve overall functioning of the

Asia remains a significant region of focus

credit markets.

for us. We now are able to offer customers in that

region dedicated product specialists in com -

ACHIEVE OPERATIONAL EXCELLENCE We contin-

modities and in foreign exchange, while enhanc-

ued to improve our technology to ensure that

ing our overall level of customer support. In

CME Globex remains the industry-leading elec-

addition, CME Group has secured a five-year

tronic trading platform. In 2008, CME Globex

agreement with the Korea Exchange to list KOSPI

handled an average of 10 million contracts per

200 futures on CME Globex for after-hours

day with an average response time of 9.5 milli-

trading in Korea.

seconds at year end. We expanded the plat-

The NYMEX acquisition has provided us

form’s cap abilities and extended our predefined,

with an opportunity to expand our presence in

intercommodity spread capabilities to our inter-

the Middle East. CME Group now has a signifi-

est rate product group. Our migration to the

cant ownership stake in the Dubai Mercantile
Exchange (DME), the Middle East’s first futures
exchange. In the first quarter of this year, DME’s

FIX/FAST protocol, the new industry standard

for market data, was a success, providing our

customers more efficient delivery of market data

three crude oil benchmark products began

with reduced bandwidth utilization.

trad ing exclusively on CME Globex. Our pres-

The challenges that our industry faced in

ence in this important region was also stren-

2008 will continue to play out during 2009. It is

gthened when the Dubai Financial Services

already apparent that the financial crisis will

Authority extended its recognition to include

change the nature of our industry. We feel that

CBOT products.

CME Group is in a strong position to continue

safeguarding our customers regardless of finan-

SERVE OTC MARKETS The financial market

cial market stresses, as well as to take advan-

crisis has brought to light issues in the OTC

tage of new opportunities as they emerge.

market around the lack of transparency, as well

as counterparty concerns. By working closely

with the OTC participants, we believe we can

develop solutions that will allow these markets

to function smoothly again and restore inves-

tor confidence in them.

We already have a highly successful, rapidly

growing OTC business through our CME Clear-

Port facility, part of our NYMEX acquisition. We

plan to leverage CME ClearPort’s capabilities

in other markets such as interest rates, foreign

exchange and agricultural swaps. In addition,

we plan to provide a clearing solution for credit

CRAIG S. DONOHUE
Chief Executive Officer

PHUPINDER S. GILL
President

default swaps (CDS) through CMDX, a joint

March 2, 2009

The value of confidence

PHUPINDER S. GILL
President

CME GROUP 2008 ANNUAL REVIEW

Accomplishments in 2008

GROW THE CORE BUSINESS

» Delivered eighth consecutive year of record volume.

» Traded 3 billion contracts reflecting $1.2 quadrillion in notional value.
» Acquired New York Mercantile Exchange (NYMEX), the premier energy and metals exchange.

» Achieved record trading volume across multiple product categories.

» Expanded side-by-side trading of commodity options.

» Extended exclusive, long-term license with NASDAQ OMX Group.

GLOBALIZE THE BUSINESS

» Inaugurated order routing agreement with Latin America’s largest exchange, BM&FBOVESPA.

» Instituted agreement with Korea Exchange to list KOSPI 200 futures on CME Globex

electronic trading platform.

» Launched Euro-denominated E-mini S&P 500 futures.

» Received recognition from Dubai Financial Services Authority for CBOT products.

SERVE OTC MARKETS
» Expanded presence in over-the-counter (OTC) market through CME ClearPort, an electronic

system that extends the benefits of centralized clearing to OTC business.

» Increased range of products available on CME ClearPort, including petroleum swap futures

contracts, natural gas liquids swaps, plastic futures contracts, gasoil options contracts, central

Appalachian coal options and PJM electricity swap futures.

» Acquired Credit Market Analysis, a leading provider of credit derivatives market data.

» Partnered with Citadel to create CMDX – an open-architecture marketplace for trading and
migration of credit default swaps (CDS) – which is designed to provide the benefits of central

clearing to CDS trades.

ACHIEVE OPERATIONAL EXCELLENCE

» Maintained unsurpassed risk management standards despite enormous market stress.

» Provided $7 billion in financial safeguards to help mitigate systemic risk.

» Held more than $100 billion of collateral on deposit.
» Delivered Chicago Board of Trade (CBOT) merger synergies.

» Completed migration of CBOT products to CME Globex.

» Commenced NYMEX integration process.

» Implemented technology upgrades that helped reduce average futures response time by 71 percent.

The value of confidence

FINANCIAL HIGHLIGHTS

Y E A R E N D E D O R AT D ECE M B E R 3 1

(in millions, except per share data and notional value)

Income Statement Data

Total revenues

Operating income

Income before income taxes

Net income

Earnings per share:

Basic

Diluted

Balance Sheet Data

Current assets ¹

Total assets ¹

Current liabilities ¹

Total liabilities ¹

Shareholders’ equity

Other Data

Total trading volume (round turn trades)

Total electronic volume (round turn trades)

Open interest at year end (contracts)

Notional value of trading volume (in trillions)

2008

2007

Change

2,561

1,756

1,582

1,248

715

1,052

1,096

659

12.18

12.13

15.05

14.93

1,458

4,154

30,505

989

11,817

18,689

2,988

2,430

19,473

3,243

7,168

12,306

2,250

1,739

1,227

1,134

46%

(19)
(19)

(65) %

(69)

33%

¹ Amounts exclude cash performance bonds and security deposits.

All references to volume, notional value and rate per contract information in this document exclude our non-traditional TRAKRS,
auction-traded and Swapstream products. All references to options in this document refer to options on futures contracts.

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05 06 07

TOTAL TRADING VOLUME

(in millions of round turn trades)

TOTAL REVENUES

(in millions of dollars)

OPERATING MARGIN

(in percentages)

NET INCOME

(in millions of dollars)

CME GROUP 2008 ANNUAL REVIEW

Around the world
and around the clock.

The value of confidence

It’s all about access. In today’s global marketplace, CME Group provides the
tools business leaders need to manage risk whenever and wherever it might
arise. We offer around-the-clock electronic access to some of the world’s
most dynamic markets, with the safety and soundness that stem from central
counterparty clearing and the financial strength of CME Clearing. Our CME
Globex electronic trading platform is available on more than 130,000 terminals
in 85 countries and territories around the world, with an average response
time of less than 10 milliseconds at year-end 2008.

CME GROUP 2008 ANNUAL REVIEW

Extending our offerings to
meet new market challenges.

The value of confidence

Markets evolve and so do needs. CME Group offers the broadest range of
products across all major asset classes, including interest rates, equity indexes,
foreign exchange, energy, agricultural commodities, metals and alternative
investment products such as weather and real estate. In 2008, we introduced
more new products to meet changing custo mer demands. On exchange, these
included Euro-denominated E-mini S&P 500 futures, weather contracts in
seven new cities, 3-month Overnight Index Swaps futures and options, and
futures and options on the U.S. Bureau of Labor Statistics Nonfarm Payrolls
data. We broad ened our array of products available on CME ClearPort, adding
new petroleum swap futures contracts, gasoil options, natural gas liquids
swap futures and plastic futures, as well as platinum and palladium futures.

CME GROUP 2008 ANNUAL REVIEW

Know where you stand.

The value of confidence

Even during times of unprecedented market stress, CME Group’s business model
continues to work. Our customers have confidence in us and count on our ability
to deliver highly liquid markets with tight bid-ask spreads in all major asset classes,
virtually 24 hours a day. We continuously monitor market conditions. Our twice-
daily mark-to-market protocol limits the accumulation of losses, which means that
our customers can better manage their risks. Ongoing, highly sophisticated
market surveillance ensures the integrity of our trading environment.

CME GROUP 2008 ANNUAL REVIEW

More than ever, we’re essential.

The value of confidence

More than ever, we’re essential.

2008 was a very challenging year, but for our customers
and markets worldwide, CME Group was a source of
stability, security and sensibility. We helped reduce
and contain systemic risks. We guaranteed the safety
and soundness of every trade. And we enabled our
customers to reduce operational costs and improve
capital efficiencies – making it easier and safer for them
to act. And making us essential for managing risk.

CME GROUP 2008 ANNUAL REVIEW

“Product breadth and depth, sophisticated technology

and credit efficiencies are just three of the reasons why
hedge funds find our markets attractive.”

KELLY BROWN
Director, Hedge Funds
CME Group

The value of confidence

BENCHMARK PRODUCTS: SEARCH

FOR QUALITY IN UNCERTAIN TIMES

CME Group offers the widest array of

products of any exchange in the world –

including derivatives based on fixed-

income, interest rates, equity indexes,

foreign exchange, energy, agricultural

commodities and metals. Even during

times of tremendous market dislocation,

CME Group offers unparalleled liquidity

and transparency virtually 24 hours a day.

“In turbulent times, you need to constantly adjust your
strategy, so having access to all asset classes and
benchmark products on one platform is an advantage.”

TRACY WILLS-ZAPATA
Managing Director,
Business Development
Campbell & Company

CME GROUP 2008 ANNUAL REVIEW

“There is no such
thing as fast enough –
we are constantly
improving CME
Globex’s functionality,
speed and distribution
capabilities.”

KEVIN KOMETER
Managing Director
and Chief Information Officer
CME Group

“Exchanges around the world want

to leverage CME Globex’s distribution
capabilities for their own products –
that is a tremendous opportunity for
CME Group and our customers.”

CHARLES FARRA
Director, International Sales
CME Group

The value of confidence

TECHNOLOGY: BORDERLESS

OPPORTUNITIES

The CME Globex platform continues

to set the global standard in electronic

derivatives trading. Our commitment

to leading-edge technology means

trades are executed in milliseconds

with unparalleled functionality

capable of handling even the most

complex transactions. Electronic

hubs in Amsterdam, Dublin, London,

Milan, Paris, Sao Paulo and Singapore

improve connectivity while reducing

customer costs.

“Having direct electronic
access to CME Group’s
commodity markets,
through BM&FBOVESPA,
offers new ways to hedge
farmers’ soybean business
in Mato Grosso against
adverse price moves.”

BLAIRO MAGGI
Governor of the State of Mato Grosso
Brazil

CME GROUP 2008 ANNUAL REVIEW

“CME Group has stepped up
to provide concrete solutions
for today’s challenges.”

JAMES WALLIN
Senior Vice President,
Fixed Income
Alliance Bernstein

The value of confidence

“CME Group is flexible
so that customers can
select the clearing solution
that works for them.”

KIM TAYLOR
Managing Director
and President, CME Clearing
CME Group

CLEARING: OPPORTUNITIES EMERGE ACROSS ALL MARKETS

In an environment of balance sheet constraints and growing counterparty

concerns, the case for central counterparty clearing is more critical than

ever. CME Clearing offers financial safeguards, valued at $7 billion as of year-

end 2008, designed to eliminate counterparty risk. In CME Group’s core

futures markets, participants benefit from integrated execution and clearing

services with straight-through processing. And CME ClearPort continues

to expand its clearing capabilities for the over-the-counter market.

CME GROUP 2008 ANNUAL REVIEW

“In today’s volatile environment,

we are always seeking a
smarter approach to managing
market fluctuations.”

STEPHEN SEMLITZ
Managing Director
Hess Energy Trading Company

The value of confidence

“The energy market is looking for
ways to more effectively balance
risk and reward – offense is now
as important as defense.”

JOSEPH RAIA
Managing Director,
Energy and Metals Products
CME Group

NYMEX: FUELING THE FUTURE

Through our acquisition of NYMEX,

CME Group offers the largest and

most liquid regulated marketplace for

futures and options on global bench-

mark energy products, including crude

oil, natural gas, heating oil, gasoline,

ethanol, propane and other products.

This extensive slate of energy futures,

options and fully cleared over-the-

counter contracts provides global

market participants the opportunity

to manage their exposure to energy

market fluctuations, reducing their

risk and creating opportunities

around the world.

CME GROUP 2008 ANNUAL REVIEW

“Including

precious metals
in a portfolio
really makes
sense from a
diversification
standpoint.”

BARRY WAINSTEIN
Vice Chairman
Scotia Capital

“At CME Group, we are developing
new products and expanding
our clearing services to meet the
challenges of today’s marketplace.”

PATRICIA CAULEY
Associate Director, Metals Marketing
CME Group

The value of confidence

“CME Group offers us broad
accessibility to the markets
as well as the counterparty
risk mitigation we require.”

ROBERT MIZRAHI
Managing Director, Precious Metals
ScotiaMocatta

“As a global, client-driven
business, ScotiaMocatta
regularly utilizes the
depth of liquidity that
CME Group provides.”

TIMOTHY DINNEY
Managing Director
ScotiaMocatta

COMMODITIES: METALS SHINE BRIGHTLY IN AN UNCERTAIN ECONOMY

The increased demand in emerging markets for certain metals such as

copper, and the role of gold as a traditional safe haven during troubled

economic times, have fueled market interest in CME Group’s metals

complex. These metals contracts comprise the world’s largest complex

of precious, base and ferrous metals available in a single trading venue.

CME GROUP 2008 ANNUAL REVIEW

“At a time of unprecedented
volatility, our customers
are looking for tools that
restore some predictability
to their business.”

THOMAS COYLE
Vice President and General Manager,
Chicago & Illinois River Marketing, LLC,
a wholly owned subsidiary of Nidera, Inc.

COMMODITIES: HUNGER FOR

SOLUTIONS DRIVES MARKET DEMAND

Global food shortages, rapidly changing

commodity prices and the debate about

biofuels have impacted the agribusiness

marketplace tremendously, creating

unpre cedented volatility and a greater

need for risk management tools. With

CME and CBOT products now available

on a single platform and trading floor, new

opportunities are unfolding for customers

that look to CME Group’s markets for

price discovery and to manage risk.

The value of confidence

“Commodity market
participants have
become increasingly
sophisticated in how
they approach their risk
management needs.”

DAVID LEHMAN
Director, Commodity Research
and Product Development
CME Group

CME GROUP 2008 ANNUAL REVIEW

JAMES E. PARISI
Chief Financial Officer

The value of confidence

Financial Milestones in 2008

» Integrated Chicago Board of Trade – migrating all electronic trading to CME Globex platform,

combining trading floors and reducing expenses by more than $100 million.
» Completed acquisition of New York Mercantile Exchange (NYMEX) and began integration –

expanding product diversity and adding strategic benefit of ClearPort.

» Obtained debt financing for NYMEX acquisition – achieving reasonable terms in a challenging market.

» Completed equity swap agreement with BM&FBOVESPA and acquisition of Credit Market Analysis –

contributing to long-term growth initiatives.

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2007

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2008

04
04

05 06 07
05 06 07

AVERAGE DAILY
TRADING VOLUME
AVERAGE DAILY
TRADING VOLUME
(in thousands)

(in thousands)

04
04

05 06 07
05 06 07

AVERAGE DAILY ELECTRONIC
TRADING VOLUME
AVERAGE DAILY ELECTRONIC
TRADING VOLUME
(in thousands)

(in thousands)

PRODUCT LINE REVENUES

(as a percentage of total clearing and transaction fees)

Interest Rates

Equities

Foreign Exchange

Commodities and
Alternative Investments

7
2
2
7
2
,
1
2

,
1

4
3
4
1
,
3
1
1
,
1

0
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0
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6

4
2
4
8
2
8

8
3
8
6
3
6

3
6
3
4
6
4

4
4
4
3
4

2
5
2
4 2
5
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4 2
4 1
8
0
4 1
.
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.
1

04
04

05 06 07
05 06 07

04
04

05 06 07
05 06 07

NOTIONAL VALUE

NOTIONAL VALUE
(in trillions of dollars)

(in trillions of dollars)

DIVIDEND PAYOUT*
DIVIDEND PAYOUT*
(in dollars per share)

(in dollars per share)

*The total dividend for 2008 includes a special dividend of $5.00 per common share.

2007

2008

PRODUCT LINE REVENUES

(as a percentage of total clearing and transaction fees)

PRODUCT LINE REVENUES

CME GROUP 2008 ANNUAL REVIEW

CME GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

Assets

Current assets

Property, net

Intangible assets – trading products

Intangible assets – other, net

Goodwill

Other assets

Total Assets

Liabilities and Shareholders’ Equity

Current liabilities

Long-term debt

Deferred tax liabilities

Other liabilities

Total Liabilities

Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

2008

AT D ECE M B E R 3 1

2007

$ 19,111,528

$ 4,987,055

707,215

16,982,000

3,369,373

7,519,209

469,329

377,452

7,987,000

1,796,789

5,049,211

108,690

$ 48,158,654

$ 20,306,197

$ 18,642,975

2,966,079

7,728,286

132,745

29,470,085

18,688,569

$ 48,158,654

$ 4,076,063

—

3,848,240

76,257

8,000,560

12,305,637

$ 20,306,197

The value of confidence

CME GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Revenues

Clearing and transaction fees

Quotation data fees

Processing services

Access and communication fees

Other

Total Revenues

Expenses

Compensation and benefits

Communications

Technology support services

Professional fees and outside services

Amortization of purchased intangibles

Depreciation and amortization

Occupancy and building operations

Licensing and other fee agreements

Restructuring

Other

Total Expenses

Operating Income

Non-Operating Income (Expense)

Investment income

Impairment of long-term investment

Gains (losses) on derivative investments

Securities lending interest income

Securities lending interest and other costs

Interest and other borrowing costs

Guarantee of exercise right privileges

Equity in losses of unconsolidated subsidiaries

Other income (expense)

Total Non-Operating

Income Before Income Taxes

Income tax provision

Net Income

Earnings per Common Share:

Basic

Diluted

Weighted Average Number of Common Shares:

Basic

Diluted

2008

2007

2006

Y E A R E N D E D D ECE M B E R 3 1

$ 2,115,366

$ 1,427,320

$ 866,089

279,533

54,073

43,618

68,429

2,561,019

317,554

52,339

59,611

71,944

98,682

137,341

71,388

70,259

4,839

94,867

978,824

145,054

106,404

36,511

40,812

1,756,101

263,347

43,471

50,480

53,142

33,878

105,653

48,202

35,651

8,892

61,477

704,193

80,836

90,148

29,021

23,853

1,089,947

202,966

31,580

31,226

33,184

1,267

72,783

29,614

25,728

—

40,136

468,484

1,582,195

1,051,908

621,463

45,514

(274,507)

(8,148)

38,323

(51,722)

(56,501)

12,824

(31,556)

(8,458)

(334,231)

1,247,964

532,478

73,157

—

(98)

121,494

(115,868)

(3,629)

(17,167)

(13,995)

—

43,894

1,095,802

437,269

55,792

—

94,028

(92,488)

(223)

—

(6,915)

50,194

671,657

264,309

$ 715,486

$ 658,533

$ 407,348

12.18

12.13

15.05

14.93

11.74

11.60

58,738

58,967

43,754

44,107

34,696

35,124

CME GROUP 2008 ANNUAL REVIEW

CME GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Cash Flows from Operating Activities:

Net income

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation and amortization

Impairment of long-term investment

Deferred income taxes

Other

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities

Proceeds from maturities of marketable securities

Purchases of marketable securities

Net change in NYMEX securities lending program investments

Purchases of property, net

Cash acquired in merger with CBOT Holdings

Acquisition of Credit Market Analysis Limited, net of cash received

Acquisition of NYMEX Holdings, net of cash received

NYMEX membership rights payment

Other

Net Cash Used in Investing Activities

Cash Flows from Financing Activities

Proceeds from issuance of commercial paper, net of maturities

Proceeds from other borrowings, net of issuance costs

Repayment of other borrowings

Net change in NYMEX securities lending program liabilities

Cash dividends

Repurchase of common stock, including costs

Other

Net Cash Provided by (Used in) Financing Activities

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and Cash Equivalents, End of Period

2008

2007

2006

Y E A R E N D E D D ECE M B E R 3 1

715,486

658,533

407,348

137,341

274,507

(115,111)

184,974

1,197,197

265,112

(367,554)

110,089

(200,102)

—

(94,141)

(2,769,894)

(612,000)

(80,578)

(3,749,068)

1,330,336

2,881,941

(1,282,909)

(110,089)

(615,193)

(224,029)

24,397

2,004,454

(547,417)

845,312

105,653

—

(50,583)

100,771

814,374

203,801

(129,125)

—

(163,644)

116,010

—

(105,680)

(78,638)

162,853

—

(151,582)

(949,340)

78,141

(859,928)

(124,192)

969,504

72,783

—

(24,847)

16,412

471,696

73,668

(29,681)

—

(87,810)

—

(42,037)

(85,860)

—

(87,537)

—

60,314

(27,223)

358,613

610,891

$ 297,895

845,312

969,504

The value of confidence

FORWARD-LOOKING STATEMENTS

From time to time, in written reports and oral statements, we discuss our expectations regarding future performance. These forward-looking

statements are identified by their use of terms and phrases such as “believe,” “anticipate,” “could,” “estimate,” “intend,” “may,” “plan,” “expect” and

similar expressions, including references to assumptions. These forward-looking statements are based on currently available competitive, financial

and economic data, current expectations, estimates, forecasts and projections about the industries in which we operate and management’s beliefs

and assumptions. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult

to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. We

want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-

looking statements, whether as a result of new information, future events or otherwise. Among the factors that might affect our performance are:

• Our ability to realize the benefits and control the costs of our acquisi-

• Changes in our rate per contract due to shifts in the mix of the prod-

tion of NYMEX Holdings and our ability to successfully integrate the

ucts traded, the trading venue and the mix of customers (whether

businesses of CME Group and NYMEX Holdings, including the fact

the customer receives member or non-member fees or participates

that such integration may be more difficult, time consuming or costly

in one of our various incentive programs) and the impact of our tiered

than expected and revenues following the transaction may be lower

pricing structure;

than expected and expected cost savings from the transaction may

• The ability of our financial safeguards package to adequately protect

not be fully realized within the expected time frames or at all;

us from the credit risks of clearing members;

• Increasing competition by foreign and domestic entities, including

• The ability of our compliance and risk management methods to effec-

increased competition from new entrants into our markets and

tively monitor and manage our risks;

consolidation of existing entities;

• Changes in price levels and volatility in the derivatives markets and

• Our ability to keep pace with rapid technological developments,

in underlying fixed income, equity, foreign exchange and commodi-

including our ability to complete the development and implementa-

ties markets;

tion of the enhanced functionality required by our customers;

• Economic, political and market conditions, including the recent

• Our ability to continue introducing competitive new products and

volatility of the capital and credit markets and the impact of current

services on a timely, cost-effective basis, including through our

economic conditions on the trading activity of our current and poten-

electronic trading capabilities, and our ability to maintain the compet-

tial customers;

itiveness of our existing products and services;

• Our ability to accommodate increases in trading volume and order

• Our ability to adjust our fixed costs and expenses if our revenues

transaction traffic without failure or degradation of the performance

decline;

of our systems;

• Our ability to continue to generate revenues from our processing

• Our ability to execute our growth strategy and maintain our growth

services;

effectively;

• Our ability to maintain existing customers, develop strategic relation-

• Our ability to manage the risks and control the costs associated with

ships and attract new customers;

our acquisition, investment and alliance strategy;

• Our ability to expand and offer our products in foreign jurisdictions;

• Our ability to continue to generate funds and/or manage our indebt-

• Changes in domestic and foreign regulations;

edness to allow us to continue to invest in our business;

• Changes in government policy, including policies relating to common

• Industry and customer consolidation;

or directed clearing, changes as a result of a combination of the Secu-

• Decreases in trading and clearing activity;

rities and Exchange Commission (SEC) and the U.S. Commodity

• The imposition of a transaction tax on futures and options on futures

Futures Trading Commission (CFTC), or changes relating to the

transactions;

recently enacted or proposed legislation relating to the current

• The unfavorable resolution of material legal proceedings;

economic crisis, including the Emergency Economic Stabilization Act

• The seasonality of the futures business; and

of 2008 and other stimulus packages;

• Changes in the regulation of our industry with respect to speculative

• The costs associated with protecting our intellectual property rights

trading in commodity interests and derivative contracts.

and our ability to operate our business without violating the intellec-

tual property rights of others;

• Our ability to generate revenue from our market data that may be

reduced or eliminated by the growth of electronic trading or declines

in subscriptions;

CME GROUP 2008 ANNUAL REVIEW

PERFORMANCE GRAPH

The following graph compares the cumulative five-year total return provided shareholders on our Class A common stock relative to the

cumulative total returns of the S&P 500 index, and a customized peer group described below as of the end of the year. An investment of $100

(with reinvestment of all dividends) is assumed to have been made in our Class A common stock, in the peer group, and the index on December

31, 2003, and its relative performance is tracked through December 31, 2008. As a result of our acquisition of NYMEX Holdings, Inc. in August

2008, NYMEX Holdings, Inc. is no longer included in the customized peer group.

Peer Group:

• IntercontinentalExchange, Inc.

• The Nasdaq OMX Group Inc.

• NYSE Euronext

CUMUL ATIVE TOTAL RETURN

$1,200

1,000

800

600

400

200

C M E G R O U P I N C .

S & P 5 0 0

P E E R G R O U P

* $100 invested on 12/31/03 in stock and index - including reinvestment of dividends. Fiscal year ending December 31.

The value of confidence

SHARE INFORMATION

CL ASS A COMMON STOCK

Our Class A common stock is currently listed on NASDAQ under the ticker symbol “CME.” In June 2008, we elected to delist from the New York Stock

Exchange and become solely listed on NASDAQ. As of February 18, 2009, there were approximately 2,200 holders of record of our Class A common stock.

The following table sets forth the high and low sales prices per share of our Class A common stock on a quarterly basis, as reported on NASDAQ.

2008

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

CL ASS B COMMON STOCK

High

Low

2007

$ 686.43

$ 399.01

First Quarter

526.98

422.24

440.00

375.38

Second Quarter

282.00

Third Quarter

155.49

Fourth Quarter

High

Low

$ 596.26

$ 510.00

565.00

609.92

714.48

497.00

506.50

593.58

Our Class B common stock is not listed on a national securities exchange or traded in an organized over-the-counter market. Each class of our

Class B common stock is associated with a membership in a specific division of our CME exchange. CME’s rules provide exchange members with

trading rights and the ability to use or lease these trading rights. Each share of our Class B common stock can be transferred only in connection

with the transfer of the associated trading rights. The memberships by class are CME (Chicago Mercantile Exchange), IMM (International Mon-

etary Market), IOM (Index and Option Market) and GEM (Growth and Emerging Markets).

Class B shares and the associated trading rights are bought and sold through our shareholder relations and membership services department. In

addition, trading rights may be leased through the department. Trading rights sales are reported on our Web site. Although our Class B sharehold-

ers have special voting rights, because our Class B shares have the same equitable interest in our earnings and the same dividend payments as

our Class A shares, we expect that the market price of our Class B common stock, if reported separately from the associated trading rights, would

be determined by the value of our Class A common stock. As of February 18, 2009, there were approximately 1,800 holders of record of our Class

B common stock.

DIVIDENDS

The following table sets forth the dividends we paid on our Class A and Class B common stock in the last two years:

Record Date

March 10, 2008

June 10, 2008

September 10, 2008

September 25, 2008

December 10, 2008

Dividend per Share

Record Date

$ 1.15

March 9, 2007

June 8, 2007

September 10, 2007

December 10, 2007

1.15

5.00

1.15

Dividend per Share

$ 0.86

0.86

We intend to pay regular quarterly dividends to our shareholders. The decision to pay a dividend, however, remains within the discretion of our board

of directors and may be affected by various factors, including our earnings, financial condition, capital requirements, level of indebtedness and other

considerations our board of directors deems relevant. Our existing credit facility as well as future credit facilities, other future debt obligations and

statutory provisions may limit our ability to pay dividends. The September 25, 2008, dividend was a special dividend. On February 4, 2009, the board

of directors declared a regular quarterly dividend of $1.15 per share to be paid on March 25, 2009, to shareholders of record on March 10, 2009.

CME GROUP 2008 ANNUAL REVIEW

BOARD OF DIRECTORS

TERRENCE A . DUFF Y
Executive Chairman

CHARLES P. CAREY
Vice Chairman

CRAIG S. DONOHUE
Chief Executive Officer

LEO MEL AMED
Chairman Emeritus
Chairman and Chief Executive

Officer, Melamed and Associates,
Inc., Chicago, Ill.

JOHN F. SANDNER
Retired Chairman of the Board
Chairman, E*Trade Futures, LLC,
Chicago, Ill.

The value of confidence

TIMOTHY S. BITSBERGER
Consultant, Washington, D.C.
Former Treasurer, Federal Home
Loan and Mortgage Company,
Washington, D.C.

MARK E . CERMAK
Director, Execution Services,
Fortis Clearing Americas,
Chicago, Ill.

DENNIS H. CHOOK ASZIAN
Chairman, Financial Accounting
Standards Advisory Council,
Norwalk, Conn.

Former Chairman and Chief

Executive Officer, CNA Insurance
Companies, Chicago, Ill.

JACKIE M. CLEGG
Managing Partner,

ROBERT F. CORVINO
Independent Trader, Chicago, Ill.

Clegg International Consultants,
LLC, Washington, D.C.

JAMES A . DONALDSON
Independent Trader, Chicago, Ill.

MARTIN J. GEPSMAN
Independent Broker and Trader,

Chicago, Ill.

L ARRY G. GERDES
Chairman, President and Chief
Executive Officer, Transcend
Services, Inc., Atlanta, Ga.
General Partner, Gerdes Huff
Investments, Atlanta, Ga.

DANIEL R. GLICKMAN
Chairman and Chief Executive

J. DENNIS HASTERT
Retired Speaker of the House

Officer, Motion Picture
Association of America, Inc.,
Washington, D.C.

U.S. Secretary of Agriculture

(1995–2001)

Member of Congress, Kansas

(1977–1995)

of Representatives

Member of Congress, Illinois

(1987–2007)

BRUCE F. JOHNSON
Independent Trader, Chicago, Ill.

GARY M. K ATLER
Vice President, Fortis Clearing

PATRICK B. LYNCH
Independent Trader, Chicago, Ill.

WILLIAM P. MILLER II
Deputy Director of Investments,

Americas, Chicago, Ill.

Ohio Public Employees
Retirement System,
Columbus, Ohio

JAMES E . NEWSOME
Former President, New York
Mercantile Exchange,
New York, N.Y.

Former Chairman, Commodities
Futures Trading Commission,

Washington, D.C.

CME GROUP 2008 ANNUAL REVIEW

BOARD OF DIRECTORS

JOSEPH NICIFORO
Chairman, Twinfields Capital

Management, Greenwich, Conn.

C.C. ODOM II
Independent Member/Trader
Sole Proprietor, Odom

Investments and Argent Venture
Capital, San Antonio, Texas

JAMES E . OLIFF
President, FILO Corp., Chicago, Ill.

JOHN L . PIETRZAK
Managing Partner, Longwood

Partners, Chicago, Ill.

General Partner, Sparta Group,

Chicago, Ill.

ALEX J. POLLOCK
Resident Fellow, American
Enterprise Institute,
Washington, D.C.

WILLIAM G. SAL ATICH, JR.
Independent Broker and Trader,

Chicago, Ill.

TERRY L . SAVAGE
Financial Journalist and Author
President, Terry Savage

Productions, Ltd., Chicago, Ill.

HOWARD J. SIEGEL
Independent Trader, Chicago, Ill.

ROBERT H. STEELE
Vice Chairman, John Ryan

CHRISTOPHER STEWART
Chief Executive Officer,

Company, Minneapolis, Minn.
Director, NLC Mutual Insurance
Company, Norwich, Conn.

Member of Congress, Connecticut

(1970-1974)

Gelber Group, LLC, Chicago, Ill.

DENNIS A . SUSKIND
Former Councilman,
Southampton, N.Y.
(2001-2004)

DAVID J. WESCOT T
President, The Wescott Group

Ltd., Chicago, Ill.

Vice President, MF Global,

Chicago, Ill.

WILLIAM R. SHEPARD (not pictured)
President and Founder,
Shepard International, Inc.

Chicago, Ill.

The value of confidence

MANAGEMENT

Management Team

Managing Directors

CRAIG S. DONOHUE
Chief Executive Officer

PHUPINDER S. GILL
President

K ATHLEEN M. CRONIN
Managing Director, General Counsel

and Corporate Secretary

ANNE E . BAGAN
Managing Director, Audits

CHRISTOPHER MEAD
Managing Director, Marketing

DAVID BOBERSKI
Managing Director, OTC Research

and Product Development

DALE A . MICHAELS
Managing Director, Credit and Market

Risk Management

NEAL B. BRADY
Managing Director, Business Development

MICHAEL O’CONNELL
Managing Director, Clearing Business Development

BRYAN T. DURKIN
Managing Director and Chief Operating Officer

BO CHAMBLISS
Managing Director, Government Relations

JOSEPH A . PANFIL
Managing Director, Operations and Systems Engineering

BARRY C. GOLDBL AT T
Managing Director, Commodities,
Energy and Metals Products

JULIE HOL ZRICHTER
Managing Director, Global Operations

KEVIN KOMETER
Managing Director and Chief Information Officer

JAMES E . PARISI
Managing Director and Chief Financial Officer

HILDA HARRIS PIELL
Managing Director and Chief Human

Resources Officer

RICHARD H. REDDING
Managing Director, Products and Services

KIMBERLY S. TAYLOR
Managing Director and President, CME Clearing

KENDAL L . VROMAN
Managing Director and Chief Corporate

Development Officer

JOHN F. CURRAN
Managing Director, Product Strategy

EVANS PAPANIKOL AOU
Managing Director, CME Globex Market Operations

TIMOTHY J. DOAR
Managing Director, Risk Management

PHILIP J. PAPESH
Managing Director, Software Engineering

DE’ANA DOW
Managing Director, Government Relations

DEAN P. PAY TON
Managing Director and Chief Regulatory Officer

DANIELLE DYCUS
Managing Director, Europe, Middle East and Africa

JOHN C. PESCHIER
Managing Director, Investor Relations

JAMES W. FARRELL
Managing Director, Software Engineering

JOHN W. PIETROWICZ
Managing Director, Corporate Finance and Treasury

EDWARD M. GOGOL
Managing Director, Clearing Solutions

JOSEPH RAIA
Managing Director, Energy and Metals Products

JILL A . HARLEY
Managing Director and Chief Accounting Officer

ROBERT D. RAY
Managing Director, International Products and Services

JOHN K . HART
Managing Director, Technology Engineering

BRIAN REGAN
Managing Director, Regulatory Counsel

DAVID HOAG
Managing Director, Clearing Technology

CHRISTOPHER RODRIGUEZ
Managing Director, Business Development

SCOT T R. K AUFMAN
Managing Director, Architecture

ROBIN S. ROSS
Managing Director, Interest Rate Products

SEAN KEATING
Managing Director, NYMEX Operations

DEREK L . SAMMANN
Managing Director, Foreign Exchange Products

RICHARD J. KOKOSZK A
Managing Director, Internal Audit

JOHN L . SANTANA
Managing Director, Software Engineering

JOHN W. L ABUSZEWSKI
Managing Director, Research
and Product Development

DONALD D. SERPICO
Managing Director, Facilities and Business

Continuity Planning

RICHARD H. L AMM
Managing Director, Chief Regulatory Counsel

ANN K . SHUMAN
Managing Director and Deputy General Counsel

THOMAS L aSAL A
Managing Director, NYMEX Chief Regulatory Officer

IAN WALL
Managing Director, NYMEX Information Technology

TINA F. LEMIEUX
Managing Director, Hedge Funds and Broker Services

SCOT E . WARREN
Managing Director, Equity Products

KEVIN LENNON
Managing Director, Real Estate

JASON WELLER
Managing Director, Corporate Strategy

ROBERT LEVIN
Managing Director, Energy Research

and Product Development

ANITA S. LISKEY
Managing Director, Corporate Marketing

and Communications

ARTHUR McCOY
Managing Director, NYMEX Clearing

JULIE M. WINKLER
Managing Director, Research and Product Development

C. F. WONG
Managing Director, Asia

CME GROUP 2008 ANNUAL REVIEW