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CME Group Takes a Hit on Weak Trading Volume

CME's average daily trading volume for December was down 9% from last year

by 1/4/2012 1:30:33 PM
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This morning, CME Group, Inc. (CME - 240.73) released its trading volume results for December and 2011. The derivatives exchange operator reported that a record 13.4 million contracts per day were exchanged in 2011, up 10% from 2010. However, the daily trading volume for December averaged 9.6 million, down 27% from November, and down 9% from a year earlier. CME said that daily volume for its interest-rates futures fell 30% from a year ago, to an average of 3.5 million contracts, and was the impetus for December's poor numbers.

Traders aren't taking kindly to the news, sending the stock down more than 1.7% so far today, exacerbating its 22.5% drop over the past year. In fact, CME has underperformed the broader S&P 500 Index (SPX) by 15.3% over the past 60 sessions. At last look, the shares are staring up at the formerly supportive $250-$255 region, which has contained all of CME's weekly closes since mid-November.


It seems that relatively few traders on Wall Street are looking for the stock to decline. Short interest for CME dropped by 17% over the past month, and now accounts for 1.7% of the security's float, pointing to a rather scant supply of sideline cash.

In fact, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.24 calls for every put during the past 10 days. This ratio arrives in the 52nd percentile of its annual range, signaling that the current preference for calls is simply business as usual for CME.

This laggard has also been able to garner some positive attention from analysts. According to Zacks, 12 out of 17 brokerages have given CME a "buy" or better endorsement. Moreover, the consensus 12-month price target -- as determined by Thomson Reuters -- rests at $317.84, representing a 32.3% premium to today's intraday nadir of $240.50.

Considering the technical and fundamental problems facing CME, an about-face from any of the bullish analysts or options traders could create further selling pressure for the stock.


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