CME GROUP INC. (CME): what the price assumes

In the published model solve dated 2026-Q2, anchored at $285.40, CME GROUP INC. (CME) is priced for +10.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/CME

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.9% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=17)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Almost two thirds of every revenue dollar reaches operating income, a 66.9% margin earned by owning the venue and the clearing house rather than by taking any position in the markets that run through them.

• The concentration is in what makes contracts trade, not in any single customer: interest rate products are about 26% of revenue, and the FY2025 annual report lists "changes in government monetary policies and the U.S. Federal Reserve and other international banks' forecasted interest rates" among the conditions that determine volume.

• The next concrete test is the securities clearing business the company plans to launch "later in 2026 beginning with cash U.S. Treasury and repo transactions", entering a market where DTCC's FICC is the incumbent.

Bull Case

The standard worry about an exchange is that it is a volatility business wearing a subscription business costume. Contracts trade when people are frightened; when markets settle, volume drains away and so does the revenue. It is a reasonable fear, and the filings suggest it is pointed at the wrong part of the company.

Look at what actually produces the revenue. Interest rate products are the largest line at roughly 26%, but equity indexes contribute about 18%, energy about 12%, agricultural commodities about 10%, and metals about 5%. Market data, sold by subscription rather than per contract, is about 12% again. Those drivers do not move together. A tariff scare, a drought, a central bank meeting and an oil supply shock are four unrelated reasons to hedge, and the FY2025 annual report attributes the year's volume growth to exactly that kind of scatter, naming "tensions, the anticipation and implementation of tariffs, and uncertain weather conditions in 2025" alongside product expansion. Fear is diversified here in a way it is not at a single-asset venue.

The second thing the company does is manufacture its own volume. It has been cutting contracts into smaller pieces to widen the customer base: the FY2025 report describes listing "products at the micro size across all six major derivatives asset classes" and says plainly that "These products are designed to attract a new customer base." It reports 11% growth in over-the-counter alternative products and "more new products in the pipeline for 2026". This is not a business waiting passively for the next crisis; it is adding the instruments the next crisis will be traded in.

Underneath both sits the thing that is genuinely hard to copy. Liquidity concentrates, and once open interest sits in one clearing house, a trader who moves elsewhere gives up the margin offsets that make the position cheap to hold. The company describes its edge as "deep, liquid markets; diverse and complementary product offerings; frequency and quality of new product development; and efficient, secure clearing, settlement and support services". That is self-serving language in a 10-K, but the margin corroborates it: $6.76B of revenue produced $4.52B of operating income over the trailing year and $4.33B of free cash flow, with a 16.0% return on equity. Businesses facing real substitution do not earn that.

The balance sheet has almost nothing on it. Gross borrowings run to $48.5M against 2.47 billion dollars of net cash, which means essentially the entire enterprise value is the franchise. Capital goes back to holders as dividends rather than repurchases, and the board declared a regular quarterly dividend of $1.30 per share on February 12, 2026, payable on March 26, 2026. A holder is buying an unlevered toll on financial risk itself, and financial risk is not a diminishing commodity.

Bear Case

What today's price buys is not this year's volume. It is roughly 6.7% a year of operating-profit growth for the next five years, and a business still standing at the end of it. At about 20 times operating income, that requirement is the whole investment case, so the fair question is which revenue stream is supposed to deliver it. Each candidate has a problem.

Take the growth that has recently arrived. The March 2026 quarterly report is admirably specific about where it came from: "We believe silver and gold volume increased as a result of higher price volatility due to the heightened geopolitical conflict in the Middle East." In the same quarter, "We believe these factors contributed to higher overall equity index and cryptocurrency volumes in the first quarter of 2026 when compared with the same period in 2025." Those are events. A Middle East conflict and a crypto repricing are not a growth algorithm, and neither compounds for five years by arrangement.

The second stream is the new one, and it starts from behind. The company plans to launch securities clearing later in 2026 in cash Treasuries and repo, where it notes that "FICC, a subsidiary of DTCC, is the primary player in the U.S. Treasury clearing market with new entrants, including ICE Clear Credit's Treasury Clearing Service." Entering an incumbent's market against a rival clearing house is a legitimate growth avenue and an expensive one, and it is priced today as though it works.

Then there is the margin itself. A 66.9% operating margin is an invitation. The FY2025 report concedes that the industry "is highly competitive and has seen multiple new entrants over time, and we expect competition to continue to intensify and become more global", and identifies the specific tactic: "A key strategy of several of these alternative and emerging venues is to compete on price, offering their" services more cheaply. Competitors cannot easily take the open interest. They can take the fee per contract, and fee compression arrives without any visible loss of volume.

This is where the valuation gets uncomfortable, because nothing sits underneath the growth assumption. Only the forward-growth methods reach today's price. The price sits about 84% above the asset-value family's central estimate and about 134% above the earnings-power family's, and the earnings-power reading is not a hostile construction: it simply capitalizes the trailing free cash flow assuming the business never grows again. If growth reverts to nothing, that is roughly where the arithmetic lands. The requirement is also delicate. Raise the assumed cost of capital by a single percentage point and the growth the price needs moves by more than seven points, which means the same business at a higher discount rate is a materially harder bet without a single contract changing hands.

There is not much of a cushion on the way down. The company holds about 1.2 billion dollars of equity stakes outside the operating business, close to 1.3% of market value, which bounds the downside without meaningfully softening it. Buybacks are not shrinking the count either; shares outstanding have crept up about 0.3% a year over the four years to March 2026. And the clearing house that makes the franchise defensible is also a concentrated risk: the FY2025 report sizes its exposure to a defaulting member at up to half a business day of fair-value change across all open positions before collateral is applied. That risk has been managed for a very long time. It has not gone away.

Valuation

Twenty times operating income is the entry ticket, and the arithmetic behind it is simple enough to state in one line: at $255.28 the market is asking the business to compound operating profit at roughly 6.7% a year for five years and then hold what it has built. Measured against what CME Group has recently delivered, that rate is not exotic. The demanding part is duration. Five consecutive years of mid-single-digit profit growth in a business whose inputs are other people's anxiety is a long time to keep the streak going.

The four ways of valuing the company disagree sharply, and the shape of the disagreement is the useful part. Only the forward-growth methods reach the price. The peer-multiple family sits about 28% below it, the asset-value family about 84% below, and the earnings-power family about 134% below. That last one deserves a translation: it takes the $4.33B of free cash flow the company generated over the trailing year and capitalizes it as a perpetuity that never grows. The gap between that reading and the market price is not an error. It is precisely the durability the price is paying for, and the static methods have no way to express it.

The margin is where the durability shows up in the accounts. Revenue of $6.76B produced $4.52B of operating income, a 66.9% operating margin. Stated book value is $73.29 per share, so almost the entire market value is an assessment of the franchise rather than of the assets on the balance sheet. On that modest book the company earned a return of 16.0% over the trailing year, comfortably above the roughly 9.3% cost of the equity funding it. That is the correct way to read an exchange. The plant is a rulebook, a clearing house and a pool of open interest, none of which appears at replacement cost anywhere.

The cohort makes the same point from the outside. NDAQ tells investors that its "combined options market share in 2025 represented the largest share of the U.S. market for multi-listed equity options", and ICE sells "proprietary real-time and historical pricing data, as well as order book and transaction information related to our global futures markets". Every one of these venues is monetizing the same asset twice: once when a contract trades, and again when someone pays to watch it trade. Market data at about 12% of revenue is the piece least tied to any given quarter's volume, and the piece a competitor cannot replicate without first taking the volume.

Solvency is close to a non-issue and should be treated as such. Gross borrowings of $48.5M against 2.47 billion dollars of net cash means the enterprise carries no financial leverage worth discussing, and the company is not consuming cash. What that removes is the amplifier: a bad year in volumes costs earnings, not solvency. What it does not remove is the concentration of the whole valuation in one question, which is whether contract volume five years from now is meaningfully larger than it is today.

Catalysts

The largest dated item on the calendar is a new business rather than a new product. The company intends to launch securities clearing later in 2026, starting with cash U.S. Treasury and repo transactions, and it names the competition it will meet there: FICC, the DTCC subsidiary that dominates U.S. Treasury clearing, plus newer entrants including ICE Clear Credit's Treasury Clearing Service. Treasury clearing is a scale business with regulatory tailwinds behind central clearing, and the first disclosed volumes will say more about the five-year growth requirement than any single quarter of futures activity.

The March 2026 quarter showed how the existing franchise responds to events. Silver and gold volumes rose on price volatility the company attributes to heightened geopolitical conflict in the Middle East, while equity index and cryptocurrency volumes were both higher than the same quarter of 2025 following a broad repricing in crypto markets. The company also reported 11% growth in over-the-counter alternative products during 2025 and says more new products are in the pipeline for 2026, which is the part of volume growth that does not require a crisis to show up.

On capital return, the board declared a regular quarterly dividend of $1.30 per share on February 12, 2026, payable March 26, 2026 to shareholders of record on March 10, 2026. Cash returns here arrive as dividends rather than repurchases, so the quarterly declaration is the number to watch rather than a buyback authorization.

Peer Cohorts (Per Segment, With Filing Citations)

Derivatives & cash markets exchange (single operating segment) (reported)

• ICE (Intercontinental Exchange Inc)
• FY2025 10-K: …to our exchange venues. Exchange data services include, among other offerings, proprietary real-time and historical pricing data, as well as order book and transaction information related to our global futures markets and the NYSE exchanges. In addition, we receive a share of revenue from the National Market System,…
• FY2025 10-K: …included in transaction-based expenses. We incur routing charges when we do not have the best bid or offer in the market for a security that a customer is trying to buy or sell on one of our securities exchanges. In that case, we route the customer's order to the external market center that displays the best bid or…
• CBOE (Cboe Global Markets, Inc.)
• FY2025 10-K: …and Asia Pacific. The Europe and Asia Pacific segment includes the pan-European derivatives transaction services, ETPs, including exchange traded funds, exchange traded notes, and exchange traded commodities, and international depository receipts that are hosted on MTFs operated by Cboe Europe Equities (Cboe Europe…
• FY2025 10-K: …on the fee set by the SEC per notional value of U.S. Equities exchange transactions and per round turn of Options transactions executed on the Company's U.S. securities markets. These fees are calculated and billed monthly and are recognized in the North American Equities and Options segments. As the Exchanges are…
• NDAQ (Nasdaq, Inc.)
• FY2025 10-K: …MRX. These exchanges facilitate the trading of equity, ETF, index and foreign currency options. Our combined options market share in 2025 represented the largest share of the U.S. market for multi-listed equity options. Our options trading platforms provide trading opportunities to retail investors, algorithmic…
• FY2025 10-K: …other exchange operators, operators of non-exchange trading systems and banks and brokerages that operate their own internal trading pools and platforms. In the U.S., our options markets compete with exchanges operated by Cboe Global Markets, Inc., or CBOE , Miami International Holdings, Inc., or MIAX,…
• TW (Tradeweb Markets Inc.)
• FY2025 10-K: …with several market participants, which increasingly put their offerings in direct competition with Tradeweb. 22 Table of Contents • Inter-dealer brokers : We compete with inter-dealer brokers, particularly within our wholesale client sector in products such as MBS, U.S. Treasuries, U.S. repurchase agreements and…
• FY2025 10-K: …member of the National Futures Association ("NFA"). • Dealerweb LLC ("DW") (formerly known as Hilliard Farber & Co., Inc. and Dealerweb Inc.), a registered broker-dealer under the Exchange Act and a member of FINRA and MSRB. DW is also registered as an introducing broker with the CFTC and a member of the NFA. •…
• MKTX (MARKETAXESS HOLDINGS INC.)
• FY2025 10-K: …trading solutions comprise one reportable segment. The Company's end-to-end trading solutions segment includes the operation of electronic platforms for the trading of fixed-income and other securities and related data, analytics, compliance tools, post-trade services and technology services. The Company derives…
• FY2025 10-K: …and payables on the consolidated statement of financial condition. The $3.1 million decrease in net cash provided by operating activities was primarily due to lower net income and unfavorable changes in net receivables from broker-dealers, clearing organizations and customers, and accrued employee compensation,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.