BofA Securities analyst Craig Siegenthaler has downgraded CME Group Inc (CME) to Underperform from Neutral, lowering the price target from $212 to $177. The analyst’s decision is driven by concerns about increasing competition from BGC Group, Inc (BGC), Cboe Global Markets, Inc (CBOE), and Intercontinental Exchange Inc (ICE).
This growing rivalry, Siegenthaler warns, could lead to market share losses and pressure on CME’s pricing strategies. To counter this, the analyst anticipates CME will reduce its pricing on interest rate futures by over 10%, particularly in light of BGC’s upcoming launch of its FMX Futures Exchange.
Siegenthaler further forecasts a 15% compound annual growth rate (CAGR) for CBOE’s index options volume through 2026. He believes that options will increasingly replace CME’s equity futures, further eroding CME’s market position.
CME’s recent performance benefited from the surge in the Volatility Index (VIX) in August, a period marked by heightened market uncertainty. This surge, fueled by concerns over a potential economic hard landing, drove CME’s trading volumes to their highest levels since the onset of the COVID-19 pandemic.
While the analyst acknowledges the volatility is likely to remain elevated throughout the US election season, he expects a downward normalization throughout 2025. This trajectory, according to Siegenthaler, makes the second half of 2024 the ideal time to consider an Underperform rating for CME.
As of Tuesday’s close, CME shares were trading down 1.77% at $211.92.
