Terry Duffy on Market Volatility Drivers Beyond Tariffs and CME Group's Shareholder Returns

Drivers of Market Volatility

• 📈 Market volatility is expected to continue for many years, driven by a multitude of factors beyond just tariffs.
• ⚠️ Significant US national debt ($38 trillion) and annual deficits ($2 trillion) are identified as key contributors to ongoing volatility.
• 📌 Record levels of consumer debt, including student loans, mortgages, and credit cards, are also fueling market instability.
• 🌍 Geopolitical tensions in regions like Russia, Ukraine, China, Taiwan, and the Middle East are further exacerbating volatility.

CME Group's Business and Strategy

• 🎯 CME Group's business model, with 80% of revenue tied to transactions, is well-positioned to benefit from increased market volatility.
• 💰 The company has a history of returning capital to shareholders, with a recent $3 billion repurchase program authorized.
• 📈 Dividends have been growing year-over-year for the last 15 years, reflecting a commitment to shareholder rewards.
• 🚀 CME Group aims to maintain a strong transactional revenue base rather than diversifying into less predictable revenue streams.

Zero-Day Options and Volatility

• 💬 Zero-day options are not seen as a primary driver of volatility; rather, the underlying conversation and information flow are the true causes.
• 💡 While popular with retail traders, zero-day options represent only 20-24% of CME's options trading on futures.
• 🛠️ Products like zero-day options are a consequence of market news and volatility, not the cause of it.

Risk Management and Market Credibility

• 🛡️ The current market environment emphasizes the critical importance of risk management for businesses to survive and thrive.
• 🌐 CME Group provides deep pools of liquidity to facilitate risk transfer for both producers and end-users.
• ✅ Maintaining the credibility of the US financial system is paramount, ensuring it remains the envy of the world.
• 📊 Volatility is a component of market moves, but not the sole driver; producers need risk transfer to operate their businesses effectively.