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CME Group (0HR2) Risk Analysis

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning. CME Group disclosed 28 risk factors in its most recent earnings report. CME Group reported the most risks in the “Finance & Corporate” category.

Risk Overview Q3, 2022

Source: the company's latest filing for the period ended Sep 30, 2022, filed Nov 02, 2022

Risk Distribution
28Risks
Sector Avg.Finance & CorporateTech & InnovationLegal & RegulatoryProductionAbility to SellMacro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Risk Change Over Time

CME Group disclosed risks per quarterNo. of Risks28Q3Showing: Q3, 2022
Risks removedRisks addedRisks changedCME Group Risk Factors
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Risk Highlights Q3, 2022

Main Risk Category
Finance & Corporate
With 9 Risks
Number of Disclosed Risks
28
No changes from last report
S&P 500 Average: 32
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Sep 2022
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 1

Risk Word Cloud

our three-month eurodollar futures and options contracts are based on the three-month u.s. dollar london interbank offered rate (libor) underlying rate. to the extent trading in eurodollar contracts decreases or is discontinued and our alternative contracts are not successful, our revenues would be negatively impacted. certain of our other businesses could also be negatively affected by changes to libor.our three-month eurodollar futuresour indebtedness could adversely affect our financial condition and operations and prevent us from fulfilling our debt service obligations. we might still be able to incur more debt, intensifying these risks.fulfilling our debt service obligationsthe success of our markets depends on our ability to complete development of, successfully implement and maintain the electronic trading and clearing systems that have the functionality, performance, availability and resilience, capacity, security and speed required by our customers.success of our markets dependssome of cme clearing's largest clearing firms have indicated their belief that clearing facilities should not be owned or controlled by exchanges and should be operated as utilities and not for profit. these clearing firms have sought, and may seek in the future, legislative or regulatory changes that would, if adopted, enable them to use alternative clearing services for positions established on our exchanges or to freely move open positions among clearing houses in order to take advantage of our liquidity. even if they are not successful, these factors may cause them to limit the use of our markets.to freely move open positionswe may have difficulty executing our growth strategy and maintaining our growth effectively.difficulty executing our growth strategyintellectual property rights licensed from third-party price reporting agencies form the basis for many of our products from which we derive a significant portion of our volume and revenue. material changes in the intellectual property landscape or regulatory framework pertaining to such benchmarks could have a negative impact on our ability to offer such products.third-party price reporting agencies formour three-month eurodollar futures and options contracts are based on the three-month u.s. dollar london interbank offered rate (libor) underlying rate. to the extent trading in eurodollar contracts decreases or is discontinued and our alternative contracts are not successful, our revenues would be negatively impacted. certain of our other businesses could also be negatively affected by changes to libor.dollar london interbank offered ratethe expansion of our global operations is complex and subjects us to increased business and economic risks that could adversely affect our financial results.subjects us to increased businessour role in the global marketplace places us at greater risk than other public companies for a cyber attack and other cyber-security risks. our technology, our people and those of our third-party service providers, and our customers may be vulnerable to cyber-security threats, which could result in wrongful use of our data or our customers’ data or cause interruptions in our operations that cause us to lose customers and trading volume and result in substantial liabilities. we also could be required to incur significant expense to protect our systems and/or investigate any alleged attack.vulnerable to cyber-security threatsas a financial services provider, we are subject to significant litigation risk and regulatory liability and penalties.subject to significant litigation risk

Risk Factors Full Breakdown - Total Risks 28

Share Price & Shareholder Rights2 | 7.1%
  • Share Price & Shareholder Rights - Risk 1
    Ten of our board members own trading rights, or are officers or directors of firms that own trading rights, on our derivatives exchanges. As members, these individuals may have interests that differ from or conflict with those of shareholders who are not also members. Our dependence on the trading and clearing activities of our exchange members, combined with the CME members' rights to elect six directors, may enable them to exert substantial influence over the operation of our business.

    Ten of our directors own, or are officers or directors of firms that own trading rights on our exchanges. We are dependent on the revenues from the trading and clearing activities of our exchange members. In 2021, 84% of our derivatives contract volume was derived from our members. This dependence may give them substantial influence over how we operate our business. Many of our members and clearing firms derive a substantial portion of their income and profit from their trading or clearing activities on or through our exchanges. In addition, trading rights on our exchanges have substantial independent value. The amount of profit that members derive from their trading, brokering and clearing activities and the value of their trading rights are, in part, dependent on the fees they are charged to trade, broker, clear and access our markets, and the rules and structure of our markets. As a result, members may not have the same economic interests as holders of our Class A common stock. In addition, our members may have differing interests among themselves depending on the roles they serve in our markets, their methods of trading and the products they trade. Consequently, members may advocate that we enhance and protect their clearing and trading opportunities and the value of their trading privileges over their investment in our Class A common stock, if any.

  • Share Price & Shareholder Rights - Risk 2
    Our members have been granted special rights, which protect their trading privileges and require that we maintain open outcry for options products still meeting certain volume thresholds and, in the case of our Class B shareholders, provide them with special board representation.

    Under the terms of the organizational documents of our exchanges, our exchange members have certain rights that relate primarily to trading right protections, certain trading fee protections and certain membership benefit protections. Additionally, our Class B shareholders, who are members of our CME exchange, are entitled to elect six directors to our board even if their Class A share ownership interest is very small or non-existent. We have limited ability to eliminate these election rights, and prior attempts to do so did not receive the necessary shareholder approvals. In connection with these rights, our ability to take certain actions that we may deem to be in the best interests of the company and its shareholders, including actions relating to certain pricing decisions, may be limited by the rights of our members.

Debt & Financing4 | 14.3%
Corporate Activity and Growth3 | 10.7%

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky. The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment. They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result. It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process. Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”. Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report. According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing. You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector. Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements. A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below. 1. Financial & Corporate Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results. Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing. Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments. Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances. 2. Legal & Regulatory Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company. Regulation – risks related to compliance, GDPR, and new legislation. Environmental / Social – risks related to environmental regulation and to data privacy. Taxation & Government Incentives – risks related to taxation and changes in government incentives. 3. Production Costs – risks related to costs of production including commodity prices, future contracts, inventory. Supply Chain – risks related to the company’s suppliers. Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls. Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation. 4. Technology & Innovation Innovation / R&D – risks related to innovation and new product development. Technology – risks related to the company’s reliance on technology. Cyber Security – risks related to securing the company’s digital assets and from cyber attacks. Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying. 5. Ability to Sell Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers. Competition – risks related to the company’s competition including substitutes. Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration. Brand & Reputation – risks related to the company’s brand and reputation. 6. Macro & Political Economy & Political Environment – risks related to changes in economic and political conditions. Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19. International Operations – risks related to the global nature of the company. Capital Markets – risks related to exchange rates and trade, cryptocurrency.