CBOT Holdings, Inc. (NYSE: BOT), holding company for the Chicago Board of Trade (CBOT), announced today that revenue in the third quarter of 2005 rose 20 percent from revenue in the same period during 2004, with increased trading volume and a higher average rate per contract contributing to these results.
Net income in the third quarter climbed 63 percent to $19.8 million, compared with $12.2 million in the third quarter of 2004.
Third quarter revenue was $112.2 million, up from $93.6 million in the third quarter of 2004. Exchange and clearing fee revenue in the third quarter grew 21 percent to $82.7 million compared with $68.3 million in the third quarter of 2004. Third quarter operating income was $32.9 million, rising 66 percent from $19.8 million in the same period during the prior year.
CBOT Holdings President and CEO Bernard W. Dan said, "We added significant trading platform enhancements over the past year, which contributed to the recent growth in reported trading volume. Global market participants have benefited from more effective risk management via increased use of reduced tick spreads and enhanced trading and matching algorithms. In addition, on October 9, 2005, we implemented an additional major upgrade to our electronic trading platform, and concurrently expanded the number of trading hours from 21 hours per day to 22, which are collectively intended to drive additional volume in our products."
Third quarter trading volume rose nine percent over the same period during the prior year to 165.2 million contracts. Average daily volume in the third quarter of 2005 increased to 2.6 million contracts, also up nine percent from the third quarter of 2004. In addition, average daily volume on the CBOT's electronic trading platform, e-cbot powered by LIFFE CONNECT, during the third quarter rose 20 percent from the same period last year.
Third quarter earnings benefited from trading volume growth along with an increase in the average rate per contract, which rose 11 percent above last year's third quarter level. The average rate per contract represents total exchange and clearing fee revenue divided by total reported trading volume.
Separately, on Monday, October 24, 2005, CBOT Holdings closed the initial public offering of 3,191,489 shares of its Class A common stock, which included 2,940,486 shares offered by CBOT Holdings and 251,003 shares offered by selling stockholders. The initial public offering price was $54.00 per share. CBOT Holdings also sold an additional 478,723 shares of Class A common stock pursuant to the exercise in full by the underwriters of their over- allotment option.
CBOT Third Quarter Operational Highlights
CBOT announced upgrades to e-cbot, along with increases in exchange fee rates for certain transactions on e-cbot, effective October 1, 2005. New functionality on e-cbot includes order book management, stop orders at the host level that expand order type access via e-cbot, nine inter-commodity spread strategies for financial products and an expansion of trading hours per day from 21 to 22.
CBOT and Singapore Exchange announced an effort to jointly explore the establishment of a commodity derivatives exchange in Singapore.
Given current market conditions and what is known today, the CBOT currently expects the following for the fourth quarter 2005:
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- Baseline expenses, which equals total operating expenses less volume based expenses, of about $66 million to $69 million, including $1.8 million to $2.0 million of non-cash stock compensation expense.
- Volume based expenses, which include clearing costs and contracted license fees, of about $0.105 per reported contract.
- The exchange fee rate increase implemented October 1, 2005 is currently expected to raise the overall rate per contract in the fourth quarter of 2005 about seven to ten percent from the rate during the third quarter of 2005.