What changed in this filing

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Item 1A. Risk Factors

2021-02-26 compared with 2020-02-28 · 136 added, 88 removed, 284 unchanged (44% of the section changed)

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• shifts in demand or supply in commodities underlying our products;

changes in government monetary policies, especially central bank decisions related to quantitative easing;

• competition;

• changes in government monetary policies, including central bank decisions related to quantitative easing and the U.S.

Federal Reserve and other international banks' forecasted commitment to zero or near-zero interest rates;

• availability of capital to our market participants and their appetite for risk-taking;

levels of assets under management;

• levels of assets under our customers' management;

• volatile weather patterns, droughts, natural disasters and other catastrophes;

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However, as evidenced by our past performance, in the period after a material market disturbance, there may persist extreme uncertainties, which may lead to decreased volume due to factors such as reduced risk exposure, lower interest rates, central bank asset purchase programs and lack of available capital.

The shifts in market trading patterns we experienced as a result of the financial crisis of 2008 may or may not recur in the future, and our business will be affected by future economic uncertainties, which may result in decreased trading volume and a more difficult business environment for us.

We believe that our interest rate product line will continue to be negatively impacted by the current state of the economy and a zero-interest rate policy.

A reduction in overall trading volume or in certain products could render our markets less attractive to market participants as a source of liquidity, which could result in further loss of trading volume and associated transaction-based revenue.

Material decreases in trading volume would have a material adverse effect on our financial condition and operating results.

Please see "Item 1A - Risk Factors - Risks Relating To Our Business" beginning on page 19 for additional information.

We operate in a heavily regulated environment that imposes significant costs and competitive burdens on our business and our failure to maintain compliance with regulations, our status as a regulated entity, or BrokerTec Americas' status as a member in good standing at FICC, could result in the loss of customers.

We are primarily subject to the jurisdiction of the regulatory agencies in the United States, United Kingdom and Europe.

As a result of our global operations, we are also subject to the rules and regulations of the local jurisdictions in which we conduct business and offer our products and services, as appropriate.

Due to the global financial crisis that began in 2008, the United States and numerous other governments have undertaken reviews of the legal framework governing financial markets and have either enacted new laws, rules and regulations, or are in the process of enacting new laws, rules and regulations that will impact our business.

We have incurred and expect to continue to incur significant additional costs to comply with the extensive regulations that apply to our business.

Additionally, regulation imposed on financial institutions or market participants generally, such as enhanced capital requirements, may adversely impact their trading activity in our markets.

Also, on January 1, 2020, amendments to the European Market Infrastructure Regulation (EMIR 2.2) became effective.

The implementation of the regulations under this legislation may increase our regulatory costs, including substantial new authority to impose fines, and/or create a disincentive for certain clients to use our products.

The European Union equivalence and recognition regime also has the potential to impact the cost and ease or difficulty for certain of our OTC execution platforms to provide access to customers on a global basis.

There is also the risk that new laws or regulations or changes in enforcement practices applicable to our businesses or those of our clients could be imposed in other jurisdictions.

We are primarily subject to the jurisdiction of the regulatory agencies in the U.S., U.K.

As a result of our global operations, we are also subject to the rules and regulations of other local jurisdictions in which we conduct business and offer our products and services, as appropriate.

Due to the global financial crisis that began in 2008, the U.S.

and numerous other jurisdictions have undertaken reviews of the legal framework governing financial markets and have either enacted new laws, rules and regulations, or are in the process of enacting new laws, rules and regulations that could impact our business.

We have incurred and expect to continue to incur significant costs to comply with the extensive regulations that apply to our business.

Additional new laws or regulations or changes in enforcement practices applicable to our businesses or those of our clients could be imposed in the U.S.

or other jurisdictions, which could change, or require us to change, our business practices or the structure of our business, including its current governance structure, or impose significant costs on us by, for example, requiring more of our funds to be set aside for the guaranty fund.

This could adversely affect our ability to compete effectively with other institutions that are not affected in the same way or impact our clients' overall trading volume and demand for our market data and other services.

Our broker-dealer and multilateral trading facility businesses, BrokerTec and EBS, are extensively regulated.

Additionally, regulations imposed on financial institutions or market participants generally may adversely impact their trading activity in our markets.

To the extent the legislative and regulatory environment is less beneficial for us or our customers, our business, financial condition and operating results could be negatively affected.

Legislation may be proposed, both domestically and internationally, that could add a transaction tax on our products or change the way our market participants are taxed on the products they trade on our markets.

If such proposals were to become law, they could have a negative impact on our industry and on us by making transactions more costly to market participants, which may reduce trading and could make our markets less competitive.

If we fail to comply with applicable laws, rules or regulations, we may be subject to censure, fines, cease-and-desist orders, suspension of our business, removal of personnel or other sanctions, including revocation of our designations as a contract market, derivatives clearing organization, swap execution facility, swap data repository or broker-dealer or other regulatory penalties.

Our broker-dealer and multilateral trading facility businesses, BrokerTec and EBS, are also extensively regulated in various jurisdictions.

These regulatory obligations generally include proper licensing and qualification of the firms and individuals, substantive conduct standards, communication and disclosure rules, monitoring and surveillance, training, capital requirements, supervisory obligations, maintenance of anti-money laundering programs, suspicious activity reporting, risk management standards, trade reporting, and ongoing examinations and reviews.

The risks from failing to meet these compliance and regulatory obligations include potential liability, disciplinary action against the firm and individuals, monetary penalties, and restrictions on future activities.

The risks from failing to comply with these regulatory obligations include potential liability, disciplinary action against the firm and individuals, monetary penalties, and restrictions on future activities.

BrokerTec Americas' matched principal platform facilitates anonymous trading in significant volumes from wholesale market participants, many of which are FICC members and understand that BrokerTec Americas is also a FICC member, such that their trades are expected to be novated promptly to FICC, which will be their ultimate counterparty.

A failure of BrokerTec Americas to maintain its membership could adversely impact the willingness of such participants to continue trading on our platform.

As part of maintaining its membership, BrokerTec Americas is required to timely and fully meet all margin calls and other obligations established by FICC, and as such must maintain ready access to sufficient liquidity to satisfy those obligations.

As part of maintaining its FICC membership, BrokerTec Americas is required to timely and fully meet all margin calls and other obligations established by FICC, and as such must maintain ready access to sufficient liquidity to satisfy those obligations.

BrokerTec Americas maintains access to liquidity resources it believes will satisfy these obligations in normal and stressed circumstances, but there can be no guarantee it will never experience a shortfall.

To the extent the regulatory environment is less beneficial for us or our customers, our business, financial condition and operating results could be negatively affected.

Legislative or regulatory changes could be adopted that would change the structure of our business, its current governance structure or impose significant costs on us by, for example, requiring more of our funds to be set aside for the guaranty fund.

Further, other jurisdictions could assert significant changes to our governance, business practices and costs in order to continue to make our services available in those jurisdictions.

Please see "Item 1 - Business - Regulatory Matters" beginning on page 11 for additional information on our areas of regulatory focus.

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Our clearing house seeks to offer customers, intermediaries and clearing firms universal access in order to maximize the efficient use of capital, exercise appropriate oversight of value at risk and maintain operating leverage from clearing activities on our exchanges.

Our strategic business plan is to operate an efficient and transparent vertically integrated transaction execution, clearing and settlement business for our futures and options business.

Our strategic business plan for our futures and options business is to operate an efficient and transparent vertically integrated transaction execution, clearing and settlement business.

Some of our clearing firms have expressed the view that clearing firms should control the governance of clearing houses or that clearing houses should be operated as utilities rather than as part of for-profit enterprises.

participants to transfer positions of futures or options from an exchange-owned clearing house to a clearing house owned and controlled by clearing firms.

Some of these firms, along with certain industry associations, have sought, and may seek in the future, legislative or regulatory changes to be adopted that would facilitate mechanisms or policies that allow market participants to transfer positions of futures or options from an exchange-owned clearing house to a clearing house owned and controlled by clearing firms.

If these legislative or regulatory changes are adopted, our revenues and profits could be adversely affected.

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Our trading volume, and consequently our revenues and profits, would be adversely affected if we are unable to retain our current customers at substantially similar trading levels or attract new customers.

The success of our business depends, in part, on our ability to maintain and increase our trading volume in our markets.

To do so, we must maintain and expand our product offerings, our customer base and our trade execution facilities, our pre-and post-trade services and clearing facilities.

The success of our business depends, in part, on our ability to maintain and increase trading volume in our markets.

To do so, we must maintain and expand our product offerings, our customer base and our trade execution facilities, our pre-and post-trade

services and clearing facilities.

Our success also depends on our ability to offer competitive prices and services in an increasingly price-sensitive business.

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Additionally, from time to time, certain customers may represent a significant portion of the open interest in our individual product lines or contracts and a substantial decrease in their trading activity could have a negative impact on the liquidity of the particular product line or contract.

If we fail to maintain our trading volume, as a result of a loss of customers or decrease in trading activity;

If we fail to maintain trading volume, as a result of a loss of customers or decrease in trading activity;

expand our product offerings or execution facilities;

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Our 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 may be vulnerable to cyber security threats, which could result in wrongful use of our information or our customers’ information or cause interruptions in our operations that cause us to lose customers and trading volume and result in substantial liabilities.

Our technology, our people and those of our third-party service providers 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.

We regard the secure storage and transmission of confidential information and the ability to continuously transact and clear on our electronic trading platforms as critical elements of our operations.

Our technology, our people and those of our third-party service providers and our customers may be vulnerable to targeted attacks, unauthorized access, fraud, computer viruses, denial of service attacks, terrorism, "ransom" attacks, firewall or encryption failures or other security problems.

Criminal groups, political activist groups and nation-state actors have targeted the financial services industry and our role in the global marketplace places us at greater risk than other public companies for a cyber attack and other information security threats.

We regard the secure storage and transmission of data and the ability to continuously transact and clear on our electronic trading platforms as critical elements of our operations.

Our technology, our people and those of our third-party service providers and our customers may be vulnerable to targeted attacks, such as "phishing" attacks, unauthorized access, fraud, computer viruses, denial of service attacks, terrorism, "ransom" attacks, firewall or encryption failures or other security risks.

Criminal groups, political activist groups and nation-state actors have targeted the financial services industry in general, and our role in the global marketplace places us at greater risk than other public companies for a cyber attack and other information security threats.

While we have not experienced cyber incidents that are individually, or in the aggregate, material, we have experienced cyber attacks of varying degrees in the past.

We have designed our cyber defense program to mitigate such attacks by preventative, detective, and responsive measures.

Our usage of mobile and cloud technologies may increase our risk for a cyber attack.

Our security measures may also be breached due to employee error, malfeasance, system errors or vulnerabilities.

Our security defenses may also be impacted or breached due to employee error, malfeasance, system errors or vulnerabilities.

Additionally, outside parties may attempt to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to our technology systems and data, or our customers’ data.

Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the services we provide that could potentially have an adverse effect on our business, while resulting in regulatory penalties or the imposition of additional obligations by regulators.

As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous and complex, any failure to comply may carry significant penalties and reputational damage.

As part of our global information security and privacy programs, we employ resources to monitor and protect our technology infrastructure and employees against such cyber attacks, including the rapid response to zero-day vulnerabilities, and the potential misappropriation of our intellectual property assets.

We have designed our cyber defense program to mitigate such attacks and security risks through administrative, physical and technical safeguards.

As part of our global information security and privacy programs, we employ resources to prevent, detect and respond to cyber-attacks and security risks that could impact our people, processes, and technology infrastructure, including the rapid response to zero-day vulnerabilities.

However, our security measures or those of our third-party providers, including any cloud-based technologies, may prove insufficient depending upon the attack or threat posed.

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As a financial services provider, we are subject to significant litigation risk and regulatory liability and penalties.

Many aspects of our business involve substantial litigation risks.

Many aspects of our business present substantial litigation risks.

These risks include, among others, potential liability from disputes over terms of a trade, the claim that a system failure or delay caused monetary losses to a customer, that we entered into an unauthorized transaction, that we provided materially false or misleading statements in connection with a transaction or that we failed to effectively fulfill our regulatory oversight responsibilities.

We may be subject to disputes regarding the quality of trade execution, the settlement of trades or other matters relating to our services.

We may become subject to these claims as a result of failures or malfunctions of our systems and services we provide.

We may become subject to these claims as a

result of failures or malfunctions of our systems and services we provide.

We could incur significant legal expenses defending claims, even those without merit.

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While we have implemented significant physical security protection measures, business continuity plans and established backup sites, in the event of an attack or a threat of an attack, these security measures and contingency plans may be inadequate to prevent significant disruptions in our business, technology or access to the infrastructure necessary to maintain our business.

Such attack may result in harm to our personnel,

the closure of our facilities or render our backup data and recovery systems inoperable.

Damage to our facilities due to terrorist attacks may be significantly in excess of any amount of insurance received, or we may not be able to insure against such damage at a reasonable price or at all.

The threat of terrorist attacks may also negatively affect our ability to attract and retain employees.

Such an attack may result in harm to our personnel, the closure of our facilities or render our backup data and recovery systems inoperable.

Damage to our facilities due to terrorist attacks may be significantly in excess of any amount of insurance coverage available, or we may not be able to insure against such damage at a reasonable price or at all.

The threat of terrorist attacks also may negatively affect our ability to attract and retain employees.

Any of these events could have a material adverse effect on our business, financial condition and operating results.

RISKS RELATING TO OUR BUSINESS

Damage to our reputation could damage our business.

The COVID-19 pandemic has negatively affected the global economy, including the U.S.

economy and the global financial markets, and has disrupted our business and that of our clients’ businesses.

The ultimate impact from COVID-19, including duration, is unknown and could have an adverse effect on our business, financial condition and results of operations.

The ongoing COVID-19 health emergency has caused significant disruption in the international and U.S.

economies and financial markets.

The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability in the U.S.

Similar impacts also have been experienced throughout the world, including in every country in which we do business.

Given the unique and unpredictable nature of this event, future impacts to our business are unknown and could be material.

Those impacts may include, among others, the following:

• Continued disruption to our business and operations;

• Key members of senior management or a significant number of our employees unable to work as a result of contracting COVID-19 or related illnesses;

• Reduced productivity and operating effectiveness as a result of our employees working remotely and impacts on our clients encountering similar circumstances;

• Impacts on our third-party suppliers and their ability to fulfill their obligations to us;

• Decreased trading volume and unprecedented market stresses in global financial markets;

• Changes in demand for our products and services, based upon fiscal, monetary and trade policies adopted in response to the economic impact of the pandemic;

• Reduced economic activity generally could cause businesses to have less need to hedge in our markets;

• Delays in our expansion, investment and strategic initiatives and system integrations;

• Impacts to our ability to expand our client base, grow our business and generate new revenue due to the inability to hold in-person meetings, events and conferences and other impacts from social distancing;

• Impacts on our brand and reputation due to negative investor sentiment in the overall financial markets;

• Increased financial and operational stress experienced by our clearing firm members due to unprecedented volatility, including significant losses that may result in a reduction of business or a default;

• Market access or trading limitations imposed by governmental authorities;

• Increased technology and cyber-security risks, social engineering and phishing campaigns.

These potential impacts may exist for a significant period of time and may adversely affect our business, financial condition and results of operations even after the COVID-19 pandemic has subsided.

In the past year, we have experienced an overall decrease in trading volume, which we believe is in part a result of effects of the COVID-19 pandemic.

Additionally, the spread of COVID-19 has caused us to modify our business practices, including restricting employee travel and continuing work-from-home protocols, and we may take further actions as may be required by government authorities or as we determine to be in the best interests of our employees and clients.

We also closed our open outcry trading floor and trading is now conducted almost entirely through our electronic trading system.

In August 2020, the Eurodollar options pit was reopened after being reconfigured to meet social distancing standards with additional safety standards in place.

There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities.

The extent to which the COVID-19 pandemic further impacts our business, results of operations or financial condition will depend on future developments, which are highly uncertain and difficult to predict, but may include, among others, the duration and spread of the pandemic, its severity, the actions taken by governments and other third parties to contain the virus or treat its impact, such as vaccination, and the effect of such actions on our business practices (including ending work-from-home protocols), the impact of existing and any future federal stimulus measures, and the pace at which, and the extent to which, normal economic and operating conditions resume, or even if they resume, whether such economic and operating conditions can be sustained.

In addition, many of the other risk factors described herein could be heightened by the effects of the COVID-19 pandemic and related economic conditions, which could result in a material impact on our results of operations, financial condition and liquidity.

Damage to our reputation could harm our business.

Maintaining our reputation and brand is critical to attracting and retaining customers and investors and to maintaining our relationships with our regulators.

Negative publicity regarding our company or actual, alleged or perceived issues regarding our products or services, including social and environmental concerns relating to certain commodity products and increased impact from climate change, could give rise to reputational risk which could significantly harm our business prospects.

Negative publicity regarding our company or actual, alleged or perceived issues regarding our products or services, including social and environmental concerns relating to certain commodity products and increased impact from climate change or criticism or market reaction to the performance of our market in periods of extreme volatility, could give rise to reputational risk which could significantly harm our business prospects.

These issues may include, but are not limited to, any of the risks discussed in this Item 1A, including risks from customer disputes, system failures or intrusions, failures to meet our regulatory obligations, failures of a clearing firm or other counterparty, issues relating to our third-party suppliers, alleged or actual fraud or misconduct or manipulative activity, or ineffective risk management.

The success of our markets depends on our ability to complete development of, successfully implement and maintain the electronic trading systems that have the functionality, performance, capacity, security and speed required by our customers.

The success of our business depends in large part on our ability to create interactive electronic marketplaces, for a wide range of products, that have the required functionality, performance, capacity, security and speed to attract and retain customers.

The 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, capacity, security and speed required by our customers.

The success of our business depends in large part on our ability to create interactive electronic marketplaces, for a wide range of products, that have the required functionality, performance, availability, capacity, security and speed to attract and retain customers.

In 2020, 94% of our overall contract volume was generated through electronic trading on our CME Globex electronic platform and we generated $352.5 million in revenue attributable to the BrokerTec and EBS trading platforms.

We plan to migrate the BrokerTec and EBS platforms to CME Globex in 2020 and 2021, respectively.

We must continue to enhance our electronic trading platforms and other technology offerings to remain competitive.

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• generate sufficient revenue to justify the substantial capital investment we have made and will continue to make to enhance our electronic trading platforms and other technology offerings.

If we do not successfully enhance our electronic trading systems and technology offerings, if we are unable to develop them to include other products and markets, or if they do not have the required functionality, performance, capacity, security and speed desired by our customers, our ability to successfully compete and our revenues and profits will be adversely affected.

While we are focused on the migration of the BrokerTec and EBS platforms to CME Globex from both a technology and a customer experience perspective, we cannot guarantee that we will not experience any client attrition and to the extent any such client attrition is significant, it could have an impact on our revenues.

If we do not successfully enhance our electronic trading systems and technology offerings, if we are unable to develop them to include other products and markets, or if they do not have the required functionality, performance, availability, capacity, security and speed desired by our customers, our ability to successfully compete and our revenues and profits will be adversely affected.

Although we are focused on the technology and customer experience as part of the migration of the BrokerTec platform to CME Globex in the first quarter of 2021 and the expected migration of the EBS platform to CME Globex in the

fourth quarter of 2021, we cannot guarantee that we will not experience any client attrition and to the extent any such client attrition is significant, it could have an impact on our revenues.

Additionally, we rely on our customers' ability to have the necessary back office functionality to support our new products and our trading and clearing functionality.

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• regulatory sanctions.

We cannot assure that we will not experience systems failures from power or telecommunications failure, acts of God, war or terrorism, human error on our part or on the part of our vendors, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, cyber attacks, acts of vandalism or similar occurrences.

We cannot assure that we will not experience systems failures from power or telecommunications failures, acts of God, war or terrorism, human error on our part or on the part of our vendors, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, cyber attacks, acts of vandalism or similar occurrences.

If any of our systems or the systems of our third-party providers do not operate properly, are compromised or are disabled, including as a result of system failure, employee or customer error or misuse of our systems, we could suffer financial loss, liability to customers, regulatory intervention or reputational damage that could affect demand by current and potential users of our market.

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Although many of our systems are designed to accommodate additional volume and products and services without redesign or replacement, we will need to continue to make significant investments in additional hardware and software to accommodate the increases in volume of transactions and order transaction traffic and to provide processing services to third parties.

If we cannot increase the capacity and capabilities of our systems to accommodate an increasing volume of transactions and to execute our business strategy, our ability to maintain or expand our businesses could be adversely affected.

If we cannot increase the capacity and capabilities of our systems to accommodate an increasing

volume of transactions and to execute our business strategy, our ability to maintain or expand our businesses could be adversely affected.

We, as well as many of our customers, depend on third-party suppliers and service providers for a number of services that are important.

An interruption or cessation of an important supply or service by any third party could have a material adverse effect on our business, including revenues derived from our customers' trading activity.

We depend on a number of suppliers, such as banking, clearing and settlement organizations, telephone companies, on-line service providers, data processors, cloud hosting providers, data center providers, and software and hardware vendors, for elements of our trading, clearing and other systems, as well as communications and networking equipment, computer hardware and software and related support and maintenance.

We depend on a number of suppliers, such as banking, clearing and settlement organizations, telephone companies, internet service providers, data processors, cloud hosting providers, data center providers, and software and hardware vendors, for elements of our trading, clearing and other systems, as well as communications and networking equipment, computer hardware and software and related support and maintenance.

Many of our customers rely on third parties, such as independent software vendors, to provide them with front-end systems to access our trading platforms and other back office systems for their trade processing and risk management needs.

While these service providers have undertaken to keep current with our enhancements and changes to our interfaces and functionality, we cannot guarantee that they will continue to make the necessary monetary and time investments to keep up with our changes.

adequately expand their services to meet our needs and the needs of our customers, we could experience decreased trading volume, lower revenues and higher costs.

To the extent any of our service providers or the organizations that provide services to our customers in connection with their trading activities cease to provide these services or provide these services in an efficient, cost-effective manner or fail to adequately expand their services to meet our needs and the needs of our customers, we could experience decreased trading volume, lower revenues and higher costs.

Our business exposes us to substantial credit risk of our clearing firms and other counterparties and, consequently, a decrease in their financial resources could adversely affect us.

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We also have in place various measures intended to enable us to cure any default and maintain liquidity.

However, we cannot assure you that these measures will be sufficient to protect market participants from a default or that we will not be adversely affected in the event of a significant default.

In addition, we have established a fund (currently $98.0 million) to provide payments, up to certain maximum levels, to qualified family farmers, ranchers and other agricultural industry participants who use our products and who suffer losses to their segregated account balances if their derivatives clearing firm member becomes insolvent.

However, we cannot guarantee that these measures will be sufficient to protect market participants from a default or that we will not be adversely affected in the event of a significant default.

Our Three-Month Eurodollar futures contracts are based on the three-month U.S.

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A transition from the widespread use of LIBOR to alternative benchmark rates is likely to occur over the next several years.

In July 2017, the UK FCA, which regulates LIBOR, announced the desire to phase out the use of LIBOR by the end of 2021.

FCA, which regulates LIBOR, has announced the desire to phase out the use of LIBOR by the end of 2021.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

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It is unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR.

In October 2020, central banking counterparties revised the discounting and price alignment interest (PAI) of U.S.-dollar cleared interest rate swaps to use SOFR.

This event affected interest rate swaps, including auctions of newly created SOFR basis swaps, and increased liquidity for SOFR and the resulting orderly auctions.

On November 30, 2020, ICE Benchmark Administration (IBA) announced a consultation on its intention to cease the publication of certain LIBOR rates, including its intention to cease the publication of the three-month U.S.

Dollar LIBOR on June 30, 2023.

FCA also announced its proposed approach to ensure an orderly wind-down of LIBOR and has supported publication of three-month U.S.

Dollar LIBOR tenor in a representative manner through June 30, 2023.

Federal Reserve, Office of Comptroller of the Currency and the Federal Deposit Insurance Company also issued a statement

encouraging banks to cease entering into new contracts that use U.S.

Dollar LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.

Any transition away from LIBOR to alternative reference rates is complex and could have a material adverse effect on our business, financial condition and results of operations.

We have closely engaged with the industry, regulators and market participants to launch products using alternative reference rates, including our SOFR and Sterling Overnight Index Average (SONIA) futures contracts.

In November 2019, we shared via a public webinar details of improved fallback plans to convert Eurodollar futures and options into 3-month SOFR futures and options.

However, there is no guarantee that a transition to such contracts would be successful and would replace the revenue we derive from our Eurodollar contracts if the trading volume were to decline or discontinue altogether.

While these actions have resulted in an increase in market acceptance of SOFR, there is no guarantee that this transition will be successful or replace the revenue we derive from our Eurodollar contracts if trading volume were to decline or discontinue altogether.

Our market data revenues may be reduced by decreased demand, poor overall economic conditions, regulatory changes or a significant change in how market participants trade and use market data.

We sell our market data to individuals, trading institutions and other organizations that use our information services to participate in our markets and/or monitor general economic conditions.

Revenues from our market data and information services represented 11% and 10% of our total revenues during the years ended December 31, 2019 and December 31, 2018, respectively.

A decrease in overall trading volume may lead to a decreased demand for our market data.

The level of trading activity by our customers may be affected by their profitability and capital constraints and may lead to a decreased demand for our market data.

For example, in recent years, we experienced a decrease in the average number of market data connections due to continued economic uncertainty, high unemployment levels in the financial services sector and aggressive cost cutting initiatives at customer firms and the continued impact of legacy incentive programs tied to trading terminals.

We could also become subject to regulatory actions, which could have the potential to restrict how we charge for our market data.

We also license our market data to be used in the creation of derivative financial products, and changes to regulation, including the impact of any changes in laws or government policy, may impact the demand of our market data for such derivative works.

We offer a wide range of data services designed to support the trading, risk management, investment and business needs of our global customer base.

Revenues from our market data and information services represented 11% of our total revenues during the years ended December 31, 2020 and December 31, 2019, respectively.

Factors that may affect our performance and demand for our data include, but are not limited to:

• Our ability to maintain existing customers utilizing our data and to attract new customers with our products and services;

• A decrease in overall trading volume, which may lead to a decreased demand for our market data;

• A challenging business environment for our customers, which may require them to reduce their usage of our market data;

• The impacts of new regulations, laws, rules or other government policies;

• Our ability to ensure that customers are appropriately licensed and are paying fees for the data used;

• The protection of our intellectual property rights and identification of misappropriation and/or misuses of CME Group market data;

• Our ability to keep pace with technological developments and client preferences.

We may have difficulty executing our growth strategy and maintaining our growth effectively.

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There is no guarantee that our efforts will be successful.

growth will require additional investment in personnel, facilities, information technology infrastructure, and financial and management systems and controls and may place a significant strain on our management and resources.

Continued growth will require additional investment in personnel, facilities, information technology infrastructure, and financial and management systems and controls and may place a significant strain on our management and resources.

For example, if we encounter limited resources, we may be required to increase our expenses to obtain the necessary resources, defer existing initiatives or not pursue certain opportunities.

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The process of integration also may produce unforeseen regulatory and operating difficulties and expenditures and may divert the attention of management from the ongoing operation of our business.

To the extent we enter into joint ventures and alliances, we may experience difficulties in the development and expansion of the business of any newly formed ventures, in the exercise of influence over the activities of any ventures in which we do not have a controlling interest, as well as encounter potential conflicts with our joint venture or alliance partners.

potential conflicts with our joint venture or alliance partners.

We may not realize the anticipated growth and other benefits from our growth initiatives and investments, which may have an adverse impact on our financial condition and operating results.

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dollar against the other currencies may affect our operating income and the value of balance sheet items denominated in foreign currencies.

The ultimate impact of Brexit is contingent upon the final terms of withdrawal and the ongoing relationship between the UK and the European Union, following a transition period which is scheduled to end in December 2020.

Brexit may result in legal uncertainty and potentially divergent national laws and regulations as the withdrawal process progresses.

As a result of Brexit, we have established certain of our businesses in Amsterdam, a European Union jurisdiction, which have resulted in, and may continue to result in increased legal, compliance and operational costs.

Our compliance and risk management programs might not be effective and may result in outcomes that could adversely affect our reputation, financial condition and operating results.

The Brexit transition period between the U.K.

ended in December 2020 and the E.U.-U.K.

Trade and Cooperation Agreement provisionally entered into force on January 1, 2021.

As a result of Brexit, we have established certain CME Group businesses in Amsterdam, an E.U.

jurisdiction, which allows these businesses to continue offering products and services to customers in the E.U.;

however, this has resulted in, and may continue to result in, increased legal, compliance and operational costs.

Our risk management and compliance programs might not be effective and may result in outcomes that could adversely affect our reputation, financial condition and operating results.

In the normal course of our business, we discuss matters with our regulators including during regulatory examinations, and we are subject to their inquiry and oversight.

Our regulators have broad enforcement and supervisory powers, including the power to censure, fine, issue cease-and-desist orders, prohibit us from engaging in some of our businesses or suspend or revoke our regulatory designations or the registration of our officers or employees who violate applicable laws or regulations.

Our ability to comply with applicable laws and regulations is largely dependent on our establishment and maintenance of effective compliance and monitoring programs.

Our ability to manage our risks and comply with applicable laws and regulations in the jurisdictions where we operate is largely dependent on our establishment and maintenance of effective risk management, compliance and monitoring programs.

In the case of alleged non-compliance with applicable laws or regulations, we could be subject to investigations and judicial or administrative proceedings that may result in substantial penalties or civil lawsuits, including by customers, for damages, which could be significant.

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In extreme cases, these outcomes could adversely affect our ability to conduct our business.

We maintain compliance policies, procedures and programs which are designed to deter, detect, prevent, monitor and manage our risks, but such policies, procedures and programs may not be fully effective.

We maintain risk management and compliance policies, procedures and programs which are designed to prevent, detect, deter, monitor and manage our risks, but such policies, procedures and programs may not be fully effective.

Some of our risk management processes depend upon evaluation of information regarding markets, customers, employees or other matters or potential threats that are publicly available or otherwise accessible by us.

That information may not in all cases be accurate, complete, up-to-date or properly evaluated.

Management of operational, financial, legal and compliance, regulatory, reputational and strategic risk requires, among other things, policies and procedures to record properly and verify a large number of transactions and events.

We cannot assure you that our policies and procedures will always be effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed.

Management of operational, financial, legal and compliance, regulatory, reputational and strategic risk requires, among other things, policies and procedures to record properly and verify a large

number of transactions and events.

We cannot guarantee that our policies and procedures will always be effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed.

We could be harmed by misconduct or errors that are difficult to detect and deter.

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Improper trading activity on our platforms by participants could include activities such as spoofing, layering, wash trading and manipulation.

Misconduct by our employees and agents could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of customers or improper use or unauthorized disclosure of confidential information.

Misconduct by our employees and agents could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of customers or the company, or improper use or unauthorized disclosure of data or confidential information of the company or its customers.

It is not always possible to deter misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.

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Our business is dependent on proprietary technology and other intellectual property that we own or license from third parties.

We own the rights to a large number of trademarks, service marks, domain names and trade names in the United States, Europe and other parts of the world.

We have registered many of our most important trademarks in the United States and other countries.

We own the rights to a large number of trademarks, service marks, domain names and trade names in the U.S., Europe and other parts of the world.

We have registered many of our most important trademarks in the U.S.

and other countries.

We hold the rights to a number of patents and have patent applications pending.

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We attempt to protect our proprietary technology and intellectual property rights by relying on trademarks, copyright, database rights, trade secrets, restrictions on disclosure and other methods.

Notwithstanding the precautions we take to protect our proprietary

technology and intellectual property rights, it is possible that third parties may copy, misappropriate or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights.

Notwithstanding the precautions we take to protect our proprietary technology and intellectual property rights, it is possible that third parties may copy, misappropriate or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights.

For example, one of our former employees pleaded guilty to theft of our trade secrets.

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Our competitors as well as other companies and individuals may obtain, and may be expected to obtain in the future, patents related to the types of products and services we offer or plan to offer.

We cannot assure you that we are or will be aware of all patents containing claims that may pose a risk of infringement by our products and services.

In addition, some patent applications in the United States are confidential until a patent is issued and, therefore, we cannot evaluate the extent to which our products and services may be covered or asserted to be covered by claims contained in pending patent applications.

We cannot guarantee that we are or will be aware of all patents containing claims that may pose a risk of infringement by our products and services.

In addition, some patent applications in the U.S.

are confidential until a patent is issued and, therefore, we cannot evaluate the extent to which our products and services may be covered or asserted to be covered by claims contained in pending patent applications.

These claims of infringement are not uncommon in our industry.

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We might still be able to incur more debt, intensifying these risks.

As of December 31, 2019, we had approximately $3.7 billion of total indebtedness and we had excess borrowing capacity for general corporate purposes under our existing facilities of approximately $2.l billion .

As of December 31, 2020, we had approximately $3.4 billion of total indebtedness and we had excess borrowing capacity for general corporate purposes under our existing facilities of approximately $2.4 billion.

Our indebtedness could have important consequences.

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exchanges, swap execution facility and clearing house also are required to maintain minimum capital levels as defined by the CFTC, and BrokerTec Americas is required to meet minimum capital requirements set by the SEC.

Under EMIR 2.2, our clearing house could be subject to enhanced minimum capital standards as well.

Any reduction in our credit rating could increase the cost of our funding from the capital markets.

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Their ratings of our long-term debt are based on a number of factors, including our financial strength, as well as factors not entirely within our control, such as conditions affecting the financial services industry generally.

In light of the difficulties in the financial services industry and the financial markets over the last few years, there can be no assurance that we will maintain our current ratings.

In light of the difficulties in the financial services industry and the financial markets over the last few years, including in connection with the global pandemic, there can be no assurance that we will maintain our current ratings.

In the past, we have experienced ratings downgrades.

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Our average rate per contract for our derivatives business is subject to fluctuation due to a number of factors.

As a result, you may not be able to rely on our average rate per contract in any particular period as an indication of our future average rate per contract.

As a result, our average rate per contract in any particular period may not be a reliable indication of our future average rate per contract.

Our average rate per contract for our derivatives business, which impacts our operating results, is subject to fluctuation due to shifts in the mix of products traded, the trading venue and the mix of customers (whether the customer receives member or non-member fees or participates in one of our various incentive programs) and the impact of our tiered pricing structure.

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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 from their trading or clearing activities on or through our exchanges.

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 income 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.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors