What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-27 · 64 added, 84 removed, 1090 unchanged (12% of the section changed)

103 unchanged sentences

Foreign currency translation adjustments 70.8 ( 195.4 ) ( 62.0 )

Reclassification adjustment for loss included in other expense — ( 40.3 ) 0.4

Reclassification adjustment for (gain) loss included in other expense 9.7 — ( 40.3 )

Foreign currency translation, net 80.5 ( 195.4 ) ( 102.3 )

9 unchanged sentences

shares in thousands)

Preferred Stock (Shares) Class A

(Shares) Class B

7 unchanged sentences

Other comprehensive income ( 81.4 ) ( 81.4 ) ( 81.4 )

Dividends on common stock of $5.90 per share ( 2,117.7 ) ( 2,117.7 ) ( 2,117.7 )

Impact of adoption of standards updates on credit losses ( 0.3 ) ( 0.3 ) ( 0.3 )

Dividends of $6.85 per common share and $4.15 per preferred share ( 2,480.4 ) ( 2,480.4 ) ( 2,480.4 )

Issuance of preferred stock 4,584 965.0 965.0 965.0

Purchase of non-controlling interest ( 20.5 ) ( 20.5 ) ( 32.1 ) ( 52.6 )

Exercise of stock options 101 5.5 5.5 5.5

16 unchanged sentences

Comprehensive

Income (Loss) Total CME Group Shareholders' Equity Non-controlling Interest Total Equity

Income (Loss) Total CME Group Shareholders' Equity

Balance at December 31, 2021 4,584 358,599 3 $ 22,193.9 $ 5,151.9 $ 53.5 $ 27,399.3

1 unchanged sentence

Other comprehensive income ( 186.8 ) ( 186.8 )

Dividends of $6.85 per common share and $4.15 per preferred share ( 2,480.4 ) ( 2,480.4 ) ( 2,480.4 )

Issuance of preferred stock 4,584 965.0 965.0 965.0

Purchase of non-controlling interest ( 20.5 ) ( 20.5 ) ( 32.1 ) ( 52.6 )

Dividends of $8.50 per common share and preferred share ( 3,096.1 ) ( 3,096.1 )

Exercise of stock options 1 0.1 0.1

21 unchanged sentences

Dividends of $9.65 per common share and preferred share ( 3,517.8 ) ( 3,517.8 )

Exercise of stock options 1 0.1 0.1

Vesting of issued restricted Class A common stock 241 ( 21.4 ) ( 21.4 )

16 unchanged sentences

Depreciation and amortization 126.0 134.9 147.8

Net losses on assets held for sale and impaired — — 26.3

Gain on sale of building — — ( 30.4 )

Gain on joint venture — — ( 400.7 )

(Gain)/Loss on derivative contracts — — ( 1.5 )

Net realized and unrealized (gains)/losses on investments ( 72.1 ) ( 4.8 ) ( 117.0 )

28 unchanged sentences

Cash Flows from Financing Activities

Repayment issuance of commercial paper, net $ — $ — $ ( 304.6 )

Proceeds from debt, net of issuance costs $ — $ 741.0 $ —

5 unchanged sentences

Other ( 9.3 ) ( 7.9 ) ( 3.1 )

Net Cash Provided by (Used in) Financing Activities ( 25,381.7 ) 69,908.7 47,246.6

Net Cash Used in Financing Activities ( 48,339.3 ) ( 25,381.7 ) 69,908.7

Net change in cash, cash equivalents, restricted cash and restricted cash equivalents ( 44,864.6 ) ( 22,815.5 ) 72,369.5

74 unchanged sentences

government securities, U.S.

government agency securities and certain foreign government securities acquired through and held by a bank or broker-dealer subsidiary of a bank, a cash account at the Federal Reserve Bank of Chicago, reverse repurchase agreements secured with highly rated government securities, money market funds or through CME's Interest Earning Facility (IEF) program.

government agency securities and certain foreign government securities acquired through and held by a bank or broker-dealer subsidiary of a bank, a cash account at the Federal Reserve Bank of Chicago, investments in highly rated government securities, money market funds or through CME's Interest Earning Facility (IEF) program.

Any interest earned on these investments accrues to CME and is included in investment income on the consolidated statements of income.

9 unchanged sentences

Property is stated at cost, less accumulated depreciation and amortization.

Depreciation and amortization are calculated using the straight-line method, generally over two to twenty years.

Depreciation and amortization are calculated using the straight-line method, generally over two to nineteen years.

Property and equipment are depreciated over their estimated useful lives.

34 unchanged sentences

The company recognizes future changes in actuarial gains and losses and prior service costs in the year in which the changes occur through accumulated other comprehensive income (loss).

Foreign Currency Translation .

Foreign Currency Translation and Re-measurement .

Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency using period-end exchange rates.

Gains and losses from foreign currency transactions are included in other expense on the accompanying consolidated statements of income.

Gains and losses from foreign currency transactions and re-measurement of monetary assets and liabilities into the functional currency are included in other expense on the accompanying consolidated statements of income.

When the functional currency differs from the reporting currency, revenues and expenses of foreign subsidiaries are translated from their functional currencies into U.S.

24 unchanged sentences

Concentration of Revenue.

No clearing firms represented at least approximately 10 % of the company's clearing and transaction fee revenue in 2023.

One clearing firm represented at least approximately 10 % of the company's clearing and transaction fee revenue in 2022 and 2021.

20 unchanged sentences

The individual operations of the company do not meet the thresholds for reporting separate segment information.

Newly Adopted Accounting Policies.

The company adopted the following accounting policies during 2022:

In August 2020, FASB issued an accounting update that simplifies the accounting for convertible instruments and amends certain guidance on the computation of EPS for convertible instruments.

This guidance reduces the number of accounting models used for the allocation of proceeds attributable to the issuance of a convertible instrument, thereby eliminating the beneficial conversion feature model.

It is also noted that this guidance revises and eliminates certain criteria for achieving equity classification on the balance sheet.

This accounting update requires entities to provide expanded disclosures about the terms and features of convertible instruments, including information about events, conditions and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments.

The company adopted this guidance on January 1, 2022.

Adoption of this guidance did not have an impact on the consolidated financial statements.

The company does not currently expect any pending accounting pronouncements to have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements.

The following accounting pronouncements were issued during 2023:

In November 2023, the FASB issued an accounting update that requires public entities to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually.

Entities are permitted to disclose more than one measure of a segment's profit or loss if such measures are used by the chief operating decision-maker to allocate resources and assess performance, as long as at least one of those measures is determined in a way that is most consistent with the measurement principles used to measure the corresponding amounts in the consolidated financial statements.

The guidance is effective beginning with our annual report on Form 10-K for the fiscal year ended December 31, 2024 and for interim periods thereafter.

The disclosures must be applied retrospectively to all periods presented in the financial statements and early adoption is permitted.

The company does not believe that adoption of this guidance will have a material impact on the consolidated financial statements.

In December 2023, the FASB issued an accounting update that requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in certain categories if they meet a quantitative threshold.

It is also noted that this guidance requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold.

The guidance is effective for annual periods beginning in 2025 and may be applied prospectively or retrospectively.

The company is in the process of evaluating the impact of this update on our consolidated financial statements.

REVENUE RECOGNITION

4 unchanged sentences

As such, the company recognizes the majority of the fee revenue upon successful execution of the trade.

The minimal remaining portion of the fee revenue related to settlement activities performed after trade execution is recognized over the short-term period that the contract is outstanding, based on management’s estimates of the average contract lifecycle.

The minimal remaining

portion of the fee revenue related to settlement activities performed after trade execution is recognized over the short-term period that the contract is outstanding, based on management’s estimates of the average contract lifecycle.

These estimates are based on various assumptions to approximate the amount of fee revenue to be attributed to services performed through contract settlement, expiration, or termination.

33 unchanged sentences

EBS foreign exchange 132.6 154.1 164.3

Optimization — 59.9 94.8

Interest Rate Swap 83.0 65.4 62.6

Optimization — — 59.9

Total clearing and transaction fees 4,588.5 4,142.7 3,765.1

Market data and information services 610.9 576.9 545.4

Market data 663.7 610.9 576.9

Other 326.7 265.8 347.7

26 unchanged sentences

For cleared interest rate swap contracts, the maximum exposure at the time of default related to the clearing house's guarantee would be one full day of changes in fair value of all open positions, before considering the clearing house's ability to access defaulting clearing firms' collateral.

The clearing firms' collateral requirements are sized to cover at least one day of anticipated price movements.

During 2023, the clearing house transferred an average of approximately $ 5.9 billion a day through the clearing system for settlement from clearing firms whose positions had lost value to clearing firms whose positions had gained value.

17 unchanged sentences

In addition, CME has a cross-margin arrangement with Fixed Income Clearing Corporation (FICC) whereby certain of the clearing firms' offsetting positions with CME and FICC are subject to reduced performance bond requirements.

Clearing firms

maintain separate performance bond deposits with each clearing house, but based on the net offsetting positions between CME and FICC, each clearing house may reduce that firm's performance bond requirements.

Clearing firms maintain separate performance bond deposits with each clearing house, but based on the net offsetting positions between CME and FICC, each clearing house may reduce that firm's performance bond requirements.

If a participating firm defaults, the gain or loss on the liquidation of the firm’s open positions and the proceeds from the liquidation of the cross margin account would be allocated between CME and FICC pursuant to a publicly-available cross-margining agreement.

10 unchanged sentences

Treasury securities.

In the event that performance bonds, guaranty fund contributions and other assets required to support clearing membership of a defaulting clearing firm for cleared interest rate swap contracts are inadequate to fulfill that clearing firm's outstanding financial obligation, the interest rate swaps contracts guaranty fund is available to cover potential losses after first utilizing $ 150.0 million of corporate contributions designated by CME to be used in the event of a default of a cleared interest rate swap clearing firm.

event that performance bonds, guaranty fund contributions and other assets required to support clearing membership of a defaulting clearing firm for cleared interest rate swap contracts are inadequate to fulfill that clearing firm's outstanding financial obligation, the interest rate swaps contracts guaranty fund is available to cover potential losses after first utilizing $ 150.0 million of corporate contributions designated by CME to be used in the event of a default of a cleared interest rate swap clearing firm.

CME maintains a 364 -day multi-currency line of credit with a consortium of domestic and international banks to be used in certain situations by the clearing house.

17 unchanged sentences

Cross-margin arrangements 183.1 1,374.5 142.6 561.1

Performance bond collateral for delivery 2.6 2.1 25.6 2.1

344.3 2.1 2.6 2.1

Total $ 90,192.5 $ 189,092.5 $ 135,249.2 $ 99,716.4

1 unchanged sentence

(1) IEF funds include customer-directed investments in IEF funds that are not included on the consolidated balance sheets.

(2) Other includes collateral for delivery and accrued interest earned on collateral reinvestment due to the clearing firms.

Cross-margin arrangements include collateral for the cross-margin accounts with OCC and FICC.

23 unchanged sentences

Value Assigned Value Accumulated

Amortization Deconsolidation (2)

Amortization Net Book

Amortizable Intangible Assets:

14 unchanged sentences

Product authorizations from the CFTC have no term limits.

(2) The activity from deconsolidation includes intangible assets as part of the contribution of the net assets of the optimization business to OSTTRA.

The originally assigned useful lives for the amortizable intangible assets as of December 31, 2023 are as follows:

7 unchanged sentences

Goodwill activity consisted of the following for the years ended December 31, 2023 and 2022 :

(in millions) Balance at December 31, 2021 Deconsolidation (1)

(in millions) Balance at December 31, 2022 Other

Balance at December 31, 2023

4 unchanged sentences

Total Goodwill $ 10,482.5 $ 12.8 $ 10,495.3

(in millions) Balance at December 31, 2020 Deconsolidation (1)

(in millions) Balance at December 31, 2021 Other

Balance at December 31, 2022

5 unchanged sentences

_______________

1) The activity from deconsolidation includes goodwill as part of the contribution of the net assets of the optimization business to OSTTRA.

1) Other activity includes currency translation adjustments.

23 unchanged sentences

The carrying amount of the company's investment in CFETS was $ 51.3 million at December 31, 2023.

In May 2023, the company repaid the €15.0 million fixed rate notes.

Short-term debt consisted of the following at December 31, 2023 and 2022 (in U.S.

1 unchanged sentence

(in millions) 2023 2022

$750.0 million fixed rate notes due September 2022, stated rate of 3.00% (1)

€15.0 million fixed rate notes due May 2023, stated rate of 4.30% $ — $ 16.0

Total short-term debt $ — $ 16.0

_______________

(1) The company maintained a forward-starting interest rate swap agreement that modified the interest obligation associated with these notes so that the interest payable on the notes effectively became fixed at a rate of 3.32 %.

Long-term debt outstanding consisted of the following at December 31, 2023 and 2022 (in U.S.

1 unchanged sentence

(in millions) 2023 2022

€15.0 million fixed rate notes due May 2023, stated rate of 4.30%

$750.0 million fixed rate notes due March 2025, stated rate of 3.00% (1)

$ 749.1 $ 748.4

$500.0 million fixed rate notes due June 2028, stated rate of 3.75%

11 unchanged sentences

The company is subject to regulation under a wide variety of U.S., federal, state and foreign tax laws and regulations.

Income before income taxes and the income tax provision consisted of the following for the years ended December 31, 2022, 2021 and 2020:

Income before income taxes and the income tax provision consisted of the following for the years ended December 31, 2023 and 2022 and 2021:

(in millions) 2023 2022 2021

24 unchanged sentences

Effective Tax Expense Benefit Rate 22.3 % 22.9 % 21.8 %

In 2022, the effective tax rate was higher than the statutory tax rate.

The increase to the effective tax rate for the state taxes was partially offset by the foreign-derived intangible income (FDII) deduction.

In 2023 and 2022, the effective tax rates were higher than the statutory tax rate.

The increases to the effective tax rate for the state taxes were partially offset by the foreign-derived intangible income (FDII) deduction.

In 2021, the effective tax rate was higher than the statutory tax rate.

The increase to the effective tax rate for the state taxes and the impact of the statutory rate change in the United Kingdom was partially offset by the non-taxable gain on the formation of OSTTRA and the FDII deduction.

In 2020, the effective tax rate was higher than the statutory tax rate.

The increase to the effective tax rate for the state taxes was partially offset by the FDII deduction.

At December 31, 2023 and 2022, deferred income tax assets (liabilities) consisted of the following:

20 unchanged sentences

At December 31, 2023 and 2022, the company determined that it was not more-likely-than-not that certain foreign deferred income tax assets will be fully realized.

As a result, valuation allowances of $ 0.4 million and $ 0.6 million were recorded at December 31, 2022 and 2021, respectively.

As a result, valuation allowances of $ 0.4 million was recorded at December 31, 2023 and 2022.

The following is a summary of the company’s unrecognized tax benefits at December 31, 2023, 2022 and 2021:

16 unchanged sentences

federal income tax as well as income taxes in Illinois and multiple other state, local and foreign jurisdictions.

As of December 31, 2022, substantially all federal, state and United Kingdom income tax matters had been concluded through 2013.

As of December 31, 2023, substantially all federal and United Kingdom income tax matters had been concluded through 2013 and state income tax matters have been concluded through 2018.

EMPLOYEE BENEFIT PLANS

20 unchanged sentences

Actual return on plan assets 38.9 ( 50.0 ) 34.0

Employer contributions 3.0 — —

Benefits paid ( 22.8 ) ( 20.6 ) ( 19.9 )

10 unchanged sentences

Total $ 350.8 $ 331.7

At December 31, 2022 and 2021, the fair value of pension plan assets exceeded the projected benefit obligation by $ 15.3 million and $ 16.3 million, respectively, and the excess was recorded as a non-current pension asset in other assets.

At December 31, 2023, the fair value of pension plan assets had a shortfall of the projected benefit obligation by $ 0.7 million and the shortfall was recorded as a non-current pension liability in other liabilities.

At December 31, 2022, the fair value of pension plan assets exceeded the pension benefit obligation by $ 15.3 million and the excess was recorded as a non-current pension asset in other assets.

CME's funding goal is to have its pension plan 100 % funded at each year-end on a projected benefit obligation basis, while also satisfying any minimum required contribution and obtaining the maximum tax deduction.

Year-end 2023 assumptions have been used to project the assets and liabilities from December 31, 2023 to December 31, 2024.

The company anticipates based on this projection that no additional contribution in 2023 will be necessary for it to meet its funding goal.

The company anticipates based on this projection that an additional contribution of $ 16.9 million in 2024 will be necessary for it to meet its funding goal.

However, the amount of the actual contribution is contingent on various factors, including the actual rate of return on the plan assets during 2024 and the December 31, 2024 discount rate.

The components of net pension expense and the assumptions used to determine the end-of-year projected benefit obligation and net pension expense in aggregate at December 31, 2022, 2021 and 2020 are indicated below:

(in millions) 2023 2022 2021

35 unchanged sentences

For 2024, management expects the fixed income asset class to be approximately 50 % of the portfolio.

The target allocation for the U.S.

equity asset class is expected to range from 15 % to 45 % of the portfolio and the target allocation for the foreign equity asset class is expected to range from approximately 10 % to 30 % of the portfolio.

The target allocation for the equity asset classes is expected to be approximately 50 % of the portfolio.

At times, the company may determine that it is necessary to place some assets in cash equivalent investments in order to pay expected plan liabilities.

48 unchanged sentences

The sale leaseback transaction was recognized under the financing method and not as a sale leaseback arrangement.

In November 2021, the company sold a building in Chicago and subsequently entered into a leaseback arrangement for this property.

This lease is classified as an operating lease.

The right-of-use lease asset is recorded within other assets, and the present value of the lease liability is recorded within other liabilities (segregated between short-term and long-term) on the consolidated balance sheets.

The discount rate applied to the lease payments represents the company's incremental borrowing rate.

The company has elected to utilize the short-term lease exception as prescribed in the leasing standard, such that the company has not capitalized on the balance sheet a lease asset or lease liability associated with leases with terms of 12 months or less from the commencement date.

The company has elected to utilize the short-term lease exception as prescribed in the leasing standard, such that the company has not capitalized on the balance sheet a lease asset or lease liability for leasing arrangements with a contractual term of 12 months or less from the lease commencement date.

The components of lease costs were as follows for the years ended December 31, 2023 and 2022:

145 unchanged sentences

Awards granted generally vest over a four-year period, with 25 % vesting one year after the grant date and on that same date in each of the following three years.

Total compensation expense for all stock-related awards (including ESPP) and total income tax benefit recognized on the consolidated statements of income for these awards at December 31, 2022, 2021 and 2020 were as follows:

(in millions) 2023 2022 2021

3 unchanged sentences

The total unrecognized expense is expected to be recognized over a weighted average period of 2.2 years.

Stock options have not been granted since 2012.

The following table summarizes stock option activity for 2022.

Aggregate intrinsic value is in millions.

Number of Shares Weighted

Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value

Outstanding at December 31, 2021 1,020 $ 56 0.5 $ 0.2

Exercised ( 1,020 ) 56 — —

Cancelled — — — —

Outstanding at December 31, 2022 — — 0.0 —

Exercisable at December 31, 2022 — — 0.0 —

The total intrinsic value of options exercised during 2022, 2021 and 2020 was $ 0.1 million, $ 15.0 million and $ 16.7 million, respectively.

In 2023, the company granted 370,024 shares of restricted Class A common stock and restricted stock units with respect to 10,774 shares of Class A common stock.

21 unchanged sentences

Non-executive directors could also elect to receive some or all of the cash portion of their annual stipend, up to $ 95,000 , in shares of stock based on the closing price at the date of distribution.

As a result, 18,836 shares, 13,769 shares and 17,322 shares of Class A

common stock were issued to non-executive directors during 2022, 2021 and 2020, respectively.

As a result, 19,966 shares, 18,836 shares and 13,769 shares of Class A common stock were issued to non-executive directors during 2023, 2022 and 2021, respectively.

These shares are not subject to any vesting restrictions.

5 unchanged sentences

Other comprehensive income before reclassifications and income tax benefit (expense) 0.6 ( 0.9 ) — 70.8 70.5

Reclassification adjustment for loss included in net income — — — 9.7 9.7

Amounts reclassified from accumulated other comprehensive income — 0.1 ( 3.6 ) — ( 3.5 )

19 unchanged sentences

• Level 1 inputs, which are considered the most reliable evidence of fair value, consist of quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 inputs consist of observable market data, other than level 1 inputs, such as quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are directly observable.

• Level 2 inputs consist of observable market data, such as quoted prices for similar assets and liabilities in active markets, or inputs other than quoted prices that are directly observable.

• Level 3 inputs consist of unobservable inputs which are derived and cannot be corroborated by market data or other entity-specific inputs.

Level 1 assets generally include investments in publicly traded mutual funds, equity securities and corporate debt securities with quoted market prices.

The company’s level 1 assets generally include investments in publicly traded mutual funds, equity securities and corporate debt securities with quoted market prices.

In general, the company uses quoted prices in active markets for identical assets to determine the fair value of marketable securities.

Level 2 liabilities generally consist of long-term debt notes.

The company’s level 2 assets and liabilities generally consist of long-term debt notes.

The fair values of the long-term debt notes were based on quoted market prices in an inactive market.

Level 3 assets include certain investments that were adjusted to fair value.

The company’s level 3 assets and liabilities include certain investments that were adjusted to fair value.

Recurring Fair Value Measurements.

20 unchanged sentences

Non-Recurring Fair Value Measurements.

During 2022, t he company recognized net unrealized losses on certain investments of $ 8.5 million.

The combined fair values of these investments were estimated to be $ 51.9 million at December 31, 2022.

These fair value assessments were based on quantitative factors, including observable price changes.

The fair value measurements of the investments are considered level 3 and non-recurring.

These investments are included within other assets on the consolidated balance sheets.

During 2023, t he company recognized net unrealized losses of $ 1.4 million on equity investments without readily determinable fair value.

The fair value of these investments were estimated to be $ 8.6 million at December 31, 2023.

This fair value assessments were based on quantitative factors, including observable price changes.

The fair value measurements of these investments are considered level 3 and non-recurring.

Fair Values of Debt Notes.

The following presents the estimated fair values of long-term debt notes, which are carried at amortized cost on the consolidated balance sheets.

The fair values below that are classified as level 2 under the fair value hierarchy were estimated using quoted market prices in inactive markets.

The follo wing presents the estimated fair values of long-term debt notes, which are carried at amortized cost on the consolidated balance sheets.

The fair values below are classified as level 2 under the fair value hierarchy and were estimated using quoted market prices in inactive markets.

At December 31, 2023, the fair values (in U.S.

1 unchanged sentence

(in millions) Fair Value Level

€15.0 million fixed rate notes due May 2023 16.1 Level 2

$750.0 million fixed rate notes due March 2025 733.8 Level 2

5 unchanged sentences

The company uses the two-class method to calculate basic and diluted earnings per common share because its Series G preferred stock are participating securities.

Under the two-class method, undistributed earnings are allocated to common stock and participating securities according to their respective rights in undistributed earnings, as if all of the earnings for the period had been distributed.

had been distributed.

Basic earnings per common share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period.

25 unchanged sentences

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 8. Financial Statements and Supplementary Data