According to Futu Securities APP, as of the close of the US stock market on Tuesday, the stock price of the Chicago Mercantile Exchange (CME.US) fell by 1.44%, and the stock experienced a rare drop of nearly 4% during regular trading hours. Prior to this, Bank of America, a major Wall Street bank, downgraded the stock rating of this exchange operator from "neutral" to "underperform the market," while significantly reducing the target price for the stock from $212 to $177 within 12 months, which means a potential decline of up to 17% in the stock price of CME within the next 12 months. The Bank of America analysis team lowered the rating and target price of CME mainly due to the accelerating formation of the market share competition pattern and the expected stabilization of VIX index volatility by 2025.

Craig Siegenthaler, an analyst from Bank of America, stated that FMX, the futures exchange under BGC Group (BGC.US), is expected to launch within a few weeks, which will intensify the competition between it and the Cboe Global Markets (CBOE.US) and Intercontinental Exchange (ICE.US). "Intensifying competition may result in market share loss and pricing headwinds," said the analyst.

During the second quarter earnings conference call, Howard Lutnick, Chairman and CEO of BGC Group, stated that FMX and LCH have obtained all necessary approvals and are expected to launch SOFR futures in September.

The Bank of America analyst expects the trading volume of CBOE's index options to grow at a compound annual growth rate of 15% by 2026, as options are increasingly used as substitutes for CME single stock futures. He added, "Finally, due to its outstanding growth strategy, track record of innovation, and product portfolio, we expect Intercontinental Exchange to continue to occupy a significant share in the energy futures market."

It is understood that the Chicago Mercantile Exchange (CME) has benefited from the surge in trading volume caused by the sharp increase in the August volatility index (VIX index). Therefore, its stock performance has outperformed the overall US stock market - the S&P 500 index and Bank of America's vertical coverage index.

Although Wall Street analysts generally expect the index to maintain relatively high levels of volatility until the November US presidential election, which will help the performance growth of CME relying on VIX trading volume to achieve huge profits; Bank of America analyst Siegenthaler expects VIX volatility index to normalize and trend downward during the period from 2020 to 2025. As VIX index volatility decreases significantly, the revenue derived from CME trading will also decrease, posing significant risks to its future profitability.

"This indicates that 2H24 is the most appropriate time to initiate a 'underperform the market' rating." The analyst wrote in the latest report. "CME will face market share pressure as these competitors expand and new entrants join forcefully. Intense competition may lead to a decrease in CME's market share, as well as pricing pressure, which could affect its revenue growth and profit margin." More importantly, according to Bank of America analyst Sigitale, the gradual normalization trend of the VIX index poses a challenge to CME's profitability, and the strong strategic advantages of CBOE and ICE in the options and energy futures markets are very unfavorable to CME's valuation.