Results of Operations for the Three Months Ended March 31, 2005 Compared With the Three Months Ended March 31, 2004

Overview

Our operations for the three months ended March 31, 2005 resulted in net income of $70.9 million compared with net income of $46.1 million for the three months ended March 31, 2004. The increase in net income resulted primarily from a 28.7% increase in net revenues that was partially offset by an 8.0% increase in operating expenses. The increase in net revenues was primarily driven by a 30.8% increase in clearing and transaction fees. In addition, we earned an incremental $4.3 million of revenue from clearing and transaction processing services provided to the Chicago Board of Trade (CBOT). Contributing to the $7.0 million overall increase in expenses was $3.3 million related to compensation and benefits, $2.0 million in depreciation and amortization expense and smaller increases in most of our remaining expense categories.

Trading volume for the three months ended March 31, 2005 totaled 240.7 million contracts, representing a 37.2% increase in total trading volume over the 175.5 million contracts traded during the same period in 2004. Average daily trading volume of 3.9 million contracts for the three months ended March 31, 2005 represented an increase of 39.4% over the 2.8 million contracts during the same period in 2004. The increase in average daily trading volume exceeded the increase in total trading volume because of one less trading day for the quarter ended March 31, 2005 compared with the same period in 2004. Average daily trading volume for the month of March 2005 was 4.3 million contracts per day, the highest monthly average daily trading volume in our history. In addition, 68.7% of our trading volume in January 2005 was generated on CME Globex , our electronic trading platform, the highest percentage of trading volume on CME Globex during any one-month period in our history.

Revenues

Total revenues increased $54.4 million, or 32.1%, to $223.9 million for the three months ended March 31, 2005 from $169.5 million for the three months ended March 31, 2004. Net revenues increased $47.8 million, or 28.7%, to $214.2 million for the three months ended March 31, 2005 from $166.4 million for the three months ended March 31, 2004. This increase in revenues was attributable primarily to a 37.2% increase in total trading volume for the three months ended March 31, 2005 when compared with the three months ended March 31, 2004. For the first three months of 2005, CME Globex volume represented 66.4% of trading volume, or an average of 2.6 million contracts per day, a 94.6% increase over the same period in 2004. We earn a higher rate per contract for trades executed on CME Globex than for trades executed on our trading floor. The increase in electronic trading volume was led by interest rate product trading volume growth, followed by equity and foreign exchange product electronic trading volume growth. Increased total trading volume levels resulted principally from:
interest rate volatility driven by anticipated and actual interest rate movement by the U.S. Federal Reserve Board, CME Globex system enhancements improving speed and reliability in response to increased volume, increased customer demand for the liquidity provided by our markets, the ongoing incentive programs designed to enhance liquidity on CME Globex and to attract new customers, particularly in Europe and Asia, and strong demand from international investors in our foreign exchange products. The additional clearing and transaction fees resulting from the increased trading volume and the increased percentage of trades executed electronically were augmented by fees for clearing and transaction processing services provided to CBOT, additional investment income and increased revenue from quotation data fees.

Clearing and Transaction Fees. Clearing and transaction fees, which include clearing fees, CME Globex electronic trading fees and other volume-related charges, increased $37.8 million, or 30.8%, to $160.8 million for the three months ended March 31, 2005 from $123.0 million for the three months ended March 31, 2004. A significant portion of the increase was attributable to the 37.2% increase in total trading volume. Partially offsetting the impact of our increase in trading volume was a decrease in the average rate, or revenue, per contract.

The average rate per contract decreased to $0.668 for the three months ended March 31, 2005 from $0.699 for the same period in 2004. Our TRAKRSSM products are charged a much lower rate per contract and, therefore, are not included in volume or revenue used in this calculation of the average rate per contract. Our tiered pricing structure for CME Eurodollars reduced the average rate per contract by $0.031 during the three months ended March 31, 2005 when compared with the same period in 2004, as increased trading

volume in our CME Eurodollar contracts resulted in additional volume incentives. The foreign exchange tiered pricing structure resulted in an additional reduction in our average rate per contract of $0.009 during 2005 when compared with 2004, as a result of the volume growth in foreign exchange products. The shift in the mix of volume generated from non-member trading activity to member and various incentive program trading activity resulted in a $0.025 reduction in rate per contract. Also, the average rate per contract in the first three months of 2005 decreased by $0.008 primarily as a result of the product mix shift of trades from equity E-mini™ products to interest rate products. We earn a lower rate per contract for interest rate products than equity E-mini products. Interest rate products represented 56.6% of our trading volume in the first quarter of 2005, compared with 50.1% in the first quarter of 2004. There was a similar offsetting decrease in the percentage of trading volume attributed to equity E-mini products. In addition, the average rate per contract was further reduced by $0.008 due to the impact of reduced volume from our mutual offset agreement with Singapore Exchange Derivatives Trading Ltd. (SGX) whereby there is a net settlement for trades executed by the originating exchange but transferred to the other exchange. These decreases were partially offset by an increase of $0.046 as a result of the higher percentage of trades executed on CME Globex for all product lines, for which additional fees are assessed. In the first three months of 2005, CME Globex average daily trading volume was approximately 2.6 million contracts, or 66.4% of total trading volume, compared with approximately 1.3 million contracts, or 47.5%, during the same period in 2004.

The following table shows the average daily trading volume in our four product lines, the percentage of total volume that was traded electronically through CME Globex and total clearing and transaction fees revenue expressed in dollars and as an average rate per contract:

                                                       Three Months Ended
                                                            March 31,                 Percentage
                                                  -----------------------------        Increase
CME Product Line                                     2005              2004           (Decrease)
---------------------------------------------     -----------       -----------       ----------
Interest Rate                                       2,234,567         1,417,965             57.6 %
Equity                                              1,365,712         1,186,680             15.1
Foreign Exchange                                      294,235           188,229             56.3
Commodity                                              51,383            37,591             36.7
                                                  - --------- -     - --------- -
Total Average Daily Volume                          3,945,897         2,830,465             39.4
TRAKRS                                                 29,839           116,160            (74.3 )
                                                  - --------- -     - --------- -
Total Average Daily Volume, including TRAKRS        3,975,736         2,946,625             34.9
                                                  - --------- -     - --------- -
CME Globex Average Daily Volume, excluding
TRAKRS                                              2,618,310         1,345,383             94.6
CME Globex Average Daily Volume as a Percent
of Total Volume, excluding TRAKRS                        66.4 %            47.5 %
Clearing and Transaction Fees Revenue,
excluding TRAKRS (in thousands)                   $   160,823       $   122,754
Average Rate per Contract, excluding TRAKRS       $     0.668       $     0.699

We experienced an increase in all of our product lines in the first three months of 2005 when compared with the first three months of 2004. In the first three months of 2005, 51.2% of our interest rate volume was executed on CME Globex compared with 11.0% during the same period in 2004. This increase represented incremental average daily trading volume in our interest rate products on CME Globex of nearly one million contracts. The recent release and utilization of our interest rate product electronic trading functionality, competitive fee programs designed to encourage the participation of market makers and global proprietary trading firms, increased usage of handheld electronic trading units on our trading floor and tiered pricing provided to high volume traders contributed to increased trading volume of CME Eurodollars on CME Globex. A changing interest rate environment contributed to higher trading volume during the first three months of 2005 to a greater extent than was evident in the same period in 2004, particularly in interest rate options, where average daily volume increased approximately 65% to nearly 740,000 contracts per day. Our equity product volume was influenced by increased distribution to customers through CME Globex facilitated by incentive programs introduced during the second quarter of 2004 that enabled additional market participants to obtain reduced fees on our products. The volatility in U.S. equity markets in the first three months of 2005 was lower compared with the first three months of 2004. Despite this low volatility, the trading volume increased partially as a result of the success of our Russell products and increased activity in our equity option products. Our foreign exchange volume has benefited from strong demand from international investors and automated trading systems, as well as fee incentive programs initiated during the second quarter of 2004 that resulted in increased trading of our foreign exchange products on CME Globex. In the first three months of 2005, 76.4% of our foreign exchange volume was conducted through CME Globex compared with 60.2% during the same period in 2004. A combination of market price levels and volatility patterns contributed to the increase in volume in commodity products during the first three months of 2005 when compared with the first three months of 2004.

In 2004, to encourage trading of CME Eurodollars, we introduced several pricing changes, which included fee reductions on CME Globex for non-member customers, expansion of our market maker program in our electronic CME Eurodollar futures market and CME Globex fee waivers for traders of more than 1,000 CME Eurodollar contracts per day using our handheld trading devices. Additionally, in August 2004, we launched an enhanced options system for electronic trading of CME Eurodollar options contracts. This functionality facilitates trading of complex combination and spread trades typically used with short-term interest rate options on futures. We also launched various programs related to our foreign exchange products. These included a 12-month CME Globex fee incentive program designed to attract increased electronic trading of foreign exchange contracts by certain members, such as fund managers, and a non-member electronic automated market maker program.

During the second quarter of 2004, we announced an alliance to provide additional access to electronic trading of CME foreign exchange (FX) products. In March 2005, we launched CME FX on Reuters to bring banks direct futures trading by offering our eFX markets to Reuters' global interbank customer base in a spot equivalent format.

A substantial portion of our clearing and transaction fees, as well as telecommunications fees and various service charges included in other revenues, are billed to our clearing firms. The majority of clearing and transaction fees received from clearing firms represent charges for trades executed on behalf of their customers. We currently have approximately 80 clearing firms. For the three months ended March 31, 2005, one firm, with a significant portion of customer revenue, represented approximately 11% of our net revenues. Should a clearing firm discontinue operations, we believe the customer portion of that firm's trading activity would likely transfer to another clearing firm. Therefore, we do not believe we are exposed to significant risk from the loss of revenues received from any particular clearing firm.

Clearing and Transaction Processing Services. Clearing and transaction processing services increased $4.3 million, or 34.6%, to $16.8 million for the three months ended March 31, 2005 from $12.5 million for the three months ended March 31, 2004. Clearing and transaction processing services primarily represents fees derived from providing clearing and settlement services to the CBOT. In addition, fees are also included for listing futures products on CME Globex for NYMEX and processing single stock futures trades for certain of our clearing firms that execute trades at OneChicago, LLC (OneChicago), our joint venture in single stock futures and futures on narrow-based stock indexes. The revenue increase in the first quarter of 2005 from the first quarter of 2004 was a result of increased clearing processing volume for CBOT as well as the expiration of lower initial pricing that was in effect during the first quarter of 2004. We cleared approximately 173.1 million matched contracts for the CBOT during the three months ended March 31, 2005 compared with 136.6 million matched contracts during the three months ended March 31, 2004.

Quotation Data Fees. Quotation data fees increased $2.3 million, or 14.8%, to $17.8 million for the three months ended March 31, 2005 from $15.5 million for the three months ended March 31, 2004. The increase resulted primarily from the change to our fee structure that was implemented on January 1, 2005. Users of our professional service are now charged $35 per month for each market data screen, or device, an increase from the $30 per month charge that was in effect during the first quarter of 2004. At the end of the first quarter 2005, there were approximately 63,000 subscribers to our market data and the data was accessible from approximately 181,000 screens and included approximately 30,000 subscribers to our lower-priced non-professional service. While the total number of subscribers remained relatively constant in the first quarter 2005 compared with the first quarter 2004, the number of lower-priced non-professional subscribers to our E-mini market data service decreased by 2,000 and the number of professional screens increased by 8,000.

For the three months ended March 31, 2005, the two largest resellers of our market data represented approximately 57% of our quotation data fees revenue. Should one of these vendors no longer subscribe to our market data, we believe the majority of that firm's customers would likely subscribe to our market data through another reseller. Therefore, we do not believe we are exposed to significant risk from the loss of revenue received from any particular market data reseller.

Access Fees. Access fees increased $0.7 million, or 18.6%, to $4.7 million for the three months ended March 31, 2005 from $4.0 million for the three months ended March 31, 2004. This increase resulted primarily from CME Globex users switching to a higher bandwidth connection at a higher cost.

Communication Fees. Communication fees decreased $0.1 million, or 5.3%, to $2.4 million for the three months ended March 31, 2005 from $2.5 million for the three months ended March 31, 2004. The number of individuals and firms utilizing our communications services and the associated rates have been relatively constant from the first quarter of 2004 to the first quarter of 2005.

Investment Income. Investment income increased $2.4 million, or 76.8%, to $5.5 million for the three months ended March 31, 2005 from $3.1 million for the three months ended March 31, 2004. The annualized average rate earned on all investments increased to approximately 2.4% in the first three months of 2005 compared with approximately 1.4% during the same period in 2004, representing an increase in investment income of approximately $2.0 million. This increase resulted primarily from increases in the interest rate environment. Also, approximately $0.8 million of the increase in interest income resulted from increased funds available for investment including cash performance bonds and security deposits. Partially offsetting these increases was a $0.4 million decrease in the investment results of our non-qualified deferred compensation plan that is included in investment income but does not affect our net income, as there is an equal decrease in our compensation and benefits expense.

Securities Lending Interest Income and Expense. Securities lending interest income increased $6.7 million, to $10.2 million for the three months ended March 31, 2005 from $3.5 million for the three months ended March 31, 2004. The average daily balance of proceeds from securities lending activity was $1.6 billion for the three months ended March 31, 2005 and $1.3 billion for the three months ended March 31, 2004. Securities lending interest expense increased $6.5 million, to $9.7 million for the three months ended March 31, 2005 from $3.2 million for the three months ended March 31, 2004. The net revenues from securities lending represented an annualized return of 0.13% on the average daily balances in the first three months of 2005 compared with 0.09% in the first three months of 2004. The increase in the annualized rate of return was due to favorable interest rate conditions in the marketplace.

Other Revenue. Other revenue increased $0.1 million, or 1.5%, to $5.7 million for the three months ended March 31, 2005 from $5.6 million for the three months ended March 31, 2004. This resulted primarily from a $0.3 million increase in fees associated with managing our IEF programs during the three months ended March 31, 2005 when compared with the three months ended March 31, 2004. This increase was partially offset by $0.2 million of losses incurred on technology equipment that was traded-in or written off during the first three months of 2005.

Expenses

Total operating expenses increased $7.0 million, or 8.0%, to $96.0 million for the three months ended March 31, 2005 from $89.0 million for the three months ended March 31, 2004. This increase was attributed primarily to increases of $3.3 million in compensation and benefits, $2.0 million in depreciation and amortization, $1.4 million in professional fees, outside services and licenses, and $0.9 million in communications and computer and software maintenance expense. These increases were partially offset by reductions in marketing, advertising and public relations and other expense.

Compensation and Benefits Expense. Compensation and benefits expense increased $3.3 million, or 8.3%, to $43.9 million for the three months ended March 31, 2005 from $40.6 million for the three months ended March 31, 2004. There were three significant components to this increase. First, compensation and benefits expense increased by approximately $2.2 million during the first three months of 2005 compared with the first three months of 2004 as a result of annual salary increases and related increases in employer taxes and benefits. Second, the average number of employees increased approximately 4%, or by 55 employees, during the first three months of 2005 from the first three months of 2004. We had 1,293 employees at March 31, 2005. This increased headcount resulted in additional compensation and benefits expense of approximately $1.6 million. Third, stock-based compensation expense increased $1.3 million to $2.4 million for the three months ended March 31, 2005. This increase resulted primarily from the expense recognized during the first quarter 2005 for the options granted in June 2004. These increases were partially offset by a $0.7 million decrease in the bonus expense, which is accrued under the provisions of our annual incentive plan. The threshold for payment of the bonus was increased from 2004 to 2005, resulting in a lower expense in the first quarter of 2005 when compared with the same period in 2004. In addition, we experienced a decrease of $0.4 million in the investment results of our non-qualified deferred compensation plan for the three month period ended March 31, 2005 that is included in compensation and benefits expense but does not affect income, as there is an equal and offsetting impact to our investment income. Finally, during the first three months of 2005, there was a $0.3 million increase in the capitalization of compensation and benefits relating to internally developed software.

Occupancy Expense. Occupancy expense increased $0.2 million, or 2.5%, to $6.9 million for the three months ended March 31, 2005 from $6.7 million for the three months ended March 31, 2004. Occupancy expense increased primarily as a result of rent that began in April 2004 for an additional remote data center. This increase was partially offset by a decrease in trading volume rent due to lower open outcry volume in the first three months of 2005.

Professional Fees, Outside Services and Licenses Expense. Professional fees, outside services and licenses expense increased $1.4 million, or 17.7%, to $9.5 million for the three months ended March 31, 2005 from $8.1 million for the three months ended March 31, 2004. The increase resulted primarily from our revenue sharing agreement with SGX and license fees relating to our equity products. We incurred $0.9 million of expense related to our revenue sharing agreement with SGX. This revenue sharing, which cannot exceed $0.3 million per month, resulted from the growth in electronic trading of CME Eurodollars. There was no similar expense during the first three months of 2004 due to the relatively low percentage of CME Eurodollars trading electronically at that time. In addition, license fees increased by $0.5 million in the first three months of 2005 from the first three months of 2004 as a result of increased trading volume and increased licensing rates related to our equity index licensing agreements.

Communications and Computer and Software Maintenance Expense. Communications and computer and software maintenance expense increased $0.9 million, or 6.7%, to $13.1 million for the three months ended March 31, 2005 from $12.2 million for the three months ended March 31, 2004. This expense is affected primarily by growth in electronic trading. During the first three months of 2005, we experienced an increase in communications expense for connections to CME Globex. This increase was equally offset by the decrease in expense due to cost reduction efforts that were achieved during 2004. Our computer and software maintenance costs are driven by the number of transactions processed and the volume of bid and offer prices received electronically, not the number of contracts traded. During the three months ended March 31, 2005, the number of transactions we processed increased approximately 43%. In addition, we processed approximately 91% of total transactions electronically in the first three months of 2005 compared with nearly 83% in the first three months of 2004, which represented 66.4% and 47.5%, respectively, of total contracts traded. As a result, our expenses for software, software maintenance and hardware maintenance increased $0.9 million during the first three months of 2005 when compared with the same period in 2004.

Depreciation and Amortization Expense.Depreciation and amortization expense increased $2.0 million, or 15.6%, to $14.8 million for the three months ended March 31, 2005 from $12.8 million for the three months ended March 31, 2004. The increase was the result of depreciation and amortization of 2004 and 2005 asset acquisitions exceeding the depreciation and amortization of assets that have become fully depreciated or retired since April 1, 2004. Capital expenditures totaled $15.8 million for the three months ended March 31, 2005 and $67.5 million for the twelve months ended December 31, 2004. For these periods, technology-related

purchases, defined as purchases of computers and related equipment, software, internally developed software and costs associated with the build-out of our data centers, represented approximately 94% and 86%, respectively, of these purchases.

Marketing, Advertising and Public Relations Expense. Marketing, advertising and public relations expense decreased $0.3 million, or 11.0%, to $2.2 million for the three months ended March 31, 2005 from $2.5 million for the three months ended March 31, 2004. This decrease resulted from reductions in product advertising and marketing program costs during the first three months of 2005 when compared with the same period in 2004.

Other Expense. Other expense decreased $0.4 million, or 6.5%, to $5.6 million for the three months ended March 31, 2005 from $6.0 million for the three months ended March 31, 2004. This decrease resulted primarily from a $0.5 million decrease in currency delivery fees resulting from lower fees due to migration to a more efficient delivery system.

Income Tax Provision

We recorded a tax provision of $47.3 million for the three months ended March 31, 2005 compared with $31.4 million for the same period in 2004. The effective tax rate was 40.0% for the first three months of 2005, compared with 40.5% for the first three months of 2004. The effective tax rate was reduced because of a reduction in non-deductible expenses and the resolution of certain tax audit issues.

Liquidity and Capital Resources

Liquidity and Cash Management. Cash and cash equivalents totaled $430.6 million at March 31, 2005, compared with $357.6 million at December 31, 2004. The $73.0 million increase from December 31, 2004 to March 31, 2005 resulted primarily from cash generated by operations for the three months ended March 31, 2005, which was retained primarily in the form of short-term investments that are included as cash equivalents. Also contributing to the increase was $18.7 million of proceeds from maturities of marketable securities and $1.5 million in proceeds from the exercise of stock options. Partially offsetting these increases was $15.8 million in purchases of property, net of trade-in allowances and our quarterly dividend payment that totaled $15.8 million. The balance retained in cash and cash equivalents was a function of anticipated or possible short-term cash needs, prevailing interest rates, our investment policy, alternative investment choices and any dividends that we pay.

Included in current and other assets are net deferred tax assets of $9.6 million and $10.8 million at March 31, 2005 and December 31, 2004, respectively. These net deferred tax assets result primarily from depreciation, stock-based compensation and deferred compensation. There is no valuation reserve for these assets as we expect to fully realize their value in the future based on our expectation of future taxable income.

Historically, we have met our funding requirements from operations. If operations do not provide sufficient funds to complete capital expenditures, . . .