CME Group has continued to grind higher since the Deutsche Bank downgrade last week, and the most notable development this week is not what bears are doing — it's what they're stopping doing.
Short sellers have been cutting positions sharply. Short interest fell 13% in a single session on August 25, bringing it to roughly 1.4% of the free float — its lowest reading in over a month and down nearly 19% from where it stood thirty days ago. At these levels, the short thesis on CME is thin: fewer than 5.2 million shares are held short, against a lending pool that is effectively unlimited. Availability is about as wide as it gets, with the borrow market fully open and cost to borrow still well under 0.5% even after a 21% rise over the week. The story here is not squeeze pressure — it's short sellers quietly unwinding as the stock refuses to roll over.
Options positioning reinforces a cautiously constructive picture. The put/call ratio has drifted down to 0.95, about a full standard deviation below its 20-day average of 1.01. That pull-back from the more defensive readings seen in early August — when the PCR was running above 1.08 — reflects a market that is hedging less aggressively than it was a fortnight ago, even as the stock trades closer to consensus targets.
The Street remains divided, and that division is worth understanding precisely. Deutsche Bank's downgrade to Hold on August 19 — the most recent and most significant analyst move — effectively declared the rally complete, with a $270 target sitting below the current price of $277. J.P. Morgan and BofA Securities carry Underweight and Underperform ratings respectively, with targets of $250 and $230 that look increasingly out of step with where the stock trades. Morgan Stanley sits at the other end, maintaining Overweight with a $330 target. The consensus is technically a Hold, but the distribution matters: the bears have already been proven wrong on direction this month, and their targets are now well below the current price. The PE multiple has expanded to around 21x — up nearly 2 points over the past month — and EV/EBITDA is running close to 18.8x, reflecting a market that is paying a meaningful premium for the exchange's volume consistency and dividend track record. The dividend score, ranked in the 79th percentile, is one of the stronger factor readings in the profile.
Institutional flows show no sign of distribution. BlackRock holds 8.5% of shares and added a small position in July. Vanguard and State Street each added over 290,000 shares in the same period. The passive bid is stable and incrementally growing.
Among peers, CBOE outpaced the group this week with a 6.1% gain, while ICE added 3.6% and TW matched CME almost exactly at 2.1%. The exchange complex is broadly firm, which tells you this is less a CME-specific story and more a sector-wide re-rating as volatility expectations stay elevated.
The next scheduled catalyst is the Q3 earnings print on October 21. The Q2 result produced a 7% single-day gain and an 11.8% five-day move — one of the cleaner post-earnings reactions the stock has had. With shorts retreating, borrow loose, and the stock trading within earshot of the mean analyst target, the key question heading into October is whether volume trends in interest rate and equity futures hold up enough to push results through the Street's already-raised bar.
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