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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 001-31553

CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
(Exact name of registrant as specified in its charter)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ý    No o

        The number of shares outstanding of each of the registrant's classes of common stock as of April 22, 2003 was as follows: 5,463,730 shares of Class A common stock, $0.01 par value; 6,998,494 shares of Class A common stock, Class A-1, $0.01 par value; 6,961,187 shares of Class A common stock, Class A-2, $0.01 par value; 6,768,969 shares of Class A common stock, Class A-3, $0.01 par value; 6,406,392 shares of Class A common stock, Class A-4, $0.01 par value; 625 shares of Class B common stock, Class B-1, $0.01 par value; 813 shares of Class B common stock, Class B-2, $0.01 par value; 1,287 shares of Class B common stock, Class B-3, $0.01 par value; and 413 shares of Class B common stock, Class B-4, $0.01 par value.

CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.

FORM 10-Q

INDEX

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PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

See accompanying notes to consolidated financial statements.

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CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

See accompanying notes to consolidated financial statements.

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CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except share and per share data)

(unaudited)

See accompanying notes to consolidated financial statements.

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CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

See accompanying notes to consolidated financial statements.

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CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

        The accompanying interim consolidated financial statements have been prepared by Chicago Mercantile Exchange Holdings Inc. (CME Holdings) without audit. Certain notes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to present fairly the financial position of CME Holdings as of March 31, 2003 and December 31, 2002, and the results of its operations and cash flows for the periods indicated.

        The accompanying consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto in Exhibit 13.1 of the Chicago Mercantile Exchange Holdings Inc. Annual Report on Form 10-K for the year ended December 31, 2002. Quarterly results are not necessarily indicative of results for any subsequent period.

        Certain reclassifications have been made to the 2002 financial statements to conform to the presentation in 2003.

2.    PERFORMANCE BONDS AND SECURITY DEPOSITS

        Each firm that clears futures and options on futures contracts traded on the exchange is required to deposit and maintain specified performance bonds in the form of cash, U.S. Government securities or bank letters of credit. These performance bonds are available only to meet the financial obligations of that clearing firm to the exchange. Cash performance bonds and security deposits may fluctuate due to the investment choices available to clearing firms and the change in the amount of deposits required. As a result, these assets may vary significantly over time. See Note 6 of Notes to Consolidated Financial Statements in Exhibit 13.1 to CME Holdings Annual Report on Form 10-K for the year ended December 31, 2002.

3.    GUARANTEES

        Interest Earning Facility.    Clearing firms, at their option, may instruct Chicago Mercantile Exchange Inc. (CME) to invest cash on deposit for performance bond purposes in a portfolio of securities that is part of the Interest Earning Facility (IEF) program. The first IEF was organized in 1997 as two limited liability companies. Interest earned, net of expenses, is passed on to participating clearing firms. The principal of the first IEFs totaled $463.4 million at March 31, 2003 and is guaranteed by the exchange as long as clearing firms maintain investment balances in this portfolio. The investment portfolio of these facilities is managed by two of the exchange's approved settlement banks, and eligible investments include U.S. Treasury bills and notes, U.S. Treasury strips and reverse repurchase agreements. The maximum average portfolio maturity is 90 days, and the maximum maturity for an individual security is 13 months. If funds invested in these IEFs are required to be liquidated due to a clearing firm redemption transaction and funds are not immediately available due to lack of liquidity in the investment portfolio, default of a repurchase counterparty, or loss in market value, CME guarantees the amount of the requirement. FASB Interpretation No. (FIN) 45, "Guarantor's Accounting and Disclosure Requirements of Guarantees of Indebtedness of Others," requires that an entity (CME) issuing a guarantee recognize, at the inception of the guarantee, a liability equal to the fair value of the guarantee. CME has evaluated its requirements under FIN No. 45 and concluded that no significant liability is required to be recorded.

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        Intellectual Property Indemnifications.    Some agreements with customers accessing GLOBEX and utilizing our market data services and SPAN® software contain indemnifications from intellectual property claims that may be made against them as a result of their use of these products. The potential future claims relating to these indemnifications cannot be estimated and, therefore, in accordance with FIN No. 45, no liability has been recorded.

4.    CONSOLIDATION OF VARIABLE INTEREST ENTITIES

        In January 2003, the FASB issued Interpretation No. (FIN) 46, "Consolidation of Variable Interest Entities—An Interpretation of Accounting Research Bulletin (ARB) No. 51." FIN No. 46 requires the primary beneficiary to consolidate a variable interest entity (VIE) if it has a variable interest that will absorb a majority of the entity's expected losses if they occur, receive a majority of the entity's expected residual returns if they occur, or both. FIN No. 46 applies immediately to VIE's created after January 31, 2003. CME is currently assessing the potential impact of FIN No. 46. As part of that assessment, CME has determined that the first IEFs (as described above) have been determined to be a VIE subject to consolidation. This entity has approximately $463.4 million in assets at March 31, 2003. The effect of consolidation that would be required beginning with the reporting period ending September 30, 2003, would be to increase assets and liabilities on the balance sheet by $463.4 million. Such consolidation would have no significant impact on net revenues and would have no effect on net income.

5.    LEGAL MATTERS

        In November 2002, a former employee filed a charge of discrimination with the Illinois Department of Human Rights and Equal Employment Opportunity Commission (EEOC) claiming that CME terminated his employment because of his race. On March 13, 2003, the EEOC dismissed the discrimination charge with a "no cause" finding. The former employee has filed an amended complaint in the Circuit Court of Cook County, Illinois alleging common law claims of retaliatory discharge and racial discrimination. He is seeking damages in excess of $3 million. Based on its investigation to date and advice from legal counsel, management believes these claims are without merit and will defend them vigorously.

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations for the Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Overview

        Our operations for the three months ended March 31, 2003 resulted in net income of $26.1 million compared to net income of $18.7 million for the three months ended March 31, 2002. The increase in net income resulted primarily from a 24.7% increase in net revenue that was only partially offset by a 17.6% increase in operating expenses. The increase in net revenues was driven by a 21.5% increase in total trading volume during the first quarter of 2003 when compared to the first quarter of 2002. The percentage increase in net revenues exceeded the increase in trading volume primarily as a result of the increase in trades executed through GLOBEX. Contributing to the overall increase in expenses was $5.1 million for our brand advertising campaign in the first quarter of 2003 as well as increases in compensation and benefits and depreciation expense.

        Trading volume for the three months ended March 31, 2003 totaled 146.4 million contracts, representing an average daily trading volume of 2.4 million contracts. This was a 21.5% increase over the 120.5 million contracts traded during the same time period in 2002, representing an average daily trading volume of 2.0 million contracts. Daily volume for the month of March 2003 averaged 2.8 million contracts per day, the highest in CME history. In addition, on March 17, 2003, 1.7 million contracts were traded on GLOBEX, the highest GLOBEX volume day on record.

Revenues

        Total revenues increased $24.5 million, or 23.6%, from $104.1 million for the three months ended March 31, 2002 to $128.6 million for the three months ended March 31, 2003. Net revenues increased $24.9 million, or 24.7%, from the first quarter of 2002 to the same time period in 2003. The increase in revenues was attributable primarily to a 19.5% increase in average daily trading volume in the three months ended March 31, 2003 when compared to the three months ended March 31, 2002. In the first quarter of 2003, electronic trading volume represented 44.3% of total trading volume, or nearly 1.1 million contracts per day, a 109.3% increase over the same period in 2002. Increased trading volume levels resulted from continued volatility in currencies and U.S. stocks; geopolitical and economic uncertainty; increased customer demand for the liquidity provided by our markets; and product offerings that allowed customers to manage their risks. The additional clearing and transaction fees resulting from the increase in trading volume were augmented by increased revenue generated through GLOBEX access fees, our fees for managing the IEF program and trading revenue from GFX, our wholly owned subsidiary that utilizes GLOBEX to trade in foreign exchange and Eurodollar futures contracts. Partially offsetting these increases in revenue were modest declines in investment income resulting primarily from a decrease in rates earned on our marketable securities, short-term investments and the short-term investment of clearing firms' cash performance bonds and security deposits; securities lending interest income, net of interest expense; and quotation data fees.

        Clearing and Transaction Fees.    Clearing and transaction fees, which include clearing fees, GLOBEX electronic trading fees and other volume-related charges increased $24.5 million, or 31.5%, from $77.9 million for the three months ended March 31, 2002 to $102.4 million for the three months ended March 31, 2003. A significant portion of the increase was attributable to the 19.5% increase in average daily trading volume. In addition to the increase in trading volume, there was a substantial increase in the percentage of trading volume executed through GLOBEX, our electronic trading platform, for which additional fees are assessed. In the first quarter of 2003, GLOBEX volume represented 44.3% of total trading volume compared to 25.3% during the same time period in 2002. Also, the product mix shifted to more equity product volume and less interest rate volume. For the three months ended March 31, 2003, equity products represented 46.6% of trading volume, compared

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to 29.2% during the same time period of 2002. By contrast, for the three months ended March 31, 2003, interest rates represented 46.7% of our volume, compared to 64.5% during the same time period in 2002. Fees for interest rate products are lower than fees for equity products. Therefore, this shift in product mix, combined with the additional fees assessed for trading through GLOBEX, resulted in additional revenue for the first quarter of 2003.

        Primarily as a result of the increase in percentage of trades executed through GLOBEX and the product mix shift, the average rate, or revenue, per contract increased from $0.646 for the three months ended March 31, 2002 to $0.699 for the same period in 2003. In addition, the tiered pricing for Eurodollar products was changed effective March 1, 2003. The thresholds for obtaining the tiered pricing discounts were increased and the amount of the discount was decreased. As a result, the average rate per contract during the first quarter of 2003 was approximately $0.006 greater than if the tiered pricing had remained unchanged. To stimulate volume in the back months of the Eurodollar futures contract, an incentive program was implemented effective March 1, 2003. This program reduced our average rate per contract approximately $0.002 for the three months ended March 31, 2003. Partially offsetting the increases in the average rate per contract was a decrease in the percentage of trades executed by non-member customers from approximately 23% for the first quarter of 2002 to approximately 21% for the first quarter of 2003. We believe our lower fee structure for members has resulted in the acquisition of trading rights by parties intending to trade significant volumes on our exchange, creating an increase in member volume. Finally, in July 2002, we began trading a new contract, Long-Short Technology TRAKRS^SM, that was followed by two additional TRAKRS contracts in the fourth quarter of 2002. Similar to limits on certain GLOBEX fees, transaction fees for this contract are limited based on the size of the order. The average rate per contract on these trades in the first quarter of 2003 was $0.012. As a result, TRAKRS volume had an adverse impact on our overall rate per contract during the three months ended March 31, 2003. If volume and fees for TRAKRS were excluded from the first quarter 2003, our average rate per contract would have increased by approximately $0.005 to $0.704.

        The following table shows the average daily trading volume in our four product areas, the portion that was traded electronically through the GLOBEX platform, and clearing and transaction fee revenues expressed in total dollars and as an average rate per contract:

        We experienced a decline in our interest rate volume in the first quarter of 2003 when compared to the first quarter of 2002. In 2002, there was uncertainty related to interest rate levels that was not evident in the first quarter of 2003, which contributed to lower volume levels in the three months ended March 31, 2003. Partially offsetting this was the geopolitical uncertainty in the first quarter of

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2003, which tends to increase usage of our products and services. Our equity product volume was influenced by the volatility in U.S. equity markets that was experienced in the first quarter of 2002 and continued through the first quarter of 2003, primarily as a result of economic conditions and the same geopolitical uncertainty that impacted interest rate volume. This volatility, combined with increased distribution to customers through GLOBEX and marketing efforts to increase awareness of our product offerings, drove the growth in volume in our equity product volume. Approximately 88% of our stock index product volume is traded through the GLOBEX platform. The growth in foreign exchange volume is primarily due to improvements in our GLOBEX trading system and our central counterparty clearing which makes these products increasingly important to large banks and investment banks. Price levels and volatility patterns contributed to the increase in volume in our commodity products during the first quarter of 2003 when compared to the first quarter of 2002.

        Our volume discounts for Eurodollar contracts changed as of March 1, 2003. This change resulted in an increase in the volume levels required to receive the discount and a decrease in the maximum discount that could be received. Also, effective March 1, 2003, we implemented an incentive plan to promote liquidity in the back months of our Eurodollar complex by offering incentives for high volume traders. The total expense under this incentive plan will not exceed $4.0 million for the 10-month period ending December 31, 2003.

        A substantial portion of our clearing and transaction fees as well as telecommunications fees and various service charges included in other revenue are billed to the clearing firms of the exchange. The majority of clearing and transaction fees received from clearing firms represent charges for trades executed on behalf of the customers of the various clearing firms. We currently have approximately 70 clearing firms. In the three months ended March 31, 2003, one firm, with a significant portion of customer revenue, represented approximately 10% of our net revenues. Should a clearing firm withdraw from the exchange, we believe the customer portion of that firm's trading activity would likely transfer to another clearing firm of the exchange. Therefore, we do not believe we are exposed to significant risk from the loss of revenue received from any particular clearing firm.

        Quotation Data Fees.    Quotation data fees decreased $0.7 million, or 5.3%, from $12.5 million for the three months ended March 31, 2002 to $11.8 million for the three months ended March 31, 2003.    At the end of the first quarter of 2003, there were approximately 55,000 subscribers to our market data and the data was accessible from approximately 178,000 screens and included approximately 22,000 subscribers to our lower-priced non-professional service. This represented a decrease of approximately 8,000 screens displaying our data on March 31, 2002 when the total was approximately 186,000 screens. While the number of subscribers has increased from approximately 51,000 subscribers at March 31, 2002, the increase occurred in our lower-priced non-professional E-mini market data service. There was a decrease of approximately 2,000 subscribers with first locations for our professional market data service, due in part to contraction in the financial services industry. The change in the number of subscribers, screens and locations from the first quarter of 2002 to the first quarter of 2003 is consistent with the trend experienced over the course of 2002.

        For the three months ended March 31, 2003, the two largest resellers of our market data represented nearly 50% 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.

        Prices for our professional market data offering increased effective April 1, 2003. Previously, these customers were charged $60 per month for the first screen at each location and $12 per month for each additional screen at the same location. The new pricing is $50 per month for the first screen and $20 per month for each additional screen at the same location.

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        GLOBEX Access Fees.    GLOBEX access fees increased $0.6 million, or 18.9%, from $3.1 million for the three months ended March 31, 2002 to $3.7 million for the three months ended March 31, 2003. This increase resulted primarily from the additional monthly access fees generated by an increased number of GLOBEX users during the first quarter of 2003, particularly those accessing GLOBEX through our T1 connection.

        Communication Fees.    Communication fees were unchanged at $2.4 million for the three months ended March 31, 2002 and 2003. The number of individuals and firms utilizing our communications services and the associated rates has been relatively constant from the first quarter of 2002 to the first quarter of 2003.

        Investment Income.    Investment income decreased $0.5 million, or 29.1%, from $1.6 million for the three months ended March 31, 2002 to $1.1 million for the three months ended March 31, 2003. The decline resulted primarily from a reduction in rate