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Stock-Based Payments
12 Months Ended
Dec. 31, 2011
Share-based Compensation [Abstract]  
Stock-Based Payments
STOCK-BASED PAYMENTS
CME Group adopted an Omnibus Stock Plan under which stock-based awards may be made to employees. A total of 8.0 million Class A shares have been reserved for awards under the plan. Awards totaling 4.4 million shares have been granted and are outstanding or have been exercised under the plan as of December 31, 2011. Awards granted before 2009 generally vest over a five-year period, with 20% vesting one year after the grant date and on that same date in each of the following four years. Beginning in 2009, 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 stock-based payments and total income tax benefit recognized in the consolidated statements of income for stock-based awards were as follows:
(in millions)
 
2011
 
2010
 
2009
Compensation expense
 
$
51.3

 
$
40.9

 
$
33.4

Income tax benefit recognized
 
18.8

 
16.4

 
13.4


Excluding estimates of future forfeitures, at December 31, 2011, there was $92.1 million of total unrecognized compensation expense related to employee stock-based compensation arrangements that had not yet vested. This expense is expected to be recognized over a weighted average period of 2.0 years.
In 2011, the company granted employees stock options totaling 273,916 shares under the Omnibus Stock Plan. The options have a ten-year term with exercise prices ranging from $239 to $286, the closing market prices on the grant dates. The fair value of these options, which was measured at the grant dates using the Black-Scholes valuation model, totaled $25.4 million. The fair value is recognized as compensation expense on an accelerated basis over the vesting period.
The Black-Scholes fair value of each option grant was calculated using the following assumptions:
 
Grant Year
 
2011
 
2010
 
2009
Dividend yield
1.2%-2.4%
 
1.4%-1.7%
 
1.4%-2.4%
Expected volatility
41%-42%
 
42%-44%
 
45%-49%
Risk-free interest rate
2.0%-2.3%
 
1.9%-2.9%
 
2.4%-3.2%
Expected life
5.6 to 6.2 years
 
6.2 years
 
6.2 to 6.5 years

The dividend yield was calculated by dividing that year's expected quarterly dividends by the market price of the stock at the dates of grant. A weighting of implied and historical volatility was used to estimate expected future volatility. The risk-free interest rate was based on the U.S. Treasury yield in effect at the time of each grant. The expected life of options granted has been determined using the simplified method as outlined in guidance from the Securities and Exchange Commission.
The following table summarizes stock option activity for 2011. Aggregate intrinsic value is in millions.
 
 
Number of Shares
 
Weighted
Average
Exercise
Price
 
Weighted Average Remaining Contractual Life
 
Aggregate Intrinsic Value
Outstanding at December 31, 2010
 
1,217,121

 
$
307

 
6.6 years
 
$
78.8

Granted
 
273,916

 
272

 
 
 
 
Exercised
 
(34,007
)
 
169

 
 
 
 
Cancelled
 
(39,814
)
 
373

 
 
 
 
Outstanding at December 31, 2011
 
1,417,216

 
302

 
6.4 years
 
29.1

Exercisable at December 31, 2011
 
777,232

 
306

 
4.6 years
 
28.6


The weighted average grant date fair value of options granted during 2011, 2010, and 2009 was $93, $101 and $117 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009, was $4.2 million, $15.6 million and $14.6 million, respectively.
In 2011, the company granted 142,168 shares of restricted Class A common stock and 472 shares of restricted stock units. Restricted common stock and restricted stock units generally have a vesting period of 2 to 4 years. The fair value related to these grants was $38.6 million, which is recognized as compensation expense on an accelerated basis over the vesting period. Beginning with restricted stock grants in September 2010, dividends are accrued on restricted Class A common stock and restricted stock units and are paid once the restricted stock vests. In 2011, the company also granted 14,751 performance shares. The fair value related to these grants was $3.8 million, which is recognized as compensation expense on an accelerated basis over the vesting period. The vesting of these shares is contingent on meeting stated performance or market conditions.
The following table summarizes restricted stock, restricted stock units, and performance shares activity for 2011:
 
Number of Shares
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2010
196,830

 
$
283

Granted
157,391

 
270

Vested
(42,677
)
 
286

Cancelled
(25,022
)
 
285

Outstanding at December 31, 2011
286,522

 
283


The total fair value of restricted stock, restricted stock units, and performance shares that vested during the years ended December 31, 2011, 2010 and 2009, was $11.6 million, $10.3 million and $6.2 million, respectively.
Eligible employees may acquire shares of CME Group's Class A common stock using after-tax payroll deductions made during consecutive offering periods of approximately six months in duration. Shares are purchased at the end of each offering period at a price of 90% of the closing price of the Class A common stock as reported on the NASDAQ. Compensation expense is recognized on the dates of purchase for the discount from the closing price. In 2011, 2010 and 2009, a total of 6,417, 4,371 and 4,402 shares, respectively, of Class A common stock were issued to participating employees. These shares are subject to a six-month holding period. Annual expense of $0.2 million for the purchase discount was recognized in 2011. Annual expense of $0.1 million for the purchase discount was recognized in 2010 and 2009.
Non-executive directors receive an annual award of Class A common stock with a value equal to $75,000. Non-executive directors may also elect to receive some or all of the cash portion of their annual stipend, up to $25,000, in shares of stock based on the closing price at the date of distribution. As a result, 8,117, 7,470 and 11,674 shares of Class A common stock were issued to non-executive directors during 2011, 2010 and 2009, respectively. These shares are not subject to any vesting restrictions. Expense of $2.1 million, $2.4 million and $2.5 million related to these stock-based payments was recognized for the years ended December 31, 2011, 2010 and 2009, respectively.