CME (CME) 14 Feb 192018 Q4 Earnings call transcript

Company Profile

Participants

John Peschier	Director, Investor Relations
Terrence Duffy	Chairman and CEO
John Pietrowicz	CFO
Sean Tully	Senior MD, Global Head of Financial and OTC Products
Derek Sammann	SD Director, Global Head of Commodities & Options Products
Bryan Durkin	President
Richard Repetto	Sandler O’Neill
Daniel Fannon	Jefferies
Brian Bedell	Deutsche Bank
Ben Herbert	Citi
Alex Kramm	UBS
Sameer Murukutla	Bank of America Merrill Lynch
Alexander Blostein	Goldman Sachs
Jeremy Campbell	Barclays
Christopher Harris	Wells Fargo
Ken Worthington	JPMorgan
Kyle Voigt	KBW
Chris Allen	Compass Point

Call transcript

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Operator

Good day, and welcome to the CME Group Fourth Quarter and Year-End Earnings Call. This call is being recorded [Operator Instructions]. At this time, I would like to turn the conference over to John Peschier. Please go ahead, sir.

John Peschier

Good morning and thank you all, for joining us. with Harbor start to going the language. Safe I'm to John open for I'll up turn remarks and over it we'll Then brief Terry and Q&A. for it then our and Statements this facts in website statements. that the are made forward-looking are call slides on historical not on are guarantees not statements future performance. These of They to involve assumptions difficult uncertainties are and risks, that predict. outcomes expressed any in or and statements. may materially differ results actual implied Therefore, from is what affect which our filings More on performance be detailed that information our SEC, about found with website. may the are factors our in can

Lastly, final find would over the With and page on call release, of I you a non-GAAP the will like that, GAAP the Terry. earnings to turn reconciliation between to measures.

Terrence Duffy

Group. for us was in you John, tailwinds prior We than We QX. thank We Thanks, averaged CME compared million XX% this year. which had joining day, and contracts per more strong appreciate all, the morning. to XX up in your interest

year, with In million volume participants more four market the we had expanding, outside in our during have from volumes and For growth volume X.X XX% totaling We we progress United based volume. contracts year. the options than our per options participants day. total States full made record along QX, global areas, from product electronic

that the me were products them. number XX%. designed of the a during few just of were For product the full detailed year highlight we provided successful new commentary of morning needs executive Many up we this ’XX. new We but launched a to customer in earlier solve let

had being Award prices clients multiple of record year. Liquidity Magazine March and is link January ’XX. futures a and FX the XXXX It facilitated swaps. often Link for day growing. FX Risk that commission the is nine across of currencies the XX,XXX client of in or better launched merchants FX contracts match base with available innovation noting in the the by of First was is currently won

February. markets Partners, The be to May in averaging daily conjunction it to and was per growth will built As steadily Houston product firms area. in buy participation firms. from Enterprise contracts we with Intermediate to to we and in in Houston Products West to of in February the the side addition has infrastructure steady launched leader this Physical November Oil think XX,XXX volume Texas trading crude in day launched reached completed pleased energy offering useful average franchise. November. Futures early is announce the Global The In business XXXX related surpassed quarter. each to Sulphur performed during well in per major in Crude XX,XXX December, NEX our January including November a in We and March existing banks, and were optimization has fourth in and proprietary XX,XXX Group day acquisition XXX the

teams Our and a are good have made integration in progress we way really on so the far. collaborative working planning

the components migration have XXXX. the of important to we customers Globex begin and migration of terms will know that EBS In most BrokerTec let the XXXX customer in will begin in the integration

asset classes. global year Turning many to has volume this across slowed

XX day per are averaging We year. million contracts this

one XXX exceptional periods following QX our reflection market the is interest worth of that health our elevated a saw As It quarter not the contracts. to of noting high currently million to see This It's was of earlier is an I business. volatility. pause at referred sitting and volatility. unusual we open is

X.X is day this million averaging options so Our business far a year. contracts

another potential Brexit, in Several impact These XX% XXXX. including on various of part all valuable which comparable to this know, a uncertainty for of or the are you the is has shutdown government volume have they could tools as from the environment. levels in headlines The important that any XX.X% total percent government issues to around as Options this other of of are market, in global an increased are XXXX. trade actions. about many negotiations, XXXX

know we our markets resolved. products do we’re will hopeful being look some said leader. closely That clarity to be outlined and at to and As we issues continue that compared other like start get of the alternatives I just to these how we

Our products overtime. strategy to has consistent enhancing and bringing activity and focus been launching risk, market very on new products. manage We participants maximizing in their existing new

turn acquisition are with of John discipline expanding my something in been over to business I look now focused moment. and so. management very Group. valuable team Expense the of integrating the a on core to focused would is like we the do I forward along We John? intensely have questions the components to to and call continue the NEX will on and your recent

John Pietrowicz

good everyone. and Terry Thanks morning

expense Terry Between is excluding during the grown NEX, of As mentioned while revenue and focus CME discipline total entire continued expense XXXX organization. time. by XXXX has million $XXX only million increased $XX that group’s adjusted

and platform NEX to operate and scalable very the efficiently. combined CME a businesses built intend have we We

and the pleased We are are begin very integration as working how our progressing so plans. outreach we The far. customer synergy together is well teams with

the participants then fourth and is us results for guidance like feedback providing for see. goal what the increased helpful have financial provide quarter, provide benefits Our along I'll to to way of in they'd some who for our the market I'll briefly XXXX. terms been cover

results. with standalone Let CME me start

XX% full fourth up the up and for year for is revenue XX% Our quarter. the

license without was counts. modest strong Our stock-based reflecting $X stable company's which Market increase by rate amount was impacted for entirely $X annual compensation during XXXX per of volunteers. line with expense million The be Otherwise the saw the flat have increased the The of by contract driven guidance. sequentially was would original tends bonus year. and adjusted with grew audit during which quarter our revenue to activity included strong and X.X%, results. incremental been data by a expense million very the we screen fees considering revenue

half the up quarter fee transaction the fourth compensation XX% $XX growth line NEX XX%. was contributed in which majority $XXX including Our of EPS of incremental In we've in was the the and NEX quarter, fourth last line. the quarterly year results and than more the margin Overall expense, rate million the highest in with seen million revenue, the the for operating reflected clearing in months of adjusted approached of decade. two

the For year by adjusted EPS grew full XX%.

During XXXX we dividends declared totaling billion. $X.X

of year Turning XXXX, to of year. expense P&L the primarily license million for excluding billion the $X.XX to NEX the we between anticipate expense reflecting deliver guidance and synergies, expect and a with back billion we impact be of half $X.XX to $XX fees the in full

CapEx between $XXX million of to rate $XXX be $XX We is anticipated continue million. run the million to year. target end and synergies by the

one Finally we of XX.X%. we you. we'd the to and our please be back to the additional like Please effective call to covering limit last Based between questions. that open yourself commentary, number where analysts tax expect and With to feel the details. us the queue. short of jump free highlights on for financial executive provide rate to then summary, XX.X% page and question your Thank the into refer

Operator

first of ahead. [Operator Instructions] our from Please O'Neill. Sandler We will take Richard Repetto go question

Richard Repetto

guess morning John. morning Terry, good morning. -- I good Good And Yeah.

the expense I guidance was about talk what discipline of impressed, guess I precision the very you as but well. is know pretty amazing You

million, think had When that's we you you expenses and And is we the so NEX in in pretax the at -- at I XX% little bit So mid-XX I look know anticipated. the what margin question I this mentioned anyway $XX stronger revenue. looked John to for was it think total guess the NEX. in million a $XXX than

gate, outlook for of the So talk guess could strong the I that given NEX of sort the about out you the margins, contribution? in right

Terrence Duffy

giving to you years saw then Sure, We team couple we've the manage of you every manage what it. a out. it as been the know a of management guidance build Appreciate of actively thanks and our close bottoms-up Yeah, very first of over expenses guidance. couple the last is We Rich. and a is, actively. made budget the terms we've do happened in day you we precision the where been points there; several

guided billion of So you we to $X.XXX the saw what beginning this the year. in we hit and was had that year

terms In NEX. to the two impact margin, are the being that million couple of know. changes Number there's points one, NEX's of expenses, that a made you terms in $XX of reflects

is internally intangibles. software capitalized developed included in time is the at purchased acquisition first of the The

So NEX's expense the at a noted executive due rate run to in treatment when you we commentary, look down would as take the by due that go of NEX per that -- month that asset. to million $X

policies NEX on salaries. rolls in The Group's less CME anticipate be is to wages and second capitalization software, there of to we piece capitalized as again

we mean And So anticipate capitalized that salaries. and and would million to higher per wages software that be about $X less month.

month. NEX’s a to impact decrease about be of $X per rate the So would million net expense

to NEX’s in a previously XX% you're take items. taking it's range into treated consideration, NEX you if So way depreciation look XX% at that at looking margins, if those more impact it the the

in forward So NEX is looking following going CME's model. terms business be of to information,

some So in we the many NEX’s of into or organization NEX’s rolled of organizations CME. future,

is generate lose a shared able very what be versus run expenses that years. anticipate NEX’s expenses the much model. next what we they'll we going synergies the of several what's in distinction And to services So CME’s is to a because generating the that's

Richard Repetto

and on Terry and congrats Thanks, a year. strong John.

Terrence Duffy

Thank much, very Rich. you

Operator

you. Thank

question Please will from from take We Dan our next Fannon Jefferies. ahead. now go

Daniel Fannon

John. it's guess here Good you, a I question morning. Thanks. part two for

is CME you're you the expense talk be was the XXXX? I ’XX? what in -- was could this So numbers you down it think accretive what guidance contribution think assuming around total you said and NEX about, between or if of what looks be like kind then could in core quarter, And for break you could put it could also some for accretion

John Pietrowicz

I up Dan. at -- a a start, very Yeah, way to the build. said it think much at of look bottoms the like do we I Thanks,

license expenses, out the add and way, one NEX’s is you that, in growth took then two if synergies expense billion, XX.XX. rate annualize million the $X.XXX gets which the you by and at and look X% a take took that November, expenses, multiply $XX P&L around and back you was December, together of excluding our right So it way you fees, we and can

So we we have the living that gives cost in from looking some we that approach and kind of that how X% And idea reflects of escalators of contracts of an in. have. service you really, the outside

it. to So look way that's at one

annual the not the policy. to the amount believe didn't that, obviously with in We around our phase be cash or that you accretion, can NEX pleased synergies out provide will we’ll our to earnings out certainly return -- accretive. calculate. of our as of something In give of capital to numbers very also that gate, any terms specific but contribution we we're policy dividend only We

Daniel Fannon

you. thank Okay,

John Pietrowicz

Dan. Thanks,

Operator

Thank you.

take go now ahead. Brian will next from our We Please question Bank. Deutsche of Bedell

Brian Bedell

the bit little about the that's opportunities with a the now of is bit Great, revenues you if you things revenue a can NEX of what appreciate forecast sort and that but thanks, about really at, Maybe morning you specifically to good talk forecast, and -- some of you both that maybe think a looking I deal area those your areas talk difficult can of can folks. if CME guys enhance if NEX, and there you synergy timeline maybe and usually where legacy closed little areas. you're just

Bryan Durkin

Thanks, running, We're about since really we've the ground Brian. we've Bryan is This closed hit well Durkin. how excited transaction. the

we’ll increase client down European continued look the almost, side our platform slightly at about that I while BrokerTec comes we've market the history, uncertain overall confidence area is and market up of seeing the platform had in repo the quarter base the of the think looking drive their when it accessing the XX% period. When that the to largest at X% side repo in you business, time repos, in look the we're seen we of foreign performance an over terms first, currency up as look at growth in during the cover performance they we're up business. X%. the towards the U.S. the activity, it's If And of we market at in

the to of are two user foreign to context currency the services and in leading more treasury increased their friendly access it look we’re the the improvements With in optimization enjoy TriReduce bringing has efforts actually in provided you of those mean growth are overall increased cycles clients just accessible. far the areas side market year. what out the by rolled us performing and more market XX% well. some number could low terms that at places make the and business about past well quite which both from TriReduce TriBalance. So market allows platform, other in to to the the platform far seen what excited specter. together, in Each When about as worlds of the we’ve in would TriResolve their of that of and to as call compression the to again we respect a participants we’ve TriBalance touch of services continued

trade wonderful a post the grow U.S. services the area continues So be, for so not only the on to more here. but think us to we within internationals

Terrence Duffy

add Maybe from on starting I XXXX we Terry is bit. BrokerTec is I'll my in think then coming the the platform referenced platform Duffy, of the to little the the EBS. and a that earlier XXXX only migration exciting on This something about just EBS in not on especially in remarks coming very EBS

growth relates it that great think to EBS Sean bit talk we the little the opportunities could selling on as especially can see I maybe from. potentially cross a more

you platform. the bit to Sean maybe that on single So on touch want little

Sean Tully

great. excited on so the off year. EBS actually very and the about we’re growth last Thank That’s base you -- saw side Terry Yes.

for So non-deliverable in growth in fourth the huge extraordinarily example strong they growth. NDFs, forwards, had where our

As the in growth U.S. between volatility especially high and CNH, penetration the had markets in in very the China. we internationally, well, particular, very and deep with

great great So, growth. business,

day mentioned XX,XXX bringing along exchange cost market standardized, the terms -- this a bringing In the far in earlier spot a market of to FX contracts market, and creating seeing growth good with futures swaps together, about OTC where our year. so the foreign together we're Link, Terry where alternative FX remarks clear, marketplaces the lower-totaled very we're

So order two together, well hard much at already in very FX had worked Link, sell. about excited platforms we cross bringing as like to

banks regional banks Asia Europe. terms side regional In has in of EBS international deep in that in and very penetration

OTC So those the as about the market see Futures into OTC into the futures we place. as we selling market market are very CME as excited well products highly cross complementary. And the places products

Terrence Duffy

revenue little where synergies. going we’re Brian flavor far as So hope that you gives a

Brian Bedell

Yeah and synergy any positive reductions? net of can a customers anticipate benefits to pricing get the you that do customers extent have kind offset more for just getting you would you price revenue that

Terrence Duffy

exact just to discussed synergies Sean because we we ability have side and outlined, the price are what think Yeah said. to-date what on be be pricing the there’s futures huge single cross sell, to determined. have cash for referring really and product EBS especially we Brian think people benefit will platform. is to I a the both there the trade and sure It’s a what haven’t We yet of I'm that

Brian Bedell

you. thank great, Okay,

Operator

you. Thank

We ahead. will Herbert. go next question take our Ben now Please from

Ben Herbert

question. Hi, good for the morning. Thanks taking

but you’re Just on wanted just interest the year-to-date there, large is to I open the reached about build and high ask trend interest to kind could open know holders particularly talk think ask you seeing a wanted of I if November just the year-to-date? and about

Terrence Duffy

Yeah, Ben it’s Duffy. Terry

million just in look coming remarks it you touch it’s in morning rounded But at just Let participants under that up to new odd my and so it some XXX thousand, our this me XXX. referenced that had on when that. I only so commercial earlier are to we a market. XXX,XXX,XXX I think to

Whether daily business. As great facilitate don't traders, you health normally who but said they is, I carry the traders of know, large commercials they're open-interest of do, our a or earlier, high-frequency a as which for positions, sign lot liquidity. algorithmic

of and Derek Sean comment holders. is to they're like could respective have what businesses seeing you OI maybe relates do Derek, So, the their I'd maybe start.. what from their to sides as on

Derek Sammann

across growth we’re and OI about non-U.S. excited of Yeah the around liquidity the see continued participation seeing our Sammann specifically, out market we is participation we're footprints Yeah, In what crude continuing the that's globalizing it’s and export Derek grow the narrative infrastructure gas time Terry and seeing growth continued builds, growing thanks energy here, the we're zones. participation oil both a where facilities. to said Ben, in as a most market

U.S. a confirming report in EIA, the of producer fact, the Administration, largest has Energy Information of crude put single as planet. which out November the now XXXX the oil In is become the

U.S. participants status for oil is on crude the gas million WTI contract, producing And natural global going that barrels that is barrels being XXXX. track XXXX. crude XX Natural achieves is means a million to to the oil same expectation The a So contract using we're Henry that in that or producing in path. exporting that, is reinforcing of day What our Hub U.S. of deliver XX only following it's Gas benchmark amounts not record amounts. be record

on was all-time So of franchise open interest and what only year but from all-time performance see not in interest Asia. our large back 'XX driven XXXX specifically in as a the QX continuing an record was of out growth in participants record we're energy business the whole, to in energy revenue open energy quarter an

there. continued growth So strong

large things shutdown, looking the note has we and to One report. interest it's the government at of holders open are the delayed the important that CFTC given

So the holder large in January. reports interest are only week through first the out open

that So the those see the of backlog of tracks global status classes. our I come out. growth But benchmarks continue we're the for our products footprints is asset a that global reports what looking of you think trend of reflective across business, a the

financials. So I'll turn to Sean over for

Sean Tully

very always was year especially interest a and great about new open holders we're success. excited last participants, large bringing Yeah,

September, in foreign we November, an in equities in record had record in in So we rates, LOIH both exchange. all-time and LOIH, had then and

cost continuously those risks, can participants. in addition sure any people to In are look at similar to bring total that where that, our products relative products we making to take lowest alternative the order in

about the our alternative outperforming markets. and into participants So bringing excited always products we're the

Terrence Duffy

Ben? that help, Does

Ben Herbert

Yes. Absolutely. Thank you.

Operator

Thank you.

UBS. of Please question take We from ahead. our go Kramm will Alex now next

Alex Kramm

everyone. Hey, good morning

But clearing that. in transaction a on down didn't both I forward like the and going an used between the that and do for NEX. side break FX and particular think John, things question you is now. treasuries They also ask to for this and revenues

those that's you it we So the perspective? a I out can volumes? question be actually actually see because how on can more will from breaking is then really you two, those can obviously we ask. are modeling have of do tracking guess Thank so which the start I guess helpful check consistent And some numbers for today revenues you. the a basis,

John Pietrowicz

NEX bit line Yes, it's is business, break geography The Alex. income the me regard million. to of revenue transaction and the BrokerTec. NEX let of than different In me EBS what $XX Thanks, on the clearing be the markets would and a fee let contributed down statement majority with Yes. to some their related because reported. so that that

In balance terms that data which of $XX would primarily other in in line. million business all of all market has that market line. NEX with of markets line. the businesses NEX their and which reflected is business transaction the contributed comes the million the NEX for is that as the -- you fee compression transaction The And excluding and expect. in putting up majority clearing data market market optimization is all of TriReduce, is the data from data we're the $XX in The

is give that's forward, with breakdown. be the We'll information of time what right determine and the going So amount appropriate of spend looking disclosure that some we at the should the out. we as businesses level

forward. doing So that going will we be

of of color some giving volumes bit as little give of a want Just mentioning, and to color there. out kind we you're some around, we're you the

a at take then growth their to very revenue And more book. look volume a like because that terms their you central when growth, take pronounced mature much revenue higher their you business CME you relationship, is more many when more they their is in bespoke of than at is growth, a EBS. and have growth compared at volume when -- look take agreements. their BrokerTec, for much especially So Group of They're look a order limit that's

our So that into types CME of to the similar utilized. products one terms overall the being to take business that are the in Group, is of of things consideration

associated if in being that with EBS, it's have example, versus -- in type versus different done. for treasuries the U.S. repo markets currencies, So it's of revenue amount transactions or the if of BrokerTec, European emerging GXX

whether And of central trading participant finally bilateral or So impact. impacts limit book rate. it's revenue order an has capture the type also then that their trades

the of once time. run to bit similar on we've But revenue terms for we'll CME businesses the at looking of So versus in the had impact volumes. very disclosure, little level to appropriate be a transaction the of growth opportunity

Alex Kramm

more for That's color and great. Thanks Thanks. can the you better obviously. yes, give the the

John Pietrowicz

that in Yeah, and we're we mind. keep very organization transparent will definitely

Operator

Thank you.

We Michael question next Please take of Lynch. go America Carrier our Merrill ahead. Bank of will now from

Sameer Murukutla

Carrier. guys, Hey. this on is Sameer Good for Murukutla actually Michael morning

on, guess, capital Just are I management, forward you move a levered. guys as this question that past you not deal,

your to us aggressive or fall lowering versus an other you. you be So what's cash I I you would And leverage Terry, in like term on update any can how to, dividend? guess, your where raising give you to on guess, Thank interest that going levels maybe near are M&A. transformative

John Pietrowicz

Good morning, Sameer. for Thank the question. you

total me at, So $X.X debt approximately debt-to-EBITDA. an have in X.X of kind where has tell we times you we're CME leverage. in and of let billion terms about our

guidance have want XXXX, by XXXX, one-time the we be of given that a to end debt-to-EBITDA. We by

have some about and $XXX loan So March of they of first NEX matures $XXX million quarter in then inherited that we Euro in notes end at March. the term is debt yen-denominated senior denominated in the million that early which had up

replace the next mature one times be we'll So the will year we in we paper likely quarters, then -- that delever as into as down near next commercial paying and with to several those down paper, over as we term that debt-to-EBITDA. commercial

next note quarter, -- between bring a did of paper. financing. the a going impact of full offset quarters by interest from you that QX. differential to end bring at some terms also very acquisition we term the And to pay down I loan want be versus to it, as the model that's And terms rate the of debt to as bonds the commercial expense, there's to and look expect this on I would we’ll increase up, interest just quarter in expense In of

the about we quarter, see so So time in expense de-lever. terms XX% first over that see or come up, into a interest as you'll we of down then tick should

our I of terms In sentiment the we're that. approach terms how reflect aggressiveness of in our think going actions to of de-levering,

terms a year. approach terms expect we took did the in approach of of we where do very to In what we this fourth de-levering, that in we balanced how quarter the

So in we'll versus very of the capital balanced the return amount in of amount versus terms be amount the de-levering of investment the of business.

Terrence Duffy

you Sameer, with see reason that's we we benefit we that why think pursued team And the for business. that just enhance latter can of the obviously, the answer a let transaction long working me did. the So management I've very I'll client focused good give our clients. one now, time your of M&A. a been to answer Right proposition, integrating about here NEX on the create canned value we I've question we're been experiences things we very if focused our my on transaction. the on and can things NEX along very Hence, is that

clients. that's we So user the think ultimately for end good

of that's So laser focused company shareholders how value for of that's my that creating way that because you that a a know value we very the approach does we're we're ultimately. deal day, a will for on not create telling we And where the a clients, focus, kind this. and

focused the I now, it. client, always completing at. if right to that -- looking there that we're the am at value looking that's now, I'm for But right at just NEX on out there's would what and things look So I'm make add the integration. NEX integration willing I'm sense

Sameer Murukutla

the for detail Thanks Perfect. guys.

Terrence Duffy

Sameer. Thanks

Operator

you. Thank

ahead. We Blostein question Alex will our Please go Sachs. take now from of next Goldman

Alexander Blostein

looks over business want And place. down XX% energy like on interest extrapolate definitely energy I hoping zone guys, was good it the morning. could the be into What is core little back open to more a obviously of and the CME in but I go Hi open the like hanging there. Total first looks volumes to I within hoping interest so trends kind bit don't the it year-over-year. was quarter, or discussion to franchise. all to

hoping granularity was get that? little more it Thanks. to behind So a what's

Terrence Duffy

Derek, to you on want that? comment

Derek Sammann

you Yeah, had energy couple Thanks have we for When context. the question. at a XXXX, an QX In going look of in bear all-time Yes, mind the in you things business. of in record. to

off finished year all-time fact, revenue In we a we single as and record had November volume month come well. as actually the at record

November X.X put I had million think of the then up million ADV single that XX of day November X.X contracts. record a within and in we month on

what the infrastructure continued is the supportive in U.S. all-time this we're based 'XX So now coming crude record the that year, infrastructure in based tough And facilities our benchmark. generation seeing Gulf and natural seeing I that products QX of as comps increased and the LNG U.S. gas. is have versus of record NYMEX online having. and of around earlier what we we're we're production built talked on with an the structural participation in of are into was build in about are that market, we energy What the built success -- seeing

seeing we a here. tough with So year, most are this classes along start of our assets to

Terry's end products suite customer point, that what a focused suite of of suits a on needs is build think functionalities product the how user commercial our to we're we've can I we what and and always best base. done

the of innovations the things our Houston a launched interesting December versus trade. So contract WTI number just contracts. with as up that you off contract. we X,XXX that spread place at we contract, today. What's to QX, about look Houston that from contracts like is record over When November of a year of have in a And the and that coming Open trades QX November, X.X X, that little January builds launched November. we're doubled that X,XXX launched volume in new we year, actually over this that our putting contract last interest actually is contract sort into in of we're seeing year growth

against crude are trade a part is that HCL. global delivered infrastructure of a Houston WTI contract our Cushing WTI spread customers export in linked and physically are product That using for NYMEX space, to as So means that emerging contract contract. the a spreading against the

particular benchmark at excited about contracts. growth we When look tiny you information products from X. the open you interest earnings removed gave on we're We've at power there. need So tiny, continued to numbers that the and the the look innovation those the are slide you guys figures

as So that whole that years. relatively OI over in of couple the note kind flat last overall is the contract a in

So options commercial months Houston crude benchmark. really XXXX. coming platform. crude, things announced with on in off a what to products their customers the years market doing directly record we're ability sell an the Group just record crude we're like innovations first reinforces we've with and WTI providing CME on The ever What focused time of

other first or live The franchise. me, X, X, actually you of our built excuse to market go there, at when versus WTI up we're will March XX% all continue actually January share in support in in that XX% XXXX out was that our WTI will franchise about in overall seeing of versus guy to February. the We've the XX% the November look and Brent. and state option And

innovate versus our on expand have we client as when competitive products tailwinds our we outperformance headwinds So you've focused us base, when product seen outperformance well. and grow and have

focus commercial doing customer our on we're to user end what participants. that's really and So problems solve

Alexander Blostein

detail. the Got it. for Thanks

Operator

Thank you.

Jeremy next We from will Please now Campbell Barclays. question ahead. of go take our

Jeremy Campbell

Hey, thanks, guys.

million integration, cost-achieve -- of a now it NEX, is enhancements, tech CapEx versus your is $XXX how like that $XXX long-term function items the and typical much to $XXX platform much guide and pace or lift integration? with near-term annual more run more one-time-type rate So, of your more of of million how

John Pietrowicz

Thanks, Jeremy this John. is

million look of has a a to XXXish C&E $XXX the take been NEX terms you in it’s million our range XXX of the NEX if you kind been companies in to a at range. the in are. And is to yeah, that business a $XXX historically CapEx. $XXX we million range gives of terms more So $XX combine in million of so different than

So some optimization. of there’s especially their in more in investments platforms,

for run. their long Globex, the migrate been CapEx but an would businesses the going down that’s as investments of to making. this forward expect level been we overtime elevated come I expect mortgage it’s level I but they’ve So some not probably of at on do

Jeremy Campbell

you that lot of coming volume are of mentioned low that it might closer levels? in to think think kind see XQ volumes RPCs that I really tiers RPCs quarter volumes fair this fourth of like to year-to-date after Got tracking because are kind a it and then quarter is good we’re we where John hitting

John Pietrowicz

lines. think RPC say that versus it’s to into previous versus other tremendous a higher we the there's of the volumes things product is in proportion One volume the a was the I being that the factored rates obviously of of couple safe overall quarter. saw amount interest Also of fourth quarter some this quarters.

volume. been expect So higher are in definitely extent the aggregate that also it’s also traded. of types RPC market the function that to there’s But and go the I products less of participants to would a

Jeremy Campbell

Thanks guys.

John Pietrowicz

Jeremy. Thanks

Operator

Thank you.

now go take We Wells Fargo. will Please ahead. question our next of Chris Harris from

Christopher Harris

guys. Thanks,

I'd on like got business of we've the more margin, term? thoughts? do a Fed a near would but hear think CME's of the be implies So, all that dovish growth sudden. to you negative over for a think What your the that I

Terrence Duffy

Sean going and I'm and make then also or might let go I Sean? comment a Well two to ahead comment

Sean Tully

that. you Yeah, so thank for

for growth we’ve expectations. while of are predicted the terms question on and new there tightening years, to product last no correct in in with we’re market so a clients our constantly few new tightening at new of product the adjustments Nonetheless had moment year But innovation do to innovation, lot over product has bringing this to and focused few year. You’re each relatively earlier mix. that RPC

BrokerTec at Actually, looking of increments notes, to some complex, of back price I'll and the So north rest a notes two-year BrokerTec mention relative the I’ll minimum -- the reduced two-year their very in example. November, their caused X%. that -- moment for in strong you growth side that in give the

adjustment product in making on to very Group was that marketplace, Similarly, in cost spread offer So, that pricing tier taken positively cross growth. the lowered the bid January, increment causing minimum CME the our notes. by strong platform, lower it

uptick an X.X% of note entire the So relative to likewise the about terms And of in futures. seeing that complex. tier that,

That’s So products. constantly the in about talk to spoke sure total bit as on a to futures product. lowest make alternatives. tier well to But side strong penetration cost a the got I we’ve we’re those very OTC notes changes seeing product side that the to earlier those the growth focused also relative relative as we’re cost

the years that look you growth if last place. So in our in to at treasury one market cash few is talked we’ve particular relative the things futures overall

futures currently We’re market. XXX% bond buying our cash treasury treasury at versus a

So we see continued strong growth.

several In offers illustrates over addition the our margin ago, talked soft much alternative XXX,XXX today now against contracts swaps marketplace to that treasury lower spreads That's portfolio that market. That total spreads, about it year last couple to years. Invoice Group running to CME a over I’ve X,XXX a invoice futures well is day. from a contracts grown of years number cost to over of relative about this the XXX,XXX. times spread

that RPC around So $X.XX. is a product, RPC high

So X,XXX day grown XXX,XXX from about over we've to year. a it well and this

more I some had. do talk In addition little bit the impact continue other well. they've futures to that, about to and might a maybe innovations Sulphur of very

January, XX,XXX XXX is Our contracts about now running XX,XXX this a a terms the XX,XXX December, Sulphur about a open we day of day, month day about participants. marketplace than futures about contracts. interest in and XX,XXX did more

And total good there. the you cost contracts uncleared continued recall we results Total very side, year, we seeing RPC return margin total $X.XX. XX,XXX Basis Those equity rules. about year; last I'd very important particular That may a high XX,XXX futures. OTC growth This to listed contracts standardized to lower is day. right swaps, contracts product index Close, a Trade like are we're a about XXXX doing is under day, exciting did a alternative thing, day. On futures year, equity did mention the swaps. Index we're product, index a return This XX,XXX last about Last there. equity innovation a

our launched in S&P out So we curve the in December, further complex.

So went from futures. XX years months around the in out to X

Russell of $X. We That also doing while it's X,XXX an return product, Dow has contracts total a only features. well over launched RPC about NASDAQ, day, and

to cost drive total we our to we So continue continue clients, to more bring innovate, we continue benefits.

Terrence Duffy

several at brought with you forward. really morning, and impressive Now, zero But because secondly, let it's CME think business. on agreement the the been me in at there to is points look all grow not our trade than industry an as just I maybe is extending rate just so a which China the look team going you the people for interest add especially pre-market on add this risk. over rate few needed manage dramatically, as a kind last little for far bit, drop President I out years, When we've to the and market his of percentage think since which hit the moments innovations come me after that able that business to with rallied interest have Sean and anymore, biggest hard Sean high outlined environment, the days, XX XXXX. just other retail A which had another you sales really the

to there. risk people the So needed manage

the all to that have We products manage risk.

really I that so is And it's think or not on to CME a hawkish all just based important note business dovish bet.

Operator

Thank you.

take We our Worthington ahead. next go Please will Ken now JPMorgan. question from of

Ken Worthington

than or and it impact the on to a impact might have go longer dealers trading shutdown extent regulators say, to have had New Hi, the implications in see good market? reaction the any early you NASDAQ when you down there on and do BrokerTec Stock down. what from went had and be bigger Exchange seems And we it equities, morning. York term What think experienced the January. from

Bryan Durkin

in platform that had Durkin to all, yes, internal resolve. attributable that able immediacy the had think, all-time explaining continuity I able the responded no we marketplace, that put of we place, recovery marketplace our our and in to ensure I that understandably, current steps of in and situation remediation appreciative continue in enjoyed And the and activity, to and the that will performance future overall the to been terms market it again note identify goes with would enjoyed to that was we high going taken to taken very what were And were had we to and the to moving regard. just to operational very And our the be terms efficacy of which which an forward. in that Brian The of the forward. responsiveness period It's of during you. first incident has occurred provide handled that of overall. we like December session, mean, error was I quickly Thank unfortunate resolution

Ken Worthington

Okay. the And response? regulatory

Bryan Durkin

would, that occurrences. we normally what the we to remediation we and had just As steps took transpired communicated prevent future

Terrence Duffy

in all we situations, what common do these very right. That's

Ken Worthington

Okay and no think? you implications

Bryan Durkin

moving are have we place. in controls we the that we’re the no of from No, the very with of perspective forward, user and base where confident terms in

Ken Worthington

Okay, thank you.

Operator

Thank you.

KBW. Please now will ahead. next take Voigt Kyle from of We our question go

Kyle Voigt

guess, going of forward? the remains long the I structure CME just that’s cash think or that market just maybe in to one in your and space. terms or mostly term market maybe treasuries Sean dealer maybe on structure cash the market looking view Terry Hey, been of dealer that for good hear business one client Most but in answered unfold play is going that evolution morning. role out how playing for to in wanted with I in bifurcated the mine to have a and this NEX I the to dealer market, dealer treasuries dealer space relatively to

Terrence Duffy

that has Bryan structure to don’t much. know I so standpoint institution is you is want why change I might or it But we of market said the did market around going change it’s I’ve transaction because derivatives as change comment on BrokerTec. to a we who think utilizing I around the this BrokerTec relates NEX any participants Sean going are we structure nobody where from I components that and of ones like That’s the that be business. the are believe And which to looking BrokerTec this think influencing like clients. today. largest the and platforms the this NEX and think passionate We very others valuable EBS to not and acquisition we but market make I the to are that listen that about am there’s be probably in thanks. acquired the platform transaction We the the to biggest banks transaction to that announced for NEX to that’s especially we complementary change. that they’re structure with we BrokerTec. relates it this this believe as Kyle, the are the market market moment it and at structure,

As us clients the critically on help they’re away that is we’re experience focus I market staying or team’s for and important component. whether so is me we the create cash what an my do have is trading And that earlier focus benefit said that structure could how to the futures. from

Kyle Voigt

I the in and when XQ that here fair this XX% you expense quarter? expect you million versus the Yeah, enough, if the interest for want an as can interest caller of adjusted said same I number $XX expense ask that just John clarify earlier that is then question to uptick

John Pietrowicz

I impact that’s to only included I quarter’s Yeah, full financing two a have of mean the we’re acquisition that correct. going said as months.

impact debt a So full also our or you quarter’s of NEX’s to interest offset will quarter’s then some get having have expense. on reductions some then you’ve and got books you and impact full

replace commercial rate As will of debt with differential NEX's paper and very short end QX between I also said we a had towards paydown the the got in then you’ve and term. their that debt the

overtime. you first see So in quarter go you’ll and it’ll down see then the it that’s be in a up tick why

majority occur We for year down of half the pay this the to year. back of the the in expect

Kyle Voigt

Okay, great, you. thank

Terrence Duffy

Kyle. Thanks

Operator

you. Thank

We Allen take now from Chris next our Compass Point. Please go ahead. of will question

Chris Allen

Good morning guys.

any one are I quick making and you uptick guys opportunities clearing about progress link update hit customer terms how one answered. And and there think most just questions clearing have the you in the term? been DTCC of I thinking on long guess

Terrence Duffy

Bryan?

Bryan Durkin

with we we’re what opportunities these can extend as two closely currently and a the you that Thank wonderful enhance seeing trying margin what and what terms capabilities to assets now in of CME path further. of Group, continuing DTCC to that available exists work do is with part to

have our report down hopefully the that about the opportunities regard efficiency to clients to excited In in in enhancing their road. assist our very of is and us. We’re we'll more of really terms goal front capital

Chris Allen

Thanks guys.

Terrence Duffy

Yeah, thanks, Chris.

Operator

turn question remarks. Thank you. back or any I conference closing This the would today’s like to for concludes answer and speakers, additional session. the to

Terrence Duffy

soon. morning. you joining me appreciate Thank to Group in you all for all look you talking We of CME and we thank interest forward to us very this Let your much.

Operator

now for This concludes you may your Thank participation, you today's disconnect. call.

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