CME - Earnings call transcript Q1 2019

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Operator

Good day everyone, and welcome to the CME Group First Quarter 2019 Earnings Call. At this time, I would like to turn the conference over to John Peschier. Please go ahead, sir.

John Peschier

Great. Thank you. you us. thank and morning for joining Good I'm start with Harbor language. the Safe going to it Terry over followed turn I'll Then to by for questions. remarks brief Other of our too also members management participate. will reference not historical are call in this on facts our made are the forward-looking Statements other that website documents and statements. on statements future are of guarantees These not performance. and uncertainties assumptions to risks, are involve difficult predict. They that Therefore, or implied expressed actual what from is outcomes and materially results any may statements. differ in

the in SEC, may that are affect performance Terry. our factors filings Also, about like found with release, you website. page information detailed our reconciliation will For last to find measures. non-GAAP to I of which With and earnings can on would our the the turn a over be on GAAP that, between the call

Terrence Duffy

you so joining appreciate for right John can Thank the provided John us Group. comments extensive thank first brief, you details interest on into your questions. commentary are released today and very we which We said be My our morning as CME quarter. Executive in We this get your to today. going all

relatively I the last volatility change drop strong every it had Market During of in tailwinds quoted significantly our the were the virtually call, our across the asset and year. our environment, we futures We that to made class. kept and options history, changed expenses conditions in we third our also. prior trading the flat. Despite most able mentioned we highest to post quarter, from finish had did while

We and as lines extensions launch optimization had and non-core product strategy cash and and execute participants campaigns continue attract we long-term our through new significant ran cross new services. product products. products educating targeted to to all new market importantly, innovative new well More strategic into and We as markets selling to customer engagement. our clients on

quarter their the in all business areas had six U.S. During the outside from first product an increase

services volume Texas had to Bitcoin futures, to Copper support West operational products, our records market we Sulphur tools interest capital Futures, to open and from innovative launch Houston and efficiencies Futures, multiple create and and and New customer product. Link, Treasury Options QX, Intermediate Invoice Spreads, continue We new FX including needs In participants.

business, much EBS is and BrokerTec close lower Within to market came in QX as This the in the volatility. QX NEX I revenues combined the earlier, said monthly results. despite fairly

of ask for us. which core week. we'd that in analysts contracts to the the would options mid-March queue. million of a covering our and our is front rose Thank like XXX excited questions. you. us, XXX it more opportunities With futures limit XXXX. interest from And And too and the get yourself On last to on open side, million far in the to your not we’ll contracts, about in one contracts XXX question, questions. summary, than million to our remain take just of your we north short from today, open sits number very call in then We based peak you And back

Operator

is question Rich Sandler first Repetto Our [Operator from from Instructions] O'Neill.

Rich Repetto

the but want on you integration know color general guess looking into we're what and and and per whether NEX contracts, double at per the to Yes. accurate? Terry. the contribution per from EBS I as John I And be around for revenue see Good Good back we're the the my BrokerTec, has morning revenue declines -- on the quarter-over-quarter morning with do in appears first when to question just digits to rate team. million that's million the well, XX%. the first mid please? -- -- the NEX just

John Pietrowicz

Yes, hi Rich, John. this is

of the BrokerTec the you you revenue at million portion primary drivers look when what the a the The is and time. is the at rate at small overall look per business treasuries would U.S. of you this think are European in repo. I two need repo to business,

to only the than the up CME QX, So volatility mentioned it you But environment at thing versus at a at. is for that's Sean? remarkably and EBS at QX than his in quarter, volume is to X% business, well in you less it in is revenue look one Group. remarks, look say when the sensitivity But you take QX or when substantially look as held was BrokerTec QX. markets look it when at it lower Also, in Terry prepared at the down sequentially. the for

Sean Tully

to need particular you right. mix, mean I Yes. get the product in

than in saw quarter the as you RPCs the mentioned, example. for lower repo John in much the a particular first outright So repo growth in are treasuries and much European

John Pietrowicz

of integration this question with terms Rich, In We're we're how synergy achieve the pleased is progressing. to targets. on integration the very year plan

event year, Kong the some are free the consolidation we combine call, London Hong to a last by systems, for on staffing integration And of mid-year leased will we end plan in will which also EBS XXXX. targeting migration space in customer space. and with support New the glow related as we're which And internal the and track York, backs XXXX, this to up BrokerTec We on of mentioned a have functions. some administrative in cut along to office with over Tokyo,

Rich Repetto

capture on anything on question And EBS the as the well? was the,

John Pietrowicz

look In we at I activity, again mix terms rest capture, when a when of between issue a think business. the take a it's know and when you -- you take at activity the the EBS the you GXX look of

and rate to have So the lower that than occurs activity that more GXX in spot CNH the NDFs tends a

Rich Repetto

much, you Got it. John. Thank very

John Pietrowicz

Thanks. right. All

Operator

Moving on.

is Dan Jefferies. Fannon from next question from Our

Dan Fannon

guess guidance. on showed expense synergies first overall some start end follow of I -- up more versus of Good profile the just the are quarter slow a It morning. the kind like Thanks. some sounds concern loaded. back your

all a that expenses? of characterizing kind we being just that not robust. progresses, year the the should we volume about I of is guess as ramp should April in how I So build here still and environment expect think guess

John Pietrowicz

Dan. Thanks

I event of middle think year, look -- have the you take when year. are a expense the we a to profile in at expecting for our the the staffing

be synergies target be will I some some the of to be capture this have and we'll So also have that at you for we cut previously, and time. I in some over, have we're space left. know updating terms going mentioned office like consolidating clarity we'll systems, our better I synergy year.

capture the the As to can. we're looks synergy at possibly management much we team as looking synergies, accelerate as

the to we done ramp having the when these in systems be some lower you of we the in of of yes up guidance, relative rest on take a quarter will we terms rest have, you you work was year. In the but for the first did know look, expense for know year, the --

as they So to get they it's launched. call. provide be more on color quarter able around more we'll and But really second timing with some as projects the

Dan Fannon

Got you. it. Thank

John Pietrowicz

Dan. Thanks, right. All

Operator

is from Citi. next Ben question Herbert Our from

Ben Herbert

question. Thanks give Hi, the Could maybe taking an next good you with us for update sticking morning. just year.

Just particularly their an through on U.S. the update non cross-sell efforts channels?

Bryan Durkin

markets optimization provide. is thing ability is we strong with that of this speaking. the to that services bringing about excited cross-sell we're The the really have that Hi, along together Bryan multitude we the product capability the offerings

challenges think NEX we've But functionalities skipping terms from I the by we've this integration of is of today integration that We're the what going about base of with the the the associated to on components. new seamless proud terms perspective. the I'm and and of Globex not as The what through and migration a the onto these is very process, adding cut together we we horizon the beat market's is acquired historical we're now Group most think be working in able important combined had process. performance the are even platforms in under capabilities will right I through have client we're over CME issues bringing and solve of on enthusiastic that forces together. more new what

and As the efficiencies very post we margin capital Group have firms having leveraging CME our is improving client with and efficiencies that have the with we that trade challenges base. across positive been look encumbered capabilities using a at impact addressing

Ben Herbert

you. Thank

Operator

Bedell Brian Bank. moving Deutsche from And hear we'll on from

Brian Bedell

much. very Great. morning. Thanks Good

John Pietrowicz

morning Brian. Good

Brian Bedell

Thanks.

X% back if on very staffing good could areas to you you I that Maybe mentioned rate which move Just from right run to expect implies guidance. in it the go The X% event touch increase about you -- level. and know up midyear. XQ the to to the guess John just a at expense now quarterly I

one you clarification fee quarterly talk X stays on just from about that, just you on new type volatility And X If impact revenue the flexibility of can to in what the if might noncash run addition with also bips bips then the the late? collateral rate? on program really to environment have

John Pietrowicz

there You've Brian. got in a lot

break then and we'll So other talk let's expenses points. break down We'll your about down. first

the bit implemented. around where of the bit, terms in around, quarter, really in So, it's it's coming little in terms in little get a projects of, see expenses we a heavier when

you workers been tick staffing So know contract will see professional up. we've fees so some you

Our the you historically projects up under get way tend the then to quarter. year. be professional the in fees during as first lighter look if they tick And during

professional fees up go a So to I'd expect bit.

gets which production, of be compensation but a that event On will you'll will rolls up back in and amortized see depreciation. into occur so line, down. I work would then, get come rolling bit, as mentioned, staffing And out into it like mid-year and process depreciation that the having put then systems be then, we'll also, tick little a then

So in a as that in customer that's occur to we've another, the another quarter. heavier then facing fourth obviously tend be in our CME, lot of quarter expenses CME And line. fourth legacy the events got

quarter. up a fourth in So you'll tick see the

kind us, when of idea So at you gives there a volumes. for be should that in of the downturn of breakdown. look the prolonged you an Then, some levers

has I think off excellent that Group the continuing. mindset the the a safe well that, think, years, last expenses in know, it's and at you CME an over entire several is done I You if organization managing that take to job first look say

downturn not discretionary spend We sharper and obviously obviously may lens to But, in not costs the that efforts that know are entertainment, things prolonged in growth, that future there's trajectory impacts down to the like do results. going travel expenses. a some we we business. volumes, anything near-term our have managing You of drive do our the of can marketing a you will terms if double put

at looking we management is of synergy we As the I capture we the mentioned course before, entire accelerate normal where can can. ways the integration, team where as

non-cash it So our perspective, I although talk a at to best we so third have bit reductions potential, thing we're the we cost view the That are, into think our history, in Yes. quarter fees will a potential on. X to fees. on have to July point collateral that's basis the that volume Xst. in this focused about We're you in control. another strong But increasing go premature X the change points. cost containment fees did we put the collaterals Then do in costs it's change mentioned collateral from point basis effect

$XXX in fund And approximately guaranty have non-cash that's are collateral and increase. not non-cash the collateral, excess fee We impacted billion $XX billion. by approximately contributions

mix trading the will collateral. to collateral you activity non-cash also of of fluctuate at ideas Now that upon what non-cash based kind looking gives collateral and we're some around based upon But there. of cash

Brian Bedell

it's million about basis if That's annualized billion? it. $XXX increase $XX points on It looks like X

John Pietrowicz

it's Well, take that's excess before, fund to billion. I the to as guaranty I out you take out got you’ve said, mentioned collateral. contributions – And got $XX and like the

Brian Bedell

Got Super much. it. so you helpful. Thank Great.

John Pietrowicz

All right. Thanks.

Operator

Alex next to go Kramm UBS. from we'll And

Alex Kramm

morning good everyone. Hey,

each obviously that pretty so you mean, owned wanted for now you're this and Just come you set single and about maybe for little doing more projects concrete so we and months the help earlier. maybe addressed here? you. to year but to now, opportunity us us see opportunity generalities talked the get a target in and the six clearly this just Thank I individual timeline a back by can can that you've that that other NEX asset what big you giving talking we've or groups is, bit the largest about

John Pietrowicz

you give think of Sean yet comment we there's about looking opportunities little that, they a talk both thanks. to on ask today. Alex, that because, at Bryan I’ll we're a but multiple they're bit color what to can and

Bryan Durkin

take markets and that's if side all to going to I'm the Sean can right. optimization speak the

capabilities trade know through capital costs On of along acquisition the our the We're our combined well as [ph] with solutions as already capital of the bringing efficiencies. through optimization them necessarily triResolve, side those you with force and you them efficiencies offering speak, optimization know clients and not optimization operating I with together clearing combination services challenged capabilities. particularly triReduce, things an consistently services earlier, marketplace have businesses our of banking and people streamlined maintaining of connectivity our as post integrated or independent Traiana institutions team equation, and and the a operating triBalance, working processing to the silos. as excellent and our We're all complement for the services as been greater find we alluded to in as of

combined been along the Sunil’s is identify team it's force been positive by with be able received having efforts strong well time has real to work for and firm's solutions being and with Just to [ph] our our clients. very a

be when you So across that excited today products, about for combined offer potential about and we by and having the centralized to the across, enthusiastic that OTC capabilities cash to able our management going forces. listed the think futures are risk provide these clients the we're very services

John Pietrowicz

the area. actually Fine, couple say I of in optimization things agree. totally Yes, I a might

you right, hit participants have the the yet. has the and margin rules which banks, largest First all but hit have foremost, uncleared not

on new impacted. a be order to we globally. be the by expect year, the September different the then could in by after are year thousand rules. be that of They'll close participants to hit They'll unclear on potentially of participants. margin And of it this see So September hit XX the

any address problems. needs group existing client’s optimization its those its with single of can see aspect services businesses and You clearing around every

-- which triResolve, of of at margin uncleared can uncleared got margin. You've the look the

words, reconciliations out etcetera. of the So the other in messages, sending margin the of

let's margin You the can sim try or uncleared calculate, those requirements. calculate,

or the to by margin they post using You triBalance margins, reducing parties, try that between the to can avoid, needed outright have service. the having uncleared

You the can reduce you to in try know order and triReduce post outstanding reduce actually order use in notional margins. also to the your need

hand, On the Dodd-Frank. was other just like it the

can from move space, uncleared cleared options, space people directly then can NDFs from into cleared to in futures or as unclear into know you the you can space them FX and complex. move as you space well particular move our You their

of launched about offering were or where for growth Currently, increasing and savings you've So as for in contracts all, to last were and we market to In the efficiencies between as was efficiencies about, spreads marketplace to Future ability the our X.X have ability billion our our in have this early terms year In lot the to CME fourth like contracts that It's spread today the the over the things; first and X.X – X.X that the portfolio If you previously invoice CME a approach so futures rules. unclear of services swap solutions far a capital so marketing futures grown solutions and example, a for swaps. them at margin day totality of spreads, market cross-selling. nice relative a of particular, exactly we couple quarter to and demand terms from very clearly the trade first XXX,XXX we're This contracts has we quarter, days relative of huge year things move the excited. saving we That's the do margin clear efficiencies. so a we're very where Treasury the portfolio billion. that add RPC, marketplace $X.XX XX,XXX in the today to in creating the very about to to side, about the business. to XXX,XXX we invoice billion, margin. the both to to heard led

we highly future those our have or marketplaces OTC know as OTC futures We EBS well clients for clients two You our into products. into complementary. the products clients the the the example as that as see

in side lowest it, what cost off do? total total possible spread. side, to your cost, If Your the interested Think, extent the going you focused both analysis you cost. even FX can a that for if can, sell in. you sense experience the liquidity give and we pools is you cost total all can be to access the we largest and investors They're liquidity accounts are bid on or about think combine the and about what right, buy the some pool market example. in And interested and about you think think to are

combine day a a billion, So that EBS the call the day on XX pool XX of billion extent our FX in with to the XX billion a futures. XX liquidity it billion, we

we start links Link, with taking FX do While year, you spread. last two off history. to the combine you which recall liquidity marketplaces You’re launched When pools what those do? base that bid those you the

you markers quoted and one book. You’re number the are taking two, deepen the that two those spread Number bid because off differently.

by exactly So bid ever market. in base. any and on the markets it proposition a vision. outlined we're book, but to Bryan we're we've that's able to better businesses value I what and had and so the see. larger by a marketplace the a is access It's be what we're because those acquisitions what to tightening exactly operational for little what why more of into that spread, which hopefully grow you cross-selling foreign think gives the than achieve. much more and of a off optimization color a opportunities Sean so little efficiencies hopefully we again, is is And the marketplace to early that's compelling, Alex, that cost trying the color client the and and before And going larger need you doing we're by both a that exchange much excited gave you days, deepening

Alex Kramm

appreciate Thanks. opportunity color. one single little than was you. do but largest a I the the Yes. It Thank bit more

John Pietrowicz

thorough, very so is Sean Well is Bryan.

Alex Kramm

Thank you.

Operator

next has Bank of our Carrier question. from Michael America

Michael Carrier

question. for Thanks morning. the taking Good

We energy look it of of some a Just driven backdrop, on look a know the areas It open like complex. product when the some that by the current overall, the you're of the environment growth in at the seeing some you say of the some lot at been equity, data a I bit show like other and the areas. current rates, -- softness. and you has interest seems

Just seeing XXXX get in some color, perspective. that wanted into of some But you're in of to what the got terms areas. in just comps in obviously tough the we and you've put product environment,

open Just given the divergence trend? interest in an

John Pietrowicz

good the Sammann the and growth Derek time open about, of spending and about rates Mike, more we’ll business, it's and of the agricultural right a Derek energy interest there today, markets talk the Derek? talk let on question, we're instead

Derek Sammann

about appreciate I talk And Derek. the some businesses. It’s Michael. thanks of other the opportunity to Yes, the –

first series of It's coming energy QX quarter in right. records all-time a off certainly You're kind you're In softer last at an specifically, recognizing market. challenging of year. a looking

seeing off. that coming Iran higher You're generally coming, even drift market the the light sanctions in news of waivers the of

You dollar the market and couple only increase on. moved that saw and in digested the a of price, quickly

We're softness for and about in seeing are WTI last both on contract reduction Brent down we're to open slight of seeing as in our interest, We down other open a about well side. each year. May on as in the both us that volatility. of contracts for what seeing We're X.X million right X.X

surprising are So returns. low see of think environment that realizing the we're the has environment actually shortfall I Folks seeing in carry resumption been trade. positive not to for a this volatility selling volatility

overall we're in folks So the we're challenging of that, you seeing, challenging, best we're actually But outperforming now. now. a and a on right top when posted at we seeing breakout our third still the quarter the space little for volatility right being that environment ever. And being other macro look

market increased XX% WTI specifically we the about market. share combined On to crude from the XX% side, of about our energy

the are this and looking and the up space, was get strength gasoline kind at QX and piece. is well. our balance in crude of up People actually business XX% over balance crude portfolio the the driven overall as refined here shift pieces year. above at numbers look the by you the of supporting If of you the lost overall or of on at look The

year. really story So on up this gasoline good with XX% volumes

That's year side environment. trends. gas, We're we spectacularly a market story prices just volatile to lower Hub stabilize challenging are in This price market XX% we're us the we of We're This a another was, other market Henry The actually actually quiet. was had shop again. continued outperform seeing and where on natural last of of back macro seen that another That's the Futures still gas year. share relatively season low market. market. up

market, outperform and is a oil this and businesses, So strongly continuing still that a are continued grow and overall strength we're we're natural narrative challenging those The a pleased to that in globalized been base market, and gas now in we a structural to has where crude theme. increasingly customer place. seeing change in and narrative manage of market globalizing retain

our Asia that in are see up the energy in volumes in You first X% quarter. actually

a the contract that That's about just crude volume hitting exports volumes both the top demand November about us we've interest barrels and and market reflect heard demand the of we the along expansion interest You've talk market crude way. a the U.S. call. put there, of records regular products about that products XX.X of XX% to out of Houston at the million for innovative of day increased share the got XX% growth the oil, and in in the and of open our market a and new you're Physical the we about share open a back reference seeing and of example, launched Asian that for

side. we're we're the That's focused that's opportunity, the resources on a on where put environment, where the pleased focused results challenging So on in user, in global the the customer we're we energy and end our with seeing participation.

Exchange. comps, on lease. performer asset the Ag Grain to while markets of compared when CBOT, Euronext our best you combined you side, Yes down weak the QX, class our look [ph]. On Ag Minneapolis again down in the complex funds all the know That's a Ags that the actually our a seeing market the also and the when we're at in was

of our the is are And a We we volatility. to from lot the top XX%, share market of XX% where also call, increased there Terry livestock. mentioned seeing at this

continued China what hogs, on of cattle trade are sanctions livestock the the very we're swine and and in seeing terms talks market. saw the to fever reacting strongly You

volume is we the there events and And number both are draws risk. open and quarter. cattle hogs, there course of options when records that customers when to their be the the place and and manage in a interest saw of So continue first futures over to risk, we

there, So do broadening work build questions, participation customers focus answer innovative we'll commercial some continue around our Did Mike? and to and globally. on our that your

Michael Carrier

Yes, thanks a lot.

Derek Sammann

Thank you.

Operator

Our next is from Blostein Sachs. from question Goldman Alex

Alex Blostein

through that's Hey equity a guys the up. good making, that overall maybe around if but, would licensing of as expense, morning. revenues you the equity percentage business of transaction some best are to think mean, year or like question of it out sure play Quick the tick on couple because guys way investment a evolves there? of the your the to you if looks business help think of quarters next I about out continues you I'm the over may, will of so sort maybe us take margin that, that equity not as how kind

John Pietrowicz

Alex. Thanks Thanks. Sure.

in out take each at give you of our unique. look our specifics when So a we fees, is and licensing terms agreement agreements don't license

So fees when adjustments be IP there license providers. to an look the to fees annual take you tends at to paid our a the

related also beginning to note important and So adjusted rates. to that equities, interest the other of it asset fees energy includes majority Also classes fee the like of license the year. while relates line at it's to gets that, the

the equities, asset So about XX% related other is is classes. to the license balance to to XX% related line of fee

we the at fee terms between up the interest you the interest, line. of rate expense, with volume our and step our when you since when banks. got revenue swaps rate was that rate at into relationship had the component, interest license XXXX. We we've with partner to take see a into the share best interest our that equity that in look it the the component -- So -- did in the product the revenue in account. look And that Also, take you a have

So that deadline impacted as that well.

Alex Blostein

That's Thanks. Got color. it. helpful

John Pietrowicz

Yes. Thank you.

Operator

to Harris Wells next go Fargo. from Chris We'll

Chris Harris

Thanks.

not Energy guess, the XXXX volumes of just I'm And I commentary back past say regarding end between relative up was this And follow were the potential create $XX. a WTI WTI and the disparity XXXX what of that that, the up out wide. to differential as forward price to if a the want a Brent does wondering a and there's Complex. disparity So a wide wide now that like in it in risk It's negative has on problem about disparity Brent widened just, price is, I wondering seen reason you being pretty is, for when The if continues. and when complex. going we've for it this as

Derek Sammann

the again. Thanks Chris, Yes this is Derek for question.

well factors, Now, I look our versus market. think different XX number you where kind focus a as to in both market when now at are broader XX the in our of as own of the structurally XXXX, are back we there business, and own commercial

in referenced commercial interest the XXXX, side, the that more meant center oil pre of our global strong in a and commercial Congress the XXXX structural we community the to WTI kind has in we market have back continually specific made that piece the that had in didn't end that you players of heard players along the December in were a financial us focused were to we just a had best user on drive in was you've and and that. saw customers, the significant with I put place the ago, it in sure on of say we're think, The as producers I of of as lifted the the change when open open XXXX very on position narrative very much, moment kind XXXX what focus the much reflected a footprint user focused financial that We That the saw we way. export the that ban. making if on and were in customers, holders, make interest we end we and WTI. sure focus levels was very that at a for the commercial

market our amount for the at had the now participation So, last X.X and were four now when we of and where under sales significantly to on response focused higher interest at a participants. kind been million significant the you our years open participation pre-XXXX contracts resources look in commercials and user commercial end versus just those of

We of smaller was and in both really proportion and had place by Asia, global WTI that our has focus Europe business driven shift structural the also the positioned much our commercial a benchmark. that taking

are had put with The the performance specific Europe of of structural biggest about kind we and on the energy our in some areas the coupled talked into shift focus probably commercial front, that in those that So, international Asia. two our outpaced place. I and resource driven that's business think Bryan, drivers. our very And

Asia specifically, quarter. up this that’s

Terrence Duffy

I speak to Just this a been reinforce me half. and think point, over the Derek's year and last to year, hearing probably you've

In alluded the terms We're growth in this very being seeing complex, the continued energy Pacific of proud of out to we're that the past trend Derek tremendous particularly quarter, oil the of Asia so region. up. crude

also, crude and coming for we're that our Commercials out growth are nice that's out as He Kong, RBOB. about highest Commercials think, growth earlier growth our seeing alone, I driving the are about up of approximately of well commercials. coming of for seen it's futures. out we've It's that about up South nice product. its China XX% Korea for record in third We're Asia-Pacific. Hong XX% alluded seeing the up X% and again our to oil, as X%. demand up

know be to export we benefits the driving to end regions. these emphasis coming us we're them, capabilities growth. reaching as for the a of those into will users, you have out of and area continued This So

John Pietrowicz

little Derek identical crude important. me basically which something different the is are really bit When for the -- interest earlier, just measure. think let open just And products, here good at I you they look a of on said pile numbers. down

if would different, fact applicable the calculating that happened is as spreads from today's to seeing volume when in it. So, you'd the you're hard bigger ago make factors today think in numbers that, be being particular and you're a them several that see not that And just number a really volume years have I that skew from and reemphasize to market marketplace. to global changed

that good that years same you when spreads color hopefully few think used widened. you ago a you can't I see the measures to your use was a for So that

Chris Harris

That’s Thank you. helpful.

Operator

Chris Your Point. Compass from is next question Allen from

ChrisAllen

guys. Morning

XXish ask for us on – a $X rate, jump well. back almost in any NEX annual the moving It's of the at as And as related a the to if if -- in annualize you color revenues if then NEX parts other quick million to you dollar kind want million saw revenues Just of The had million the on we $XX the XXXX. out CME run you about real jump revenues. million that? like a XQ quarter, for nice this five there, give wonder lot XQ the levels

John Pietrowicz

is Chris, I'll this Sure. John. start.

contract $X in adjustment and got NEX $X at about look netted side, revenue the a being the to line. now take terms line. point the million that that's then rent take out. about was it year One when CME And revenue about of our was about the about to rent the on year. a two There of was $X adjustment its rent following it was other the And a every with I at expense, BM&F netted was million. that up It in million that And the to side. rent $X we've CME up There be NEX -- were inflation – if – relocation year an being for -- the look gets In in $X recorded you that of revenue. at wanted and beginning you million, Group is resets booked items used the million. with and baseline

$X that in line. you're line. really excluding of that fee $XX The a different the is the performed amongst the balance host adjustment the of which that optimization in that seeing businesses to on market increases way million whole you're transaction that's have the are related businesses are there. excited the increase seeing, market million businesses particularly So about We're about

over So, comment there. I’ll make turn to Brian a to

Bryan Durkin

that product strong we of equation had offer. just our to and I a John. we're earlier. diversity that excited the and businesses across robust of very about Reset the would capabilities which performance There's I strong referenced and on side both we again for Go triResolve, the to goes say these optimization back the demand Sean commentary Traiana our

John Pietrowicz

Yes.

talked the it. fee one collateral other I booked not and revenue that's be a point that's a fee So line, change into did the earlier about I didn't want effect Bryan the thing out, make to a in call income. collateral Chris investment that go fee July and I collateral question want to to had change. in will point going in in

make want just I that to point. So,

mid-year. you'll see line, adjusted you'll this get So

ChrisAllen

the change good expect and growth fair? Is XQ. from for adjust we optimization a obviously is going kind here in any business forward this rate run then collateral of the that coming and in So

John Pietrowicz

annual the Yes. one adjusted an would say, adjustment. the from talked I the thing, inflation, that's about I

than going rate was that sense? make So $X run $XXX,XXX quarter. it this That the about million. rather increase quarter adjusted per forward Does would

ChrisAllen

Makes sense.

John Pietrowicz

Yes. Thank you.

Operator

from next Kyle question Voigt Our is from KBW.

Kyle Voigt

some… morning. Good There's Hi. been

Bryan Durkin

morning, Kyle. Good

Kyle Voigt

regarding There’s the trend in in other capital to recent following press reduction morning. recent Good strategies. allocated and Bloomberg some publications

you any CTAs And XXXX? that And seeing or in the these total volume you do as and of way size volume frame context start on strategies total approximate CTAs help then any revenues? to some secondly meaningful trend from the believe impact outflows having can XXXX; in this is softer following is there

Terrence Duffy

there the we them speak products breath community provide look mean, just our face ship hedge be the with to the that continue to to and growth buy-side particular that we as products as It's our venues at across we from the I opportunities trading asset the the opportunities the regions us in at. to that to look that need would a incumbent our within represent. solutions upon of We swath and managers. challenges able product side of strategies particularly I strategies. across all they their their into funds continuing and see buy as of I that community perspective well other broad and they having with and offer liquidity

a be So it continued will focus.

Bryan Durkin

indices has is Index, to grow that commodities as interest they looking our volumes cetera. business at our we in the making weightings that the businesses are that direct the can attract in commodity is sure on side commodity the Bloomberg impact the important et that important MSCI various open commodity have that a of way most say, the side Let’s one get fund on into we inflows

about for re-weighted year total higher an get that percent a is reweights not those every the as our absolute proportion growth a at talk continued indexes but So on importantly equally the indices. as here of products well of those the side relative

futures in about not might index products. from directly index So talking pile the in then CTA the the as that the be in that and to trend footprints followers respective the you're arm back those

us hedges in puts proportion So growth focus weighting which and ends products a of indices those in the growing and back traded future. us giving CME into our open higher in our group those volumes interest volumes up

directly by we can't at it, we those as for put of in see position flows increase So, percent best control but those ourselves in higher we products our each a getting reweighted the indices.

Operator

is Our from Ken next JPMorgan. question Worthington from

Ken Worthington

Good morning. Hi.

earns you collateral CME? in more and then the this at In I last? Maybe seems you. It terms CME indicate can the can about allocations of where Thank changing also versus and non-cash between on investment profitable And or SGM cash think is you cash much more customer quarter spread like which how is non-cash. talk are stood highlight cash, for collateral income the profitable. clients

John Pietrowicz

Sure. Ken, is that couple the the last average we seen at the in clearinghouse. I'll of kind quarters of over you John. we've this through walk cash have of balances terms what

those first cash points XXXX. gone of has XX billion quarter we about the $XX.X basis balances billion on gone about quarter around trended of quarter Balances, in XX the the first receive to The first XXXX quarter downwards. it's So, so we the that down saw of from in basis it XXXX to average about $XX first return of XXXX, average. points in in

the You we on on have correct, collateral than are collateral. the collateral the earned cash do less we non-cash non-cash

as but we on take will adjustment are take impact that when look which of the making So was amount the a cash we our $XX about that net we collateral. July. that previously take that if you And in it return the -- on about received at an on XXXX the you the that first quarter so collateral on that earnings the have a in that's collateral, talked in adjusted be look earn July non-cash million, we

Ken Worthington

Thank you much. very Great.

John Pietrowicz

Thanks Ken.

Operator

a And from question follow-up we'll from Deutsche Bank. Bedell Brian take

Brian Bedell

a couple of much. on questions very Maybe product. Thanks Great. just

the remain you impact meaningfully – low of the to weak what know if [Indiscernible] getting really meaningfully some And that invoice these that and So, then volatility just in the the continue boost volume comments light? kind think of been on made you're are or rich interest spreads see in on the equity market. capture indices there indices within obviously perspective some rates up. just RBC some whether Maybe with earlier equity extent that's also obviously what capture perspective launch volatility to Sulphur new the trends starting to you you in I Q&A? trend

John Pietrowicz

question. May Great launch X about excited very Sure, much. We're you e-mini futures. very micro our of Thank the Brian.

across is reminder For folks major to the this a as four indices.

utilizing XX,XXX we’re So why e-mini have across the we about about indices, and excited And S&P, this. accounts Dow, Russell XXXX the and NASDAQ currently futures.

give will granularity. this greater them So

to of will relative question this to their them granularity one-tenth contracts to give is had them earlier the our size in a contract CTAs. those exposures with past. also to the o So much contract greater optimize existing their exposure the size the marketplaces e-minis. I’ll futures order they've optimize finer in allow than to And

were about of better this has the since you launched those then have think If e-minis the since and dramatically to in counts. grown so the contract -- us penetrate indices XXXX; grown that allow size

available significant We are e-mini at have accounts portion them numbers to that those more too traders numbers believe existing look there better external contract active that and approximately Much may to us site allow XX do million Futures terms of for importantly active users if gotten to of some XXX,XXX the this currently accounts. addition XX,XXX in you the of traders those that CME dormant will order there large high on retail as marketplace are retail seen We've as globally. penetrate actually them. XX in are In

positive our very We've we from the had that hopeful see all distribution very by that very will are XX uptake. channels. feedback retail we good So countryside dividing of

believe their product working on one we'll their XX% are well of that eight as with to the We And introducing start week order brokers of them ready brokers. clients. in different retail to we offering be zero as

very idea. a we think about from positive very it's are those right great now feedback we're distribution seeing excited I channels launch. very size we won't positive We're So a expecting the very opportunity. but it and

to that Now terms Sulphur year traded record in growing this complex other our of of excited of We XX,XXX the in we've hit contract. about contracts at about futures, anniversary there CME recently and launched, very look we're at had that in innovations a interest single one the we've one our anniversary one had if you rate I think products year anywhere fastest ever And is day. of a the Group.

of a it in XX the the all putting trillion million contract XXX contracts equates month new trade in than first reached about time of participants. with notional. perspective to monthly in X about March So worth record we months. had we've X a And more X.X different That of XX,XXX

adjusted we're products renovations, the right to So return could traction continued futures excited equity going back the December, right. side those there. on total on keep we relative in I about very

So futures recall, efficiencies, on – company the capital margin you total is focused environment regulatory help this and to changing may return how clients.

XX% interest. seen exchange. in out five it to and third very S&Ps as day. the had $X marketplace good record of December uptake we took day. there return the we this contracts the and contract. years think about -- go that in recently is to five a We very equity rate is So a to quarters. considered year. nice a largest we and our under growth year we offered when as addition go those year actually XXXX an after the in only category that in the was addition we the growth I year, actual particularly a RPC over had was pain open now swaps we over about contracts it Last saw rates And growth This foreign so XXX,XXX we that point five marginals, And to being made with year years. in alternative And contracts especially uncleared We've are total out the extensions their XXXX

innovating. constantly constantly We're attracting clients. at we're new So, looking

I not thing the new continuously we’re is optimizing product might Another existing but just innovation, contracts. the up bring

our the I as note as two-year note cash. just is might two well note futures Now nothing year

reduction action So back while futures. minimum This the two cash. in increments in because in note And note we're in took there two those saying actually the environment increase difficult those is a health a November, a a was week a volatility marketplaces that we half minimum year price important and our is important? similar in BrokerTec ago research of increase reduced the about Fed paper the price year is and January that Why in published increments massively this volumes.

side So the if XX% approximating contracts future side about being I’m you well look both XX% the two XX%, to to the on BrokerTec here about went notes of as each about from the an on side additional at equates year a about the the platforms volumes as XXX,XXX that complex on overall CME in Treasury day. increase

XXX year said so far $X.XX to as Invoice contracts of from portfolio good again very – this So, a there result the XXX,XXX RBC I'm growth a last spreads, positive margin. very really advantage I this XX,XXX seeing year taking a day and earlier is

earlier and that. we're huge advantage also of seeing As mentioned I and growth taking people adopting

Brian Bedell

Thanks John. Very helpful. you. Thank

John Pietrowicz

you. Thank

Operator

UBS. from Kramm Alex from question follow-up another have we And

Alex Kramm

Thanks Hey. again.

things the asked Just very before. two quick that follow-ups were with

the any On we have run good, of history. the but don't revenue you sort quarterly rate said clarify, is just other line to

the and given around aware So of of, or it can more comp the of performance just take if beginning don't the bonus you out bit you you and end doing -- year? a end I quarter anything gave expenses, bounce so the what at customers optimization the can bounce to kind that then volumes or of low range I be there? any should Can think know and there business to the high a be call give incentive asked that us target then seasonality would the certain the little obviously for around? in And that Thanks. that is Do on we just actually earlier. of there year, was in kind

John Pietrowicz

Thanks. Yes.

just the based. of a that revenue. side talked about to – terms to bit revenue be the subscription In The on that we more tends little and information or into line NEX other the clear, be goes

than be should transaction less revenue. it So, the volatile based

you're thinking that much So, more to a when tends be line it about stable line.

we’ll be which as collateral we change that mention -- I There a of are leasing the be fee Also there impact is that sub into office will going that there that staff impact is in line. space. our consolidated couple office One in as in be are As things some rolling did well. space there. a move to will the line

of couple you about to the a that's other revenue out think model as So points line.

specifically terms when CME at on look outcomes it bonus In a there bonus, the based really when side to we comes the of expenses compensation look plus we range when the of of being look performance at comp. stock-based the is you kind at is it, compensation

we So the or bonus, a there AIP so target cash to hit don't of zero our is bonus obviously And to the do. that terms disclose earnings go cliff it cap depending down we you way all that extent can don't know and a a we range. certain how is don't call we we on there in targeted that

the what see been it proxy the past. in you Although has can in

compensation is can to entire S&P return based the the to compared compared pure the that total terms of set also to what Obviously -- a relative that's stock happen margins our and XXX. is So in our bonus.

Alex Kramm

right. All Take for Thanks clarifying. care.

John Pietrowicz

you. Thank

Operator

And for conference you the to I'll the time back have additional remarks. turn today's. Speakers, or for questions we all that's closing

Terrence Duffy

appreciate talking Thank in very questions to the opportunity quarter. next your today. answer you. to to you much forward We We look the

Operator

our you conclude today. that your participation. conference Thank And does for

You may now disconnect.

CME (CME) 1 May 192019 Q1 Earnings call transcript