CME (CME) 30 Oct 192019 Q3 Earnings call transcript

Company Profile

Participants

John Peschier	Investor Relations
Terrence Duffy	Chairman and Chief Executive Officer
John Pietrowicz	Chief Financial Officer
Bryan Durkin	President
Sean Tully	Senior Managing Director, Global Head, Financial and OTC Products
Richard Repetto	Sandler O’Neill
Dan Fannon	Jefferies
Ben Herbert	Citi
Brian Bedell	Deutsche Bank
Michael Carrier	Bank of America
Kyle Voigt	KBW
Alex Blostein	Goldman Sachs
Ken Worthington	JPMorgan
Jeremy Campbell	Barclays
Owen Lau	Oppenheimer
Chris Harris	Wells Fargo

Call transcript

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Operator

Ladies and gentlemen, good day and welcome to the CME Group Third Quarter 2019 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. John Peschier. Please go ahead, sir.

John Peschier

you joining thank and morning all us. for Good with Harbor language. am going Safe start to I the Then turn brief remarks, I John followed and will by it over your questions. Terry to for

is other materially predict. this uncertainties that can find and statements. last between differ GAAP are on results and factors what the measures. historical forward-looking guarantees assumptions our expressed are a are Therefore, reconciliation are and the More These detailed facts that may our on implied in may will on or any They of made in page with Statements information future not in of the performance. actual website affect be filings documents outcomes are call non-GAAP Also from about our that and statements our the not to statements. which performance earnings difficult SEC website. you on involve found risks, release

over would I like that, Terry. With the to call to turn

Terrence Duffy

John as get right to My released brief the provided can we And extensive us morning, thank so this comments your quarter. will details John. questions. morning. commentary joining for said, third our to We this Thanks, which all be you want executive on I

contracts grew more volume daily QX average QX, In up than per XX XX% year. the to August months slow. and are million Normally day, last to compared of July

well. products, XX%. this than to the rose equities activity very daily delivered metals more each and record in We interest up business with XX%.Our year. pleased we’re So continues daily which were volume rates perform average volume options Average and quarterly

significant United from up X.X million States. XX%. customers volume based third the We per contracts reached the During day, our outside options or growth drove quarter,

from of in was overall Asia last based quarter, reached and European year QX and up volume X.X customers the Volume XX%. originating metals level quarter with third During the contracts records by increased versus per third XX% day, million equities. record a from best

America the accelerated. contracts highest has per Latin activity the history. We day XXX,XXX during second the our quarter, from Lastly, had in

rollouts, Micro and QX to contract mid of QX. traded contracts product traded. sequentially SOFR new our with successful more a deliver record XX,XXX our to September new ADV grew in XX% daily in record contracts September E-minis continue popular a in We than monthly reached XXX,XXX We from

New recently developed products we the the ESG include natural export Shanghai S&P between the US futures agreement CME announced pricing liquefied also Exchange. E-mini and bilateral Gold gas and futures,

integration, we it Turning with are progressing. is NEX to the how pleased

portfolio and services. great the sales the offer progress, full products have to cross We leveraging of joint and selling made to teams enable

the cost. with We beginning the remain you on are transaction combine at and also to world, which We office a progress. synergies our revenue to on this lower very assist updated strategic focused space look forward laser around keeping generating should

you me over let turn With provide that, to to some the additional John with comments. call

John Pietrowicz

the Thanks, seasonally Terry. franchise. year highest billion touched the futures Terry level almost on we quarter. a It typically slow our this a was tremendous seen what $X.XX is quarter. during strength options reached and have in Revenue

at EBS, including and sequential We BrokerTec business also in growth saw triReduce. NEX the

which $X.XX During related adjusted will we up confident customers at in earlier to from fees excluding by third whether from year, year be a foreign $X.XX the slightly come the in US this regulations were reduced federal the XXXX. These license quarter. tax related between prior we highly legislation that million last note deduction to available U.S. We operations. quarter, service enacted released expenses our proposed expenses billion $XX regulations clarified would came our remain in quarter. $XXX the and adjusted for million, billion in One final

adjusted guidance. We and this, these nearing income XXXX tax in XXXX we returns, the approximately $XX tax million an year, remaining quarter. Of tax revised rate quarter have XX.X% of of and result adjusted this taken completion in calculations recorded and non-GAAP results. Adjusted out effective $X.XX. quarters new EPS the The $XX of this million this resulting was XXXX the $XX quarter. for of XXXX the an QX a As the our for million to tax including regulations entry related to benefit in our diluted current reflect first relates three was to

annual XX.X%. approximately to XXXX We be expect the effective rate tax

analysts call covering With your that to up the number Thank open would you. feel on limit and the like back we to to free Based one then yourself for queue. question us, the short summary, please jump into questions. of

Operator

will first Instructions] Sandler you. with O’Neill. Thank question our [Operator come Repetto Richard from And

Richard Repetto

Yes, morning, morning, Terry. Good my... good John. guess I

Terrence Duffy

morning. Good

Richard Repetto

Everybody call short-term Good focus over last you classes the have volumes picture I what weeks. and have about asking to things, volume dropped on the morning. asset not is the X.X across but know,

and So in guess importantly environment rates the of guess drive, the then going you revenue How interest outlook revenue. of picture low forward much there? transaction are the the think I the longer-term any volume rate But complex so much I insight rate transaction a more for interest about and rate is well? would interest of the so as

Terrence Duffy

think, across look of they equities going be. have referenced period the as lot on. to of you’ve very the you because That a They and may ETFs couple Richard, volumes especially the and and or what weeks. future last would kind but little like a down that a tightening I jump significantly – it’s cash of not being of board mean us volumes of said we’ve predict be across you they of hard you last when in got I the the been bit snippets have the to know, careful seen across us at volumes what give may all in to Well, think for you we markets

then not it’s when comes So rates. it just to CME interest and

people is to that have rate the rate – at people borrowing need are There different a risk borrowing in roughly funds think going Fed. give XX% we’re of States, that throughout different is the, the all at look I there service continually continually that XX% look regardless are by manufacturing the at we that manage or manage lot and lot people to risk You economy and to of the a the and cost United curve. don’t the of what Fed levels

I relates rates undeniable as then a to interesting is what very still coming slowed question. will There uncertainty be good in it So position has is it that Paul see no going it volatility. businesses I says to be know what to up. we those the is capture think the that to are set Chairman, there that up and additional think we’re And down, that

comment not XX-month a would a period try to to Sean X-week let but I I’ll base on So cycle. more,

Sean Tully

this jumping hi. in. Yes, Rich, Sean is

So of than the for surprise volumes have but for been the previous the couple markets. last been to lower relative ebb two not and flow really the months, had of and information weeks, certainly economic they

go month sorry, tightening the of the less ago, XX%. is back at and easing of a than easing, the less Fed which probability excuse so was If occurring probability or this week me, I’m was XX% you meeting, than

If look you at running it’s today, around the probability XX%.

because that, the certain me, uncertainty, FOMC to has a relative tend standpoint. volatility excuse from gone to to from volumes marketplace the meeting, the tends So the conclusion. highly has marketplace you uncertain a then at market when the situation least come fall, do a When a to to situation remove fall that’s you market

as terms the the are as that doubt, couple will But into weeks. well think drag ebb a that’s I high part year of and the of last there of later FOMC in this be just of uncertainty a upcoming that event. flow, year. So It’s at that’s no short-term next levels meetings

well, that themselves continuously much If their in down running less in more are making managing XX%, look market products for our ETFs our of to our down to than in volumes you risk. at participants marketplace at the Terry volumes, that. We In our attractive terms available equities, at most than they’re products if terms any the of are down of come products the and as comparable substantially around you example, look look and us the are sure ours largest products for volumes indicated,

know on new continuously adjusting products more So to as as you products. make order are we innovating our them focused attractive well as in

futures in year are ago. year substantially this will rest are volumes up of price you were those the example, of – two year a the For the and lowered to increments they recall, minimum relative we January in where marketplace our versus now

So futures they volumes previously, around our X-year overall were running of to XX.X%. our at like futures, running treasury XX% of whereas more it our

year So out the notes on out of an of of two the back that. contracts additional XXX,XXX coming –

very ago. SOFR. have We of futures, which XX-Year our a in day. know couple am growth just example I for XX-year Recently, new – outside about doing XXX,XXX contracts a you Ultra excited years are also seen

open day had that perspective, the there market, In SOFR. May Terry previous heard terms the of the in in in that in repo now fact talk futures earlier than We single in September, an to that of repo the about for in interest a billion repo of year. market, launched to product. record SOFR their It’s risk. XXX,XXX the mentioned Putting day. we as I’ll innovation. enormous trillion equivalent. more Recall contracts in that day notional volatility now manage coming is of traders You’ve CME month product that $X.X only XXX have a the

continuously are we So innovating.

earlier on of the mentioned terms In Terry that Micro E-minis, the call.

trading. XX,XXX than sorry, more XXX,XXX at XX,XXX contracts currently contracts We’re than accounts more trading, ADV

to growth a trading we huge so futures it’s that and E-minis, the and continuously that is it’s look for and make contract, adjusting it’s participants innovative, also rate got contract, environment any or clients it, the the than X.XX we’re absolute we’ve in number our E-minis very huge most possible SOFR to additive in whether mention market interest I any average price so new existing So smaller attractive grow the most sure will the contracts, on the complex environment. whether looking trade whether of so products, our far our Micro

Terrence Duffy

at think And Rich, confusion one look I more a sometimes add of me thing, so when people there just let is rates. bit

making of money. not is Our of driven money, business off off

other whole to part a that business of host have small to interest to have for is business unlike businesses, does that rate come mitigate risk our We a manage marketplace that. very our fluctuations to of that our some

a money at people to living. for affects think, low are when make what historical I levels we at that look rates who of we So do money off versus trying

Richard Repetto

helpful Understood. Thank Very guys. you.

Terrence Duffy

you. Thank

Sean Tully

Rich. Thanks,

Operator

Thank you.

Dan comes next with Jefferies. Our from question Fannon

Dan Fannon

thanks. morning. Hi, Good

potential synergy and So, Terry, be in specific progress. the opportunity. of could having you meetings potential of happening what’s guess kind kind you integration about or I NEX the you’re the and the mentioned meetings and revenue success

start, the around some Asia. and the was intermediary Europe it at of in think in I banks the

more there would having So are could guess you progress the of tangible if be what be some around kind I helpful? comments

Terrence Duffy

little a a more Bryan to along bit talk that’s this Dan, in Yes want leading great you’ve this. ask to John. on effort I with question. about, because chime To been

Bryan, chime So you little a maybe can in bit.

Bryan Durkin

Thank you, Terry.

are integrating skipping in last beat call of last our on a the businesses. since chat We not our earnings terms

this think is very formidable sales I the effort. part a of

So you teams. sales allude earlier, heard we Terry how really integrated to our

more We’re solutions we banking offer our speaking quite for up engage them across exciting help cash, the side and the on that’s with business one and we’ve other resonating quadrants as the very base of is not the go into and client that engagement the portfolio. strongly. management their regional the an out community, across voice meet futures to as which very area What’s the the banking both opportunities, is risk sector, some with particularly optimization needs we’re and well us the able core as that entire in that’s our introduction futures drive offering again to have within services

able offerings sales the are we’re cohesively the So how we have how about that represent efforts to together excited come we very have. and

Terrence Duffy

John?

John Pietrowicz

entire with our sales current sales were we team that force providing Terry. on thank is terms to can Yes, clients team. just have the about our followed entire this help initial which a ‘XX had year Dan, help with to about all kind the They XXX it’s of what all give that and this is product going example, To so by XXXX. tangible the in offering clients more you and they’re educating due XXX call sell yesterday come of our of you, between that and following the triResolve about interesting, sales to a calculations year margin working at clients. do

it’s entire services. So being the about talk sit and really, down to suite of able

offer the and offering we’re whether Terry on we’re it’s or business. managing cash optimization mentioned, As them down providing to futures and side, the risk management risk through with our able about management side sit the it’s it’s, whether clearinghouse risk on then on the whether

example. great a as interesting of kind it’s really, it’s So

In on being force, the the on entire through – working Sean? call this terms that across of them the sales walk campaign and having we’re

Sean Tully

Dan I will helpful. one be Yes, mean specific,

earlier talked day success in a month briefly So talked September and far SOFR XX,XXX great contracts month. futures, our contracts a XX,XXX I terms briefly earlier SOFR, Terry about about this day, the so of of in

If of you worth think billion U.S. Repo about the a BrokerTec $XXX every it’s day. business,

BrokerTec needed in the team are is risk to with the literally repo who everyday. So repo our September. desk during phone Those traders SOFR the month same their those of hedge on

was success. it sell very that So who talk largest them are SOFR easy futures, U.S. and significant the very business that our think a to BrokerTec has into now to repo have which team I their exists, clients

the we’re and of marketplace. September, interest running If ran SOFR you average look open at month of at or of the XX% we XX% today, the XX% of volume during around the daily currently the futures

where already opportunities opportunity getting those clear the a in it’s we’re So synergies.

Terrence Duffy

your Thanks, Dan for questions.

Dan Fannon

you. Thank

Operator

Thank you.

Herbert comes question Ben with next Citi. from Our

Ben Herbert

Hi, good morning.

Terrence Duffy

Ben. morning, Good

Ben Herbert

I quarter versus strength the help organic think kind that overall could of uncertainty. macro hoping efforts just geopolitical high non-US the just through and the us in was on touch you customer to base and expand volume

Terrence Duffy

does I’ll that as Ben. Bryan again that Bryan? the he International question, business. to up ask head Thank you for address

Bryan Durkin

quarters know, international. of and is in volume, we as out one of activity, top producing noted, You this our of revenues terms

international Our grew by activity XX%.

million contracts, up this a we’re X.X from of about quarter past which and XX%. was contracts about X.X excited EMEA day Asia, X.X million our total generating very volume. activity a We’re increase million XX% about their of represented contracts

all activity resonating We’ve marketplace. activities the really planning, each these regions you. our with can country that that across deeply it commodities, up. our more I break visits past can within financials, with of within definitely product chartered we in equities, on coming mentioned I’ve focus where penetrate As the down so the and is of by it’s quadrants

classes. indicated, the so, broad of ground, on those array boots able through And we’ve as sales the being asset to the having is efforts, offer

coming are existing regions, We these continuing great our into new of to growth of all clients coming out see products.

last our for the One interest drivers major quarter of the was rates.

our bringing is them to those that segments And coming example, out markets. there efficacy versus these of so to reach specific of out of that growth the sophistication year sales the are segments driving being about complex coming of and talk treasury again different when that to very we Europe goes for two to able our out team Asia and in,

John Pietrowicz

growth talk little the tax we as it’s it deduction strategy bit to a Just taking. globally. relates that the of international the about Really, we’re to another growing benefit have

ability is we’ve clients States. Our tax really take our to this to because service from the chosen United deduction foreign

is advantage extent outside able the that take and and U.S., are we’re globally that to U.S. the we continuing Bryan – to tax as that within to then So growth faster of grow deduction. this indicated the the

clients grow a provide XX hours globally, and our better growing globally day. XX we’re and it’s as we systems to liquidity utilize our So hours a to another benefit to, we’re and day able also able better

infrastructure all an the risk. night, liquidity, allow really any we we to have create that event us day so So to really time leverage – to when it’s that happens or the place it that manage able are and

Terrence Duffy

for question, your Thanks Ben.

Ben Herbert

Great. Thank you.

Operator

you. Thank

next comes Bank. Bedell Brian question with Our from Deutsche

Brian Bedell

the improving question Great, got that some outlook I is guess the your volumes combination I sales potential thanks. things with portfolio initiatives forces rules you sort of the those of MBS of of growth linking of savings may traction and margining like so sales hedging, in you If the improvement Good morning, with the combination organic potentially or kind are question a, together have link sales the an your international with the on FASB for folks. two sort also with the can of an how force, combined And clients? the see you volumes elevated, initiatives the know, forces? combination from resonating that portfolio with of traction, now from

Terrence Duffy

Brian. Thanks,

don’t bit. you Let a and Sean, Sean little starting? then why turn me that Bryan in can add add them to

Sean Tully

you if over of increased has bond seen mean treasury couple we’ve great our there futures know, our our well you options been the particular overall complex. And insurance usage of Treasury treasury as complex growth I at and last as futures years. companies Yes, in in look

are new to addition the the in in about reached billion record uptake we very growth, portfolio our will saving In terms in margins. margin, year. OTC terms we the to of last very all-time increase portfolio $X.X clearing. as margining In us October, lead that over well in participants, to significant strong excited a worth of help of market That

XXX overall, about up last you If year. our currencies day, products for XX% a all look in volumes OTC across example, at running billion year, volumes this clearing all from total

So a – large and advantage set of number increase with a margining. very portfolio of of greater again increased taking significant very participants participants

On have portfolio – that we the recently enhancing our enhancing are announced portfolio efficiencies. we well, front margining margining as

month be will the We doing of that in November.

it dollar In make terms it more to swaps. me, trade as interest spread, as rate futures will even today of efficient a spread that, excuse that than – U.S. a to Eurodollar is

and our example all time the as create, And is of but that continuously they where time efficiencies so much greater they showing we take of of all on advantage enhance it clearing, do, enhancements we to participants sometimes new growth over and all products for are. of We’ve OTC services, of it and the new an enhanced through that’s services. the takes

Bryan Durkin

the paramount well perspective. sector side. user will of the particularly Capital our international I buy banking just comment the efficiency as importance to community, from is on as

driven in and so thing terms been looking same Europe. EMEA The this as tremendous holds growth hedge at throughout of sector of out side Japan true of as funds. out of we coming A throughout, quadrant, seen the the and the Australia. have on well banking particularly activities lot has EMEA Asia, Singapore, Our rate interest

of UK, rates Republic, hedge community triple-digit out the interesting. the triple-digit that’s Czech banks very out coming areas, growth driven growth are something coming in fund and We the seeing being of almost out some our of the

You’ve highlighting drivers right planning heard the are driven again, that’s and interest out me out sector. terms of talk And about EMEA. and in coming rate of number our number two Those country of areas now Netherlands and the Switzerland. the growth three of

Brian Bedell

much. very Okay, thanks in the back one. for queue I’ll another get

Terrence Duffy

Thanks, Brian.

John Pietrowicz

Brian. Thanks,

Operator

Thank you.

Michael Our America. comes Carrier from with question Bank next of

Michael Carrier

yet taking Maybe about volume flexibility, term, an quarter. thinking guys are you obviously areas expenses thanks the of And the then the us solid you just on continues. given for and morning, the concerns, weakness more just the how a horizon? question. Good needs give in some on update John, near-term Thanks. of maybe can some investment of any near

John Pietrowicz

Thanks Mike.

have business we couple there performance. really on of of always as a talked fluctuate think, I is based items that about, line kind

the One of on bonus license license are attributable fees, our them equity really to is our quarters performance, based three business of complex. and then fluctuates are our you obviously about fees

and when lever expenses, this So in our sustained is I bit equities slow downturns point, that not had we we as we you at April, in a said to this business a performance prematurely. know, call had when period of will pull that in impact the a in want

know So always we’ve as you talked flows call about of this in and volume. terms there ebbs is on

and want too impact we be So don’t very that growth. we future tightly to careful squeeze

always managing the So focused very on efficiently. business extremely we are

impact squeezing So harder. want by always even but future every we careful growth we very to prematurely we with don’t are spend dollar

business. in of constantly You know, in investment terms the go-forward investing our in of, terms we’re

the Globex out right of migrate to build our now infrastructure We’re into NEX from the in legacy infrastructure. Globex investing

out be that Globex environment, the running So double and as production capabilities able carrying are for and a is then, ultimately costs in system legacy capacity test build then infrastructure. completed we’ll right the decommission NEX now we out to having NEX once while a build the we

business. in investing constantly are we So the

sure We’re giving risk clients EBS and and providing we’ve best customers management about synergies you our we experience. we’re capture we onto the know, talking investing revenue experience, Globex, as been that and can of constantly in also our the the best move BrokerTec trading make some very that

Michael Carrier

Alright. Thanks the color. for

John Pietrowicz

Thanks Mike.

Terrence Duffy

Mike Thanks,

Operator

you. Thank

Our Kyle KBW. comes from next question with Voigt

Kyle Voigt

every thinking and I joint recommendation respect asset just was standards Hi, in was on fund, on appetite to some managers and up week, forward? feels you fluctuating number written the paper about up game. here, think suggestions keeps know not can management the and you how Maybe their one that topic that have topic CCP It that just but or good by the of the around be priority you talk new one comes regulators think talk would about, last that CCPs put this skin like or the default I was around. just large morning. paper couple in CCP standards of the about should some a years up with of XX% going like can banks and suggested, that the list management whether far releasing this But regulators

Terrence Duffy

Kyle. Sunil Terry. little well. as It’s I’ll And Bryan comment comment bit. and maybe ask Thanks, to I’ll

you we of of that but signatories were different know, in XXXX. way way – two that new it as are never there couple lot number a a XXXX, on There’s game that there of are a put from CME percentages back in it levels, are in We the going the the little did. heard in we’ve especially explain Sunil better first skin can issues game before, to I, has waterfall. surprised had than the paper been a we skin about the There to for this see discussing the obviously probably we that in they years the things it dropped and in

who the we One things from people the skin risk we careful be that the system the should very, to – putting very system. about of introduce in money be game, the to in for believe have

the don’t risk, manage introduce to the we risk. We are here

much those hedge are are have want don’t introduce they the in other We do a system, smaller don’t and risk to but to be so, the the could the trying money want get the world. Production, throughout hurt ones bringing get and too putting default most put up. where risk crops for money of business to that participants they’re so the bigger to that smaller their situation should fund. participants into the And because

bit also a that moral defense bit for of at concern are with a line defense moral number you are when you us, look a could of a that’s of So as first risk is for line hazard CCP. on first lack a as better term, think large a the people the the knowing but of it’s of default you well practices. hazard for a full We that management good don’t the that of

that. were I we subscribe on new some So that don’t to There other provisions in products disturbing. there, very one found

I nurture think If risk product at liquidity, you we it, some new products. differently. exchange it, it. look we in kind there front we is without zero quite management build a We candidates create new when not of of

that it a in default they definitely referenced I I a inherent Once they surprised that are in to rhetoric that. see if of associated is it. the to with have think as very see have vote with could some earlier. participants last that of we the happens, for associated an it that the thing that participate. that other having came So I’ll participants positions which conflict paper the, We can want would be of concerned to interest because their comment then out on and to a was market The the vote relates

an have regulators the do to for was question It’s other address this. to speak the not me for appetite regulators. Your

members you with I think or well and aware the my is. can concerns to in you very everything said right discussed explaining have now to this you working I’ve has regulators. as appetite I have been thereof. call, You otherwise explained for to regulators And cannot just other are associated Commission, the speak I decide I them, team all of the that’s what communication I and them the I in wouldn’t – to our the talk issues but said to of to that so have their with and they I have Bryan them say,

Kyle Voigt

Thank you.

Bryan Durkin

Sure.

Terrence Duffy

Kyle. Thanks,

Operator

you. Thank

with Our comes next from question Sachs. Alex Goldman Blostein

Alex Blostein

equity set holding strong new incentives you from should waivers kind little here more mix of equity kind constant, to the buckets guys the futures like traction once the think in Can for the that the everybody. what Hello. go when sort of definitely some should for again these of normalized we Good the where as maybe morning, away? the expire these around bit Question sort capture of about of business, about rate fee talk capture sort of and of look franchise, you rates are volumes products. a

John Pietrowicz

Thanks, Sure. John it and is Alex. I then This Sean. over will pass to

equity have very, performance was of was about this to with that the quarter. of pleased QX, in trading very total X% In expectations. the exceeded to volume We about far our XX% been had we the micros complex related our micros increased

in good, about rate that So the of our is $X.XX think does net mean had we the a this $X.XX and we But positive that is there all the that on per what second additive downward this in terms Micros contract of business. the impact to per that thing pressure our our rate contract quarter. to is revenue, related the about and cannibalization don’t quarter any

Sean? pleased so the kind new performance. this So us, very revenue is of for really with very,

Sean Tully

thing incentives the lower. a that The starting will only aggressive and initially, a a very is off. this month, next bit month. be did And we program have incentive waning would I that Even bit but only lower lower add than is

retain order in liquidity. to So very strong but the will in incentives some place we keep

remind of So something RPC we product. RPC to quarter, cannibalization terms see you’re the seeing the expect or the like it’s believe in that and Nothing – in cannibalization. probably you again, or that now in not more of we the net and next it’s, you’ll that

micros and trading the smaller than the much size. – product, said as trade I is contract, accounts average We’re so one-tenth XX,XXX recall are earlier, the X.XX E-mini, that

average about of the is trade an So XX% E-mini.

to you pricing, just tells in a this on that that the is as So that, reminder. addition

contract. members $X.XX For a is

$X.XX in nice equivalent our E-minis member for versus $X.XX, is premium. E-mini a rate so a a on So that’s rack a

In our $X. are multiply that’s addition non-members contract. by these per to that so for at $X.XX E-minis XX, $X.XX trade Whereas

on at a adjusted also significant basis. are they premium So risk a priced

John Pietrowicz

Yes, Alex, this is John.

the sorry, the idea, an has $X.XX but gone I’m micros. average About to $X.XX for give RPC just from to currently. up Micro, minis, about you not about the E-minis So

Alex Blostein

you. Thank Right.

John Pietrowicz

Alex. Thanks,

Terrence Duffy

Thank you. Good question, Alex.

Operator

Thank you.

Our from next Ken with JPMorgan. question comes Worthington

Ken Worthington

good tell. classes Hi, with out There to Eurodollar data this a magnitude. phenomenon If quoting Could you does have take morning direction all Journal Street size . quoted highlighted volumes. – quite you Wall and any impact which so, was if issue or this Eurodollars I the article morning regard just phenomenon data. a could. impact the a guess Does was asset on in couldn’t on And

Terrence Duffy

lot – questions and a we’re you Ken, these why days, articles off. assume the answering ahead Yes, they’re there I from and the address press of don’t Bryan, like Eurodollar. thanks. go written are

Bryan Durkin

I’ll perspective had applies and how do technology that in calibrated to a these you into and our access of based to our it’s the our users upon have of We place in we address program platform. the Globex have the messaging address terms messaging all complexes product and policy programs how if utilize trade. markets asked policy

ratio our to messaging in transactions. messaging very are We terms of is understanding of sophisticated and

terms of course a last very had occur in transparent policy – dynamic a has seen. increasing addressed our enhancement So on got We addressed We see of to it’s have messaging conduct the that in we’ve with place. that a did of messaging excessive had an introduced few top significantly. policy over policy, that the We that. weeks and dealing the the we we

coming that’s in system overall to infrastructure marketplace that coming So we’ve we’re our for the that in, behavior ensure is appropriate general. messaging with that’s our into actions and the pleased undertaken

Terrence Duffy

have I is more And I Bryan very . that division change underscore the concerns. Ken thank very to with It but participants anybody that messaging it to can’t trying in you policy we issues. question. up think important. very, addressed with well They doesn’t add enough I for made, the REC the We’ve couldn’t much summed circumvent our these your traffic. marketplace, understand market we’ve our benefit people by including talked that, the

we what a we’re believe And in that’s before. you – don’t I to in than So our I procedures, flawed. a better while. think just did. need these we amend we much that that policies think past the things once I exactly were our place in were

was I the think what that’s So reflecting. article

So answers hopefully that question. your

Ken Worthington

Great, thank you.

Terrence Duffy

Thanks, Ken.

Operator

you. Thank

Campbell question Jeremy comes next Barclays. Our with from

Jeremy Campbell

around on Fed’s Open guys of but and level rates bond in also accounts for the getting around more the earlier of business. volumes rates purchases OI and impact questions some specific question and Rich’s from absolute I’m the reset about the thanks of Market the color thanks, Hey, the volumes,

recent years I a and context there’s been market lot during the QE that years has on from Now the well. short macro seven obviously know kind of ago at to been XX going grounds in QE more as a of repo stabilized Quasi the regulatory named

you Sean, the prior QE should management what what there at or we talked lower QE-driven at rate QE the QE prior cycles. current three, risk and volumes one, evolve the How CME’s escalation but think in about parallels, we years. So, if level risk on any experience management draw in of at during business, if for Two, of a in like the be world. maybe next impact earlier kind – and looking OI couple is about and was by we, need guess, rates could Terry can I of of an the get

Terrence Duffy

question, I I’ll jump great to he and is want John it’s turn Yes to Jeremy. it done. in, when then

John Pietrowicz

Jeremy. Yes, you, thank

of most the borrowing lending, the is terms the experienced amount recent and market. in overnight as of of well to Clearly activity, Reserve, the the relative that available for its T-bills order September. liquidity jump as marketplace Federal Fed’s in to into entrants the repo is that purchase In stabilize

very crisis rate. the financial Reserve, level in has in So the a reserves funds the Fed to target daily the make the that it on right sure Federal to repo market order to of prior in if recall, active order basis you was

the of overnight all the entering That’s Reserves terms purchase recent the the repo, the target not at does these not and of overnight rate. part of overnight really term ability repo It of actions but in their they Federal look is long the it the can anything you and target doesn’t rate. curve. This changing If T-bills. impact also to impact

about you think it. If

of financial they it. the grew want a sheet easing they crisis, With get Reserve the how rate their advent that did to that it time during the huge and of into zone financial the tremendously lot the uncertainty and the on Federal that overnight crisis balance quantity from

volatility rate lot whatsoever, about additional of in are So they’re is want really the that that a go change to. sure changing is that that the FOMC it, rate, their using, where terms just to tools in overnight these it make what change doesn’t target products they doesn’t it which our of

So I don’t see it having a big impact.

terms In of previous experience.

the challenged, of to ‘XX question, our financial part implosion and crisis part look from volumes probably bank From you Zero were early Rate to Policy, of the at. Interest sheets. no of ‘XX relative balance Yes. the early the If very

our underline interest XXXX you business example, Zero Rate since For our I can and grew however, at look tremendously. we Interest experience during Policy, even I tremendously think, if rate

today. If at look you

statistic, our talk average calls on of few back For XXXX. in running me about We of market. cash is the years market about record example, we’re daily terms Today, we’re to were this all-time I’m in you’ve the US running last treasury of treasury for XXX% heard cash treasury and say, the bond to earnings volume futures happy treasury XX% in a terms futures. relative our of new of

we, can Policy. the the volumes again, Derek we number way. holders. I grew shown continue know of the open grew will that cash right Zero large to grow, said and same we and job relative We We So Derek. interest my grew Rate I feels Interest market our And to think – our earlier, I throughout underlying interest. open we’ve

making grow to are through are jobs more our now any in market Our environment, complexes products our innovation attractive.

Terrence Duffy

a add just bit. will I little know, You

lot of you his what a Sean that very, we ‘XX, what fundamental Sean for thought Everybody ‘XX, geopolitical marketplace, creating and new risk people, at when did. else are I grow. summed back we to think, in I waited and not creating we were to That’s and very it they ‘XX for rates, and the mitigate the doing? But, think business team up factors when so to products their well. look were change

rates business we the to grew the lows, products all all and historic these the quantitative during he even introduced. going So new easing with that Sean out pointed

confident durations that what Sean years, give that’s have ago. did we the there of whole today that’s and exactly we the moment So trillions lending with that to associated with I’m a and of to out exposure to continue that raised of host last the just the dollars innovate XX numbers quite different

dollars several that’s way market continue will are the at to the mitigate needs there we there’s So Fed the no to price be because what to next lending know needs the trillions look We’ll of years. that I risk, the look rate be matter of their the out of at what managed.

So that optimistic I’m about Thank quite you. business.

Jeremy Campbell

Thank you.

Operator

you. Thank

comes Oppenheimer. next Our question from with Owen Lau

Owen Lau

thank morning Good and taking my for you questions.

buyers. million. to but process $XX driving synergies up the for so look maintain do rate acceleration additionally, the for impact to still Thank Exchange, like So And some or at million, $X you you And Treasury you. please What realize year expense of businesses run the expense of and NEX sale announced the and expect have could of synergy million this size the in the expense any timing also revenue that NEX us. divestitures you was you of $XX realization. businesses you are those

Terrence Duffy

John go Thanks, that. address ahead Thanks. and I’ll Owen. let

John Pietrowicz

Yes, Yes. thanks, Owen.

we we beginning and down. October. is have we’ve – that in then platform ENSO fourth at Let’s we talk the quarter NEX which Italy on. of winding anticipate the in and acted about closed are a closing [indiscernible] Exchange Treasury, that the businesses NEX of of kind the that

The $XX $XX at on The on forecast impact So impact million. was XXXX. the when about million. costs look we direct about for were revenue

a are million. loss So around at of $XX those forecasted

to we’ve it’s of know the this realized the synergies we anticipated. We done we capture those we’ve With of year synergies, earlier terms faster you management acted that has function able to anticipated, increase our were those regard are team to all did with than we of of the allowed regard the terms integration. managing – – some office a amount make the than of in some moves – on synergies really, the on work So those which all, businesses. – the originally in we had to us great of that those and

the terms of, and end this of carry as year this track well the where EBS. a, in So we’re I in run in have parallel migration on running net of of as Globex rate have realize that do year more $XX we we the mentioned of infrastructure actually that’s synergies by infrastructures, and synergies achieving in legacy a the anticipation and infrastructure BrokerTec million as double for previously, well we NEX

NEX. remarks. the very, going the with about really So kind really excited pleased business of has as and Terry future the very prepared indicated integration with way been of our in his

Owen Lau

very very That’s much. you helpful, thank

John Pietrowicz

Owen. Thanks, Sure.

Terrence Duffy

Owen. Thanks,

Operator

you. Thank

with Wells Fargo. Our Harris next question comes Chris from

Chris Harris

then Thanks EBS Globex? next-gen a different platform bit guys. Can about from little you and this for the how platform talk your is expectations

Terrence Duffy

Bryan don’t that Right. Sean discuss Sean? Why we real have and quick,

Sean Tully

we’ll the are X.X. that much Sure. speed Very what the primary migrating launching much much, EBS briefly QDM faster to EBS over differences current be we from greater we in September, The months, announce clients next will bandwidth. and did XX be we call platform Direct

these between So are trading counterparties. direct platforms platforms

bandwidth which latency, attractive market greater lower the efficient the And is gives much faster so participants. that very at speed, – gives trading much more to

will I you. remind thing other The

relative a consuming transacting going data actually over the platform. they’re They’re the to our actual time, at to not and take performance that’s order for that the doing but system it’s XX the test is are again and in both it moment, so, rollout performance over used so And before expectations. the months, the their results far to pleasing participants and of trading very

thing on execute lower should to for well and it optimize the to allow their have The trades be customers other analytics they we the continuously platform aware of costs. that revise that is that that you way

as the very So inherited the we the the businesses. that are Bryan? as are excited to that technologies we other well NEX we – that we’re about from EBS technologies making enhancements

Bryan Durkin

client a deal and of value the most without the great base to of of platform. Major and active these migration markets engaging is and doubt Globex users a enthusiasm is driver all There Globex this of our moving of the all with to EBS. and

as benefits and functional that that need the think, time. now able we’re it, was the have migrate that they’re platform upgrades fair EBS markets it’s substantial infrastructure being say platform it now doing for we’re for to so it to onto they I want and acquisition to some to to the prior due our that of attributes some used and these enhancing already ability

and the orders comes into order are in reducing complexity those matching We’re the also the of how by platform engine. terms how messaging received

with to important going base process. feedback that So actively The positive. as this through engaged us client be is the far extremely it’s very integration getting so for we’re we’re

Chris Harris

you. Thank

Terrence Duffy

question, for your Thanks Chris.

Operator

you.. Thank

Deutsche next Our Bank. from question Brian the with Bedell comes

Brian Bedell

taking for thanks follow-up. Great, my

run rate Just one a is that also tax consider is to that XX.X% rate. clarification good the on John XXXX? for

John Pietrowicz

in Yes. that really, question, you Great, that XXXX, the where benefit we know, tax to anticipate until Brian, until is third. like great looking what of going getting continuing this business we quarter, we’re the But think function – be XXXX. by it’s a gets a decreases about it

benefit XX between to subject regulations, anticipating million subject – law which changes a and changing. of we’re we per obviously the $XX tax million don’t is tax anticipate finalization any year, So potential of to $XX the

in the our US terms in our February. provide going US within outside servicing tax of guidance international rate is effective getting we’re into that quarter fourth benefit benefit this the us an of the ongoing So we’ll customers from and for call

international and international expansion. very our very, with pleased very, growth So

strategy benefited Our through situation. growing tax again of our is globally

Brian Bedell

just think that’s the the accounting the, in or was that banks maybe I better hedge – could then FASB And now, just guys you the aspect sales with comment you’ve mentioned, first are your throw could regional if on my on able penetrate a maybe little been Sean one on helpful. And rules. regional and Bryan, combined this, force. community, to I view of Okay, my of question bank bit

do about may just thinking So what particular. in banks

relaxed, has right on MBS hedging, if the – more MBS been allows I’m hedging accounting that. think that hedge I Now which

John Pietrowicz

certainly the a from it that much our financial – action products. more made reporting for efficient utilization and certainly really has the has FASB the to perspective easier Yes taken of

you. the at have really financial that I more a I about this on really is end margins it is day, than rather think the really, impact, of Sean, do I because than margins. more it’s I kind don’t a the the think, of does concerned some reporting, activity it’s are the major driver impacts think the know, economic on people which but of

Sean Tully

mean add addition having what benefit. closely, very there, to wouldn’t probably, Hi John, a impact that’s it’s, I much Brian, I I able think be track marginal to positive don’t to have that small we in again

Brian Bedell

very Thanks much. great. Okay,

Terrence Duffy

you, Brian Thank

John Pietrowicz

Brian. Thanks,

Operator

you. Thank

Kyle Our with from Voigt comes next question KBW.

Kyle Voigt

Hi, could could, give line. for follow-up, investment taking thanks my curious if an us update on you you if net income just the

cash Fed, basis get total going and the like another and if fee likely your collateral forward. you’re Just average the quarter And we in rate move the cut how point that. from then on fee, that generating will just net

John Pietrowicz

you because been asked Yes. this I Great. I’m glad have studying so.

So anyway, Kyle.

$X.X by billion so from in increase Clearinghouse $XX.X related you – XX up billion, the we up got those to is and deposit – the about increased that about about third primarily million QX. quarter, the non-operating $XX.X at increased can the of on average and So a taking our that cash the income billion about offset the that, two of $XX $X balances of lower balances it’s partially $X points you of from on at QX a have see of we did basis XX our couple average, things, balances amount function went to about it’s about returns average at from we section, the to it could the gone statement, portion billion, got quarter on return and look a a million one sequential second about points basis in went on really, to was of

$X So $XX for a our the which that change our in statement it and collateral, is – our of sequential have I’m was about charge we sorry, about increased in section of revenue million. in did We non-cash the the – of increase in amount income section total, other other income a sequentially million.

So that’s section income up in but of another other the not other revenue.

a a debt. the and about interest really function lower of income been driver is our that’s expense. The $X.X million – focused balances, our debt section balances, of statement main lower of, lower we’ve paying really function of down down That’s that’s other lower non-operating on

of do and of out, subsidiaries section point main want to really So I about to that million and – in other NEX earnings the legacy investments. income unconsolidated non or did our a two income investment those from to are we have related statement. drivers non-consolidated non-operating $X the equity income is and reclass equity

now and So be subsidiaries. equity in that earnings will unconsolidated recorded

So are the main those drivers.

Kyle Voigt

That’s just great, ask thank one your sheet. you. If balance I on just more, could

you correctly. I I’m I’m now. calculating think of cash about anticipate much year. annual there. available year, If CP timing of just down – right trying dividend by Do be the just would $XXX commercial for paying paper your of get how the variable million end the to Thanks. that flow sense have completely you that this a maybe of or your outstanding

John Pietrowicz

that. Yes, don’t sure. We don’t. Yes, give guidance we on out

of our – that cash capital $XXX kind about on $X.X minimum walk down to balance, cash we – million hand that was comfortable we’re the at had just level. structure, So with billion comfortable

$X.X year. $X.X X.X have which a times debt currently billion total We cash since down on first in got of and we’re we at of have to $X.X billion the commercial debt paper hand. EBITDA the paid in million in We’ve about billion $XXX as sitting debt we

have cash we as look In We one in our quarter, builds. Obviously, the pre-funded to do you don’t of terms funding fourth modeling that generally. larger quarter. the at of in when business subject it’s We pension XXXX. performance have fourth

pension have but we look mentioned funding, you at said, like usually we if – a we pre-funded in trends, So I that XXXX. cash historical

anticipate tax than will one not lower the a as we in tax historical of payments We have change. So result XXXX.

fourth in flows have payment will cash fourth we significant QX. cash of in bond which quarter quarter. And tends have then have a be of impact – in will higher be benefit the a and December. We in that generation AP also fourth in in interest quarter, to dividend do a So terms terms the fairly the in the in a

of fourth takes in help to terms some in the of quarter. So those modeling the are puts flow and kind cash

In of the we’re any commercial on actual not terms the pay of paper, down guidance giving that.

Kyle Voigt

you. Okay, thank

Terrence Duffy

Kyle. Thanks,

Operator

Thank you.

Richard comes next from Our Repetto with O’Neill. question Sandler

Richard Repetto

commissions on and are trades, ETF mentioned the I went in you quick a guess and retail a still one The just retail, John, part been trades follow-up. and I and I volume that zero before. e-brokers your think it’s the Terry premium. know equity good hi, to of futures last Yes,

see I know, around was there. to some, expect or think trading for you you offer futures impact, to benefits that it on But what account. do any XX% you somewhere I call retail anyway,

in You get can’t as equities well.

the you of commission the do retail see your, business. how impacting that zero balance and side So the your

Terrence Duffy

a on then Rich. Thanks, and touch let that give comment. I’ll Bryan I’ll

Bryan Durkin

Thanks, Rich.

efficiencies dedicated opportunities, retail we’ve to Our been developed their marketing partners continue Winkler’s sales and us education, products. and generating to and classes several new team concert this futures with liquidity retail to our that to global effort. the this XX,XXX through some it’s very efforts growing our very for in XX/X in has over futures them them margin them Julie for grow versus asset efforts. appreciate They the help grow these of look marketing you last for retail the alternatives. been to toward user regard to Through their traders years one, I partnerships that very education We’ve in segment, and focusing products, leverage sales and we in well us. products our over in strong efforts, significantly We’ve help of expand her certain And access we’ve then our efforts in the to with our business growth been allowed base year client alone. terms liquidity that terms fortuitous look The undertaken us know offer. them a as in in and other offered us successful

a break that to down little bit. Just

in and average XX% daily retail today QX, contracts of is this. Our is which about volume XXX,XXX out up

look on terms the Sean our out of front, as in growth excited work marketing Asia. EMEA this say as heavily out outlined. of efforts collaboratively in is consistent options. the our increased E-minis products most to continue education providing last It’s We’re demand come example have of Group Terry for one grow on very is to of years efforts coming that coming area very the of knowledge and out rely perspective, for product area. their XX% we of of in education for and And that. we base and When recent you addressing the It’s and the of an most have been launches that two to Micro successful well at XX% focus success innovation this our product and

through been tremendous. Our from options growth this community has

and a our just of cost retail continue that So all perspective the that above outlined, the and to look to of partner are you take confident when clients our at total in offerings. very have firms look from trade will I our given we

Terrence Duffy

And Rich, just to to that. add

Bryan I of some up But valued clients most with think that summed use products are have today, brokers it quite look they if at of are what are today. you biggest the they well. retail some that they saying saying, our their

I we’re have we to them. retail, about trying what brokers don’t or want that a retail statement to at don’t of same I their I making want. talk have. that’s want I say it, futures don’t to good about that’s discount time, about when mean the think see that I making think, not name, And talk lot case, push a that not we that’s not it, into making, it’s That’s but them understanding to in reference an people all us important I derivatives participants. it, don’t these what brokers would they’re that sophisticated

continue a shifted retail their may business so into the to our markets accustomed bit to. commissions. want time, they zero with our same pushing the model little product them just process, because So have we’ll that line, We educational not don’t into the at brokers working on are but

Richard Repetto

and answer, prepared well Bryan. Very Terry it. Got

Terrence Duffy

Thank you.

Bryan Durkin

Thanks.

Operator

you. back further so it I for questions, Thank comments. to this will we closing time At no management have turn

Terrence Duffy

over Well we’ll the we quarter. in forward my next several and today. very see you weeks look next were thank talking all We questions to you you Those much. to

John Pietrowicz

Thank you.

Operator

and gentlemen, Group earnings CME concludes third XXXX that Thank quarter you. call. the Ladies

lines phone your joining disconnect us you morning. and for may thank this You

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