CME (CME) 8 Feb 232022 Q4 Earnings call transcript

Company Profile

Participants

Adam Minick	Investor Relations
Terrence Duffy	Chairman and Chief Executive Officer
Sean Tully	Senior Managing Director and Global Head, Rates & OTC Products
Tim McCourt	Senior Managing Director and Global Head, Equity & FX Products
Derek Sammann	Senior Managing Director and Global Head, Commodities, Options & International Markets
Julie Winkler	Chief Commercial Officer
John Pietrowicz	Chief Financial Officer
Lynne Fitzpatrick	Deputy Chief Financial Officer
Rich Repetto	Piper Sandler
Dan Fannon	Jefferies
Gautam Sawant	Credit Suisse
Chris Allen	Citigroup
Alex Blostein	Goldman Sachs
Brian Bedell	Deutsche Bank
Alex Kramm	UBS
Simon Clinch	Atlantic Equities
Michael Cyprys	Morgan Stanley
Owen Lau	Oppenheimer
Ken Worthington	JPMorgan
Craig Siegenthaler	Bank of America
Andrew Bond	Rosenblatt Securities
Kyle Voigt	KBW

Call transcript

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Operator

Greetings and welcome to the CME Group Fourth Quarter and Year End 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, February 8, 2023. I would now like to turn the conference over to Adam Minick. Please go ahead.

Adam Minick

Good morning and I hope you are all doing well today.

CME quarter discussing XXXX full be results. financial will Group’s and fourth year We with Harbor for the will start will I Safe over by questions. Terry followed turn language, to and remarks team brief your it I then will Other participate Q&A in also members management the our of team session.

website. Therefore, what can and documents guarantees involve actual factors in facts Statements Detailed statements. materially the are are outcomes this and reference performance results These in that our the about of found be may that They any website is assumptions differ statements from the and on our with that to information our uncertainties are not which filings future difficult forward-looking implied risks, performance. expressed affect made other are in predict. may or call on are SEC, statement. not historical on

the Lastly, a and between GAAP final the will you of see on earnings reconciliation measures. page non-GAAP release,

I to With that, call over Terry. will turn the

Terrence Duffy

Adam then and commentary earlier to Thank just high-level for executive our our the joining the details start provided extensive going I morning. which results fourth will summarize and to comments our thank on this Lynne few am for you, year speak with of released today, John XXXX. We you will ‘XX. a all quarter financial regarding us and guidance expense

as we answer other have Lynne, said, members management Adam John the after questions to and prepared team our In present addition remarks. to of

finished year. XX% million record by our XX.X XXXX growth classes a finally, led X.X average our ‘XX. million contracts, ADV last products, all from across history, to daily with of contracts, increased record which contracts. non-U.S. versus up also XX.X up contracts. The ADV daily was with average record volume of million X.X daily the a volume And set XX% record Options asset best million average the volume to of in year Group’s up CME was a year financial XX%

futures trading we deep the of result, industry And LIBOR transition. collaborated XXXX tools We XXXX, with open a we behavior, with flow are the options a as our interest SOFR. Throughout wide liquidity continued and efforts rates for a shift on order and as the across to participants market leading supporting short-term hedging and the forward interest range with the strategies curve. beginning SOFR’s to

the and products Customer the contracts innovation leading contributed year. million to product our activity. enhanced the X.X to Micros Micro industry and our contracts record demand throughout continued in drive nearly We overall suite with services aggregate ADV of additional

further venture Dow in we invested offerings and Indices credit income S&P year, our Jones its indices. joint to the leading During to include expand fixed

and for investments to CME produce joint continue Our Group. meaningful ventures results

these have income. XXXX contributed investments an our For on adjusted million of nearly pre-tax X% or basis, $XXX

Google cloud for be data our about a launching fundamental XXXX built and in application. the migrated some early out platform our accelerating products year cloud. application including the also was successfully We partnership. ‘XX will migration,

our year. aggressive an throughout to and have ‘XX accomplishments reporting forward migration We for the look plan

across with uncertainty higher our continue our of business will we and cost for general management be into XXXX Risk as all to classes. doing customers persisting critical in move asset of

diverse to and a operational innovating set. control, participants, meaningful continue what relevant We capital across market we on offering efficiencies focus and a can product

of is on to near XXXX day, So business positioning in average continue the long-term for million also while be contracts and far the growth. volume per will XX the our sustained this growing approximately focus year, short-term averaging all for

and forward it to over turn to With your John that, will we questions. I look

John Pietrowicz

September growth. XXXX record which of for Terry. revenue when launched $X XXXX with annual was adjusting Driven CME’s Thanks, OSTTRA, record double-digit was volume, year trading XX% billion, earnings Financially, a adjusted were in CME Group revenues for up XXXX. and by

the before impacts Our $X.XXX annual and annual adjusted which cloud our $XX of license migration, below guidance. were billion, million approximately our expenses, was excluding fees

adjusted margins up expanded XX%. income to year adjusted was XX.X% net and for the operating Our

the and in incremental with For year, our line expectations. our migration filed million our $XX cash with to were the costs associated

the in basis in $XXX million volume $XXX revenue $XXX billion license and Turning carefully CME revenue costs. fourth same average X.X% million, X% on were $X more generated excluding cloud nearly and to than very to year and last last nearly quarter, year. Expenses up the period to up $X.X daily was Market approximately compared of data the quarter with million. managed for an million fees migration from adjusted

in the Capital $X expenditures were dividend approximately net the and over common tax quarter shareholders ‘XX, annual of million, $XX the approximately Group CME cash fourth year which CME dividends of during rate the $X.X quarter including quarter for of billion. was of EPS of billion of at billion to attributable fourth up declared CME variable $X.X XX.X%, $XXX adjusted end to the million, from last $X.XX. adjusted and had effective income attributable adjusted an resulted an XX%

November, we fee which adjustments, became in effective X. Finally, February announced

transaction and patterns range trading similar revenue increase adjustments fee the Assuming of as X% the options in to would XXXX, futures X%.

executed best Group. strategy, volume while We well, managing our In of served our effectively. customers majority financially transitioned successfully summary, cloud very for our XXXX migration to benchmarks our the LIBOR-based CME of was on the all SOFR, costs year the

to call that, I XXXX over With Lynne to guidance. discuss turn Group’s CME the will

Lynne Fitzpatrick

Thanks, John.

operating XXXX. excluding adjusted for license total expect fees, be approximately We billion expenses, $X.XX

travel and will guidance Our full discipline, impact which of our inflation the cost normalized continued a year of in-person reflects events. moderate on and focus

our to in decrease million million our addition we the $XX by partnership incremental approximately in $XX rate migration and to expense of related range for cost the in of bringing are adjusted $XXX million effective offset net approximately migration million Total year. improvement cash come a XX%. be our tax to for In expenditures capital expenditures, investment to net expected $XX expense, the core to capital between expect in the should allowances leasehold and guidance, be and the Google the cloud XX%

questions. We would Thank for now you. the like call to open your up

Operator

is Our question the Sandler. Instructions] go [Operator Repetto first ahead. Piper of line Please coming with from you. Thank Rich

Rich Repetto

Yes, and excuse – good Lynne. and morning Terry me John

Terrence Duffy

morning, Rich. Good

Rich Repetto

Good morning.

stay just seeing outlook on I and but to on perfect right Terry, outlook broad XXXX year, get that came your – the start on what no given you financial they wanted year But products. last your outlook get we time, just certainly as gets positive one volumes for we through and anyway, the so were So the all volumes? and know

Terrence Duffy

Rich. Thanks, Yes.

up I year factors when think And up having other of market, think that’s given to that the it’s the going the certain it what whether geopolitically was thought think the was price the could I pretty rates I in year. saw was setting biggest at just its in I you fundamental a be a setting last of market what I marketplace we by history. did, for that the and made products, because reflection the see of time, year in price I comments CME whether was exclusive

Now predict it’s future know. really difficult to you volumes as

to to which So make as XX, I in is are am said ended that exciting a try. going I start per the reference, year, XX day, my last million same January roughly we we remarks year. I as will contracts around starting prepared the with of in the the not beginning pretty ADV off

had really It’s geopolitical offsets, seen like debt people that to the going the to events. People to talk the happen had always mean what’s – be of the say mean, to give age a me this we satisfied. on efficiencies for the predict it’s of the even hard really about and age I risk. it’s balance the of depressions, year. think I’ve don’t to broader months debates internal issue, XX have So hard does give could arguments, recessions I my uncertainty, in to does stacking for the we’ve my to up into? know, what own before. mitigate in Rich. I really debt I predict ceiling age are positioned, that’s the It because it translate team said have think, that question – never So, have of now The don’t been ceiling remarks, with prepared we manage And is I about want here we but I again, what always left to as

have people as so to am debt We congress can a negotiate I I like going not history. as they it’s be never a that seen agreement. the in believe ceiling easy have sure

summer and the Fed be the into money So and coming will what the country QX move can that around longer interesting see to happens where the no months has to that treasury deadline arises that pay built. to when

seems So I into away a got Ukraine-Russian have soon. be We factor which to conflict, going not any still that’s think time the it. big

new year, that be So, to interest management to rates And I people lends I are seen in need risk over is having the to suite money additional the And lay product reissue the think debt, we have off that of at are risk. think managing that. going last to the increase minds. they still to with that going people’s forefront our

think there a one I factors volume that there, in to of up but So is translate at interesting come tough end a into is does equation. the lot

Rich Repetto

Understood. very much. you Thank

Terrence Duffy

Sure.

Operator

from coming Fannon the Please Dan of line is question Jefferies. next ahead. Our with go

Dan Fannon

to I up in what I typical the the from you think past. mentioned, have X% that’s pricing, follow to to above John, morning. X% X% Good wanted Thanks. the the X% you that on increase we seen

year, And is any So, also power behind you And there as as maybe aware side, data, think a of? then about market more changes that think non-transactional potential we detail about be the you on little there? this bit that? maybe should pricing

John Pietrowicz

Sure, Dan. question. Thanks for the

up the Let impact of are and kind going pricing XXXX. at me changes all take look to back that and a adjustments

transaction adjustments volumes. take not approach our of As all in careful made prepared targeted I fees business. And across impacting and indicated futures adjusted. very remarks, of my asset objective a the have the in with we classes been We our

patterns February effect an impact to increase commodity of so the X%, to of our about as products our and of assuming about each commodity The X. X% financial impact each year, I increase X%. X% X% took of be the is As in to range to The sets. X% trading said, on financials similar products product last would and

impact in and fees. two-thirds in the see transaction full QX, related impact that’s of first you quarter to a So the quarter

conditions look January is let’s had at data. adjustment licenses, assuming which we also similar So to the X, an data XXXX. as Beginning market subscriber inflation of range our X%, in market

waivers, million completion million have have the successful in XXXX addition, fee our which will That fees an that of initiative. about license lowered had and Options $XX XXXX. we in to revenue First in seen $X very increase for In we not SOFR

So our of set. across revenue number a adjustments

do. we our we create it, to think of I as for value at felt appropriate that a and look was this lot customers

Dan Fannon

Great.

And normalize plus had an in revenue on the clarify that drag to year increase? a so last data, million pricing $XX just market should you X%

John Pietrowicz

was That That X% not included that Options for and our our SOFR. mentioned. was that. impacted was just No, transaction sorry, was program SOFR First I – Options that I This fees. the that X% in in to am to our SOFR addition

Dan Fannon

Understood.

you. Okay, thank

John Pietrowicz

Alright. Dan. Great. Thanks,

Operator

Suisse. Gautam Our is the line Credit next question of Sawant coming ahead. go Please from with

Gautam Sawant

taking morning the you and is investment next more clearing question. you the how collateral income, thank you a details us clearinghouse trending? for non-cash Good pace XX my within please And non-operating and you think cash Can also breakout cash of stand? with provide does income balances of how could outlook? Can over where on house the months the provide the move

Lynne Fitzpatrick

take Gautam. is will I that. This Sure, Lynne.

XX $XX $X the is million XX That If same the by about the third What billion, earnings was an saw the returns cash by at as clearinghouse. last quarter, from driven in about quarter. basis balances $XXX increased versus of income the That to average quarter. quarter. you increase non-operating the we million look steady basis largely we was see up on at in saw what an it partially increase in to the million the relatively for the points. points did We $X

the that we change funds using optimize have what did to look and short-term other do deposits. at repo Now, we the is didn’t we on markets the our but returns held keep Fed,

S&P equity in total. included and increase million. offset million the in decreases increases These That an were cash. by $XX in returns we were a on gain QX related up was that $X non-consolidated the saw two in $XX million in saw subsidiaries. also the one-time down to Those That slightly $XX quarter to We JV. million the our corporate

I In forward, go on cash non-cash we the what it’s so will little far but have difficult to-date. detail a seen terms this predict quarter provide obviously in it collateral, and of going more where can to

were at relatively balances To-date, the X, As the I in two cash billion mentioned, average at February our quarters. $XXX.X $XXX through balances flat billion. last are

Terrence Duffy

Does that answer question? your

Gautam Sawant

stand? does And Yes. just what non-cash the collateral

Lynne Fitzpatrick

Sure.

And QX. billion, $XX.X billion So, at was billion. was for we saw at $XX.X we are it quarter-to-date, in $XX.X it QX, at

Terrence Duffy

we note, back increase a it’s tremendous keeping people really was amount for making to fared alternative our of And second, keep actually that we to clearinghouse. did just versus could us the think and would our money have not there in question I keep tried important Lynne decision to to take that because their park to the go strategically clearinghouse in in that not numbers bring additional because we a people the alternatives referenced gone That knew to we fruit we revenue by that were and if our to able have increase continue investments. it may

Gautam Sawant

it. Thank you. Got

Operator

question next from the coming of Chris Please ahead. is Allen line Citigroup. go Our with

Chris Allen

the out granularity was demand wondering market this morning bit you good price could just terms of of driven of Google. saw by a products with year-over-year when And the some year rolling in little more some data, in I around increases new maybe you increase Yes, everyone. if SOFR. addition provide the

or us about incremental maybe thought I color would $XX know could just give breaks how to developments, kind any just migration was there of related am annual $XX on down? this wondering that in you. just just terms helpful? what’s is product So you are bit million a you Thank there color is migration, of I Google it terms in of I little the cost costs. incremental that new of And it talking be million. more in

Terrence Duffy

Thanks, Yes. Chris.

stay because in the to and will numbers I Lynne Julie the turn it talk We all to we sure then about Google make will data. same are we let cost going the about over to I the think talk migration, on

Lynne Fitzpatrick

Sure.

side, in The cost see million the guidance. on $XX expense did guidance XXXX is So in expense. we our XXXX, million $XX line in for in with

required. expenditures that as Now are capital refreshes we are seeing to the capital will offset longer a to see decline an in we that related no

be about we between in expense and split million technology So million professional this fees seeing guidance offset approximately $XX a we step year. back. that will have $XX the are But for fees evenly

Terrence Duffy

Julie?

Julie Winkler

Yes.

we across I’d organic to say very professional just in is market And So, a value to and we work thing as we for. had data another the both what going strong – X% data were the data, of and also quarter the year-on-year putting we increases quarter, certainly our due be the have new relates our one was up primarily again know fourth products is our favorable with drive as able licensing, non-display. and also being and also in subscriber data terms January that are made and mentioned devices you both performance our the in also that the area adjustments in fee it in that in we that cloud introducing asking are our the to valuable are we analytics Google also really that of to XXXX. of our we And is back very back and new data know produce seeing the products more clients throughout SOFR and year

develop with we on at our so are looking to highly partners Google. ways that focused new at And

number new front, a on analytics, data clients including their of them on management. underway to AI, and and ways risk around also data things innovation APIs got understand analytics deep our new have help with We ML, the dives the

we those rolled begun a be forward. to of begin in number So to launch out products, have those already

that model we is it product also are of just new operating some our And using.

are put we seeing these things which velocity products data increased mined area. can in an in so so And our out, like we

are Some and being of that. benchmarks our created through also new indices

This At we term of really, effort was the the to there X,XXX end new over – to specifically as to licensing that. the we’re team had derivative rollout continuing That just CME a And is firms of revenue to to for for These the end part these relates see QX, being QX, SOFR over that. acceleration so licensed back demand the the increased cases, since we’re lot term of it underway. firms we OTC have revenue. just a customers are of of product And of you’ll that in And that of revenue are XXX that is people Group. SOFR continue – finding licensed see these up usage. kind for was around show also, is the products.

So and those to our sales organization working we’re them our convert trading users also into within heavily expose business.

it’s with can us. everything also to that data, transaction And and will within insights I synergies that we market hope what so to do helps provide our create clients support and based.

Chris Allen

you. Thank

Terrence Duffy

Chris. Thanks,

Operator

Goldman Our of Blostein Please next Alex line with go question is ahead. the coming from Sachs.

Alex Blostein

that. on to Hey, morning. for cloud expenses just around good migration last follow-up Thanks discussion I hoping related question. the was a and the

beyond associated you as be future sort hoping what to out. could costs like As you limits you also you flesh I think on go-forward bigger more migration. think do we’ve But about a To seen the the extent expense this basis. was and your Thanks. incremental CME’s about think XXXX, guys flexibility past? any with in that flexible picture, of ability

Terrence Duffy

Lynne?

Lynne Fitzpatrick

Sure.

to Google see what if million year. cost that cash about we $XX per incremental averaging last year, the costs would of about migration, I think John years think cash was guided we So X

So $XX $XX cost we did XXXX. cash see estimated year that at this The are million. for in million

to positive to expect some we ourselves over migration. next So see for to costs point, a have After we breakeven that the getting X ultimately and related the incremental investment. cash flow do years the

through infrastructure. of see line expense as the in flexibility. infrastructure-intensive environment One will to is technology as spend need are building of we capacity initiative to to from the have down, reasons we moving coming coming a And where CapEx and renting we the down, continue into the see this we will this we increase that are as the we ultimately, opposed our more move pursuing it

several years that is to cost next So see over the migration on expect base. the the we that

John Pietrowicz

when that we to think the add that, without investment you technology, machine having query, the able like Google things we’re to thing make to investments about make one get Just learning, intelligence, in artificial through that to ourselves. big

associated you flexibility, So business don’t have the because success. we entire there faster. When able of to the the is success, investment better products cases, lot with build can cloud, migration have positives we infrastructure, our certainly to to assuming ability towards including launch to returns about on a build think be to the going out

positives with lot a with Google. the of strategically our real So think long relationship we in run

Alex Blostein

you. Thank Great.

Terrence Duffy

Alex. Thanks,

Operator

Brian is go question from of Bank. next line Our the coming with ahead. Bedell Please Deutsche

Brian Bedell

Hi, – volumes other talk to revenue. obviously, got factors the about that record franchise, ends morning, the or a interest a of would number folks. is back the continue good that that rate volume. There actually but Fed tightening Come strong could we’ve reduce volumes, record that and as perception

So just you that, and that? about the customers wanted the the also from new talked to potential term thoughts obviously, of new introduction get being, customers. Those then on those Julie, your price increases the SOFR,

hedgeable on higher then comment in can you complex that not into historically curve, the developing if I that – private of just hands about to and versus mention you’ve you’re – the treasuries long things the and of RPC the terms also side. and more it or short other end that treasury making on maybe the So bond what the on being long saying think XX-year high side been

Terrence Duffy

to want and you do Sean, Brian. go Thanks, start? ahead

Sean Tully

much Great question. very for the question. Thanks Yes.

large record In year, holders. said, record complex, volumes interest, terms as open overall obviously, good the open of interest with very you year a rates strong this

large the if our over of decade, number interest so significantly. expanding working we’ve base fact, Julie’s than open team, holders, with the client doubled you In more very closely look last

environment obviously, in look market If strong been that growth market positive. at environment, you has the a the

end your with curve the our seen very futures Fed’s had to I uptick haven’t the sheet. reduction specifically that we that in treasury of get – yet XX-year terms question, we in a expected the strong of the In long balance actually to

This In slightly. year, down fact, surgery futures are X%. are down they

So is that marketplace actually down.

up greater rate So seen on past strong Federal something year, this how the rates year. think, now a weak is year having before we we’ve will to very that some be and we that others Lynne the a relative greater uncertainty X% I numbers they was is with to as calls, Reserve is has whether economic a very demand strong are mentioned, that dispersion see seeing than What far you decreasing economy, that which it much which last with for see so ever greater rates increasing options. or our a interest economy in seeing with and

So this our in they day at by we’re year, rate XX%. so investment interest obviously contracts fact, if futures now plus And look, in SOFR year. doing fact, far made if short-term SOFR success in you we at our this are, last That’s look up options, options year. driven SOFR in huge a options million you the X the

Federal for So or potential makes the for decreasing to relative before. outlook or rates increasing than the I the think our Reserve rates opportunity greater products having either the ever need

Brian Bedell

if organic could about you the Maybe side.

new from you X,XXX the talked onboarding? customers think – trading new about I potential the the that you’re firms

Sean Tully

Yes, really I’m excited.

single going what and thing be and Another – we’re year did our able short-term largest facilitate we what think to about a the interest products. years to in is that’s meant over the SOFR to clients. back benchmark. new what going last excited to and significant very the innovation What couple to business futures migrated of I’m business, over we’re we this options from benchmark time And money with to get LIBOR rate is get that that the migration was in to order resources, is our back investment about

futures options new We’ve and be them XXXX recall we the And year. in that from products come got you half since that options may several products business of future So new I’m in some of new the products. about excited We’ve about the this pipeline. very has our listed pipeline. launching got in growth will rates, the

very that excited innovation. new year will launching many about we back we So to getting and be products that this are

so more over of CME far. turn where now have than I’ll terms clients, In we additional X,XXX terms with Julie. new to it the licensed clients

Julie Winkler

Yes.

are. clients those who of terms in So

But just Clearly, talk lending for the helpful are about they are the the a They segments. ones if of a those firms, business is that I be be are for trade could about lot some private lending work that more largest point I against real think first groups this banks and some loan, of you finance, rate just hedge to are commercial of specialized segments. companies, for asked the lenders, across PE are insurance all those that organic these estate. this it used. funds, might to the definitely rate that of other be that minute time, so are doing need

We’re also seeing licensees globe. those to buy-side coming touching specific from the buy CLO side and and are other cases And death. the across very participants, investors use those running loan again, syndication, really are

education the risk funnel. to that, understand right? what treasurers to there So accounting. we’re a imagine commercial providers, is also them can able seeing and And and is data them. number also, that where for be continuing management, get valuations, how help other rate as and so just And we’re understand to corporate So administration, that that critical work sales fin-tech imagine Europe you through rates Asia these them works, licensed and of our for them going other And vendors the growing work we have this around you need available are to in clients, risk can to service well. help products those management loan with is team both

now. right through working still and segments pipeline opportunities are we So have as of that a working I through good across mentioned, this we’re those

Brian Bedell

so color. great That’s Thank you much. Alright.

Terrence Duffy

Brian. you, Thank

Operator

with ahead. question Alex the Please Our line is of Kramm go next UBS. from coming

Alex Kramm

everyone. Hey. Hello,

this year side saw and we’ve talked increase, price upside seems in on never that year. the be obviously as mix driving your lot impact pricing years we us for year, like, minute. you this it the hey, every also should seen what higher about one be expect. you maybe level mix another then or same recent that I really where adjusting a way a that of But Just last similar is a the of to that know say

pricing that So about, the I the we question X% there what maybe a, you biggest review but hopefully, how know have lot much was think the or crystal that with a stick? X% you maybe gist of on you a mix I that against worked don’t got expect but are the to the you should is – it. talking has question, do now ball, just of maybe recently? to drivers you’re know And side of

John Pietrowicz

obviously, out. certainly mix going to Yes. year impacts as mix RPC. Thanks, difficult, And Alex. how have is It’s what you our in over happen I seen and are to the volumes think we as to predict time only know, year we’ve very real shifts the build,

in words, So we reduce don’t prices. other generally

be look at our at what time, in if saw fee biggest was right, for fourth year, You and impact part which at of if adjusted business. where the we the we you you XXXX, were RPC to example for put First successful. the behavior wanted to it change SOFR when our an hugely $X.XXX. some waivers if But quarter – was gave perspective, the the you did I price of look Options, we obviously equities, the to made equity At so into that at last we adjustment. a X.X% going in to equities X% said look And we

the at our we’re $X.XXX the at this you and complex a equities If fourth look for quarter, in in XX.X% is today volume. year-over-year on increase

So when business. we and that sticking, that’s incentives it’s I our in the would consider like you when you have pretty say sticking, talk about volume especially equity

pricing it extremely So adjustments we take seriously. We basis. on do look product-by-product a our at

We’re very surgical.

in dynamics, maker in And and prices been when done say incentive at and terms that time. that we’re we’ve regular pretty have our the appropriately. pricing you sure think we’ve it I discussions successful make right plans market overall, investments volume what to making I would We programs and of around the adjusting look at

Alex Kramm

enough. Fair Okay. guys. Thanks,

Terrence Duffy

Thank Appreciate you, question. Alex. the

Operator

next is of with question the line Atlantic Please Simon coming go from ahead. Clinch Our Equities.

Simon Clinch

been to Maybe up, just that’s relative to out my those more that open you, could guess, that what that rates outstanding back on debt benefit seems you from be be holding towards terms point? here question puzzling and something interest the previous the go the taking the the guess in Hi, it to debt. I balance higher guys. actual low would what’s And the holders in question. catalyst do back sheet yet levels particular there, long-term to shifting to thesis public Thanks the I’ve balance yet show What for see I on points or at outstanding we the Fed out haven’t franchise. relatively that of can playing really to reduction seems I substantially about, of be. the of that myself still sort started surprise over this of That’s think

Sean Tully

Yes, see back. just necessarily fact. I holding the it anything I’m at looking don’t

While when sheet billion, $XXX in increase is careful by maybe The a the to here, reduce Fed substantially Fed balance saw Fed we didn’t futures. in a treasury bit – XX% right? until balance start sheet its The let’s our September. XXXX,

So $XXX it’s about actually been it’s billion. a very recent phenomenon, although

more So as $X know, the reduce than expected Fed is balance trillion we by their sheet to year. this

would I shown had but I in that’s – earlier, for very significant positive So positive yet wait a this was XXXX, year. Again, and And tailwind us has said our as not it yet. business see. it it not results

Simon Clinch

point, of just case more it’s There still Okay. early I is – guess.

Sean Tully

Yes.

Simon Clinch

Okay.

am a terms last was time? things in of follow-up. couple and well, going the impact next collateral I and about the during we we should of at just the to Because And the overall wondering resurged should just Great. year requirements to business? Okay. as well back have crashes trend over normalizing wondering obviously, how And about just as – moment? levels they How years as of over think the I that how the think

John Pietrowicz

would in a think the function associated jump very then and the those make When couple risk our it, I’ll is balances. comments. overall in really, say occurring open exchange clearinghouse on it John. is it’s and to I collateral This of that’s difficult that interest maybe about can have discern a trades. Sunil we trading with and the Yes. the of you

ensuring So of and from and risk that about markets, it’s the soundness our really very perspective, paramount. management the and that’s all safety

here more cash for But cash to lot management do two risk at indicated, more a at to perspective. We than keep a CME we’ve it collateral. to collateral. advantageous balances doing reasons. incent management collateral non-cash them One, a obviously, the keep our from perspective, than most from the importantly, non-cash much on Terry As in risk Group. we is it cash having been earn start, our or clients

strike So they cash a Ultimately, terms non-cash that clients of or by appropriate going returns we that balance. not or every our be can each the upon get. it’s decision to though, it’s and to try day based in whether

because they access terms think, been, to we’ve our that of it’s we’ve approaching really it. has So the the And in Fed guess how it. Fed to over clients beneficial get Fed. I’ll the obviously, I also, us. been I – hit to prudent something for And been then Sunil. don’t to need it’s I balance it to over I benefited turn turn it

Simon Clinch

Thanks.

Terrence Duffy

Simon. thanks, Hey,

Operator

Michael coming is question from next Please line Our Cyprys Stanley. the of with ahead. go Morgan

Michael Cyprys

And you January. morning. might a good taking could margin evolving we was elaborate in a varied across I you’re on have year? you volume point? year-on-year How talk how sets marketplace. customer the the bit be you bit and to all Thank the about holding this complex still has levels I seeing hoping you Hey, see energy? at could spend extent what on this elevated little moment participation how for year back you. opportunity volume Thanks was for what this see activity shape hoping in maybe your customer across to a And taking able energy that with the question. the

John Pietrowicz

Yes. Thanks, Michael. Appreciate the question.

in ever energy in we ever saw shock, largest demand market XXXX, largest shock supply the the the by ‘XX. Following followed

global energy starting the begin We’re to normalize. to market actually see

the players are there financial return this seeing market. to is to we’re starting of indicators One

seeing in seeing we’re that complex. WCI clear open interest our this of of year we’re our far, recover those so indicators One

our year come last challenging exited about X.X about look normalizing, XX%, you fact that’s hedge to that at up that up margins performed of on revenue the carrying We’re open into energy both back our into the year, side, And or points index the U.S. year. of and end energy particularly with XX% the business we’re the million LATAM They trackers in previous funds year, up managers really some option the volumes on carry Globally, a options year the side continued Last the year versus and it up seeing X% function to the extremely a up energy challenging last our market really degree. with also we a outside APAC growth year. franchise but market. year. the over Despite well interest and of circumstances ‘XX. this since saw last largely was of last XX%

Micro growth quarter, retail, the to XXX,XXX volumes a up in client with WTI in little continued back our XX% over side, Finally, on fourth the contract we TI contracts. specifically saw

good global segment and participation client So, participation. good

the think are and for markets to and to exporting see export that barrels of setter one, grow. and are around believe markets. a exports price will going, the waterborne now of Couple WTI Iraq here. points crude we and you to when million X.X about behind look is the where importantly, level Saudi only U.S. continue to the not U.S. QX. record central equal We physical financial as Number both capacity energy proof continue marketplace in slot energy that, the Arabia. More markets evolve revolve number

putting U.S. WTI product is into more global out the So markets.

are and of barrels also increase production out between U.S. oil about XXXX. global the expecting to million We market now expects X and that the

increased just footprint that globally. So, WTI’s

versus the the and exports up double So, XX% Asia into of already continue U.S. out about XXXX, on exports U.S. into market. global product ‘XX we up exports see roughly since to ‘XX,

about are a volume the global of contracts. grades for is positions XXX,XXX combined year. this interest open market. contract what And seeing making at mean, had contracts point record a has and of does only about what that we the Gulf actually, Coast central that we price XX,XXX just So, strong Argus WTI our not oil But

means, Brent there. about think is that and that got what global into means WTI That the you price the when oil, centralized grade in set assessment. of the continually to So, that WTI WTI Midland put be you going not

export have We and upswing. market production the largest now on the got

in open that got customers it grades contracts contract, the and hedge Gulf, XXX,XXX So, from export the the to then XX% position commercial their WTI, they market participation. and and there. of Argus and exports interest, the have to we in basis where strongest exposure That’s I we is discover price like that that said, basis about out contract, as then those

that the of position back of we client in. coming So, mix right we we got and centrality WTI. players got the in, We in product the are think have like financial the terms mix we and

talk oil that So, the WTI the like going has strong forward. we very structural can what we volumes Terry global predict but are, market position in said, can’t about

Michael Cyprys

you. Thank Great.

Operator

Our Oppenheimer. next line ahead. coming of with go from question is the Lau Owen Please

Owen Lau

Good launched outlook down pulling digital strategy thank would you. and you question. my Could C&E clients you your us morning asset and then or give you for Metaverse the rates and recently space? Do indices. road? back? products reference rates see in What please And about taking you update sense the an three make for other your Thank reference

Terrence Duffy

Thanks Owen. Tim?

Tim McCourt

Yes. Thanks for question. the

at we look the at space seeing offering. when So, asset and digital the strong in growth CME, remain cryptocurrency business our very we

access products the regulated products as a bonafide risk just marketplace. regulated venue, So, the reminder, that provides cryptocurrency being and in the way trusted to to offering as management approach our a

QX anything figure one That day, at out with over Benchmarks, And stress November. want month, for our last remains large cryptocurrency broadly of did of at make more per rates providers tokens, opening. January, month more trading people reference mean real-time reference I with record is, holders interest pricing, assets we accounts. need given November, in When with to well the along rates source we trusted in day in the with as to added also is cryptocurrency continue to develop dozen CME at complements by hopper new on the look We indices sure so the that These marketplace What around We to down space, to necessarily a focused accounts in indices. a about some And on. in volumes that development we here as of customers. listen are to to in of respect really real-time to remain with account open of have November, accounts That’s the will XXX, in we momentum worth. really, where these seen on we our Typically, over slowed that of in the seen the tokens month normal products. record in cryptocurrency We preeminent we add respect of additional or strategy than the will the XXX that CF adoption And have at a rate non-tradable the testament new with introduced CME. the that rate. reference but respect have we ecosystem. in the don’t more opened And the traditional of is a CME, business. with cryptocurrency events growth in have additional XXX we true three hasn’t on the number some front, once saw partner, Metaverse, sector pricing cryptocurrency we additional in doubling reference the as else and – cryptocurrency continued in rates the introduced accounts to look rest XXX times let’s DX cryptocurrency where the have widespread are value pricing to reference reference rates holders additional what turning we CME. product tick-by-tick, proposition products respect we that

at will almost we a the indices our of reference We ourselves rates sort have the and XX there lane of out Bitcoin that in. function development in be, as And landscape again, find and product real-time regulatory present. Ether

function structured development ETF, we add products, are is of by as lift, thing more not will when the but just other for look products marketplace our underlying the is the used can being one what a at trades. participants the product the I CME ecosystem, broader OTC in increasingly However,

the respect center with the we trend that and products, in we to are XXXX. of Bitcoin expect and growing ecosystem at regulated continue to So, Ether

Owen Lau

Got it. much. Thank you very

Terrence Duffy

Owen. Thanks

Operator

with JPMorgan. next is the of Please coming line ahead. Our go Ken question from Worthington

Ken Worthington

Hi. Good morning. the Thanks question. for taking

makes still to even collapse registered wake FCM, an the FCM that sense? last Where launching stand? of in or a priority launch application year. does of the is FTX, You an And

Terrence Duffy

following I process that is FCM the day that job not will take from taking that. their launched Ken, application. we Yes. the application anybody Listen, away of exactly on

look looking place collapse and do tomorrow. none is if going And and in prudent place facilitate FCM like. a look tomorrow I for going what world to and different like to hearings structure to believe, was I that to we looking us in business like that the what to things to to long-term going Since us this, in I go the order the as market is congressional all or for FTX’ and have we far participate is a to application need ahead prior of We as am and it it’s – in and market be, look said have are know rules are at have two to for not going going what world the whatever really structure get place. process

pie I we commitment successful. said a fact, forward, be with As if have hope everybody we our them unwavering. do the today. I I to piece for model FCM has have so we can of publicly, bring said our our for am FCMs are and can Whatever to have in that to the about along bigger work unwavering I would change, going we model

to be years written wouldn’t applying model to a model appeared a willing government us. sense FCM to no So, that many back rules were model too without writing I situation direct rules much that. into you the applicable technically are the But many, and to ago read the when are to approve in direct where that made only

things to order the the certain in don’t with case. of decision case just was to our along had put my prepared, that’s government. I I team be believe place, So, that in in

new I be think rules. there will

for rule. do. wanting in been in have about a difficult You been to is process. very you in have relates it comes helping is University have I Johnson to and Duke process write forward. may I from seen, very And difficult around and even That And if public rules to or to years, her rules a this long, Commissioner the it participated model, Washington business XX write write heard as direct remarks it

may and for anywhere that the see soon. is nothing time, is it’s it same than there FCM more than more And that don’t I may going for a the nothing wait can. or the And what see to bring. not So, – but future –

Ken Worthington

Great. Thank much. you very

Terrence Duffy

Thank you.

Operator

America. of coming is with Craig line from go question of ahead. the Siegenthaler Bank Please next Our

Craig Siegenthaler

Hey. but Good I an everyone. specifically. to morning I follow-up to question, hone in wanted earlier a energy have on

this been could in impact So, been now declining a what have much has requirements feedback? you do margin have your think positive energy, and early that especially of And how on the volumes?

Terrence Duffy

Derek?

Derek Sammann

seeing Yes. mentioned the Thanks Craig. before, market And I of process as this normalize. in are we

thing to fitters see margins sitting that books. in we Ukraine first number step the saw you continued up. year, last not did the the We popped deleverage away participants Now, there war commercial the when saw did on disruptions risk happened That their of basically because market pull of be financial the may back.

have have we I interest as think normalize, open trends positively. very overall seen, mentioned, turned margins certainly the I the We part as that’s equation. seen one of

As open in end right last now of XX%. I WTI said, year versus up our is interest

the similarly And are in. at open gas most interest of nat side, we last the the is interest those and QX year. marker there of about from beginning On important the holders customers up types seeing back coming XX% is open the look

beginning the natural in about of interest large to also versus holders just grown gas have Our open up up XX% about XXX QX.

a growth price market large the in transact, reflected rebuild back. that out, both position I global both in be as natural retail as of we And suspected, gas central products we these and our increased holders initially have index interest see of and as process, Henry importantly, financial And in Hub export being well mentioned, globally. and will micros points as open cost we setting oil we like structurally, push So, increased start WTI and of the and as more form initially and margin in both interest. largest trackers, the the open that customers of tends the seen to to to come

slow this now. year. like but we So, trajectory right on markets those That is into we seeing going the are are will the build, this be a

Craig Siegenthaler

years Thanks. rate you side, on me? guys I down like – had too. XX the a can follow-up hear

Terrence Duffy

ahead. go Yes,

Craig Siegenthaler

Perfect. Thank you, guys.

go is complex, points like year-to-date. but will there your QT and XX negative probably down margin margin XX-year months to does same in Those factors the hold months. are Fed The six lower on at requirements. So, the be continue could basis time, rate for three –

complex? So, negative on mix the like kind factors should think positive how about of of and these we rate all

Sean Tully

Yes.

XX in XXX then futures Currently, to my tightening to answer into the the Reserve. what’s points to world I there or points to or basis the what about funds basis there XX now, Fed basis right the points curve. see is priced the pricing curve market expectations are goes similar earlier, the curve, more out the is Federal actually two obviously, further easing. in think CME’s And

in like or either earlier, perspective, decreasing, potential continued I from We with example, uncertainty data the substantial for for are payrolls, and easing the XXX,XXX versus, Reserve the if amounts. by everything recession. economic you the that from the relative to my said market As for look the and the is, probability increasing, running about boom Federal potential not in each case non-farm see at the the to the dispersion numbers, of tightening high-XXs, have which you of ISM

savings of to which post-COVID, around at at In according remains addition recent look trillion. that reports to that, you the households $X.X remains excess can

But Reserve personally down were either increases interest what huge are for slightly from treasury rates that earlier, in I overall, the short-term our reflective we of Federal way. year, enormous The savings, uncertainty seen have as year-over-year. very Reserve, XX% in last rates they So, of again could futures, the uncertainty, to I is, Federal enormous up go which And high. said have our uncertainty terms is relative X% declined excess options, of volumes. rate think that the

highly think I the is environment So, that uncertain.

Terrence Duffy

Fed Let just Fed. me hold Sean that this when and never When more days that the hawkish Sean’s share the think could even most to we at ago. saw, through you And what of talking looked of pivot they Craig, looking a as happened. point, a a theory XXXX, recently were think I the I just add of personal pivot. increases, most said, you to is on couple participants say, of their The

and waiting would they So, even lot mean refis that if I pivot, of do mean are hold, people on massive that, they would anticipate a were as a to people would business as activity which think a were pivot not waiting happen, more was for to if as that do be moment if activity, less. And to that in would market you was it hold. referring the fact to that think a I a

at be even would a for So, hold, be very I that think CME. that not bullish could bearish for CME,

Craig Siegenthaler

Terry. you, Thank

Terrence Duffy

Thank you.

Operator

from line coming of the go with Please ahead. Our next Rosenblatt Securities. question Bond is Andrew

Andrew Bond

morning. Good Hey.

in natural Just one year, up of XXXX tightest decade. specifically the last up on markets one energy markets years. oversupplied of gas, over more set the appear this to was many following for gas we And and the be

we since shifts is this market seen – seeing market structural participation XX in this are gas Can impact to since Russian about perhaps some We the have pricing lowest months. level the in of at you invasion? talk natural how the dynamic likely and natural the

Derek Sammann

for is directly interesting It contract. Russian the And into you certainly Russia that gas had Yes. by Europe, which for from the is natural the – pipe one. was basis when the directly an effectively coming TTF impacted flow gas invasion

So, like crude, normalize. to market natural gas is beginning

of year, interesting of X%, X%, dynamics last like full Hub think volume Henry a when percent, going down normal We a XX% mentioned Now, – is bit warm supply are little was into Europe a I our Europe, couple up the for downdraft. given oversupplied some from magnitude of thing the QX market. there well not enough have – was here in a as out I we looked I both low. has market which consumer, was weather in as a making terrible failed the in U.S. The lot open warm a I is before, seeing the now but But larger winter. had as we unusually year, a that actually something It’s something in interest the the sure think is feeling at winter, which the and saw

XX% importantly, well. participants [ph] seeing are X%. QX. nat And complex begin the lead as we we more that about up gas Overall, beginning holders whole in to market options, by starting our from So, a open January is up large are to was seeing X%, interest normalize. up

of normalization are activity seeing we there. some So,

Hub. evolve of as way thing we I the that we that think physical the are the our importance structural position the the in far WTI same That’s volumes the every of we natural think in the Henry the market growing function largest seeing and energy the way happen of same export capacity a same as is by markets U.S., the market gas both that well. significant year. market, seen out And Henry growing production around about global U.S. Hub around in but world in have the the

Europe. have to huge itself LNG Russia. was out of begin the market, from TTF position point Northern going an only it’s challenges global of as have will taking to TTF not it’s domestic is reference light gas So, Hub Henry European a market pipe or well. marker to in the is the TTF, to becoming The the coming

some crude, of terms centrality back nat seeing the up, global participations So, Hub starting we flowing we interest of open similar believe, a very position. strong are are client normalization, market us, client in to and in participation, we gas where Henry puts in

a of of warm unusually season back flat just or an in a right while dynamics market and to going for evolve, trending However, the we function are we gas be are up. now middle That’s whether winter. low in

TTF. TTF something now. Henry normalize that’s would just We like versus it, the think the about market Hub we and of like our I of the magnitude like in I you is think size molecule price the size position is overhang Hub But dynamics. of the part right XXx the by Henry

our We are in like interest customer like the participation we direction. right position. trends and open So, our the heading

Andrew Bond

Alright. Thanks.

Terrence Duffy

Thanks Andrew.

Operator

UBS. is a follow-up Kramm the line next Alex Please our go ahead. from question And with of question

Alex Kramm

Yes. again. Hey. Hello

down basically competitor, all X% for been CAGR example, X% has and second. time, I last business it’s growth. mean But for obviously years, your think ex follow-up I terms. got you back track, wanted When revenue times of in And grown look last, I that. to we you the on like guys back XX your actually at that these think position. CAGR. revenue have when one X that whatever, a in which Just questions X a years, you XX at mean I look on I I really business, bunch the the energy there over And several years, step primary the same know years, said I strategic

a is X% there So, delta.

hear So, still you sandbox. know happened has sets I with have and the but product structurally positioning, the what you play I And but I there? wondering so just am same forth, you like in different

gap hoping that can maybe like how? you So, any and close idea

Derek Sammann

appreciate Thanks. Yes. I it.

is has the a to given We But franchise TTF good think the physical been significant won’t market run gas means I basis I the have are challenges the going strain to market or franchise. that what of I our Certainly, When what right in of and X now now, you here come represents. markedly are over as marker ICE’s for from look last LD-X, and that you years. and different where that for think terms which flows energy try under Hub in example, some years products going that’s last have couple forward those long-term ICE those in do right. has TTF not otherwise, our on a tell of X you years. at differently complex, Henry the results of been terms performance

sets that are in they So, are we product not.

they I compliance are voluntary voluntary now. in market. markets, carbon that of the the an market or in in example, They not. are missions not contracts would are offsets in the product our point that or sets We markets global that are as in they we a in right to

So, break those when the different like-for-like businesses, the been on down pieces you have the where markedly results are. not results differently

are of their their – are some we been contributors growth. have of to products Some where line the in not asset there bottom

at look complex, perspective, core very export as Hub crude, the our we positive I both which respective biggest of structural Henry of looks as and the WTI biggest markets, as for said, those products. the those – global we benefits complex well our from the positioning the in in being now So, markets

have forward, like going we what we – a So, we done. as just

We be have you they like of really globalized lucky franchises that it’s function outperformance, got as business, not in. both our lucky complex. be And position options that have in business. a where We operating successful expanded good be in have we been to our to products going forward. said, and Alex, to But our I they are and we that’s, this

Alex Kramm

Very. Helpful. Appreciate it.

Terrence Duffy

Alex. Thanks

Operator

is Kyle queue go Voigt Please And ahead. our KBW. last line from question in coming of with the

Kyle Voigt

to you broadly? to willing extending employment address would that, are the Terry, for be on But will you provide believe, contract your know also succession you question with And I you more an to or your any to Hi. planning or Good could again? open Maybe next color whether views I if Board last share how employment end able morning. as to am a to year. if agreed I set be year. extension wondering contract

Terrence Duffy

they the Board, I Yes. I general committed will there Board some had conversations into on with my of end is And would Thanks will I My a And take contract is At that will I I just at with that Board obviously, time, at the same told fact, looking say we not in give am – process, the I my we to looking that XXXX. goes are. Kyle. be the you to until comfortable them have here through if XXXX. succession. but are confidentiality be it.

that’s So, it. kind how are of leaving we

a happen lot deviate my will company, it then, it now these a and commitment been between but not that. from So, all obviously, and could has years, is to

people is we seamless from has the the us to And knows Board businesses. right as things in do do that and is and And succession There too a have multiple know we sure job the but make the that, these there planning goes one. world make that to exchanges to ahead many So, all sure lot of we how Washington not a else. everything a to it’s M&A on that operate. in know attributes

person, only of to in they if have we in where we extend are not we in-comfortable through are. is we in talent right And a will the – but I but this fact, lot room, then got find with at, got organization. the So, until Board the

Kyle Voigt

Thank very helpful. very It’s you much.

Operator

that we to management. over like is I call questions now to have. all turn And the would the back

Terrence Duffy

all you taking have day morning for be out you and a Well, good and time safe. thank we this hope

Operator

conference That today. call participation. for you your for does conclude the thank We

you please disconnect that Ask your lines.

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