Q2 2020 CME Group Inc Earnings Call
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Good day and welcome to the see any group second quarter 2020 earnings call. At this time I would like to turn the conference over to John T shirt. Please go ahead Sir.
Good morning. Thank you all for joining us I'm going to start with the Safe Harbor language.
Turning over to charity Julian John.
Remarks, followed by questions. Other members of our management team will also participate in the Q.
Statements made on this call is in the other.
Documents our website, they're not historical facts are forward looking statements.
Statements are not guarantees of future performance.
All the risks uncertainties assumptions that are difficult to predict.
Therefore, actual outcomes and results may differ materially what is expressed or implied in any statements or detailed information about factors that may affect our performance can be found on our website.
Also in the last page of the earnings release, you will find reconciliation between GAAP and non-GAAP measures.
With that I'll turn it over Terry.
Thanks, John Thank you all for joining US today my comments today will be brief so we can spend the majority of our time directly addressing your questions. We released our executive commentary this morning, which provided an extensive details on the second quarter.
John mentioned, Sean John Sean Dargan, Julie when cooler joining me today in Q2, we averaged 17.6 million contracts per day, which is down from 21 million contracts for data you're going down from our strong start to the or in Q1.
Global exchange traded market has been challenged in many different product areas since the beginning of the pandemic impacting us and many others in the trading industry.
Clearly.
The front end of the U.S. rate curve has become impacted from a trading perspective also what the recovery or the price of oil back to the $40 range. The global crude oil market has stabilized what's a fairly flat forward curve, leading to a reduction in the volatility back to more normal.
Wise levels as a market balances supply and demand.
Well in the near term that reduces the need for some participants to manage risk with us and others. The competitive dynamic of trading volumes across different markets has not changed.
However, with the global crude oil demand still depressed due to the cobot 19, which we believe is a temporary situation, we expect to see market conditions improve as global oil demand returns.
We're very fortunate to have a highly diversified business. We're looking forward to the integration of brokered tech coming.
Onto globex by yearend, we remain committed to achieving capital and operational efficiencies for our clients.
For all of this I assure you we remain very disciplined as it relates to expenses.
I'd like to do is turned to call over the Julie Winkler to provide some context on ourselves outreach, what we're hearing from our customers and she will touch realty upon our data business that I look forward to answering your questions Julie.
Thank you Terry despite challenging circumstances, we are continuing to see positive momentum in our global client engagement.
Similar to last quarter, many of our clients continue to work from home and our sales organization has excelled at their virtual outreach during Q2 client engagement by our sales organization was up 66% versus the same period last year and year to date sales activity, it's up 81%.
Our actively engaging with clients by a virtual meeting Webinars on lane events email communication and chat to support the execution of our sales and go to market strategy.
Science continue to express their appreciation for how highly responsive we have been through the peak of the crisis and our continued focus on delivering value added solutions across product lines clients. In some areas are beginning to return to the office, which means we will take appropriate steps to adjust our coverage model where.
Safe inappropriate.
In Q2, we also saw an acceleration of our cross introduction and cross sell efforts to capitalize on the next acquisition May represented a record high month with more than 300 cross introductions across our sales organization, which is more than the entire first quarter combined a total of five.
Hundred cross introductions were made throughout Q2.
Additionally, we reinvigorated campaign selling to help bring key products and services to market. We are seeing great success with those campaigns, including the relaunch of our three year Treasury product, which had more than 40 clients participating on day one of training.
Our active trader retail segment performance was strong in Q2 and year to date 80 beat it up over 70% driven by an overall increase in retail trading resulting from the locked down.
Yeah, I mean was well positioned prior to these events and its product mix, particularly the E. Micros allowed it to take advantage of strong macro factors lastly, our market data business had a strong quarter through the first half of 2020 consolidated revenue was up 3% Sammy market data.
Sessional subscribers count was solid due to increased subscriptions as traders were migrating to work from home environment. We continue to see success with our data services strategy, which confirms the value of our data to our global customer base I will now turn things over to John.
Thanks Julie.
The first half of the year. In addition to navigating the challenging environment. We've been very active would be ongoing next integration. We remain on track to migrate from the legacy next trading systems to our Globex technology, We recently announced to our clients the cutover dates for broker Tech.
Protect you clients will begin trading on November 16, and Pokertek Americas treating will commence on December seven.
With our progress on the integration the remote working environment and our overall strong expense discipline. We finished the second quarter with adjusted operating expenses, excluding license fees of $380 million. We are extremely focused on actively managing our costs.
Based on our outlook for expenses for the rest of the year our guidance for adjusted operating expenses. Excluding licensees for 2020 is being reduced from a range of $1.64 billion to $1.65 billion to approximately $1.595 billion.
This level spending reflects reality of the current operating environment, and we would expect a higher level spending next year, assuming the conditions improve from here would that short summary, we'd like to open up the call for your questions based on a number of analysts covering US. Please limit yourself to one question and then feel free to jump back into the queue. Thank you.
Thank you.
He would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function. It's turned off again press star one to ask a question we will pause for just a moment to allow everyone an opportunity to signal.
Our first question comes from Rich Repetto with Piper Sandler. Please go ahead.
Good morning, Perry, John and Julie or I guess the first my question is on expenses and you made a you know a solid reduction.
Joining the expense guidance or but I guess the question is you know the first half run rate you know it is you are averaging somewhere around 383, you know million in Ah expenses X a license fees. If you back into you know that full year guidance you know could be.
8.5% increase in the back out and you got.
You know hopefully you've got the 15 million of a piano expenses coming from the next synergies. So I guess the question is can we go dot if the current environment Didnt rebound say in 2020 is there more room to cut expenses could I know yeah. There's some events have already been canceled so.
Oh, yeah. Thank you rich thanks to the question on in terms of the first half versus the back half of the year. You know we do expect to have some increase in in costs in the back half of the year. As you know for example in depreciation as we migrate onto glow backs and also were in the process.
Datacenter consolidation effort and we have a build out of a data center in the on New York, New Jersey area.
As part of the integration efforts that were doing with next.
Also you know we do have planned where the back half the year. Some opening of the you know some economies you know around the world, where we would expect to see some more travel and marketing efforts I'm as those economies opened up so that you know that is.
Planned for sort of in the back half of the year if that doesn't happen you know obviously, we wouldn't expect those those costs to come through but in terms of our guidance. We did we didn't make some assumption that there would be a modest opening you know in Asia in Peru.
Ocular for example, you know in terms of our overall expense or you know discipline. We are as a management team I'm very focused on our expenses or you know for this year in and planning for next year on so we have a laser light.
Our focus.
On you know on our on our expenses and we were you know the entire organization is making sure that we expend every dollar you know as efficiently as we possibly could spend it.
Got it thank you and everybody. Please stay safe can help.
You too thanks Ritu.
Thank you. Our next question comes from Dan Fannon with Jefferies. Please go ahead.
Thanks, Good morning, my questions on market data Julie you mentioned some of the strength if you could kind of elaborate on the outlook for that business and how we should think about growth in the broader market data business sure. There may do this year and into next.
Sure. Thank you Dan you guys mentioned that you know we had a great Q2 with with consolidated revenue in the market data business of 135 million, which is a you know up about 5% over the second quarter 2019, and the majority of that was driven by those increased professional subs.
Kreidler accounts.
So what that has happened right is that in that work from home configuration were seeing modest demand and display devices.
And you know it's also just coupled with you know are there.
In licensing that that we're doing across the business and so you know we're continuing to closely consult with our data vendors and our clients to gather input. We you know have a really great channel partner base card data distribution, which gives us really a wide range of very flexible ways to deliver our data and new products.
As we kind of look at that the outlook and what else. We see you know we still see increased need for.
Our data in terms of automated training solutions and we also are are saying that in terms of using our data into product creation. So that comes through as those non display license revenue as well as derived data revenue. We are certainly focused on the next data integration on a long way.
With what we're doing on the go back side. There also is a lot of next day, a that needs to be integrated as well as continuing to create more flexible distribution channels and in terms of what you saw US you know announced with our Sammy smart screen and other new products. So this last quarter. We did the successful edition of the new 10 year Treasury bond as well.
And our next data products and that that just coupled with continued strengthen our policy or pricing and her audit functions.
And really making sure that our clients have that level, playing field and access to our data I think is it's contributing in as well as the outlook for our market data business.
Thank you.
We'll next go to Alex Kramm with yes. Please go ahead.
Hey, good morning.
Yeah, and I know this is a difficult question to answer on the rate side, but everybody can obviously see the the volume in open interest trends, but curious if there are any other data points. You guys are looking at anything in conversations with clients that gives you some confidence.
We may have troughed here and that things can improve when when certain events happen or or if maybe people start putting more risk on et cetera, what you're looking for due to get comfort.
Why don't we Alex. Thank you for that question I'm going ask Sean told me to give you.
His take on that what she's been obviously briefing all of us his thoughts with his team.
On.
Hi, Thanks, very much for the question I'm a really good question.
During the March timeframe, we saw a very high volatility in interest rate and if we look more recently in the month of July we've seen unprecedented low volatility across the entire yield curve from our eurodollar futures all the way out to our ultra bombed futures in fact, if you look at our eight youre at all future. This is the lowest falls.
Really we have seen since the inception of the contract in 1987, Nonetheless, the level of uncertainty in economic numbers has never been higher what seem from the perspective, but the range of possible outcomes for a number such as unemployment in GP.
One of the fed is currently doing everything possible to support the economy in the short run.
And you know during the month of March and April bought as much as 300.
Billion, a week worth of security.
And in fact, they increased the size of its balance sheet from.
4.2 trillion to 7.2 trillion or close to nine to sorry are up 2.9 trillion in a period of just over three months, including the purchase of 1.7 trillion whether securities. Those actions, obviously have dampen volatility tremendously, but nonetheless, if you look at.
What happened post financial crisis, when does the federal reserve between 2008 2014 purchased 3.6 trillion. They then later on proactively reduced the size of their balance sheet in particular, they reduce the size their balance sheet from 4.5 trying to 3.7 trillion.
From January of 2018 to September 2019.
From which we did get town additional additional volumes and volatility if you look at the unprecedented deficit this year.
Estimated at 3.7 trillion now estimated potentially two trillion of deficit next year, you're going to see the highest density GDP ratios. The U.S. government seen certainly since World War, two and possibly ever going to see the highest levels of debt in the U.S. ever if you look at though the refunding announcements. So if you.
Look at the refund the announcement, we had in the quarterly refining announcement by U.S. The Treasury in February versus the quarterly refining announcement that we had in may the growth in coupon issuance was 24% by the U.S. government in order to address you know that that.
Huge death and deficit need next week, where he had the next August the the August quarterly refining announcement, the gross in the coupon securities the growth in death and deficits once the federal reserve.
Reduces its intervention in the market and once the pandemic receipts or does that needs for hedging that needs for our products are being much much larger I think than ever before in history. So yes July is very low volatility however, the unprecedented debts deficits and issuance of coupon securities means.
That the risk that is going to need to be managed on a go forward basis is gonna be much larger than ever I said earlier that the federal reserve was buying as much a 300 billion plus a week insecurities. It's now reduced that to 20 billion a week. So we're already seeing significantly reduced activity by the tide hope that helps.
Yes.
Thanks, Sean there. Thank you.
Thank you Alex.
Thank you next we'll go to Brian the down of Deutsche Bank. Please go ahead.
Thanks, very much just wanted to Sean maybe following up on those comments I'm I guess it is an interesting dynamic of the of the potential I'm like <unk> like you said in terms of or the hatchability or the the hedgeable assets second.
Hedgeable I'm Treasury I've.
Outstanding stock that well need to be you hedged in speculated on I guess, what's your view on you know if the fed Steve and intervention mode for a prolonged period of time, if there is there.
Anything you can do on your end a a t. a me too to stimulate those rate volumes are really where we're kinda dependent on that environment and then maybe it's the [noise].
Second question tied to that maybe you can also talk about the equity index franchise, you've got a lot of new products coming on.
In terms of the options and and the to the Taco offering as well if he could talk about your your efforts there.
Outlook for for volume growth and the answer is.
Yeah of course Thats. It thanks very much I greatly appreciate the question. We're very excited as you know innovation has been more of our mantra is over the last several years has always been part of a teeny groups DNA, but for innovation continues unabated and the results. So far this year are extremely strong.
If you feel that the first half about 2020 products launched since 2010. This is a data that we frequently updates for you.
Anyway. The first half of this year, we achieved 3.2 billion contracts 80, D and new products launched since 2010, you'll recall.
That Ah Ah last year those same products, we're just 2.1 million HDD. So we've seen 52% growth year over year in the 80 of those products launched since 2010. In addition to that a in the first half. This year, we earned $193 million revenues Likewise a annualized.
About 25% year over year. So the innovation continues on an extremely strong basis across all of our asset classes and it's definitely a driver of growth the single greatest product launch and Simi group history. As you will be aware by now is our micro you many the micro E mini.
Have achieved.
1.6 million a contract Eightv so far this year.
And Ah Ah if you look at the second quarter they achieved.
1.9 million.
If you look at other actually in addition to that we have recently announced on August 30, Onest, we will be launching micro options.
So these are smaller options that are the option equivalent of the micro even any futures.
Which we're very excited about relative to the very significant uptake that we've had.
In Micros, if you look the micros another thing regarding the micros that we've talked about through time.
Is there RPC.
When we launched a new products, we typically have higher incentives. So that net RPC is going to be lower as you know in the second quarter of 2019, the RPC on that the micro E. Minis was 6.8 pen.
We told you at the time that we would be reducing those incentives overtime and that that RPC would increase we're very happy to say that in the second quarter of 2020.
They're about 12 on behalf of cents per my colleague many so.
Nearly double.
The RPC a year ago. In addition to that we recently launched the news three year treasury or future relaunched the news through your Treasury futures, we did it as we always do in terms of having a product that delivers a lower total cost with in fact half of the minimum price increase until the previous.
Contract that existed we're excited about you know our traction in the new through your future on the first day of that contract. We had 40 participants we had more than 50 participants in total since launch as of today.
We're achieving over 3080 be a day on the first day, we achieved more volume on globex and that contract than we did on our ultra tenure future. So we're very excited about participants there from banks asset managers hedge funds and about five and you have to house contracts open interest, which shows that it's real and users.
That are trading the product.
That gets me back to the previous you know the previous Ah Ah. The I guess all time, great launch it seems bigger picture, but the ultra tenure future, yeah, I'm very happy to say that.
The ultra tenure future even in this environment. The A.D.V. is 262000, a day, we're up about 20, 21% year over year and its open interest at 977000 contracts likewise up well over 20% year over year. So we continue to see you know in the if you know innovation. So during Covance, we launched a very successful.
Three year Treasury, we've seen extremely strong.
Growth in our micro you Minis and Ah you know products like our recently launched ultra tenure continue to thrive I might mention our silver futures. So for futures volumes are up 58% year over year 45000 contracts today.
80, the we had a record open interest in March of 612000 contracts and again, you know huge growth with 3.2 million contracts today in Eightv from from the financials unit coming this year from innovative products I think so the question.
Thanks, Brian.
Next we'll news to Ari Ghosh with Simi Group. Please go ahead.
Hey, good morning, everyone, maybe just a quick one for Sean on the metals complex you know to smaller revenue piece, yeah, but couldn't be facing some nice steel bins, given fed intervention and the rounds of stimulus I know you've also launched a new looks likes to live Regal contract. So just curious you know the level of interest you see here.
You know you see in print build and any color on broader customer trends out of Asia. We've typically seen nom strong demand for both the metals and equity index products.
Well I'm going to have a Dirk salmon answer that who heads up our metals complex a dark.
Hey, Thanks for the question. It's Derek here, Yeah metals continues to be big area of growth for us not only just coming off the a the overall macro environment, it's pretty positive for gold in the points that you've made.
The ER, we just recently have revisited the highs and come back to the highs of over $1900 that we just last we tested it back in March the business. This year has been spectacular and to be honest, that's actually seen significant market share gains relative to the broader OTI CE mark in the physical work in London over that five years as well from a client perspective.
We put up record numbers in Q1 actually record first half numbers as well and what's really interesting what we like about the metals business and the precious particularly as the point you just made or international growth continues to set the pace for the overall participation in our markets. When you look at the first half a business. This year overall, but this was up 18% or Asian business is up 30.
<unk> percent and from a pack what we like about the non U.S. businesses I think you're aware is that our weight per contract associated with her non U.S. customer base comes at a substantially higher rate than.
A U.S. franchise, primarily because they tend to be a lower per cent of members and we also see folks and then in the retail bucket in kind of the buyside participant coming in higher RPC. So the overall macro trends for gold have been and continue to be very positive or the non U.S. business continues to set the pace and I think one of the really interesting things that we've seen not only in the.
Volume growth and participation from Europe, and Asia is not a lot of people pay attention to this we were at all time record stocks of gold in our Depositories. If you go back to February March of this year, we had about eight and a half 9 million ounces of gold in or Coolmax warehouses were up to a little bit north of 30 million ounces right now and that tells you not only.
The volume trends, the global participation and the growth in the non U.S. business, but it also means when the depositories grow like that clearly the market is voting with its feet to determine that comex branded warehouse depositories is the place where they want to have their models and that's been driving broader participation. So it becomes a virtuous cycle of volume growth.
International participation, adding more materials or the warehouse and that's been one of the major reasons why we've seen not just growth in the metals volumes overall, but continued high strong growth in a rate per contract as well I think are totally per contract in our overall metals complex is the highest RPC contracts, we have at about $1.46.
Despite the fact that business is up 17, 18% volume wise, we actually have an RPC that's drifting a little bit her think it's about 1% up year on year. So strong growth in the non U.S. participant strong vote in terms of the metals flowing into depositories and that's reflected both in the volumes revenues and the hiring for contract despite higher volumes.
Thanks.
Rick Fellow thanks, guys.
Thank you.
We will next go to Chris Allen of Compass point. Please go ahead.
Good morning, everyone.
Appreciate the incremental color on the cross selling efforts wonder if you can give us any numbers in terms of how that's translating into the whether its volumes are open interest.
We also do you provide an update would do there's been any progress on the clearing fun.
In terms of realizing any synergies oh chain for customers in China, or see me and DTCC and maybe just to refresh awards expectations or in terms of the benefits once the technology migrations over to globex are completed thank you.
Thanks, Chris I'm going as Julie Winkler to talk little bit about the cross selling and then on clearing would do to see see on the margin benefits Sean can address that.
[noise] question, So just wanted to start.
Sure. Thanks, a question Chris.
That we really making outstanding progress as we think about how we've been able to integrate the sales team to support cross selling.
As we kind of expected right. There was unnatural death in those cross introductions and in late March and April as really the sales reps were focused on supporting those clients are this unprecedented volatility, but now what we're seeing as those efforts are really accelerating at a record pace. So when we looked at Q2 and I mentioned it earlier the 500.
Cross interactions May was a new monthly high for us, where we did 300 across our respective businesses.
Little more insight on that so nearly 70% of the crops introductions that have been made have occurred for the transactional based businesses in Q2. The FX franchise is really a cornerstone of that and is at the forefront of the cross introduction efforts, so that would be optimization or.
Yes or broker attack.
Clients that are being referred into our you know futures and options are our core business.
And you know kind of right. After FX you know that the other introductions have been happening with TV ads as well as interest rates, so poor futures and options as well as try on a end market data.
I'd say, you know and the other probably stand out client segment that we're seeing momentum with cross selling is for our commercial clientele and that's really happening across he asked as well as her optimization product suite and so this is you know really kind of based on the investment that we're making aren't in our global sales force.
And providing them with the the training and the tools that they need to effectively cross sell this holistic suite of products. So still a little early days for specifics in terms of that the revenue that those items are generating obviously as we go into on these clients going live with these products and we'll have more information on that thanks for the question.
I'll turn it back to you Terry.
Thanks, Julie Sean you want to address the current benefits with DTCC that we're working on.
Yes, absolutely. So as you mentioned, we are working very closely the DTC armed.
Creating benefits or we're working on increasing or benefits in the potential to cross margining between our treasury futures and catch treasuries.
Kind of its today for the handful of clients to take advantage of them typically at 20% or 30% worth of.
Offsets, we do expect to to get those offset percentages closer to 70% plus.
Once a D agreements are finalized and approved by the regulators we are working very closely with them on that.
Don't have any announcements in that regard yet, though I would like to mentioned nonetheless, it in terms of delivering margin capital total cost efficiencies to our customers. This is something we work on everyday and we have several initiatives. So for example.
With the increased volatility this year ads with therefore, the 60 made increases in margins that are required in order to cover the more volatile product and we have seen since you've been uptake in portfolio margining between our otcs swaps and our interest rate futures.
Turning to clients this year or so up to 55 clients and two clients do had stopped using the service has started using it once again so.
This year on outbreaks, we've achieved 5.4 billion worth of margin savings for clients.
And that's an old to all time record new high in terms of the average.
For the year to date in addition to that we are working hard.
Hard to clearing house is working hard on creating portfolio margining between our lifted interest rate options and interest rate swaps as well.
That is another efficiency that we hope to launch in the next several months, which which will also had a unique efficiencies the to the marketplace. So yes, we're working on the efficiencies the DTCC, we're getting greater traction our portfolio margining against so do you see swaps.
And we're also looking to add portfolio marching against our listed or interest rate options.
Thanks, Sean figures. Thanks for your question.
Thank you leave on next go to my carrier with Bank of America. Please go ahead.
Hi, good morning, and thanks for taking the question [noise].
The bigger picture question, but given the rate backdrop I just want to get your take on this cycle versus the prior one I've said last time you reach for here you guys worked with clients and you were fairly innovative and creating new products, which eventually played out but if you take some time. So in this backdrop are you seeing similar trends in terms of to me.
And for some of those contracts or even product innovation or is it too early in his blu ray backdrop impacting other product areas, similarly, or not universally last cycle.
John you want to go ahead, and a drill a dress up and then I'll jump in as well.
Sure it isn't volatility there very different across the different markets and you can see that in our volume numbers right. So that's obviously volatilities is something that is out of our control the pots innovation interaction with clients the delivering additional value. That's all in our control and we do that everyday the volatility it's outside our control as I said earlier in the month of July oil.
On record low volatility it's across the curve from.
You know dollars wholly out to the ultra involved if you look at the eighth eurodollar future.
The last time, we've seen something like this or not surprisingly the mockingjay side looks to me a lot like October of 2012.
And if you think about it as I said earlier the federal reserve.
Has intervened pipeline buying 2.9 trillion worth securities so increasing their balance sheet by 2.9 trillion right in a period of three or four months that is almost as much intervention as they did during the entire financial crisis during the entire financial crisis their balance sheet grew by [laughter].
You know he said 2.9 trillion about 3.6 trillion, so they've already bought a almost as many securities as they did back that so unprecedented speed up and I think that's why the dog volumes look you know similar again to October 20 talk in terms of innovation, we're very excited about the three year treasury future.
With that I mentioned earlier you know we're also very excited about growth that we've seen in our long and with the additional coupons, even with the intervention and by the Federal Reserve.
If you look at as I said earlier the to be it the ultra tenure up more than 20% year over year. The bomb future 80 be a is that the full year.
Eats up 13% and the that's a bomb future and the Ultrapar up about 16%. So we continue to see.
More trading further out the curve, we had an email announced out to our clients today reminding that you know about the great use of our bond and ultra bombed futures in regards to new 20 year issue as you'll recall during that May refunding.
There was the announcement of the new 20 or a bomb to buy the though the U.S. treasury during the quarterly auction series. The three months. The Treasury did issue 50 billion worth of those bonds and we have seen very good growth and our ultra bought at our Bob's features where those are being used as a hedged against that new 20. Your issue if you look.
At stuff for example, inter commodity spreads the single most popular inter commodity spread.
In our rates complex today.
Now, what we called the Bob spread what bond versus ultra bombed.
At this is specifically around that new 20 year issue.
And I dynamics, there were a during the Wi period, when the new 20 or started trading.
The new 20, or a bond [laughter], if I get the center of the Liberal basket of our bonds feature.
And the marketplace shows.
That it would trade. It does lie is the spreads to the cheapest to deliver to our are also or our ultra up on future. So we are seeing.
Increasing use of our parks further up the curve as though.
Treasury is issuing is the issue more security, we're constantly looking as well as you know things like lower minimum price increase.
So you know that we had great success, along the minimum pricing rent on cash to your notes as well as to your note futures.
You'll recall, we did that at the beginning.
Oh 2019, and we saw approximately 160000 contracts a day additional.
Volume in our two year note futures.
That was one of things that that that caused us to lumps in its three year with a lower metal price increment matching the minimum pricing around all the two year and half of the minimum price movement that that contract had previously and again with a successful start you know whether it isn't the cash surgery bond market, where we now have pokertek. We are definitely looking there at the the innovation to possible with her.
Or minimum price incurrence and what we can do there you know and also answer your question with broker Tech we are moving on very well in terms of the migration of broker check from the protect existing platform today.
For two Sammy Goldex.
And you know we are as John mentioned earlier, we do expect that cutover later this year next year.
We will we will migrate yes, its existing platform over to call backs.
Thanks, Sean Mike. Thank you for your question I was going to Edinburgh thing Sean hit all the Highpoint sort of.
Thank you.
Our next question comes from Oh in Mount with Oppenheimer. Please go ahead.
Good morning, Thank you for taking my questions.
Would you be able to provide any more color on the wells notice for your interest to stray V with SMP, but if not can you talk more about yes. She is any and he has she can you show to you as you would like to called <unk> CMBS working on thank you.
I'm sure. Thank you own a this is John in terms of the in terms of the wells notice you know that is something that we had been aware of and that is something that does not impact are treating business at all and any questions regarding the well.
As noted at the S&P Dow Jones, JV should really be addressed.
To a S&P global so.
I'd encourage you to to contact them to get more more updates in terms of the U.S.G. products. You know we certainly you know are involved in developing products around U.S.G. initiatives you know we currently.
I have a a equity product on the S&P at U.S.G. I'll turn it over to Julie because you know she can talk a little bit about you know some of the work that.
You know her research team is doing regarding product development on the U.S.G. stays.
Yeah, Thanks, John and thanks for the question Oh, and we it we did introduce our first yes. She reports I'm just a few weeks ago on our website, which talks a little bit more broadly about Sammy groups E.S.G. strategy and.
A key part of that is definitely our product related strategy and where you know the progress that we've been making in terms as a cross functional U.S.G. product Committee has really been looking at this across our product suite and we believe there's some great opportunities to adjust some of our.
Existing products as well as some new product introduction and we are looking to get some of those rolled out before the balance of the year. There's a lot of interest from our client base I'm, particularly in Europe, I would say a lot of investor interest and that's been a key part of the success of art, yes. She.
Yeah, 500, S&P index futures contracts and we believe that that will you know also helped drive some of the interest in these other benchmarks that we look to introduce later this year.
Thanks Julie.
Thank you own.
We will move to our next question that comes from and Jeremy Campbell with Barclays. Please go ahead.
Hey, Thanks, and Sean Thanks for the the macro color around the Reed Smith puts and takes we outlook from here I was wondering.
About the rates activity impacts a once we control for the number of users you guys have hooked into the see me features eco system like I think over the past like six eight years since the prior zero rate environment user base has grown in both the U.S. and abroad, but you have 80 views you know excluding the first quarters here, but I kind of tracking more aligned with the 2012 to 2014 level. So.
I know volatility is crazy low and maybe it's the fed crowding everybody out a bit but I would've thought even materially lower activity levels per user might have yielded a better overall activity level a than the prior cycle.
Sean.
Yeah, I think that's a very good question and Ah I think your supposition is a good one the a challenge that we're facing is that the volatility. We're seeing in July is in fact lower than we saw in October of 2012 for example, which was the all time low for the Youre at all.
Future so.
Yeah as I said earlier, you know the I'm the volatility in that eight shoretel or future. If you look at a continuous contract.
Or is he is in fact, the lowest it's ever been since the launch of the product. So I agree with your supposition the volatility environment is more challenging now than it was in 2012 in fact, a from a that that metric perspective.
But again with the unprecedented increasing the size of the death definite says as well as the unprecedented certainty around the unemployment numbers and the GDP numbers. For example, they usually that on a go forward basis that there's going to be more hedging a than ever before needed.
In the future once the pandemic proceeds.
Great. Thanks.
Thanks, Jeremy.
We will move next to Chris Harris with Wells Fargo. Please go ahead.
Yeah, I wanted to ask a little bit about 2021, I know, it's early but but what do you guys need to see.
In order for expenses to grow in 2021 with there also need to be revenue growth and then related to that I believe there's a decent amount of any ex synergies that should flow through next year. So maybe you can flesh out why spending would exceed the synergies.
Next year.
Sure Chris This is John Thank you for the thank you for the question.
You know in terms of our expense outlook you're correct. It is it's it is early days to be able to no provide you some.
Some some guidance I'm you know, we're all very hopeful that you know we can have the economies around the world you open up safely no should you know should the environment improve or you would see for example, a higher level of travel and marketing spend you know as we look to intensify our client outreach so that would mean their expenses might be higher than the low.
Single digits as we are growing off an artificially low base and let's say low single digits, that's really our core expense growth base as the growth rates. So if you look over the last several years you know our expense growth rate you know are on the core side, it's been about 2.5% to 3%.
You as you can imagine you know with Ah you know sales and you know our in person marketing, it's been really curtailed you know the sales.
Efforts in terms of travel and entertainment and marketing has really been curtailed a during the pandemic and hopefully as you know as economies open up we'll see no more or more intensified in person, where we can experience for our clients.
In terms of a in terms of synergies you're you're right. The bulk of the synergies a run rate synergy capture is in front of us.
No we targeted 50 million last year, we exceeded that target didn't hit 64 million Oh, we're targeting $110 million a in run rate synergies for this year, it and we're well on our way to achieving that hundred $10 million a run rate.
You know when you take a look at the amount of realized synergies that or is that we have in our income statement in 2020, yeah, we anticipated that being approximately 15 million and we've been able to accelerate that realize synergies to 25 million and that was also somebody that was you know that we were able to use.
To help reduce our overall expense you know a guidance for 2020. So I'm. So really when you think about you know our expense growth going into 'em into next year, you know similar to the model that we use this year, we've got an core expense growth.
Three of 2.5% to 3%, we would make any adjustments for you know for any additional spending you know relative to you know coming out of the co bid you know we would obviously reduced after the amount of realize synergies and 2021 that we would get.
Through the migration of.
You know Oh, yes towards towards the back half of a 2021. So we'd see you know a synergy capture there we'd also see a full year impact of the synergy capture when we migrate off of by grid broke attack off the legacy platforms on onto glow backs. So.
The puts and takes you know our you know in general a a core expense growth rate any adjustments related to I'm coming out of the co bid and that's going to be offset.
By our synergy capture you know as we migrate off of you know the legacy next systems into all into our global platform.
But I mean, I think the long and short of it though is you know we as a management team are laser focused on our expenses I'm going into this year and going into next year. This is something that we are going to have a strong eye on throughout the rest of this year and as we planned for 2021.
So thank you thanks for the question Chris.
We will go to our next question coming from Patrick O'shaughnessy with Raymond James. Please go ahead.
Hey, good morning, I'm curious what should we read into broker text U.S. treasures market share losses accelerated during the second quarter.
On.
Yes so.
Haven't seen that actually so if you and let me let me let me let me let me, let me actually clarify that right. So.
If you look at a the central limit order book share of the dealer to dealer market.
Our market share over the last 12 months has actually increased.
When we look at a market share we look at the dealer to dealer market you maybe looking at the deal at a customer market plus the dealer to dealer market, which you know we don't compete and the deal if a customer market. So that may be a difference there we have seen.
Small drop in the overall in our share of the overall do you have a dealer to dealer market and what I need in that regard is where there is some attraction in dealer to dealer space coming from relationship based trading platforms.
On that front, we're working hard on.
On a few things first.
We have launched broker tech stream.
Which is our broker tech dealer to dealer Ah Ah Ah relationship based trading platform and we're making progress on that front.
We also look to enhance that technology. So we are investing in technology, that's already been plan.
To to prove that technology.
So that becomes more competitive relative to alternative platforms. We also will offer unique.
Benefits because we have the most significant central limit order Buckland dealer to dealer space and once we have that better technology and the deal are there in the direct to trading dealer to dealer space. So again main messages first he may be looking.
At the overall, a treasury market, which would include dealer to customer, which we don't compete in.
I will tell us customer has grown relative to dealer to dealer within the dealer to dealer space our share of market in terms of central limit order books has actually grown over the last 12 months. If you look at the overall dealer to dealer market. It has receded.
By my calculations by about five percentage points or maybe six.
And they get relative to the direct to trading platforms and we are building around and are looking to grow. Thanks for the question.
Great. Thank you.
Thanks, Patrick.
We will go next to kind of late with KBW. Please go ahead.
Hi, Thanks, taking my question, maybe just a clean up question for John on the on net investment income think QQ revenues, there and quite a bit higher than the two basis point, you'll you mentioned last quarter. Just wondering if you could give it to Q average cash balances and the yield on that and to Q and maybe how those balances.
And the yield on those such trend it into the third quarter.
Sure. Thanks, well take it takes Terry Thanks, Kyle Thanks for your question Yeah. When you take a look at or non operating income and expense portion of our income statement sequentially. It's down about $15 million. That's made up primarily three items. One a you're correct. You know when you look at the returns are we earn on cash.
Held by clients.
At the clearing house it came down as we mentioned last quarter. The interest on excess reserves came down to about 10 basis points in the middle of March and you know with them move we adjusted our reach accordingly that reduced our net returns from net 19 basis points in Q1 divorce four basis points in Q2.
To that was partially offset by higher average cash balances, which more than doubled to $83 billion. So that's that's what drove the sequential reduction now yeah. We did have a higher you know investment returns from the two basis points to approach.
Maximally four basis points, and that's because we were able to leverage some or.
Since they leverage but it's a you know invest in a higher yielding a instruments than than at the fed. So we were able to take advantage of some of that which allowed us to increase our yield from about two to four.
In terms of the other items and that section you know we did see I'm a reduction in the earnings from the JV of about $2 million. It's important to note that year to date. You know this line is up about 18.6% compared to last year and then we saw small reduction or corporate investing activities is about you know a million dollars.
You know in terms of you in terms of our our leverage again as I mentioned last quarter, we did hit our one times debt to EBITDA target and we paid off.
The balance of $100 million and commercial paper. This quarter. So are we have no commercial paper outstanding I'm. So that that was six cents, which was a roll into into this line in terms of activity going into.
This does third quarter and you take a look at the average Oh, so far in July our cash average cash balances about 71.5.
Billion dollars that compares to the average in Q2 of 83.8.
3.1 billion.
So that's a that's should break down Kyle.
That's helpful and should that four basis point yield be sustainable.
You know, it's really you know that.
No I would anticipate no higher than the two basis points. At this point you know I don't have a forecast in terms of interest rates getting you know to the to the four basis points, but right now it you know I would say, it's going to be higher than the too.
Thank you.
Right they scale.
We will take our next question from 10 Hell with Rosenblatt. Please go ahead.
Hey, good morning.
Wanted to ask on the international front here in one Q. I think the growth was pretty strong in Asia, and Europe, 73%, 54%. It looks like Asia into Q is still slightly positive, but I didnt see a number for Europe. So I was hoping you could provide that number I from what you're up like into Q and then maybe more broadly comment on how the environment trended throughout the quarter.
Did you see people coming back into the market.
As the pandemic Meda east in those areas or what are you seeing in the region today as well thanks.
Sure I actually our last Julie to join in as well.
Yes. Thank you thanks Terry.
Yes.
Thanks, Ken So in terms of you in terms of our international activity you know year to date Yost continues to outpace U.S. performance you know of <unk> for the quarter, our international business faced really tough Comparables is you know Q2 of.
2018 was the second highest quarter for international activity behind Q1 of this year after the quarter APEC grew about 1% year over year six out of our top 10 countries, including our top three of Singapore Korea in Hong Kong were up.
In four out of the top 10 were up double digits on looking at AMEA. It was down about 11% year over year, but we did see as we saw five out of the top 10 countries there were up.
In three of those top 10 countries were up double digits, and the Netherlands, which is our second largest country by volume was up triple digits. Now we did see some migration from the UK to the Netherlands in anticipation of Brexit, but.
But we also saw very strong growth there as well so our overall international activity for the quarter was in line with full year 2000, 1980, the which is a strong your for US a in 2019, so I'll turn over to Julie in terms of the customer experience.
Yeah.
As you know right much of our international activity is is driven by that active trader retail client segment, you know equities and metals being products that were you know significantly transacted by those clients and when were looking you know across this space.
You know it Q2 was was very strong in revenue for that segment.
We saw it you know over 130000, new accounts coming into our markets through that active trader segment that was up more than 100% year on year.
Obviously the volatility as is there, but also just as you know work from home and locked down environment is really making that particular segment you know trade even more with US and also just point out you know as we think about you know those new customers. So over 50% of those new customers that I just.
Talk about again most of those being international trade at at least one of our for E Micro equity index products, and 20% and those new customers had only traded and he micro and so you know we continue to see that being a great new client acquisition driver for us in terms of the products.
We need and that means we believe it's also going to lend well see that he micro option launch that we have coming up in Q3.
We're up of those new clients. They came in from over 166 different countries around the world. So while the U.S. was strong as John pointed that out as well, Taiwan, South Korea, Hong Kong, China, Yeah, We're definitely seeing those you know those countries and participants with in those countries work.
You know trade more with us as well as the work that we're doing with our broker partners is really helping to drive some of those numbers.
I hope that helps.
Thanks.
Thanks Kim.
We will go to our next question from Ken Worthington JP Morgan. Please go ahead.
Hi, Good morning, maybe just wrapping up on oil and gas trading. So what is your perspective on the impact if any from the negative W.P.T.I. pricing during the April delivery and has there been any lasting impact on trading behavior or participation and then why do you think there might have not been gray.
Later acceptance of the Houston based products they seem like a a great product that they really haven't taken off any views there.
[noise] Dirk.
Ken. Thanks. The question, Yes. Good question. The a you know when you look at the impacts of both extreme levels of high volatility in the price uncertainty driven by that you know huge demand destruction by the supply concerns as a has created by the Saudis and then some of the questions around stores, what we saw from the primary output from the negative pricing on.
April 20th was you know for those firms that have problems with their systems being able to handle negative pricing, we've seen brokers intermediaries largely update their systems and the anticipation that they need to be able to handle both pricing, but frankly margining for their clients.
In case negative pricing happens again going forward, we did see some brokers initially pull out of allowing customers primarily the retail side from being able to trade from a trading in both WT <unk> and Brent and that did impact some of the self directed trading volumes, but we are seeing some of that business come back online now that most of those brokers if not all have updated there.
Systems.
Really the biggest change that we've seen from April you know high degrees of volatility I think we saw front a front month W.P.I. spike up close to 106% volatility of the biggest changed over the last three months as we've actually seen the normalization of the overall supply and demand dynamics in the global crude oil market you certainly saw OPEC out there announcing their decisions to.
The rollout agreed cuts we've seen that roll into addressing at least some of the concerns around the supply side of the equation. The demand side of equation is still a influx right now what we actually see as with the price of crude oil globally rebounding to kind of the current $40 level on or thereabouts, we're actually seeing a fairly flat for.
We're curve in both both W. T <unk> and Brent with a fairly static two to two and a half dollars Brent Ti spread. So this is frankly, creating a less interesting market for some financial players and we're seeing that in the reduced volumes and volatility in both June and July.
You look at the a year to date results overall, we did deliver both record Q1, and first half energy revenues as a whole and we've talked about the strength in some of the business were seen out of Europe, and Asia and actually look at the European revenues European revenues first half are up 25%. So we continue to expand our non U.S. customer base and that's really helped us maintain.
The overall growth clearly the energy revenue despite the overall volumes being up 20% our rate per contract in energy as a whole has been almost out of getting down maybe half a cent. Despite the 20% growth overall, you know one of the really interesting parts of the overall energy franchise, we don't talk about nearly as much as natural.
Yes, you know natural gas as a business that has been fall within that same globalization path that we've been seeing and been talking about having been investing in both in crude oil and in what we've seen in the natural gas market year to date on natural gas futures business is up 46% natural gas options were up 71% and that continues to be a huge part of our overall.
Energy story. This is a market also that we need to remember we've maintained that 82% market share and this has been a boost or overall energy business because our rate per contract in Nat gas.
Futures and options is higher than what we've seen crude oil. So that's helping the upward pressure on a and b T or excuse me on the overall RPC as a whole.
Very quickly on the Houston contract. It's a great point you know we launched that contract back in November of 2018 explicitly focused on the those folks involved in the export chain. So remember what that Houston physical contract references it's to allow customers that if you're involved in the export chain you need a price for on the water Houston based delivery.
As a this oil flows out of Cushing down to Houston goes on barges and ships out to your U.S. well, what we saw in the first half of this year was overall continued production ramps up in the U.S. up until about February we were producing I think in the U.S. about 13 million barrels a day of which about 3 million, we're going to export and we did see that business an H.C.L. king.
Convey system contract grow, but it's you know in the maybe five to 800 contracts a day sort of a volume what we saw a following the the implosion of that both supply and demand story was not only U.S. production pulled back to about 10 tend to happen, though it was a barrel today, we're actually seeing exports out of U.S. decline as well so as.
<unk> exports to climb demand for an export focused product had decline. So it still out there were actually continuing to still innovative talk to our commercial customers about what we can do to enhance that contract and they've got some conversations going into how to make that more interesting, but that will really be a function can of what that export situation in the U.S. look.
Like the other point that I, probably want to touch on very briefly is we continue to see a strong growth in the August assess contracts, primarily in Midland and in Houston and as you remember trade about seven to 8000 contracts today, but have close to 350000 contracts open interest and those are additional contracts that allow.
Customers involved in both the domestic market, but also the export market to use those contracts they trade as a basis against W. tea and those are contracts that allow physical participants to manage their risk out into middle and out into Houston and so those contracts you've had that for a number of years, but it takes a long period of time for customers to it.
Particularly the commercial customers to using those products that we see that strong continued growth and significant holdings and alike as potentially path for how we see that Houston Hcl contract evolve, but that'll be a function of how we see the export market regained its footing here as the cobot demand impacts or start to level out they start to see.
<unk> phone and miles driven increase again, so hope that answers a answers your questions Ken.
Yep, great very comprehensive thank you.
Thank you.
On his next to Alex Kramm with yes. Please go ahead.
Yes, Hello, again, sorry for dragging on the call just a couple of follow ups, one coming back to the rates franchise any updated thoughts on the on the floor I know youre reopening I think the euro dollar paid in August, but when a couple of weeks or so any any any updated thoughts of.
How that may impact the a the overall trading markets again, I mean, obviously, if you looked at data little bit more closely held maybe the flow being closed has had a negative impact on that on the trading markets overall, and then different topic and I guess, it's coming back to the all question just now, but just one quick follow up <unk>.
I keep on reading more headlines around oil production in the U.S. may or May never see peaks like we had in the past so with that backdrop and kind of like that underlying commodity really not not growing any more long term.
Can you still grow your oil franchise or or is this oh, oh outside of Oh sort of what you just said Derrick.
Why don't I go and start under can talk little bit up about oil, but I don't believe the demise of oil is.
Here, just yet so I would say Alex that we've heard this before.
And then we saw prices either drop precipitously or rise exponentially. So every time someone comes out any particular product or an asset class. It seems to move so I would not just comment, though just yet they're still I think what we're seeing right. Now is just so much uncertainty on the supply demand equation as it relates to the covert.
Could because it's not in one central location, it's around the world.
So I would not again count that asset class, so as not being able to move up or down.
And there can you give you more color and just a second but on the the trading floor I don't believe that not having the floor has impacted the trading business. As you know we've been able when we've spent many years with our technology being able to replicate transactions that have been done has.
Basically on the trading floor.
So I don't see that as anything that's inhibited our business growth is especially as it relates to the euro dollar contract I think what Sean referenced is really the most important component of the fundamentals of the Euro dollar contract, which is the levels of volatility or not just to sort of close but a contract flows.
Since inception that is you know that's a big statement that could have the impact. We are excited to have before come back that being said on August 10th as you referenced you know.
So the business as you know, we're still roughly 50 50 as it relates to the floor and the screen. So we'll see if the participants when they come back if they can be able to continue to facilitate that business in the world that we live in today, but we don't believe it's been impacted just by the foreclosure, so but that being said I'll.
I'll turn it over to Sean or.
The dark.
Yeah. Thanks Al Good great question on the on the oil side listen I think a terrorist exactly right I think we there's there's cyclicality to the oil market people, calling for the demise of this market until he knows because he was sitting in front of Senate talking about you know that the market a dollar $440 a barrel and there were a lot of prognostications as to what that would lead to and we then have seen even the other.
End of the spectrum over the last couple of months. So I think there's significant fluctuations and a lot of diverse into opinions out there about what OPEC is going to do what Russia is going to do the U.S. capability, what certainly the U.S. has done having looked at the export ban back in 2000 and to 14 15, and what we've seen that mean to U.S. energy independence has done nothing but positive.
In terms of job creation and certainly in terms of the U.S. his ability to ramp up production from four to 5 million that barrels a day after that 13 peak that we hit earlier this year and export in in excess of 3 million barrels a day, we expect that that will continue to come back that as a pure function of of the demand side of the equation you know the more shut ins we have.
The more states that are walking down the more countries that are disallowing travel that's just a cap on a on demand right now so once we start to move into economies opening once you start to move into vaccines, you know for US we see that de lever of growth that we have pulled hard working in conjunction with julie's team on the international sales.
Side is continuing to grow or non U.S. participation. It has been the hallmark of our growth. We are early markets penetration into Europe, and Asia right now and I think the numbers you see that we continue to talk about certainly validate that and the growth in our sales organization that Julie has built over the last couple of years with a focus from Europe and Asia continues to unlock offer.
Securities for Us So we don't see this as a static market that has to be split up based on kind of who's in the market or what products are choosing we see this very much as our ability to access a growing demand customer base in Europe, and Asia, and I think as far too early to call the sort of a a peak oil conversation here in a in 2020, when I think you've got the significantly.
Artificial cap on global demand really coming from the the Covance situation I'm coming from economic growth. So that's how we think about it and Alex the way we continue to invest in the business as a whole international as in our business extending W.T. icicle benchmark growing our options business, and then extended education and education out into Europe, and Asia for those customers to come.
Turning to grow that high margin business for us so hopefully that puts a little extra color on top of what Terry was talking about earlier.
Yeah very good thanks again.
Thanks, Alex.
Thank you we will now go to our final question from Brian, but now with Deutsche Bank. Please go ahead.
Great. Thanks for taking my follow up front, thanks for extending the call I'll just it just two quick follow up just turned back on the expenses on the synergies just wanted to verify <unk>. We're exiting 100 at 110 million of synergies at year end.
After the broker to conversion.
Should that be should we be considering that like an 85 million tailwind to the expenses you know in reducing expenses given that given the 25 million I think you talked about for for 2020 that that's the first question and the second question was just to go back to a Julie said about retail.
I'm not sure if I missed it but the the proportion of volumes from retail in the second quarter versus the first quarter and do you see is it just a is it a israel concentrated in equities in metals are you seeing any in energy and it just to just along those lines the RBC dynamic going into.
Third quarter obviously.
You know, it's it's a headwind on the equity side, but we've also seen really good RPC building energy do you see that sustainable through Q.
Hi, Hi, Brian. This is this is John and I will.
I'll take a I'll take the integration question, and then mentioned kind of Ah what we're seeing the equities RPC, which I think would be helpful. For you as you can just think about a third quarter. So in terms of the in terms of our integration. We added to you know we had a target of 50 million in terms of run rate synergies with the.
End of last year, we hit 64 million Who's got a target of 110 million at the end of this year and we're on track to to meet that 110 million you know obviously, the organization's focus not exceeding it but we're well on our way too.
Given the the one the 110 so going into next year, we would have a 46 million dollar reduction in our cost base.
The difference between the 64 million that we ended last year and 110 million.
Million that we've got targeted this years that 60 that 46 million would be what would allow us to reduce our costs going into next year and that would give us a 110 million a run rate synergies you know based on yeah. What we had you know projected or.
Forecasted with the acquisition of of next so you know that's a that's on the integration side. Then when you look at the are you know the RPC side, you know I think it's it's really important on the equities.
To to really understand the product mix. So it's a product mix story for equities this quarter.
As you guys know our micros products Archer our tremendous success in sequentially. The treaty is up 30% no. It's a premium price product from a risk adjusted perspective, but has a lower RPC that are you minis into one micros were 22% of our total volume in in Q2, there were 34% of our.
Total volume now a couple things to note and Sean touched on this one earlier, but I'll reiterate it the micros RPC increased from 11.2 cents in Q1 to 12 and a half sense in Q2, and they're up from 6.8 cents. The same quarter last year. When you look at the.
The.
When you look at the you'll be equity RPC, excluding micros.
That RBC increased 75 from 76 cents in Q1 to 80.4 cents in Q2, and it's up from 73 cents from the same quarter last year on that's increasing because we didnt make some pricing adjustments in our equity a complex, but also we find our clients are you.
Using higher price products like you know VTEC like our dividend futures. Unlike the total return futures. So you know the equity in our equity complex. The Rpcs are increasing it's really it's just it's a mix shift story in our equities.
So that those were the the too and I think I'll turn over to Julie for your third question.
Sure. So on the on the product mix with our active trader segment. You are correct. There there we did see some declines as as Derek pointed out earlier given the.
Access on the brokers to that providing to clients for the W. T. I. We saw some some declines year to date were still up on energy as well as you know up significantly with our equity index and our metals business as well as.
Efax and our AG, an interest rate is pretty flat.
We've also seen that trend it, particularly from our Asia Pac clients of transitioning from W.T.I. into Nat gas and you know that is something that you know it's definitely positive across the energy product mix for this segment. So that's something that we are watching as well.
And then just the overall mix of retail within your 80 views for different two key versus work here.
Chris <unk> across the franchise.
John do you have that number.
I will I haven't even.
No we're never handy.
It's not going to come up later [laughter]. Thanks, so much rather detail I really appreciate it.
Thank you.
Thanks.
Thank you. This concludes today's question and answer session. Mr. Duffy at this time I will turn the conference to you for any final remarks.
Thank you and you know thank you all I appreciate very much and I don't know team does as well you know we live in very interesting times and we truly believe that managing risk will be critically important as we continue to evolve not only from covert but other issues that are affecting the entire world.
For all the reasons that Sean and are working Julian John explained we will feel very optimistic about our position we as a team I will tell you that we remain laser focused on innovation client outreach the things we talked about capital efficiencies the integration of next.
And I'll stress again like we are laser focused on expense discipline, we will continue to be discipline as we can do run this business on everyone's behalf. So we thank you for your time. This morning. We appreciate your questions and we look forward to talking you soon and we wish you and your families on the health and safety.
And thank you very much.
Thank you and thank you all for your attention. This concludes today's conference you may now disconnect.
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