Q4 2020 CME Group Inc Earnings Call

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Good day and welcome to the CME group fourth quarter and full year 'twenty 'twenty earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. John P. Sir. Please go ahead.

Good morning, and thank you all for joining us today on Mr.

And with the Safe Harbor language, and then I'll turn it over to Terry and John for brief remarks, followed by your questions. Other members of our management team will also participate in the Q&A session.

Statements made on this call and and other reference documents on our website and are not historical facts are forward looking statements each day.

And so are not guarantees of future quarters and involve risks uncertainties and assumptions that are difficult to predict therefore actual outcomes and results may differ materially from what is expressed on.

And entertainment detailed information about factors that may affect our performance can be found and the filings with the SEC, which are on our website lastly on the final page and the earnings release, you will see a reconciliation between GAAP and non-GAAP measures with that I would like to turn the call over to Terry. Thank you John.

John and thank you all for joining us this morning.

And how much will be a group as John says and you write your questions I Hope you and your families are all staying safe and healthy.

And we released our executive salary. This morning, which provides extensive details on the fourth quarter and Twenty-twenty and.

As John said I have John.

Sean Derricks and Neil and George There with me this morning, and moving towards their dressing and.

Questions that you may have 2020 wasn't challenge with all volatility and several asset classes, including a friend and.

And then on W. T on contract for much of the year.

See some very encouraging signs whatsoever on higher rate per contract and products also during 2020 and metals habits.

And every year.

And with annual volume and that's off to a strong start in 'twenty and 'twenty one please.

And we saw very strong activity and our agricultural commodities and on our part.

And then continuing to rise and the first month of this year up 36% first and last year soybean futures had its second highest quarterly 90 day, including record volume.

And I think Europe and Asia.

And then the extreme volatility on the first quarter of 'twenty and 'twenty as the pandemic began to volume and total volume came in at $15 6 million contracts per day, and the third quarter and jumped to 16 point to buy and contracts per day and Q4.

During this entire time, we have remained heavily engaged with our global customers during 'twenty and 'twenty, our volume from clients outside the United States grew by 7% and selecting the global relevance of our markets.

I am encouraged on the January 'twenty, and 'twenty, one volume, which came in at all and 19 million contracts per day.

We are very pleased with the progress we've made integrating nex business during 'twenty and 'twenty, including back office migrations to some force finance and HR systems, and the building and integrate day global sales team.

Last week, we announced that broker Jack has migrated and see.

U S Treasury benchmark trading and government bonds, and repo markets and content rollbacks and.

And tax dealer to dealer platform now a fully integrated part of CME rollbacks clients have and enhanced suite of government bond trading on things across the west and derivatives cash and repo markers on a common platform.

And greater operational and technological efficiencies and managing our risk cost and cash and futures.

We remain excited about the Martin I think eight channel or I should say migration excuse me and all the ebs onto globex on your.

And and the ability to provide further efficiencies to our global customers and the FX market.

During 2020, and the first quarter of this year.

And to innovate with several new products.

And trading globally, and Michelle offset contracts referred to as G O futures on March 1st.

And we just launched our new and cheaper and futures earlier. This week, we continue to work closely with our.

Global customer base and solutions to help them manage their risks.

These new products and build on and globally relevant products, we have the library and clothing sulfur futures and you've any S&P ESG futures and South American soybean contract cobalt and futures and options on our popular bitcoin futures and clearing micro products across several of our.

Asset classes with that let me turn it over to John who will discuss and financial results.

Thanks, Terry throughout 2020, and we navigate the difficult operating environment executed on the integration with Nex launched do and innovative products and actively managed our expenses.

For the year, we delivered $4 $9 billion and revenue up slightly from the prior year and with a strong focus on expenses, we achieved $6.72 and adjusted diluted EPS.

During the year, we announced our annual variable dividend of $2 on 50 cents per share and we recently announced a regular dividend of <unk> 19 per share for the first quarter of 2021, 6% increase compared to the first quarter last year.

In terms of fourth quarter revenue, our average rate per contract across the product areas were fairly stable with our micro contracts continued to perform well across several asset classes market data revenue was very strong with an all time quarterly high of $140 million. It was up over 7% compared to Q4 last year.

We were intensely focused on expense management throughout the year at the beginning of 2020, and we provided guidance for adjusted operating expenses, excluding license fees of between 164 and $1 $65 billion for the year. We came in approximately $90 million below the midpoint of that range and $80 million below 2019 led.

And 1 billion and $557 million.

In terms of synergies, we had initially targeted $110 million and run rate synergies by the end of 2020 related to the nex acquisition by year end, and we had exceeded that target and achieved a total of 140 million and synergies. This is net of the additional costs. So we are carrying to run parallel infrastructures as we continue to work on the migration to globex.

We remain committed to our target of $200 million of annual run rate synergies by the end of 2021.

Turning to guidance for 'twenty and 'twenty, one and we currently expect full year adjusted operating expenses, excluding license fees and increased slightly from the already low 'twenty and 'twenty levels, two 1 billion and $575 million for capital expenditures, excluding onetime integration costs and net of leasehold improvement allowances, we expect.

To be and a range of $180 million to $190 million and.

In addition, we expect our 2021 and adjusted effective tax rate to be between 23.2 and 24, 2%.

Finally, we are very excited about the recently announced joint venture with IHS Markit and the opportunities that it will provide our clients and our shareholders on the JV will be a leader and trade processing and risk mitigation services and offers the combined clients complimentary services across the global OTC marketplace and interest rate FX equity and credit asset classes.

We don't anticipate.

Great any material change to earnings as a result of the JV and will provide more information when the transaction closes.

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

Yes.

[laughter].

Thank you, ladies and gentlemen, if you would like to ask a question. Please signal by pressing star followed by one that is star one if you wish to queue for a question.

Take our first question from Richard could you go of Piper Sandler. Please go ahead. Your line is open.

Yeah. Good morning, Terry Good morning, John and I hope everyone at sea.

And you need safe and healthy as well.

Hopefully things on light at the end of the tunnel here.

So my question on the expense.

Thank you my question is on the expense side John.

Trying to understand you gave out that Ah I believe was 30 to 35 million you expect to have the P&L impact of the synergies and 2021 can you tell us what the P&L impact the actual realized synergies in 2020 work and also what you're assuming.

For Covid expenses are COVID-19 and by that I guess that expenses and sales and Everything's day.

I'm afraid of restricted.

Throughout the full year. So those are the two.

Questions. Thanks, guys.

Great. Thanks, Thanks, Rich and thank you very much.

Yes in terms of the in terms of the synergies.

Are anticipating.

On achieving that $200 million run rate synergies.

By the end of this year. So if you take a look at where we're at in terms of run rate synergies. We had originally targeted 50 million.

And the first year, we achieved 64, we had targeted 110 by the end of this year and achieved a 140 and we're already planning on achieving that full 200 by the end of this year. So if you look at it on a year by year basis, we over achieved by in terms of run rate synergies.

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By $14 million.

Last year, and 2000 and night by the end of 2019 and again over achieved by approximately the same amount. This year, we overachieve by about 16, this year and terms of run rate synergies in terms of P&L.

Yeah, we anticipate.

Our synergies are being realized in our income statement in 2021 of $35 million.

And so.

So that is what we expect to have in our P&L. This is being offset by you know additional cost that we anticipate having and.

And you know in terms of.

It increased depreciation related to our migration migrations onto globex. So the way that works is that we do some programming that goes into work and process and it goes from work in process and into production and when it goes into production and that's amortized over and over.

Several years, we also are building out our data center.

And disaster recovery center on the East Coast. So that's partially and that's partially being offset by the synergy capture and lastly in terms of you know our impacts we do anticipate having some improved environment in terms of and.

In terms of operating environment towards the back half of this year, and we anticipate having about $20 million and additional costs that we didn't have this year that we are building into the back half of 'twenty 'twenty, one related primarily to travel marketing and and events.

So that's.

And that's a that's the story for 'twenty and 'twenty one.

Okay. Thanks, Thanks, very much John.

Thanks Rich.

Yeah.

We'll move onto our next question from Alex Kramm of UBS. Please go ahead. Your line is open.

Yeah. Good morning, everyone can you.

Touch on a real could take a little bit more now that the integration is complete and couple of things. One you know what should we be expecting from this combination now too to drive and simple that you sort of upsides and on on either side, but then I think Gary last quarter, you made a comment that as you improve and on the offering.

Clients, you know that that obviously, you wont have compensated for that so I need any details on any pricing changes, you're contemplating or and anything that should impact the financials more directly outside on sport to be thank you.

Yeah, Let me go ahead and ask John and make some comments on that and then the restaurants and jumped Venezuela. So thanks Sean.

Yeah. Thank you Alex and thank you Terry and we are very excited about the migration.

Brokerage Jack over to go that's possible.

And I think I've spoken about before but I'll mention it and now we are very excited and particularly the new technology of being able to offer products and services and particular with you all.

RV or relative value curve trading order type so we're very.

Very excited about this and curve trade spreads are very popular and especially in this market and.

And Oh.

Order type low allows you to reduce the risk of trading net order type by eliminating the day Telega transactions, one suite and you're kind of reduced the minimum price increments in.

The spreads relative to the at rates.

And then three we're gonna have the CME globex implied functionality, which means that you have.

And spreads water, let's say between two year notes and five year notes and you've got outright orders and senior notes that that should theoretically, but not all theoretically actually does on globex imply allied orders and five year notes and so we're very excited about the dog eat technology works and watching that March and shortly thereafter, we were also going to be producing with them.

And it's a three year notes and we've got a total of seven different initiatives that we will be taking.

What are two zinc that platform more attractive relative to alternatives.

And you know in terms of pricing I guess I'm, most focused on making sure that the platform is more valuable to our clients and then you get more volume over our platform and that's really our focus.

And Terry I'm, not going to jump on.

No I think that answered that and Alex that that caller I didn't hear the other part of your question. If you have something on me.

No I think you've got both of them. Thank you okay, great. Thanks Allison.

Okay and move on through our next question from Dan Fannon of Jefferies. Please go ahead. Your line is open.

Thanks, Good morning so.

Market data was an area and strength.

And in 2020, and they take a group prepared remarks, you mentioned that the record net sales pipeline and you're kind of exiting the year. So thank.

How can we think about growth in 'twenty, and 'twenty, one and and potential pricing changes as well as the demand side and you could think about the build on the success you had this past year.

Thanks, Dan Let me ask Julie Winkler, who runs that division and make some comments on market data and Julien and I think I'm sorry. The question, Dan and Yeah. We did have a record year and data services revenue being up 5% year on year, Yeah, I think the that work from home environment kind of further highlighted that need for real time data access really a cross dock.

Global client base as well as the need for historical data rate as we evaluate and are really the impacts and the volatile market conditions that we saw and since you and we also made some investments and our bids and half last year, and so bringing badly and business.

And it's closer to our commercial capability, we established that day the sales team and we also supported a number of new products and services and so that's where we really feel kind of that continued investment is certainly helping to grow the data business and and positioning as well as as we head into 'twenty and 'twenty one and.

And those solid trends, we continue to see and the professional subscriber device count was strong throughout the quarter and you know what Q4 revenue was up 7% compared to where we were in Q4 2019. So I think its on its strong you know definitely global demand as well as things on the dry data front and are are really kind of force.

Palin and that business and this is just that that longer term trend that we've talked about on on other calls as customers use their technology and their trading strategies is increasing and the need or our data through a number if he is not on display and use cases. So we did have some minor adjustments and that are being made in 'twenty and 'twenty one two.

Really we're slap power and customers are utilizing our data now and also just the value on the data and that we offer and the services that we have and and how our market data customers are really receiving and expecting to receive that data. So there was a $5 increase to our and real time data on <unk>.

Wondered and five 210 her D C and per month and that goes into effect in April and then we also had some pricing changes on the non displayed and and historical redistribution side and then also what kind of trickle in throughout the year. Since there are certainly some licensing and implementation and.

We'll need to be done between ourselves and our customers that we feel well yeah that we're in a good position and and as we onboard those customers and that we're really and you know I'm gonna be on a good position to continue to grow the business going forward.

Great. Thank you.

Thank you.

Okay.

And then move onto our next question from Brian Bedell of Deutsche Bank. Please go ahead. Your line is open.

Oh, great. Thanks, good morning, folks and I hope, everyone and as well as well.

Couple of questions on retail our participation and obviously, we're seeing that increase.

And the market, especially in equities and options, but but but after and futures.

Yeah.

Well I talked about leveraging.

[noise] abilities.

And this one might be good maybe if you could just give us some perspective on uses of course and a V E V or revenue revenue that you think is coming from retail now and and.

And some initiatives and where do you think that might be doing and 21 and is it just you did that youre working on in terms of.

On conversations with.

And writers like on my brokers and also obviously been developing and micro complex and maybe if you could talk about.

The other product extensions across the bank Republic, and that could help that as well.

Yes.

Thanks, Brian and then let me ask Julie to comment on that I would comment as well as it relates to what we think is going to go down and go forward basis and give a.

And you got some of the flows Julien Yeah, sure, Thanks, Terry and and a lot of questions and there. So I will start and then and think back to Teri.

And really thinking and you mentioned it a couple on fire and you know broker partners and your question and it's really because of that strong broker distribution network and mass educational programs and really the content that we support a diverse product mix that we were and are really good position to be able to take advantage of the increase and overall.

Retail trading and 2020, we saw record levels of participation and revenue globally and the number of retail traders that were active at CME group last year increased over 50% and so the biggest gains we're definitely on the equity index products side, where you know the volatility there really weren't.

So a lot of increased trading opportunities and we also saw great year on year gains and and metals were up over 20% and packs as well as the act and that really speaks to again the diverse product mix and the fact that people are looking for it and different opportunities.

<unk> been investing quite a bit and in our sales and marketing and staff overseas, both on APAC and EMEA and those are playing out also a large role and as we've grown the business globally on the retail side. So we saw both APAC and EMEA retail business was up double digits.

Now countries and a strong growth continue to be in Korea, and Taiwan, and Singapore, and then, Germany, and Switzerland and in Europe.

You know the the work from home environment has allowed I think you know the potential for even more retail customers. The kind of active and you know our digital outreach I think was also just a real positive trend last year, because we're able to just reach more retail and active traders.

And then ever before and so the efforts through our education and helped us reach over two and a half million new active individual traders throughout the broker and partner and digital events that we have that we're focused specifically on CME group products and the largest growth in Asia, and we had events at Inc.

And that has increased over 65% over 2019, and why all of our 400 events and by going digital and you know we reached 15 times more active traders and they only having to pass on and when more and does have vendors were in person and also you know were seeing similar strong trends in North America, where.

The problems are where were growing their weapon our output by 225%. So we feel that this continued investment on.

And is leading us to have well educated retail traders and that really kind of helps position us for continued success and with that I'll, maybe turn it over to Terry and enjoy your restaurant a lot on the questions on it but let me just add a little bit and I'm going to ask John to comment a little bit on the cost and some of these products to them.

And it's really hard for us to predict Brian what we think 'twenty and 'twenty, one and future volumes are for any particular constituents on the market participant going forward.

It doesn't it takes the last several weeks for us to think about the growth of retail trading and struggle on that.

The reason why we talk about retail trade and as you know we've been building on this business for a number of years, but it's becoming more and more clear, but in my opinion, but retail traders want them to have a parent participate and all different forms of markets and we're looking at all different ways for them to allow them to come into our market share as Julie referenced education is key.

And though.

You talked on would've been about the micros and the growth of them and they are looking at other ways to continually work with our partners to bring in more and more retail participants it's Jack.

And one of those things and that's not going away I don't believe it's going away and and.

Don't say that because on what happened.

With the run up and some are on the recent equities and.

Or are you and then what they perceive us running up into silver and you can talk about fundamental stories that door and silver versus.

And that's not fundamental stores and some on the other products that had the runs on them, but there's no question about it that the proliferation of social media. The proliferation of access to marketplaces is allowing people to participate more and more and they want to do that and I think it's extremely encouraging for more and more young people.

And to have interest and financial services and financial markets. So we want to take advantage of that with them and bring them along and Jennifer.

Very thoughtful smart way as Julie outlined and so it's not only and micro products that we have and we're gonna retails, we're looking at new and innovative ways to continue to move forward with this.

Growing our constituency of our clients. So very excited by the growth on that but at the same time I don't want you and the thing that we're just putting all of our everything into one basket such as retail because we're not I mean, the institutional clients of this company are critically important.

On the commercials are critically important and so all the different parts that go into making a trade work are very important as we continue to move forward and grown this business, but we do not want to deny them day access to the retail participant and a good and thoughtful smart way and we'd like to talk a little bit about couple of and some of the fee changes.

Associated with some of these micro products and maybe I can ask John to do that thanks.

Thanks Jerry.

And as we as everybody here knows that the micros and been a tremendous success not just in equities, but also and metals as well when.

When you take away the equity micros, you've seen our RPC steadily increase over time.

Was it a 11.4 cents.

Around turn and Q4 of two one and 2019 and it hit on.

Approximately 2 million contracts, a day and Q4 of 'twenty 'twenty AR and VR be seen increased to 14 sets. This.

This year, we're taking a very targeted approach to pricing and.

Really we're focused on changes to the non member fees and our micro products with increases in micro equities of five cents per side micro gold of 20 per side and micro silver of 40 cents per side and those are for a non member fees and.

So you know I think we're doing we're continuing to add value.

And that and <unk>.

Net product, whether it's increasing liquidity and working with our our intermediary partners through education and also launching new products like the options on our equity products.

And the micro so those are some changes that we'll be rolling through and beginning in February.

Hopefully that gives you a little color on where we're at with that one.

Thank you so much.

Okay.

Yeah.

Thanks, Craig.

Okay.

And I'll move on through our next question from Ari Ghosh with Credit Suisse. Please go ahead. Your line is open.

Hey, good morning, everyone. Just a quick one on the joint venture with I just want to illustrate on I was hoping to talk about the market opportunity.

And just broadly given that you'd have some flow and any false zero and show the potential size and growth of this business just given the scale benefits that you're enjoying this fragmented market and then any color on you know the joint customer base level applying to overlap with our growth.

Perhaps you know more of a complementary portion of that that might be out of the overall client profile, so and any high level talk on this would be valid with things.

And generally John Hi, IRA.

And thank you for the question Yeah, we're extremely excited about on that front.

Joint venture with IHS Markit.

For the customers and and our shareholders there'll be a leader and the trade processing and post trade services and will benefit customers by providing a more efficient access to services and we think it'll be a great platform to launch new solutions across a broad set of asset classes, including interest rates FX equity and credit on this one.

Allow us to innovate and bring to market analytics workflow tools and solutions that allow clients to manage their risk and process more efficiently. So when you look at and when you look at the kind of the.

The client base there is a substantial overlap in terms of a large global banks.

Utilizing the services both off market served and our optimization businesses, but theyre all across complementary asset classes. So the strength of market served are very complementary to the strengths of our optimization businesses. So.

So what does that mean for clients that means a much more efficient way for them to access those services because a lot of the information going to those platforms are very similar and by providing you know one kind of point of access for that information and.

And we'll provide a lot of efficiencies for our clients and also reduced.

On the amount of errors that could potentially occur as processes could potentially breakdown as as youre accessing multiple platforms across multiple businesses. So very very excited about that so you know like I said with the added value I think that we're gonna be able provide.

Which I think will be very compelling for the clients is around you know additional analytics additional workflow tools and additional.

It'll solutions that we're gonna be able to offer clients, because we're gonna be and a.

And a place where you wouldn't be able to provide our clients. A you know a window into a lot of their trade processing and post trade services across all of those asset classes. So we think it's gonna be pretty pretty exciting and just a couple of quick points on it it.

Is it's going to be a 50 50 joint venture. So we will be using the equity method of accounting and it will not be consolidated at CME group. So it'll be so you'll see a shift and the geography of our income statement the revenue and expenses will be netted in the equity and unconsolidated subs.

City rely on of our income statement similar to our indexing joint venture with S&P Global.

And as I mentioned, and we don't anticipate any material changes to our earnings and what other point just from a financial perspective, and it's between now and close and it will be categorizing the optimization businesses as a held for sale asset in our 'twenty 'twenty, one and financial statements. So this will mainly impact our balance sheet presentation.

And there'll be minimal impact on our pro forma operating results. So.

Some change and geography, but most importantly, a very positive change for the business you know and I think a real positive for our clients.

We feel like I'm, sorry, if I'm so much.

Yeah. Thanks, sorry.

Yeah.

We will take our next question on for Mike Carrier of Bank of America. Please go ahead. Your line is open.

And good morning, and thanks for taking the question.

And some of the price of that you guys saw and short race day TICC.

Yours.

Yeah, Yeah and improve.

Economic and in place and outlook for the back half and each year and any point of view, just curious and you're seeing any signs of increased traction on some of these areas either you know from conversations with clients and the more participants or nuances you know expenses.

Trading activity you know that you see.

Eric do you want to take that yeah. Thanks, Mike I. Appreciate the question Yeah, we've seen a lot of action and I actually just on the last six weeks. If you look at the run up of the activity over the last six weeks, you've seen crude recover you've seen W. T I and Brent actually move up and a lockstep. There are a number of fundamental drivers and to whats going on the markets generally are responding to the.

Increased expectation for economic activity with the vaccines rolling out.

You've got significantly reduced stocks and Cushing if you actually look at the drop in barrels we've seen about a 14% reduction and Jimmy.

And the existing stock and cushy and this reduction and were up 14%.

When you look at the what's actually driving the uncertainty around U S energy policy and and the by the administration and the increased flow of exports and U S. They're actually seen the energy curve and W. T are right now and what's called Backwardation, where the funds out of the curve is more expenses on the back end of the curve and why is that important that's hugely important because I'd actually feeds on it.

And the narrative that we're seen more broadly play out and both metals, and particularly and eggs and overall price rising cycle. What that means is you've got folks filing and on the increase and expectation for growth and price and what impact that had had on our business. We actually saw one of our biggest days and W. T I yesterday and trade about $1.3 million contract.

So if you look at our February Adv, it's about $1 1 million that's up from 784000 and Q4 of last year. The reason that's important is that that's actually driven us back to open interest levels that we haven't seen for over two and a half years were about 245 million contracts open interest and.

Versus where Brent is about right about $2 6 million, so and and so you've heard us talk about Mike as increasing economic activity takes place. That's represented itself in the form of use of our crude benchmark globally, a y on the rise and.

Institutional investments flowing in and there's broader talk on the overall commodity cycle resuming you've got soybeans and 13 and a half hours, you've got quantified dollars and you've got oil at highs and over a year and so if the market is playing for economic recovery, you're seeing that reflect and both are just below record levels of W. T I O y.

And record a balance of AG and metals product come into the franchise as well. So I think that this is the place people are playing on global Reflation trade and that's where you're looking at roll yields and W. T I and 8%. So institutional investors are looking for yield. This is the place to get it and this market right now and just to continue on with that a little bit Mike, Let me ask Sean and talk.

Just a little bit about some of the day rate products and the silver and the ultra and maybe you could talk about the backend on the euro dollar, especially shrunk.

Yeah, Thanks, very much Terry greatly appreciate it. So there's no question, we're seeing a much better market environment and the last couple of months across the rates businesses.

Our exciting development and one that we expected and we are especially seeing that further out the curve. Some examples in terms of the market itself. If you look at the two year vs 30 year spread has widened out to 1.81% or 100 and aim on basis points, we emptied and environment like that since February of 2017, So the market is expecting.

Very strong growth and that's a very good indicator of strong growth on a go forward basis and also just very briefly in terms of the treasury inflation protected securities or tips.

And with the 10 year chips, they're now, implying a and inflation rate and consumer inflation rate over the next decade up to two 1%. That's the highest level, we've seen and it applies in place and since 2014, which is at the five year types whats even more impressive at 231% implied by the market for inflation on the next five years, we haven't seen anything like that.

2013, how is that impacting on markets.

Good day.

A very big positive impact, especially on long and we've seen several new records. This year in terms of opening doors and in terms of our ultra 10 year futures in particular.

We've also seen very good growth overall.

And of the Treasury curve. So if you look.

Through January and Ultra 10 year, Adv was up 44% and year over year as a bond futures up 13% the ultra Bob.

About 7% if you look further out the curve if you looked at the particular I guess.

And do we get them back 30 to 30.

32 contracts and our eurodollar futures and we've seen significant growth there is the fourth quarter.

Which was a very positive results.

And further I guess I looked in detail at the Green and the Blue. So what are the claims and Greens or is that 2023, eurodollar futures and the blues are that 2024, eurodollar futures and the 'twenty and 'twenty three eurodollar futures are running.

And a D D up more than 100%.

This year versus <unk>.

Full year last year, and the Blue Eurodollar futures likewise up more than 100 per cent.

Versus last year, less and I mentioned, maybe on the market price impact and that's if you go back to the third quarter of last year on.

The first and implied tightening by marketplace was in December of 2024. It is what today's marketplace, they're applying a tightening in the summer of 2023. So you see a much improved market outlook the impact on <unk>.

And pricing and to give you an impact on our volume actually I mentioned I apologize my last name large open interest holders and I've also seen a very nice balance.

And actually since December 1st Oh rates of large open interest holders and they've increased by 9%.

And its recovered half of the losses basically that we saw during the recent crisis. Although it was 9% below the all time highs and you know rates are low drove major photos and the first time, we've reached that peak, where we are so last time, we reached the first time I should say we reached the current levels of L. O I H and rates with 2018, so so we're seeing that.

Big recovery, there as well sorry Terry.

No that's very helpful. John Thank you very much thank.

And you might calculate that.

Answered your questions, Yeah, and that was great yeah. Thanks, a lot.

We will now move on to our next question from Alex Blaustein of Goldman Sachs. Please go ahead. Your line is open.

Great. Thanks, Good morning, everybody on just one clarification for me I know you guys provided an incremental color around and capture rates for for even easier and gold and and on the micro side. I guess you know John if you think about the current and big staying the same I know you guys change pricing or just the non member side.

But assuming the fixed volume stays roughly the same can you give us a sense of what kind of pro forma GAAP reads for those buckets would look like in 'twenty, one kind of pro forma for the changes and price.

And.

Yeah sure I'd say, you know I think when you're talking about the mix of micros and minis is that what you're asking and Alex right right exactly sure like I know you guys are east breaks even on just the non member side of the equation for growth I guess, you know gold and and Goldeneye gross and then he might gross so I'm just trying to get at.

And I'm like what the run recapture rates there would be for you know kind of assuming similar mix of volumes.

Got it yeah, Okay, and you've got a couple of a couple of points. So you know one of the things that we've been.

Doing over time is you know, making adjustments are in the and Ah.

As you know somebody incentive plans for for Micros and also you know as I just outlined com and we've made some some fee adjustments. So you know a couple of things to think about you know number one you know the the micros have been have been hugely successful.

And.

When you look at the changes that we're making I think from an overall company perspective, they're relatively modest but when you look at the the micros and you know I think though you'll see a more meaningful impact in terms of and terms of the you know the Rev.

And you know and we don't think this is gonna be impacting low volume necessarily we're providing a lot of value for the clients and are in a product that is highly liquid. So we think low so we think it'll be low from a volume perspective.

That are not as impactful on when you look at the capture rate you know generally speaking.

It's roughly an 80 20 rule, 80% of the volume coming from you know coming from Nonmembers and members I'm, sorry, and then 20% coming from non members. So when you think about the capture rate.

And you know that's something to think about so about 20% of the volume roughly will be impacted by our by the fee increase on the equity side and and metals and so it's a little bit a little bit different and spoke with a heavier on the non non member side as you know I'm, a little bit higher than the than the 80 20.

In terms of in terms of the non members.

Okay.

Great that's helpful. Thanks.

Alright, great. Thanks, Alex.

Yeah.

And that would take our next question from Oh and low of Oppenheimer. Please go ahead. Your line is open.

Good morning, and thank you for taking my questions. So can you just launched the futures and the volume of the bitcoin contracts has been quite strong could you. Please talk about the regulatory and pharma and what they do.

Sort of assets and how it will impact CME to launch more products and this space and then also one more point or what's the plan to launch something like E Bay and you all may go even they become futures for retail investors. Thank you.

Thanks on yes, we have seen some upticks and our bitcoin futures contract, obviously, and we're seeing a massive appreciation and the price I think because of this volume is around 46000 about coin.

So we're seeing great appreciation net and of course interest always follows those type of price movements. So let me ask Sean to talk a little bit on not only about crypto, but and I think you also reference to my name's and your question was well so shop.

Yeah. So in terms of the new crypto contracts and terms need their futures on the first day the trade at 388 contracts 35 unique accounts across its U S Yens and ended.

About 40% of that was customer paper, so and you had good starts the day in terms of the bitcoin and doing more than 11000 contracts. A day, we are the largest risk transfer platform for bitcoin and in the marketplace.

And we've got a significant RPC Inc.

And $4 a contract so and I, both growing very nicely.

Yeah, Yeah, we do have several thousand TEG fifties, they're trading a breakpoint and teachers. So this also brings additional participants for overall markets.

I don't know if that answers the question.

Oh, Thank you very much.

And when did you have a person about him and he's or no. Yeah, yeah exactly like any plan to launch on email me or Mike what do you mean the uptick.

On futures for retail and thank you.

Okay. Thank you. So the question was on the micro and petrol and micro E mini.

On the bitcoin and contract so I.

I think it's right now.

Saying, yes or no.

And we've seen a great appreciation as Ive said again.

Product of itself the price, but at the same time and the volume is still being near term and it is still growing and we want to be cautious about how many people are participating on this new asset class or a store.

So I I still strong value and when we need to make sure that we're comfortable going forward. We've always said, we're going to walk before we run and when it comes to crypto as a and with the launch of our new either contract and people, having the ability to trade one against another and we want to see how that starts to pan out for the.

Apparently and more spread trading them for other terms.

And I think that's important and before we decide we're going to move forward with a smaller version of a crypto contract. So again I think you're on this contract is not that old and.

And so relatively new and the options were and just listed on and I've already and over the last several months I'm, a big believer and do you have to get on with put options market along with your futures contracts. So you can continue to bring it to a broader audience and that broader audience might be here and with the people that we referenced and we earlier part of this call which is more on the retail side.

And they will obviously not it's hard for them to participate in such a high value contracts. So smaller versions or something you know obviously, we're looking at it but we have no plans to make any announcements on a watch or something of that nature and just at this point.

Okay. Thank you very much Terry.

Thank you.

We'll move on to our next question from Chris Harris of Wells Fargo. Please go ahead. Your line is open.

Oh right. So another one related to you know the growth that's happening.

And from retail investors.

What do you guys think about that.

And the potential risk of increased regulatory scrutiny.

The larger this business becomes and.

And relate to that are there safeguards in place that prevent novice retail investors from trading and teachers.

Well as far as the regulatory scrutiny.

And we don't need retail traders to get regulatory scrutiny and you'll get that wasn't all different participants and that was one thing that I've said forever, which is a benefit to this organization that we are a highly regulated entity and I believe regulation lends to the credibility of any business and allows us to grow globally and that's exactly what we've been able to do because.

And some good smart regulation now the question might be this do we invite and different types of regulation because of the retail client entering into the marketplace. I don't believe so all the way because we've got a growth of retail over the years, regardless and I think when people have access to marketplaces, it's not like the U S. A.

And where are the SEC's main mission is to protect the public for manipulation and fraud and and other things are we are a global regulator and that obviously youre looking into those things as well but.

I am very convinced that the retail participants will continue to grow and it doesn't mean you have to have additional burdensome regulation against them, Oregon, and so you get to that wants to house them as long as your practices are and good.

Housekeeping for lack of a better term from your March and require a requirements to the money that you have on deposit for and your F C and so as a whole host of things that the.

<unk> clients need to make sure of the day you have to understand that they still need to have those requirements and I'll ask Julian and make some comments on the retail globally and other places as well and so when you want to comment a little bit about that but I think on a regulation side, Chris I don't believe because and growth of these particular group of people that would envy.

New regulation I think what you're seeing right now is a lot of headline regulation being discussed and it doesn't mean, that's going to happen.

Thank you Terry I think you know he makes a very good point about the differences and the market structure right between equity markets and and insurers and the other thing I'd. Just add is that you know this is a critical part of what our broker partners and intermediaries really do to ensure that they have retail and active traders that are.

Going to be trading futures are qualified to do so and so we work with our partners throughout the globe and to ensure that so just because you're able to trade and the equity market. Yeah. That's not the same as having a futures and count and so there has to be and intentional you know opening of that account those restrictions.

Our different varying on country, but what we see is that typically right. There's the graduation of retail and active traders from trading and the equity markets into trading equity options, and then coming into the derivatives market place and so that lends itself to be a more sophisticated retail trader.

And that's part of what we work with our broker partners on on the education front as well so they are well versed and what they're getting into and.

Opening up accounts, because they are ready to trade and our markets because we want to make sure. They are well supported and that you know we have a good customer experience for them and a diverse set of products for them to access and so on Chris what I've heard a lot of and I'm sure you have as well and there's some headlines and and there's a whole host of people and makes them different.

Rhetoric as it relates to the recent activity by what supposedly some of the retail traders have done. So that you have people talking about transaction cash because you got people talking about well in Texas and you have people talking about high frequency trading and people talking about payment for order flow.

Just so we're all clear what what happened and the marketplace last week could have happened without any of those things being in place at all so it had nothing to do with it but people are assuming and pick their favorite.

Regulation dish or taxed assure to add to what's going on in the marketplace over the last several weeks as it relates to some of his retail activities of which it has nothing to do with it. So I'm hopeful that you know we always.

And the ability.

To go voice, our opinions as it relates to some of the potential regulatory conversations and there'll be a hearing coming up I believe you. This week on next.

And then we will always participate and news and make sure that our voice is heard but again I think what you're hearing right and I was mostly headlines from a bunch of abundance about what they believe happened and how they believe and kind of stop it or a.

Net and it happened at all.

Okay.

Got it thank you both.

Thank you.

Yes.

Next we'll take a question from Ken Worthington with J P. Morgan.

Hey, good morning.

I love to dig a bit deeper into the FX business and advance of the the further integration with UBS.

Your FX futures volume and or why growth has been maybe more stagnant over the last six years, despite being a global product at a time when you've been very successful and building up this global client base. So what's been weighing on sort of CME FX futures trading and O y growth.

Over the maybe the intermediate term.

And as well as more recently and zero rates and then I guess, maybe more importantly, with the integration of next upcoming for for FX had a things change for the FX futures business and how does the combination sort of jumpstart our futures for CME.

Sean and you'll I picked up.

Sure. Thanks, very much the question and greatly appreciate it.

We're very excited actually about the developments and steps, we've had recently and our FX futures marketplace.

And have over the last few years and continuously reducing the minimum price increments and I'll begin on done it across nine different instruments very excited actually late last year, we saw it and all time record open interest and our euro versus U S. D futures.

Which is really amazing given the fact that volatility has been a has had a tremendous dampening effect on volumes.

Look at the STR across each of the major currency pairs. The the volatility ranking was typically the lowest day decile going back the last 20 years. So in other words, 90% of the time over the last 20 years volatility was higher and each of the major currency pairs nonetheless, even in that environment.

On a record number of record open interest and in those and those are Europe versus U S D contracts.

And to that the changes we've been making in order to make our complex much more attractive and we've also seen a recently good growth.

And block trading so in the month of December was our largest ever.

U S dollar versus Sterling.

And options block trade.

And that was the equivalents of $2 billion and a single trade some market participants or migrate more of their options activity towards the listed space that actually could accelerate that through this year why.

Yeah, So and you haven't spoken about and a while because it was delayed last year relative to COVID-19, but we do expect there'll be 100, new participants and it's hard to give participants that are required for this year globally and to adhere to the Uncleared margin rules. That's in September of this year that should drive more products, requiring greater efficiencies and in particular.

Puzzling and our FX options in the month of January after we sold a record block size in December in dollar Sterling and saw a record block size and royalty dollars. It was $4 billion. So we had seen our athletes featured last year actually outperform the spot market places.

And we're seeing now some uptick and the option space in particular and box yeah and in terms of what the team is doing and get in order to make.

The I'll talk more much more attractive and it's taken a unique set of assets. We have right. So we don't have and Etfs as well as the futures data so.

We are looking to use this unique set of assets in order to bring greater athletics greater tools to spark lights to cross sell our products down and give you a cross sell with teachers down the Etfs.

Recent channel.

And so participants on the.

And both marketplaces wheat.

Have the analytics now that we've recently launched that show motor participants, if you're really going to use both the features as well as the spot liquidity pools and in order to optimize your execution, there and with just your execution some of them and tools that we've launched so.

We launched the new ethnic swap rate motherhood, we did that now late summer of last year on board.

And 4000 views more than 3000 users. This is our.

Our FX link product, it's the first time ever with a central limit order book and standardized cleared low cost alternatives FX swaps and be able to market participants we are seeing some greater uptake there where it makes and enhancements to technology and that'll come out later this year that will make it much easier to consume for participants and we do expect to see significant growth now once we.

Once that technology is released and additions that we also released the new <unk>.

Small converter tool and it takes a wall of our listed FX options and converts it to OTC equivalents or participants can see our FX options on futures.

The same way they look at the OTC marketplace, we think that that's a part of what drove that record block trades and as a separate and there's like a block trade of January.

Last thing I'll mention is our ethics and profile tool. It's the first time.

Uh Huh synchronizes the data between E. B S spot foreign exchange and our foreign exchange futures and she was the relative liquidity that bid offer spread.

Our books, so the size available.

To hit on the list and.

Each of the two markets simultaneously and it quantitatively shows participants the benefits.

On the benefits of using both marketplace and so we're very excited about these new tools, we are distributing and out to the very large tail of clients.

You know cause Etfs, especially regional banks across Europe, and Asia, and most exciting is as I mentioned earlier and excitement I have over and.

The migration of brokerage and it goes to claw backs and how that's going to allow us to offer new products and services with that greater technology. Similarly on the EPS side they'll be migrating UBS over growth. That's later this year, which will allow us to do.

And to offer many new products and services across our platform. The one number two it also make it much simpler.

Once we once we move it over four participants too.

Trade on EPS, so we should be able to attract new participants last thing I'll mention is we've been investing and direct streaming technology and we do expect it to roll that out likewise weighted this year and expect to have the state and the art and drug.

And I've screening platform available for participants and foreign exchange.

Later this year.

And we do that foreign exchange, we will actually also roll that out and infrastructures.

Great and I'm very very comprehensive thank you so much.

Thanks, and thanks John.

Moving onto our next question from Simon clearing of Atlantic.

Atlantic Equities. Please go ahead your line is open.

Hi, there thanks for taking my question.

And I was wondering if I could get an update please on the agreement with the D. T C C and regarding cross margining and.

And whether that's already been submitted to the FCC and in terms of.

Timing of when and how long and you're thinking about to put something on that could be approved and when you might actually start to see it.

The benefits of that.

And you know a fundamental problems.

And really a good question Simon let me turn it over to some reopening funeral and crossover and clearinghouse to address that channel.

Thank you Terry very quickly I think.

Very few a very few participants and know that it's been we currently have and cross margining agreement with B D. C C.

On our effort right now and it's going to improve that gross margining agreement and enhanced and savings.

So we are actively working with D. D. C C. It's very hard to handicap regulatory approvals.

So all we can say and as we anticipate completing deep operational effort. This year, and then and the rest of it depends upon the approval timelines with the FCC and CFT and.

And just to add to that assignment.

We're hopeful that and as you know has been working on this rigorously.

But we talk a lot about efficiencies and this is one of the most of the efficiencies that we are very excited about once it gets put into place for our global client based training and the rates and a business and you're her and Sean Tully talk earlier about some of the encouraging sign around on a range of business, especially with the widening of the yield curve, a little bit and some of the things.

Where this could be on a huge benefit for us. So we're really excited about creating more and more of these efficiencies and it's been a pretty much one of the things that we've been focused on over the last several years and they're bringing clients deficiencies and when can we think will bring greater growth of our businesses and this asset class and it is right for that so we're looking forward to getting that agreement done.

And I went to N T E C M a S Hussein and.

And then going forward and with the growth that was shot and as already pointed out and these range business and stuff that would have a big part of flow. So thank you for your question Simon.

Okay excellent.

Oh.

We will now move on to my next question from Jeremy Campbell of Barclays. Please go ahead. Your line is open.

Hey, Thanks, guys and I know, we're getting them into the into your time here, but Teri maybe just a quick one on the emissions contract I know, we've discussed you know carbon offsets and other green contracts on the past just kind of wondering you know what's changed on the demand side of the equation that led you guys launches contract and can you characterize the competitive landscape and how big you think this might be over time.

Yeah. That's a great question, Jeremy Let me, let me kick it and Derek was on working on this and launch this contract for us. So derik yeah. Thanks, Jeremy it's an exciting space and I think what you're seeing right now and you're absolutely right. There. There is an absence of mandates globally right now at their existing markets and emissions tend to be very very regional in nature.

And why we're excited about working with a C. D. L exchange on this which is our partner in developing this contract does it. This represents a significant change in net these carbon offset futures represent a contract that is and offset versus whatever it is in fact, I don't mind product or even better light.

And might be involved and not limited just to get energy markets imagine a a afirma that wants to manage their carbon footprint and imagine that aluminum company that wants to adhere to either voluntary standards on a regional standards and.

And emissions credits I mean, this is a product that's very capably as able to extend and outside of just the traditional space and energy and have and application across a full range of our commodities participants heated and non commodity participants and the feedback that we've got and both in the validation space have gone out to the market and assessing and interest and this and actually since.

And we've announced has been bigger and actually more overwhelming and we had anticipated. So just to remind everybody. This is eight and voluntary emission offset it.

It's based on standards that the market participants are agreeing to and the competitive space is one that is open right now when you look at the position that we're in and our commodities markets. We are the largest metals market, where the largest energy market. We're the largest agricultural products market. So the application of these offset products Inc.

And well beyond just the energy space. So we think this is gonna be a process and not just dealing with and fossil fuels market and transition.

And most companies charters right now everybody is trying to adhere to ESG standards and apply to what they feel their carbon footprint and needs are so this is broadly applicable to a lot of different market participants the feedback we're getting and validates that we're excited to get this out and we've got a whole host of market makers and market takers are lined up on this and we're excited about what this could mean.

And this is a slightly different product and what you're seeing any existing product slate that we have and others have that are really regionally focused. So we think this is early days and this we think this is extensible to the range of benchmark markets that we run and where we run the majority liquidity and and so we think there should be a great service to customers looking to extend their ESG credentials.

Charles and manage their carbon footprint, and really you, new and unique and market oriented ways and.

Thanks, Eric Thanks, Jeremy.

Thanks.

Yeah.

And we'll take our next question from carve off of K B W. Please go ahead. Your line is open.

Hi, Thanks for squeezing me in here and I'm, just wondering if needed and update on your thoughts around M&A and the.

Final stages of the Nex integration and you're at your leverage target and as we look around the exchange check there and many of your global peers have just recently closed large transactional. So I guess are you seeing attractive opportunities out there and.

And what are you looking for strategically in terms of what that asset and they might add to CME is it the improvement revenue growth moving into different asset classes, and you're adding non transaction businesses, just wondering kind of what the strategic priorities. Thank you.

John I Kyle this is a this is john jumping in on.

There hasn't been any change in terms of our M&A strategy.

And are always looking for opportunities to and create shareholder value and as you've heard I'm you know across the board here, you know create efficiencies and opportunities for our clients.

So you know the the recently announced joint venture with IHS Markit is a great example of that where we're taking our assets.

And combining them with the assets of a of a partner of ours, and creating and creating value for our clients and and ultimately our shareholders by providing more efficiencies for those clients and that and using that as a platform.

You know to provide other services around you know around that so on.

That's that's our primary focus I wouldn't say that we necessarily are.

And are looking specifically for you know what type of revenue whether it's.

And whether it's transactional or a subscription.

I would say we were more focused on optimizing the revenue and and you know based on the industry that you know that that asset is in a we are very focused on completing the nex acquisition you know the nex integration as we mentioned previously we're targeting 200 million and.

And run rate synergies by the end of this year.

We're well on track and we've exceeded our our synergies each of the last two years and are well on track to achieve that 200 million for a 2021.

And so that that and so that's our point of view and with that I'll I'll.

Turn it over for the next question.

We will move on to our next question, which comes from Chris Allen of Compass Point. Please go ahead. Your line is open.

Yeah morning, everyone. Just a real quick one for me you talked about increases and price increases and more computer and on the micros.

And that did and the other price increases and and the other products and we should contemplate for this year.

And yeah.

Thanks, Chris.

And as you recall in and 'twenty and 'twenty, we made a number of adjustments across all of our asset classes.

And with an expected revenue impact of a 1.5% to 2% and futures and options transaction fees and.

You know I reviewed the I'll review the results of that and we did achieve our objective going into this year, we're being very targeted and our approach and you hit on all the ones that we've announced we've announced adjustments to our member fees on the micros and we've made some selective adjustments you are.

<unk> data business in terms of increasing the screen fees are.

For real time data and also.

The non display data and so those those are the ones that we've announced thus far I would say this is a year that will will be flexible in terms of our approach and and you know a lot of you know a lot of it really depends on and know how the how the year plays out. So you know, we'll always be I'm looking at creating value.

For our clients and.

Charging appropriately for that value that we're adding.

Thanks, Chris Thanks, John.

And we'll take our next question from Patrick O'shaughnessy of Raymond James. Please go ahead. Your line is open.

Good morning, what's your assessment on the competitive landscape and cash U S treasuries trading, particularly in light of the pending sales NASDAQ fixed income to trade web.

China and dress up.

Yeah. So.

No question, we embrace competition and we're continuously working to make our platform and our services far more attractive to participants and as I mention.

And really we're very excited about moving the project over to the global platform.

One on deck with technologies that allow us to create much more attractive trucks and services like R&D and technology you implied that we have on our D are unmatched by any other technology and the marketplace now and so we are very excited about that as a unique value proposition.

In addition to that.

We've got a unique data center and nobody else in the World has which is that the the ability to synchronize our treasury futures data along with our crashed you can't she treasury data. So in addition to the 100 billion pumps.

Cash treasuries that we trade on broker Tech every day.

Recall, we do 400 billion ish, a day and Treasury futures and so we've got unique datasets.

With unique efficiencies and rice market participants and unique analytics in order to improve their execution. In addition to that we are investing in.

And as I had mentioned earlier.

Brooks Street.

And so direct streaming of U S treasuries and on the benefits of having both a streaming platform as well as the central limit order book and.

So we have the strongest dealer to dealer controls and order book and the world.

We are building, our direct streaming business agility dealer and we're combining that with the unique data that we have the teachers to provide a unique set of analytics and efficiency and nobody else can offer and so you know we embrace competition and as I said earlier and constantly focused on making sure that we have the single most attractive place and see what most attractive.

And one for any participant in order to execute their risk and I hope that helps.

Thanks, John Thank you Patrick.

We'll move on through our next question from Alex Kramm of UBS. Please go ahead. Your line is open.

Yeah, Hey, just a couple of quick follow ups here and I apologize if it's been mentioned before.

One on the <unk> on the other revenue John did you mentioned what drove the strength this quarter and how do I think about the sustainability of that line item or what seasonally made me change here I guess over the next few quarters and then just as a quick follow up to so the question just now on the Treasury business.

And then also just talks about this and the past, but I think it wasn't clear to take again the dealer declines repo offering that you have a I guess a within brokerage Jack now on next now and.

And he talks about this before while you're doing this and also that does that mean that your medium and willing to play a little bit more on the D to C space I think historically, it's been really dealer to dealer and so any quick comments there would be appreciated. Thanks.

Okay, Let me ask John to comment first and then I'll try to Sean and before Sean on mix of comments, I mean referenced something about the dealer to client and dealer to dealer the way our structure and where appropriate time.

Yeah. Thanks, No no we didn't really weird and cover the other revenue yet Alex So when you take a look at our other revenues are up about $10 million sequentially between Q3, and Q4 and there are a number of puts and takes but the primary driver of the increase is our annual adjustment based on.

And exchange activity paid by our partner in Brazil, or software that we license them. There was also a termination fees related to our agreement with the Korean exchange. Both of these agreements conclude and the fourth quarter of 2020. So you will not see that that 10 billion dollar step up between Q3 and Q4 going forward.

Sean why don't you address real quickly the dealer to client and I believe we are on the repo side and.

And not so much on the broker tech are good and your platform.

Yeah, Thanks, very much Gerry so we do see it makes it a the question and we do see and he has the opportunity and we are executing on a dealer to client and legal platform. Both for Europe, and we've recently launched it and the United States, we see it as Oh offering huge operational efficiencies to market participants and especially between.

Dealers and customers relative to that transaction all handshake, how they're on.

Also opportunities and to leverage obviously, the dealer to dealer platform in combination with the deal with customer and platform and repo on and deal with customer States. We are seeing near all time record.

P and repo volumes on our on our dealer devastate Tucson, and so we are engaged and that states. We do believe that we can and electronic operational efficiency, so that states and we are.

And so far good uptake from our customers.

And again just to reemphasize shall we have not changed and structurally around our dealer to dealer platform as it relates to the brokerage or treasuries just on our repos.

And that's absolutely correct alright, thank you for quantifying.

Thanks, Alex.

And you will.

And I will move on tour and <unk>.

Next question from Rich Repetto of Piper Sandler. Please go ahead. Your line is open.

Yeah. Thank you and Terry first dates on that sort of level headed comments on equity market structure.

You know, we'll see what our regulators and lawmakers and followed that sort of level.

And it's thinking about it.

We will see.

[laughter] People's fees.

On February 10th so I.

I guess following that line of thinking on from a regular regulatory standpoint.

You mentioned and or someone asked about the margin efficiencies from D. T C C to the CME clearing house and.

I know you'd bring benefits and the technology side from a data side.

And this sort of like just top off you know the whole promise of trade and cash and futures on the same platform, adding to those other benefits and like.

And if there's an offset that that's clearly what is the regulatory you know hang up on our process here. If there was on the cash and you have and offset from a future why.

Been a long process, but.

And whats make it more difficult I guess is the question.

Yeah. Good question. So let me ask somebody on that comment a little bit but our average.

And correct one on all the great benefits on the transaction with Nex was to do the integration of broker tech on the growth ex to create the efficiencies going forward and we are as you've heard other speakers talked earlier very excited by that integration being completed and on to Evs and crazy and efficiencies that is really what were all up.

Let me pass and you know on that comment a little bit on the risk side and the efficiency side on the margins.

Thank you Terry Rich just and <unk>.

You know to give you a simple and to be currently have a cross margining agreement and that our participants and what taking advantage of the offsets between cash and Treasury futures. So it is an existing program feedstock and that's in 2003.

And we continue to provide that service and what we're doing right now is enhancing that so we are actively working with D. D. P. C. Now given that it is too clearinghouses to separate and clearinghouses and.

But we are regulated by you know one is bad and so you see them together and others, but he said you just have to work through the process to get.

Any enhancements improved so that does take time.

But but we are very confident that and really get through that process is just that it's very hard for us to give you a timeframe when it comes to regulatory approvals and so that's what he's saying so operationally we continue to work actively and improving.

The March and efficiencies between our clearing firms and I.

And that helps yeah, and again rich and you know we can't control the bureaucracy of dressing and see what does she have QC, but I will say that I think the clients are really.

Pressuring also because they know the efficiencies and this brings without adding any risk to the system on which is critically important and the regulators I hopefully are weighing that and Canada, and a very margin and pinch world that we live in and we're all razor thin, especially in this world today.

And if interest rates and so I'm hopeful that we will and get this agreement.

Played it and charging and the benefits go to the clients and because that's exactly what they need to do to continue to run their businesses more efficiently and I think the governments understand that well.

Got it thank you very much.

Thanks Rich.

We will now move onto our final question from Brian, but I don't know if Deutsche Bank. Please go ahead. Your line is open.

Oh, great. Thanks for taking my follow up just want to clarify I just went from up to the retail question and I had earlier on if you're disclosing that proportion of either revenue or E. B, that's coming from retail and he did that a while back and then maybe it's a question for sure and also on on on.

On a LIBOR for 'twenty, one and in terms of how you see that developing through the Super C and B Super contracts versus the Euro dollar contracts, whether you think that transition and really going to take a lot longer and therefore that switch over to therapy will be much much more slow.

Gradual.

So, Brian let me ask John or and or it's really the comment on your first question on.

And I can comment on why Werent and ticket and Sean and then we can wrap it up.

Thank you, we don't and haven't disclosed the revenue from retail for a for a while you know in general when you take a look at the retail business.

You know, we're generating in the fourth quarter about half a million contracts a day from what we call. The retail segment are they active active.

Active trader segment, so and also you know what I made a comment.

Today around the proportion of member non member mix and the adjustments we've made sure to the pricing so that should help in terms of modeling. It out. So so that is that's that question and I'll pass it over to Sean on the on.

And the follow up question and as John was getting greater and respond to that let me just make a comment one of the things that we have said as it relates to LIBOR and it relates to on a transition over especially over the last two year on year and a half cause and we believe were and are very strong position to benefit from whatever and see how.

Outcome as it relates to LIBOR and.

And I think what you heard from Sean earlier, and I'm sure he'll weapons system, so, but I didn't want to have.

I'd be remiss, if I didn't say it again when we're looking at the growth of the Vac 32 of the eurodollar contract like we're seeing today, we're looking at the growth on the silver futures contract like we're seeing today of roughly 90, 496% on the open interest being held here at CME. We are the beneficiaries of this on both products growing and.

And that is something that we said is a strong profitability and we're starting to see that mature in our favor and we're very encouraged by that so John can talk about the timing or the transition from LIBOR to sulfur and I guess shot it could be a bit speculative, but there are some hard dates and people are talking about and fall backs associated with it but I would be remiss if I.

I didn't remind folks out and it is important and we have a really strong ring franchise with efficiencies that are almost unmatched anywhere in the world and we are very excited that we can participate and bolt and sulfur and and grow and doors John.

Yeah. So thanks, so much Terry for that and thanks for the question and you know there are several points in there. So again the issues of the back 32 between and the fourth quarter of 2019, and the fourth quarter of 'twenty and 'twenty Adv grew and so it's and the eurodollar futures.

The group by 36%. So a very positive result, as I said earlier and I haven't seen very good growth in January and the green and the blues and the 'twenty and 'twenty three 'twenty 'twenty four contracts and for that curve eurodollar futures and growing very strongly at the same time, Inc.

And we've seen a number of records and our software features and finally 20 was a record year for volume and so on futures on 51000 contracts and so far this year, we're doing more than 100000 contracts a day in January. We also saw on open interest record of 727, thousands soap and futures contracts.

So on a record number of large open interest holders and our silver futures on 175.

Large open interest holders and you have on more than 500 participants trading with a silver futures last thing I'll mention David in terms of zone.

Is that if you look at the global so for marketplace. In terms of features we have about 80% on the average daily volume so far this year and.

We are running 90, 293% of the global open interest so.

You see a recently good growth and the back end of the Eurodollar futures and also extremely good growth.

And so teachers they absolutely are.

And then has somewhat different takes on lead free market and both are useful from participant standpoint, we have seen from I b, a and B S. T a day.

They recently did launch a.

You know eight and a.

Survey I guess.

And where they are potentially looking at and.

But whether or not LIBOR should continue to be published post June of 'twenty and 'twenty three so there's hope that for a long time away on theirs.

And there's a lot of uncertainty.

Meantime, our silver futures and grown strongly the backend of eurodollar futures are growing strongly.

And I think we're exactly where we wanted to be you know and Terry mentioned in terms of efficiencies.

With the huge open interest and are you on all features the bulk of the open interest and silver futures, obviously from an execution and clearing standpoint, both right and he commodity spreads on the execution side.

And March and offsets between the two the futures contracts.

No one else can can compete with that those sets of efficiencies. In addition to that we've got so for interest rate swaps as low as obviously over a LIBOR based interest rate swaps and the potential for portfolio margin offsets and between all of those features and all of those swaps laugh.

Terms of the portfolio margining and I think they talked about this on less during school, but you did offer starting in December of last year.

Portfolio margining between girl and options and.

Interest rate swaps.

We've got more than a handful of participants taking advantage of that.

And I'm already getting well over 100 million a day or so of margin efficiency. So we continue to enhance the efficiencies last thing I'll mention one last thing don't forget we have the single largest U S treasuries and repo platform on the planet and that is where software is created every day to a large extent, so we also and providing that.

On the actual transactions that go to making up so for every day and addition to our silver futures and some swaps and I went on there.

And Sean Thanks for your help and they gave me a little color.

Yeah and Super helpful. Thank you so much.

Thank you.

Yeah.

Yeah.

It appears there are no further questions at this time I'd like to turn the conference back to management for any closing or additional remarks.

Thanks, John and we appreciate it very much. We appreciate you taking time out of your rest of your day to participate and our call family and wish you and your family continued safe safety and health. So thank you very kindly.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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