Q2 2021 CME Group Inc Earnings Call

[music].

Good day and welcome to the CME group second quarter 2021earnings call at this time I would like to turn the conference over to John P share. Sir. Please go ahead.

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

I'm going to start 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 stay.

Statements made on this call and and the other reference documents on our website that are not historical facts are forward looking statements. These statements are not guarantees.

<unk> of future performance and involve risks uncertainties and assumptions that are difficult to predict therefore actual outcomes and results may differ materially from what is expressed or implied and any statements detailed information about factors that may affect our performance can be found and the filings with the SEC, which are on our website.

Day Lastly on the final page of 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.

Thanks, John and thank you all for joining us this morning.

John said, our comments will be brief so we can get to your questions. We released our executive summary, this morning, which provided.

And extensive details on the second quarter of 2020.1.

Also as John said, I have John Shawn, Derik, and Neil and Julie Winkler and Nick.

Call with US this morning, and we look forward to addressing any questions you have.

We delivered solid volume during the second quarter of this year as we average more than 18 million.

<unk> X per day, we saw strength and our rates and agricultural businesses.

<unk> to Q2 last year equities and energy volume were down with less volatility and those markets compared to the prior year.

So far in July we are up 29% month to date compared to July last year.

With particular strength and rates, which has more than doubled compared to a year ago, we have seen a rebound and energy, which is up more than 25% month to date in terms of products, we had a record adv or average daily volume and sulfur futures.

Total bitcoin futures and options.

Contra and copper options and Q2, we had a highly successful launch of our micro W. T I.

Which was the most successful commodity product launch and the history of CME group.

On August 1st we will begin trading nature base global emission offset contracts and addition.

Our new micro treasury yield contracts will be available for trading in August.

And the second quarter non U S. Adv was $5.2 million contracts up 6%, we saw 9% growth and Asia Pacific, 8%, and Latin America, and 6% and Europe.

Across.

Regions and the growth came from increased rates activity AG.

AG products FX and metals. This was also supported and how our clients interacted with our digital properties as eggs metals and FX saw double digit growth and new users from all regions. The main point is.

As we are constantly finding ways to assist our clients.

With the world's most diverse product offerings across all the critical global asset classes, but thats short and introduction, let me turn the call over to John who will discuss some of the financial results.

Thanks, Terry during the second quarter, CME generated almost $1.2 billion and revenue.

Revenue with average daily volume of more than 18 million contracts expenses were very carefully managed and on an adjusted basis were $427 million per the quarter and $373 million. Excluding license fees CME had an adjusted effective tax rate of 24, 1%, which resulted in adjusted diluted EPS.

So a $1.64 <unk>.

Capital expenditures for the quarter were approximately $40 million and CME paid out more than $300 million of dividends during the second quarter and cash at the end of the quarter was approximately $1.2 billion.

Turning to guidance, we now expect total adjusted operating expenses for 2021 excuse.

<unk> license fees to come in at approximately $1 billion and $560 million that is $15 million below our prior guidance and virtually flat with last year's adjusted expense levels.

All other guidance remains unchanged, we project capex to be and a range of 180 and $190 million and our adjusted effective tax rate to be between $23.2 and.

And 24, 2%.

Finally, we are on track and have a very good line of sight to achieve our targeted $200 million and cumulative run rate synergies by year end.

Please refer to the last page of our executive commentary for additional financial highlights and details with that short summary, we'd like to open up the call for your questions based on the number of.

Covering us please limit yourself to 1 question and then feel free to jump back into the queue. Thank you.

Thank you Sir if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again, Please press star.

And listen to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for questions.

Thank you our first question will come from rich Repetto with Piper Sandler.

Yeah, Good morning, Terry and John and team I guess my question is going to be sort of on new.

Our watch but.

And you definitely expanding the micros, the micro E mini products and pretty impressive.

Bitcoin.

Our results with you.

And we have the price of the the regular future, but you know.

150, if they think of the size.

Products, but anyway. The question is how are you building is this a broader.

The buildout of micro going towards retail or is it really institutions and using the product as well and is there going to be any other expense or investment.

Market if it is.

As a and oriented towards retail and Terry.

Well I'm going to start and I'm sure everybody all have a little something to say about this because some of the people and they feel more receive some of those micro products, but in <unk>.

General Rich when we list some of these micro contracts, we'd do it for fundamental reasons to address the concerns of the market.

And as happens Theres many of times as you know we can look at the micro equity component micro and macro equity contracts and because of the valuation of the certain underlying equities and made sense for us to go ahead and list smaller contracts, whether it was the E mini now down to the micro and so that was a driving force.

And for that and then we look at the demand for other products associated with it.

On the crypto you could almost day at the same story with the appreciation and bitcoin going upwards of 60000 and at 1 given point it made sense to have a smaller contract to address and the audience to make sure they can mitigate and manage their risk on the.

West, Texas contract that was just.

I think that was just a demand from different participants both on the commercial side and the financial side, who wanted to participate in that market and just a bit of a smaller contract. So theres. A question is how are we going to invest more in that sector of the business. We will continually look at the needs of the clients and make that decision as.

As it comes so I don't want to prejudge, it and say, yes, but I wouldn't want to rule it out either so I'll, let some of my colleagues go ahead and jump in and maybe Mr. Petroleum's would.

Thank you Terry.

When you look at our micro products, we've done a few things 1 is we really found a.

Position and the market where these.

He's really resonate to Terry's point in terms of.

Meeting clients' needs.

1 of the things. We've also done is we've adjusted the pricing on the micros as I mentioned last quarter. So when you take a look at the micro equity products, we saw an increase and the rate per contract from $15 <unk>.

And $17.6.

Up about 14%, which reflects the full quarter impact of the pricing adjustment plus the launch of our highly successful micro bitcoin contract that has RPC and about $1.50, 57 to $1.59, so a huge success.

And there we also saw an increase and the micro gold RPC, which went from $39.7 to $44.6 sense. When you look at first quarter versus second quarter for a 12% increase what's very exciting is we have built.

100 million dollar a year business.

So far.

And that didn't exist just a couple of years ago with our micro products. So it's pretty exciting.

In terms of addressing and client need and really having the product set which allows.

Which allows us to offer a wide variety of micro products.

I'd like to have Derek.

And just for 1 second and touch on the newest product because as I referenced in my earlier remarks, and West Texas intermediate contract.

Was the most successful commodity launch we've ever had here, which is impressive and and of itself. So Derek maybe you could just give a couple of sentences.

As it relates to what Youre seeing and the new contract and West, Texas, Yes, it's been we've gotten off to a good start we trade at over 450000.

Contracts and just the first 11 trading days, what's most interesting about this is Terry said this is actually a new client acquisition tool for US. This is bringing in customers that would like to participate in our markets and found the institutional sales contracts, a little bit too big and the key stat. There is that we've got over 2600 participants and our micro contract that have never traded any.

And concrete product with CME group and sports. So this is functionally and practically brand new business to us and this asset class.

And we're seeing a higher participation percent of non U S participants about 26% from micro business is trading from outside the U S versus the average of about 20%.

Coming from outside.

Any other bits and our main contracts open interest has grown we're seeing steady liquidity participation across the global trading day, 16, and liquidity providers have been and there every single day and they've got 6200 unique users trade and the contract and 75 individual unique trading firms. So broad participation global participation net new.

Client acquisition really strong start and so we're excited about what this can mean for the business and what this means for liquidity provision globally. So just to finish up on your last part of your question Rich. Yes. This is part of our strategy as it relates to retail and new client acquisition, but it's not the only component of our strategy as it relates to retail so the micro contracts are a component.

Do you have and not the only piece. So hopefully that gives you some color as it relates to the questions that you asked.

Very helpful. Thanks Darren.

Thanks Rich.

Thank you. Our next question comes from Alex Kramm with UBS.

Yeah, Hey, good morning, everyone.

And of that but if you can give us an update on the on the broker tech integration and what you've seen so far what I'm, particularly interested in now and it's been a few months. It's like any tangible evidence that this has been driving some new revenue opportunities for you I think brokerage net revenues year over year were basically flat future's revenues and interest rates, obviously up a lot.

So question is is that being driven by anything that you've done for clients.

Or is it too early to point to anything thank you.

John It's really good question and this is Shawn speaking.

Greatly appreciate it so yes, we are excited about the initial uptake of new products and services that we're offering across our platform at that.

Curious talked about previously obviously larger picture there is a lot of direct streaming going on and that.

And the cash market in general both in the Treasury markets as well as and.

Foreign exchange markets, and we're investing very heavily there so we.

1 of the Big investments, we're making is and what we called Q D. M..2 data.

We have flow driven market to that though we expect to be we are launching that now are in the middle of doing that on our FX business and after we launched that and our FX business, we will be launching it and our treasuries business and we do expect that to be a state of the art and the best in class direct streaming platform, so that should help but even before that I talked.

A lot on previous calls about RV trading RV trading is still getting uptake.

And we are excited about the progress so far so it did $280 million.

Average daily volume and the month June last week, we did $530 million average daily volume and last Wednesday, We did $1.1 billion. So it is starting to show the result.

And that helped.

This is <unk>.

And in an environment, where the bulk of many of our participants actually the bulk of our participants do.

And do not yet have automated API connecting to the functionality. So this is a manual users who are taking advantage of the advantage of it at this point. So we don't have the bulk of.

<unk> that we aren't a community and there yet.

We did have a major isd last week.

For the first time offer to their customers testing and new functionality and so we are very excited to see what that has to offer in the coming months and in addition to that we reduced the 3 year minimum price increments 3 year note minimum.

And price increments and have very.

Very significant positive impact if you look at 3 year notes. They went from a typical average daily volume of $10 billion a day to 16 billion a day. So we saw on a relative basis relative to the entire platform.

60% increase.

And in that individual security.

The electric and excited about that we are also other moves that we are taking relative to optimize and commissions and other things.

And that are having a positive impact if you look at the overall industry while over the previous couple of years or protect had lost significant market share.

And in the dealer to dealer space.

So if you look at Q.

Sorry, the fourth quarter of last year first quarter of this year and the month of June we have flattened out that market share and level. So if you'll get the fourth quarter were 59% first quarter weird and 59% and in June we were at 58, 5%.

So we are we are getting traction.

And in the new products and services.

And it has stabilized.

And relative share of that platform and.

And we do expect it to grow further as there's greater uptake and the new functionality.

For the question.

So very quickly and have you just from my first part of the question and have you attempted to put any of the things that you've just talked.

And in revenue terms, so that we can think about the benefits and we've seen so far and a little bit more in terms of hey, This is what the deals contributing on the topline.

We have not put them in revenue terms and so far.

You can look at.

There isn't a separate charging or any of these.

About it so the overall volumes that a participant does no matter what functionality they are using our charge. Similarly.

So it wouldn't have a different impact.

Okay. Thanks again.

Yeah.

Thank you. Our next question comes from Dan Fannon with Jefferies.

Great. Thanks. Good morning. My question is for you John just with regards to expenses the guidance, obviously, we see the reduction but it still implies.

A decent step up and the second half. So if you could talk about where we would with those anticipated kind of costs and where those are coming in and and also could you update us and just what the realized synergies are.

<unk> as a <unk> I understand what you said by the end of this year, what you expect with just kind of where we are today.

Sure Dan Thanks for the question.

Yeah as you heard from my prepared remarks pardon me, we reduced our guidance by $15 million the entire team at CME has done an excellent job and managing our cost.

With the revised guidance, we're holding expenses virtually flat with last year, and just under $80 million below 2019 levels.

When it comes to the expenses the second half of the year is traditionally higher than the first half marketing and advertising spend tend to occur later in the year and we also tend to see higher project spending and the second half as.

Causal spending this year reflects the same pattern, but we had anticipated a higher than normal spend and the second half of the year. When we built out our spending plans during the year. We also chose to delay some of the planned first half spending to the second half of the year as the environment became clearer for example, we brought back our employees.

And we're seeing some of our clients also returned to the office.

In terms of the type of cost marketing and advertising reflects just under half the increased spending between the first and second half of the year, we will be targeting a portion of that spending on our successful micro products.

Balance reflects higher technology spending as we continue to advance the integration.

Well of EPS, which also drive higher depreciation and finally, we anticipate contingent labor spending for accelerating some of our projects as Sean indicated we are investing and some of the streaming platforms.

Our cash market businesses.

So that gives you an idea of the change and first.

Integration versus.

Versus second half and then in terms of realized synergies are realized approximately $9 million of.

Synergies in our P&L for 2000 and.

21, and just to finish off on that on that we've got.

First half and we've got a very strong.

Line of sight to achieving our $200 million and run rate synergies by year end.

Great. Thank you.

Thanks, Dan.

Thank you. Our next question comes from Ken Worthington with Jpmorgan.

Hi, good morning, Thanks for taking my question.

As we think about the actions that CME is taking to drive greater utilization of its products.

Where do you see as the most important themes or actions to help encourage open interest and volume growth say over the next 3 to 5 years. So in the past you focus on globalization and Rich's question.

And you talked about the micra micro rising of products, you've changed minimum price increments and you've done acquisitions. So as we think about the future where you're focusing your resources.

To drive that next level of growth.

As we look ahead.

Ken. Thank you I'm Gonna have Julie Winkler start and give you a <unk>.

And your thoughts on net and then some of US will chime in as well yeah. Thank you for the question I think those themes that you pointed out are something that we have utilized 2 very successfully drive not just new product adoption, but continued growth and the business.

I think as we continue to be and this hybrid environment.

Our ability to reach our clients digitally to be able to customize more of that experience has been something that we've been pretty focused on.

Over the last year and a half as many businesses have and so what's happened.

And is it it's far easier for us to reach those global clients than it even was before so there will be continued investment and those digital properties that personalization. The education that we do and and that really relates back to the work with our broker partners and the micro space as well.

And extremely active with them in terms of investing in the educational effort is 1 such example.

We've had.

Our partners alone and have increased over 123 per se.

And the education of traders and the first half of this year and reaching over.

We've been retail traders and so.

That is how we make them.

People continue to be successful and trading and our markets that we're going to continue to see that investment as Terry pointed out earlier a lot of this is about understanding client need and we know that there will be a continued work as we move toward.

So far and that transition and.

The last thing is just continuing about Apple efficiencies I mean, it has been a hallmark of our business for many years and that continues to be very top of mind to client book.

Continuing to work with Derek Sean and so Neil on how we can deliver that going forward per.

For our clients and I think Ken just to.

Expand upon Julie's comments, you did touch on them book the capital efficiencies theme is something that resonates throughout this organization and we're constantly looking at different ways, John touched on and a little bit earlier with the broker debt question and we're going to continue to become more and more efficient as we get offsets against our futures.

<unk> products, which will again lend people to adding more open interest 1 of your questions was around open interest the UBS integration onto the platform onto the Globex platform. You are talking about multiple participants who've never traded futures before and FX. We believe we have a good opportunity for them to participate in the FX market another additive.

And to the open interest pool here at CME. So some a lot of the things that we've done can be very additive and that doesn't even include the environment that we're all living and which we know is among the most riskiest environments as world has ever seen so.

We feel confident that the open interest and continue to build with the capital efficiencies and some of the acquisitions, we did with the cash.

<unk> products and the futures products, along with people needing to manage risk and all of our asset classes.

Thank you.

Okay.

Thank you. Our next question comes from Alex <unk> with Goldman Sachs.

Hi, this is <unk> filling in for Alex.

Can you provide us an update on the joint venture and how is it.

And I have seen so far and how should we think about any financial ores.

Or implications of the joint venture for the CME business as a whole. Thank you.

Yes. Thanks. Thanks for the question. This is a this is John.

And we're making excellent progress on the formation of the joint venture and the integration planning has gone extremely well and we believe we are well positioned to hit the ground running when we get the necessary approvals in terms of the approvals. We continue to move through the regulatory approval process. We have received all antitrust approvals and we are waiting on.

And 1 financial regulatory approval. So we are really poised to launch this.

This joint venture.

And I think what's very exciting is we've got a great relationship with IHS market.

We met with them, just a week or so ago.

And so I think everybody has a common vision for the for the joint venture and our strategy, which we think could be winning for the for the clients.

We've also got a great relationship with S&P global 1 of our and this will be the second joint venture with them. So we've got we're excited about.

About working with them once their.

Merger with IHS market has been completed.

In terms of the financial implications I will provide an update in terms of the financial implications.

And once the joint venture gets launched.

We are we don't anticipate from a earnings perspective.

Any material changes we.

We do you will see some geography changes on our income statement, where revenues and expenses for the for the contributed companies will be netted into equities and hung and consolidated subsidiaries, which is at the same location we have the S&P.

Dow Jones joint venture so really excited about the.

About the joint venture what it could mean for the marketplace will be the leading provider of risk mitigation and post trade services and very I think we're going to be very well positioned to accelerate the earnings on that.

And that business.

Got it thank you so much.

And thank you.

Thank you. Our next question comes from Owen Lau with Oppenheimer.

Good morning, and thank you for taking my question could you. Please elaborate a bit more on your strategy to launch more analytic.

And I'll, let it go choose do you have all the pieces you have in this area and what are the gaps you would like to Phil. Thank you.

Sure. This is Sean Johanna and we are very excited about the new analytical tools that we have launched in particular over the last year or so.

On the right side for example, we launched the new Treasury watch tool, especially watchful.

Now over 8000 unique users look at it every day and certainly where the marketplace goes to look at the U S Treasury and government issuance.

Federal Reserve's purchase of Securities.

And as well is that the activity in our treasury futures as well as on broker tech so that as a tool.

And that has gotten significant traction and we think offers an enormous amount of value to our customers and helps to cross sell our products from the cash market, the futures and futures and to cash in addition to that on the foreign exchange side.

We launched 3 new tools last year, we launched our FX market profile tool, our FX swap rate monitor and our FX.

Options are all converter tool.

Those tools likewise with several thousand each.

In terms of unique users and if you look at our FX market profile 863 different companies represented FX swap rate monitor 630 different companies represented so youre seeing and.

And enormous.

Penetration of our customers and potential customers from new client acquisition and cross selling get value out of these tools. So all of those are growing very positively. This is just where we have been over the last 12 months, though if you look at it on a go forward basis, 1 of the great value propositions that we have is the ability with the.

The acquisition of our cash market and with our derivatives markets to combine this data and synchronized as data for the very first time.

We have seen as I said earlier good uptake on our FX market profile tool. We are actually just in the process of launching a version 2 point all of that.

Which shows and different order levels.

Levels in terms of the order book and it really shows participants how not only they need to use both liquidity pools, both futures and the.

The spot market cash spot market in order to optimize their execution and foreign exchange, but and in addition to that much greater depth and how to do that.

We will be launching later this summer and the initial.

Treasury market profile tool, which will likewise synchronized for the first time average treasury futures data with our treasury cash data.

So those are a significant development if you look though at what we plan on over the next year.

And that will that will turn into full.

Full blown TCA tool. So we already have on Evs, a EPS quanta analytics and <unk>.

CA tool that allows you to look at 3 different ways of executing your foreign exchange.

And you can look at it and the central limit order book, you can look at it and on our direct streaming platform with your existing liquidity providers.

Or third you can look at it.

And on direct streaming with and alternative set of liquidity providers.

And what we're going to be adding to that once we move EPS over to <unk>.

Ability to look at it and futures equivalent terms as well.

So.

We have started to take advantage of and we have.

To provide analytics to our customers.

That is unique relative to this unique set of assets.

Order to create new efficiencies, which is really behind everything that we do.

But over the next year, we're going to be able to provide much much more.

And I think.

Another part of it is some of the work a lot of the work that we've done.

And our.

The world's largest multi asset class options business, we have built our leading options analytics capability with our quick strike antics capabilities that has led to our third consecutive record quarter of monthly utilization. We're on track right now to deliver the highest record revenues ever through our senior director.

Direct front, and where we embed our quick strike analytics.

And as you know we've we are now publishing 40, CME volatility indices based on the benchmark liquidity and our options business. We found this has brought more options customers to us for customers looking to manage specific risk and each and digital asset class those benchmarks.

And at CME group. So the work we continue to do to build out market data and analytics in our front and is bringing us new customers generating new options business, which generates and futures business as well. So we'll continue to push down that path. Thanks, Eric Thanks, Sean.

Thank you very much.

Thank you.

Thank you again.

Reside reminder, please press star 1 to ask a question again that is star 1 to join the queue. Our next question comes from Michael Cyprus with Morgan Stanley.

Hey, good morning, Thanks for taking the question I was just hoping you could talk a little bit about the opportunity set that you see to grow data and information services revenues over the next couple.

And as yours, which existing offerings would you say have the most meaningful growth potential and and what new offerings could you bring to the marketplace to enhance the growth profile of the market data and information services revenue pool, and if you could also just touch upon the impact that the pricing changes well had and the quarter. It looked like I think I went through in April.

But the revenue they are only went up about $1 million sequentially. So maybe you could help flesh out some of the moving dynamics pieces. There. Thank you.

Thank you for the question, Yeah, and market data had really another great quarter and and so 1 of the things that we're seeing is debt is stabilization across the professional subscribers that are.

Our utilizing our real time market data and we did capture and its entirety that price increase that you mentioned of the $5 per user per D. C M.

What happened in Q2 is that we had a little less and audits and Q2 over the Q1 result.

And.

We've continued to stay on that.

We work with our customers to ensure that they have the right data the right licenses for their business need and yet you know as we have audits that is going to flow up and down depending on where we're at in the process. So it's largely driven with the audit results there.

In terms of other areas of growth and and what's really exciting.

And it's about market data you know, we've made some changes and our non display policies and pricing.

We've got all that cash market data that Sean referenced earlier that is now part of our product portfolio as well as a you know a number of new benchmarks and Steve I'll indices et cetera, and so we're seeing a lot.

Brian and interest from clients of making sure. They are taking advantage of all of those products and services are derived business is also performing quite well.

And the other thing that we've talked about on from past calls it still is continuing to be very interesting for clients is accessing our data through the cloud and so with the Google cloud platform.

That form being launched now we've added new users. We're now up to 21 global clients that are in production there and we have nearly 16 more that are and that certification process and so this is how our clients and these are new users to CME data that you know they like the ability to be.

We're able to turn on and off their connectivity and and take the data that is most relevant to what they are interested on and so we're working to expand.

And that and data products presence really in the cloud later this year. So that is something that team is working on and so I think.

A lot of additional.

Work being done with with Sean's team on the analytics fraud and sustained no what other tools and capabilities and we deploy we we have a lot of very very valuable data and asset and that's what we're working to monetize.

Great. Thank you.

Thank you. Our next question comes from Simon clinch with Atlantic Equities.

Hi, Thanks for taking my question.

And kind of curious as to your thoughts around.

And the crypto markets on the products you are launching here just.

What kind of.

Opportunities you see.

Additional to broaden out and the next couple of years, particularly but also how are you seeing your products being used volume.

Split between institutional and retail clients.

And we are seeing a combination obviously of smaller active clients as well as a very large participants.

And the reason again for launching our Microbitcoin was in order to better penetrate this market trader community and as you'll recall the microbitcoin 1 fifth of the size of the bitcoin futures.

And half of the scheduled fees.

So that did allow us to deeply penetrate a newcomer.

<unk> already and we're very excited about that if you look overall it did start talking I believe is the last earnings call I said, it would start talking about crypto differently and I had in the past relative to the.

And the growth and volumes and revenues that we've achieved if you look today, our bitcoin RPC is $5.45 and.

<unk> second quarter, and we're running around 11, and a half thousand contracts Adv Microbitcoin, John said it earlier $1.57.57, obviously when we initially launch a product we have significant incentives as I said earlier the rack rate fees are half.

So over time, we typically.

<unk> reduced those incentives.

And historically, if you look at whenever we've launched a new product.

Actually if you look at for example, our micro E minis, those rpc's grow over time.

And there we're doing a 23000 year to date and the second quarter, we did more than 25000 a day.

So.

Very I think a huge success there honestly.

Other futures at $2.53.

And 2600 contracts a day. So if you look at those rpc's against those.

Average daily volumes, you'll see that we've now grown and substantial business.

And were very.

Very pleased with it so far.

Thanks.

Thank you. Our next question comes from Kyle Voigt with K B W.

Hi, good morning.

I know you highlighted some some better energy volume.

And lie specifically, but I guess, even inclusive of some of the July volume your energy Adv and and.

2021 to date is on pace to be the lowest volte.

Volume year since 2015, so just curious if you can give some more color as to.

All the factors that are driving are the big factors that are driving the weakness.

This year, how much impact has the pandemic had versus other factors and.

And then more importantly, I guess, what do you see as the catalyst to kind of reaccelerate structural growth and that product segment as we look out over the next few years.

Yes, Thanks, Paul that's a good question.

And last year was really a.

Table 3 different years, we saw the first half of the year with all the disruption and the first half of the year and then significant trade off and the back half of the year.

We saw both the significant destruction demand coming from what we actually saw.

From the demand side of things and it was a very very unclear picture for certainly U S shale when prices.

Mrs were languishing.

Back half of last year kind of around 45, which was right at or slightly below breakeven for a lot of the U S shale producers what we've seen over the last couple of months now that the OPEC and OPEC plus agreements have come in and we've actually seen a stabilization of oil prices exactly what they wanted well above those breakeven levels and what you've actually seen.

And you picked up on the comments before our June <unk> were actually up 6% year on year. Our July WT volumes were up 46%, what we've actually seen from a volume perspective overall the market has picked up and the back half of the year, our market share and volume terms.

RW Ti contract relative to Brent.

About stable year on year, where we've seen a real outperformance has been and the open interest side of things. When you look back to November of last year. We saw the W. T. I open interest bottom out and about 195 million contracts or so we have now recovered on the WTO side back up to almost $2.5 million contracts, that's fit and are close to 3 year highs.

We all know what you're bringing in commercial customers and they are the outsized performers on the open interest growth side of that so we've had a significant return of the commercial participants back into our market over the last couple of months that is what we focus on and we focus on the end user customer needs. We focus on what they are looking to manage their business with them.

Thats pretty suddenly coming to CME group, what's interesting about that open interest share is typically and if you go back and look at the numbers. The WTO you're open interest market share would hover between 42% and 48% when you compare to some of <unk> at CME versus ice Brent we're actually sitting at about 50% market share and open interest terms. So we're above.

And they are in Korea, almost our historical high point right now so we think the strong fundamentals that we've seen a we've seen gasoline demand reached record high of 10 million barrels per day and the weekend of July 2nd TSA checkpoint travel numbers are reached and the highest levels read in 'twenty..1 just 2 weeks ago traveler throughput at 2 to 3 million and so we're seeing.

The early stages of airline recovery that has been missing during this whole demand side of the crude oil market, Saudi Arabia, UAE came to an agreement and OPEC plus and we think Theres, a little more stability, there and Thats certainly.

<unk> <unk>.

<unk> and some specter of less concern about the 100 calls being and the money over the next couple of months, but it also.

Because if there was greater stability and the shale gas and like where that's going so we're reading that and the open interest participation. We're seeing the work that we're doing to bring new customers into the crude oil market with as Charlie referenced before the WTO and micro contract and we're unleashing and those customer.

Capital efficiencies across the full range of products and.

Also mean preparing from the energy transition as we're pushing out our both our global emerge.

Global emissions offset contracts and our new nature based global.

And imagined and offsets contracts as well so not only are we expanding our customer base, we're preparing for energy transition as well. So we feel good about what's going on and fundamentals are strong and open interest.

First is a 3 year high assembly like where we're at and I just wanted to add to that.

And that when you look at you you referenced 2015 levels of trading you got to look at what just happened just a year ago, we were and a complete lockdown and the world when demand was going absolutely zero and we are just rebuilding that and I think <unk> pointed out a few highlights such as.

The airline industry now getting ramped up again, and the TSA numbers and so forth. So I really think the measurement of 2015 to we're at today is a tough 1 because in between that only a year ago, we had a lockdown situation that we've never seen before.

Okay, that's really helpful Dark and Terry.

And if I can just follow up on that just real quick.

Just curious are you seeing any any like now we've had a couple of quarters passed since the.

The event was kind of negative negative wty pricing do you think you are seeing any lingering effects from not even from from certain from certain users or is that open interest trends that you pointed to.

And kind of speak to the fact that you haven't seen anything material.

We haven't seen anything material I think that again and when you look at what happened on April 20th from 2020, we were at the height of a perfect storm as I like to say at that time.

Had a complete lockdown, we had at the same time production being ramped up right before that.

And then all of a sudden I guess are we locked down and zero demand and a tremendous amount of product with nowhere to put it. So that was a perfect storm at that given moment in time, I think that people understand that and now they are looking at the business and a different light hopefully, but theres still some headwinds as far as the pandemic, we keep talking about delta variant.

And things of that nature, So I'm, assuming there was some trepidation.

Just in general about what could potentially happen around the world again, so no one's predicting any pricing here, but that is still a lingering effect. We are not out of this pandemic, yet and I think that's what people need to realize.

And I think the only point I would probably add to that as and when you talk about the.

And so why indicator being the strongest marker of increased participation. The key stat in their calls the fact that commercial participants are the biggest growth driver of that increase and a $1.9 million to the $2.5 so its 3 year highs sitting with the commercial participants consultants and physical participants being the biggest participants in that growth and.

And then tells you where the market's hedge net risk right now.

Great. Thank you very much.

Okay.

Thank you. Our next question comes from Alex Blaustein with Goldman Sachs.

Hi, This is Eric again.

And again filling.

And photonics.

And I'm just wondering about John can.

Can you and then.

What was the and be fine.

And balance into Q.

Sure.

Great great questions. So when you look at.

And then maybe just a couple of quick points on the other day.

Other income portion of our income statement because it.

And we've got a couple of items that are performing very well.

Well there the first is.

The cash held at our at our clearing house and.

And we saw an increase sequentially of about $3 million. The average balances were up $27.7 billion and our returns were up about 1 basis point from last quarter.

And then I just wanted to.

And remind everybody that there was a change and the Io. We are on June 16th from 10 basis points to 15 basis points and our share of the returns on net investment activity increased from 2 basis points to 5 basis points and Youll see that full quarter impact in Q3 also.

Are the.

And the performance of our JV, our S&P Dow Jones JV also has been performing extremely well and was and we're up about 14% from the same quarter last year.

So that kind of gives you some highlights on the other income portion of our our income statement.

Okay. If there if there's no further questions.

There are no further questions at this time Sir.

Thank you very much we want to thank everybody for joining us on the call. This morning, and once again, we wish you and your families all the health and safety.

And have be safe and we look forward to talking to you next quarter. Thank you.

Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.

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Good day and welcome to the CME group second quarter 2021earnings call at this time I would like to turn the conference over to John P. Sure. Sir. Please go ahead.

Good morning, and thank you all for joining us today I'm going to start with the Safe Harbor language, and then I'll turn it over to Terry and John for brief remarks, followed by your questions. Other.

Of our management team will also participate in the Q&A session.

Statements made on this call and and the other reference documents on our website that are not historical facts are forward looking statements. These statements are not guarantees of future performance and involve risks uncertainties and assumptions that are difficult to predict therefore actual outcomes.

Outcomes and results may differ materially from what is expressed or implied and any statements 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 of 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 Thanks, John and Thank you all for joining US. This morning, as John said, our comments will be brief so we can get to your questions. We released our executive summary, this morning, which provided extensive details on the second quarter of 2021.

Also as John is that I have John Shawn Derik and Neil and.

And declared on the call with US this morning, and we look forward to addressing any questions you have.

We delivered solid volume during the second quarter of this year as we average more than 18 million contracts per day, we saw strength and our rates and agricultural businesses relative to Q2 last.

And year equities and energy volume were down with less volatility and those markets compared to the prior year.

And so far in July we are up 29% month to date compared to July last year, with particular strength and rates, which has more than doubled compared to a year ago, we have seen a rebound and.

Julian <unk>, which is up more than 25% month to date in terms of products, we had a record adv or average daily volume and sulfur futures.

Total bitcoin futures and options and copper options and Q2, we had a highly successful launch of our micro <unk>.

Which was the most successful commodity product launch and the history of CME group and.

And on August 1st we will begin trading nature based global emission offset contracts. In addition, our new micro treasury yield contracts will be available for trading in August.

And the second quarter non.

Energy U S. Adv was $5.2 million contracts up 6%, we saw 9% growth and Asia Pacific, 8%, and Latin America, and 6% and Europe. Okay.

Ross all regions the growth came from increased rates activity.

AG products FX and metals. This was also.

And so supported and how our clients interacted with our digital properties as ads metals and FX saw double digit growth and new users from all regions. The main point is we are constantly finding ways to assist our clients with the world's most diverse product offerings across all the critical.

John Global asset classes, but Thats short and introduction, let me turn the call over to John who will discuss some of the financial results.

Thanks, Terry during the second quarter, CME generated almost $1.2 billion and revenue with average daily volume of more than 18 million contracts expenses were very carefully managed and on an adjusted.

Basis were $427 million for the quarter and $373 million excluding license fees.

CME had an adjusted effective tax rate of 24, 1%, which resulted in adjusted diluted EPS of $1.64 <unk>.

Capital expenditures for the quarter were approximately $40 million CME paid out more than 3.

Critical dollars of dividends during the second quarter and cash at the end of the quarter was approximately $1.2 billion.

Turning to guidance, we now expect total adjusted operating expenses for 2021, excluding license fees to come in at approximately 1 billion and $560 million that is $15 million below our prior guidance.

<unk> hundred million dollars flat with last year's adjusted expense levels.

All other guidance remains unchanged, we project capex to be and a range of 180 and $190 million and our adjusted effective tax rate to be between 23, 2% and 24, 2%.

Finally, we are on track and have a very good line of sight to achieve our targeted 200.

And for towers, and cumulative run rate synergies by year end. Please.

Please refer to the last page of our executive commentary for additional financial highlights and details with that short summary, we'd like to open up the call for your questions based on the number of analysts covering US. Please limit yourself to 1 question and then feel free to jump back into the queue. Thank you.

Thank you Sir.

And I'd like to ask a question. Please signal by pressing star 1 on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our Clinton.

John Please press star 1 to ask a question.

Pause for just a moment to allow everyone the opportunity to signal for questions.

Thank you our first question will come from rich Repetto with Piper Sandler.

Yeah, Good morning, Terry and John and team.

I guess my question is going to be sort of on new products, but.

And you definitely expanding the micra, the micro E mini products and pretty impressive.

On the bitcoin.

Our results.

Sure.

Only half the price of the regular future, but you know.

150, if they think of the size of it but anyway. The question is how are you building. This is this a broader.

The build out of micro go.

And vantage retail or is it really institutions using the product as well and.

And is there going to be any other expense or investment.

The market if it is more oriented towards retail Terry.

Well I'm going to start and I'm sure everybody will have a little something to say about this because.

And 2 of them have the people and there is room will receive some of those micro products, but in general rich when we list. Some of these micro contracts, we do it for fundamental reasons to address the concerns of the market participants. There is many of times as you know we can look at the micro equity component micro and macro equity contracts and because.

Simulation of the certain underlying equities and made sense for us to go ahead and list smaller contracts, whether it was the E mini now down to the micro and so that was a driving force for that and then we look at the demand for other products associated with it.

And the crypto you could almost say the same story with the appreciation and bitcoin going.

And upwards of 60000 and at 1 given point it made sense to have a smaller contract to address and the audience to make sure they can mitigate and manage their risks on the.

West, Texas contract that was just lifted I think that was just a demand from different participants bolt on the commercial side and the financial side, we wanted to participate and that Mark.

And just a bit of a smaller contract. So there is a question is how are we going to invest more in that sector of the business. We will continually look at the needs of the clients and make that decision as it comes so I don't want to prejudge, it and say, yes, but I wouldn't want to rule it out either so I'll, let some of my colleagues go ahead and jump and maybe Mr. Petroleum's Wood.

Thank you Terry.

When you look at our micro products, we've done a few things 1 is we really found a.

Position and the market, where these really resonate.

<unk> point in terms of.

Meeting clients' needs.

1 of the things. We've also done is we've adjusted.

Adjusted the pricing on the Micros as I mentioned last quarter. So when you take a look at the micro equity products, we saw an increase and the rate per contract from $15.4 to.

The $17.6.

Up about 14%, which reflects the full quarter impact of the pricing adjustment.

And launch of our highly successful micro a bitcoin contract that's has RPC at about $1.50.57, and $8.59. So huge success. There. We also saw an increase and the micro gold RPC, which went from $39.7 to $44.6.

And when you look at first quarter versus second quarter for a 12% increase what's very exciting is we have built.

100 million dollar a year business so far.

That didn't exist just a couple of years ago with our micro products. So it's pretty exciting.

In terms of addressing.

And client need and really having the products set which allows.

And which allows us to offer a wide variety of micro products.

And maybe I'd like to have Derek just for 1 second touch on the newest product because as I referenced in my earlier remarks, and West Texas intermediate contract.

Was the most successful commodity.

<unk>, which we've ever had here, which is impressive and and of itself. So Derek maybe you could just give a couple of sentences.

As it relates to what you're seeing and the new contract and West Texas, Yes, it's been we've gotten off to a good start we tried it over 450000 contracts and just the first 11 trading days.

What's most interesting about this is Terry said this is actually and new client acquisition tool for US This is bringing in <unk>.

Lance I would like to participate in our markets and found the institutional SaaS contracts, a little bit too big and the key stat. There is that we've got over 2600 participants and our micro contract that have never traded any other crude product with CME group and sports. So this is functionally and practically brand new business to us and this asset class.

And we're.

<unk> higher participation percent of non U S participants about 26% from micro business is trading from outside the U S versus the average of about 20%.

And coming from outside the U S and our main contracts open interest has grown we're seeing steady liquidity participation across the global trading day, 16 and liquidity providers.

And then in there every single day and they've got 6200 unique.

Users trade and the contract and 75 individual unique trading firms. So broad participation global participation net new client acquisition really strong start and so we're excited about what this can mean for the business and what this means for liquidity provision globally. So just to finish up on your.

The last part of your question Rich, Yes. This is part of our strategy as it relates to retail new client acquisition, but it's not the only component of our strategy as it relates to retail so the micro contracts are a component of that but not the only piece. So hopefully that gave you some color as it relates to the question that yes.

Very helpful. Thanks.

Thanks Terry.

Rich.

Thank you. Our next question comes from Alex Kramm with UBS.

Yeah, Hey, good morning, everyone.

And if you can give us an update on the on the broker tech integration and what you've seen so far what I'm, particularly interested and now.

And it's been a few months any tangible evidence that this has been driving some new revenue opportunities for you I think brokerage net revenues year over year were basically flat future's revenues and interest rates, obviously up a lot. So question is is that being driven by anything that you've done for clients.

Is it too early to point to anything thank you.

Yes, it's a really good question. This is Shawn speaking.

I greatly appreciate it. So yes, we are excited about the initial uptake of new products and services that we're offering across that platform and that we have talked about previously obviously larger picture. There was a lot of direct streaming going on and that.

In the cash market in general both in.

Treasury markets as well as and.

Foreign exchange markets, and we're investing very heavily there so we.

1 of the Big investments, we're making is and what we called Q D. M..2 dato quote driven markets 2 day, though we expect to be we are launching that now are in the middle of doing that on our FX business and after we launched that and our FX business.

We'll be launching it in our treasuries business and we do expect that to be a state of the art and the best in class direct streaming platform. So that should help but even before that I talked a lot on previous calls about RV trading RV trading is still getting uptake and.

And we are excited about the progress so far so it did 280.

From a.

Average daily volume and the month June of last week, we did 530 million average daily volume and last Wednesday, We did $1.1 billion. So we're just starting to show the results that we had hoped.

This is <unk>.

In an environment, where the bulk of many of our participants actually the bulk of our participants.

Do not yet have automated API connecting to the functionality.

This is Emmanuel users, who are taking advantage of the advantage of it at this point. So we don't have the bulk of the electronic community and there yet.

We did have a major IFC last week.

For the first time offer to their customers testing.

Testing and new functionality and so we are very excited to see what that has to offer and that in the coming months and in addition to that we reduced the 3 year minimum price increments 3 year note minimum price increments and have very.

Very significant positive impact if you look at 3 year notes.

Went from a typical average daily volume of $10 billion.

And the day to $16 billion a day. So we saw on a relative basis relative to the entire platform a 60% increase.

And that individual security. So very excited about that we are also other moves that we are taking relative to optimize and commissions and other things.

And that are having a positive impact.

You look at the overall industry a while over the previous couple of years for protect had lost significant market share.

And the dealer to dealer space, if you look at Q.

Sorry, the fourth quarter of last year first quarter of this year and the month of June we have flattened.

Is that market share and level. So if you'll get the fourth quarter. We were at 59% first quarter, we were at 59% and in June we were 58, 5%.

So we are we are getting traction in new products and services.

It has stabilized the relative share of that platform.

And we do expect it to grow.

Further as there's greater uptake and the new functionality. Thank you for the question.

So very quickly and have you just on my first part of the question and have you attempted to put any of the things that you've just talked about in revenue terms. So that we can think about the benefits and we've seen so far and a little bit more in terms of hey, This is what the deals contributing on the topline.

And now.

We have not put them in revenue terms so far.

You can look at.

There isn't a separate charging or any of these right. So the overall volumes that a participant does no matter what functionality theyre using our charge similarly.

And so.

Line and have a different impact.

Okay. Thanks again.

Yeah.

Thank you. Our next question comes from Dan Fannon with Jefferies.

Thanks, Good morning.

And as for you John just with regards to expenses the guidance, obviously, we see the reduction but still implies.

It was a decent step up and the second half. So if you could talk about where we would with those anticipated.

And of course, and where those are coming in and and also could you update us on just what the realized synergies are as of <unk> I understand what you said by the end of this year what to expect with just kind of where we are today.

Sure Dan Thanks for the question.

Yeah as you heard from my prepared remarks pardon me.

We reduced our guidance by $15 million the entire team at CME has done an excellent job and managing our costs with the revised guidance, we're holding expenses virtually flat with last year and just under $80 million below 2019 levels.

And most of the expenses the second half of the year is traditionally higher than the first half marketing and advertising spend tend to occur later in the year and we also tend to see higher project spending and the second half as well spending this year reflects the same pattern, but we had anticipated a higher than normal spend in the second half of the year when we.

Built out our spending plans during the year. We also chose to delay some of the planned first half spending to the second half of the year as the environment became clearer for example, we brought back our employees and we're seeing some of our clients also returned to the office.

In terms of the type of cost marketing and advertising reflects just under half the increased.

Spending between the first and second half of the year, we will be targeting a portion of that spending on our successful micro products. The balance reflects higher technology spending as we continue to advance the integration of EPS, which also drive higher depreciation and finally, we anticipate contingent labor spending for accelerating some of our projects.

As Sean indicated we are investing and some of the streaming platforms.

And our cash market businesses.

And it gives you an idea of the change and first half versus second half and then in terms of realized synergies are realized approximately $9 million of.

Synergies in our P&L for 2000 and.

21, and just to finish off on that on that we've got of <unk>.

Got a very strong line of sight to achieving our $200 million and run rate synergies by year end.

Great. Thank you.

Thanks, Dan.

Thank you. Our next question comes from Ken Worthington with Jpmorgan.

Hey, good morning, Thanks for taking my question.

As we think about the actions that CME is taking to drive greater utilization of its products.

Where do you see as the most important thing.

From actions to help encourage open interest and volume growth say over the next 3 to 5 years. So in the past you focus on globalization and Rich's question, you talked about the micra micro rising of products, you've changed minimum price increments and you've done acquisitions. So as we think about the future.

And where you're focusing your resources.

To drive that next level of growth.

As we look ahead.

Yeah, Ken Thank you I'm gonna have Julie Winkler start.

Her thoughts on net and then some of US will chime in as well yeah. Thank you for the question and I think those themes.

Themes are you pointed out are something that we have utilized 2 very successfully drive not just new product adoption, but continued growth for the business.

As we continue to be and this hybrid environment.

Our ability to reach our clients digitally to be.

Seems that customize more and that experience has been something that we've been pretty focused on over the last year and a half as many businesses have and so what's happened is it's far easier for us to reach those global clients and then it even once before so there will be continued investment and those digital properties.

And able to personalization the education that we do and that really relates back to the work with our broker partners and the micro space as well.

We've been extremely active with them in terms of investing in the educational effort is 1 such example.

We've had.

And is that our partners alone and have increased over 123% the education of traders and the first half of this year and reached.

Reaching over 1 million retail traders and so.

That is how we make them.

And people continue to be successful and trading and our market. So we're going to continue.

Good day.

And that investment as Terry pointed out earlier a lot of this is about understanding client need and we know that there will be a continued work as we move toward.

And so far and that transition and the last thing is just continuing about Apple efficiencies I mean, it has been a hallmark of.

Our business for many years and that continues to be very top of mind to client so continuing to work with Derek Sean and so Neil and how we can deliver that going forward for our client and I think Ken just to.

Expand upon Julie's comments, you did touch on them, but the capital efficiencies theme is something that resonates.

And just put this organization and we're constantly looking at different ways, John touched on and a little bit earlier with the broker debt question, we're going to continue to become more and more efficient as we get offsets against our futures products, which will again lend people to adding more open interest and 1 of your questions was around open interest and <unk>.

Yes integration onto the platform onto the.

It is true ups platform, we're talking about multiple participants who've never traded futures before and FX. We believe we have a good opportunity for them to participate and the FX market. Another additive into the open interest pool here at CME. So some a lot of the things that we've done can be very additive and that doesn't even include the environment that we're all living and which we.

Global is among 1 of the most riskiest environments as world has ever seen so.

And we feel confident that the open interest can continue to build with the capital efficiencies and some of the acquisitions, we did with the cash products and the futures products, along with people needing to manage risk and all of our asset classes.

Great. Thank you.

No.

Thank you. Our next question comes from Alex <unk> with Goldman Sachs.

Hi, this is Sharon and feeling and photonics and.

And you provided an update on the joint venture and how is it.

And it seems so far and how should we think about any financial.

So all indications of the joins me in June from the CME business as a whole. Thank you.

Yeah. Thanks. Thanks for the question. This is this is John.

And we're making excellent progress on the formation of the joint venture and the integration planning has gone extremely well and we believe we are well positioned to hit the ground.

And when we get the necessary approvals in terms of the approvals we continue to move through the regulatory approval process. We've received all antitrust approvals and we are waiting on 1 financial regulatory approval. So we are really poised to launch this.

And this joint venture.

And running in and I think what's very exciting is we've got a great relationship with IHS market, we met with them just a week or so ago and so I think everybody has a common vision for the for the joint venture and those on a strategy, which we think could be winning for the for the.

We've also got a great relationship with S&P global and 1 of our and this will be the second joint venture with them. So we've got we're excited about the about working with them once they're <unk>.

And with IHS market has been completed in terms of the financial implications I will provide an update.

And in terms of the financial implications.

And once the joint venture gets launched.

We are we don't anticipate from a earnings perspective any material changes we.

We do you will see some geography changes on our income statement, where revenues and expenses for.

<unk> for the contributed companies will be netted into equities and unconsolidated subsidiaries, which is at the same location, we have the S&P Dow Jones <unk>.

<unk> ventures, so really excited about the about the joint venture what it could mean for the marketplace will be the leading.

Provider of risk mitigation and post trade services and very I think we're going to be very well positioned to accelerate the earnings on that on that business.

Got it thank you so much.

And thank you.

Thank you. Our next question comes from Owen.

Or the <unk> with Oppenheimer.

Good morning, Thank you for taking my question could.

Could you please elaborate a bit more on your strategy to launch more analytical tools do you have all the pieces you have in this area and what are the gaps you would like to Phil. Thank you.

Sure.

Sure. This is Sean and we are very excited about the new analytical tools that we have launched in particular over the last year or so I'm on the right side. For example, we launched the new Treasury Watch tool Treasury Watch tool has had now over 8000 unique users look at it every day and certainly where the marketplace goes to look at the U S Treasury and government issuance.

And Lau of federal Reserve's purchase security.

And as well is that the activity in our treasury futures as well as <unk>.

And broker tech so that is a tool that has gotten significant traction and we think offers an enormous amount of value from our customers and helps to cross sell our products from the cash market, the futures and futures and cash.

Cash and addition to that on the foreign exchange side.

We launched 3 new tools last year, we launched our FX market profile tool, our FX swap rate monitor and our FX.

<unk> vault converter tool.

Those tools likewise with several thousand each.

In terms of unique users.

And in our FX market profile 863 different companies represented FX swap rate monitor 630 different companies represented so youre seeing and enormous.

Penetration of our customers and potential customers for new client acquisition and cross selling get value out of these tools. So I'm all of those are growing.

And very positively. This is just where we have been over the last 12 months, though if you look at it on a go forward basis, 1 of the great value propositions that we have is the ability with the acquisition of our cash markets and with our derivatives markets to combine this data and synchronized as data for the very first time we.

We have seen as I said earlier.

And they feel a good uptake on our FX market profile tool. We are actually just in the process of launching version 2 point all of that.

Which shows and different order levels in terms of the order book and it really shows participants how not only they need to use both liquidity pools, both futures and the.

Spot market cash spot.

In order to optimize their execution and foreign exchange, but and in addition to that much greater depth and how to do that.

We will be launching later this summer and the initial.

Treasury market profile tool, which will likewise synchronized to the first time average treasury futures data with our treasury cash data.

And so those are significant developments if you look though at what we plan on over the next year.

That will turn into full blown TCA tool.

So we already have on Evs, a EES quanta analytics.

TCA tool that allows you to.

At 3 different ways of executing your foreign exchange.

You can look at it and the central limit order book, you can look at it and on our direct streaming platform with your existing liquidity providers or third you can look at it.

On direct streaming with and alternative set of liquidity providers.

What we're going to be adding to that and once we move EPS over to <unk>.

To look at it.

And the ability to look at it and futures equivalent terms as well.

So.

We have started to take advantage of and we have started to provide analytics to our customers.

That is unique relative to this unique set of assets.

In order to create new efficiencies, which is really behind everything that we.

We do but over the next year, we're going to be able to provide much much more.

And I think.

Another part of this is some of the work a lot of the work that we've done and our.

World's largest multi asset class options business, we have built our leading options analytics capability with our quick fact antics capabilities that has led.

All of our third consecutive record quarter of monthly utilization. We're on track right now to deliver the highest record revenues ever through our CME direct front and where we embed our quick strike analytics.

As you know we've we are now publishing 40, CME volatility indices based on the benchmark liquidity.

2 our options business. We found this has brought more options customers to us for customers looking to manage specific risks and each and digital asset class those benchmarks reside at CME group. So the work we continue to do to build up market leader and analytics in our front and is bringing us new customers generating new options business, which generates and futures business as.

As well so we'll continue to push down that path.

Thanks, Sean.

Thank you very much.

Thank you.

Thank you again as a reminder, please press star 1 to ask a question and again that is star 1 to join the queue. Our next question comes from Michael Cyprus with Morgan Stanley.

Hey, good morning, Thanks for taking the question I was just hoping you could talk a little bit about the opportunity set that you see to grow data and information services revenues over the next couple of years, which existing offerings would you say have the most meaningful growth potential and what new offerings could you bring to the marketplace to enhance the growth profile of the market.

Data and information services revenue pool, and if you could also just touch upon the impact that the pricing changes well had and the corner. It looks like I think that went through in April.

The revenue they are only went up about $1 million sequentially. So maybe you can help flush out some of the moving dynamics pieces. There. Thank you.

Thank you for the question Yeah.

Peter had really another great quarter, and and so 1 of the things that we're seeing is this stabilization across the professional subscribers that are utilizing our real time market data and we did capture and its entirety that price increase that you mentioned of the $5 per user per DCM.

Market what happened in Q2 is that we had a little less and audits and Q2 over Q1 result.

And.

As we've continued to stay on that right. We work with our customers to ensure that they have the right data the right licenses for their business need.

And as we have audit that is going to flow up and.

Depending on where we're at in the process.

It's largely driven with the audit results there.

In terms of other areas of growth and and what's really exciting us about market data.

We've made some changes and our non display policies and pricing.

Got all that cash market data that Sean.

And down earlier that is now part of our product portfolio as well as a number of new benchmarks and Steve I'll indices et cetera, and so we're seeing a lot of interest from clients, making sure. They are taking advantage of all of those products and services are derived business is also performing quite well and the other.

Other thing that we've talked about on past calls it still is continuing to be very interesting for clients is accessing our data.

And the cloud and so with the Google Cloud platform being launched now we've added new users. We're now up to 21 global clients that are in production there and we have nearly 16 more that are and that certification.

Process and so this is how our clients and these are new users to CME data that they like the ability to be able to turn on and off their connectivity and take the data that is most relevant to what they are interested on and so we're working to expand.

That and data products presence really in the cloud later this year. So that is something that team is working on and so I think.

A lot of additional work being done with Sean's team on the analytics product Athene, and what other tools and capabilities and.

And we deploy we have a lot of very very.

Valuable data and asset and Thats, what were working to monetize.

Great. Thank you.

Thank you. Our next question comes from Simon clinch, but the Atlantic equities.

Hi, Thanks for taking my question.

And kind of curious as.

Your thoughts around that.

The crypto markets and the products and launching here.

And what kind of.

Opportunities you see.

Now in the next couple of years, particularly but also how you're seeing your products being used by.

And the split between to Institute.

<unk> and retail clients.

Yes, we are seeing a combination obviously.

Smaller active clients as well as a very large participants.

And the reason again for launching our Microbitcoin was in order to better penetrate our small active trader community as you'll recall microbitcoin.

2 of the size of the Bitcoin futures and.

Half of the scheduled fees.

So that did allow us to deeply penetrate.

New community and we're very excited about that if you look overall it did start talking I believe is the last earnings call I said, it would start talking about crypto differently and I had in the past.

And once it relative to the.

The growth in volumes and revenues that we've achieved.

You look today, our bitcoin RPC is $5.45, and the second.

Second quarter, and we're running around 11, 5000 contracts Adv Microbitcoin, John said, it earlier $1.57 or $1.57, obviously.

And when we initially launch a product we have significant incentives as I said earlier the rack rate fees are half.

So over time, we typically reduce those incentives.

And historically, if you look at whenever we launch new product and actually if you look at for example, our micro E minis.

And those rpc's grow overtime.

And there we're doing 23000 year to date and the second quarter, we did 25000.

So.

And a very I think a huge success, there honestly either futures and $2.53.

And 2600 contracts a day so if you.

<unk> <unk> at those rpc's against those.

Average daily volumes, you'll see that we've now grown a substantial business.

And we're very pleased with it so far.

Thanks.

Thank you.

Our next question comes from Kyle Voigt with K B W.

Hi, good morning.

I know you highlighted some some better energy volume and July specifically, but I guess, even inclusive of some of the July volume your energy Adv and and.

2021 to date is on pace to be the lowest.

Look volume year since 2015, so just curious if you can give some more color as to all.

All the factors that are driving are the big factors that are driving the weakness this year, how much impact has the pandemic had versus other factors.

And then more importantly, I guess, what do you see as the catalyst to.

And kind of Reaccelerate structural growth and that product segment as we look out over the next few years.

Yes. Thanks, Paul that's a good question I mean last year was really a tale of 2 different years, we saw the first half of the year with all the disruption and the first half of the year and then significant trade off and the back half of the year we saw both.

Significant destruction demand coming from.

We actually saw.

From the demand side of things and it was a very very unclear picture for certainly U S shale when prices were languishing back.

Back half of last year kind of around 45, which is right at or slightly below breakeven for a lot of the U S shale producers, what we've seen over the last couple of months now.

And the OPEC and OPEC plus agreements have come in and we've actually seen a stabilization of oil prices exactly what they wanted well above those breakeven levels and what you've actually seen and you picked up on the comments before our June WTS volumes were actually up 6% year on year. Our July WT volumes are up 46%.

So we've seen from a volume perspective overall the market has picked up and the back half of the year, our market share and volume terms of RW Ti contract relative to Brent and that's pretty much stable year on year, where we've seen a real outperformance has been and the open interest side of things. When you look back in November of last year, we saw the WTO open interest bottom.

What we've added about 195 million contracts or so we have now recovered on the WPS side back up to almost $2.5 million contracts, that's fit and are close to 3 year highs. We all know what that you're bringing and commercial customers. They are the outsized performers on the open interest growth side of that so we've had a significant return of the commercial participants.

Bottom out into our market over the last couple of months that is what we focus on and we focus on the end user customer needs. We focus on what they are looking to manage their business with and they are increasingly coming to CME group. What's interesting about that open interest share is typically and if you go back and look at the numbers. The WTO you're open interest market share would hover between.

42% and 48% when you compare to <unk>.

W. T I at CME versus ice Brent, we're actually sitting at about 50% market share and open interest terms. So we're above almost our historical high point right. Now. So we think the strong fundamentals that we've seen a we've seen gasoline demand reached record high of 10 million barrels per day.

Bank and in July 2nd TSA checkpoint travel numbers are reached and the highest levels read in 'twenty..1 just 2 weeks ago traveler throughput at $2 million to $3 million. So we're seeing the early stages of airline recovery that has been missing during this whole demand side.

The crude oil market, Saudi Arabia, UAE came to an agreement and OPEC.

And the west So we think theres, a little more stability, there and Thats certainly.

<unk> <unk>.

Raising some specter of less concern about the 100 calls being and the money over the next couple of months, but it also means that there is greater stability and the shale gas and like where that's going so we're reading that and the open interest participation. We're seeing the work that we're doing to bring new customers into.

<unk> flow market with as Charlie referenced before the WTO and micro contract and we are unleashing those customer.

Capital efficiencies across the full range of products and we're also preparing from the energy transition as we're pushing out our both our global emerge.

Global emissions offset contracts and our new nature based global.

The crude or imagined and offsets contracts as well so not only are we expanding our customer base, we're preparing for energy transition as well. So we feel good about whats going on fundamentals a strong open interest is a 3 year high so we like where we're at and I just wanted to add to that.

And when you look at you you referenced 2015 levels of trading you got to look at what just.

Having just a year ago, we were and a complete lockdown and the world when demand was going absolutely zero.

And we are just rebuilding that and I think Doug pointed out a few highlights such as the airline industry now getting ramped up again and the TSA numbers and so forth. So I really think the measurement of 2015 to we're at today is a tough 1 because in between.

And only a year ago, we had a lockdown situation that we've never seen before.

Okay, that's really helpful Dark and Terry.

If I can just follow up on that just real quick.

Just curious are you seeing any any like now we've had a couple of quarters passed since the.

The event was kind of negative negative.

<unk> pricing do you think youre seeing any lingering effects from that even from from certain from certain users or is that open interest trends that you pointed to.

Kind of speak to the fact that you haven't seen anything material.

We haven't seen anything material I think that again and when you look at what happened on April 20th from 2020.

We were at the height of a perfect storm as I like to say at that time, we had a complete lockdown and we had at the same time production being ramped up right for that and then all of a sudden I guess are we locked down and zero demand and a tremendous amount of product with nowhere to put it. So that was a perfect storm at that given moment in time.

And that people understand that and now they are looking at the business and a different light hopefully, but theres still some headwinds as far as depend dynamic we keep talking about delta variance and things of that nature. So I'm, assuming there's some trepidation John.

Just in general about what could potentially happen around the world again, so no ones.

I think any pricing here, but that is still a lingering effect. We are not out of this pandemic debt and I think that's what people need to realize.

The only point I'd, probably add to that is when you talk about the the.

Oh, why indicator being the strongest marker of increased participation. The key stat in their calls the fact that commercial participants are the biggest.

Biggest growth driver of that increase and a $1.9 million to the $2.5 so 3 year highs sit and with the commercial participants themselves and physical participants being the biggest participants in that growth I think tells you where the market hedges risk right now great.

Great. Thank you very much.

Okay.

Thank you. Our next question comes from Alex <unk>.

Predict with Goldman Sachs.

Hi.

And you can again filling and photonics.

John.

Can you and then.

And what was the and.

Fed balance and Tokyo.

Sure.

Great great questions. So when you look at.

At.

Just a couple of quick points on the other.

The other income portion of our income statement because we've got a couple of items that are performing very well there. The first is.

The cash held at our at our clearing house and.

We saw an increase.

<unk> sequentially of about $3 million. The average balances were up $27.7 billion and our returns were up about 1 basis point from last quarter I just wanted to.

Remind everybody that there was a change and the Io. We are on June 16th from 10 basis points to 15 basis points and our.

And returns on net investment activity increased from 2 basis points to 5 basis points and you'll see that full quarter impact in Q3.

Also our the performance of our JV.

S and P. Dow Jones JV also has been performing extremely well and was and we're up.

Up about 14% from the same quarter last year.

So that kind of gives you some highlights on the other income portion of our our income statement.

Okay. If there is theres no further questions.

There are no further questions at this time Sir.

Okay. Thank you very much we want to thank.

Everybody for joining us on the call. This morning, and once again, we wish you and your families all the health and safety and you can.

And have to be safe and we look forward to talking to you next quarter. Thank you.

Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.