Q2 2022 CME Group Inc Earnings Call

July 27, 2022

Thank you for standing by will begin momentarily again, thank you for standing by.

[music].

Please standby we are about to begin.

Good day and welcome to the CME group second quarter 2022 earnings call at this time I would like to turn the comments over to you John Fischer. Please go ahead.

Thank you and good morning, everyone I hope, you're all doing well 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.

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

Actual outcomes and results may differ materially from what is expressed or implied in any statements.

Information about factors that may affect our performance can be found in our 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 will turn the call over to Terry Thanks, John and thank you all for joining US. This morning, we released.

Our executive commentary earlier today, as John said, which provided extensive details on the second quarter of 2022.

I have John Lynn, Shawn Derik, Chenille, and Julie Winkler on the call with me. This morning, I will start and then John will provide some comments before we open up the call to your questions trading activity during the second quarter increased 25% to an average daily volume of 23 million contracts per day.

This strong growth was driven primarily by the financial asset classes with the second highest quarterly ADB on record for the our equity index products, which were up 57% year over year and included record micro E. Mini S&P 500 futures Adv of one 4 million contracts. In addition, both interest rates.

And FX daily volumes increased 24% compared with the second quarter last year.

Total options average daily volume increased 23% compared with Q2 last year to $3 9 million contracts driven in part by 92% growth in equity index options record E. Mini NASDAQ100 options average daily volume grew 136% and E mini S&P.

500 options Adv was the second highest quarterly Adv on record at $1 1 million contracts.

Furthermore, options activity outside the U S was also robust with non U S options, Adv and metals growing 60% year over year equity index up 44, 4% and energy was up 28%.

In Q2 total non U S average daily volume grew 21% to $6 3 million contracts also driven by the financial product lines, we saw 15% growth in Europe , 36% growth in Asia, and 40% growth in Latin America.

Turning to our ongoing focus on industries LIBOR to software transition.

Silver.

Futures reached record quarterly Adv of $1 6 million contracts and record open interest on June 30th of $6 4 million contracts.

During the quarter Silver futures Adv represents 99% of Eurodollar Futures. In addition trading in silver option skyrocketed in June with a record number of participants are market wide freeway, where he was instrumental in moving this critical liquidity into the silver options market.

Sulfur options Adv represented 46%.

Of eurodollar options activity for the month of June having also re still weekly high of 68% and the daily high of 111% of eurodollar options activity during the month.

In terms of new products customer demand and the ever apparent need for risk management across our global products continues to lead in new product launch opportunities during the quarter. We continued to build out our micro sized contract suite with the launches of micro copper futures as well as options in the popular might go West, Texas intermediate crude oil fuel.

<unk> within our ESG focused portfolio, we announced the upcoming launch of two additional voluntary carbon emission offset contracts, adding to our suite of products that are already meeting a significant market need today.

A record 90, plus number of participants having traded one of the existing carbon emission offset products since launch other.

Other <unk> product launches include the Canadian wheat futures as well as options and are physically delivered aluminum. Additionally, we announced our plans to launch the first ever TBA futures for the mortgage backed securities market as well as event contracts later this year.

I mentioned at the time of Google is $1 billion investment in CME group that we will look for opportunities to use this capital to grow our business during the quarter, we invested approximately $410 million and our S&P Dow Jones indices joint venture. This funded our portion of the acquisition of the IHS market indices.

<unk>, which included leading fixed income and credit indices, such as <unk> <unk> and CTX.

The shift from active investing to indexing was growing in 2012, when we launched the joint venture and that momentum has only continued to strengthened since that time.

A portion of the earnings from the index joint venture have more than tripled from the $75 million earned in the full year of 2013, which was the first year post formation looking ahead with the addition of the IHS market fixed income and credit indices. The joint venture is well positioned to continue to innovate and grow across and even <unk>.

<unk> set of products and services that will service investors all over the world as we described last quarter. Several macroeconomic factors continue to contribute to an extremely complex market landscape and the importance of risk management is accelerating our team continues to execute on our strategic priorities to empower market.

Participants worldwide to manage risk and capture opportunities look forward to answering your questions with that let me turn it over to John to provide some financial highlights.

Thanks, Terry during the second quarter, CME generated approximately $1 billion and $240 million in revenue up more than 5% versus Q2 last year, driven by a 25% increase in futures trading activity or.

Our revenue was up over 11% when adjusting for the impacts of the formation of <unk>, Our post trade joint venture with S&P Global that we formed in the fourth quarter of last year.

Market data revenue was again a record during the quarter up 4% compared to a year ago to $152 million. We continue to see a strong need for our globally relevant product set and our risk management expertise.

Expenses were very carefully managed on an adjusted basis were $442 million for the quarter and $359 million excluding license fees.

We continue to progress with our Google partnership we are tracking to our internal objectives and are well underway to building the foundation for our move to the cloud year to date, we spent approximately $14 million in cash costs towards that effort.

<unk> had an adjusted effective tax rate of 23, 3%, which resulted in an adjusted net income of $717 million up over 22% from the second quarter last year and an adjusted EPS attributable to common shareholders of $1 97.

For the first half of the year CME had an adjusted EPS of $4 eight <unk>.

Making the first half of 2022.

Six months results in CME history.

Capital expenditures for the second quarter were approximately $21 million CME paid out just over $1 9 billion of dividends. So far this year in cash at the end of the quarter was approximately $2 billion.

In summary, the team at CME group continues to execute across the business delivering to our clients valuable risk management tools in this time of growing uncertainty.

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 one question and then feel free to jump back into the queue. Thank you.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Youre using a speakerphone. Please check your mute function is turned off all your CMO to reach our equipment.

Your question has been answered please press star two.

Again.

One if you'd like to ask your question.

And we will go ahead and take our first question from Rich Repetto with Piper Jaffray. Please go ahead.

Yeah. Good morning, Terry Good morning, John .

Alright.

Good morning, So Kerry you highlighted the investment in the S&P Dow Jones Index, JV and the use of cash to keep the 27%.

How the volumes of <unk>.

Thank you said tripled or so.

Since the initiation of our JV partner.

The revenue.

Yes, the revenue has tripled so I guess trying to understand just.

Okay.

Just a little bit more of the.

The numbers behind the investment.

So it kept you at the 27% and.

Maybe just a little bit of the analysis John .

Around the numbers.

I guess the balance would be.

That cash go into the annual variable dividend.

Thank you and it's an extremely strategic investment and as I pointed out in my prepared remarks. This has been an exceptional investment for CME with this partnership with Dow Jones. So we are very happy to be able to extend that into these other product lines I'm going to ask Glenn.

Fitzpatrick to give you a little bit of comment on the details of the transaction economically.

Sure. Thanks, Kerry during the quarter, we invested $410 million as he noted into our S&P Dow Jones indices joint venture the state fund the purchase of the IHS market indices business.

That includes leading fixed income and credit indices like the IMAX global cash.

Global cash bond indices, and the CTX and attract credit default swap entities.

We are excited about the strategic benefit of operating multi asset class products and further diversify in the joint venture Scout.

A little more color on the earnings.

You asked that question.

Earnings of the joint venture have grown at a 14% compound annual growth rate since the first full year in 2013.

We are pleased to continue investing in this growth business using a portion of the proceeds we received from Google share purchase.

I would say that given the overall scale of the joint venture, we expect that near term impact on earnings from this purchase to be relatively small.

As he noted that $410 million.

So towards the purchase and it does keep our ownership stake at 27%.

Yes.

One other point rich.

When we did the we got the investment from Google. We had indicated that you were going to use that those funds to invest in the business and that at the time, we didn't anticipate including that as part of the annual variable dividend calculation.

Yes.

Alright, thanks for that clarification, great. Thank you.

Thanks Rich please rich.

Yes.

We'll go ahead and move onto our next question from Alex Kramm with UBS. Please go ahead.

Yeah, Hey, good morning, everyone.

Just a couple of questions on the on the balance sheet or rather the margin deposits at the at.

Deferred so long list of numbers hopefully you can give them to me clearly balances came down quarter over quarter as expected from the data that we track. It seems like those are down another I don't know 13 plus percent. So maybe you can just give us an update where we stand today, if I'm right. There and then in terms of the the basis points that you're generating.

<unk>, obviously that was up in the second quarter, I think you're doing 25 basis points in the third quarter, So maybe give us.

Theres, a little update where we are and then obviously.

Given that its first day, if we get 75 basis points today, what would be a good assumption to use in terms of your kind of net take on.

If that materializes I think that should be all of them, but if theres more. Please please give me more.

Thanks, Alex we will be very clear with you and as John months, let them start yes ill do my best to be clear Alex So.

Yes, it's why we walked through some of the numbers.

There is a.

Quite quite a number of things to talk about so.

There is two components that we earn on in terms of.

Collateral put up at the clearinghouse.

One is the cash collateral that's put up and then we also have noncash collateral that we earn on as well so looking at Q2.

We had average cash balances of $145 billion.

In terms of in terms of cash with ending balance of $136 $4 billion at the end of Q2.

Through the first part of July through July 25th our average balances on the cash side were $118 8 billion and the ending balance was 113.3 billion.

So we earned approximately pardon me 20 basis points on the cash balances for.

For the for the quarter, so that $72 $2 million.

That is up from seven basis points in the first quarter, where you earned about 25 <unk>.

$3 million.

So that is on the cash balance side on the noncash we earned five five.

Five basis points and that is recorded in other revenue. So when you look at the sequential increase in other revenue.

See were up approximately $4 million.

Main driver of that is the increase in noncash collateral put up at the clearing house so looking at the non.

Noncash collateral we had $59 $2 billion that we earned five basis points on in Q1 that increased to approximately 81 billion average cash balance in Q2.

The ending noncash I'm, sorry, the noncash balance in Q2.

The ending noncash balance where we earned fees on those.

On the noncash collateral that's put up the clearinghouse was $86 billion at the end of Q2.

The average non cash collateral through the month of July through July 25th was $95 billion and the ending balance at the end of July 25th was $103 billion.

So basically.

Basically what <unk> seen is a shift from cash collateral to noncash collateral, we're earning now 25 basis points. The fed made a move in June where they increased it to 165 basis points, we are rebating 140 basis points.

Back to our clients and keeping 25 basis points.

That is a that is through the.

That is in June beginning in July for non cash collateral will be earning seven basis points there'll be increasing from five basis points of earning today to seven basis points in beginning in July and that is recorded in other revenue.

Does that.

Is that good I, Alex that was that was that was more than I asked for the one thing that you missed of course was the whats going to happen today I mean, do we have to wait until you disclose it maybe tomorrow or can you give us a little flavor.

Okay.

Yeah.

Terry Duffy, we're not going to prejudge, what the fed may or may not do we I mean at the assumptions are all but they are so we can kind of assume that well listen we're competing to make sure that we have a good balance of cash and other securities and our clearinghouse for risk management.

And that is truly what is most important to us and we will continue to do so while we remain competitive we understand there's all other investments that people can put their money into and deliver as collateral against your positions. So we want to make sure. We have a good balance and we're going to be very prudent about it.

Sounds good I'll hop back in the queue. Thank you guys. Thank.

Thank you.

We'll take our next question from Dan Fannon with Jefferies. Please go ahead.

Thanks, Good morning, just wanted to follow up or discuss expenses and kind of the outlook.

You have the guidance implies a second half pickup.

You kind of gave us what you've spent so far on the Google was $14 million, but maybe just talk in general about where the levels of spend and.

The second half, we're going to ramp and how conservative.

The outlook is at this point.

Okay.

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

Yes, you are correct, we didn't adjust our guidance were comfortable with our guidance at this point.

As you guys know the entire team at CME group is very focused on ensuring we're spending in the most efficient manner possible.

We did give our expense guidance, excluding license fees of $1 billion and $450 million. We had planned for a heavier second half of the year anticipating an improving business environment and also historically <unk> had a higher level of expense in the back half of the year related to in person events.

You haven't seen that recently, obviously because of the synergies we were capturing from the next acquisition.

So to give you some color as to where I'm seeing those costs increase second half versus first half.

Little over 40% of the increase compared to the first half of the year is related to customer facing activities that includes increases in travel marketing advertising and in person events.

We have seen an increase in in personal in person customer sales activity, especially in the U S and in Europe , and we're very focused on growing the business.

A little over another 40% is primarily technology related including professional services for staff augmentation and project work higher technology costs in the first half of the year and depreciation as we've migrated eds to glow backs in certain systems have now been put into service and will be depreciated.

The balance of the increase is related to the impacts of the salary treatment that was that occurred in March and in September and additional customer facing resources.

So our spend and also as you mentioned our spend on the migration to the cloud as we indicated would be in the $25 million to $30 million range and we're on track for that so.

We had anticipated a pickup in the back half of the year and it is going as as we had planned.

Understood. Thank you.

Alright, Thanks, Dan.

We're ready for another question.

Somebody would like to ask one.

Okay.

When we lose connection and.

And we'll take our next question from Brian Bedell with Deutsche Bank. Please go ahead.

Great. Thanks, Good morning can you hear me okay.

Yeah, Thanks, Brad Brian .

Okay great.

My question would be on the Super LIBOR transition. If you wanted to just elaborate a little bit more on that really around the.

First of all that the take up in Cooper has been obviously pretty strong.

In the near term I.

I guess your expectation for volumes to be elevated.

As clients switch.

Do that migration from Super to LIBOR, maybe the how long do you think that might last for and then after the fee waivers are dropped on the super contract.

Do you expect.

Just to be revenue neutral this transition rather to be revenue neutral or or dilutive to revenue or virtually accretive to revenue over the long term.

Brian . Thank you a lot to unpack there lots to talk about it in this transition and I'm going to let Sean make some comments on it but I also want to talk a little bit about the strategic nature and I'll, let him start John Yeah.

Hi, Brian Thanks, very much for the question this is Sean.

I think we're very pleased with the progress that we've made so far and it is along the lines of our plants.

In terms of so for futures. They are currently trading around 134% of eurodollar futures during the month of July so for options are now trading 74% of eurodollar options during the month of July .

If you look at our overall stirs complex with the federal reserve being very active in monetary policy and with every <unk> meeting at play in terms of what they might do we're very excited and pleased with the growth that we've seen on the entire short and complex. If you look at our short term interest rate futures in.

In the first half they were up 48% year over year. If you look at our short term interest rate options, they're up 2000 year to date, they're up 26% year over year, so very strong growth overall.

So very strong growth in Europe in the.

In the entire complex, but also in the sofa futures and the sofa options with the increased adoption.

In terms of the Rpc's.

We have had significant incentives in place.

For both the so for futures adoption as well as the sofa options adoption in terms of the sulfur futures adoption. We are further along in that process.

Relative to <unk>.

The as I mentioned, the 134% so so so far so for futures being 134% of Eurodollar futures.

So we're pleased that the RPC there.

Is headed in the right direction and the goal for both the silver futures and the sofa options is for their RPC to equal what.

We have had historically for eurodollar futures and eurodollar options so that.

It's irrelevant to us and to our investors as to which product customers trade. We are not there yet that is our strategy. That's what we've been saying that we intend to do and that is what we.

And to do last thing I might mention is if you look at where we are placed today relative to sofa, it's an extremely strong position relative to our terms sofa rates in terms of CME terms sulfur we have now licensed CME terms, so far to 1300 different firms.

Across 74 different countries.

And it's being used in more than one six trillion worth of cash market products across the globe. So those are.

The 1300.

New license source right, whose interest rates that they are using for borrowing are based upon our futures contract. So we feel very positive about strategically where we are both in terms of the adoption of the silver futures and options. We're very pleased with the adoption of term sulfur and we are on track relative to.

Two meeting investors needs to be.

Getting those rpc's up at the same level sometime.

In the not too distant future.

Yes, thanks, So just a.

A quick point.

In our license fee line this quarter.

We have three between three and $3 $5 million of costs associated with the sulfur first for options initiative, we plan on $3 to $3 $5 billion per month.

<unk>.

Additional costs that are in that license fee and other fee arrangement line.

For the next two months that'd be July and August where we where are we.

Plan to conclude the silver first for options initiative.

Definitely a highly successful as Sean has indicated and certainly pleased with the outcome of our of our transition off of the LIBOR based benchmark.

And the other thing I was going to say, Brian we talked about this transition a year or so ago and what wasn't going to look like from a competitive standpoint, and I think we've done a lot of really smart things here in order to give you the numbers that Sean and I have reflected on just a moment ago. So when you look at the incentive program that we put into place this summer.

And doing it a year ahead of time before the expiration of LIBOR. We achieved many things one we were able to transition most of that into the LIBOR futures and options, our sulfur futures and options market, which is critically important but we also did something else that we said we would do a year ago. We thought we would benefit by both euro dollar trading and sulfur futures trading and that's exactly what's happened.

So strategically I think our timing was very good on this and our fee waiver program did exactly what we anticipated doing and we look to be.

Head of the transition versus July of 2023.

That's a lot of great color. Thanks, so much for the comprehensive answer.

Thanks, Matt Thanks, Brad welcome.

Well go ahead and move on to our next question from Gautam swap with credit Suisse. Please go ahead.

Good morning, and thank you for taking my question can you. Please help us size, how much international Adv is coming from existing international clients doing more trading versus maybe new international clients that have been on boarded in the last year or so and do you see incremental opportunities to launch new products in there.

Local markets I know you talked about the Canada products, but maybe in Asia or Europe .

That's a great question and I'm going to let Derrick.

Derek Salmon, who runs international for us.

Excuse me and Julie Winkler the answer to that question, Doug Why don't you start yes, I guess I. Appreciate the question as you heard from tariffs.

Terry's comments at the top of the call. We are continuing to go from strength to strength in our non U S business.

$6 3 million contracts are non U S. Adv was our best second quarter on record and we have now put up our best first half on record of $6 8 million Adv for the first half of this year, that's up 20% as you rightly point out we are both scaling and leveraging our existing customers cross selling them into additional products, but we're also.

<unk> net new customers into our business a little color on the regional growth and I'll talk to the client side of this.

When you look at the strong growth of the business, we've actually seen our bank business up 31%.

Our retail business up 43% and our proper market, making business up 15%. So that should show you. The participation of the retail side is particularly strong and important to us that ties back to our new product development you've seen the success that we put up in our micro contract products. We continue to rollout Terry mentioned with the <unk>.

Top of the call both our micro WTS crude.

Crude oil options as well as our micro Wty futures contract launched last year, we launched a micro copper contract this year.

When you look at the makeup of the participation there on the micro side. We're seeing those are net to about half of the micro wty options customers are have never traded another option contracts at CME group before same thing on the future side about a third of our incremental new customers and micro WTO I have never traded at.

Any contract before so this is both scaling and broadening our distribution partner relationships as well as net bringing new customers into CME group, which then becomes a cross sell and upsell opportunity for us over time. So we're very pleased with the non U S growth. It's a big part of our growth story continues to.

These are both a source of net new client acquisition and cross selling and Julie Winkler can probably talk a little bit about the success. We've had there and the framework we have in place for Upselling and cross selling customers, we can bring in.

I think adding to what Derek mentioned the.

Power of our international model is really that we have regional client facing resources around the globe to work with our local customers identify those product opportunities that you mentioned.

Obviously micros is something that we find has a lot of international appeal as Eric just pointed out but if you also just look into some of the trends going on in Europe right our customers.

Our moving into Paris, and that is definitely emerging as a main destination for both banks and buy side clients.

And then you go down to Australia. When you look at what we're seeing is strong growth from buy side clients out of Australia, and the fact that we have those teams there locally.

Our becoming very well versed in what those client needs are and are doing that direct sadam into what is most relevant given our current product portfolio and then also identifying those new product opportunities. So if we look back into Q2 launches right options on European HRC, because the Canadian western.

As you pointed out and also a lot of interest I would say, particularly in Europe and Asia for those voluntary carbon products that we talked about and that is really helping to drive both the adoption of those products as well as.

Innovate the new products that will be coming in the second half of this year. So I think it again speaks to the investment that we're making from an international resource perspective, and we're seeing growth in areas that.

We expect to continue in the second half of the year. So it's been a great opportunity as well throughout the summer.

To meet with our clients in person and those numbers are up about 300, 377% over where we were in Q2 of 2021. So those in person meetings I think are helping to improve our insight on what those client need Dara. Let me just make a quick point for you also on new contracts, we don't need to list them in.

Certain areas in order for the rest of the world not to participate we list them. So everybody can participate we just might dedicate more resources to what Julie said to that particular region, where that product seems to be more apt to be participated in but again, there's a lot of products that have been launched in different parts of the world.

Some quite successful in other parts of the world. So I don't want you to think that we have to list Canadian wheat.

Just the only Canadian participants that's not the case as an example, so we more towards julie's dedicating our resources to the people in those areas to grow those products. Derek I think just a little bit additional color in terms of where we're actually seeing some of the participant growth, we're not seeing our international growth coming only from our biggest financial center. So.

For example, our fastest growing country over the course of this year year to date with our Brazil business up 96%. This is a top 10 country for us that's moving up the country table.

Our second fastest growth came out of India third the United Arab Emirates, we're seeing a lot of golf business continued to grow.

South Korea, and Taiwan all of these countries are growing between 50 and 90%. So these are countries all in our top 10, So I think it speaks to the breadth and the scale of our product set.

Customers want to trade benchmark products that are on screen $24. Seven those are the markets. The customers are drawn to that's why the kind of the benchmark markets CME group and the investments in our technology to reach those customers across the globe are driving that business.

Thank you for your question very comprehensive answers.

And we will go ahead and move on to our next question from Alex <unk> with Goldman Sachs. Please go ahead.

Hey, guys. Good morning, everybody. Thanks for the question.

I was hoping you can dig into some of the legacy nex businesses brokerage that can ebs.

It feels like the revenue trends have been there fairly range bound over the last couple of quarters. Despite what's been obviously pretty constructive macro backdrop for that product set so maybe just a little color on kind of what's going on underneath the surface and what are you guys are working on too.

Reinvigorate growth in these businesses.

So let's break this down into segments, where the legacy nex businesses, because we have the optimization businesses in the trading business. So I'd like to ask Sean to talk a little bit about the broker Tech Slash Evs, and then maybe Julie and John I know Theres can talk about the transition we did with IHS and originally that went into our <unk>.

JV, yes.

Thank you Terry and thank you Alex for the question.

If you look at.

Our plans relative to the acquisition step.

Step one was to migrate the broker tech business over to Globex step two was to migrate evs over to globex.

And both of those are now completed.

Last year, we moved brokerage hangover to go back to this year, where we just recently moved in May.

UBS over to go back if you look at broker Tech since we are further along in the process.

We are starting to see some of the benefits.

<unk>.

The move to go back in that regard if you're a broker tech U S. Treasuries volumes are up 14% year over year, you protect U S. Repo is up 25% year over year easily broker Tech EU repo was up 14% year over year, whereas this growth coming from the.

The initiatives that you've heard US talk about previously first cross selling and we are seeing about $4 5 billion worth of U S. Treasury volume on broker Tech this year from new customers that have never traded on broker tech before that have traditionally been U S. Treasury futures customers that are now trading both sets of product we have a pipeline of additional new clients.

That is a couple of times as large.

We do hope to.

Get started trading on broker tech.

In the coming months in addition to that the RV trading.

The opportunity the RV trading.

Order type that we instituted relative to curve trading that you've heard me talk about before relative to the efficiencies that offers our customers.

It achieved $2 4 billion worth of volumes in the second quarter, an all time record. It has achieved a number of days around the $5 billion Mark and that continues to grow so in terms of delivering new innovations to the clients relative to having been on globex in the cross selling we're starting to see some traction on the broker tech side.

On the EPS side, we are looking as we.

Post that transition to globex.

To make enhancements to the systems and to continue to invest in the systems and to continue to improve the market microstructure, but these things do take time.

So in terms of the.

In terms of the joint venture that we created with IHS Markit and know that S&P global.

We really think that this is from a strategic perspective positioning ourselves.

And that business well to serve our clients one of the things that you've heard Terry and others talk about is developing efficiencies for the client and the combination with IHS markets market serve business, along with our optimization businesses.

We will create that efficiency.

From an operational perspective for our clients.

The.

Strategy has been laid out we've got the management team in place and we are starting the integration process.

With.

Between the optimization businesses that we contributed into the joint venture and the market serve business.

And youre seeing some of that play through in our earnings.

As.

You can see in our financial statements, they're up $2 million sequentially.

Q1 to Q2.

We think that we.

We think that we've created well what's going to be a tremendous amount of value, but most importantly for our clients.

We're going to be creating value for our shareholders by creating the joint venture through the efficiencies that we're going to be generating by combining the.

Those businesses.

And.

Most importantly, we're positioning that business strategically to be the leader in the post trade processing space.

Which in this time of.

Uncertainty in this time of.

Cost management, we think is going to be very attractive for our clients and also I think you suggested that the revenue on the broker Tech has been a little stagnant during the fundamental times that we're living in right now and what is the response to that I think Sean gave you a good response, but.

John referenced something else that I'd like to talk about a lot about which is the efficiencies and we're at hopefully at the final end game, you're creating the efficiency as it relates to margin offsets with our futures products.

We have DTC is finalized all of their applications to the SEC.

We are doing joint Webinars together to point out the benefits of the.

The offsets between futures and broker tech. So we're hopeful that once the FCC approves. This they have I believe a 60 day window once the business.

<unk> been presented to them, which they are now or that we will achieve much higher benefits for our clients. So that's one of the strategic benefits that we saw from the beginning of this transaction.

Where those margin offsets and the efficiencies and we do believe that that is exactly where the point where we're at in the next quarter or two as we get approval from the SEC. So that's something we're shooting for as well great. That's great. Thanks very much.

Thanks, Alex.

Our next question from Mike <unk> with Morgan Stanley . Please go ahead.

Hey, good morning. Thanks, so much for taking the question I just wanted to ask more broadly an industry question bigger picture just on the shift from.

OTC to exchange traded products, just curious where you think we are in that journey. What's left at this point, that's still OTC, how would you sort of size that town. How do you think about trying to penetrate whatever's left at this point what can make the most sense versus what makes less sense there.

Sean we're continuously focused as Terry has mentioned on providing new efficiencies to our customers. We're very excited actually.

While it was several years ago that we began offering a portfolio margin between cleared interest rate swaps at CME group and our interest rate futures. Although we had all time record in the second quarter of $7 2 billion in savings for our customers. So I think that that transition may continue but the most important thing for us is to provide.

The efficiencies for the customers that bridges now all three marketplace. So the OTC derivatives market.

Cash treasury market, the cash foreign exchange market and all of our listed futures and options.

Honestly that we're very early in the process relative to the benefits that we can offer the community across.

All of those different modalities of taking risk in particular, I've talked a lot before about our analytics and we do have a great set of analytics eds quantum analytics to particular customers find extremely useful in terms of optimizing their foreign exchange trading we do expect to enhance that technology to include our futures it still does.

And then to use that technology likewise across all of our fixed income product. So we in terms of CME group and the values that we're going to add to our clients.

I would say theres still an awful lot in front of us.

If youre doing that to make all of those marketplaces more efficient Megan let me just add to what Sean said.

It is important to remember that we do get directly benefit by the growth even though the over the counter business because of the risk off says, they're using our marketplaces. So even if they grow they don't think that that's a bad thing for us because we do get those risk offset so I like to think of yes, we create efficiencies through the clearing mechanisms and things of that nature of that.

John pointed out in the margin efficiencies, but there'll be certain people in certain institutions that are going to do bilateral transactions and they will do them forever, but we want to make sure that we continue to get the offsets and create the efficiencies of Sean laid out. So it is not actually a terrible thing for us either.

Great. Thank you.

Thank you.

We will take our next question from Owen Lau with Oppenheimer. Please go ahead.

Good morning, and thank you for taking my question.

Could you please add more color on some of the initiatives for your market data in this rising rate and volatile environment.

I think Jim you benefit on the trading side, but on the data side.

I'd say any product or geographic area that CMS can penetrate and expand further into and then along that line can you. Please give us an update on your cloud migration. Thank you.

Thank you Julien Yeah. Thank you for the question.

Answer the market data question, and then turn it to.

It's Neil.

We will respond.

To date, our market data business is for sure an international and business and this was a record quarter of $152 million in revenue up 4%.

Seeing that in two different areas I mean, one we have a very robust and diverse product pipeline and our clients need and want access to that real time market data.

And that increase in subscriber counts for that data in this quarter and also continuing to see strong interest in our derived data and so that is where our products and prices are being used as input into other structured products and etfs and things of that nature.

And I'd say that has continued to grow internationally as well as domestically and that is.

Part of what we continue to be focused on within that market data business I think.

I'll relate back to the comments that Sean made earlier I think one of the great things that are sitting on the horizon and we're continuing to work toward is when we have new benchmarks as we do with that term sulfur right.

Is representing a great global opportunity for us as our team goes out and continues to.

<unk> licensed entities really across the globe and this is a diverse set of participants and many of which are completely net new to CME and so we are using.

Data is an opportunity to introduce ourselves to get them licensed that for that term silver rate and then that will be a process that our sales organization will continue to work through and converting them and cross selling them into other products and services here at CME group, So a great global opportunity there and I'd say, we're continuing.

To work with other partners, So we announced our partnership with Deutsche Boerse and a seven platform, where we're looking to find other means and other channels to distribute our market data from a historical standpoint and in Q2, we launched that are things like our third party crypto client data set on data.

Mine, so looking at it both from a product and.

Channel opportunity and where we can use market data to cross sell would be kind of where we see growth going forward and then I'll turn it over.

A little update on the cloud please.

Thank you Terry so on the cloud migration.

We're on track to deliver foundational services towards the end of this year. The three services. We have talked about first one is margin calculation services, we call it the margin calculator.

<unk> is a product dictionary that gives clients the ability to actively trade our products look up and trade up products very easily and then the third aspect of it is market data on the cloud on a DCP platform.

We are on track to deliver all three of these services towards the end of this year.

Thank you very much.

And is going to give you just a little bit of <unk>.

Color around the.

Financials, just speak to the expenses related to the migration in the quarter, we saw $8 million related to the migration, bringing the year to date total to approximately 14 million. The majority of this spend youll find within professional fees and outside services. We do remain on track for our annual guidance of $25 million to $30 million related to.

The migration expense.

Okay. Thanks, Mike appreciate it.

We will take our next question from Matt <unk> with <unk>. Please go ahead.

Hi, good morning, So earlier in the call you you touched on retail that from an international perspective, but more broadly speaking I was wondering if you'd give us an update on how much of your total transaction revenue is being driven by retail today and how that's trended over time.

And then could you maybe talk about the event contract announcements and where you think the introduction of those contracts could drive that retail percentage overtime.

So Kyle I'm going to turn it to Julie Winkler on the event contracts to start with and then we will talk more about the retail participation in the numbers that we do disclose versus the ones that we don't so why don't I go ahead in terms of the Giulia as far as the.

To start with in Q1.

We announced our plans to begin offering the event contract later this year that launch date has announced a number of weeks ago. So we're focused on September 19 for that launch and really what our goal is to be working with our existing broker partners to ensure that.

We make futures more presentable to individual end user client and so this is a lot about packaging up a product in a much more simple and straightforward guests know format instead of more standardized bid offer training environment that people trade our existing product.

So our target audience is different I would say than than our existing client base that it's people that have interest in <unk>.

Financial and commodity markets, but have a smaller appetite for risk perhaps than a typical futures trader <unk>.

Perhaps less experienced in doing that so.

There has been obviously, a growing trend or self directed trading across the U S. Over the last two years and working with our broker partners. This was identified as an opportunity. So we've been working with them to create.

Our customer experience for the U S retail traders in the sense and also being able to provide liquidity that we've got some committed market makers to supply liquidity.

For these products as well and we will continuing to be ramping up some marketing in that vein as.

As the launch gets closer and working closely with our broker partners to ensure that clients are educated about how these products work in the retail participation going discuss them to what you can yes.

Yes.

We don't disclose the percentage of our retail trading.

As a percentage of our overall activity.

Revenue was up 26% this quarter and continuing to really perform very strongly it looks to be another record year in terms of the number of retail participants that we see in our marketplace.

And this continues to be driven by the same things that we talk about the micro suite has been extremely attractive.

As there has been volatility in the marketplace.

Micro equity suite in particular has performed very strongly and I'd say the other thing is this continues to be an education story for us so working to get content out there working with our broker partners working with third party educators. This is a key part of our retail model and one that we will.

Continue to invest in and continue to.

Put new products out so the micro crude the micro yield and also the ether futures.

This all attracted additional attention.

This suite and things are going very well there, but Julia why don't you just described real quick about how we categorize our retail participant versus some others might characterize for.

For us it's really what we determined is and see as active traders. So those are people.

Trading 10 or more times per month.

Our broker partners are doing all the KFC in AML on these clients and these are people that have.

Largely traded in in other equity options market.

And in equity portfolios and so they are qualified and.

Have the appetite to take on and use derivatives to hedge part of their retail portfolio and that has been really a cornerstone of our retail marketplace and will continue to be our clients that kind of we're not pointing that out for you or were just pointed out for the public sake, because the retail the way it has grown and proliferated.

Individuals' walking down the street is a little bit different than the way we participate in it. So that's the only reason I ask you to clarify that.

Part of the equation.

Then on our options business on retail has been a significant change there yes.

Julia has made is we're investing significant amounts of education and training to both upsell and cross sell our retail clients and just a great case in point here is that not only is our options portfolio as a whole continuing to grow faster than futures year to date, our options were up 28% versus futures up 21% retail participation in our options complex is up 62.

2% that substantially.

Fastest growing client participation. So I think it speaks to the resources and tools and capabilities, we've developed and the upsell and cross sell capabilities that Julie talked about earlier, so we're bringing in scaling participation in our markets across the whole portfolio of asset classes and the whole portfolio of options and futures and as you know.

Customers that trade options tend to trade futures and grow into other asset classes as well overtime. Thanks, Kyle. Thank you very much for your.

Thank you.

Well go ahead and move on to our next question.

Patrick O'shaughnessy with Raymond James Please go ahead.

Good morning does it surprise you the energy volumes have not been more robust given the macro events that are driving outsized energy volatility and in particular, a big move in natural gas.

Eric Yeah, I appreciate that Patrick Yes, there is.

Energy market has been.

Under a lot of stress over these last couple of months, what we've actually seen is a significant dislocations in physical supply chain, that's true in energy agricultural products and metals products.

We saw a huge bump immediately following the <unk>.

Ukraine more in March what we've seen since then we saw then a jump in activity. We did see more of a risk off profile on the future side definitely we saw that in the global oil market. We saw that in an ice Brent we saw that in our wty contract as well, but we've actually seen is a rebuild since then if you look at.

The overall commodities portfolio as a whole our June Adv was 7% up on April 18% up on May. So we're seeing that initial jump in activity, which was really a risk off high volume and then open <unk> reduction we've seen them start to rebuild what's really interesting is the make up of actually how.

<unk> are managing risk in this extremely complex environment AG energy and metals right now I'll be talked a little bit about this on the last earnings call. We've actually seen a significant increase in proportion of customers portfolios that are traded in transacting in the form of options versus futures in markets that are moving both up and down rather VI.

I would put equities in that camp I put oil in that camp, where actually seen a an interesting differential between this and the open interest build in between futures and options for example.

Our energy.

Futures open interest is down 23% our options open interest is up 10% our futures in energy is up 1% and our options is up 11% what that is telling us as customers are finding that the the.

The flexibility of options is much better suited to some of the really challenging moves in our physical markets right. Now so proud to say that we're seeing growth substantially in both open interest and in volumes on the option side, which you would expect when flat price hedging in these uncertain markets is as challenging as it is right now so we are seeing a rebuild where.

We're seeing a reload.

The uncertainty around the war and frankly, <unk> got supply issues, China is likely about to announce zero growth GDP that has already had an impact on the price of oil you can have supply shocks as well. So the market is using a hard a larger proportion of options to manage that risk and I think as the market becomes a little more certain other path forward, we'll start to see market.

Mean revert a little bit, but right now I think the market is defensible using options. So we're pleased that they're using our benchmark market share to manage that risk. So Patrick let me just make another comment I think Derek.

We made really good thoughts about how we are rebuilding the marketplace, but let's talk about what's happened over the last several months here and fundamentals are what drive free markets and they move on fundamentals such as what's going on in Russia, Ukraine, such what's going on in inflation, such what's going on over in China as Darren pointed out what we don't markets don't like or geopolitical.

Interference and we've seen a lot of geopolitical interference, especially here in the United States under a certain product meaning energy.

What the policies are and I think sometimes investors get a little spooked by how much the geopolitical is going to impact the fundamentals of the marketplace. So I think we're starting to see that check off and then the reason I say that otherwise our president and wouldn't have gone over to Saudi Arabia, you wouldn't have done other things to try to increase this products. So I think we're starting to see the geopolitical factors get away.

Wave from the fundamental factors and that's hence the reason why we're seeing the rebuild and open interest and trading which we should have seen the whole time and I think to wrap up on your question on Nat gas and Nat gas has really been the shining part of the energy portfolio. When you look at our.

Second quarter Adv of 554000 up 19% from second quarter last year and average open interest of $6 million up 17%. So it's a great case in point, where youre seeing.

There is term volatility there was a little less.

A little more clarity I should say in terms of what that the term demand is for gas we're seeing our markets respond very very strongly so we.

We like the position we have in Henry hub, we continue to be between 75%, 80% market share in that market and as I said in that market our year to date, our futures up 10% in options were up 16%. So continuing the theme here, but very very strong returns and growth of the business for full year as well as Q2 of natural gas and we expect that to continue given the ongoing challenges.

Demand in Europe , right, so badger and hopefully that gives you a little sense of what we're seeing from our everyday seats here as it relates to energy and all the different factors that go into this business.

Very helpful. Thank you.

Thank you.

We will take our next question from Craig Siegenthaler with Bank of America. Please go ahead.

Hey, good morning, everyone.

Good morning.

So how is the competitive landscape in the metals business evolving as participants react to Allen <unk> canceling a nickel contracts in March and we know you had a pretty large scale marketing campaign in the quarter and also launched a few metal contracts are really focusing on CME has potential to take market share.

Yes, Craig. Thank you for the question and Doug who runs our metals business, where his team can give you a little bit of color around the way we're approaching it yeah I appreciate the great question Craig It was certainly the <unk> challenges for March have reverberated out across the broader market. What we are seeing is continued.

Expanded engagement with particularly by side and commercial customers that have historically done a larger share of their base metals business.

We have as you know continued to significantly build and expand success in our copper market with a differentiated set of offerings versus the <unk> that has continued to go from strength to strength, particularly in copper options, where he gained significant share over the last two to three years, particularly.

We have seen significant customer interest in doing a larger proportion of their aluminum business with us and we've seen some nice growth there off admittedly off a low base. There. So I think we're seeing the client engagement customers looking for best solutions in jurisdictions, where they have the customer protections, where they've got the market certainty and where they know exact.

The rules around how markets operate and when they get the best risk management tools increasingly that CME group. So we like the broader engagement. We've seen we like the direction in terms of broader impact of customers looking to move more of their base metals business to CME group and that will really leverages on the success that we've had in other parts of our franchise like battery metals.

Cobalt and lithium where we continue to be the merger the largest market for battery metals and the growth that we're seeing in base metals globally. So hopefully that answers your question, but I think that the.

Global client base that we built and the team that Julia is managed with client specific sales teams, particularly with commercials has opened that dialogue and now extended portions of our business in ways that were here to best serve client need and we think we're the best market for that and we're seeing that in our results.

Thank you Derek.

Yes.

Thanks, Alright.

Last question from Alex Kramm with UBS. Please go ahead.

Hey, Thanks, again, Hello, again, I guess, just one quick one maybe not quick one on your largest business interest rate futures unless I've missed it we haven't really discussed that and.

I don't want to belittle the growth in the quarter, which was obviously solids, but I think relative to whats going on the environment and also Terry your comments earlier. This year in terms of unprecedented times I think people generally expect that a little bit more action. So really curious in terms of what do you think <unk>.

Essentially weighed on activity and I'm asking this in the context of when we talk to market participants. They also echo that it feels lighter and maybe some trading strategies are not as active as they should be and I guess im wondering like with it just seems like capital as far as banks are watching the capital they're not extending his.

Credit like what are the things that you think are weighing what could change there or are we going down the wrong path here. Thank you.

Alex I appreciate your question, but I think when John stated in his opening remarks at the last two quarters combined with the two largest quarters in the history of the company kind of bolsters, what we said the beginning of this year about unprecedented activity that we're seeing in our marketplace and I think thats come to fruition. So and then when you hear what Sean has said about the transition as we're going through a mass.

We've transitioned from one benchmark to another I think that we've done a pretty good job when people considered it a jump ball just recently as you know because you were at that meeting on rest of the guys. We're talking about a potential jump ball four.

The sulfur business. So I think we've done a really good job on that and as far as the unprecedented activity I think we've seen unprecedented activity I.

I think theres other events that go into it but I would guess would differ with you when I look at our numbers. So I don't know if people misunderstood what I said unprecedented activity demand that we're going to trade.

80% more than we did or the levels that we did which were record levels. So let me talk to you.

John Nestor.

Alex Thanks for the question and thanks for the thoughts just to back up some of the things that Terry has already said the first half was an all time record revenue for our rates franchise. The first half was an all time record average number of large open interest holders of our rates franchise. The first half was an all time record Adv for our rail franchise.

If you look at the year over year growth. The most recent numbers in our volumes and our listed rates franchise. It is up 21% year over year.

One of the references that I have made to investors previously was it the current environment looked an awful lot like 1994, I think I've been saying that now for at least 18 months and if you look at 1994, what I always reference was the fact that if you combined CME and cbot interest rate volumes and you looked at.

The growth in 1994 relative to 1993 that it was up 20%.

So this looks to me like what I would've expected relative to the economic environment. In addition to that I mentioned earlier with every <unk> <unk> meeting in play there are short term interest rate franchise.

If you look at the <unk> futures and options are sorry, stir futures alone is up 48% year over year. If you look at the store options up 26% year over year, it's a very exciting result.

<unk> left in front of Us and Thats actually also very exciting is the fed balance sheet. So we have seen an environment very much like 1994 in terms of the stairs franchise. Our treasury futures are only up 10% year over year, but they are up 10% year over year. So what is what is the potential.

Catalyst for further growth the federal reserve only started to reduce the size of its balance sheet. During June and July during June and July as we know the fed is is only targeting.

A reduction in balance sheet of $47 5 billion per month, starting in September . We also noted the federal reserve is planning on reducing that balance sheet by $95 billion a month.

On the short end relative to the similarities with 1994, we're seeing the <unk> fully in play 48% growth year over year, and we're very pleased with it relative to the long end of the yield curve and the nine trillion dollar balance sheet the deferred accumulated over the last now I guess, some 12 years.

<unk>.

That part of the benefits that we might get from this economic environment are still in front of us. So all of them. So I guess my comments and I don't know exactly who you're referring to there in January of this year. When I said I thought that this could be an extremely active I think I was answering <unk> question at the time about the overall markets and.

The numbers are reflecting what we saw what I saw and the teams are going into that so.

When we when we can.

Coming with records that we produce today theyre not coming off of a basis of zero. We are kind of taking reference that are coming out very high base. So I think that it's exactly what we said was going to happen. So if you're a new business and you went from zero to one I would say, okay, you get no credibility, but when you have what we have and we create a rapid off that I think you should at least technology.

We saw what was coming down the Pike.

I appreciate the commentary as I said, Didnt mean to be a little the growth just keep on hearing that it's quieter than it should be but that's.

Thank you.

No and I appreciate that and I think.

The numbers reflect something different but at the same time I hear what you're saying so.

Again, we are continually we're in this for the long run.

But again, we were very impressed with the last two quarters that we've had here at CME.

Thanks again guys.

Thanks, a lot thanks, Alex.

With that that does conclude our question and answer session I would now like to hand, the call back over to management for any closing or additional remarks.

I want to thank all of you for joining us today, we appreciate it very much again.

Your family's please stay safe and healthy thank you.

With that that does conclude today's call. Thank you for your participation you may now disconnect.

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Yes.

Good day and welcome to the CME Group second quarter 2020 earnings call.

This time I would like to turn the comments over to you John P. Sir. Please go ahead.

Thank you and good morning, everyone I hope, you're all doing well I am going to start with the Safe Harbor language, 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 in the other reference documents on our website that are not historical facts are forward looking statements. These statements are not guarantees of future performance. They involve risks uncertainties and assumptions that are difficult to predict.

Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements.

Detailed information about factors that may affect our performance can be found in our 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 will turn the call over to Terry Thanks, Dan and thank you all for joining US. This morning, we released our executive commentary earlier today as John said, which provided extensive details on the second quarter of 2022.

I have John Lynn, Shawn Derik, Chenille, and Julia Winkler on the call with me. This morning, I will start and then John will provide some comments before we open up the call to your questions trading activity during the second quarter increased 25% to an average daily volume of 23 million contracts per day.

Jan FX daily volumes increased 24% compared with the second quarter last year.

Total options average daily volume increased 23% compared with Q2 last year to $3 9 million contracts driven in part by 92% growth in equity index options.

The E mini NASDAQ100 options average daily volume grew 136% and E. Mini S&P 500 options Adv was the second highest quarterly Adv on record at $1 1 million contracts.

Furthermore, options activity outside the U S was also robust with non U S options Adv in metals growing 60% year over year.

Equity index up 44% and energy was up 28%.

Turning to our ongoing focus on industries LIBOR to software transition CME silvers futures reached record quarterly Adv of $1 6 million contracts and record open interest on June 30th of $6 4 million contracts during the quarter Silver futures Adv represents 99.

Percent of Eurodollar Futures. In addition trading in silver option skyrocketed in June with a record number of participants are market wide freeway was instrumental in moving this critical liquidity into this over options market.

Sulfur options Adv represented 46%.

Of eurodollar options activity for the month of June having also reached a weekly high of 68% and the daily high of 111% of Euro dollar options activity during the month.

In terms of new products customer demand and the ever apparent need for risk management across our global products continues to lead in new product launch opportunities during the quarter. We continued to build out our micro sized contract suite with the launches of micro copper futures as well as options on the popular might go West, Texas intermediate crude oil fuel.

Within our ESG focus portfolio, we announced the upcoming launch of two additional voluntary carbon emission offset contracts, adding to our suite of products that are already meeting a significant market need today.

A record 90, plus number of participants having traded one of the existing carbon emission offset products since launch other.

I mentioned at the time of Google is $1 billion investment in CME group that we would look for opportunities to use this capital to grow our business during the quarter, we invested approximately $410 million and our S&P Dow Jones indices joint venture. This funded our portion of the acquisition of the IHS market indices.

<unk>, which included leading fixed income and credit indices, such as <unk> <unk> and CTX.

The shift from active investing to indexing was growing in 2012, when we launched the joint venture and that momentum has only continued to strengthen since that time.

Disappoints worldwide to manage risk and capture opportunities look forward to answering your questions with that let me turn it over to John to provide some financial highlights.

Our revenue was up over 11% when adjusting for the impacts of the formation of <unk>, Our post trade joint venture with S&P Global that we formed in the fourth quarter of last year.

Expenses were very carefully managed on an adjusted basis were $442 million for the quarter and $359 million excluding license fees.

<unk> had an adjusted effective tax rate of 23, 3%, which resulted in an adjusted net income of $717 million up over 22% from the second quarter last year and adjusted EPS attributable to common shareholders of $1 97.

For the first half of the year CME had an adjusted EPS of $4 eight <unk>.

Making the first half of 2022.

Six months results and CME history.

In summary, the team at CME group continues to execute across the business delivering to our clients valuable risk management tools in this time of growing uncertainty.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

We are using a speaker phone. Please make sure your mute function is turned off all your CMO to reach our equipment.

Your question has been answered please press star two.

Again.

One if you will.

I'd like to ask a question.

And we will go ahead and take our first question from Rich Repetto with Piper Jaffray. Please go ahead.

Yeah. Good morning, Terry Good morning, John .

Alright.

Good morning, So Kerry you highlighted the investment in the S&P Dow Jones Index, JV and the use of cash to keep the 27%.

How the volumes of <unk>.

Thank you said triple or so.

Since the initiation of the JV.

The revenue.

Yes, the revenue has tripled so I guess trying to understand just.

Yeah.

Just a little bit more of the.

The numbers behind the investment.

So it kept you at the 27% and.

Maybe just a little bit of the analysis John .

Around the numbers because it.

I guess the balance would be.

That cash go into the annual variable dividend.

Thank you and it's been an extremely strategic investment as I pointed out in my prepared remarks. This has been an exceptional investment for CME with this partnership with Dow Jones. So we are very happy to be able to extend it into these other product lines I'm going to ask Glenn.

Fitzpatrick to give me a little bit of comment on the details of the transaction economically.

Sure. Thanks, Gary during the quarter, we invested $410 million as he noted into our S&P Dow Jones indices joint venture the state fund the purchase of the IHS market indices business.

That includes leading fixed income and credit indices like the IMAX global cash.

Global cash bond indices, and the CTX and attract credit default swap entities.

We are excited about the strategic benefit of our offering and multi asset class products and further diversifying the joint venture Scout.

A little more color on the earnings.

You asked that question.

Earnings of the joint venture have grown at a 14% compound annual growth rate since the first full year in 2013. So we are pleased to continue investing in this growth business using a portion of the proceeds we received from Google share purchase.

I would say that given the overall scale of the joint venture, we expect that near term impact on earnings from this purchase to be relatively small.

As he noted that $410 million.

So towards the purchase and it does keep our ownership stake at 27%.

Yes.

One other point rich.

When we did the got the investment from Google. We had indicated that you were going to use that those funds to invest in the business and that at the time, we didn't anticipate including that as part of the annual variable dividend calculation.

Right. Thanks for that clarification, great. Thank you.

Thanks Rich is rich.

Yes.

And we will go ahead and move on to our next question from Alex Kramm with UBS. Please go ahead.

Yeah, Hey, good morning, everyone.

Just a couple of questions on the on the balance sheet or rather the margin deposits at the.

At the fed so long list of numbers hopefully you can give them to me clearly balances came down quarter over quarter as expected from the data that we track. It seems like those are down another I don't know 13 plus percent. So maybe you can just give us an update where we stand today, if I'm right. There and then in terms of the the basis points that you <unk>.

Generating obviously that was up in the second quarter, I think you're doing 25 basis points in the third quarter, So maybe give us.

A little update where we are and then obviously.

Given that its first day, if we get 75 basis points today, what would be a good assumption to use in terms of your kind of net take on.

If that materializes I think that should be all of them, but if theres more. Please please give me more.

Thanks, Alex we will be very clear with you John .

John months, let them start yes ill do my best to be clear Alex So yes.

Yes, that's why we walked through some of the numbers.

There is.

Quite quite a number of things to talk about so.

There's two components that we earn on in terms of.

Collateral put up at the clearinghouse.

One is the cash collateral that's put up and then we also have noncash collateral that we earn on as well so looking at Q2.

We had average cash balances of $145 billion.

In terms of in terms of cash with ending balance of $136 $4 billion at the end of Q2.

Through the first part of July through July 25th our average balances on the cash side were $118 8 billion and the ending balance was $113 3 billion.

So we earned approximately pardon me 20 basis points on the cash balances for.

For the for the quarter, so that $72 $2 million.

That is up from seven basis points in the first quarter, where we earned about 25 <unk>.

$3 million.

So that is on the cash balance side on the noncash we earned five base.

Five basis points and that is recorded in other revenue. So when you look at the sequential increase in other revenue you see we're up approximately $4 million.

The main driver of that is the increase in noncash collateral put up at the clearing house so looking at the non.

<unk>.

Noncash collateral we had $59 2 billion.

We earned five basis points on in Q1 that increased to approximately $81 billion average cash balance in Q2.

The ending noncash I'm, sorry, the noncash balance in Q2.

The ending noncash balance where we earned fees on those.

On the noncash collateral that's put up the clearinghouse was $86 billion at the end of Q2.

And the average non cash collateral through the month of July through July 25th was $95 billion and the ending balance at the end of July 25th was $103 billion.

So basically.

Basically what <unk> seen is a shift from cash collateral to noncash collateral, we're earning now 25 basis points. The fed made a move in June where they increased it to 165 basis points.

Our rebating 140 basis points back to our clients and keeping 25 basis points.

That is.

That is through the.

That is in June beginning in July for noncash collateral will be earning seven basis points there'll be increasing from five basis points of earning today to seven basis points in beginning in July and that is recorded in other revenue.

Does that.

Is that good I Alex It was that was that was more than I asked for the one thing that you missed of course was the whats going to happen today I mean, do we have to wait until you disclose it maybe tomorrow or can you give us a little flavor.

Okay.

Yes.

Terry Duffy, we're not going to prejudge, what the fed may or may not do with the assumptions are all but they are so we can kind of assume that well listen we're competing to make sure that we have a good balance of cash and other securities and our clearinghouse for risk management.

And that is truly what is most important to us and we will continue to do so while we remain competitive we understand as all other investments that people can put their money into and deliver as collateral against your position. So we want to make sure. We have a good balance and we're going to be very prudent about it.

Sounds good I'll hop back in the queue. Thank you guys. Thank.

Thank you.

We will take our next question from Dan Fannon with Jefferies. Please go ahead.

Thanks, Good morning, just wanted to follow up or discuss expenses and kind of the outlook.

You have the guidance implies a second half pickup.

You kind of gave us what you've spent so far on the Google was $14 million, but maybe just talk in general about where the levels of spend in the second half, we're going to ramp and how conservative.

The outlook is at this point.

Okay.

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

Yes, you are correct, we didn't adjust our guidance were comfortable with our guidance at this point.

As you guys know the entire team at CME group is very focused on ensuring we're spending in the most efficient manner possible.

We did give our expense guidance, excluding license fees of $1 $450 million, we had planned for a heavier second half of the year anticipating an improving business environment and also historically <unk> had a higher level of expense in the back half of the year related to in person events.

You haven't seen that recently, obviously because of the synergies we were capturing from the next acquisition.

So to give you some color as to where I'm seeing those costs increase second half versus first half.

Little over 40% of the increase compared to the first half of the year is related to customer facing activities that includes increases in travel marketing advertising and in person events.

We have seen an increase in in personal in person customer sales activity, especially in the U S and in Europe , and we're very focused on growing the business.

A little over another 40% is primarily technology related including professional services for staff augmentation and project work higher technology costs in the first half of the year and depreciation as we've migrated evs to glow backs in certain systems have now been put into service and will be depreciated.

The balance of the increase is related to the impacts of the salary treatment that was that occurred in March and in September and additional customer facing resources.

So our spend and also as you mentioned our spend on the migration to the cloud as we indicated would be in the 25% to $30 million range and we're on track for that so.

We had anticipated a pickup in the back half of the year and it's going as as we had planned.

Understood. Thank you.

Alright, Thanks, Dan.

We're ready for another question.

Somebody would like to ask one.

Okay.

When we lose connection.

And we'll take our next question from Brian Bedell with Deutsche Bank. Please go ahead.

Great. Thanks, Good morning can you hear me okay.

Yeah, Thanks, Brad Brian .

Okay great.

My question would be on the Super LIBOR transition. If you wanted to just elaborate a little bit more on that really around the.

First of all the take up and so far has been obviously pretty strong.

In the near term.

Your expectation for volumes to be elevated.

As clients switch.

Do that migration from Super to LIBOR, maybe the how long do you think that might last for and then after the fee waivers are dropped on the Super contract do you expect.

Just to be revenue neutral this transition rather to be revenue neutral or or dilutive to revenue or virtually accretive to revenue over the long term.

Hi, Brian Thanks, very much for the question this is Sean.

I think we're very pleased with the progress that we've made so far and it is along the lines of our plant.

In terms of so for futures. They are currently trading around 134% of eurodollar futures during the month of July so for options are now trading 74% of eurodollar options during the month of July .

In the first half they are up 48% year over year. If you look at our short term interest rate options. They are up 2000 year to date, they're up 26% year over year, so very strong growth overall.

So very strong growth in Europe in the.

In the entire complex, but also in this so for futures and the sofa options with the increased adoption.

In terms of the Rpc's.

We have had significant incentives in place.

For both the sulfur futures adoption as well as the sofa options adoption in terms of the sulfur futures adoption. We are further along in that process.

Relative to <unk>.

The as I mentioned, the 134% so so so far so for futures being 134% of Eurodollar futures.

So we're pleased that the RPC there.

Is headed in the right direction and the goal for both the silver futures and the sofa options is for their RPC to equal what.

We have had historically for eurodollar futures and eurodollar options so that.

It's irrelevant to us and to our investors as to which product customers trade. We are not there yet that is our strategy. That's what we've been saying that we intend to do and that is what we.

Across 74 different countries.

And it's being used in more than one six trillion worth of cash market products across the globe. So those are.

1300.

Two meeting investors needs to be.

Getting those rpc's up at the same level sometime.

In the not too distant future.

Yes, thanks, so just.

A quick point.

In our license fee line this quarter.

We have three between three and $3 $5 million of costs associated with the sulfur first for options initiative, we plan on $3 to $3 $5 billion per month.

<unk>.

Additional costs that are in that license fee and other fee arrangement line.

For the next two months that'd be July and August where we where are we.

Plan to conclude the silver first for options initiative, it's <unk>.

Definitely a highly successful as Sean has indicated and certainly pleased with the outcome of our of our transition off of the LIBOR based benchmark.

<unk> a year ahead of time before the expiration of LIBOR, we achieved many things one we were able to transition most of that into the LIBOR futures and options, our sulfur futures and options market, which is critically important but we also did something else that we said we would do a year ago. We thought we would benefit by both euro dollar trading and so for futures trading and that's exactly what's happening.

So strategically I think our timing was very good on this and our fee waiver program did exactly what we anticipated doing and we look to be.

Ahead of the transition versus July of 2023.

Yes.

That's a lot of great color. Thanks, so much for the comprehensive answer.

Thanks, Pat Thanks, Brad welcome.

We'll go ahead and move on to our next question from Gautam Swat with Credit Suisse. Please go ahead.

Good morning, and thank you for taking my question can you. Please help us size, how much international Adv is coming from existing international clients doing more trading versus maybe new international clients that had been on boarded in the last year or so and do you see incremental opportunities to launch new products.

In those local markets I know you talked about the Canada products, but maybe in Asia or Europe .

That's a great question and I'm going to let Doug.

Examine who runs international for us.

Excuse me and Julie Winkler the answer to that question, Doug Why don't you start yes, I guess I. Appreciate the question as you heard from.

Terry's comments at the top of the call. We are continuing to go from strength to strength in our non U S business.

At $6 3 million contracts are non U S. Adv was our best second quarter on record and we have now put up our best first half on record of $6 8 million Adv for the first half of this year, that's up 20% as you rightly pointed out we are both scaling and leveraging our existing customers cross selling them into additional products, but we're also.

Bringing net new customers into our business a little color on the regional growth and I'll talk to the client side of this.

When you look at the strong growth of the business, we've actually seen our bank business up 31% are.

Top of the call both our micro wty crude oil options as well as our micro Wty futures contract launched last year, we launched a micro copper contract this year.

When you look at the makeup of the participation there on the micro side. We're seeing those are net to about half of the micro wty options customers are have never traded another option contract at CME group before same thing on the future side about a third of our incremental new customers and micro WTO have never traded at.

Both a source of net new client acquisition and cross selling and Julie Winkler can probably talk a little bit about the success. We've had there and the framework we have in place for Upselling and cross selling customers, we can bring in.

I think adding to what Derek mentioned the power of our international model is really that we have regional client facing resources around the globe to work with our local customers identify those product opportunities that you mentioned.

Obviously micros is something that we find has a lot of international appeal as Eric just pointed out but if you also just look into some of the trends going on in Europe right our customers.

Our moving into Paris, and that is definitely emerging as a main destination for both banks and buy side clients.

And then you go down to Australia. When you look at what we're seeing is strong growth from buy side clients out of Australia, and the fact that we have those teams there locally.

Becoming very well versed in what those client needs are and are doing that direct sadam into what is most relevant given our current product portfolio and then also identifying those new product opportunities. So if we look back into Q2 launches right options on European HRC, because the Canadian western.

Innovate the new products that will be coming in the second half of this year. So I think it.

<unk> speaks to the investment that we're making from an international resource perspective, and we're seeing growth in areas that.

We expect to continue in the second half of the year. So it's been a great opportunity as well throughout the summer.

To meet with our clients in person and those numbers are up about 300, Eric standard 77% over where we were in Q2 of 2021. So those in person meetings I think are helping to improve our insights on what those client needs are let me just make a quick point for you also on new contracts, we don't need to list them in <unk>.

Certain areas in order for the rest of the world not to participate we list them. So everybody can participate we just might dedicate more resources to what Julie said to that particular region, where that product seems to be more apt to be participating in but again, there's a lot of products that have been launched in different parts of the world.

Some quite successful in other parts of the world. So I don't want you to think that we have to list Canadian wheat.

For example, our fastest growing country over the course of this year year to date with our Brazil business up 96%. This is a top 10 country for us that's moving up the country table or.

Our second fastest growth came out of India third the United Arab Emirates, we're seeing a lot of golf business continued to grow.

With Korea, and Taiwan all of these countries are growing between 50 and 90%. So these are countries all in our top 10, So I think it speaks to the breadth and the scale of our product set.

Customers want to trade benchmark products that are on screen $24. Seven those are the markets. The customers are drawn to that's why the kind of a benchmark markets CME group and the investments in our technology to reach those customers across the globe are driving that business.

Thank you for your question very comprehensive answers.

And we will go ahead and move on to our next question from Alex <unk> with Goldman Sachs. Please go ahead.

Hey, guys. Good morning, everybody. Thanks for the question.

I was hoping you could dig into some of the legacy Nex group businesses brokerage that can ebs.

Reinvigorate growth in these businesses.

JV, yes.

Thank you Terry and thank you Alex for the question.

If you look at.

Our plans relative to the acquisition step.

Step one was to migrate the broker tech business over to Globex step two was to migrate evs over to globex.

And both of those are now completed.

Last year, we moved brokerage hangover to go back to this year. We just recently moved in May.

UBS over to go back if you look at broker Tech since we are further along in the process.

We are starting to see some of the benefits.

<unk>.

The move to go back in that regard if you're a broker tech U S. Treasuries volumes are up 14% year over year gives you protect U S. Repo was up 25% year over year easily broker Tech EU repo was up 14% year over year, whereas this growth coming from the.

That is a couple of times as large.

We do hope to.

Get started trading on broker tech.

In the coming months in addition to that the RV trading.

The.

The RV trading.

Order type that we instituted relative to curve trading that you've heard me talk about before relative to the efficiencies that offers our customers.

It achieved $2 4 billion worth of volumes in the second quarter, an all time record. It has achieved a number of days around the $5 billion Mark and that continues to grow so in terms of the delivering new innovations to the clients relative to having been on globex in the cross selling we're starting to see some traction on the broker tech side.

On the EPS side, we are looking as we.

Post that transition to globex.

To make enhancements to the systems.

To invest in the systems and to continue to improve the market microstructure, but these things do take time.

So in terms of the.

In terms of the joint venture that we created with IHS Markit and know that S&P global.

We really think that this is from a strategic perspective positioning ourselves.

We will create that efficiency.

From an operational perspective for our clients.

The.

Strategy has been laid out we've got the management team in place and we are starting the integration process.

With.

Between the optimization businesses that we contributed into the joint venture and the market serve business.

And youre seeing some of that play through in our earnings as is.

You can see in our financial statements, they're up $2 million sequentially.

Q1 to Q2.

We think that.

We think that we've created well what's going to be a tremendous amount of value and most importantly for our clients, we are going to be creating value for our shareholders by creating the joint venture through the efficiencies that we're going to be generating by combining the.

Those businesses.

And most importantly, we're positioning that business strategically to be the leader in the post trade processing space.

Which in this time of.

Uncertainty in this time of.

We have DTC is finalized all of their applications to the SEC.

We are doing joint Webinars together to point out the benefits of the.

The offsets between futures and broker tech. So we're hopeful that once the FCC approves. This they have I believe a 60 day window once the business.

Thanks, Alex.

Our next question from Mike <unk> with Morgan Stanley . Please go ahead.

Hey, good morning. Thanks, so much for taking the question I just wanted to ask more broadly an industry question bigger picture just on the shift from OTC to exchange traded products. Just curious where you think we are in that journey. What's left at this point, that's still OTC, how would you sort of size that Tam and how do you think about trying to penetrate.

Whatever is left at this point, what can make the most sense versus what makes less sense there.

Sean we're continuously focused as Terry has mentioned on providing new efficiencies to our customers. We're very excited actually.

The efficiencies for the customers that bridges now all three marketplace. So the OTC derivatives market <unk>.

Cash treasury market, the cash foreign exchange market and all of our listed futures not I think honestly that we're very early in the process relative to the benefits that we can offer the community across all of those different modalities of taking risk in particular I've talked a lot before about our analytics.

And we do have a great set of analytics eds quantum analytics particular customers find extremely useful in terms of optimizing their foreign exchange trading we do expect to enhance that technology to include our futures. It still does not and then to use that technology likewise across all of our fixed income product. So we in terms of CME.

Group and the values that we're going to add to our clients.

I would say theres still an awful lot in front of us.

If youre doing that to make all of those marketplaces more efficient Megan let me just add to what Sean said.

It is important to remember that we do get directly benefit by the growth even though the over the counter business because of the risk off says they are using our marketplaces. So even if they grow they don't think that that's a bad thing for us because we do get those risk offset so I like to think of yes, we create efficiencies through the clearing mechanisms and things of that nature of that.

John pointed out in the margin efficiencies, but there'll be certain people in certain institutions that are going to do bilateral transactions and they'll do them forever, but we want to make sure that we continue to get the offsets and create the efficiencies of Sean laid out so it's not actually a terrible thing for us either.

Great. Thank you.

Thank you.

We will take our next question from Owen Lau with Oppenheimer. Please go ahead.

Good morning, and thank you for taking my question.

Could you please add more color on some of the initiatives for your market data in this rising rate and volatile environment.

I think Jim you benefit on the trading side, but on the data side.

I'd say any product or geographic area that CMS can penetrate and expand further into and then along that line can you. Please give us an update on your cloud migration. Thank you.

Thank you Julien Yeah. Thank you for the question.

Answer the market data question, then turn it to.

It's Neil.

We will respond.

To date, our market data business is for sure an international and business and this was a record quarter of $152 million in revenue up 4%.

Seeing that in two different areas I mean, one we have a very robust and diverse product pipeline and our clients need and want access to that real time market data. We saw an increase in subscriber counts for that data in this quarter and also continuing to see strong interest in our dirt.

<unk> data and so that is where our products and prices are being used as input into other structured products and etfs and things of that nature and I would say that has continued to grow internationally as well as domestically and that is.

Part of what we continue to be focused on within that market data business.

Thank you.

Is representing a great global opportunity for us as our team goes out and continues to.

<unk> licensed entities really across the globe and this is a diverse set of participants many of which are completely net new to CME and so we are using.

A great global opportunity, there and I'd say, we're continuing to work with other partners. So we announced our partnership with Deutsche Boerse and a seven platform, where we're looking to find other means and other channels to distribute our market data from a historical standpoint and in Q2, we launched.

Things like our third party crypto client data set on data mine. So looking at it both from a product and channel opportunity and where we can use market data to cross sell that would be kind of where we see growth going forward and then I'll turn it over.

A little update on the cloud please.

Thank you Terry so on the cloud migration, we are on track to deliver foundational services towards the end of this year.

<unk> services, we have talked about first one is margin calculation services, we call it the margin calculator.

We are on track to deliver all three of these services towards the end of this year.

Thank you very much Scott.

And is going to give you just a little bit of <unk>.

Color around the.

The migration expenses.

Okay. Thanks, Mike appreciate it.

We will take our next question from <unk> with <unk>. Please go ahead.

Hi, good morning, So earlier in the call you you touched on retail that from an international perspective, but more broadly speaking I was wondering if you can give us an update on how much of your total transaction revenue is being driven by retail today and how that's trended over time.

And then could you maybe talk about the event contract announcements and where you think the introduction of those contracts could drive that retail percentage overtime.

To start with in Q1.

We announced our plans to begin offering the event contract later this year that launch date has.

<unk> announced a number of weeks ago. So we're focused on September 19th for that launch and really what our goal is to be working with our existing broker partners to ensure that.

So our target audience is different I would say than than our existing client base people that have interest in <unk>.

Financial and commodity market, but have a smaller appetite for risk perhaps than a typical futures trader <unk>.

Less experienced in doing that so.

Our customer experience for the U S retail traders in the sense and also being able to provide liquidity that we've got some committed market makers to supply liquidity.

For these products as well and we will continuing to be ramping up some marketing in that vein as.

As the launch gets closer and working closely with our broker partners to ensure that clients are educated about how these products work in the retail participation you want to discuss that to what you can yes.

Yes.

We don't disclose the percentage of our retail trading.

As a percentage of our overall activity.

Revenue was up 26% this quarter and continuing to really perform very strongly it looks to be another record year in terms of the number of retail participants that we see in our marketplace.

And this continues to be driven by these same themes that we talk about the micro suite has been extremely attractive.

As there has been volatility in the marketplace.

Micro equity suite in particular has performed very strongly and I'd say the other thing is this continues to be an education a story for us so working to get content out there working with our broker partners working with third party educators. This is a key part of our retail model and one that we will.

Continue to invest in and continue to.

Putting new products out so the micro crude the micro yield and also the ether futures.

Thats all attracted additional attention.

This suite and things are going very well there, but Julia why don't you just described real quick about how we categorize our retail participant versus some others might categorized yes for us it's really what we determined is and see as active traders. So those are people.

Trading 10 or more times per month or.

Our broker partners are doing all the KFC in AML on these clients and these are people that have been.

Largely traded in in other equity options market.

And in equity portfolios and so they are qualified and.

Have the appetite to take on and use derivatives to hedge part of their retail portfolio and that has been really a cornerstone of our retail marketplace and will continue to be our clients yes.

Im pointing that out for you, where just pointed out for the public sake, because the retail the way it has grown and proliferated by individuals' walking down the street is a little bit different than the way we participate in it. So that's the only reason I ask you to clarify that.

Part of the equation.

In our options business on retail it's been a significant change there.

One of the points that Julie has made is we're investing significant amounts of education and training to both upsell and cross sell our retail clients and just a great case in point here was that not only is our options portfolio as a whole continuing to grow faster than futures year to date, our options were up 28% versus futures up 21% retail participation in our options complex is up.

62% that substantially.

Fastest growing client participation. So I think it speaks to the resources and tools and capabilities, we've developed and the upsell and cross sell capabilities that Julie talked about earlier, so we're bringing in scaling and participation in our markets across the whole portfolio of asset classes and the whole portfolio of options and futures and as you know.

Customers that trade options tend to trade futures and grow into other asset classes as well overtime. Thanks, Kyle. Thank you very much for your.

Yes.

Thank you.

Well go ahead and move on to our next question from.

Patrick O'shaughnessy with Raymond James Please go ahead.

Good morning does it surprise you to the energy volumes have not been more robust given the macro events that are driving outsized energy volatility and in particular, a big move in natural gas.

Eric Yes.

I appreciate that Patrick yes, there is.

The energy market has been.

Under a lot of stress over these last couple of months, what we've actually seen is a significant dislocations in physical supply chain that is true in energy agricultural products and metals products.

We saw a huge bump immediately following the.

Ukraine more in March what we've seen since then we saw then a jumping activity. We did see more of a risk off profile on the future side definitely we saw that in the global oil market. We saw that in an ice Brent we saw that in our wty contract as well, but we've actually seen is a rebuild since then if you look at.

<unk> are managing risk in this extremely complex environment AG energy and metals right now I'll be talked a little bit about this on the last earnings call. We've actually seen a significant increase in proportions of customers' portfolios that are traded in transacting in the form of options versus futures in markets that are moving both up and down rather.

Finally, I'll put equities in that camp I put oil in that camp, where actually seen a an interesting differential between this and the open interest build in between futures and options for example.

Our energy.

Futures open interest is down 23% our options open interest is up 10% our futures in energy is up 1% on our options is up 11% what that is telling us as customers are finding that the <unk>.

Flexibility of options is much better suited to some of the really challenging moves in our physical markets right. Now so proud to say that we're seeing growth substantially in both open interest and in volumes on the option side, which you would expect when flat price hedging in these uncertain markets is as challenging as it is right now so we are seeing a rebuild we're seeing.

A reload.

The uncertainty around the war and frankly, <unk> got supply issues, China is likely about to announce zero growth GDP that has already had an impact on the price of oil you can have supply shocks as well. So the market is using a hard to a larger proportion of options to manage that risk and I think as the market becomes a little more certain other path forward, we'll start to see.

<unk> mean revert a little bit, but right now I think the market is defensible using options. So we're pleased that they're using our benchmark market share to manage that risk. So Patrick let me just make another comment I think Doug.

We made really good thoughts about how we are rebuilding the marketplace, but let's talk about what's happened over the last several months here and fundamentals are what drive free markets and they move on fundamentals such as what's going on in Russia, Ukraine, such what's going on in inflation. Subsequent is going on over in China as Darren pointed out what we don't markets don't like our geopolitical.

Interference and we've seen a lot of geopolitical interference, especially here in the United States under a certain product, meaning energy and what the policies are and I think sometimes investors get a little spooked by how much the geopolitical is going to impact the fundamentals of the marketplace. So I think we're starting to see that check off and then.

The reason I say that otherwise, our president and wouldn't have gone over to Saudi Arabia, you wouldn't have done other things to try to increase this product. So I think we're starting to see the geopolitical factors get away from the fundamental factors and that's hence the reason why we're seeing the rebuild and open interest and trading which we should have seen the whole time and then to wrap up on your question on Nat gas and Nat gas has really been the shining.

Part of the energy portfolio when you look at our.

Second quarter Adv of 554000 up 19% from second quarter last year and average open interest of $6 million up 17%. So it's a great case in point, where youre seeing.

There is term volatility there was a little less.

A little more clarity I should say in terms of what that what the term demand is for gas we're seeing our markets respond very very strongly so we.

We like the position we have in Henry hub, we continue to be between 75%, 80% market share in that market and as I said in that market our year to date, our futures up 10% in options were up 16%. So continuing the theme here, but very very strong returns and growth of the business for a full year as well as Q2 of natural gas and we expect that to continue given the ongoing challenges.

Demand in Europe , right. So Patrick hopefully that gives you a little sense of what we're seeing from our everyday seats here as it relates to energy and all the different factors that go into this business.

Very helpful. Thank you.

Thank you.

We will take our next question from Craig Siegenthaler with Bank of America. Please go ahead.

Hey, good morning, everyone.

Good morning, good morning.

So how is the competitive landscape in the metals business evolving as participants react to Ellen <unk> canceling a nickel contracts in March and we know you had a pretty large scale marketing campaign in the quarter and also launched a few metal contracts, so really focusing on CME has potential to take market share.

Yes, Craig. Thank you for the question and Doug who runs our metals business, where his team can give you a little bit of color around the way we're approaching it yeah I appreciate the great question Craig It was certainly the <unk> challenges from March have reverberated out across the broader market. What we are seeing is continued.

Expanded engagement with particularly by citing commercial customers that have historically done a larger share of their base metals business on the <unk>.

As you know continued to significantly build and expand success in our copper market with a differentiated set of offerings or is the <unk> that has continued to go from strength to strength, particularly in copper options, where he gained significant share over the last two to three years, particularly.

The rules around how markets operate and when they get the best risk management tools increasingly that CME group. So we like the broader engagement, we've seen we like the direction.

In terms of a broader impact of customers looking to move more of their base metals business to CME group and that will really leverages on the success that we've had in other parts of our franchise like battery metals, cobalt and lithium where we continue to be the merger the largest market for battery metals and the growth that we're seeing in base metals globally. So hopefully that answers your question, but I think that the.

The global client base that we've built and the team that Julie has managed with client specific sales teams, particularly with commercials has opened that dialogue and now extended portions of our business in ways that were here to best serve client need and we think we're the best market for that and we're seeing that in our results.

Thank you Derek.

Sure.

Thanks, Alright.

Last question from Alex Kramm with UBS. Please go ahead.

Hey, Thanks, again, Hello, again, I guess, just one quick one maybe not quick one on your largest business interest rate futures unless I've missed that we haven't really discussed that.

I don't want to belittle the growth in the quarter, which was obviously solids, but I think relative to whats going on the environment and also Terry your comments earlier. This year in terms of unprecedented times I think people generally expect it a little bit more action. So really curious in terms of what you think has potential.

Weighed on activity and I'm asking this in the context of when we talk to market participants. They also echo that it feels lighter and maybe some trading strategies are not as active as they should be.

I guess I'm wondering like with it just seems like capital as far as banks are watching the capital they're not extending as much credit like what are the things that you think are weighing what could change there or are we going down the wrong path here. Thank you.

Alex I appreciate the question, but I think when John stated in his opening remarks at the last two quarters combined with the two largest quarters in the history of the company kind of bolsters, what we said the beginning of this year about unprecedented activity that we're seeing in our marketplace and I think thats come to fruition. So and then when you hear what Sean has said about the transition as we're going through a massive.

<unk> from one benchmark to another I think that we've done a pretty good job when people considered it a jump ball just recently as you know because you were at that meeting on the rest of it again, we're talking about a potential jump ball for.

The sulfur business. So I think we've done a really good job on that and as far as the unprecedented activity I think we've seen unprecedented activity.

I think theres other events that go into it but I would guess would differ with you when I look at our numbers. So I don't know people misunderstood what I said unprecedented activity demand that we're going to trade.

One 8% more than we did or the levels that we did which were record levels. So let me talk to.

John next year.

If you look at the year over year growth. The most recent numbers in our volumes and our listed rates franchise. It is up 21% year over year.

One of the references that I have made to investors previously was that the current environment looked an awful lot like 1994, I think I've been saying that now for at least 18 months and if you look at 994, what I always reference was the fact that if you combined CME and cbot interest rate volumes and you looked at that.

Growth in 1994 relative to 1993 that it was up 20%.

If you look at the <unk> futures and options are sorry store futures alone is up 48% year over year. If you look at Mr options up 26% year over year. It's a very exciting result, what's still left in front of us and Thats actually also very exciting.

Is that the fed balance sheet.

So we have seen an environment very much like 1994 in terms of the stairs franchise. Our treasury futures are only up 10% year over year, but they are up 10% year over year. So what is what is the potential catalyst for further growth.

The reserve only started to reduce the size of its balance sheet. During June and July during June and July as we know the fed is is only targeting.

A reduction in balance sheet of $47 5 billion per month.

In September we also know that the federal reserve is planning on reducing that balance sheet by $95 billion a month.

On the short end relative to the similarities with 1994, we're seeing the <unk> fully in play 48% growth year over year and were very pleased with it relative to the long end of the yield curve.

<unk> nine trillion dollar balance sheet, the deferred accumulated over the last now.

Now I guess 12 years.

That part of the benefits that we might get from this economic environment are still in front of us.

So I guess my comments and I don't know exactly who you're referring to there in January of this year. When I said I thought that this could be an extremely active I think I was answering <unk> question at the time about the overall markets and I think the numbers are reflecting what we saw what I saw and the teams are going into that so.

When we when we.

Coming with records that we produce today they are not coming off of a basis of zero. We are kind of taking referenced that are coming out very high base. So I think that it's exactly what we said was going to happen. So if you are a new business and you went from zero to one I would say, okay, you get no credibility, but when you have what we have and we create a record of that I think you should at least acknowledge.

We saw what was coming down the Pike.

I appreciate the commentary as I said, Didnt mean to be a little the growth just keep on hearing that as Steve is quieter than it should be but that's.

I think on the snacking.

No and I appreciate that and I think.

The numbers reflect something different but at the same time I hear what youre, saying so.

Again, we are continually we're in this for the long run.

But again, we were very impressed with the last two quarters that we've had here at CME.

Thanks again guys.

Thanks, Alex.

With that that does conclude our question and answer session I would now like to hand, the call back over to management for any closing or additional remarks.

I want to thank all of you for joining us today, we appreciate it very much again.

And your family's please stay safe and healthy thank you.

With that that does conclude today's call. Thank you for your participation you may now disconnect.

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