Q3 2023 CME Group Inc Earnings Call - Q&A

Ladies and gentlemen, please standby the conference will begin momentarily. We thank you for your patience and I ask that you. Please stay connected.

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Greetings and welcome to D. C M Eat group third quarter 2023 earnings call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone.

Any time during the conference you need to reach an operator, Please press star Zero I would now like to turn the conference over to Adam Melnyk. Please go ahead.

Good morning, I hope, you're all doing well today, we will be discussing CME group's third quarter 2023 financial results.

I'll start with the Safe Harbor language, then I'll turn it over to Terry.

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 statement.

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'll turn the call over to Terry Thanks, Adam and thank you all for joining US. This morning, we released our executive commentary earlier today, which provides details on the third quarter of 2023 I'll make a few brief comments on the quarter.

<unk> and current outlook and Lynne will summarize our financial results. In addition to land we have other members of our management team present to answer questions. After the prepared remarks.

Turning to the most recent quarter average daily volume up $22 3 million contracts was less than 1% off their record Q3 high set in Q3 2022, while our revenue grew 9% to $1 34 billion, which is the highest Q3 revenue in CME group's history.

As we've mentioned throughout this year, we are operating in an environment that unquestionably requires risk management with so much uncertainty in the world. We live in we're continuing to work closely with our clients to help them navigate uncertainty and manage their risks this.

This is particularly true in the interest rate markets today.

We see divergent market views around inflation unemployment monetary policy and ongoing geopolitical tensions all impacting future interest rate expectations, regardless of whether rates rise fall or hold steady.

<unk> of the yield curve and interest rate views continue to shift and our customers need to manage that risk. As a result, we have continued to see growth on top of a record year in 2022 for our interest rate business. This was our highest Q3 for our interest rates complex up 6% from the same quarter last year.

Sure.

We saw particular strength in the Treasury complex, which was up 16% in the quarter and is off to a strong start in Q4 as well.

Completing the successful migration of euro dollars to sulfur we continue to list other products to complement our interest rate cut.

Complex today.

Our European short term rate or aster contracts traded a record 10000 contracts per day in September.

Our newly listed Treasury Bill Futures launched on October 2nd and we have traded at over 15000 contracts in the first three weeks. This is one of the most successful launches of our rates product ever.

Our broad product offering and focus on capital efficiencies.

As the enhanced cross margining agreement with D. T Cc going live in January of 2024 continued to enhance the value proposition for our customers using our products to manage their interest rate exposure.

On the commodity side third quarter 2023 volume was up 15% in total and included our highest ever Q3 volume for our agricultural products. Our energy complex also performed well with volume increasing 16% from last year. We believe the current environment for this asset class will continue to.

Bring new clients as well as existing ones to manage their exposure in our global benchmark.

We believe the strong macro environment combined with our diverse set of asset classes and strategic execution across our growth initiatives position positions us well for continued growth in 2023 and beyond with that I'll turn it over to Lynn to cover third quarter financial results.

Thanks Terry.

The third quarter <unk> generated 134 billion in revenue up 9% compared with a strong third quarter of last year clearing and transaction fees and market data revenue each grew 9% versus Q3 2002 <unk>.

Fences continue to be very carefully managed and on an adjusted basis were $448 million for the quarter and $369 million, excluding license fees, both lower than the second quarter. This year.

This quarter, our investment in the cloud migration was approximately $13 million.

Alright, adjusted operating margin for the quarter expanded 66, 5%.

Up approximately 240 basis points compared with the same period last year.

CME group had an adjusted effective tax rate of 22, 8%, which resulted in net income of $818 million and adjusted diluted earnings per share of $2.25 each up 14% from the third quarter last year.

Of the $110 million increase in revenues versus last year, we were able to drive 90% to the bottom line with adjusted net income up $99 million.

As a result of the strong expense discipline throughout the firm we are lowering our core expense guidance, excluding license fees of $1 475 billion.

$8 million decrease from our original guidance of $1 49 billion.

We are maintaining our guidance of $60 million for our cloud migration expense for a total expense guidance of 153 5 billion excluding Lee.

We continue to manage our capital expenditures effectively with.

With an eye towards our move to the cloud.

As a result, we are lowering our capex guidance $85 million.

For the quarter, our capital expenditures were approximately $8 million.

EMEA paid out $2 $8 billion of dividends. So far this year in cash at the end of the quarter was approximately $2 5 billion.

Our strong financial results this quarter continue to build on the strength of achieved in the first half of the year. This quarter, we delivered our ninth consecutive quarter of double digit adjusted earnings growth.

Our global benchmark data and a strong focus on innovation and execution continue to address the needs of our clients and deliver results for our shareholders.

Please refer to the last page of our executive commentary for additional financial highlights in detail.

We'd now like to open up the call for your questions.

So on the number of analysts covering us please limit yourself to one question and then feel free to jump back in the queue. Thank you.

Thank you.

Ladies and gentlemen on the phone lines. If you wish to register for a question. Please press the one follow up with the four on your telephone.

You will hear a three ton palm to acknowledge your request.

If your question has been answered and I would like to withdraw your ledger.

Jason Please press the one followed by three once again it is one four to ask a question one moment. Please.

Once again it is one four ladies and gentlemen on the phone lines one for.

First question is from the line of Dan.

Fannon with Jefferies. Please go ahead. Your line is open now.

Thanks, Good morning.

Terry a question for you on M&A, you've been vocal about your financial capacity to do additional transactions I was hoping you could talk about.

Kind of the scope and whats youre looking at and also in the context of the current environment why now have valuations come in or your competitors distracted with other deals or other <unk>.

Other tab, so curious about the current backdrop of what youre looking for or what Youre thinking about.

And really the scope and what that May look like.

Yes, Thanks, Dan I think Thats. The reason why people sometimes need to read the whole story of not just the headline because if you read the whole story.

<unk> said anything different than what I've said for several years as I would only stating facts to the point, where our capacity is much greater than everybody else's because we've stayed very disciplined and very focused as it relates to our M&A transactions that we've done.

I was only referring to our EBITDA being lower than one times compared to some of our competitors were at multiples of that one.

When asked the question if deals are to be offered I made the reference to the comment that.

Where else would you want to shop, something but the CMA. It doesn't mean at CME is interested but that's all I was referencing so my my.

Appetite for this hasnt changed a bit we have not looked at any thing that.

To a point, where I said, okay. We want to do a deal I was only referencing what I've been saying for a number of years and unfortunately, the headline say what date, what theyre going to say so.

There's not much more I can say about them that down but again nothing has changed from our discipline and again, if we see something and I've said this publicly and I believe this will we see something that benefits our users and benefits our shareholders. We will take a very strong look at it to build and grow this great company and Thats, all I was saying.

Great. Thank you.

Thanks, Dan.

Thank you. Our next question is from the line of Patrick <unk> with Piper Sandler. Please go ahead. Your line is open.

Yes. Good morning, Thanks for taking my question.

Gary I was hoping you could maybe just give us your updated thoughts on the outlook for volumes heading into year end, just given some of the evolving yield curve dynamics. We've seen in this kind of heightened geopolitical uncertainty and then coming into this year you talked a lot about how great. The setup was for Cme's business. So maybe if you could just.

Talk about how that maybe compares.

Now to or how it has played out relative to your expectations and how it may be compares to the setup. We are now looking at heading into 2024.

Yes.

The good and thank you Patrick I appreciate it.

Thank you know, it's really hard to predict the future and I tried to be careful but the setups that we saw in 2022, what you're referring to and 2023 or something so glaring that you had to call. It out because of the geopolitical events, what was going on with inflation, where people were calling a transitory versus <unk>.

<unk> III Julien and to the American public hands, you know that it's not going to be transitory. So I was only sprinkling out the favorable events that we were seeing fundamentally but I thought it was good for every single one of our asset classes and it was actually very good for US as you know was a record year in 2022, and an amazing quarter. This quarter in 2023, and as Lynn said, our ninth consecutive.

<unk>.

Quarter of double digit revenue growth. So those are all very impressive numbers. We will continue I don't think the setup is change Patrick when you look at what's going on right now thats going to be much different for 2024, I think we're going to see a little bit of the same but who knows it is hard to predict what the volumes would be associated with that but there is a massive amount of.

The uncertainty out there when we made comments like we did in 'twenty two and 'twenty. Three we also didn't have the unfortunate situation, we're seeing in the middle East today. So there's another added component going on to that and then we also have other situations.

Situations as I said earlier as it relates to our energy complex, where people are looking for more production coming out of the U S and Derek can touch more about that throughout the Q&A, but again I think that bodes well for <unk> products.

Beyond that I would be careful what I say.

Alright, great color. Thank you.

Thanks.

Thank you. Our next question is from the line of Alex Kramm with UBS. Please go ahead. Your line is open.

Yes, Hey, good morning, everyone just quickly on the regulatory side seems like the.

The SEC is getting closer to mandating treasury clearing on the cash side obviously.

Your arrangement with DTC now in place starting in January so good position, there I guess, but like more broadly just wondering how you think.

Treasury clearing what changed the marketplace, both on the cash side and maybe even in the future sites customer behavior, new customers anything.

You had some thoughts on it so anything would be helpful. A hallmark of structure may change if that happens.

Yes, no. Thank you very much and it's a great question because it is a great unknown to what's going on out there on what is being proposed and what may happen is still being.

Hammered out I'm going to ask Suzanne Sprague, who is the president of my clearinghouse.

To give you some comments on the Reg side of it. She is working closely with her team is they're watching this and then I'm going to turn it over to Tim Mccourt from an opportunity perspective, what he is saying.

As it relates to the complex if in fact, some of these things happen or even if they don't so maybe we will give you a little two part answer here, Alex If you don't mind, yes. Thanks Terry.

Do you think generally the benefits of central clearing will bring the marketplace into a strong position for things like our cross margining program with a fixed income clearing corporation. So you are correct to put those dots. Together then it will potentially enable higher participation in that program.

We do today have the program.

It's eligible for common clearing members and some of the enhancements will benefit those common clearing members within the program and therefore increased activity through clearing of treasuries generally should translate to more eligible activity that could benefit from cross margining between CME and the fixed income Corporation.

We generally believe the benefits of central clearing plus those enhancements to the cross margin program will position us in the industry well for taking advantage of more capital efficiencies in this space I'll turn it over to Tim Mccourt to add anything else as well.

Sure. Thanks, Alex for the question I think when we think about the opportunity why we remain excited and very optimistic that the cross margin agreement is finally coming online in January of next year is because this is something that we've seen before in our other markets. When you unlock the capital efficiencies of related products is significantly increases the risk management capabilities of the marker.

Please and can lead to increased trading velocity in the product well as Terry said, it's hard to predict the future. If we look at some of the other areas. We've unlocked capital historically portfolio margining of futures versus swaps is probably a pretty good analog to look at and that's been in place since 2012 since that's been put in place the average daily savings have grow.

From $1 billion in 2013 to a little over $7 5 billion today in 2023 and at that same time, our rates volume grew 109% and open interest doubled in the complex and our cash market participation went for about 54% to over 100%.

So it's certainly unlocking capital is beneficial to the volume and the velocity of the complex and we're optimistic about what we can do once it comes online early next year.

Hopefully that gives you a little color to your question Alex.

Hey, good thank you guys.

I appreciate it.

Thank you. Our next question is from the line of Owen Lau with Oppenheimer. Please go ahead. Your line is open.

Hey, good morning. Thank you for taking my question. So it somehow related to the last question, but I think you talk about couple of them on budget deficits in the path leading to more treasury issuance, which increased like more hedging activities could you. Please unpack a little bit more on that relationship.

It is.

You're seeing when we see more treasury issuance that should.

Like kind of induce higher trading activity.

Any more color would be helpful. Thanks.

As Terry Duffy and one of the things that we have said historically and if you recall some of the comments in our former colleague Mr. Sean Tully you made over the years that when the fed no longer is acquiring some of these treasuries at the demand for them will have to go somewhere else the fed does not hedge.

Their treasury portfolio as you know the other people that acquire the issuance is coming out from the government need to hedge those so it's hard to predict what the the issuance is going to be.

But again those the parties that will be taken the issuance of its not deferred are traditionally people that hedge those in our marketplace. So that should benefit CMA. So Tim maybe you want to add any more to that yes sure. Thanks, one when we look at the net issuance of Treasury securities. They increased significantly in Q3 compared to Q Q2 up almost <unk>.

80% and Thats not surprising if you remember this is really looking at the replenishment of the Treasury General account, which reached a record low of just under 50 billion prior to the debt ceiling and at the end of the September that balance stood about 672 billion now it's important to Terry's point to look where that debt is being issued and comments made previously a lot of.

Issuances going into T bills on the short under the curve. That's what we saw in Q1 Q2 and that pattern has not changed here in Q3.

So with respect to how that can impact our complex in treasuries, one would assume that if we look back over historical distributions of how the treasury has look to issue debt. There's only so much that can go into the front end of the curve.

Perhaps a little bit below the historical norm. The last several years, where the treasury has taken advantage of the lower rates further out the curve. So one can reasonably conclude going forward. They would look further out the curve to be more in line with your traditional or historical allocation, where that's where our complex at CME has all of the historical products is.

Terry noted the growing treasury complex from both a volume and then a wide perspective, we would expect that issuance further out the curve in the coupons and bonds to increase the velocity as the marketplace looks to digest that issuance hedge the related trading activity of it and with the introduction of our T. Bills earlier this year is off to a <unk>.

Late start we now also have tradable products across the entirety of the curve and even better suited for that risk management needs of the marketplace as they find ways to absorb this increasing debt being issued to the market.

Got it thank you very much.

Thanks, Sean.

Thank you. Our next question is from the line of Brian Bedell with Deutsche Bank. Please go ahead. Your line is open.

Great. Thanks, good morning folks.

Have a couple of questions I'll get back in the queue for the second one.

The first question I have is on just on the.

I guess there is there is some talk of more regulatory or potentially more regulatory scrutiny around.

Basis trading with futures in treasuries and just wanted to get your perspective on.

On on how you view.

Any potential scrutiny there or.

The merits of that trade and I don't know, if youre able to potentially size the.

The impact on volumes I know it can be.

Yes, it can change quite dramatically over cycles, so maybe hard to do but just wanted to get a sense.

Yes.

Brian its Terry.

Turn it over to Tim but.

Sometimes there is.

Problems looking for solutions as I say, our solutions looking for problems.

And this is government. It is fine is trying to introduce new legislation, where there is no problem with the basis trade is something that we will continue to move in as well it should in the basis trade is actually what keeps the markets in line. So we feel very strongly that this is going to continue to keep the market efficient and the more you explain that.

To regulators to show them, what kind of potential chaos you could introduce if in fact, you have additional regulation that it takes people out of that trade, which widened the basis. They may not like that outcome. So let me turn it over to Tim to give you a little bit more color but.

I would be cautious to draw the conclusion that any kind of pending regulation is coming down the pike and in that time zone, Tim Thats correct. Terry I think the one thing I would add is that the existence of basis between cash and futures market is not an isolated phenom to the treasury market. We see this in almost all of our asset classes here at CME and the fact that.

You can independently trade the basis as a standalone risk parameter is an important key elements to keep these markets aligned and arbitrage free.

Operator: Ladies and gentlemen, please stand by. The conference will begin momentarily. We think you're for your patients and ask that you please stay connected.

We have seen is vital to the marketplace for this purpose and it's something that we also see remaining in this market, it's not surprising with rates traversing the range that they have that youre going to see different behavior of the basis that we have in previous decades, when we've seen similar activity and it's something that we engage with the market and the one thing I would note is that it is also important.

<unk> also has the ability to trade cash treasuries on broker Tech and the futures, which is also both leading price discovery mechanisms. So we are the natural home. This trades take place and we continue to work with the marketplace. Now we can increase the efficiency of this trade going forward and work even more closely with market participants to make sure we unlock the value of that.

Still exists between bringing the broker tech and our futures business together its DNA.

Adam Minick: Greetings and welcome to the CME Group third quarter, 2023 earnings call. During the presentation, all participants will be in a listen only mode. Afterwards, we'll conduct a question in our session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero.

Thanks, Dan and thank you Brian Thank.

Thank you.

Thank you. Our next question is from the line of Kyle Voigt with <unk>. Please go ahead. Your line is open now.

Thanks, maybe just a question on expenses good to see the lowered expense guide today, but just given the slightly higher kind of inflationary environment and still relatively tight labor market. Just wondering if you could remind us how you think about steady state organic expense growth on a medium term basis for this business.

Adam Minick: I would now like to turn the conference over to Adam Minick, please go ahead. Good morning. I hope you're all doing well today. We will be discussing CME Group's third quarter, 2023 financial results. I'll start with the safe harbor language, then I'll turn it over to Terry. 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.

In the current macro backdrop.

Then second part of that question as we're approaching the end of the year. Here can you also just remind us how the Google related expenses are expected to unfold into 2024.

Ah versus 2023 levels. So I think there was spend for the first four years, but just maybe give us an update on where you stand with that spend today and when that starts to wind down.

Adam Minick: 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 statement. Detailed information about factors that may affect our performance can be found in the filing with the SEC, which are on our website. Lastly, on the final page of the earnings release, you will see a reconciliation between Gap and non-Gap measures.

Thank you Kyle.

Dressed vocalizations, yes, sure. So overall expense guidance. If you look at our estimate for this year, that's up about three 6% on our core expenses.

Terry Duffy: With that, I'll turn the call over to Terry. Thanks Adam and thank you all for joining us this morning. We released our executive commentary earlier today, which provides details on the third quarter of 2023.

The inflationary environment. So I think what you've seen from us over the years is really tight expense discipline and expense control. We're always looking for ways to minimize the run the business expense to become more efficient. So that we can have more of our expense base going to growth initiatives and helping to grow the bottom line. So I think we have a strong track record there.

Terry Duffy: I'll make a few brief comments on the quarter and current outlook and Lynn will summarize our financial results. In addition to Lynn, we have other members of our management team present to answer questions after the third remarks. Turning to the most recent quarter, average daily volume of 22.3 million contracts was less than 1% off the record Q3 high set in Q3 2022. While our revenue grew 9% to 1.34 billion, which is the highest Q3 revenue in CME Group's history.

If you look back in history, it's averaged between that three to three 5% over the last several years.

Certainly as we look forward, we will continue that same type of discipline.

I'll look to provide guidance as we get closer to year end on.

On the Google Front, we did guide that we would have four years of incremental cash costs in the range of $30 million per year on average so our expense guidance for this year. This is our second year is 60 million in expense offset by $20 million in.

Terry Duffy: As we've mentioned throughout this year, we are operating in an environment that unquestionably requires risk management, with so much uncertainty in the world we live in, we're continuing to work closely with our clients to help them navigate uncertainty and manage their risks. This is particularly true in the interest rate markets today. We see divergent market views around inflation, unemployment, monetary policy and ongoing geopolitical tensions, all impacting future interest rate expectations. Regardless of whether rates rise, fall or hold steady, the shape of the yield curve and interest rate views continue to shift and our customers need to manage that risk.

Capex savings to get to a net 40, we had 30 million in net expenses last year. So we have two more years, where we think there will be an incremental expense associated with the Google migration before we see start to see breakeven and ultimately cash flow positive.

Great. Thank you very much.

Thanks Kyle.

Thank you. Our next question is from the line of Benjamin <unk> with Barclays. Please go ahead. Your line is open.

Hi, Good morning, Thanks for taking the question Terry in your comments, you talked about the kind of uncertain rate environment and the ongoing need for participants to manage risk earlier in the year, you talked about the opportunity with regional banks, but maybe just at a high level. How do you see that opportunity more broadly is it kind of new participants that haven't been on Cme's platform before is it more <unk>.

Terry Duffy: As a result, we have continued to see growth on top of the record year in 2022 for our interest rate business. Business. This was our highest Q3 for our interest rate complex, up 6% from the same quarter last year. We saw a particular strength in the Treasury complex, which was up 16% in the quarter, and is off to a strong start in Q4 as well. Completing the successful migration of Euro dollars to software, we continue to list other products to complement our interest rate complex today.

Involved hedging from existing participants how do you see kind of like the medium term Tam coming from that environmental need that you see.

Yes.

Hard to for us to describe if it's a regional banks or the bigger banks hedging Zheng Yan would help me with more color on that as who the exact participants are because they come in.

Terry Duffy: Our European short term rate or Esther contracts traded a record 10,000 contracts per day in September. Our newly listed Treasury bill futures launched on October 2nd, and we have traded over 15,000 contracts in the first three weeks. This is one of the most successful launches of a rich product ever. Our broad product offering and focus on capital efficiencies such as the enhanced cross-margining agreement with DTCC going live in January of 2024, continued to enhance the value proposition for our customers using our products to manage their interest rate exposure.

Two.

The bigger banks anyway, even the smaller ones too. So we're not quite sure, which one is laying off the risk, yes I would.

I agree with that it is generally appealing I would say for both of those groups of folks to engage with us on an ongoing basis, especially now with the uncertainty in the rate environment to think through the offerings that we have from a capital efficiency standpoint, as well as the general risk management standpoint for ensuring that there aren't additional.

Micro or macro events that will I.

Circulate in the industry. That's the SCB is one example of a lot of engagement that we've had leading up to and afterwards with clients about the way that we provide services and clearing solutions to allow people to manage risk as well as the product side. So I think it is hard to specifically identify what.

Terry Duffy: On the commodity side, third quarter 2023 volume was up 15% in total, and included the highest ever Q3 volume for our agricultural products. Our energy complex also performed well with volume increasing 16% from last year. We believe the current environment for this asset class will continue to bring new clients as well as existing ones to manage their exposure in our global benchmark.

Of those participants might be new and existing but we have been engaging pretty broadly in the marketplace around those events that make sure that the products and services as well as the way that the clearinghouse offers risk management services are accounted for and available for market participants more broadly to get ahead of any other events that might be speculating on the end to end.

Terry Duffy: We believe the strong macro environment combined with our diverse set of asset classes and strategic execution across our growth initiatives, positioning positions us well for continued growth in 2023 and beyond.

To add to that Ben. Thank you Susanne that's a great answer, but just to add to that Ben the duration risk that we saw takedown SBB.

Lynne Fitzpatrick: With that, I'll turn it over to Lynn to cover the third quarter financial results. Thanks, Terry. During the third quarter, see me generate 1.34 billion in revenue, up 9% compared with a strong third quarter of last year, clearing and transaction fees and market data revenue each grew 9% versus Q322. Expenses continue to be very carefully managed, and on an adjusted basis were $448 million for the quarter, and $369 million excluding license fees, both lower than the second quarter this year.

It has not gone away as we talked about earlier in our comments the issuance that is coming out from the government.

Seems quite large in order to run and pay our bills and this government and the demand has been a little bit lighter. So in return whether they like it or not rates are continuing to be very stubborn regardless of what the fed does or does not do.

So I think that we're not suggesting there'll be more duration risk, but what I am suggesting is that people are going to have to manage that and so whether it's the biggest banks or the mid tier banks. The the risk management associated with duration not only is it not going away in my opinion is increasing because of the fundamentals of the overrun.

Lynne Fitzpatrick: This quarter our investment in the cloud migration was approximately $13 million. Our adjusted operating margin for the quarter expanded 66.5%. Up approximately 240 basis points compared with the same period last year. Teamy Group had an adjusted effective tax rate of 22.8%, which resulted in net income of 818 million and adjusted diluted earnings per share of $2.25 each of 14% from the third quarter last year. Of the $110 million increase in revenues versus last year, we were able to drive 90% to the bottom line with adjusted net income up 99 million dollars.

Treasury market in general so from our standpoint, we think that will lend to more people mitigating and managing risk to our treasury complex from all different sizes.

The banking world.

That leaves you Ben.

No that was great. Thank you so much.

Okay.

Thank you. Our next question is from the line of Chris Allen with Citi. Please go ahead. Your line is open now.

Lynne Fitzpatrick: As a result of the strong expense discipline throughout the firm, we are lowering our core expense guidance, including license fees to 1.475 billion, a $15 million decrease from our original guidance of 1.49 billion. We are maintaining our guidance of 60 million for our cloud migration expense for a total expense guidance of 1.535 billion excluding license fees. We continue to manage our capital expenditures effectively, with an eye towards our move to the cloud.

Good morning, everyone. I was wondering if you could provide color on the average collateral balances for cash noncash in the quarter and then.

With respect to yields and then where does it stand a present.

Sure Chris Happy to so if you look at quarter three the average cash balances were 91 billion.

The yield on that average 36 basis points.

For noncash, we averaged 137 billion, yielding seven basis points.

Lynne Fitzpatrick: As a result, we are lowering our CapEx guidance 85 million. For the quarter, our capital expenditures were approximately 80 million dollars. CME paid out $2.8 billion of dividends so far this year and cash at the end of the quarter was approximately 2.5 billion. Our strong financial results of the quarter continued to build on the strength achieved in the first half of the year. This quarter we delivered our ninth consecutive quarter of double digits adjusted earnings growth. Our global benchmark data and strong focus on innovation and execution continues to address the needs of our clients and deliver results for our shareholders.

If you look at October to date.

The cash balance has trended down.

We're seeing average cash balances of 71 billion.

And a shift into the non cash collateral, which is up to 152 billion.

I would point out that on the noncash collateral side, we did announce a fee change that takes effect in January.

The charge on the noncash collateral will be increasing from a blended seven basis points up to 10 basis points.

Unknown Executive: Please refer to the last page of our executive commentary for additional financial highlights and details.

Just to give that a little sizing if you applied that change to this quarter's average volume that would have added $10 million to the revenue associated with the noncash collateral which rolls through other revenue.

Operator: We'd now like to open up the call for your question. Based on the number of analysts covering us, please limit yourself to one question and then feel free to jump back in the queue. Thank you. Ladies and gentlemen on the phone lines, if you wish to register for a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Once again, it is 1-4 to ask a question. One moment please. Once again, it is 1-4. Ladies and gentlemen on the phone lines, 1-4.

Great. Thanks, I'll get back in queue.

Okay. Thanks, Chris.

Thank you. Our next question is from the line of Ken Worthington with JP Morgan. Please go ahead. Your line is open.

Hi, good morning, Thanks for taking the question.

As you go into year end, maybe could you talk about how you're thinking about price increases in data and trading for 2024, particularly in the context of the fairly.

Daniel Fannon: Our first question is from the line of Dan Fanon with Jeffries. Please go ahead. Your line is open now. Thanks. Good morning. Terry, a question for you on M&A. You've been vocal about your financial capacity to do additional transactions. What's hoping you could talk about the scope and what you're looking at. And also in the context of the current environment, why now have valuations come in or your competitors distracted with other deals or other tasks. So curious about the current backdrop of what you're thinking about and really the scope and what that may look like.

Fairly sizable changes you made in 2023.

Okay, Ken Thank you I'm going to ask Lynn to start and then Julie Winkler, who heads up our data organization as our chief commercial officer will participate as well so Linda yes. So as you know on the clearing and transaction fee side, we typically announce any changes there later in the year typically around the late November time for.

<unk>.

Our approach is the same as it's always been and it'll be a bottoms up approach looking at all the different market looking at the health of the market the value we've created.

Health of our customers and the total cost of trade, including not only clearing and transaction fees market data fees, but also the cost of collateral and making sure that we don't do anything from a fee perspective that would impact volume or liquidity, given our high incremental margin.

Terry Duffy: Thanks, Dan. I think that's the reason why people sometimes need to read the whole story and not just the headline because if you read the whole story, I haven't said anything different than what I've said for several years is I was only stating facts to the point where our capacity is much greater than everybody else's because we've stayed very disciplined and very focused as it relates to our M&A transactions that we've done.

So as I mentioned, we have increased that non cash collateral fee effective in January that run through other revenue.

And Julie has announced some market data fee changes, which take effect in January as well do you want to walk through.

Terry Duffy: I was only referring to our EBITDA being lower than one times compared to some of our competitors were at multiples of that. When asked the question, if deals are to be offered, I made a reference to the comment that, you know, where else would you want to shop something, but the CME doesn't mean that CME is interested, but that's all I was referencing. So my appetite for this hasn't changed a bit.

Yes, I mean Q3 was another record quarter of a $167 million in data revenue. So up another 9% year on year and I think this the strong growth also is something that as we look into 2020 or.

Yes, there will be some fee adjustments, but we also are looking for continued new product development active sales efforts continued education and also our enforcement effort. So it should be noted even in this quarter, we saw about $4 9 million in nonrecurring revenue.

Terry Duffy: We have not looked at anything that I, you know, to a point where I said, okay, we want to do a deal. I was only referencing what I've been saying for a number of years and unfortunately the headlines say what they were going to say. So there's not much more I can say about than that, but again, nothing has changed from our discipline. And again, if we see something, and I said this publicly and I believe this, if we see something that benefits our users and benefits our shareholders, we will take a very strong look at it to build and grow this great company. So that's all I was saying.

Unknown Executive: Thank you.

That was reflective of both of those prior period activities from subscriber adjustments as well as that audit revenue that we sometimes talk about and so as similarly with the transaction based business that Lynn just referenced we're continually evaluating the pricing of these data offerings, we have a very large and diverse set of offerings. So it's difficult to.

Really specify a specific increase to forecast for 2024.

Patrick Moley: Our next question is from the line of Patrick Moley with Piper Sandler. Please go ahead. Your line is open. Yes, good morning. Thanks for taking my question.

Many of our data products. However, we'll see price increases next year, ranging from 3% to 5% kind of reflecting that price to value approach. However, again. This is dependent on both subscribers as well is that nonrecurring revenue that occurs.

Terry Duffy: The Terry, I'm hoping you could maybe just give us your updated thoughts on the outlook for volumes heading into your end. Just given some of the evolving yogurt dynamics we've seen in this kind of heightened geopolitical uncertainty. And then, you know, coming into this year, you talked a lot about how great the setup was for CME business. So maybe if you could just, you know, talk about how that maybe compares now to how it's played out relative to your expectations and how it may be compares to the setup we're now looking at heading into 2024.

Most quarters to hope that's helpful.

So that was great. Thank you very much.

Thanks, Ken.

Thank you. Our next question is from the line of Alex Blaustein with Golden Goldman Sachs. Please go ahead. Your line is open.

Hey, good morning, everyone. Thanks for taking the questions.

I was hoping you can upon on some of the potential new competitive dynamics and developments in interest rate futures markets with FX futures potentially entering this space in partnering with <unk>.

Terry Duffy: Thanks. I think I think the good and thank you, Patrick. I appreciate it. I think, you know, it's really hard to predict the future. And I try to be careful, but the setups that we saw in 2022, would you referring to and 2023, where something so glaring that, you know, you had to call it out because of the geopolitical events. What was going on with inflation, where people were calling it transitory versus, you know, you sprinkle three trillion dollars into the American public's hands.

Now we've seen this movie before right multiple times in all these kind of attempts have been unsuccessful, so I wonder whether or not this might feel different given <unk> position as the largest pool of.

Clearing in the swaps market, maybe just a reminder of sort of the benefits of our customers get by keeping everything in futures and the savings across the portfolio that can get.

Terry Duffy: You know that it's not going to be trans story. So I was only sprinkling out the favorable events that we were seeing fundamentally, but I thought was good for every single one of our asset classes. And it was actually very good for us. As you know, with a record year in 2022 and an amazing quarter, this, this quarter in 2023. And as Lynn said, our ninth consecutive quarter of double digit revenue growth.

Versus the alternative of.

I'm trying to kind of cross margin between futures and swaps.

Thanks, Alex and I'm going to ask Tim and Luca So many of my other colleagues around the table to comment as well but.

You know when we're looking at the <unk> proposal it's.

We haven't seen all their details and I think so it's really hard to comment on exactly what the competitive offering is going to be other than what you just referenced I understand what you said.

Terry Duffy: So those are all very impressive numbers. We will continue. I don't think the setup has changed, Patrick, when you look at what's going on right now, that's going to be much different for 2024. I think we're going to see, a little bit of the same, but who knows it's hard to predict what the volumes would be associated with that. But there is a massive amount of uncertainty out there. When we made comments like we did in 22 and 23, we also didn't have the unfortunate situation we're seeing in the Middle East today.

I think with the announcement of DTC and the offsets that we are going to be able to supply to the users is going to be an extremely powerful benefit to the participants of the marketplace and you also have to remember that <unk> is coming from a position of zero futures trading today.

Terry Duffy: So there's another added component going on to that. And then we also have other situations as I said earlier as it relates to our energy complex where people are looking for more production coming out of the US and Derek and touch more. About that throughout the Q&A. But again, I think that bows well for CMEs products. But I'll, you know, beyond that, I'll be careful with what I say. Very great. Thank you.

And where we are sitting on as Tim has referenced record open interest and charged very complex listing new products and lifting the benefits thereof.

We are ready enable to compete with anybody and competition that is something that has made <unk>. What it is today, but the benefits that we continue to work on and you've heard me say this for years. So we're going to continue to look for capital efficiencies in each and every one of our asset classes. We are delivering on every one of them.

Alex Kram: Our next question is from the line of Alex Kram with UBS. Please go ahead. Your line is open. Yes. Hey, good morning, everyone. Just quickly on the regulatory side seems like the SEC is getting closer to mandating Treasury clearing on the cash side. Obviously, you have your arrangement with the DCC in place starting in January. So good position there, I guess. But like more broadly, just wondering how you think Treasury clearing would change the marketplace both on the cash side. And maybe even in the future side, customer behavior, new customers, anything. I assume you have some thoughts on it. So anything would be helpful.

Those asset classes to deliver capital efficiencies that does not go lost on the participants in a capital intensive world. So when you were talking about new offerings with LSE and what they could potentially offer versus what we have we think we have a massive competitive.

Selling offering for our clients that saves them additional funds so.

I like our position.

I think we were in a position of strength again, I think a lot of people.

Alex as you know very well when the LIBOR was going away and everybody was going to convert from euro dollars us two sulfur that people thought it was a jump ball and we felt we were in a very strong position to transition 100% of that business and to CME sulfur products.

Terry Duffy: How a home orchestra may change with that happens. Yeah. No, thank you very much. It's and it's a great question because it's a great unknown to what's going on out there and what is being proposed and what may happen. It is still being hammered out.

We did because of efficiencies to everything we have to offer and those go from the back office to my sales team right across the entire organization that creates those benefits. So I like our position again I think you said at the beginning of your question. We've seen this movie before I don't want to quote you wrong, but I think.

Suzanne Sprague: I'm going to ask Suzanne Sprague who is the president of my clearinghouse. To give you some comments on the reg side of it, she's working closely with her team as they're watching this. And then I'm going to turn it over to Tim McCourt from an opportunity perspective, what he's seeing. As it relates to the complex, if in fact, some of these things happen or even if they don't. So maybe we'll give you a little two-part answer here, Alex.

As we have said and we will continue to take every party that wants to compete with us very seriously, but at the same breath. We think we have a very strong powerful compelling offering for our clients. Tim you want to add to that sure. Thanks, Terry and thanks.

Suzanne Sprague: Yeah, thanks, Terry. We do think generally the benefits of central clearing will bring the marketplace into a strong position for things like our cross-margining program with a fixing and clearing corporation. So you are correct to put those dots together that it will potentially enable higher participation in that program. We do today have the program that's eligible for common clearing numbers. And so the enhancements will benefit those common clearing members within the program and therefore increased activity through clearing of treasuries generally should translate to more eligible activity that could benefit from cross-margining between the me and the fixed income corporation.

Just to add a little more color on that picture.

Is when we look at the gravity of the conflicts at CME Terry's point. This is unmatched and the one thing I want to further remind the marketplace about is you can unlock a tremendous amount of capital savings and efficiencies at CME today and the marketplace is doing it. In addition to the $7 5 billion plus margin savings from our port.

Polio margin portfolio, let's look at some of the numbers with respect to the open interest with record average daily open interest in our Treasury complex zone, just under $19 million contracts for the third quarter a record average daily open interest in our sulfur conference of about $11 million contract and with a record large open interest holder population of 31.

Suzanne Sprague: So we generally believe the benefits of central clearing plus those enhancements to the cross-margin program will position us in the industry well for taking advantage of more capital efficiencies in this space. I'll turn it over to more court to add anything else as well. Sure, and thanks Alex for the question. I think when we think about the opportunity, why we remain excited and very optimistic that the cross margin agreement is finally coming online in January of next year is because this is something that we've seen before in our other markets when you unlock the capital efficiencies of related products, it significantly increases the risk management capabilities of the marketplace and can lead to increased trading velocity in the product.

175 participants that has an enormous amount of gravity that although lca's, maybe the leader with respect to their interest rate swap clearing offering.

The gravity and the size of the complex is going to be unmatched about the capital efficiency, we can tap into it CME the sheer function of our position on the future side, which we expect to only be more and more important to the marketplace as we head into 2024.

Suzanne Sprague: As Terry said, it's hard to predict the future. If we look at some of the other areas we've unlocked capital historically, portfolio margining of futures versus swaps is probably a pretty good analog to look at and that's been in place since 2012 since that's been put in place that the average daily savings have grown from 1 billion in 2013 to a little over 7.5 billion day in 2023 and at that same time our rates volume grew 109% and open inches doubled in the complex and our cash market participation went from about 54% to over 100%.

Hopefully that gives you a little color on how we're thinking about it Alex but again, we've taken everything seriously and but I think again, our offering as Tim has said and I said it was very compelling.

Very helpful guys. Thank you.

Thanks, John.

Thank you. Our next question is from the line of Michael Cyprus. Please with Morgan Stanley. Please go ahead. Your line is open.

Great. Thank you. Good morning, two part question just following up on the capital efficiencies.

On the cross margining with TTC, just curious what other steps you might be able to take as you look out. The next two years to further enhance that and then the other part of the question just around regulators proposing new capital rules for banks that can make some of this.

Suzanne Sprague: So certainly unlocking capital is beneficial to the volume and the velocity of the complex or optimistic about what we can do once this comes online early next year. Hopefully that gives you a little color for your question, Alex. Thank you guys. Appreciate it.

Oak off exchange derivatives, just more capital intensive just curious your take on that what do you see the biggest opportunity to bring derivatives from OTC to the exchange traded marketplace.

Unknown Executive: Thank you.

Owen Lau: Our next question is from the line of Owen Lowe with Openheimer. Please go ahead. Your line is open. Hey, good morning. Thank you for all taking my question. So it's somehow related to the last question, but I think you talk about government budget deficit in the past leading to more Treasury issuance, which could increase like more hatching activities. Could you please unpack a little bit more on that relationship? Are you saying when we see more charge for issuance that should like kind of induce higher trade activity? I think any more probably be helpful. Thanks.

Michael both really good questions. The latter one as you know we dealt with in 2017.

I'm, assuming you're referring to the Basel III, what's being proposed and the second part of your question. Okay. So on the first part on the capital efficiencies I'm going to turn it over again as Suzanne spread and she can touch on both but I'll give you a mic.

Blood process under Basel, III as well yeah. Thanks, Eric So we do look forward to extending the enhanced cross margin program to the client level, we have had quite a bit of conversation with ourselves in the fixed income clearing corporation as well as clients on the importance of continuing to broaden that program. So we don't have any timelines to commit to at this point.

Terry Duffy: Yeah, Owen, history, Duffie. And one of the things that we have said historically, and if you recall, some of the comments that, you know, our former colleague, Mr. Shontelli made over the years that when the Fed no longer is acquiring some of these tragedies that the demand for them will have to go somewhere else. The Fed does not hedge their Treasury portfolio, as you know. The other people that acquire the issuance is coming out from the government need to hedge those.

Time, but it is a focus of ours jointly to be able to expand those enhancements to the end client level, which I think will help even more with things we've already covered on the treasury mandate and needing more capital efficiencies to address things like increased capital costs under the Basel proposal.

I think Terry hit at a high level.

Yes, let me just comment on the practicality, Michael and I know that you've been in there for a little while now at your firm and understand how this works there is zero consensus amongst the regulators as it relates to some of these proposals in Basel III actually theres really opposing views to them.

Terry Duffy: So it's hard to predict what the issuance is going to be. But again, those parties that will be taken the issuance if it's not the Fed are traditionally people that hedge those in our marketplace, so that should benefit CME. So tell them if you want to add any more to that. Yes, sir.

That which makes it very difficult to move something forward, we will have internally at a regulator not the same people supporting the proposal the.

Derek Sammann: And thanks, Owen, when we look at the net issuance of Treasury securities, they increase significantly in Q3 compared to Qt Q2 up almost 80%. And that's not surprising if you remember this is really looking at the requirements of the Treasury general account, which means a record low of just under 50 billion. And at the end of the September that balance stood about 672 billion. Now, it's important to Terry's going to look where that debt is being issued and comments made previously.

The markets need to remain efficient and I guess again another.

A solution looking for a problem with Basel III.

We've never had.

Two and.

And the issue.

Under the margin that we're holding that needs to have a capital hit associated with it we only think that would add to the lack of liquidity to the overall marketplace and make market is less efficient than they are today and that's not healthy, especially as we laid out the fundamental places that we are in the world today.

Derek Sammann: A lot of the issuance is going into T bills on the short end of the curve. That's what we saw on Q1, Q2 and that pattern has not changed here in Q3. So with respect to how that can impact our complex in treasuries, one would assume that if we look back over historical distributions of how the Treasury has looked to issue debt, there's only so much that can go into the front end of the curve.

With the issuance coming forward, we need to manage this there's risk in everything we do in this life, including the treasury issuance and who is using it or not we think we have a very good platform and we think that the rules that are in place right now makes sense for the users and if you want to just continue to add capital charges that everything we do I guess, we can constricted.

Derek Sammann: It was perhaps a little bit below the historical norms the last several years where the Treasury has taken advantage of the lower rates further out the curve. So one can reasonably conclude going forward, they would look further out the curve to be more in line with your traditional or historical allocation, where that's where our complex at CME has all the historical products as Terry noted the growing treasury complex from both a volume.

<unk> zero and we won't have any more risk in the system, but we won't have any economies around the world either so I do think it gets to a certain point again like I said earlier. This was proposed in 2017 and it was not agreed upon then.

Derek Sammann: And then a wide perspective, we would expect that issuance further out the curve in the coupons and bonds to increase the velocity as the marketplace looks to digest that issuance, as the related trading activity of it, and with the introduction of our T bills earlier this year, that's also a great start. We now also have tradable products across the entire of the curve and even better suited for that risk management needs of the marketplace as they find ways to absorb this increasing debt being issued to the market.

So we'll see where this goes we are meeting with people in Washington, now My Washington folks are trying to explain the detriment in such a proposal could bring to the overall marketplace.

Great. Thanks, so much I appreciate it.

Thanks, Mike.

Thank you. Our next question is from the line of Craig Siegenthaler with Bank of America. Please go ahead. Your line is open.

Unknown Executive: Thank you very much.

Unknown Executive: Thank you.

Hey, good morning, everyone.

Brian Bedell: Our next question is from the line of Brian Bedell with Deutsche Bank. Please go ahead, your line is open. Great. Thanks. Good morning, folks. I have a couple questions. I'll get back in the queue for the second one.

So in the quarter. There was another instance of vertical integration between an exchange or actually technically of DCM and NFC and so now we have clean base my acts with vertically integrated business model. So.

Terry Duffy: The first question I have is on just on the I guess there's there's some talk of a more regulatory or potentially more regulatory scrutiny around basis trading within futures and treasuries and just wanted to get your perspective on, you know, on on how you view any potential scrutiny there or you know, the merits of that trade and I don't know if you're able to potentially size the impact on volume. I know it can be, you know, can change quite dramatically over cycles.

First I wanted to get your perspective on what this means for the ecosystem.

And then and also CME already registered its FTM last year, I think partly a reaction to mtx's move so what are your updated objectives for that business now.

So Greg again.

And also talking a lot about market structure and how market structure as always have a shelf life and we don't know what the next one is going to look like what we all need to be prepared for it and Thats. What CME will always do we will be prepared for anything that comes our way. That's one of the reasons, we file for the <unk> application not just because of <unk>, but not to say you are wrong.

Terry Duffy: So maybe tough to do, but just wanted to get a sense. Yeah, and Brian and Terry, I'm going to turn it over to Tim, but sometimes there's problems looking for solutions as they say or solutions looking for problems. And this is government at its finest trying to introduce new legislation where there is no problem with the basis trade is something that will continue to move as well as should. And the basis trade is actually what keeps the markets in line.

Terry Duffy: So, you know, we feel very strongly that this is going to continue to keep the market efficient and the more you explain that to regulators to show them what kind of potential chaos you could introduce. If in fact, you have additional regulation that takes people out of that trade, which widens the basis, they may not like that outcome.

That was part of the reasons why but it was again around market structure I think what these vertically integrated models that is being proposed such as my X and I.

I think <unk> basically the other one you referenced.

The conflict of interest question for the clients is huge and it would be big for us to if we decided to go ahead and deploy in <unk>. So we would have to be very careful about that ourselves, but at the same breath I think that if theyre going to go down this vertically integrated.

Model they need to write rules associated with this was my entire complaint around F. T X that they were trying to make.

Existing rules fit for their business proposal. So if in fact, we're going to have integrated models of what my access proposing today and go into business in the United States you need to write rules with them because of the commodity Exchange Act clearly states in the year 2000 that those rules were written with intermediaries in mind.

Tim Mccourt: So let me turn over to Tim to give you a little bit more color, but I would be cautious to draw to conclusion that any kind of pending regulation is coming on a pike ending at time soon. That's correct. I think the one thing I would add is that the existence of basis between cash and futures market is not an isolated phenom to the treasury market. We see this in almost all of our asset classes here at CME and the fact that you can independently trade the basis as a standalone risk parameter is an important key element to keep these markets aligned and arbitrage free.

Not on a direct model, so not saying you couldn't have intermediaries.

In the direct model, but the rules are not clear on that so I think there's a long way to go I think one of the reasons. They are not getting much attention today on that is because of their size, which I think is wrong to look at it that way it shouldn't matter of their size, who is to say they can't get bigger tomorrow who's to say, we can do something different tomorrow as well so I think there needs to always be.

Tim Mccourt: It's something that we've seen as vital to the marketplace for this purpose. And it's something that we also see remaining in this market. It's not surprising with rates traversing the range that they have that you're going to see different behavior of the basis that we have in previous decades when we've seen similar activity. And it's something that we engage with the market. And the one thing I would note is that it's also important that CME also has the ability to rate cash treasuries on broker tech and the futures, which is also both leading price discovery mechanisms.

Rules and the rules of the road need to be.

Applied so people understand them, we do not need situations like Oh wait and other ones that we could all describe because of people trying to advanced businesses that they think is in their best interest without having the public's interest at heart. So again, we've always been a neutral facilitator of risk management, we will continue to do so we like the <unk>.

Tim Mccourt: So we are the natural home this trade to take place and we continue to work with the marketplace. Now we can increase the efficiency of this trade going forward and work even more closely with market participants to make sure we unlock the value that still exists between bringing the broker tech and our futures business together at CME.

Immediate very model and again, but we don't know what the future's going to hold but I do I am very concerned about some of these existing platforms and the government needs to look at them and REIT rules for them. If in fact, they're going to allow them to stay in business.

Unknown Executive: Thanks, Sam. Thank you, Ryan.

Unknown Executive: Thank you.

Thank you Terry.

Thank you.

Kyle Voigt: Our next question is from the line of Kyle Void with KBW. Please go ahead. Your line is open now. Thanks. Maybe just a question on expenses, you know, good to see the lower expense guide today. But given the slightly higher kind of inflationary environment and still relatively tight labor market.

Thank you. Our next question is from the line of Andrew Baum The bond with Rosenblatt Securities. Please go ahead. Your line is open.

Thanks, Hey, good morning, one for Derek on the energy business energy markets, particularly natural gas markets have experienced some structural shifts benefiting north American markets. Following the Russian invasion of Ukraine.

Lynne Fitzpatrick: Just wondering if you could remind us how you think about steady state organic expense growth on a medium term basis for this business with in the current macro backdrop. And then second part of that question, as we're approaching that of the year here, can you also just remind us how the Google related expenses are expected to unfold into 2024 versus 23 levels. I think there was spend for the first four years, but just maybe give us an update on where you stand with that spend today and when that starts to wind down.

Recently with the geopolitical events in the Middle East are you seeing more of a continuation of these dynamics and can you talk about the potential longer term impact of the geopolitical events of late on your markets.

Andrew. Thank you we appreciate it and Dirk yes. Thanks, Andrew I think this is the kind of proof positive of what we've been talking about for the last couple of years that structurally the U S is an.

Strong position.

Given the position we have both in crude oil as well as natural gas as you know we're currently.

Lynne Fitzpatrick: Thank you, Kyle, then you want to address both of those issues? Yeah, sure. So overall expense guidance, if you look at our estimate for this year, that's up about 3.6% on our four expenses despite the inflationary environment. So I think what you've seen from us over the years is really tight expense discipline and expense control. We're always looking for ways to minimize the run the business expense to become more efficient so that we can have more of our expense space going forward.

Currently export and record amounts of oil from the U S. At $4 6 million barrels a day. We're also exporting our record levels of natural gas, while based on Henry hub pricing.

At record levels from our U S capacity point of view, so as we've talked about that structurally positions CME SW Ti franchise as kind of the leader in that space and certainly positions WTS global benchmark as the U S continues to export the marginal barrel.

Lynne Fitzpatrick: Through to growth initiatives and helping to grow the bottom line. So I think we have a strong track record there. If you look back in history, it's average between that 3 to 3.5% over the last several years. Certainly as we look forward, we'll continue that same type of discipline.

Outside the U S with challenges everywhere else natural gas as you pointed out has been a really really strong point for the energy franchise overall when you look at the what's going on.

From uncertainty point of view options continue to be a significant proportion of our customers client behavior. So we like our position in both natural gas and crude oil when you look at the volume and growth of the.

Lynne Fitzpatrick: And we'll look to provide guidance as we get closer to year end on the Google front. We did guide that we would have four years of incremental cash costs in the range of 30 million dollars per year on average. So our expense guidance for this year, this is our second year. It's 60 million in expense offset by 20 million in a catback savings to get to a net 40. We had 30 million in net expenses last year. So we have two more years where we think there will be an incremental expense associated with the Google migration before we see start to see break even an ultimately cash flow positive.

Unknown Executive: Great. Thank you very much.

Both futures and options.

Strong in Q3 and more importantly, we continue to see that strength in October with our energy options up 81% overall.

Energy up 26% in October so really strong year. This year, continuing really strong year into Q4, and the position that we have as the swing producer both the natural gas and crude oil I think positions us well long term and what we think is a potentially multi generational energy shift.

Thank you.

Thanks, Andrew.

Yeah.

Thank you. Our next question is a follow up from Alex Kramm with UBS. Please go ahead. Your line is open.

Benjamin Budish: Thank you. Our next question is from the line of Benjamin Baudish with Barclays.

Terry Duffy: Please go ahead. Your line is open.

Terry Duffy: Hi, good morning. Thanks for taking the question. Terry, in your comments, you talked about the kind of uncertain rate environment and ongoing need for participants to manage risk. You know earlier in the year, you talked about the opportunity with regional banks, but maybe just at a high level, how do you see that opportunity more broadly? Is it kind of new participants that haven't been on CME's platform before? Is it more involved hedging from existing participants?

Yes, Hello, again, just a very quick one on the on the interest rate business again.

Terry Duffy: How do you see kind of like the medium term Tam coming from that environmental need that you see? Thanks. Yeah, I think it's hard to for us to describe if it's the regional banks of the bigger banks hedging. I mean, Suzanne can help me with more color on that as who the exact participants are because they come in to one of the bigger banks anyway, even the smaller ones do. So we're not quite sure which one is laying off the risk.

You guys Terry mentioned.

The LIBOR sulfur transition, obviously, that's now behind us and successful, but just maybe looking back on that I think early on there were some concerns that sulfur would not be the best replacement for euro dollar and that maybe it won't meet certain trading strategy. So now that we sit in here I don't know six months after the real cut off.

Is the marketplace different at all are you seeing certain strategies not being applied anymore and is that still room for innovation for your is sofa eurodollar basically now at the same thing as it as it was last thank you.

So I'm going to let Tim answer as well, but I will say the following that the reason why people believed that sofa might not be as good as euro dollars just because of pure uncertainty when you know a certain way for so many decades of how youre going to price short term interest rates and all of a sudden the.

Terry Duffy: Yeah, I would agree with that. It's generally appealing, I would say, for both of those groups of folks to engage with us on an ongoing base, especially now with the uncertainty and the rate environment to think through the offerings that we have from a capital efficiency standpoint, as well as a general risk management standpoint for ensuring that there aren't additional micro or macro events that will. I guess, circulate in the industry, SCV is one example of a lot of engagement that we've had leading up to and afterwards with clients about the way that we provide services and and clearing solutions to allow people to manage risk as well as the product side.

Governments say you have to change them.

The uncertainty of the marketplace for starters.

As far as it goes to the strategies I think Tim already outlined the open interest in trade and sulfur. So you would have to say the answer to question number two our people not doing certain strategies is no. So question number three is.

Terry Duffy: So I think it is hard to specifically identify what portion of those participants might be new and existing. Things, but we have been engaging pretty broadly in the marketplace around those events to make sure that the products and services as well as the way that the clearinghouse offers with management services are accounted for and available for market participants more broadly to get ahead of any other events that might be circulating in the industry.

Is there opportunity for people I think it was the last thing you would ask for the sulfur versus what was not in our LIBOR and I'll turn that to Tim.

Yeah, Thanks, Ryan and thanks, Alex for the question I think what's interesting is when we see several months after the transition and we look at the sofa complex at CME year to date through Q3, I believe we're already about 14% above the best year on Euro dollars previously and we still have a whole quarter to go which is exciting but certainly <unk>.

Terry Duffy: And just to add to that, Ben, thank you, Suzanne says a great answer, but just to add to that, Ben, the duration risk that we saw take down SVB, is not gone away. As we talked about earlier in our comments, the issuance that is coming out from the government seems quite large in order to run and pay our bills in this government and the demand has been a little bit lighter. So in return, whether or not rates are continuing to be very stubborn regardless of what the Fed does or does not do.

<unk> certainly being integrated we're seeing similar strategies with respect to the various options strategies that futures the outright the spreads. So we're really pleased with how the ecosystem is coming along but the one thing I would add is we also have new additional short term interest rate products that can be spread against over when we look at the introductions of T bills and as Terry said in his <unk>.

Opening comments with respect to us are leading and taking a really strong roots in the <unk> market overseas. These are all new things that are additive to the ecosystem that didn't exist when euro dollars are around so we're very optimistic for the future and further buttressed by our efforts on the CME terms, so forefront with respect to licensing and the IP in the graph.

Terry Duffy: So I think that we're not suggesting there will be more duration risk, but what I am suggesting is that people are going to have to manage that. And so whether it's the biggest of banks or the mid-tier banks, the risk management associated with duration, not only is it not going away, in my opinion, it's increasing because of the fundamentals of the overall treasury market in general. So from our standpoint, we think that will lend to more people mitigating and managing risk to our treasury complex from all different sizes of the banking world.

Terry Duffy: That was great. Thank you so much.

<unk> that we're lending to that complex. These are all great things that continue to position not only silver, but the rest of our rates complex given the interrelated newness and the spreads strategies that exist as we head into next year.

Derek Sammann: Thank you.

Excellent good to hear thanks.

Thanks, Alex.

Thank you. Our next question is a follow up question from the line of Brian Bedell with Deutsche Bank. Please go ahead. Your line is open.

Great. Thanks for taking my follow up.

On RPC.

Some of the drivers in the third quarter that you mentioned were member mix and product mix.

Chris Allen: Our next question is from the line off. Chris Allen with city. Please go ahead. Your line is open now. Morning, everyone. I was wondering if you could provide color on the average collateral balances for cash, non-cash in the quarter and then respective yields and then where they stand present. Sure, Chris, happy to. So if you look at quarter three, the average cash balances were 91 billion. The yield on that average 36 basis points.

I think that was mostly on the product mix side between asset classes.

I was wondering if you could comment a little bit about.

Chris Allen: For non-cash, we average 137 billion yielding seven basis points. If you look at October to date, the cash balance has trended down. We're seeing average cash balances of 71 billion and a shift into the non-cash collateral, which is up to 152 billion. I would point out that on the non-cash collateral side, we did announce a fee change that takes effect in January, where the charge on the non-cash collateral will be increasing from a blended seven basis points up to 10 basis points.

Were there any outliers within the asset classes.

Dutch that significantly.

<unk> impacted the RPC and then it looks like geography wise or non U S was actually up a little bit sequentially.

<unk>.

I thought that was usually is typically at a higher RPC. So maybe just some comments on that and then also just on options versus futures. If you can remind us on the differentials. There I think I think Eric you mentioned the options volumes in energy in particular were up nicely in October.

Yes, Brian two parts of your question, so I'm going to ask Glenn to comment on the RPC and then ask Derek to comment on the international business, what Youre correct does carry a higher RPC than the traditional.

Some of the stuff here in the U S. But go ahead, yes.

So if you look at the overall RPC.

97.

Versus the prior quarter of $72 four so down one 7%.

The drivers for that were really lower proportion coming from commodities product. It was about 18% this quarter down from about 19, 5% last quarter. We did also see a slight increase in member mix and a contribution from micros overall in terms of the specific asset classes I wouldn't call anything out as unusual per se.

Chris Allen: Just to give that a little sizing, if you applied that change to this quarter's average volume, that would have added 10 million to the revenue associated with a non-cash collateral, which rolls through other revenue. Great. Thanks. Good luck. Thank you.

I would just point you to if you look at the year over year basis on very similar volume, we saw a 12% uplift on RPC, that's driven by a couple of things you do have a lower proportion coming from my growth you have an increase in the commodities as we have seen that rebound in this year and you are seeing the impacts of that.

Ken Wartingham: Our next question is from the line of Ken Wartingham with JP Morgan. Please go ahead. The line is open. Hi. Good morning. Thanks for taking the question.

Terry Duffy: As you go into your end, maybe could you talk about how you're thinking about price increases in data and trading for 2024, particularly in the context of the fairly sizable changes you made in 2023? Okay. Ken, thank you. I'm going to ask Linda Stard, and then Julie Winkler, who heads up our date organization as our Chief Commercial Officer, will participate as well. Yes. So as you know, on the clearing and transaction fee side, we typically announce any changes there later in the year, typically around the late November timeframe.

And change rolling through.

Thanks, Lynn Derik go on talk a little bit about the new non U S business as it relates to the RPC. Yeah. Thanks, Brian we are seeing some continued really strong growth in building on the back of what was a record 2022 for non U S business. We're building on that again, our Q3 international volume was up 7%. This year and that was led by some of the higher RPC products, Our AG non U S business was up 32% energy.

30% rates were up 16% metals up 10% also what you saw and I think he might have mentioned this our non U S options continues to grow extremely strongly as well as our non U S options volume was up 31%, while the overall options is up 21%. So good strong story within a good strong story.

Terry Duffy: Our approach is the same as it's always been. It'll be a bottoms-up approach looking at all the different markets, looking at the health of the markets, the value we've created. The health of our customers and the total cost of trade, including not only clearing and transaction fees, market data fees, but also the cost of collateral and making sure that we don't do anything from a fee perspective that would impact volume or liquidity given our high incremental margin. So as I mentioned, we have increased that non cash collateral fee effective in January that runs through other revenue and Julie has announced some market data fee changes which take effect in January as well.

So we saw EMEA be a particular standout there relative to the.

The volumes and I think were the efforts we put into place boots on the ground you heard us talk about the investment we're making in the majority of our sales force now being outside the U S.

Accelerating both our new client acquisition opportunities as well as reinforcing and cross selling into our existing customer base. So.

Non U S business continues to be a source of strength and new client growth for us and I think we will see that we're on track for another record year for that side of the business across asset classes, and we like our position going into 2004, so just to sum that up because I think it was a really important question.

Julie Winkler: So maybe you want to walk through both. Yeah, I mean, two, three was another record quarter of 167 million in data revenue. So up another 9% year on year. And I think this, this strong growth also is something that as we look into 2024, you know, yes, there will be some fee adjustments, but we also are looking for, you know, continued new product development, active sales efforts, continued education, and also our enforcement efforts.

Not a particular asset class whether its degradation in the RPC. So much it was more the mix of member versus non and then we have some of these really outliers not outliers, but some higher rate RPC and some of the energies as Lynn referenced and it's a very sensitive tool. So that can move it a little bit and that's what you saw.

Okay. That's great and then just can you remind us on the RBC of options versus futures.

Julie Winkler: So it should be noted, even in this quarter, you know, we saw about 4.9 million and non recurring revenue that was reflective of both those prior period activities from subscriber adjustments as well as that audit revenue that we sometimes talk about. And so as similarly with the transaction-based business that Lindus referenced, you know, we're continually evaluating the pricing of these data offerings. We have a very large and diverse set of offerings.

In general Yes, yes, so the total RPC for options this quarter were $65 eight.

Okay.

Got it okay perfect. Thank you so much for that really complete answer thank you.

Thanks, Brian.

Thank you. Our next question is from the line of Owen Lau with Oppenheimer. Please go ahead. Your line is open.

Thank you for taking my follow up question.

Julie Winkler: So it's difficult to really specify a specific increase to forecast for 2024. Many of our data products, however, we'll see price increases next year ranging from three to five percent, kind of reflecting that price to value approach. However, again, this is dependent on both subscribers as well as that non recurring revenue that occurs in most quarters to hope that helpful.

I think <unk> recently launched beauty IQ oil Monday, and Wednesday weekly auctions I am just wondering how much incremental opportunity and demand for these kind of zero DTE products, not just energy, but in the whole cfd platform. Thank you.

Thanks, Alan Derek Yes on the weekly staff, Yes, we have had really great success across the entire franchise of launching additional.

Unknown Executive: That was great. Thank you very much. Thanks. Thank you.

Points of maturity curve, we've recently launched Mondays and Wednesdays and.

Alex Blostein: Our next question is from the line of Alex Blostin with Goldman Sachs. Please go ahead, your line is open. Hey, good morning, everyone. Thanks for taking the questions while I was hoping you could apply on some of the potential new competitive dynamics and developments and interest rate futures markets with FMX futures, potentially entering the space and partnering with LCH. Now, we've seen this movie before right multiple times and all these kind of attempts have been unsuccessful.

Energy, particularly in <unk>.

Actually set a number of records there we had an all day record Adv of about 43000 contracts on the first of September.

Alex Blostein: So wonder whether or not this might feel different given LCH position as the largest pool of clearing in the swaps market, maybe just a reminder of sort of the benefits that customers get by keeping everything in futures and the savings across the portfolio that can get versus the alternative of trying to kind of cross margin between futures and swaps. Thanks. Thanks, Alex. And I'm going to ask Tim and maybe so many of my other colleagues are on a table to comment as well.

And that was after the addition of the Mondays and Wednesdays was set a single day record on the same day of about 15000 contracts. When you look at that opportunity for US we've talked about this before.

Certainly in a world with as much risk as we see on any given day on any particular asset class, adding additional maturity points and granular levels of risk management have proven to be successful.

Sort of we plumbed to that path with fixed with equities, we've incrementally rolled out at LSI classes and I think over time, we found our customers have adopted those more broadly those are additive to VOI pool, those have created more opportunities for spreading across maturities, but I would also note that our record options growth.

Is accelerating not just on the front end of the curve, but across the entire maturity curve. So we're seeing growth there where the short dated pieces are additive to the growth, but it's actually being led by farther out across the curve. So we see those as additional tools and.

Alex Blostein: But you know, when we're looking at the FMX proposal, it's we're we haven't seen all their details. And I think so it's really hard to comment on exactly what the competitive offering is going to be other than what you just referenced. I understand what you said. I think with the announcement of DTCC in the offsets that we are going to be able to supply to the users is going to be an extremely powerful benefit to the participants of the marketplace.

Nice additive pieces of growth, but not the primary source of growth.

Got it thank you very much.

Thanks Owen Thank you Derrick.

Thank you. Our next question is a last question from a follow up from Craig Siegenthaler with Bank of America. Please go ahead. Your line is open.

Alex Blostein: And you also have to remember that FMX is coming from a position of zero futures trading today. And where we are sitting on as Tim has referenced record open interest in treasury complex listing new products and listing the benefits thereof. We are ready and able to compete with anybody and you know competition is something that has made CME what it is today. But the benefits that we continue to work on you've heard me say this for years that we are going to continue to look for capital efficiencies in each and every one of our asset classes.

Hi, This is Ely from Craig's team. Thanks for taking my question I was wondering if can you speak up just a little bit of I think it was Eli on that Craig on the phone.

And so if you like from Craig's team.

Thanks for taking the question I was wondering if you could give us a sense of the potential impact of approval of the spot crypto Etfs on your crypto complex.

What proportion of volumes through the futures futures based ETF managers contribute to that complex today and if you if we see like a migration from the future based vehicles to spot would that threaten the viability of that complex.

Alex Blostein: We are delivering on every one of those asset classes to deliver capital efficiency. That does not go lost on the participants in a capital intensive world. So when you're talking about new offerings with LSE and what they could potentially offer versus what we have, we think we have an massive compelling offering for our clients that saves them additional funds. So, you know, I like our position and I think we were in a position of strength.

Yes. Good question Eli Thank you Tim.

Alright, Thanks, Terry certainly a pressing question given the recent moves that we've seen in big point and I think one thing to note is that before we dive into the nuances of the ETF. We've also seen tremendous volume and Oi growth year in the third quarter for our crypto complex. Just this week, we saw over 130000 contracts traded forthright.

Seven $6 billion, that's our largest day in the critical conflicts in the wake of the <unk> collapse.

Alex Blostein: Again, I think a lot of people, I think a lot of Alex, as you know very well, when the live or was going away and everybody was going to convert from Euro dollars us to Sofer, that people thought it was a jump ball. And we felt we were in a very strong position to transition 100% of that business into CME Sofer products, which we did because of efficiencies to everything we have to offer.

A little over a year ago. So.

So when we saw also a record or bitcoin futures over 20000 contracts, which is equivalent of more than 100000 Bitcoin and this really speaks to the fact that we are a institutional grade offering for the crypto community. So it's not surprising that we are the underlying for a lot of the futures based Etfs, which has done phenomenally well in terms of serving the marketplace to date certainly.

There is a belief that some of the upwelling of price to almost 35000 36000, we've seen this week on the belief of spot based ETF approvals.

Alex Blostein: And those go from the back office to my sales team right across the entire organization that creates those benefits. So I like our position. Again, I think, you know, you said it at the beginning of your question, we've seen this movie before. I don't want to quote you wrong, but I think that's who you said. And we will continue to take every party that wants to compete with us very seriously. But at the same breath, we think we have a very strong powerful compelling offering for our clients.

Not necessary here to comment on whether that's going to happen, but what I can tell you is that we do see the introduction of additional structure products, whether they be spot or other underlying base in that crypto community will be additive to our complex at CME on two fronts. One these markets are highly interrelated, where futures will not only be the underlying for some of these products. They will also be the hedge <unk>.

<unk> for market makers as well as market participants looking to hedge their digital or ETF based holdings and the second thing to always keep in mind is we also have the CME C. A bitcoin reference rate, which is the underlying for a lot of these etfs coming to market. So not only will be additive to our futures based volume as we've seen in other asset classes such as equity.

Alex Blostein: Tim, you want to add that up? Sure. Thanks, Terry. And thanks. I think they'll just add a little more color on that picture is when we look at the gravity of the complex. It's CME. Terry's point. This is unmatched. And the one thing I want to first remind the marketplace about is you can unlock a tremendous amount of capital savings and efficiencies at CME today. And the marketplace is doing it. In addition to the 7.5 billion plus margin savings, our portfolio margin portfolio, let's look at that at some of the numbers with respect to the open interest with record average daily open interest in our treasury complex of just under 19 million contracts.

It's also to keep in mind that these products take root and grow in the market there will be additional revenue generation opportunities from the licensing front as a function of AUM and derive license fees here at CME as the IP owner of the underlying data.

Okay.

Got it thanks guys.

Thank you Doug.

Thank you.

And there are no further questions I'll turn it back over to management for closing remarks.

I want to thank you all very much excellent questions today, we appreciate it very much and.

We wish you a good day and everybody stay safe. Thank you.

Thank you, ladies and gentlemen that does conclude today's call. We thank you for your participation and ask that you. Please disconnect your lines have a good day.

Alex Blostein: If you can tap into it, see me, they share function of our position on the future side, which we start to only be more and more important to the marketplace as we head into 2024. Hopefully that gives you a little color on how we're thinking about it, Alex. But again, we take it everything seriously. And, but I think again, our offering as Tim has said and I said, what is very compelling.

Okay.

Uh huh.

Okay.

Okay.

Okay.

Yes.

Terry Duffy: Yep, very helpful guys. Thank you.

[music].

Michael Cypress: Our next question is from the line of Michael Cypress. Please, with Morgan Stanley. Please go ahead, the line is open. Great. Thank you. Good morning.

Yes.

Okay.

So.

Okay.

Uh huh.

Terry Duffy: Two part question. Just following up on the capital efficiencies beyond the cross-margining with TTC. Just curious what other stuff you might be able to take as you look out the next three years to further enhance that.

Yes.

Uh huh.

Okay.

Okay.

Okay.

Yes.

Yes.

Terry Duffy: And then the other part of the question is around regulators proposing new capital rules for banks that can make some folks off exchange derivatives just more capital intensive. It's just curious your take on that where you see the biggest opportunity to bring derivatives from OTC to the exchange traded marketplace. Michael, both really good questions. The latter one is, you know, we dealt with in 2017. I'm assuming you're referring to the Basel III, what's being composed. And I'm the second part of your work.

Sure.

Sure.

Uh huh.

Paul.

Okay.

Okay.

Yes.

Okay.

Okay.

Okay.

Okay.

Hum.

[music].

Okay.

Okay.

Okay.

Hum.

Okay.

Suzanne Sprague: Okay, so on the first part, on the capital efficiencies, I'm going to turn it over again to Suzanne Sprague. And she can touch on both, but I'll give you my thought process on the Basel III as well. Yeah, thanks, Terry. So we do look forward to extending the Enhanced Cross Margin program to the client level. We have had quite a bit of conversations with ourselves in the thick income clearing corporation, as well as clients on the importance of continuing to broaden that program.

[music].

Bruce.

Okay.

Sure.

Suzanne Sprague: So we don't have any timelines to commit to at this point in time. But it is a focus of ours jointly to be able to expand those enhancements to the end client level, which I think will help even more with things we've already covered on the Treasury mandate and needing more capital efficiencies to address things like increased capital costs under the Basel proposal.

Terry Duffy: I think, Terry, I'll head on a high level now, the Basel proposal. Yeah, let me just comment on the practicality, Michael. And I know that you've been there for a little while now at your firm and understand how this works. There is zero consensus amongst the regulators as it relates to some of these proposals in Basel III. Actually, there's really opposing views to that, which makes it very difficult to move something forward.

Terry Duffy: We will have internally at a regulator, not the same people supporting the proposal. The markets need to remain efficient. And I guess, again, another solution looking for a problem with Basel III. We have never had an issue under the margin that we're holding that needs to have a capital hit associated with it. We only think that would add to the lack of liquidity to the overall marketplace and make markets less efficient than they are today.

Michael Cypress: And so we'll see where this goes. We are meeting with people in Washington now. My Washington folks are trying to explain the detriment to such a proposal could bring to the overall marketplace. Great. Thanks so much. Appreciate it. Thanks, Mike.

Craig Siegenthaler: Thank you. Our next question is from the line of Craig Sigenthaler with Bank of America. Please go ahead. Your line is open. Hey, good morning, everyone. So in the quarter, there was another instance of vertical integration between an exchange or actually technically a DCM and an F. CM, so now we have Queen base, my acts with Berkeley Integrated Business Models. So first I want to get your perspective on what this means for the ecosystem and then and also CME already registered its FGM last year. I think partly reaction to FGX has moved. So what are your your updated objectives for that business now?

Terry Duffy: So Craig, again, you know, I've been also talking a lot about market structure and how market structures always have a shell. And we don't know what the next one's going to look like, but we all need to be prepared for it. And that's what CME will always do. We'll be prepared for anything that comes our way. That's one of the reasons we filed for the FGM application, not just because of FGX, but not to say you're wrong because that was part of the reasons why, but it was again around market structure.

Terry Duffy: I think what these vertically integrated models that they're being proposed, such as my ex. And it was, I think, Coinbase is the other one you reference. You know, the conference of conflict of interest question for the clients is huge. And it would be big for us too if we decided to go ahead and deploy an FGM. So we would have to be very careful about that ourselves. But at the same breath, I think that they're if they're going to go down this vertical key, this integrated model, they need to write rules associated with this was my entire complaint around FTX that they were trying to make existing rules fit for their business proposal. So if in fact, we're going to have[inaudible] I think that's why I think Andrew, thank you, we appreciate it, and dark. Yeah, thanks, Andrew.

Andrew Bond: Yeah, I think this is kind of pretty positive of what we've been talking about for the last couple of years, that structurally the US is an incredibly strong position given the position we have both in crude oil as well as natural gas. As you know, we're currently exported record amounts of oil from the US at 4.6 million barrels a day. We're also exporting record levels of natural gas while based on Henry Hub pricing at record levels from our US capacity point of view.

Andrew Bond: So as we've talked about that structurally positions, CME's WTI franchise as kind of the leader in that space and certainly positions WTI as a global benchmark as the US continues to export the marginal barrel outside the US with challenges everywhere else natural gas as you point out has been a really, really strong point for the energy franchise overall when you look at the what's going on from a uncertainty point of view options continue to be a significant proportion of our customers client behavior. So we like our position in both natural gas and crude oil when you look at the volume and growth of the both futures and options strong in Q3.

Andrew Bond: More importantly, we continue to see that strength in October with our energy options up 81% overall energy up 26% in over. So really strong year this year continuing really strong year in the Q4 and the position that we have as the swing producer, both in natural gas and crude oil, I think positions us well long term in what we think is a potentially multi generational energy shift. Thank you.

Alex Kram: Next question is a follow-up from Alex Kram with UBS please go ahead. The line is open. Yes. Hello again. Just a very quick one on the on the interest rate business again. You guys Terry mentioned, you know, the live or so for transition obviously that's now behind us and successful. But just maybe looking back on that, I think early on there were some concerns that sulfur would not be the best replacement for your dollar and that maybe it won't meet certain trading strategy.

Alex Kram: So now that we sit in here, I don't know six months after the real cut off. Is the marketplace different at all? Are you seeing certain strategies not being applied anymore and is that still room for innovation for you or is sulfur your dollar basically now the same thing as it was was.

Tim Mccourt: Thank you. I'm going to let Tim answer as well, Alex, but I will say the following that the reason why people believe that sulfur might not be as good as your dollars is because of pure uncertainty. When you know a certain way for so many decades of how you're going to price short-term interest rates and all of a sudden the governments say you have to change them. It's the uncertainty of the marketplace for starters as far as it goes to the strategies.

Tim Mccourt: I think Tim already outlined the open interest in trade and sulfur so you would have to say the answer to question number two. Are people not doing certain strategies is no so question number three is are is there opportunity for people I think was the last thing you had asked for the sulfur versus what was not in the library and I'll turn that to Tim. Yeah, thanks, Diane, thanks to the question.

Tim Mccourt: I think what's interesting is when we see several months after the transition, we look at the sofa complex at CME, year-to-date Group Q3, I believe we're already about 14% above the best year in Eurodial or previously. And we still have a whole quarter to go, which is exciting. But certainly adopted, certainly being integrated. We're seeing similar strategies with respect to the various option strategies, the future is the outright, the spread. There were really pleased with how the ecosystem is coming along.

Tim Mccourt: But the one thing I would add is we also have new additional short-term interest rate products that can be spread against sofa. When we look at the introductions of T-bills, and as Terry said in his opening comments with respect to us, leading and taking really strong roots in the ester market overseas, these are all new things that are additive to the ecosystem that didn't exist when Eurodial was around. So very optimistic for the future.

Tim Mccourt: And further buttress by our efforts on this CME term sofa front with respect to licensing, and the IP and the gravity that we're lending to that complex. These are all great things that continue to position not only sofa, but the rest of our rates complex given the interrelateness and the spread strategies that exist as we head into next year.

Unknown Executive: Excellent. Good to hear. Thanks.

Unknown Executive: Thank you.

Unknown Executive: Our next question is a follow-up question from the line of Brian Bedell with Deutsche Bank. Please go ahead, your line is open. Great. Thanks for taking my follow-up. It's on RPC, some of the drivers in the third quarter that you mentioned were a member of MIX and product MIX. I think that was mostly on the product mix side between asset classes. I was wondering if you could comment a little bit about, you know, were there any outliers within the asset classes that significantly impacted the RPC.

Unknown Executive: And then looks like geography wise or non-US was actually up a little bit sequentially. And I thought that was usually typically higher RPC. So maybe just in the comments on that and then also just on options versus futures. If you can remind us on the differential there, I think I think Derek you mentioned the options volumes and energy in particular were nicely in October. Yeah, Brian, two parts of your question. So I'm going to have to ask Lynn to comment on the RPC and then ask Derek to comment on the international business, which your correct does carry a higher RPC than the traditional some of the stuff you're in the U.S.

Unknown Executive: But go ahead. Yeah, so if you look at the overall RPC of 70.7 cents versus the prior quarter of 72.4 so down 1.7 cents. The drivers for that were really lower proportion coming from commodities product. It was about 18% this quarter down from about 19.5% last quarter. We did also see a slight increase in member mix and the contributions from micros overall in terms of the specific asset classes. I wouldn't call anything out as unusual per say.

Unknown Executive: I would just point you to if you look at the year over year basis on very similar volume. We saw a 12% uplift on RPC. That's driven by a couple of things. You do have a lower proportion coming from micros. You have an increase in the quantities as we've seen that rebound in this year and you are seeing the impacts of that pricing change rolling through. Thanks, Lynne. Derek, you want to talk a little bit about the new nine U.S, business as a release to the RPC?

Unknown Executive: Yeah, thanks, Brian. We are seeing some continued really strong growth and building on the back of what was a record 2022 for nine U.S, business. We're building on that again. Our Q3 International volume was up 7% this year, and that was led by some of the higher RPC products. Our ag, nine U.S, businesses up 32% energy up 30% rates for up 16% metals up 10%. Also, what you saw, and I think you might have mentioned this, are nine U.S, options.

Unknown Executive: Continues to grow extremely strong as well. So, our nine U.S, options volume is up 31% while the overall options is up 21%. So, a good strong story within a good strong story. So, we thought EMEA be a particular standout there relative to the volumes. And I think we're the efforts we put into place boots on the ground. You heard us talk about the investment we're making in the majority of our sales force now being outside the U.S, is accelerating both our new client acquisition opportunities.

Unknown Executive: As well as reinforcing and crosshaling into our existing customer base. So, our nine U.S, business continues to be a source of strength and new client growth for us. And I think we'll see that we're on track for another record year for that side of the business cross asset classes. I mean, like our position going into 24.

Brian Bedell: So, just to sum that up, Brian, because I think it's a really important question. Not a particular asset class, whether it's degradation in the RPC so much it was more, you know, the mix of member versus non. And then we have some of these really outliers, not outliers, but some higher right RPCs and some of the energies as Lynn referenced. And it's a very sensitive tool. So, that can move it a little bit.

Brian Bedell: And that's what you saw. That's great. And you can remind us on the RPC of options versus futures in general. Yeah. So, the total RPC for options is quarter. We're 65.8 then. Got it. Okay. Perfect. Thank you so much for that really complete answer. Thank you. Thanks, Brian.

Owen Lau: Thank you. Our next question is from the line of Owen Lau with Openheimer. Please go ahead, your line is open.

Derek Sammann: Thank you for taking my follow up question. I think CME recently launched the WTI, KuOio Monday and Wednesday with the options. I'm just wondering how much incremental opportunity and demand for these kind of zero DTE products, not just an energy, but in the whole CME platform. Thank you. Thanks, Owen Derrick. Yeah, I found the weekly stuff. Yeah. We have had really great success across the entire franchise of launching additional points of maturity curve.

Derek Sammann: We've recently launched Mondays and Wednesdays in energy, particularly in WTI. We've actually set a number of records there. We had an old day record ADV about 43,000 contracts on the 1st of September. And that was after the addition of the Mondays and Wednesdays was set a single day record on the same day of about 15,000 contracts. When you look at that opportunity for us, we've talked about this before, certainly in a world with as much risk as we see on any given day on any particular asset class adding additional maturity points and a granular levels of risk management have proven to be successful.

Derek Sammann: You know, we sort of we plumbed that path with six with equities. We've incrementally rolled that at the other side classes. And I think over time we found our customers have adopted those more broadly. Those are added to the UI pool. Those have created more opportunities for spreading across maturities. But I would also note that our record options growth is accelerating not just on the front end of the curve, but across the entire maturity curve.

Derek Sammann: So we're seeing growth there where the short dated pieces are added to the growth, but it's actually being led by farther out across the curve. So we see those as additional tools and nice added to pieces of growth, but not the primary source of growth. Cody, thank you very much. Thanks, Owen. Thank you, Derek. Thank you.

Elias Abboud: The next question is a last question from a follow-up from Craig Siegenthaler with Bank of America. Please go ahead, your line is open. Hi, this is Eli from Craig's game. Thanks for taking my question. I was wondering if you could speak up just a little bit, Elias. I think it was Elias not Craig on the phone. Yep, this is Eli from Craig's game. Thanks for taking a question.

Tim Mccourt: I was wondering if you could give us a sense of the potential impact of approval of the spot crypto ETFs on your crypto complex. What proportion of volumes to the futures based ETF managers contribute to that complex today? And if we see like a migration from the future based vehicles to spot, would that threaten the viability of that complex? Yeah, good question, Eli. Thank you, Tim. Thanks, Elias. Thanks, Terry. Certainly a pressing question given the recent move that we've seen in Bitcoin.

Tim Mccourt: And I think one thing to note is that before we dive into the nuances of the ETF, we've also seen tremendous volume in OI growth here in the third quarter for our crypto complex. Just this week we saw over 130,000 contracts trade with worth about $7.6 billion. That's our largest day in the crypto complex since the wake of the FTX collapse in little over a year ago. So when we saw also a record OI in our Bitcoin futures over 20,000 contracts, which is equivalent to more than 100,000 Bitcoin.

Tim Mccourt: And this really speaks to the fact that we are a institutional great offering for the crypto community. So it's not surprising that we are the underlying for a lot of the futures based ETFs, which has done phenomenally well in terms of serving the marketplace today. Certainly there's a belief that some of the upwelling of price to almost 35,000, 36,000 we've seen this week is on the belief of spot-based ETF approvals. I'm not necessarily here to comment on whether that's going to happen.

Tim Mccourt: But what I can tell you is that we do see the introduction of additional structural products, whether they be spot or other underlying based in the crypto community. We'll be added to our complex of CME on two fronts. One, these markets are highly interrelated where futures will not only be the underlying for some of these products, they will also be the hedge mechanism for market makers as well as market participants looking to hedge their digital or ETF based holdings.

Tim Mccourt: And the second thing to always keep in mind is we also have the CME CF Bitcoin reference rate, which is the underlying for a lot of these ETFs coming to market. So not only will we be added to our futures based volumes as we've seen in other asset classes such as equity, it's also to keep in mind that these products take root and grow in the market. There will be additional revenue generation opportunities from the licensing front as a function of AUM and derived license fees here at CME as the IP owner of the underlying company.

Unknown Executive: Thank you. And there no further question. I'll turn it back over to management for closing remarks. I want to thank you all very much excellent questions today. We appreciate it very much and we wish you a good day and everybody stays safe. Thank you. Thank you, ladies and gentlemen, that does conclude today's call. We thank you for your participation and I ask that you please disconnect your lines. Have a good day. Thank you.