Q2 2024 CME Group Inc Earnings Call

Operator: Thank you for standing by. The call will begin momentarily. Again, thank you for standing by. The call will begin momentarily. [inaudible] At this time, I would like to inform all participants that your lines have been placed on a listen-only mode until the question and answer session of today's conference. I would now like to turn the call over to Adam Minick. Please go ahead.

Operator: Welcome to the CME Group, Second Quarter 2020 for earnings call. At this time, I would like to inform all participants that your lines have been placed on a listen-only mode until the question and answer session of today's conference.

Welcome to the CME Group second quarter 2020 earnings call. At this time, I would like to inform all participants that your lines have been placed on a listen only mode until the question and answer session of today's conference. I would now like to turn the call over to Adam Minick. Please go ahead.

Adam Minick: I would now like to turn the call over to Adam Minick. Please go ahead.

Adam Minick: Good morning. I hope you're all doing well today. We released our executive commentary earlier this morning, which provides extensive details on the second quarter 2024, which we will be discussing on this call.

Adam Minick: Good morning. I hope you're all doing well today. We released our executive commentary earlier this morning, which provides extensive details on the second quarter of 2024, which we will be discussing on this call. I'll start with the safe harbor language, and 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.

Good morning. I hope you're all doing well today. We released our executive commentary earlier this morning, which provides extensive details on the second quarter 2024, which we will be discussing on this call. I'll start with the safe harbor language, and then I'll turn it over to Terry.

Adam Minick: I'll start with the safe harbor language, and 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.

Speaker Change: Statements made on this call and in the other reference documents on our website that are not historical facts are forward-looking statements.

Terry: 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.

Adam Minick: Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website. Lastly, on the final page of the earnings release, you will see a reconciliation between GAAP and non-GAAP measures. With that, I'll turn the call over to Terry. Thank you, Adam, and thank you all for joining us this morning. I'm going to make a few brief comments about the quarter and the overall environment.

Adam Minick: Detailed information about factors that may affect our performance and be found in the filings with the SEC, which are on our website.

Terry: Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website.

Adam Minick: Lastly, on the final page of the earnings release, you will see a reconciliation between GAAP and non-GAAP measures.

Terry: Lastly, on the final page of the earnings release, you will see a reconciliation between GAAP and non-GAAP measures.

Terry: With that, I'll turn the call over to Terry. Thank you, Adam, and thank you all for joining us this morning. I'm going to make a few brief comments about the quarter and the overall environment. Following that, Lin will provide an overview of our second quarter financial results. In addition to Lin, we have other members of our management team present to answer questions after the prepared remarks. Our strong second quarter results again reinforced how the need for risk management continues to grow. And see me group as we're markable participants turned to manage that risk across the most diverse set of benchmark products.

Terry: With that, I'll turn the call over to Terry. Thank you, Adam, and thank you all for joining us this morning. I'm going to make a few brief comments about the quarter and the overall environment. Following that, Lynne will provide an overview of our second quarter financial results.

Adam Minick: Following that, Lynne will provide an overview of our second quarter financial results. In addition, Lynne, we have other members of our management team present to answer questions after the prepared remarks. Our strong second quarter results again reinforced how the need for risk management continues to grow, and CME Group is where market participants turn to manage that risk across the most diverse set of benchmark products.

Speaker Change: In addition, Lynne, we have other members of our management team present to answer questions after the prepared remarks.

Speaker Change: Our strong second quarter results again reinforced how the need for risk management continues to grow. And CME Group is where market participants turn to manage that risk across the most diverse set of benchmark products. We delivered record quarterly revenue.

Terry: We delivered record quarterly revenue driven by year-over-year growth in both average daily volume and open interest across every single asset class. This was the first quarter with such broad-based growth since 2010. Second quarter average daily volume of 25.9 million contracts increased 14% and represented the highest Q2 ADV in our history, including a quarterly record for non-U.S. average daily volume of 7.8 million contracts, or up 23% year-over-year. This robust activity drove record-adjusted quarterly earnings, which Lynne will detail shortly.

Terry: We delivered records quarterly revenue. Driven by year-over-year growth in both average daily volume and open interest across every single asset class. This is the first quarter with this broad-based growth since 2010.

Speaker Change: driven by year-over-year growth in both average daily volume and open interest across every single asset class. This is the first quarter with this broad-based growth since 2010.

Speaker Change: Second quarter average daily volume of 25.9 million contracts increased 14% and represented the highest Q2 ADV in our history.

Speaker Change: including a quarterly record for non-US average daily volume of 7.8 million contracts or up 23% year-over-year. This robust activity drove record adjusted quarterly earnings which Lynne will detail shortly.

Terry: We delivered 16% year-over-year ADV growth across all our physical commodity products to 5.2 million contracts, which included double-digit year-over-year growth for both energy and metals products at 16% and 42%, respectively. Importantly, our overall commodities portfolio has generated record revenue year to date in 2024, up 16% versus the first half of last year to over $836 million, representing 34% of our clearing and transaction fees revenue in the first half of the year.

Lynne: We delivered 16% year-over-year ADV growth across all our physical commodity products to 5.2 million contracts, which included double-digit year-over-year growth for both energy and metals products at 16% and 42% growth, respectively.

Lynne: Importantly, our overall commodities portfolio has generated a record revenue year-to-date in 2024, up 16% versus the first half of last year to over $836 million.

Lynne: representing 34% of our clearing and transaction fees revenue in the first half of the year.

Terry: Turning to our financials, total ADV across the complex increased 13% from Q2 last year, including a record Treasury ADV of 8.2 million contracts, or up 36%. Our U.S. Treasuries set a new daily volume record of 34.4 million contracts during the quarter on May 28.

Lynne: Turning to our financials, total ADV across the complex increased 13% from Q2 last year, including record Treasury ADV of 8.2 million contracts, or up 36%.

Lynne: Our U.S. Treasuries set a new daily volume record of 34.4 million contracts during the quarter on May 28. The continuing high levels of issuance and deficit financing are tailwinds, even in the absence of Fed rate changes.

Terry: The continuing high levels of issuance and deficit financing are tailwinds, even in the absence of Fed rate changes. Also, Foreign Exchange's second quarter ADV grew 20% versus Q2 last year. In addition to our impressive quarterly volume results, we continue to provide unmatched, and I'll say it again, unmatched capital efficiencies for our customers. For interest rates alone, these efficiencies resulted in margin savings of nearly $20 billion per day for our clients through the unique combination of offsets with our rates, futures, and options franchise. Our one-pot margining with CME cleared swaps and cross-margin offsets versus cash treasuries offers clients efficiencies that no one else has the regulatory approval to provide.

Lynne: Also, Foreign Exchange Second Quarter ADV grew 20% versus Q2 last year.

Lynne: In addition to our impressive quarterly volume results, we continue to provide unmatched

Lynne: And I'll say it again, unmatched capital efficiencies for our customers.

Lynne: Within interest rates alone, these efficiencies resulted in margin savings of nearly $20 billion per day for our clients through the unique combination of offsets with our rates, futures, and options franchise.

Lynne: Our one-pot margining with CME cleared swaps and cross-margin offsets versus cash treasuries offers clients the efficiencies which no one else has the regulatory approval to provide.

Terry: Coupled with 13 million interest rate futures and options traded on our exchange on a daily basis, the liquidity depth of book capital savings in our interest rate complex is parallel. While we are pleased with our quarterly results and our ability to consistently deliver quarterly earnings growth, we continue to innovate with an eye toward the long-term needs of our customers. Near the end of the quarter, we were particularly excited to announce a significant step forward in our partnership with Google Cloud.

Lynne: Coupled with 13 million interest rate futures and options traded at our exchange on a daily basis, the liquidity, depth of book, capital savings, and our interest rate complexes...

Lynne: is unparalleled.

Lynne: While we are pleased with our quarterly results and our ability to consistently deliver quarterly earnings growth, we continue to innovate with an eye towards the long-term needs of our customers.

Lynne: Near the end of the quarter, we were particularly excited to announce a significant step...

Terry: I have Ken Broman in the room with me, who will provide more detail during the Q&A period on the integration. We plan to build a new private Google Cloud region and a co-location facility in Aurora, Illinois, designed to support global trading of our futures and options markets in the cloud with next-generation cloud technology, ultra-low latency networking, and high-performance. This next-generation platform will build on the benefits we provide our clients today through a broader range of connectivity options and faster product development. In addition to our state-of-the-art trading infrastructure, our clients will also be able to utilize Google's artificial intelligence and data capabilities to help develop, test, and implement trading strategies to manage their risk more efficiently.

Lynne: forward in our partnership with Google Cloud.

Kenneth Brooks Worthington: I have Ken Broman in the room with me who will provide more detail during the Q&A period on the integration.

Speaker Change: Google Cloud Region, and a co-location facility in Aurora, Illinois, designed to support global trading of our futures and options markets in the cloud with next-generation cloud technology, ultra-low-latency networking, and high-performance computing.

Speaker Change: This next generation platform will build on the benefits we provide our clients today through a broader range of connectivity options and faster product development.

Speaker Change: In addition to our state-of-the-art trading infrastructure, our clients will also be able to utilize Google's artificial intelligence and data capabilities to help develop, test, and implement trading strategies to manage their risk more efficiently.

Terry: Finally, as we begin the second half of the year looking at the uncertainty around the U.S. political landscape, with the disparity of opinions and policies, the need to mitigate and manage risk has never been more paramount. On top of that, the ongoing uncertainty in the Middle East, coupled with unrest between Russia and Ukraine, are continuing issues with no end in sight that markets definitely need to manage. These are just a few of the geopolitical events that highlight the need for our risk management products.

Speaker Change: Finally, as we begin the second half of the year, looking at the uncertainty around the U.S. political landscape.

Speaker Change: With the disparity of opinions and policies, the need to mitigate and manage risk has never been more paramount. On top of that, the ongoing uncertainty in the Middle East, coupled with unrest between Russia and Ukraine, are continuing issues with no end in sight.

Speaker Change: That market's

Speaker Change: Definitely need to manage. These are just a few of the geopolitical events that highlight the need for our risk management products. We look forward to working with our clients to make sure that they have the most liquid and efficient markets to manage these issues and all the others we encounter in this world. I'll now turn the call over to Lynne to review our Q2 financial results.

Terry: We look forward to working with our clients to make sure that they have the most liquid and efficient markets to manage these issues and all the others we encounter in this world. I'll now turn the call over to Lynne to review our Q2 financial results. Thanks, Terry, and thank you all for joining us this morning. CME Group delivered the strongest earnings in our history this quarter.

Lynne: Thanks, Terry, and thank you all for joining us this morning.

Lynne: CME Group delivered the strongest earnings in our history this quarter.

Lynne: Starting with the highest-ever quarterly revenue at over $1.5 billion, up 13% from the second quarter of 2023. Quarterly revenue for our physical commodities asset classes grew 17% year-over-year and represented over one-third of Clarion transaction fees in the quarter at $444 million. Market data revenue of $175 million increased 7% from the same quarter last year, and other revenue increased over 35% to $107 million. Continued strong cost discipline led to adjusted expenses of $474 million for the quarter and $388 million, excluding license fees.

Lynne: Starting with the highest ever quarterly revenue at over $1.5 billion, up 13% from the second quarter in 2023.

Lynne: Quarterly revenue for our Physical Commodities Asset Classes grew 17% year-over-year and represented over one-third of Clarion transaction fees in the quarter at $444 million.

Lynne: Market data revenue of $175 million increased 7% from the same quarter last year, and other revenue increased over 35% to $107 million.

Lynne: Continued strong cost discipline led to adjusted expenses of $474 million for the quarter and $388 million excluding license fees. Our adjusted operating margin was 69.1%, up from 66.8% in the same period last year.

Lynne: Our adjusted operating margin was 69.1%, up from 66.8% in the same period last year, and we had an adjusted effective tax rate of 23.1%. Driven by the robust demand for our risk management products, we delivered the highest quarterly adjusted net income and earnings per share in our history at $932 million and $2.56 per share, both up 11% from the second quarter last year. This represents an adjusted net income margin for the quarter of 61%. Capital expenditures for the second quarter were approximately $17 million, and cash at the end of the period was approximately $2 billion.

Lynne: CME Group had an Adjusted Effective Tax Rate of 23.1%.

Lynne: Driven by the robust demand for our risk management products, we delivered the highest quarterly adjusted net income and earnings per share in our history at $932 million and $2.56 per share, both up 11% from the second quarter last year.

Lynne: This represents an adjusted net income margin for the quarter of 61%.

Lynne: Capital expenditures for the second quarter were approximately $17 million, and cash at the end of the period was approximately $2 billion.

Lynne: CME Group paid dividends during the quarter of $419 million, and we've returned over $25 billion to shareholders in the form of dividends since implementing the Variable Dividend Policy in early 2012. A consistent, higher level of demand for our products continued in the second quarter, evidenced by 52% of our trading days being above 25 million contracts in the first half of this year, compared to 34% in the first half of 2023. In addition, four of the first six months of this year set all-time volume records, including all three months this quarter.

Lynne: CME Group paid dividends during the quarter of $419 million, and we've returned over $25 billion to shareholders in the form of dividends since implementing the Variable Dividend Policy in early 2012.

Lynne: A consistent, higher level of demand for our products continued in the second quarter, evidenced by 52% of our trading days being above 25 million contracts in the first half of this year, compared to 34% in the first half of 2023.

Lynne: In addition, four of the first six months this year set all-time volume records, including all three months this quarter.

Lynne: We're very proud of the team for their efforts to efficiently run the business, driving earnings growth for our shareholders, while also focusing on the future and providing our clients with the risk management products and capital efficiencies they need as our industry continues to evolve. We'd now like to open the call to your questions. Thank you. We will now begin our question and answer session. If you would like to ask a question, please press star 1. Please press star 2 if you would like to withdraw your question. Again, that is Star 1 to F. Our first question comes from Patrick Moley with Piper Sandler. Your line is open. Yes, good morning.

Speaker Change: We're very proud of the team for their efforts to efficiently run the business, driving earnings growth for our shareholders, while also focusing on the future and providing our clients with the risk management products and capital efficiencies they need as our industry continues to evolve. We'd now like to open the call for your questions.

Patrick Malcolm Moley: Thanks for taking the question. So I think I think it was the first time today that you disclosed that aggregate amount of daily margins. 20 billion. Can you maybe just elaborate or provide a breakdown of how that Transcripts provided by Transcription Outsourcing LLC. Patrick, thank you for your question. Sunil Cutinho is going to answer the first part of that.

Speaker Change: Thank you. We will now begin our question and answer session. If you would like to ask a question, please press star 1. Please press star 2 if you would like to withdraw your question. Again, that is star 1 to ask a question. Our first question comes from Patrick Moley with Piper Sandler. Your line is open.

Patrick Malcolm Moley: Yes, good morning. Thanks for taking the question. So I think it was the first time today that you disclosed that aggregate amount of daily margin savings of $20 billion. Can you maybe just elaborate or provide a breakout of how that

Speaker Change: split between the buckets.

Speaker Change: Margining Buckets, Cross Margining, Portfolio Margining

Speaker Change: And then could you also maybe just help investors understand how that compares to what the competitor is offering and what type of moat that provides you?

Speaker Change: When we think about, you know, your customers potentially looking elsewhere. Thanks.

Sunil Cutinho: Suzanne Sprague is out sick today, so Sunil, as you know, headed up our Clearinghouse for many, many years, and she was very informed on that question. I will answer the latter part of that question as it relates to the competitor and what they offer, because it will be a short one, but go ahead, Sunil. Um, you know, the same clients trade both futures and options, swaps, and cash products. So the rough split is around $12 billion for futures and options.

Speaker Change: Patrick, thank you for your question. Sunil Cutinho is going to answer the first part as Suzanne Sprague is out sick today. So Sunil, as you know, headed up our Clearinghouse for many, many years, who is very informed on that question. I will answer the latter part of that question as it relates to the competitor and what they offer, because it'll be a short one, but go ahead, Sunil.

Sunil Cutinho: The same clients trade both futures, options, swaps, and cash products, so the rough split is around $12 billion for futures and options, $7 billion for swaps with futures and options, and then $1 billion including the cash products.

Sunil Cutinho: $7 billion for swaps with futures and options, and then $1 billion including the cash flow. Patrick, if you're referring to a competitor such as people who have announced they're going to compete with us, their efficiencies are exactly zero. They don't have any futures business, so they can't have any efficiencies to date. So I don't know what you want me to do, speculate on what you think they're going to get or not get. But the answer to your question: they have zero efficiency. Sunil?

Speaker Change: Patrick, if you're referring to a competitor such as...

Speaker Change: People who have announced they're going to compete with us, their efficiencies are exactly zero. They don't have any futures business, so they can't have any efficiencies to date. So, I don't know what you want me to do, speculate on what you think they're going to get or not get, but the answer to your question, they have zero efficiencies.

Terry: The only other, additional thing I would add is our competition cannot provide any efficiencies relative to options either. Correct. It's very unique.

Sunil Cutinho: Sunil? The only other, an additional thing I would add is our competition cannot provide any efficiencies relative to options either. Correct. It's very unique to CME.

Patrick Malcolm Moley: Okay, great. And maybe just one on the pricing increases you announced at the beginning of the year. I think you said you expected market data revenues to increase by three to five percent and then one to two or one and a half to two percent bump in futures revenues. Could you maybe just update us on how you're feeling about, you know, how you're tracking towards that? And, you know, with half the year behind us, do you have any sense of where you could maybe come in directionally within those ranges? Thanks. Thanks, Patrick. Lynne?

Sunil Cutinho: Okay, great. And maybe just one on...

Speaker Change: On the pricing increases you announced at the beginning of the year, I think you said you expected...

Speaker Change: MarketDataRevenues.

Speaker Change: increase by three to five percent and then one to two or one and a half to two percent bump.

Speaker Change: In futures revenues, could you maybe just update us on how you're feeling about, you know, how you're tracking towards that? And, you know, with half the year behind us, you have a sense of where you can maybe come in directionally within those ranges? Thanks.

Lynne: Yeah, so thanks, Patrick. So far, in the first half, we're very consistent with the guidance. So we said 1.5% to 2% on the clearing and transaction fees, 3% to 5% on the various data products, and then getting to a total revenue impact of somewhere between 2.5% to 3%. And I would say that we're tracking very well on each of those line items through the first half. Okay, great. Thanks for that. I'll hop back in the queue.

Speaker Change: Thanks, Patrick. Lynne? Yeah, so thanks, Patrick. So far in the first half, we're very consistent with the guidance, so we said one and a half to two percent on the clearing and transaction fees.

Speaker Change: 3% to 5% on the various data products, and then getting to a total revenue impact of somewhere between 2.5% to 3%, and I would say that we're tracking very well on each of those line items through the first half.

Speaker Change: Okay, great. Thanks for that. I'll hop back in the queue.

Benjamin Elliot Budish: Our next question comes from Ben Budish with Barclays. Your line is open. Hi, good morning, and thanks for taking the question. Maybe just following up on Patrick's first question, can you give us an update on where you are with the DTCC cross-margining program?

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Ben Budish with Barclays. Your line is open.

Benjamin Elliot Budish: You know, how are efficiencies looking there versus what you've kind of been signaling? And where are you in the process of getting to where you think you'll be getting? Thanks Ben. Again, I'm going to turn to Sunil with that answer. Sunil?

Benjamin Elliot Budish: Hi, good morning, and thanks for taking the question. Maybe just following up on Patrick's first question, can you give us an update on where you are with the DTCC cross-margining program? You know, how are efficiencies looking there versus what you've kind of been signaling, and where are you in the process of getting to where you think you'll be getting to?

Benjamin Elliot Budish: Thanks, Ben. Again, I'm going to turn to Sunil with that answer. Sunil?

Sunil Cutinho: We have 10 clearing participants taking advantage of it, and we have a few more in the pipeline that will be onboarded shortly. And as I mentioned before, we have grown to about a billion in savings, and we'll continue to grow that. We are also working on trying to provide efficiencies all the way to indirect participants, but that would require approval with the HSI. So the savings Ben has gone up exponentially since we last reported out last quarter.

Sunil Cutinho: We have 10 clearing participants taking advantage of it. We have a few more in the pipeline that will be onboarded shortly. And as I mentioned before, we have grown to about a billion in savings, and we'll continue to grow that.

Speaker Change: We are also working on trying to provide efficiencies all the way to indirect participants, but that would require an approval with the HSE.

Speaker Change: So the savings...

Benjamin Elliot Budish: Ben has gone up exponentially since we last reported out last quarter, so that number hitting a high watermark of near a billion is a record for us.

Benjamin Elliot Budish: So that number, you know, hitting a high watermark next year, a billion is a record for us. And maybe just a follow-up on the energy side, you published a white paper recently talking about the increasing use of WTI and setting the price of Brent and how you were seeing, I think, an increasing amount of WTI trading happening during European hours. Could you just talk, unpack that a little bit?

Speaker Change: Okay, that's very helpful. And maybe just a follow-up on the energy side. You published a white paper recently talking about the increasing use of WTI and setting the price of Brent and how that you were seeing, I think, an increasing amount of WTI trading happening during European hours. Could you just talk, unpack that a little bit? Are you seeing, you know, new customers joining the platform? Is it, you know, taking share from existing customers that may have been previously trading on other exchanges? Any other color there would be helpful. Thank you.

Derek: Are you seeing new customers joining the platform? Is it taking a share from existing customers that may have been previously trading on other exchanges? Any other colors there?

Derek: Thanks, Ben. Derek. Yeah, thanks Ben. As you heard Terry mention at the start of the call, we set a record revenue for the first half of this year on the commodity side. Energy is a big part of that. Our overall energy volumes are up 16% this year to 2.4 million contracts. We've also seen our open interest grow 20% as well. When you look at our WTI business, as we've said, with record amounts of U.S. crude oil out in the market, both on the production side and the export side, that's creating net new exposures for non-U.S. customers on the WTI side.

Derek: Thank you, and Derek.

Derek: Yeah, thanks, Ben. As you heard Terry mention at the top of the call, we set a record revenue this year for the first half on the commodity side. Energy is a big part of that. Our overall energy volumes are up 16% this year.

Derek: 2.4 million contracts. We've also seen our open interest grow about 20% as well. When you look at our WTI business,

Speaker Change: As we've said, with record amounts of U.S. crude oil out in the market, both on the production side and export side, that's creating net new exposures for non-U.S. customers.

Derek: When you look at where this growth is coming from our WTI complex, we actually see that our energy volume across EMEA is up 53%. So European volumes from European customers are up 53% this year. Just on the WTI futures side, that's up 42% from the European customer base. So, as we expected, as physical U.S. oil hits the global market, we're expecting to see customers that were not directly exposed to U.S. crude oil imports in Europe now using WTI products to manage that risk.

Speaker Change: On the WTI side, when you look at where this growth is coming from in our WTI complex, we actually see that our energy volume across EMEA is up 53%, so European volumes from European customers up 53% this year.

Speaker Change: Just on the WTI future side, that's up 42% from European customer base.

Speaker Change: As we expected, as physical U.S. oil.

Speaker Change: It's the global market. We're expecting to see customers that were not directly exposed to U.S. crude oil imports in Europe now using WTI products to manage that risk.

Simon Alistair Vaughan Clinch: We're seeing that most acutely on the options side as well, where WTI options are up 23% this year. As it relates to kind of the share and where that's coming from, we're seeing net new customer growth on the WTI side in Europe, but we're also seeing shares between our WTI and the competitor's WTI basically going back seven months now to December of last year. And actually, in options, we're seeing our share increase to 89% and 86%. So we're growing in absolute terms, we're growing in relative terms, and we continue to see that growth. Thanks, Derek.

Speaker Change: We're seeing that most acutely on the options side as well, where WTI options is up 23% this year. As it relates to kind of the share and where that's coming from, we're seeing net new customer growth on the WTI side in Europe , but we're also seeing shares between our WTI and the competitors WTI basically flat, going back seven months now to December of last year. And actually in options, we're seeing our share increase.

Speaker Change: 89% and 86%. So we're growing in absolute terms, we're growing in relative terms, and we continue to see that growing.

Simon Alistair Vaughan Clinch: Thanks, Ben. Thank you. Our next question comes from Simon Clinch with Redburn Atlantic. Your line is open.

Benjamin Elliot Budish: Thanks, Derek. Thanks, Ben. Thank you.

Speaker Change: Thank you. Our next question comes from Simon Clinch with Redburn Atlantic. Your line is open.

Simon Alistair Vaughan Clinch: Hi, thanks for taking my question. I was wondering if we could cycle back to the prospect of competition here, and I was wondering if you could expand on the levers you would consider pulling and what kind of signals you'd be looking for as you respond to competitive effects going forward. Just maybe you can reference, you know, how that's been done historically, because this has always been a competitive market. Simon, your question is, what are we going to do if they actually launch?

Simon Alistair Vaughan Clinch: Hi, thanks for taking my question.

Simon Alistair Vaughan Clinch: I was wondering if you could, let me cycle back to the prospect of competition here, and I was wondering if you could expand on the levers you would consider pulling

Simon Alistair Vaughan Clinch: and what kind of signals you'll be looking to as you respond to competitive effects going forwards. And maybe you can reference how that's been done historically because this has always been a competitive market.

Terry: And what are we going to do if they actually get business? I'm confused by what you're asking. No, it's more a case of what would you be looking for?

Simon Alistair Vaughan Clinch: Thanks.

Simon Alistair Vaughan Clinch: Simon, is your question, what are we going to do if they actually launch and what are we going to do if they actually get business? I'm confused what you're asking. No, it's more a case of what would you be looking for in terms of what they might do and how you might think about responding to those signals.

Simon Alistair Vaughan Clinch: And in terms of what they might do and how you might think about, you know, responding to them. I made it perfectly clear on the last call that we have done a number of things over the last eight to ten years to put ourselves in the strongest position possible. I could not cite the numbers of $20 billion if we didn't make the investments we have made over a long period of time to create efficiencies for our client base.

Speaker Change: I made it perfectly clear on the last call that we have done a number of things over the last eight to ten years to put ourselves in the strongest position possible.

Speaker Change: I could not cite the numbers of $20 billion if we didn't make the investments we have made over a long period of time to create the efficiencies for our client base. And that is something that is unparalleled, as I said, in the industry.

Simon Alistair Vaughan Clinch: And that is something that is unparalleled, as I said, in the industry. We are in a very strong position today, so to walk away from a potential 20 billion dollars in margin savings on a daily basis to go to an unproven model seems to be a bit of a fiduciary stretch for people to direct business in that venue. So we are in a strong position today to compete with anybody, including the announced Competitors. And so this is something that we've always been prepared for. We are always prepared for them. And I do believe competition always makes everybody better. So I take everything seriously.

Speaker Change: We are in a very strong position today, so to walk away from a potential $20 billion of margin savings on a daily basis, to go to an unproven model...

Speaker Change: Seems to be a bit of a fiduciary stretch for people to direct business in that in that venue So we are in a strong position today to compete with anybody including the announced

Terry: And that's the reason why we've made the investments we have for our clients along the way. That's what we did. And that's what we'll continue to do. First purpose question: that those are additional steps. I have to wait and see what they're going to offer. Here, let me be clear. There's no approval for anybody to list in the United States.

Speaker Change: Competitors

Speaker Change: And so, this is something that we've always been prepared for, we always are prepared for, and I do believe competition always makes everybody better. So, I take everything seriously, and that's the reasons why we've made the investments we have for our clients along the way. That's what we've done, and that's what we'll continue to do.

Speaker Change: First part of his question?

Speaker Change: Thank you.

Speaker Change: Those are additional steps. I have to wait and see what they're going to offer.

Speaker Change: Here, let me be clear.

Speaker Change: There's no approval.

Speaker Change: For anybody.

Terry: Foreign Sovereign Debt, and clear that U.S. foreign sovereign debt and another legal jurisdiction outside of the United States. There's $27 trillion of outstanding debt in treasuries that the U.S. Treasury and the United States government depend on to run this country under the rules of the United States, not under the rules of the United Kingdom or the Bank of England. So we will wait and see how that progresses, if that offering goes anywhere.

Speaker Change: to list in the United States.

Speaker Change: Foreign Sovereign Debt

Speaker Change: And clear that U.S. foreign sovereign debt.

Speaker Change: and another legal jurisdiction outside of the United States.

Speaker Change: There's $27 trillion of outstanding debt in treasuries that the U.S. Treasury and United States government depends on to run this country under the rules of the United States, not under the rules of the United Kingdom or the Bank of England.

Speaker Change: So, we will wait and see how that proceeds, if that offering goes anywhere. I think there's a lot of concern about giving up jurisdiction.

Terry: I think there's a lot of concern about giving up jurisdiction to a nation the size of Great Britain with some of the track records they've had with LME and some other issues they've gone forward with. So we'll have to wait and see, Simon. So I don't want to put the cart before the horse, but I think there's a long way to go before that's even decided what you can and cannot do. That's why the efficiencies are zero, and they'll stay zero.

Speaker Change: to a nation the size of Great Britain with some of the track records they've had with LME and some of their other...

Speaker Change: issues they've gone forward with. So we'll have to wait and see, Simon. So I don't want to put the cart in front of the horse, but I think there's a long way to go before that's even been decided, what you can and cannot do. That's why the efficiencies are zero, and they'll stay zero.

Simon Alistair Vaughan Clinch: I appreciate that. Thanks very much, Terry. I mean, just as a follow-up question. We're going back to the pricing dynamics in futures and options. Could you just expand on what's really going on from a mixed perspective in RPC, particularly in rates?

Simon Alistair Vaughan Clinch: No, I appreciate that. Thanks very much, Terry. I mean, just as a follow-up question,

Speaker Change: Just going back to the pricing dynamics in futures and options, could you just expand on what's really going on from a mixed perspective in RPC, particularly in rates? I've just noticed that we're back to sort of year-on-year.

Simon Alistair Vaughan Clinch: And I just noticed that we're back to sort of year-on-year declines, and despite the what should ultimately be a positive mixed shift towards long-term rates within that franchise. And I'm just trying to piece that together.

Speaker Change: declines and despite what should ultimately be positive mix shift towards the long-term rates within that franchise and I'm just trying to piece that together. Thanks.

Simon Alistair Vaughan Clinch: Thanks. I'll take the pricing piece. So, Simon, are you looking at the year-over-year rates for RPC in total? That's your question? The decline there? In total, yes.

Speaker Change: Yep.

Speaker Change: So, Simon, you're looking at the year-over-year race RPC in total, that's your question, the decline there? In total, yes, and the impact from rates as well, wouldn't that, yes.

Lynne: And the impact from rates as well, wouldn't that, yes? So if you look at rates on a year-over-year basis, they were up 14% volume-wise. So you are going to see some pressure, downward pressure, from the increased volume tiering. You also have a higher contribution from treasuries, which is positive, but you do have higher members this quarter, and you do have a decrease in some of the block volume that we saw last year.

Lynne: So there's a number of factors at play there. I would say the most impactful is probably that 14% uplift in volume, which is going to put that downward pressure on the RPC, but still a strong revenue growth number for the rates complex, given that volume growth. Okay, that's really useful.

Speaker Change: So if you look at rates on a year-over-year basis, they were up 14% volume-wise. So you are going to see some pressure, downward pressure, from the increased volume tiering.

Speaker Change: You also...

Speaker Change: have a higher contribution of treasuries, which is a positive.

Speaker Change: But you do have higher members this quarter, and you do have a decrease in some of the block volume that we saw last year. So there's a number of factors at play there. I would say the most impactful is probably that 14% uplift in volume, which is going to have that downward pressure on the RPC, but still a strong revenue growth number for the rates complex, given that volume growth.

Speaker Change: Okay, that's really useful. Thank you.

Lynne: Thank you. Thank you. Our next question comes from Dan Fannon with Jeffries. Your line is open. Thanks. Good morning.

Speaker Change: Thank you. Our next question comes from Dan Fannon with Jeffries. Your line is open.

Daniel Thomas Fannon: I was hoping, Lynne, just to talk about expenses for a bit. First half run rate, you know, is tracking well below the guidance. www.google.com. Sure, Dan, happy to. So, yes, the guidance. We are still comfortable with a full year guidance that would imply about a 60 million increase in the back half of the year versus what we saw in the first half. There are a few things to keep in mind. You mentioned the typical uplift in our marketing and events spend in the fourth quarter. That is going to continue.

Daniel Thomas Fannon: Thanks, good morning. I was hoping, Lynne, just to talk about expenses for a bit. First half run rate, you know, is tracking well below the guidance, you know, typical seasonality of that building in the second half, so hoping you could flush out a bit.

Speaker Change: of what you're spending on, and then also the new co-location facility that you announced in partnership with Google. Just thinking about that in terms of what that means from an expense and or investment perspective versus, you know, the guidance that you've kind of talked about in terms of that Google partnership over time.

Daniel Thomas Fannon: But you also have other items where we are spending more on things like some retail marketing, as we're supporting some new brokers that are coming into that space. Another piece of that increase is going to be around the Google migration, so some of the cloud consumption. You will see increases in our technology line item. You've started to see that in the past few quarters.

Speaker Change: Sure, Dan, happy to. So, yes, the guidance, we are still comfortable with the full year guidance.

Speaker Change: That would imply about a $60 million increase in the back half of the year versus what we saw in the first half.

Speaker Change: There's a few things to keep in mind. You mentioned the typical uplift in our marketing and event spend in the fourth quarter. That is going to continue, but you also have other items where we are spending more on things like some retail marketing as we're supporting some new brokers that are coming into that space.

Speaker Change: Another piece of that increase is going to be around...

Speaker Change: The Google Migration, so some of the cloud consumption.

Speaker Change: You will see increases in our technology line item. You're starting to see that in the past few quarters. You will continue to see that as we go through the balance of the year. As we move more applications into the cloud, you will see more of that consumption spend.

Lynne: You will continue to see that as we go through the balance of the year. As we move more applications into the cloud, you will see more of that consumption spend. Now, remember, the offset is we are spending less on CapEx, and you're seeing that come out of depreciation as well. The other things to keep in mind are some of the project-based work on things like the treasury clearing project that we've announced, and the balance of that increase is going to be in compensation.

Speaker Change: Now remember, the offset is we are spending less on CapEx, and you're seeing that come out of depreciation as well.

Speaker Change: The other things to keep in mind are some of the project-based work on things like the Treasury Clearing project that we've announced, and the balance of that increase is going to be in compensation. So we remain comfortable with that increase, and it's a number of factors beyond just the typical marketing spend in the fourth quarter that we've seen in the past.

Lynne: So we remain comfortable with that increase, and there are a number of factors beyond just the typical marketing spend in the fourth quarter that we've seen in the past. Tim, do you want to talk more about the second part of you? Thanks, Terry. This is Ken Vroman.

Speaker Change: Tim, you want to talk more about the market?

Kenneth Brooks Worthington: Maybe just a little bit of context on what's next with respect to Google. We're very excited about what we announced and what Terry alluded to. This is a one-of-a-kind, purpose-built facility for CME that will provide scale and resiliency to our customer base, at the same time allowing markets to operate in the cloud, not next to the cloud, in the cloud. And we think there's an innovative amount of engineering that went into delivering ultra-low latency capabilities in the cloud that will allow our customers to take advantage of that for both scale, efficiency, new products, and new services.

Tim: And the second part of you, go ahead.

Ken: Or Ken, I'm sorry.

Kenneth Brooks Worthington: Thanks, Terry. This is Ken Vroman. Maybe just a little bit of context on what's next with respect to Google. We're very excited about what we announced, and Terry alluded to.

Speaker Change: One-of-a-kind, purpose-built for CME facility that will provide scale and resiliency to our customer base, at the same time allowing markets to operate in the cloud, not next to the cloud, in the cloud.

Speaker Change: And we think there's an innovative amount of engineering that went into delivering ultra-low latency capabilities in the cloud that will allow our customers to take advantage of that for both scale, efficiency.

Kenneth Brooks Worthington: So with respect to that, we're very excited about it. We've extended our relationship with Google that goes out as far as 2037 to ensure that we have plenty of time to burn in this capability. So for Next, for us, we are in a process. We're now reaching out and working with our customers to drive that iteration and make sure that we get the technology and the ecosystem correct as we build the facility out in Aurora.

Speaker Change: New products and and new services. So with respect to that, we're very excited about that We've extended our relationship with Google that goes out as far as 2037 to ensure that we have plenty of time

Speaker Change: to to to burn in this capability so for next for us we are in a process we're now reaching out and working with our customers

Speaker Change: to drive that, you know, iteration and make sure that we get the technology and the ecosystem correct as we build the facility out in Aurora. At the same time, in parallel to that, and related to some of the things Lynne's talking about, we are migrating

Kenneth Brooks Worthington: At the same time, in parallel to that, and related to some of the things Lynn's talking about, we are migrating our core business, our regular non-ultra-low latency business, to the cloud. We have received approval from the CFTC to run clearing in the cloud.

Speaker Change: Our core business, our regular non-ultra-low-latency business to the cloud, we received

Owen Lau: We expect to be running cycles shortly in the cloud with respect to our business, and other non-ultra-low latency applications will go there as well. We're about two-thirds of the way through that migration and continue to make great progress. And just to finish, Stan, on the expense piece of that, it doesn't have an impact on the current guidance, and we will layer in any impact in the later years as we give the guidance going forward. So, no impact yet on our financial guidance from the COLO facility. Great, thanks for taking my question. Thanks, Tim. Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Speaker Change: Approval from the CFTC to run clearing in the cloud. We expect to be running cycles shortly in the cloud with respect to our business and other non ultra low latency applications will go there. We're about two-thirds of the way through that migration and continue to make great progress with respect to it.

Speaker Change: And just to finish, Stan, on the expense piece of that, it doesn't have an impact on the current guidance, and we will layer in any impact in the out years as we give the guidance going forward. So no impact yet on our financial guidance from the COLO facility.

Stan: Great, thanks for taking my questions.

Tim: Thanks, Dan.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Terry: Hey, good morning, and thank you for taking my question. So it's a broad question and go back to Terry's comment about the upcoming election. Um, I know you have many asset classes, but I want to hear more about how the upcoming election and potential change in administration could impact CME over the next 12 to 24 months. Is it mainly because of volatility, or there's some potential secular trend that we may not see?

Owen Lau: Hey, good morning, and thank you for taking my question.

Speaker Change: So it's a broad question and go back to Terry's comment about the upcoming election.

Owen Lau: I know you have many different asset classes, but I'm interested to hear more about how does the upcoming election and potential change in administration could impact CME over the next 12 to 24 months. Is it mainly because of volatility or there's some potential secular trend that we may not fully appreciate? Thanks.

Terry: Oh, and again, this is speculation, so we have to be very careful here. Depending on who assumes the White House, will it be the same policies that we've seen over the last several years, or will it be a new administration with President Trump coming back in and putting his agenda in place?

Speaker Change: Oh, and again, this is speculation, so we have to be very careful here.

Speaker Change: Depending on who assumes the White House – is it the same policies that we've seen over the last several years, or is it a new administration with President Trump coming back in and putting his agenda in place? You know what his agenda is – for less regulation, less taxes.

Terry: You know what his agenda is, for less regulation, less taxes, things of that nature, more security for the country, and attention to more domestic issues to try to eliminate those. So the question will be, what does that have to do with markets? I think regardless of who sits in the White House, the uncertainty, as I said in my opening comments, is there, and markets are going to need to manage that risk, because no matter what people say on the campaign trail and what they do once they assume office are normally two different things, and if you look at history, you'll find that to be a fact.

Speaker Change: More security for the country, pay attention to more domestic issues to try to

Speaker Change: Eliminate those. So the question will be, what does that have to do with markets? I think regardless of...

Speaker Change: Who sits in the White House? The uncertainty, as I said in my opening comments, is there.

Speaker Change: And markets are going to need to manage that risk, because no matter what people say on the campaign trail and what they do, once they assume office, are normally two different things, and if you look at history, you'll find that to be a fact. It's very difficult to follow through with some of the rhetoric that you say on the campaign trail. So markets get very...

Terry: It's very difficult to follow through with some of the rhetoric that you say on the campaign trail. So markets get very skittish one way or another, get excited one day, not so excited the next. Is President Trump going to sit on the Fed or make fun of the Fed like he did before to try to get them to take rates down, or does the Fed stay independent like he has, which I think he's done a great job of doing?

Speaker Change: Skittish one way or another, get excited one day, not so excited the next.

Speaker Change: Is President Trump going to sit on the Fed or make fun of the Fed like he did prior?

Speaker Change: The two tried to get them to take rates down as the Feds stay independent like he has, which I think he's done a great job of doing. So there's a lot out there about pressure and rhetoric, so we're going to have to wait and see.

Terry: So there's a lot out there about pressure and rhetoric, so we're going to have to wait and see. You know, we've had a man, if he does have a change of administration, he's had four years in the office, and if he does reassume that office, I think he'll have a whole new cabinet, and obviously a new cabinet with new people around him that could, the advice might be completely different than the first four, and if in fact the current vice president assumes the office, we know where the administration has been, and so I don't think there's any surprises there.

Speaker Change: You know, we've had a man, if he does have a change of administration, he's had four years in the office.

Speaker Change: And if he does reassume that office, I think he'll have a whole new cabinet, and obviously a new cabinet with new people around him that could, the advice might be completely different than the first four.

Speaker Change: And if, in fact, the current vice president assumes the office, we know where the administration has been, and so I don't think there's any surprises there. So that's the best way I can look at it.

Terry: So that's the best way I can look at it and say that I think overall the volatility issue with the markets, because the U.S. is the dog that wags the tail around the world, is going to be very important. We saw what happened in France with a bit of a surprise; we saw what happened in the U.K. with a bit of a surprise.

Speaker Change: and say that I think overall the volatility issue with the markets because the U.S. is the dog that wags its tail around the world.

Speaker Change: is going to be very important. We saw what happened in...

Speaker Change: In France with a bit of a surprise, we saw what happened. In the UK with a bit of a surprise.

Terry: Markets need to pay attention to this because it has long-term effects on it. So again, we've got to get rid of the rhetoric, see who wins, and then we'll move forward, but that's how the markets need to manage it. Lyn?

Speaker Change: Markets need to pay attention to this because it has long-term effects on it. So again, we've got to get rid of the rhetoric, see who wins, and then we'll move forward. But that's how the markets need to manage it. Lynne.

Lynne: Yeah, and oh, and I would just add that regardless of that dynamic, we're seeing a lot of this volatility play out in our markets today. So we talked about the records in the quarter, the fact that all six asset classes were up in both volume and open interest. If you look at it on a year-to-date basis, we have that same trend.

Lynne: Oh, and I would just add that...

Speaker Change: Regardless of that dynamic, we're seeing a lot of this volatility play through in our markets today. So we talked about the records in the quarter, the fact that all six acts of the classes were up in both volume and open interest.

Lynne: So July has continued to be strong, running 20 percent ahead of last July, trending towards an all-time record if these levels hold, and we're continuing to see that year-to-date across all six asset classes. The volumes are up, and the open interest is up, and that's something that's fairly unusual. Typically, it won't be such a broad-based use of our product, but we are seeing that people need this risk management in this current environment across all of the offerings that we have.

Speaker Change: If you look on a year-to-date basis, we have that same trend. So July has continued to be strong, running 20% ahead of last July .

Speaker Change: Trending towards an all-time record if these levels hold and we're continuing to see that year-to-date across all six asset classes The volumes are up and the open interest is up and that's something that's fairly unusual. Typically, it won't be such a broad-based

Speaker Change: We are seeing that people need this risk management in this current environment across all of the offerings that we have.

Lynne: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host. You will change how you approach your capital allocation priority and acquisition strategy if the situation persists or not at all. I think we got your question, but it came through a little bit scrambled.

Speaker Change: And then my follow-up is about, maybe about the stock, I mean, the company continues to have record quarter, but the stock has been under pressure this year because of the interest rate and competition narrative.

Speaker Change: Will it change how you approach your capital allocation priority and acquisition strategy if the situation persists or not at all? Thanks.

Owen Lau: But your question was about capital return, and then your question was about the pressure on the market. Is it due to announced competition? Or is it due to Fed policy? Is that fair?

Speaker Change: I think we got your question. It came through a little bit scrambled, but your question was about, I think, capital return and then your question was the pressure on the market. Is it due to announced competition or is it due to Fed policy? Is that fair?

Lynne: I would say that the stock has been under pressure, even though you continue to achieve record quality, because companies have never, I mean, how is that dynamic? The Fifth Dynamic changed how you... Okay, so Lynne's going to go ahead and start, and then I'll jump in for capital return. Yeah, so certainly, you know, we have seen the disconnect between record performance and the stock price, and certainly, you know, we continue to do what we can on the performance side to help that equation. On capital return policy, it's something that we consistently look at.

Speaker Change: I would say that the stock has been under pressure even though you continue to achieve record quarterly because of, I mean, because of the companies in there. I mean, how does that dynamic, does this dynamic change how you approach your capital allocation priority? I think that's the question.

Speaker Change: [inaudible]

Speaker Change: Thank you.

Speaker Change: Okay, so Lynne's going to go ahead and start and then I'll jump in.

Lynne: that will return.

Lynne: Yeah, so certainly, you know, we have seen the disconnect between the record performance and the stock price and certainly, you know, we continue to do what we can on the performance side to help that equation.

Lynne: It is something we are undergoing a new review on again. It's something that we do periodically as good stewards of the capital to make sure we're returning that capital to shareholders in the most effective manner. So we'll be continuing to go through that process, and, you know, should anything change, we'll certainly... Communicate with both shareholders and the analyst community.

Lynne: On the capital return policy, it's something that we consistently look at. It is something we are undergoing a new review on again. It's something that we do periodically.

Lynne: As good stewards of the Capitol to make sure we're...

Lynne: Returning that capital to shareholders in the most effective manner, so we'll be continuing to go through that process and you know should anything change we'll certainly communicate with both shareholders and the analyst community.

Speaker Change: Got it. Thanks.

Owen Lau: Thanks. Thanks, Owen. Thank you. Our next question comes from Chris Allen with Citi. Your line is open. Good morning, everyone.

Lynne: Thanks, Owen.

Speaker Change: Thank you. Our next question comes from Chris Allen with Citi. Your line is open.

Christopher John Allen: Thanks for taking the question. I wanted to talk through some of the structural growth opportunities, specifically in energy around natural gas. It's expected to have a material impact on demand for natural gas over the next, let's call it five to 10 years. I wonder if you can help us frame out the opportunity as you see it, what potential impact you could see on volumes and any color just in whether data centers currently hedge energy exposure, and if not, any thoughts on why?

Christopher John Allen: Good morning, everyone. Thanks for taking the question. I wanted to talk through some of the structural growth opportunities, specifically in energy around natural gas.

Speaker Change: Expected to be a material impact from AI-driven data-centered demand on natural gas over the next, let's call it, 5 to 10 years.

Speaker Change: I wonder if you could help us frame out the opportunities you see it, what potential impact you could see on volumes and any color just in whether data centers currently hedge energy exposure and if not, any thoughts on why.

Christopher John Allen: So before Derek answers on natural gas, which we have a good story to talk about with natural gas, and he will, are you suggesting that, because of AI and the computing that it will take to run AI, that natural gas will be more, Transcripts provided by Transcription Outsourcing, LLC. Yeah. And Chris, I think that they don't disagree with the premise that there is going to be increased demand for natural gas and AI.

Speaker Change: Before Derek answers on the natural gas, which we have a good story to talk about with natural gas and he will so, are you suggesting that because of AI and the compute that it will take to run AI that natural gas will be more

Speaker Change: In favor or out of favor? I'm trying to understand your question. Our energy team here has done work around the income of the energy demand from data centers driven by AI.

Speaker Change: 50% of that is expected to be filled by natural gas, a pretty material increase, so see it as a positive catalyst, just wondering how you guys are framing that out.

Speaker Change: Thank you. I just want to make sure we understood your question. Yeah. Hey, Chris. I think that they don't disagree with the premise that there's going to be increased demand for natural gas and AI, but frankly, that's just the energy transition story. So, I mean, you're just seeing NatGas replace all other. I mean, we're seeing coal reduced, eliminated. We're seeing not a real adoption of nuclear. So, natural gas is that solution.

Christopher John Allen: But frankly, that's just the energy transition story. So, I mean, you're just seeing NatGas replace all other energy sources. I mean, we're seeing coal reduced, eliminated. We're not seeing a real adoption of nuclear energy. So natural gas is that solution.

Derek: We're already seeing that in the record results in our natural gas business now. When you look at the year we have put up already this year, we've set multiple records on a year-to-day basis and quarterly basis for both futures and options, with NatGas up 29 percent. More importantly, NatGas options are up 54 percent. This is a global story as much as a domestic story, because we're seeing our fastest growth in our Henry Hub Compact coming from outside the U.S. So when you look at EMEA business growth right now, we're seeing our 2024 year-to-date consumption of Henry Hub up 78 percent year-on-year.

Speaker Change: We're already seeing that in the record results in our natural gas business now. When you look at the year we've put up already this year, we've set multiple records on a year-to-day basis and quarterly basis for both futures and options.

Speaker Change: with NatGas up 29%, more importantly, NatGas options up 54%. This is a global story as much as a domestic story, because we're seeing our fastest growth in our hand-rehab compacts coming from outside the U.S.

Speaker Change: So when you look at the EMEA business growth right now, we're seeing our 2024 year-to-date consumption of Henry up 78% year-on-year. We're setting records in terms of participation, globalization, and options are a big part of that as well. So we see this as a broader story, not limited to energy being consumed by AI, but nat gas being not just a transition fuel, but a fuel for the future. And that is a position that we're in, we're 80% market share of that natural gas futures business. And we've increased our share of Henry Hub options business as well to about 69%. So we feel good about that. We agree with the premise that we'll see natural gas be a bigger source of energy consumption over time. And we like our global position in Henry Hub there.

Derek: We're setting records in terms of participation, globalization, and options are a big part of that as well. So we see this as a broader story, not limited to energy being consumed by AI, but NatGas being not just a transition fuel but a fuel for the future. And that is a position that we have an 80 percent market share of that natural gas futures business, and we've increased our share of Henry Hub options business as well to about 69 percent.

Derek: So we feel good about that. We agree with the premise that we'll see natural gas be a bigger source of energy consumption over time, and we like our global position in Henry Hub there. And Chris, just to follow up on that, I think you guys are right. The question is, Derek's point, I don't know if I would just use AI as your story. When you look at the grid system in the United States of America, the grids are down significantly.

Christopher John Allen: And Chris, just to follow up on that, I think you guys are right, the question is, Derek's point, I don't know if I would just use AI as your story.

Speaker Change: When you look at the grid system in the United States of America, the grids are down significantly and to continue to power them up, which you know as well as anybody, the grids today are powered by nuclear and fossil fuels and a handful of what they would call green energy, but that's two or three percent.

Terry: And to continue to power them up, which you know as well as anybody, the grids today are powered by nuclear and fossil fuels and a handful of what they would call green energy, but that's two or three percent. Natural gas needs to play a bigger role because we're running out of power in parts of the world today. We don't have it.

Speaker Change: Natural gas needs to play a bigger role because we're running out of power in parts of the world today. We don't have it. So not only computing AI, how about lighting our homes and powering our country? So there's a lot, it's a lot bigger story than just AI, but we agree with your premise.

Terry: So not only computing AI, how about lighting our homes and powering our country? So there's a lot, it's a lot bigger story than just AI, but we agree with your premise. Thanks. And just for a follow-up, I wanted to dig in a little bit on dealer relationships. I'm just wondering what areas there are ways to improve relationships with dealers.

Speaker Change: Thanks. And just for a follow-up...

Speaker Change: I wanted to dig in a little bit on dealer relationships. I'm just wondering what areas are there ways to improve relationships with dealers. I would imagine price is always going to be top of their list.

Christopher John Allen: I would imagine price is always going to be top of their list, but I'm just wondering what other areas they would be asking for in terms of rooms for improvement in how they view CME. So I think that the relationships are good, Chris, and maybe you heard something I didn't, but we work very closely with them. I work with not only the CEOs of all the dealers but up and down the street with the people who run the FCMs, as do my team.

Speaker Change: I'm just wondering what other areas would dealers be asking for in terms of rooms for improvement in how they view...

Speaker Change: CME.

Speaker Change: I think that the relationships are good, Chris, and maybe you heard something I didn't, but we work very closely with them.

Speaker Change: Not only the CEOs of all the dealers, but up and down the street with the people who run the FCMs, as does my team.

Christopher John Allen: And I think the way relationships are always enhanced is by giving them return on their trading. And when you can invest over the years, like I hate to keep harping on this, but give them, that crosses a lot of bridges for them and makes them very pleased with what we are doing. So I think the relationships are good.

Speaker Change: And I think the way the relationships are always enhanced

Speaker Change: for their trading. And when you can invest over the years, like, I hate to keep harping on this, but give them basically $20 billion of savings on a daily basis in the capital-constrained world, you got to imagine that, that, that, uh,

Speaker Change: That crosses a lot of bridges for them and makes them very pleased with what we are doing, so...

Terry: The dealer community does have a tendency to turn over a little bit more than the exchange community, so we're constantly working to bolster those relationships, but I don't see them as fractured in any way, shape, or form.

Speaker Change: I think the relationships are good.

Speaker Change: The dealer community does have a tendency to turn over a little bit more than the exchange community. So we're constantly working to Bolster those relationships, but I don't see them as fractured in any way shape or form

Terry: And I think that the guy that's out there promoting his 10 friends is trying to promote that there's a fracture in there because of pricing and other things. But you got to remember, and I think Chris, you're smart enough to understand this, that the smallest cost of any transaction is the transaction cost. The spreads are what really affect affect the dealers and affect the participants, and they know that. So the cost is not the issue.

Speaker Change: And I think that the guy that's out there promoting his 10 friends...

Speaker Change: that is trying to promote that there's a fracture in there because of pricing and other things. But you got to remember, and I think, Chris, you're smart enough to understand this, that the smallest cost of any transaction is the transaction cost. The spreads are what really affected the dealers and affect the participants.

Terry: We bring a lot of value to it, and that 20 billion goes a long way on a daily basis. Thanks, Chris. I appreciate it.

Speaker Change: And they know that. So the cost is not the issue. We bring a lot of value to it, and that $20 billion goes a long way on a daily basis.

Christopher John Allen: Thanks, guys.

Christopher John Allen: Thank you. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open. Craig, your line is open. You'll need to unmute yourself.

Christopher John Allen: Appreciate it.

Speaker Change: Thank you. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Speaker Change: Craig, your line is open. You'll need to unmute yourself.

Craig William Siegenthaler: Hey, good morning. Can you guys hear me okay? Yeah, Craig, go ahead. We got you now. All right, perfect. Good. Good morning, everyone.

Craig William Siegenthaler: Hey, good morning. Can you guys hear me okay?

Craig William Siegenthaler: So we had a follow-up on the rates capital efficiency topic. So in the quarter, you held a call and disclosed that the capital efficiency of cross-margining CME futures with CME interest rate swaps is 20% to 25% less than CME future-to-future clearing. But given that your rate swaps business is heavily skewed towards Latin America, how does that actually reduce capital efficiency versus a business that was mostly SOFR-based? I'm not sure we're calling you on it, Craig. We didn't say that. So, uh, that is not true.

Speaker Change: Yeah, Craig, go ahead, we got you now.

Craig William Siegenthaler: All right, perfect. Good. Good morning, everyone. So we had a follow-up on the rates capital efficiency topic. So in the quarter, you held a call and disclosed that the capital efficiency

Craig William Siegenthaler: of cross-margining CME futures with CME interest rate swaps.

Speaker Change: was 20% to 25% less than CME future-to-future clearing. But given that your rate swaps business is heavily skewed towards Latin America, wouldn't that actually reduce the capital efficiency versus a business that was mostly SOFR-based?

Speaker Change #100: I'm not sure what call you're on, Craig. We didn't say that. So, uh, that is not true and we're happy to have a follow-up and Sunil can walk you through it right now, but we did not say that.

Terry: And we're happy to have a follow-up, and Sunil can walk you through it right now. But we did not say that. We have deep and rich liquidity across all of our REITs products. You're rightfully pointing out that we have a significant market share in Latin American currencies, but our dollar market is very strong, and we are the only clearinghouse that provides capital efficiencies between futures, options, cash, and swaps for dollar REITs. So, the growth has been very strong. The capital efficiencies, in and of themselves, are a function of the structure of the portfolio and the open interest.

Speaker Change #101: We have deep and rich liquidity across all of our RAIDS products. You're rightfully pointing out that we have...

Speaker Change #102: Significant market share in Latin American currencies, but our dollar market is very strong and we are the only clearing house that provides You know capital efficiencies between futures options cash and swaps or dollar rate

Speaker Change #102: So, the growth has been very strong.

Speaker Change #102: The capital efficiencies in and of themselves are a function of the structure of the portfolio and the open interest. And as Lynne pointed out, the open interest is ground as well.

Sunil Cutinho: And as Lynne pointed out, the open interest has grown as well. So, Craig, I think what we were probably pointing out, maybe what you heard, is we're dominant in some of those Latin American rates, swaps, business clearing. But if you look at the swaps clearing against our futures portfolio today, I assure you, if anybody was giving up on portfolio margining, they would move their swaps to CME to get those offsets today

Speaker Change #103: So Craig, I think what we were probably pointing out, maybe what you heard, is we're dominant in some of those Latin American rates.

Speaker Change #104: Swaps Business Clearing

Speaker Change #105: But if you look at the swaps clearing against our futures portfolio today, I assure you if anybody was giving up on portfolio margining, they would move their swaps to CME to get those offsets today. So everybody that's trying to achieve offsets is bringing that business to CME. That's the reason we got the $20 billion. So I think we were pointing out the dominance we have in the Latin American market.

Sunil Cutinho: So, everybody that's trying to achieve offsets is bringing that business to CME. That's the reason we got the $20 billion. So, I think we were pointing out the dominance we have in the Latin American nations of their swaps clearing. Is that fair, Sunil?

Sunil Cutinho: That's fair. And then the most important metric here is that we have over 3,300 large open interest holders. So, they are the ones who are carrying inventory every day. And, as Terry pointed out, they have to fund those positions every day. So, this $20 billion in capital efficiencies is material. And that's an important number, Craig, and for the rest on the call, those 3,300 large open interest holders direct where they want their trade to go because they're the ones deriving the benefits of the $20 billion.

Speaker Change #106: Nations of their swaps clearing up is that person that's and then the most important Metric here is we have over three thousand three hundred large open interest holders, but they are once we're carrying inventory every day

Terry: And as Terry pointed out, they have to fund those positions every day, so this $20 billion in capital efficiencies is mature.

Craig William Siegenthaler: And that's an important number, Craig, and for the rest on the call, that 3,300 large open interest holders, they direct where they want their trade to go, because they're the ones deriving the benefits of the $20 billion. So that's a lot of people to convince. It's not convincing 10 people, two of which are proprietary trading firms.

Sunil Cutinho: So that's a lot of people to convince. It's not convincing 10 people, two of which are proprietary trading firms. Got it. I guess our worry was that CME may not have enough SOFR, the initial margin balance, to provide total savings and that the portfolio margining benefit between US rate futures and LATs and interest rate swaps might not be as efficient as US rate futures to US rate swaps. So I don't know if you can provide any kind of high-level commentary on the efficiency between the two, but that would be helpful. Hi Tim. Hey Craig,

Craig William Siegenthaler: Got it. I guess our worry was that...

Speaker Change #107: CME may not have enough SOFR initial margin balance to provide total savings and that the portfolio margining benefit between U.S. rates futures

Speaker Change #108: and lots of interest rate swaps might not be as efficient as U.S. rate futures to U.S. rate swaps. So I don't know if you can provide any kind of high-level commentary on the efficiency between the two, but that would be helpful.

Tim: Yeah, so I think what's interesting, I think what you're trying to get out, is there are various permutations and calculations of how those capital efficiencies can be extracted across the various product types. I think the main takeaway you should think about SOFR is that right now, we have 100% of the SOFR open interest across futures and options, so we're the only ones who can actually afford that as a mechanic or part of the calculation to unlock that savings. So SOFR could be used against OIS swaps on the cleared swap side.

Speaker Change #108: Hi, Tim. Hey, Craig. Yeah, so I think what's interesting, I think what you're trying to get at is there's various permutations and calculations of how those capital efficiencies can be extracted across the various product types.

Speaker Change #109: I think the main takeaway to think about SOFR is right now we have 100% of the SOFR open interest across futures and options, so we're the only ones who can actually afford that as a mechanic or part of the calculation to unlock that savings.

Tim: They could be used against treasury futures. SOFR futures can be used against SOFR options. And with the improvements we made in January, they can now be used against cash positions at fixed with the enhanced cross margin. So the real takeaway here is not necessarily just a mathematical result.

Speaker Change #110: So SOFR could be used against OIS swaps on the cleared swap side, it could be used against treasury futures, SOFR futures can be used against

Speaker Change #108: So for options, and with the improvements we made in January , they can now be used against cash positions as fixed.

Speaker Change #108: with the Enhanced Cross Margin.

Tim: You have to look at the gravity of the risk pool that is here at CME with the large open interest holders and the growing open interest records across the rate complex. Those are the more important things because that is the cornerstone of how clients access the capital efficiencies, not just the individual computation by any sort of one possible trade combination. Does that help? Does that give more color for you, Craig?

Speaker Change #108: So the real takeaway here is not necessarily just the mathematical result. You have to look at the gravity of the risk pool that is here at CME.

Speaker Change #108: with the large open interest holders, the growing open interest records across the rate complex. Those are the more important things because that is the cornerstone of how clients access the capital efficiencies, not just the individual computation by any sort of one possible trade combination.

Craig William Siegenthaler: Now that's helpful. Thank you, guys. Thank you, buddy.

Speaker Change #108: Does that help? Does that give more color for you, Craig?

Craig William Siegenthaler: Now that's helpful. Thank you, guys.

Kyle Kenneth Voigt: Thank you. Our next question comes from Kyle Voigt with KBW. Your line is open. Hi, good morning.

Craig William Siegenthaler: Thank you, everybody.

Speaker Change #111: Thank you. Our next question comes from Kyle Voigt with KBW. Your line is open.

Kyle Kenneth Voigt: Maybe just to follow up on the cloud announcement. I'm just wondering if you could expand a bit on how that might work in practice in terms of clients potentially migrating towards a Google infrastructure as a service offering versus utilizing a self-managed infrastructure, and more specifically, I'm wondering if rolling out the new co-location facility and matching engine and the subsequent client migration will have any material impact, whether positive or negative, on CME's connectivity, co-location, or low I'm gonna let Ken answer that for you, Kyle, but I'm going to make one comment because I think it's important.

Kyle Kenneth Voigt: Hi, good morning. Maybe just to follow up on the cloud announcement.

Kyle Kenneth Voigt: I'm just wondering if you could expand a bit on how that might work in practice in terms of clients potentially migrating towards a Google infrastructure as a service offering.

Speaker Change #113: versus utilizing a self-managed infrastructure and more specifically

Speaker Change #114: I'm wondering if rolling out the new co-location facility and matching engine and the subsequent client migration will have any material impact, whether positive or negative, on CME's connectivity, co-location, or low-latency data feed revenue.

Terry: We listen to our clients who use that facility, and one of their main concerns when we announced this deal in 2021, of where that cloud could potentially be, where would that data center be? How disruptive would it be? We've announced that that cloud data facility is across the street. So there is no disruption from the client perspective. So we heard them loud and clear.

Speaker Change #115: I'm going to let Ken answer that for you, Kyle, but I'm going to make one comment because I think it's important.

Ken: We listen to our clients who use that facility, and one of their main concerns when we announced this deal in 2021 of where that cloud could potentially be, where would that data center be, how disruptive would it be?

Ken: We've announced that that cloud data facility is across the street.

Ken: So there is no disruption from the client perspective, so we heard them loud and clear and we worked with our partners at Google for them to build.

Kenneth Brooks Worthington: And we worked with our partners at Google to do that and to build a one-of-a-kind bespoke facility for CME's clients. So Ken, I'll turn to you. Yeah, one of the things, just to build on that, a number of us were around for this, but when Globex was first developed, it wasn't as a replacement for the floor. It was put alongside the floor to enable new strategies, new business models, new products, and services.

Ken: One-of-a-Kind Bespoke Facility for CME's Clients. Ken, I'll turn to you. Yeah, one of the things, just to build on that, a number of us were around for this, but when Globex was first developed, it wasn't as a replacement for the floor.

Ken: It was put alongside the floor to enable new strategies, new business models, new products and services.

Kenneth Brooks Worthington: We think about this as the migration to the cloud very similarly. We allow our customers to choose and migrate over time. So today, as we move forward with the cloud, our customers, because of what Terry said, because of the location, will have the ability to choose. They can continue to do what they do today and manage their own gear, or they can migrate into the Google Managed Solution and take advantage of the various capabilities there.

Speaker Change #116: We think about this as the migration to cloud very similarly. We allowed our customers to choose and migrate over time.

Speaker Change #116: So today, as we move forward with the cloud.

Speaker Change #116: Our customers, because of what Terry said, because of the location, they will have the ability to choose. They can continue to do what they do today and manage their own gear.

Speaker Change #116: And, or they can migrate into the Google Managed Solution and take advantage of, you know, the various capabilities there. But ultimately, it was important for us to allow the migration to happen.

Kenneth Brooks Worthington: But ultimately, it was important for us to allow the migration to happen based on the pull of the value proposition, not us pushing it in a certain direction. So the facility out there in Aurora allows it to leverage the infrastructure it has today, leverage the infrastructure we're building for tomorrow, and that migration will happen in a seamless manner because of that. And so we can be both intentional and careful with our customer interests as we do so.

Speaker Change #116: Based on the pull of the value proposition, not us pushing it in a certain direction.

Speaker Change #117: So the facility out there in Aurora allows it to leverage the infrastructure they have today, leverage the infrastructure we're building for tomorrow, and that migration will happen in a seamless manner because of that. And so we can be both intentional...

Kenneth Brooks Worthington: And again, as I said earlier, we're in a process now where we're iterating on a daily basis with our customers' input to make sure that we get all that right. So let me just clarify one thing my colleague said because it's important. Globex was not a floor product.

Speaker Change #118: And careful with our customer interests as we do that. And again, as I said earlier, we're in a process now where we're iterating on a daily basis with our customers' input to make sure that we get all that right. So let me just clarify one thing my colleague said because it's important.

Kenneth Brooks Worthington: Globex was a product that was an electronic product that was distributed outside of the trading floor, so it was not a floor-based product. So I want to make sure that that's clear for all the lawyers that are listening. Just to clarify one point there, though, but when the migration does happen, or that pull does happen for those clients, and they elect to migrate to the Google infrastructure, from a CME revenue perspective, is that a net positive or net negative or net neutral?

Speaker Change #119: Globex was not a floor product. Globex was a product that was an electronic product that was distributed outside of the trading place. It was not a floor-based product. So I make sure that that's clear for all the lawyers that are listening.

Speaker Change #120: Just to clarify one point there though, but when the migration does happen or that pull does happen for those clients and they elect to migrate to the Google infrastructure,

Kenneth Brooks Worthington: When you look at the connectivity, colo, and kind of low latency data feed revenue bucket, yeah, Kyle, there's a lot of moving pieces in that at this point. So once we get closer to that, we probably will have more guidance, but there's going to be a number of ways that you can access the facility. There's going to be a number of ways that you can access data. So there's going to be potentially new stream changes to existing streams. It's just too early to comment on that at this point.

Speaker Change #121: From a CME revenue perspective, is that a net positive or net negative or net neutral when you look at the connectivity, COLO, and kind of low latency data feed revenue bucket?

Speaker Change #122: Yeah, Kyle, there's a lot of moving pieces in that at this point. So once we get closer to that, we probably will have more guidance, but there's going to be a number of ways that you can access the facility. There's going to be a number of ways that you can access data. So there's going to be potentially new streams, changes to existing streams. It's just too early to comment on that at this point.

Kyle Kenneth Voigt: Okay, and then just if I could just follow up on the discussion around just competition. Obviously, we saw the announcements about the bank and market maker partners from FMX and 2Q, but I guess my question is more so on the client side. CME has a large sales force; you're in constant communication with your end users of your futures products. I'm just wondering at this point if your sales team has been fielding more or any questions from end users, hedge funds, CTAs, asset managers, other buy side firms, about this FMX platform or any of the value props. Yeah, so Julie, you want to, I'll let Julie Winkler, our Chief Commercial Officer, who deals with most of the end user clients, along with the rest of us, answer that. Yeah, no, thanks for the question.

Speaker Change #123: Okay, and then just, if I could just follow up on the discussion around just competition.

Speaker Change #124: Obviously, we saw the announcements on the bank and market maker partners from FMX and 2Q. But I guess my question is more so on the client side.

Speaker Change #125: CME has a large sales force, you're in constant communication with your end users of your features products. I'm just wondering at this point if your sales team has been fielding more or any questions from kind of the end users, hedge funds, CTAs.

Speaker Change #125: Asset Managers, other buy side firms about this FMX platform or any of the value proposition.

Speaker Change #125: Yeah, so Julie, you want to...

Speaker Change #126: I'll let Julie Winkler, our Chief Commercial Officer who deals with most of the end user clients, along with the rest of us.

Julie Winkler: And certainly, this has been a great opportunity for our sales force to, you know, continue to engage with our customers, which is part of what we do each and every day. And our rates business is just continuing to demonstrate strength and resilience. We, you know, this 15% surge in volume and records, Treasury Futures ADV, it's, it's giving us a lot to talk about with our customers, and the feedback. We're, we, a key part of what we do is, listen to our customers. And as Terry pointed out earlier, you know, transaction fees are one very small piece of the value proposition that is being offered.

Julie Winkler: Thanks for the question and certainly this has been a great opportunity for our sales force to continue to engage with our customers, which is part of what we're doing each and every day.

Speaker Change #128: You know, our rates business is just continuing to demonstrate, you know, strength and resilience. You know, this 15% surge in volume and record Treasury futures ADV, it's giving us a lot to talk about with our customers.

Speaker Change #128: And the feedback, you know...

Speaker Change #129: A key part of what we do is listen to our customers. And as Terry pointed out earlier,

Julie Winkler: And so, what we're really trying to do is make sure we understand the dynamics of what they're hearing but also very focused on highlighting the key aspects of our value proposition, which is our deep liquidity, the capital efficiencies that we've talked a lot about on this call today. And so, you know, we're not assessing or hearing anything from those constituents that you spoke to earlier that would concern us that people are extremely happy and have shown that And the calls that I've fielded from, that call me, Kyle, have been more of the business side of what we can do more together to continue to create these efficiencies. Those are the calls that I'm fielding. I'm not fielding any questions about any other offering.

Speaker Change #130: Transaction fees are one very small piece of the value proposition that is being offered. And so what we're really trying to do is make sure we understand the dynamics of what they're hearing, but also being very focused on highlighting the key aspects of our value proposition, which is our deep liquidity, the capital efficiencies that we talked a lot about on this call today, and making sure that across our offering, both with broker tech and with our treasury futures complex, as well as SOFR futures and options.

Speaker Change #130: aware of all of those dynamics that we have and that has been the focus of our conversation.

Speaker Change #131: We're not assessing or hearing anything that's from those constituents that you spoke to earlier that would concern us.

Speaker Change #131: People are extremely happy and have shown that with, you know, their trading volume on our exchange over the past quarter. And the calls that I fielded from the call me, Kyle, have been more of the business side of what we can do more together to continue to create these efficiencies.

Julie Winkler: So they're calling me about more efficiencies, talking more about Basel III. What does that mean for the bottom line? How can we work together to continue to build their business and CME's business together? These are the calls that I'm talking to from the real business trading community. Great. Thank you very much.

Speaker Change #131: Those are the calls that I'm fielding. I'm not fielding anything about any other offering. So they're calling me about more efficiencies, talking more about Basel III. What does that mean for the bottom line? How can we work together to continue to build their business and CME's business together? That's the calls that I'm talking to from the real business trading community.

Speaker Change #131: Great, thank you very much.

Michael J. Cyprys: Thank you. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open. Hey, good morning.

Speaker Change #132: Thank you. Our next question comes from Michael Cyprys with Morgan Stanley . Your line is open.

Michael J. Cyprys: Thanks for taking the question. I just wanted to ask about the rates franchise as the Fed begins to cut rates expected. In a couple of months, how do you anticipate that impacting the types of instruments that customers will trade as well as the level of activity? And then specifically, how might it impact the capture rate if investors, for example, maybe extend durations?

Michael J. Cyprys: Hey, good morning. Thanks for taking the question. I just wanted to ask on the rates franchise as the Fed begins to cut rates expected.

Michael J. Cyprys: In a couple of months, just how do you anticipate that impacting the types of instruments that customers will trade as well as the level of activity, and then specifically, how might it impact the capture rate if investors, for example, maybe extend duration or even shift from options to futures? Just how do we think about any sort of impact to the capture? Thank you.

Tim: Transcripts provided by Transcription Outsourcing, LLC. Thanks, Michael. Tim?

Tim: Yeah, thanks, Michael. I think what's interesting is when we look at the backdrop that our rates conflict continues to serve the needs of our clients in, as Terry said, the uncertainty is only increasing over both the near-term and the long-term horizon. So the one thing that is important is that we have all those tools at CME to trade, whether you want to use SOFR on the short end of the curve or the Treasury Complex on the long end of the curve.

Tim: Thanks Michael. Tim? Yeah thanks Michael. I think what's interesting is when we look at the the backdrop that our race conflict continues to serve the needs of our clients in, as Terry said, the uncertainty is only increasing over the over the both near-term and long-term horizon.

Speaker Change #134: So the one thing that is important is that we have all those tools at CME to trade, whether you want to use SOPR on the short end of the curve or the Treasury Complex on the long end of the curve. We've already seen a tremendous amount of...

Tim: We've already seen a tremendous amount of, you know, difference in expressions or views on what the Fed will do at the end of the year. We've gone from expecting six-rate cuts across 2024 to maybe one; now the market is pricing maybe two by the end of the year.

Speaker Change #135: You know, difference of expressions or views on what the Fed will do by the end of the year. We've gone from expecting six rate cuts...

Speaker Change #135: across 2024 to maybe one now sort of the market is pricing maybe two by the end of the year and we're well positioned to take advantage of that from both a product innovation perspective where we've introduced things like T-bills on the short end of the curve

Tim: And we're well positioned to take advantage of that from both a product innovation perspective, where we've introduced things like T-bills on the short end of the curve; we're continuing to invest in and add expiries to our SOFR complex, and on the option side. We're also continuing, as Terry said, to figure out ways to unlock additional capital efficiencies around that and how that sort of manifests into the capture rate or the RPC for the complex. That's tough to predict.

Speaker Change #135: We're continuing to invest and add expiries to our SOFR complex in the option side.

Terry: We're also continuing, as Terry said, to figure out ways to unlock additional capital efficiencies around that.

Terry: And how that sort of manifests into the capture rate or the RPC for the complex, that's tough to predict.

Lynne: As Lynne said earlier, the mix between STRS and LCTRS is one element of the impact on RPC. It also is a function of what is being done on Globex versus XPIT or in the block trade, also as well as between member and non-member. So the fact that we have a very diversified, healthy, and robust community of traders, as Sunil and Terry said earlier, with a recent record of 3,370 large traders in that complex, that complex is growing.

Speaker Change #136: As Lynne said earlier, the mix between STRS and LCTRS is one element of the impact on RPC. It also is a function of what is being done on Globex versus Expit or in the block trade, also as well as member and non-member. So the fact that we have a very diversified, healthy and robust community of traders, as Sunil and Terry said earlier, over with a recent large open interest holder record of 3,370 large traders in that complex, that complex is growing.

Lynne: So we also need to factor in the growth rate of additional non-members coming online, the additional increase in buy-side participation, asset managers, insurance companies, all these participants coming in. It's hard to forecast, but it is important just to note that there is a difference, but it's more than just the volume itself.

Speaker Change #137: So we also need to factor in...

Speaker Change #137: The growth rate of additional non-members coming online, additional increase in biocide participation, asset managers, insurance companies, all these participants coming in. It's hard to forecast, but it is important just to note that there is a difference, but it's more than just the volume itself. It's the member, non-member, and participant mix that will also increase or impact the RPC going forward.

Michael J. Cyprys: It's the member, non-member, and participant mix that will also increase or impact the RPC going forward. Great, just to follow up. Yes. Can you guys hear me?

Speaker Change #140: Great, just a follow-up question. Yes, can you guys hear me?

Terry: Yeah, go ahead, Michael. Yeah, just to follow up a question, Terry, to your point on the phone calls you're getting from customers asking for more efficiencies. Just curious, Terry, how you're thinking about that, where there might be opportunities to bolster efficiencies for customers in the near term and also the longer term, what steps you might be able to take there, and are there any ways for maybe some strategic actions to help with that?

Speaker Change #140: Just a follow-up question, Terry, to your point on the phone calls you're getting from customers asking for more efficiencies. Just curious, Terry, how you're thinking about that, where there might be opportunities to bolster efficiencies for customers in the near term and also the longer term, what steps might be able to take there, and are there any ways for maybe any strategic actions to help with that?

Terry: I'll be careful talking about strategic action, but there are some conversations going on as it relates to that, how we could be more strategic. I think when you look at what Sunil pointed out earlier, with the billion dollars, with the offsets against FIC, which has grown exponentially, bringing in more and more clients into that is something that is very exciting for them. These banks, these dealers need to continually look for ways to free up some of their balance sheets so they can continue on with their other activities, and this is just another way of doing it.

Terry: I'll be careful talking about strategic action, but there are some conversations going on as it relates to that.

Speaker Change #138: How we could be more strategic. I think when you look at what Sunil pointed out earlier, with the billion dollars with the offsets against FIC, which has grown exponentially bringing in new

Speaker Change #139: And bringing more and more clients into that is something that is very exciting for them. These banks, these dealers need to continually look at ways to free up some of their balance sheets so they can continue on with their other activities.

Terry: So our conversations are more focused on that. There are some strategic conversations going on with some of the dealer communities that I've had and with other entities. So I think it's around efficiencies. Let me be clear about that.

Speaker Change #141: And this is just another way of continuing to do it. So our conversations are more focused on that. There are some strategic conversations going on with some of the dealer communities that I've had and with other entities. So I think it's around efficiencies. Let me be clear about that. They're mostly dealing with efficiencies.

Terry: They're mostly dealing with efficiencies and what we can or cannot do together. So it's a pretty exciting time for the marketplace, and we'll have more to report as we continue to have conversations. But at the moment, that's where I can go with it.

Speaker Change #141: And what we can or cannot do together. So it's a pretty exciting time for the marketplace. And we'll have more to report as we continue to have conversations. But at the moment, that's where I can go with it, Michael.

Michael J. Cyprys: Great, thank you. Thank you. Thank you. Our next question comes from Alex Blaustein with Goldman Sachs. Your line is open. Hey, everybody. Good morning.

Michael J. Cyprys: Great, thank you.

Michael J. Cyprys: Thank you.

Speaker Change #142: Thank you. Our next question comes from Alex Blaustein with Goldman Sachs. Your line is open.

Alexander Blostein: Thanks for the question as well. One slightly bigger picture question around the firm's kind of longer-term revenue growth algorithm that I was hoping to get your thoughts on. So, you know, over the years, CME rates pricing across various parts of the business by calling it low single digits, maybe two to 3%. And as you think and kind of think forward, whether it's due to competition or feedback you're getting from the market, is that sort of two to 3% still reasonable? And what part of the model do you think pricing increases can become more challenging?

Speaker Change #143: Hey, everybody. Good morning. Thanks for the question as well.

Alexander Blostein: One slightly bigger picture question around the firm's kind of longer-term revenue growth algorithm that I was hoping to get your thoughts on. So, you know, over the years, CME rates pricing across various parts of the business, but I call it low single digits, maybe 2 to 3 percent. And as you think and kind of thinking forward, whether it's due to competition or feedback you're getting from the market,

Speaker Change #145: Is that sort of 2-3% still reasonable and what part of the model do you think pricing increases can become more challenged and kind of how are you thinking about offsetting that? Thanks.

Terry: And kind of what you're thinking about. So, first of all, Alex, we look at price increases all the time and how we do them, and we don't believe in just raising prices because you can. We do it because of a value-add strategy, and I think that's what's long-term and more lasting for our shareholders. So working with our market participants, bringing them value strategically, thinking about different opportunities, different risk management tools. I can't emphasize enough what this Google AI can do for our clients, going into test environments to see what they can do to enhance their own books as it relates to risk and other opportunities for them that nobody else will be able to effectuate in such a quick way.

Speaker Change #146: So, first of all, Alex, we look at price increases all the time and how we do them, and we don't believe in just raising prices because you can strategy. We do it because of value-add strategy, and I think that's what's long-term and more lasting for our shareholders.

Speaker Change #146: So working with our market participants, bringing them value strategically, thinking about

Speaker Change #147: Different opportunities, different risk management tools. I can't emphasize enough what this Google AI can do for our clients going into test environments about what they can do to enhance their own books as it relates to risk and other opportunities for them that nobody else will be able to effectuate in such a quick way. This is exciting times for our market participants.

Terry: This is exciting times for our market participants. So we look at those value-added proposals that we have with all of our clients across the spectrum. We don't just raise prices because of inflation or because you can't. That's a bad strategy in my mind.

Speaker Change #148: So we look at those value-added.

Speaker Change #148: of

Speaker Change #148: [inaudible]

Lynne: So that's not what we do. We do it because of value. I'll let Lynn comment further. Yeah, I think Terry covered that. I mean, it's always a bottoms-up approach.

Lynne: It's market by market, looking at customer health, market health, and where we've created value. So I think that strategy is still intact, and it's something that we'll continue to do as we think about making any changes. Okay, thanks. Thank you, Alex.

Speaker Change #148: and where we've created value. So I think that strategy is still intact. And it's something that we'll continue to do as we as we think about making any changes.

Speaker Change #149: Okay, thanks.

Brian Bertram Bedell: Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Alexander Blostein: Thank you, Alex.

Speaker Change #150: Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Brian Bertram Bedell: Maybe just back on Google Cloud, maybe you can talk about the timing of when the new platform will become available and any early expectations about, you know, how much faster it could be versus Globex and views on, you know, what portion of the client base would be migrating to that over time. You know, maybe when you think, you know, most people would migrate over to that new platform if it was, if it was. Great question, Brian.

Brian Bertram Bedell: Great. Thanks. Good morning. Thanks for taking my questions.

Brian Bertram Bedell: Maybe just back on the Google Cloud, maybe just if you could talk about the timing of when the new platform will become available and any early expectations about how much faster it could be versus Globex and views on what portion of the client base would be migrating on that over time. It may be when you think most people would migrate over to that new platform if it was superior.

Brian Bertram Bedell: And there's some information that we don't have fully baked yet. I'm going to let Ken give you as much as he possibly can right now to give you some color as it relates to the transition into the cloud as we move forward. Yeah, thanks, Brian. As you can imagine, you know, we're actually building a physical building now. So that takes a little bit of time.

Ken: Great question, Brian . And there's some information that we don't have fully baked yet. I'm going to let Ken give you as much as he possibly can right now to give you some color as it relates to the transition into the cloud as we move forward.

Ken: Yeah, thanks.

Ken: Brian , if you can imagine, you know, we're actually building a physical building now, so that takes a little bit of time and

Kenneth Brooks Worthington: And one of the things that's nice is that there is a capability in Dallas. So you also heard us announce that our disaster recovery site will be in Dallas. And we will have our customers up for testing and playing around in that environment by early 26. What we said about the longer timeframe is more about making sure our customers and our ecosystem are prepared. And so we tend to talk that when we have more specifics about bringing the market migration online, we're going to give 18 months notice at a minimum before we start migrating our markets. So that's really what we've said about timing.

Ken: One of the things that's nice is that there is a capability in Dallas, so you also heard us announce that our disaster recovery site will be in Dallas, and we will have our customers up and testing and playing around in that environment in, you know, early 26.

Ken: What we've said about the longer timeframe is more about making sure our customers and our ecosystem is prepared. And so we tend to talk that when we have more specifics about bringing the market migration online, we're going to give 18 months notice at a minimum in order before we start migrating our markets. So that's really what we've said about timing. And then.

Kenneth Brooks Worthington: And then as it relates to which customers will take advantage of which venues and how long that will take, those are very early days in that process. And, as I said before, we're providing choice and optionality to our customers. And as we get further iterating with them, and they understand the value proposition and the things that are available and their ability to do, they will make individual decisions about their business models and what makes the most sense for them. So I think it'd be premature to speculate on who's going to do what.

Ken: As it relates to which customers will take advantage of which venue and how long that will take, those are very early days in that process. And as I said before, we're providing choice and optionality to our customers.

Ken: And as we get further iterating with them and they understand the value proposition and the things that are available and their ability to do, they will make individual decisions about their business models and what makes the most sense for them. So I think it would be premature to speculate on...

Kenneth Brooks Worthington: But I will say that we're very excited about the engineering that has gone into this capability. We think it's innovative. We think it's differentiating, and we think it'll be beneficial for our customers. And so we're excited about that, but it's a little too soon to give specifics. And just to add to what Ken said, Brian, when you referenced latency or speed, how you said it, as I've said since 2021, we will not go into the cloud if, in fact, Google does not put forth a platform that is as good or faster than what we have today. And that has not changed one bit.

Ken: On who's going to do what, but I will say that we're very excited about the engineering that has gone into this capability. We think it's innovative, we think it's differentiating, and we think it'll be enabling for our customers, and so we're excited about that, but a little too soon to give specifics.

Brian Bertram Bedell: And just to add on to what Ken said, Brian .

Speaker Change #152: When you reference the latency or the speed, how you set it, as I've said, since 2021, we will not, not go into the cloud, if in fact, Google does not put forth a platform that is as good or faster than what we have today. And that has not changed one bit. So we still have to make sure we see that platform before that ultimate decision can be made. We think they will get there. But the exciting part is what Ken said, and the functionality associated with that speed. I don't know where markets are ultimately going to go on the speed. We're pretty much at that point right now where it's kind of hard to continually make it any faster than it is.

Terry: So we still have to make sure we see that platform before that ultimate decision can be made. We think they will get there, but the exciting part is what Ken said and the functionality associated with that speed. I don't know where markets are ultimately going to go on speed. We're pretty much at that point right now where it's kind of hard to continually make it any faster than it is.

Brian Bertram Bedell: But what I think is impressive and important is the distribution, the functionality, and the tools associated with Google Cloud that others will not be able to represent. And maybe I could just follow up with Lynne on the collateral balances in terms of the rates that you're paying and the spreads you're getting exiting the second quarter coming into the third quarter, both on the non-op line and the other fee lines. Yes, so for the second quarter, the cash balances averaged $73 billion, and the non-cash balances averaged $161 billion.

Ken: But what I think is impressive and important is the distribution, the functionality, and the tools associated with Google Cloud that others will not be able to replicate.

Speaker Change #153: That's a great color. Maybe I could just follow up with Lynne on the collateral balances in terms of the rates that you're paying and the spreads you're getting exiting the second quarter coming into the third quarter, both on the non-op line and the other fee line.

Speaker Change #154: For the second quarter, the cash balances averaged $73 billion.

Speaker Change #154: And the non-cash balances averaged $161 billion.

Lynne: Both of those are fairly similar to what we saw in Q1. So far in July, we've seen the total collateral is down a bit, and we've seen both of those lines come down a little bit. So, so far in July, the average cash balance is $69 billion, and the average non-cash is $159 billion, and the rates that you're paying are 36 basis points on the cash that is our portion. And then we're paying out. The fee on the non-cash is 10 basis points, rather.

Speaker Change #154: Both of those fairly similar to what we saw in Q1.

Speaker Change #155: So far in July , we've seen the total collateral is down a bit, and we've seen both of those lines come down a little bit. So, so far in July , the average cash balance is $69 billion, and the average non-cash is $159 billion.

Speaker Change #155: [inaudible]

Speaker Change #156: And the rates that you're paying out on this? Yes.

Speaker Change #157: It was 36 basis points on the cash, was our portion, and then we're paying out the fee on the non-cash is 10 basis points, rather, so 36 on the cash, 10 on the non-cash.

Lynne: So 36 on the cash, 10 on the non-cash. It's too early to say when the Fed cuts, where you might go at this stage, or do you think you might be able to maintain the spread? It's a bit early to say, but I would keep in mind that the spread that we're actually charging is 25 basis points less than the IORB rate, and it's been at that level since last June. So it's it's stayed at a consistent level since the IRB was at 165, if that's helpful.

Speaker Change #158: Too early to say when the Fed cuts, where you might go to at this stage, or do you think you might be able to maintain the spreads?

Speaker Change #159: It's a bit early to say, but I would keep in mind that the spread that we're actually charging is 25 basis points less than the IORB rate, and it's been at that level since last June .

Speaker Change #159: It's stayed at a consistent level since the IORB was at.

Speaker Change #160: 165, if that's helpful. Yep, totally. Yep. Okay, great. Thank you. Thank you very much

Brian Bertram Bedell: Great, thank you very much. Thanks, Brian. Thank you. Our next question comes from Ken Worthington with J.P. Morgan. Your line is open.

Brian Bertram Bedell: Thanks, Brian .

Speaker Change #161: Thank you. Our next question comes from Ken Worthington with J.P. Morgan. Your line is open.

Kenneth Brooks Worthington: Hi, good morning, and thanks for taking the question. I wanted to dig into CME's treasury clearing plan. Can you give us a more detailed picture of what you're planning to offer, what needs to be built out still, and when it might be ready for launch, and are there any regulatory approvals that you'll need to get this up and running? Yes, yes, and yes, Ken.

Kenneth Brooks Worthington: Hi, good morning and thanks for taking the question. I wanted to dig into CME's treasury clearing plans.

Kenneth Brooks Worthington: Can you give us a more detailed picture of what you're planning to offer? What needs to be built out still and when it might be ready for launch? And are there any regulatory approvals that you'll need to get this up and running?

Terry: A Treasury clearing proposal we've announced. We're working with the SEC now. I did a call with the chair and staff and all of my staff again on Friday. We feel very confident that all the information will be in the SEC by mid-September, and then it will be in the hands of the SEC. They do need to go through an approval process, which is public.

Speaker Change #165: Yes, yes and yes, there Ken. A Treasury clearing proposal we've announced. We're working with the SEC now.

Speaker Change #162: I did a call with the Chair and staff, with all of my staff again on Friday.

Speaker Change #162: We feel very confident that all the information...

Speaker Change #162: will be in the SEC by mid-September, and then it will be in the hands of the SEC. They do need to go through, deem it complete and approve, and they have an approval process.

Kenneth Brooks Worthington: which is public, so you'll see that, Ken.

Kenneth Brooks Worthington: As far as our plans, what products, I'm assuming is what you're asking, will launch?

Tim: So you'll see that, Ken. As far as our plans go, what products, I'm assuming is what you're asking, will launch? Please.

Tim: Yeah, and I'll let Tim go ahead and reference that. But again, I think we're really focused on getting our approval and getting the structure of the new clearing facility up and running. And I think what's even more important is, I've said this publicly before, and I'll say it again, that the FIC offering today is a dominant offering. They are the incumbent. We don't know where the world's going to be come 2026 when the mandate kicks into place.

Speaker Change #161: Please.

Speaker Change #164: Well, yeah, and I'll let Tim go ahead and reference that, but again, I think we're really focused on getting our approval and getting the structure of the new clearing facility up and going, and I think what's even more important is, I've said this publicly before and I'll say it again.

Speaker Change #163: That the FIC offering today is a dominant offering. They are the incumbent.

Speaker Change #163: We don't know where the world's going to be come 2026 when the mandate kicks into place, so we will be prepared and ready if, in fact, we need to. But at the moment, I've got to be honest with you, when you just take your savings with FICC up to a billion dollars in a very short period of time with those offsets,

Terry: So we will be prepared and ready if, in fact, we need to. But at the moment, I have to be honest with you, when you just take your savings with FIC up to a billion dollars in a very short period of time with those offsets. That's a very powerful tool to offer your clients today. So again, we'll be prepared, but I don't want to be dismissive of my colleagues over at DTCC and the FIC offering because they've done a good job. And we'll see how they progress as long as they are side by side with us. Tim?

Speaker Change #163: That's a very powerful tool to offer your clients today. So again, we'll be prepared, but I don't want to be dismissive of my colleagues over at DTCC and the FIC offering because they've done a good job, and we'll see how they progress as long as side-by-side with us.

Speaker Change #167: Yeah, thanks, Terry. Again, just to reinforce, Terry's absolutely right. We have a long-standing partnership with BIC that unlocks a tremendous amount of savings for our clients and market participants. And when we're looking at our offering...

Speaker Change #166: that we will be building. Part of it is to satisfy the mandate both with respect to the U.S. active treasuries as well as repo clearing.

Speaker Change #166: But when we're engaging with clients, we want to make sure that we're looking at this from a complimentary fashion. How can we work with market participants to...

Speaker Change #166: Not only bring the service to market, but in a way that deals with some of the issues presented, whether it's on dunaway trade or how they've added it to some of the activity and services that they are providing.

Tim: It's also important when we look at it; we know notice and partnership with our clients is going to be of the utmost importance as we look to bring the solution to market. As Terry said, we're working towards the approval timeline for this year, and we're looking to be ready to test in the second half of next year, such that we can meet the January 26th deadline for U.S. actives and the June 26th deadline for repo.

Speaker Change #166: It's also important when we look at it, we know notice and partnership with our clients is going to be of the utmost importance as we look to bring the solution to market.

Speaker Change #166: As Terry said, we're working towards the approval timeline for this year and we're looking to be ready to test in the second half of next year such that we can meet

Terry: The January 26th deadline for U.S. ACTIVs and the June 26th deadline for REPO. Stay tuned for that, but that's the broad strokes we've provided so far.

Tim: Stay tuned for that, but that's the broad strokes we've provided so far. Thanks, Tim. Great. Thank you. Yep. And just on the Google facility, do you have a dollar cost of the investment? Like, is this all being paid for by you? Is it being paid for by Google? And what sort of payback would you expect on your investment? Are you referring to the facility itself, Ken?

Speaker Change #168: Thanks, Sam. Okay. Great. Thank you. Anything else, Kenny? Yep. And just on the Google facility, do you have a dollar cost of the investment? Like, is this all being paid for by you? Is it being paid for by Google? And what's sort of the payback you would expect on your investment?

Kenneth Brooks Worthington: Are you referring to the commercial arrangements we have at Google? What are you referring to? The facility itself, the new announcement, I guess today, with the co-location facility in Illinois. Yeah. Yeah. I want to make sure we're clear on that, Lynne. Yeah, so we won't, we won't own the facility, and we won't be building it.

Speaker Change #171: Are you referring to the facility itself, Ken? Are you referring to the commercial arrangements we have at Google? What are you referring to? The facility itself. The new announcement, I guess, today with the co-location facility in Illinois.

Speaker Change #169: We won't own the facility and we won't be building it, so there will be some costs associated down the road for our usage, but it's not a build that we are undertaking. They are paying for the building, to put it more clearly.

Lynne: So there will be some costs associated down the road for our usage, but it's not a build that we are undertaking. They are paying for the building, to put it more clearly. Perfect. Thank you. Thank you. Your line is open. Morning, this is Eli. Unknown Speaker 1-1-1. Yes, can you hear me?

Speaker Change #170: Perfect, thank you.

Speaker Change #170: Thank you. Our last question comes from Craig Siegenthaler with Bank of America. Your line is open.

Speaker Change #170: Morning, this is Eli Abboud from Craig's team. Thanks for taking the question.

Craig William Siegenthaler: You onboarded a couple of large retail brokers earlier this year. Can you share any details around the incremental volume you're seeing from these clients? I know you set some records in certain micro-contracts this quarter. To what extent would you attribute this to these? Thanks, Eli. It's a great question. I'll let Julie and then Derek want to jump on as well with some of the contracts, but Jill.

Elias Noah Abboud: Yep, can you hear me?

Elias Noah Abboud: You onboarded a couple large retail brokers earlier this year. Can you share any details around the incremental volume you're seeing from these clients? I know you set some records in certain micro-contracts this quarter. To what extent would you attribute this to these new clients?

Speaker Change #173: Thanks Elias, that's a great question. I'll let Julie and then if Derek wants to jump on as well with some of the contracts.

Julie Winkler: Yeah, I mean, thanks for the question, Eli. Certainly, Q2 was a really strong quarter for our retail business. We saw growth in both the number of retail participants as well as revenue. This growth was really kind of driven by a few factors.

Julie Winkler: Thanks for the question, Eli. Certainly Q2 was a really strong quarter for our retail business. We saw growth in both number

Julie Winkler: of Retail Participants as well as Revenue. This growth was really kind of driven by a few factors. One of them was the one that you mentioned, and that is the focus that we've had on these new-to-futures channel partners that are distributing CME Futures for the first time.

Julie Winkler: One of them was the one that you mentioned, and that is the focus that we've had on these new-to-futures channel partners that are distributing CME Futures for the first time. We saw a lot of strong client interest in our dollar-denominated equity index offerings and also just the fact that we have a very diverse product offering and a really strong quarter for metals as well as options. So as we looked at the new brokers that are offering our products, you know, really what we've seen is the support from both our marketing and education partnerships.

Julie Winkler: We saw a lot of strong client interest in our dollar-denominated equity index offerings and also, you know, just the fact that we have a very diverse product offering and a really strong quarter for metals as well as options.

Julie Winkler: So as we looked at the new brokers that are offering our products, you know, really what we've seen is the support from both our marketing and education partnerships.

Speaker Change #174: They have delivered a number of significant new clients in Q2. They're experiencing that success with our educational content that they're able to deliver on their website and also have told us about the strong customer engagement that they're seeing. So we'd say definitely early success.

Julie Winkler: They have delivered a number of significant new clients in Q2. They're experiencing that success with our educational content that they're able to deliver on their website, and they've also told us about the strong customer engagement that they're seeing. So we'd definitely say that this is an early success, and we believe that this is promising for future growth and really sets a blueprint for some additional brokers that we hope to bring online in the second part of this year.

Speaker Change #174: And we believe that that is promising for the future growth and really sets a blueprint for some additional brokers that we hope to bring online in the second part of this year.

Julie Winkler: In terms of the second one and the APEC retail clients, you know, again, I think this is one where there seems to be a lot of interest in dollar-denominated equity index complexes, which we are extremely strong. So that resulted in, you know, a big uptake of over 20% in our mini and micro NASDAQ suites. And, you know, this is where we were able to outpace our competitors in terms of ETFs and other products out there. This is even with low volatility.

Speaker Change #175: In terms of the second one and the APEC retail clients, you know, again, I think this is one where there seems to be a lot of interest in dollar-denominated equity index complex, which we are extremely strong, so that resulted in

Speaker Change #175: You know, a big uptake over 20% in our mini and micro NASDAQ suites, and you know, this is where we were able to outpace our competitors in terms of ETS and other products out there.

Derek: So I think it speaks to the power of our complex, as well as the investments that CME has made in long-term access to that intellectual property. And then just the last point, you know, when volatility is up where gold futures prices were at record levels, you know, we saw some really great results, I would say in metals activity among our retail client base, revenue, they were up significantly in Q2. And as well as, you know, some good penetration, I would say in getting brokers, particularly internationally, having options access for the first time ever to a retail client. So I think it was a combination of all of those factors.

Speaker Change #175: This is even with low volatility, so I think it speaks to the power of our complex, as well as the investments that CME has made in long-term access to that intellectual property.

Speaker Change #175: And then just the last point, you know, when volatility is up, where gold futures prices were at record levels, you know, we saw some really great results, I would say, in metals activity among our retail client base.

Speaker Change #175: You know

Speaker Change #175: Revenue there up significantly in Q2, and as well as some good penetration, I would say, in getting brokers, particularly internationally, having options access for the first time ever to a retail client. So I think it was a combination of all of those factors.

Derek: That is, you know, certainly setting us up in a strong way for future growth. So we're excited about those new brokers that we've brought on and also the additional ones that we expect to come online this year. customers. So this is a function of serving customer needs for intermediaries and users. And that's led to growth not just in volume, but open interest in a broad main set of market participants.

Speaker Change #175: That is, you know, certainly setting us up in a strong way for future growth. So we're excited about those new brokers that we've brought on and also the additional ones that we expect to come online this year.

Derek: Thanks, Joel. Derek, do you want to wrap it up? Yeah, just very quickly on the gold side, as Julie touched on, we saw significant growth in participation on the gold market this year. When you look at our Q2 volume in metals overall, up 42%.

Derek: Retail in the second quarter is at 70%. This is a function of having the right product size for the right participants and the right risk appetite. So when we look at that growth, we saw records with both micro copper, micro silver, and micro gold, and we saw as prices pushed up, we had the right products for those customers. So this is a function of serving customer needs for intermediaries and users, and that's led to a growth not just in volume, but open interest and a broad main set of market participants as well.

Julie Winkler: Thanks, Derek. Thanks, Julie. Thanks. Thanks. If I could squeeze in a follow-up,

Derek: Thanks, Derek. Thanks, Julie.

Eli: You mentioned you'll be giving clients access to Google's AI capabilities. I was just wondering if you could give us any more details on what use cases you're envisioning and which market participants you'd be targeting. Is this for the buy side, FCMs, market makers? Yeah, we'll be careful disclosing what market participants we always are on that form, but Ken can give a little bit more color as it relates to that. Yeah, I think I think AI is just one part of it.

Speaker Change #176: Thanks. Thanks Eli.

Speaker Change #177: If I could squeeze in a follow-up. You mentioned you'll be giving clients access to Google's AI capabilities. I was just wondering if you could give us any more details on what use cases you're envisioning and which market participants you'd be targeting. Is this for buy-side, FCMs, market makers?

Speaker Change #177: Yeah, we'll be careful on disclosing what market participants we always are on that form, but Ken can give a little bit more color as it relates to that.

Kenneth Brooks Worthington: Certainly, we're focused on data and analytics capabilities. And as AI relates to that, I think some of the things that we'll be working with our customers on and unveiling over the coming years will be very interesting, very interesting to them, and hopefully will enable both their risk management and their trading strategies. So beyond that, I think it'd be a little bit premature to talk about, you know, too much more depth about which clients would do what with AI. They're all figuring it out on their own in their own ways, frankly.

Kenneth Brooks Worthington: Yeah, I think I think AI is just one one one piece of it. Certainly, we're focused on, you know, data and analytics capabilities. And as AI relates to that, I think some of the things that we'll be working with our customers on and unveiling over the coming years will be will be very interesting, very interesting to them.

Kenneth Brooks Worthington: and hopefully enable their both their risk management and their trading strategies. So beyond that, I think it'd be a little bit premature to talk about, you know, too much more depth about which clients would do what with AI. They're all figuring it out on their own in their own ways, frankly.

Eli: Okay, Eli, I got it. Thank you, thank you, buddy. All right. Thank you, and we have no further questions at this time. I'd like to hand the call back to management for closing remarks. Well, we want to thank you all for joining us on today's call. We're very thrilled about our record results. We are going to continue to work hard to bring efficiency to the marketplace and bring value to our shareholders. So, thank you very much for joining us. We look forward to following up. Thank you. That concludes today's conference. Thank you for participating. You may disconnect at this time.

Elias Noah Abboud: Okay Eli. Got it. Thank you.

Elias Noah Abboud: Thank you, buddy. All right.

Speaker Change #178: Thank you and we have no further questions at this time. I'd like to hand the call back to management for closing remarks.

Speaker Change #179: We want to thank you all for joining us for today's call. We're very thrilled about our record results. We are going to continue to work hard to bring efficiencies to the marketplace and bring value to our shareholders. So thank you very much for joining us. We look forward to following up with you.

Speaker Change #180: Thank you. That concludes today's conference. Thank you for participating. You may disconnect at this time.

Speaker Change #180: www.circlelineartschool.com