Q1 2025 CME Group Inc Earnings Call
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Speaker Change: Welcome to the CME Group, first quarter, 2025 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.
Speaker Change: So Neil to comment on our market operations during this high volatility environment.
Speaker Change: Following that Lynne will provide an overview of our first quarter results and additional Suzanne Chenille and land we have other members of our management team present.
Speaker Change: Answer questions. After the prepared remarks this quarter represented the highest volume revenue operating income and diluted earnings per share in the history of CME group, our quarterly revenue crossed $1 6 billion for the first time and we also exceeded 1 billion and adjusted net income.
Speaker Change: Our record breaking performance in the first quarter demonstrated the growing need for risk management globally first quarter average daily volume up $29 8 million contracts not only was the highest quarterly adv in CME group's history.
Speaker Change: Also increased 13% compared to the same period last year.
Speaker Change: This strong growth was broad based with year over year volume growth in all six asset classes.
Speaker Change: All time quarterly volume records in interest rates equities agricultural commodities and foreign exchange.
Speaker Change: In aggregate, our commodity sector volumes grew by 19% and our financial products grew by 4%.
Speaker Change: This quarter highlighted the strength of our product diversity and the ability to customers for customers to manage risk and in times of uncertainty.
Speaker Change: It also reinforces our past comments about the importance of deep liquidity, especially in times of market stress.
Speaker Change: This was also a record quarter for our international business, which averaged $8 8 million contracts per day up 19% from the prior year.
Speaker Change: This strength was driven by.
Speaker Change: Growth across all asset classes, including quarterly volume records in both EMEA and APAC.
Speaker Change: We also continued to innovate and evolve our product offerings to meet the risk management needs for our clients. We recently announced several new offerings that will create opportunities for stronger links between cash and futures markets.
Speaker Change: Later this year, we plan to launch broker Tech Chicago, a central limit order book for cash U S. Treasuries and will be located co located next to our U S Treasury futures and options markets.
Speaker Change: Last week, we launched FX spot, plus which enables spot FX participants.
Speaker Change: Tap into CME, FX futures liquidity and.
Speaker Change: Gibbs FX futures and broader access to OCC as a commodity.
Speaker Change: Looking forward, we continue to see very strong volumes to start the second quarter as market participants look to hedge exposures to tariff policies and geopolitical dynamics are open interest today is 7% higher.
Speaker Change: And at the same point last year with strong open interest growth in our interest rate energy and agricultural complexes.
Speaker Change: Long open interest trends and indicate that despite the high level of volatility market participants are not leaving the market, but rather continuing to use our products to manage their risk exposures and.
Speaker Change: Risk management and resiliency is Paramount at CME group.
Speaker Change: The record activity this past quarter, leading into April I'm going to ask Suzanne Greg to give you an update on margins and so Neil Contango you gave you some color around our resiliency during some of the most unprecedented times and we have seen with that I will turn the call over to Suzanne.
Speaker Change: Gary in response to the heightened levels of volatility earlier this month.
Speaker Change: We proactively increased margin requirements and various products.
Speaker Change: All asset classes and incremental steps over the course of April to ensure adequate collateral coverage.
Speaker Change: But what did he demand due to margin increases are typically a fraction of the size of mark to market cycles I attributed the daily pricing.
Speaker Change: A new single day record for moving cash.
Speaker Change: It is a mark to market on April nine.
Speaker Change: <unk> $32 million from firms that day, and paying out $32 billion. It forever.
Speaker Change: This far exceeded our previous record of $22 billion.
Speaker Change: Garrison increased collateral requirements due to margin increase on April eight total.
Speaker Change: There are a number of things settlement banks have been performing well given the increased volatility and liquidity.
Speaker Change: Management is most important to our business and we are monitoring grasp on the wall claim basis every day regardless.
Speaker Change: Thanks, Suzanne I'm Gonna have Sunil casino now to comment on the technology and the resiliency of our markets.
Sunil: Thanks, Terry despite the high volatility in record activity in our markets, including seven straight days over 14 million contracts a systems functioned as designed and sharing market continue during a period of extreme volatility during.
Speaker Change: During the period during the week of.
Sunil: April seven we saw record order entry bothers, you understand all banks.
Sunil: Banks exceeding 13 billion messages over the course of the week the system's ability to handle record volume's underscores that.
Sunil: Yeah.
Speaker Change: Thank you Sidney I ask bolt, Sunil and Suzanne to comment because I think it's critically important for.
Speaker Change: Analysts and investors understand what we do here on a daily basis, sometimes it doesn't get quite ask but I think during the unprecedented times that we've seen especially over the last six to eight weeks I wanted to give you just a little bit of a flavor of how we are operating at scale makes it which I think is really important to understand that and we look forward to your further questions during that part of the.
Speaker Change: Uh huh.
Speaker Change: In your presentation. This morning. So thank you both you Susanna.
Speaker Change: I'm going to turn the call over to Linda to review our financial results in more detail.
Linda: Thanks, Mary and thank you all for joining US this morning, as Terry mentioned during the first quarter CME group generated revenue of $1 6 billion for the first time.
Speaker Change: 10% for the first quarter.
Speaker Change: Sure.
Speaker Change: Yes average rate per contract for the quarter was strong at 68, 6%.
Speaker Change: Down 1% from the prior year, and 13% volume growth, resulting in our highest quarterly clearing and transaction fees to our history of $1 3 billion.
Speaker Change: <unk> year over year.
Speaker Change: Market data revenue also reached a record level of 11% to $195 million.
Speaker Change: If we need strong cost discipline led to adjusted expenses of 475 million for the quarter and $378 million excluding license fees.
Speaker Change: Adjusted operating income came in at a record $1 2 billion up 14% year over year.
Speaker Change: Our adjusted operating margin for the quarter was 71, 1% up from 68, 9% in the same period last year.
Speaker Change: CME group had an adjusted effective tax rate of 23.
Speaker Change: 5%.
Speaker Change: Driven by the strong demand for our risk management product, we delivered the highest quarterly adjusted net income and adjusted diluted earnings per share in our history at $1 billion and $2 80 per share respectively. Both up 12% from the first quarter last year.
Speaker Change: This represents an adjusted net income margin for the quarter of over 62%.
Speaker Change: Capital expenditures for the first quarter were approximately $12 million in cash at the end of the quarter with workplace Elliot.
Speaker Change: Amy group paid dividends during the quarter of approximately $2 6 billion and.
Speaker Change: $3 8 billion over the past year.
Speaker Change: We're very proud to deliver the best quarterly earnings in our history.
Speaker Change: We had a strong start continue into the second quarter with year to date volumes up 20% versus 2024.
At CME group, we continue to focus on providing risk management products needed by our clients and driving earnings growth for our shareholders I'd now like to open the call for your questions.
Speaker Change: Thank you we will now begin our question and answer session. If you would like to ask a question. Please press star One star Q. If you would like to withdraw your question again that is star one if you would like to ask a question.
Kyle Voigt: Our first question will come from Kyle Voigt with K B W. Your line is open.
Kyle Voigt: Hey, good morning, everyone maybe.
Kyle Voigt: Maybe if I if I could just start by asking you one on the operating environment.
Kyle Voigt: In some prior periods of extreme volatility and increasing margin requirements, we've seen deleveraging occur by market participants.
Kyle Voigt: You kind of just mentioned in your prepared remarks, it doesn't seem like the open interest data really supports that theres any type of significant deleveraging occurring.
Kyle Voigt: Open interest total NOI is up since the start of April However, theres there does seem to be some pockets with O Y down meaningfully in April, particularly in AG futures.
Kyle Voigt: I was just wondering if you could talk about what youre seeing and hearing from market participants in terms of health.
Kyle Voigt: Why do you think we haven't seen any broad based deleveraging and what is happening in some of the small pockets, where you are seeing a decline a bit in April.
Kyle Voigt: Thanks, Kyle So the question is.
Kyle Voigt: What are we hearing from clients of why they're not deleveraging. During this time period and what are we seeing with some of the smaller contracts as it relates to agricultural products that have some seen some open interest drop is that a fair way to categorize your question.
Kyle Voigt: Okay.
Kyle Voigt: Yes.
Speaker Change: I saw it Derek why don't you address the commodity issue and I'll address the broader issue.
Suzanne: Suzanne so thanks Kyle.
Suzanne: You look at the overall AG came off a record year of just under $600 million generated in eggs last year. When you look at the first quarter of this year, we set another adv record not just in futures and options overall of the business up 23%.
Suzanne: Look at the whole wide trends overall, we set multiple records N O I know Chuck in options, but the aggregate options plus future. In fact, we just set a record $5 1 million open interest in options just last week on the 21st of April.
So you look at the aggregate story options plus interest, but actually has seen record levels of open interest we're on track to exceed the record that we set in February with another record I'm, assuming you continue the trends over the last over the next couple of days.
Suzanne: When you look at the pockets that you're talking about yes, we have seen some trailing off in future, but we've seen that more than offset the pick up in open interest and options hence.
Speaker Change: Joe for all record levels, we did see some pullback and livestock, particularly feeder cattle.
Speaker Change: And the future side options group overall in aggregate. This is very much a risk on environment and that's the benefit that's having a market where you've got the grains and oils change we've got the dairy you got the lumber and we got the livestock.
Speaker Change: Yeah.
Speaker Change: Markets overall, we're coming off a record quarter record a wide options record and we're seeing record levels of non U S activities. So I would say the deleveraging is not something we're seeing it in aggregate across acts in fact very much the opposite cause a risk on environment. We are seeing some shifts between products inside.
Speaker Change: The AG market overall, so Kyle let me address some of the other questions about the broader markets and just talk about some of the fundamentals that we're seeing that.
Speaker Change: I don't know I've been in this business for probably as long as anybody and I have not seen some of the fundamental factors that we're seeing today. So our open interest as Eric referenced is up 7% across the board in total so I think that's an important factor.
Speaker Change: You're also looking at reason why people may not be deleveraging, it's very difficult to.
Speaker Change: Take risk off our deleverage your hedges when.
Speaker Change: Most of them certain times, we've ever seen in our history no one's ever traded through these tariffs are in the market places to any extent over the last 30 plus years, we've never had 38 trillion dollars of debt on the books. So the United States of America Theres debt on books of countries all around the world There is so.
Speaker Change: Much risk out there associated with margins being massively than that if you do not participate I don't think you have the luxury of not participating in this volatile time, just because if you do not participate you could be out of business. The next day and that's how quick these markets are moving and Thats the size of.
Speaker Change: The moves associated with them. So I think that's a big part of the reason why we're not seeing deleveraging like you may have seen like I've seen in 25 30 years ago. When the markets got very volatile and people just kind of put their hands in their pocket and tried and tried to wait to see when there's some clarity you don't have that luxury today because of the fundamentals are not only.
Speaker Change: Here in United States, but globally. So I think that's a big part of why we're not seeing the deleveraging and I think that's why our products are critically important for our user base today.
Speaker Change: Thanks Terry.
Speaker Change: Thanks Colin.
Speaker Change: Yes.
Speaker Change: Our next question comes from Dan Fannon with Jefferies. Your line is open.
Dan Fannon: Hi, Thanks, good morning.
Dan Fannon: I was hoping for some historical context can you talk to what happens historically when you guys have raised margin requirements and then ultimately volumes thereafter, I notice period is pretty unique but we focus on maybe the largest asset classes is it reasonable to assume some level of slowdown after the raise.
Dan Fannon: Margin requirements and then ultimately and also if you could provide just kind of where those challenges on the collateral side.
Dan Fannon: Currently.
Dan Fannon: So Dan I think it's really important it's hard to give you a one answer on that because every situation is different with margins. So if you want to talk about margins there and you already don't mind crisis. That's a fundamental issue why you might move margins up or down why you're moving margins up or down in 2025 going on with the geopolitical.
Speaker Change: That's a boots on the ground wars in Russia, Ukraine.
Speaker Change: The issues going on in the Middle East and the tariff conversations that have been going on are completely different than what was going on in all cases. The housing crisis. So it's hard to pinpoint what exactly can or cannot happen I will say on margins, though and that's one of the reasons.
Speaker Change: Pay a lot of attention to what Suzanne and Sunil are doing because it's really important that when we talk about margins and when we work with our clients on margins, we want to make sure. We do it in a very judicious way that we're not just being reactive on margins because I think that can be disruptive to markets and that's what puts people on the sidelines.
Speaker Change: Disruptive I think when your deliberate we have been proactive likelihood then you lessen the chance of the reactionary.
Speaker Change: Activity of people walking away from your marketplace because of not understanding what margins mean to it. So I believe that there's no one simple answer and I promise you I'm not dodging normally better than that I, just think that fundamentally the markets are different today than there were in historical trends that we've seen when we move margins up or down as Suzanne if you Wanna comment you're happy to yeah I would agree.
Suzanne: I think every situation is different but in periods of increased volatility people are looking for central counterparties to be a place to come to manage their risk in a safe manner.
Suzanne: Hang upon the Collateralization that happens in our ecosystem. So we have seen record levels of overall margin requirements and collateral in the system that seems to be consistent with the activity increases that we've seen over the past couple of weeks as well. So again, we can't speculate what's going to happen in the future, but it seems in this case that people appreciate the level of safety.
Suzanne: That you got from margin Collateralization of and clearing houses like CME.
Suzanne: And again, Dan I think that was one of the reasons why we invested the way we did it spanned two technology. It helps allow us to make some of these decisions, but again. These are it's an art not science all the time and we do work with market participants to make sure that everybody's comfortable Houston neutralized system and is critically important to all market participants that we are doing our job correctly. So we think.
Suzanne: It very seriously and as Suzanne said earlier. This is real time risk management. This isn't cheap one or two Judas as real time risk management. So I. Appreciate your question, Dan hopefully that answered it for you.
Dan Fannon: Yes. Thank you.
Suzanne: Thank you.
Suzanne: Yeah.
Speaker Change: Thank you. Our next question comes from Patrick <unk> with Piper Sandler Sandler excuse me your line is open.
Speaker Change: Yes. Good morning, Thanks for taking my question.
Speaker Change: Recently announced that youre going to be selling the <unk> JV.
Speaker Change: With S&P global for $3 1 billion.
Speaker Change: Which I assume you are going to receive half of so was just hoping maybe you could comment on what you plan to do with the proceeds from that deal and how that informs your capital allocation priorities.
Speaker Change: For the rest of this year and into next year. Thanks.
Speaker Change: Thanks, Patrick go ahead, yeah. Thanks, Patrick So you're right. It is a 50 50 joint venture so we might be putting the proceeds of that I would expect to close it's probably about six months out we have to go through the regular regulatory review.
Speaker Change: So that does take some time so on the on the use of proceeds we're going to hold off on kind of making any statements on that just given the amount of time between now and the clouds, but certainly we'll keep you updated as we get closer to that point.
Speaker Change: Okay. Let me just add one thing parents or gotten to regulatory approvals. We are not anticipating we have not been advised that where there's any hurdles that cannot be crossed so we're not anticipating any.
Speaker Change: Regulatory hurdles I am closing this transaction is just a time consuming process.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thanks, Patrick.
Speaker Change: Thank you. Our next question comes from Ken Worthington with Jpmorgan. Your line is open.
Speaker Change: Hi, good morning, Thanks for taking the question.
Ken Worthington: I'd actually like to follow up on <unk> can you talk about the decision.
Speaker Change: Why you decided to sell it was true and maybe what your thoughts are on post trade.
Ken Worthington: Going forward after the sale.
Ken Worthington: So Ken let me, let me just say a couple of things when we acquired that business back in 2018.
Ken Worthington: Business.
Ken Worthington: Interesting back office business part of it.
Ken Worthington: Decent business it became.
Ken Worthington: A much more attractive when when we were able to do partnerships with than IHS market and then ultimately when they acquire S&P acquired them you know I have another JV what S&P. So were as Lynn said rolling one side of that trade. So there is a decision process and these JV is about how you want to go about them.
Ken Worthington: Listen I think it became very lucrative foresee I mean, as we put these properties together and we thought it was a good opportunity for us to monetize those gains on behalf of our shareholders and we would not be putting ourself at any disadvantage whatsoever by not owning them. If in fact, they still wanted to use some.
Ken Worthington: These services instead of running them. So I think it was a very smart business decisions and that's what we did with <unk>.
Speaker Change: Great. Thank you.
Ken Worthington: Thanks, Ken.
Speaker Change: Thank you. Our next question comes from Ben <unk> with Barclays. Your line is open.
Speaker Change: Hi, good morning, and thanks for taking the question just wanted to follow up on some of the margin questions. Just curious with the pricing change going into effect at the beginning of April any early reads on the sort of shift from cash to noncash or non cash to cash collateral or is it perhaps like too volatile too to really see what the longer term decisions of your clients will be.
Yeah, Thanks, Ben Lynn Yes.
Speaker Change: Yes, so just to give you a few data points.
Speaker Change: For the quarter, our average cash balances were 79 billion.
Speaker Change: Had average noncash collateral of 173 billion.
Speaker Change: In April amongst today, Alright average cash balances up to 131 billion and the fee eligible noncash is 140 billion.
Speaker Change: I would now as Suzanne talked about the overall level of activity and margin is up.
Speaker Change: And we're also very early days in terms of the the new soft minimum being in place.
Speaker Change: This is an item that we do report on on a monthly basis in our volume tracker. So I want to keep an eye on that as we're putting out that data over the next few months because we need to see when people are more used to the cash minimum and you know as.
Speaker Change: As we look at levels of activity as we go through the year, we could see some changes there but to date, we're seeing the vast majority of participants that 30% drop in cash.
Speaker Change: Very helpful. Thanks, so much.
Speaker Change: Thanks Ben.
Speaker Change: [laughter].
Speaker Change: Thank you. Our next question comes from Bill Katz with TD Cowen Your line is open.
Bill Katz: Okay. Thank you very much for taking the question maybe shift gears, a little bit Steve the non U S opportunities continues to grow rather nicely year on year quarter on quarter and across the different regions to which youre participating I was wonder if you could unpack some of the drivers for that growth how much of that might be sort of onboarding, new users versus maybe a penetration.
Bill Katz: Of that user base and how to think about the outlook going forward. Thank you.
Steve: So that's a great question and we have been very pleased with our growth internationally and I'm asked Julie Winkler, who heads up that division to give some color on that.
Speaker Change: Yeah. Thanks for the question you know that certainly Q1 was another record in terms of average daily volume of $2 8 million contracts and it opens up 19%.
Speaker Change: It was great to see is that we saw double digit growth across all asset classes in particular energy AG and foreign exchange products were extremely strong.
Speaker Change: What I also like to see it grow.
Speaker Change: Those came from every international customer segment, which is speaks to I think probably with that also the need for our products.
Speaker Change: Our clients to be able to risk manage them here at CME group that was led by commercial participants that we're up almost 30% and so we often speak about the health and diversity of our client base and how critical those hedgers arent to our marketplace and so that is a great.
Speaker Change: Trend that we've continued to see also just point out you know it was a record quarter for non U S options growth, one 5 million contracts and 80 D that was up over 20% year on year. So this has been another strategic initiative that we talked about increasing that penetration and the options or APAC.
Speaker Change: Strong EMEA was strong I think the other trend that we're seeing is certainly from the buy side community.
Speaker Change: That was strong in both EMEA as well as APAC and you know what we're seeing is.
Speaker Change: Quite funds in APAC are continuing to further expand their trading strategies and so things like that yeah. We have a lot of resources across the world to really engage with our customers and help to drive that trading activity and work with our customers. So we.
Speaker Change: We have good outlook going forward and are happy with the performance in Q1.
Speaker Change: Thanks Julien.
Julien: Thank you Bill Thank you.
Speaker Change: Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.
Owen Lau: Hi, Good morning, Thank you for taking my questions. So on the retail Youll micro equity index and Michael Ethics.
Owen Lau: <unk> went up quite a lot in the first quarter could you. Please talk about how much of it is driven by your partnership with Robinhood and how much more you can do with them and launch more products through that platform. Thanks a lot.
Joel: Okay Joel.
Owen Lau: Got it.
Owen Lau: Just speak a little things I had a question on about you know the retail performance and I'll Trust your point on on Micros and also our futures brokers.
Owen Lau: Partners, which are important.
Owen Lau: Q1 in general was a record quarter for our retail segment, we saw growth across a number of key metrics. So certainly revenue was up 10%. That's a key metric for us, but also we've spoken about the importance of new client acquisition or a N C. A.
Owen Lau: This surge by an impressive 44% to over 83000, new traders in Q1.
Owen Lau: They said the fourth consecutive quarter of that double digit MCA growth. We also had some at 17.
Owen Lau: The 17% increase in total participation so reaching over 350000 traders.
Owen Lau: Billy I couldn't.
Speaker Change: News as well is that we saw that growth across all.
Speaker Change: All three regions and so I think that continues to speak to the global nature of our partnerships.
Speaker Change: And you know the importance of our micro suite sell total microbiome $3 8 million in average daily volume in Q1, this was up 13%.
Speaker Change: And you know where.
Speaker Change: We're.
Excited to see that that's happened.
Speaker Change: Micro equities as you pointed out and also recycle.
Speaker Change: Really robust.
Speaker Change: And for our micro metal and also our micro crypto currencies.
Speaker Change: So that continues to speak to the diversity of our product base and also the fact that we're continuing to educate these retail customers and cross sell across equities into these other more diverse asset classes.
Speaker Change: The market environment, and we've talked a lot about on this call with a key part of creating those opportunities or retail engagement and you know we've also talked about strategic partners, including Robinhood, plus 500, Meatballs Tomorrow and these partners are critical for us to be able to go out.
Speaker Change: And N C customers, they're educating customers. They are onboarding them quickly and also you know pushing up to down market opportunities, which there were a lot of them in terms of trading opportunities in Q1, So it's a part.
Speaker Change: Part of that about that going forward and we'll continue to.
Speaker Change: At work with them as well as we see a need for product innovation in the future and let's say you know we launched you know new things like micro access as well. So this is about combining the partnerships with also the product innovation to continue to see all of this growth going forward.
Speaker Change: Thanks, Joe you're talking about.
Speaker Change: Thanks, Sean.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.
Alex Kramm: Yes. Good morning, everyone. A quick one from me on on market data really strong revenue performance I know you gave the audit numbers already in the prepared remarks, but can you maybe break down the remainder of the growth between some of the price increases, but also you know core subscription growth and any other one time as you would point out and under.
Alex Kramm: Subscription growth of course, maybe you can talk about where you see new subscribers from come from in particular, thank you.
Speaker Change: Okay I'm going to ask you both win enjoyed a comment.
Speaker Change: So a reminder, Alex on the market data front, we did have a three 5% price increase that went into effect in January so that is going to be part of that we also saw strong subscriber growth and maybe you can.
Speaker Change: Comment on some of the retail.
Speaker Change: Retail expenses how that.
Speaker Change: They are all around us.
Alex Kramm: Yeah. Thanks for the question Alex It is as Lynn pointed out.
The biggest.
Speaker Change: Biggest move I'd say was among our professional subscribers to our reach real time market data and so.
Speaker Change: That was both we see we talk.
Speaker Change: Check in demand. So we saw more users and then we also had that price increase of three 5% that took effect on Jan one.
Speaker Change: The other major trend with outperformance from.
Speaker Change: Nonprofessional. It. So these are retail users.
Speaker Change: <unk> access to our market data.
Speaker Change: And also saw some growth in our derived data.
Speaker Change: Instruments as well and so that was that was combined with that I'd say you know on the nonrecurring revenue side.
And uptake and increase over Q1 and.
Speaker Change: Lots of 'twenty 'twenty four and also up over Q4, they were about $3 5 million and audits and some other additional true ups, but as we've stated in the past you know those those.
Speaker Change: A pretty difficult to predict and or just the timing on that from our side based on how we work with our clients I'm not Friday. So I'd say the biggest you know kind of new trend is is this continued demand from retail and that nonprofessional subscriber usage, which is it tends to grow relatively significantly and I think coincide.
Speaker Change: What we're seeing on the volume side with our retail business.
Speaker Change: Thanks Julien.
Speaker Change: Alex.
Speaker Change: Very good thanks.
Speaker Change: Thank you. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.
Speaker Change: Hey, good morning, everyone hope, you're all doing well have a big picture question. So in the quarter you generated about 30% of your Adv from international customers and we wanted an update on how these businesses compete with the non U S futures exchanges, especially given the <unk>.
Speaker Change: <unk> trade conflict. So how do you think of the risk of share losses versus the potential for gains from domestic exchanges in these markets.
Speaker Change: So Greg I understand your question, you're saying where.
Speaker Change: Where do we compare against the foreign exchanges on a percent basis.
Speaker Change: So it's about 30% of your total Adv, but I just wanted to generally.
Speaker Change: Crime and terror.
Speaker Change: On your on how you compete with the international Futures exchanges for example, there's there's five in mainland China.
Speaker Change: Yeah, Yeah got it thanks Craig.
Linda: I can start and then others Julian others can jump in so thanks, Craig It's Linda.
Linda: You know I think as we look at it we have a unique product offering and kind of the breadth of our offering contracts that our customers are able to come to us to risk manage so not just the places where we have IP protection over those contracts and they are not offered on the local exchange, but also the depth of liquidity that you can get in our market.
Linda: On a 24 hour a day basis, so getting access to the major U S indices or trading on.
Linda: Oh treasury curve or the whole U S rate curves are energy products. These are unique to see me and you have not only that product diversity that the depth of book, where our customers around the globe can be trading in those markets and have the same trading experiences during her U S towers.
Speaker Change: Right, Yeah, I think just to put some data behind yeah, Linda point on convert the benchmarks I mean, particularly in equities internationally. We saw outsized volume those are up 33% year on year and that was largely driven by the buy side in EMEA APAC props and retail business.
Speaker Change: And also Latam on the sell side and buy side. So you know users are continuing to come to our markets and the depth of liquidity is is unparallel and you know they they fail.
Speaker Change: Suzanne correctly pointed out earlier right safe in training in that environment and with CME group.
Speaker Change: We've just yeah I just returned from the Middle East and I had a sales was just over in Asia over the last week as well and the sentiment is that you know even among that as market volatility and the tariff turmoil clients are reiterating the importance of really that trusted partnership they have with CME group to access our liquidity in and manage risk. So.
Speaker Change: We feel strong about the relationships that we've built with our customers and the fact that we have such a diverse product suite, but they're able to take advantage of it Greg I would just add that the one measuring stick that you have to look at it as we as we announced earlier the record volume coming from outside the U S is really the measuring stick how we look at ourselves versus other entities. So at $8 90.
Speaker Change: Contracts a day that is a record for <unk>.
Speaker Change: And I think that's something that we're very proud of and we're continuing to build them.
Speaker Change: Thank you.
Greg: Thanks, Greg.
Speaker Change: Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.
Speaker Change: Oh, great. Thanks. Thanks. Good morning, Thanks for taking my question, maybe just to come back to retail if we think about the surge that we've been seeing in micro futures can you comment on to what extent retail users may may or may use other other.
Speaker Change: Contracts outside of micro like how good of a proxy is micro for for retail and.
Speaker Change: As we think about volume tiers as well that you called out in the in the in the commentary should we be thinking of that mostly in interest rates or is that you know quite diversified by product line, including equities of course since we've seen the volume surge in April there really pick up.
Speaker Change: Thanks, Brian So I'm going to ask Glenn to comment on the volume tiers and that wasn't that had the impact on the RPC as you saw and then on the Micros Oh ask Julie to comment is it a proxy as it relates from the retail going forward and then I have a and then I might as well so yeah. So the volume carrying Brian you will see.
Speaker Change: And the individual asset classes and the individual so those are separate it's not across the board where it's the total volume over our complex you would need to look at the the volume within each asset class and for instance.
Speaker Change: It will be volume tiers for treasury.
Speaker Change: If you look at the performance of those.
Speaker Change: Yes.
Speaker Change: Parts of the asset classes. So when we have not only record overall volume our highest quarter in history, but we also had our highest quarter for interest rates equities and FX you will see more of the impact of cheering when you're at those high levels of volume that is intentional we want to make sure in these high periods of volatility there.
Speaker Change: Our customers can continue to manage that risk and that exposure and make it cost effective for them to do so and continue to trade and it's all basically highly profitable for us as we see that increase in volume coming across the system. We have very high operating leverage and get high incremental margin on that train. So it is something that we've built into the.
Speaker Change: Our system to make sure that we are capturing that maximum velocity of training.
Speaker Change: I think in terms of the micro question I mean, it was a very deliberate decision on our behalf to introduce those products and you know the thinking at the time is the same as it is today, we wanted to find a product that had the correct size.
Speaker Change: For the retail customer and clearly there is a spectrum of retail customers in terms of those trading with the smaller account size where micros.
Speaker Change: Very much fit into their portfolio and a and just the right size. There are also you know retail accounts that are much larger than that and people are hedging.
Speaker Change: Typically large shock.
Speaker Change: Stock portfolios, where they may be able to get into our E mini and have actively traded that in the past.
Speaker Change: So we monitor this in and are certainly seen as well that adds new to futures brokers come into the marketplace and even our existing partners. There is more product diversity and what they are training and so I think micros are a good proxy however.
Speaker Change: Retail traders are not limited to just trading micro equities and you know I think that's where we do see them.
Speaker Change: That in Q1, they were training that both sides gold contract Payor and trading the full sized crypto currency contract and so yeah again, I think it speaks to the breadth of our product portfolio, but it also is heavily dependent on the size of that individual trader, who is accessing our market place and just to add to that a little bit.
Speaker Change: I do think when you look historically at Micros and you look back at the equity markets, calling back 25 years ago. When the multiplier of the S&P 500 was cut to 50 that was a smaller contract and the money was came out of that now the email. These large contracts the value of our contracts, sometimes determines where the participant may or may not go.
Speaker Change: With Julie's point, they can go in different sized contracts and I think that's very important so to say, it's a proxy it would be a bit of a stretch of I believe and right now what you're seeing institutions trade micros, and youre, saying institutions trade the large contracts depending on what their needs are and again, we're trying to.
Speaker Change: It should have a structure to allow all participants to participate at their comfort level, but you got to remember that a lot of this is depending on the price of the actual product to determine the risk associated with that product. So it goes up $3500, an ounce versus $1000 an ounce, obviously the contracts much more expensive and it wasn't a.
Speaker Change: All stars mouse.
That's great Yeah, I was just going to.
Speaker Change: When we look at what the uptake is on the micro gold side that we've talked about that's actually market to Jerry's point, we had to stockholders in 2000 to 3500, that's a market that has attracted a lot of not just retail, but small institutional participation that is such an important product right now that you've actually exercised some pricing power increased fees on those starting February 1st and that is very important.
Speaker Change: Point so on these smaller products that maybe larger participants are trading we are adjusting the pricing associated with them just like we did the equity market over the last 25 years as you know many became the dominant size contract for the equity market. So we're very aware of that and we don't price them on notional value like we did when they first came out we probably something on what we.
Speaker Change: We believe the participants using them right.
Speaker Change: Right. Okay. That's great color. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Alex Blaustein with Goldman Sachs. Your line is open.
Alex Blaustein: Hey, everybody. Good morning, I actually had another quick follow up on retail for you guys you talked about retail in the context of just kind of volume contribution in the business can you help break down the composition of retail in terms of just the revenues where that stands now.
Both on the trading side as well as the market data and if you look at the market environment in April obviously, a lot more volatility it sounds like retail continues to be fairly engage but as you sort of assess the health of retail and why this time around might be different from other drawdown. So I'd love to get your perspective on.
Alex Blaustein: What sort of been driving a bit more durability in retail trading so far in April, which again seems to be still linger.
Alex Blaustein: Engaged yeah, Alex. Thank you I appreciate it first of all we don't give out the information on the breakdown of the participants whether on the revenue or market data or their trade.
Speaker Change: Well, let me comment as it relates to why I think the retail is different today than it may have been a year ago or 10 years ago. The retail today has many more tools to allow their participation into our marketplaces as well as many others that they did not have just a few years back. So when you look at retail.
Speaker Change: Brokers today offering futures, we didn't see that before there was a comment earlier about robinhood now offering futures contracts for F. C. I mean that was not around a few years ago.
Speaker Change: The size of the retail market is so much bigger and diverse than it was years ago. I think that's one of the reasons why we're saying not to take down our retail why do we still see the uptick continuing and it's just the distribution of that product and technology that allows people to participate people have access to it they want access to it and I think that's the big difference.
Speaker Change: We're seeing today and we just saw in recent times and I don't see that going away I see that only continuing because of the way technology allows people to participate in different markets around the world, including CMS.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Great. Thanks.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Ashish <unk> with RBC capital markets. Your line is open.
Speaker Change: Thanks for taking my question I wanted to pin down further on the energy similar to other asset classes. We saw some really strong volumes in in April.
Speaker Change: Do you think about the puts and takes going forward and then maybe just on the theme.
Speaker Change: The topic of energy, how do you think about any updated thoughts on WT I wish this brand and the same on not guess thank you.
Speaker Change: They're going to come on that yeah. When you think you are looking back at 2024, we put up a record year. Corey I think are generated are in excess of $200 million of revenue last year. We started strong this quarter. So you have currently.
Speaker Change: First quarter volumes are up 20% led by options up 34%.
Speaker Change: We're seeing record individual pumps and for options overall.
Speaker Change: In terms of open interest overall in the Henry hub complex, we've seen volume records in options and futures open interest levels, we haven't seen in over 10 years. So we're seeing multiple reference open of course. It came out that is carried over into 75% growth in April as well when you look at where and how that business is scaling when you look at the client segment perspective every <unk>.
Speaker Change: Client inside our portfolio check props banks buy side commercial customers all up double digits. When you look at where that business growth is happening as you heard from chart at the top of the call I'm truly earlier energy contributed to record revenues outside the U S and non U S benefit that's a new all time records for energy contributing as opposed for access.
Speaker Change: Well when you look at the kind of positioning of both Henry hub and W. G. I think everything we've been talking about for the last two to three years, that's what a structural shift positively positioning.
Speaker Change: Henry happens at Hei as global benchmarks, we see that in our claim.
Speaker Change: Client participation numbers, we see that in the regional growth. A question was asked before about retail participation. We're seeing net new energy customers in Europe, and Asia expand participation into our WJ and how do we help our products as the U S.
Speaker Change: Continues to produce and export these products at record levels. So when we look at our position going forward. We think very firmly CNA is in the white position with benchmark products are when you look at the growth. It's a risk on environment right now when you look at the competitive metrics I would say that our W. Sky share relative to ice in Q1 was about static about seven.
Speaker Change: 3% basically unchanged from last year, and we have about the same in the future 70, 778%. We did see our share actually grow M. W. T I options relative to ice up to 91% and we saw an increase in Henry hub option, a share up to 71% from 66%. So we think to the points made earlier global benchmarks.
Speaker Change: Adopted given the liquidity given the infrastructure all the conversation we've been having about the benefits of what see any good presents to our customers that is totally the story of global client adoption, we think a strong positioning going forward through what is a an unbelievably difficult challenging environment for our markets, where our job is to help customers manage that risk.
Speaker Change: And the tools, we give them daily.
Speaker Change: Thanks, Eric Thank you Ashish.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Chris Allen with Citi. Your line is open.
Speaker Change: Good morning, everyone and thanks for taking the question little stuff has been covered but one question. We've been getting is how to think about the implications for a resolution to Ukraine, Russia.
Speaker Change: Specifically in the energy complex most of them when they're considering other indications for other other areas seem to be maybe adds as well so any color there would be helpful.
Speaker Change: So the resolution between.
Speaker Change: You say, Russia, and Russia and France.
Speaker Change: If there is a resolution obviously yeah.
Speaker Change: What does that mean for the energy market is that what you said Chris.
Speaker Change: Yep.
Speaker Change: Yeah, again, I'll, let Derrick comment, but I think that the resolution of that is not for anybody in this room to try to figure out there theres a lot of people internationally. They work for a government that are trying to deal with that issue. All we can say is we hope that it comes through a resolution soon because we don't like no one likes to see what's going on with all the bloodshed.
Speaker Change: So as far as the price of the product.
Speaker Change: I think that is.
Speaker Change: You could take some time before the Russian market gets back into the world market. If in fact, it does I don't know that but that would be my political take on it.
Speaker Change: It takes a little bit of time for them to be more accepted back into the world a global marketplace.
Speaker Change: So what does that mean for the price I don't know I guess, we'd have to see what the supply is going to look like and also the demand and that will help us more with that I think that there's many parts of the world that are producing energy today, especially the U S.
Speaker Change: Facilitate you know what's going on in Russia, and Derrick I'll, let you comment more on it but that is my take on it I don't know if it's going to have a massive impact on the price of LNG. Once that's resolved I just hope it gets resolved yeah, I think Chris you raise a good question I think to Terry's point, we don't actually know, but it is talking to our customers and <unk>.
Speaker Change: Seen how they have basically redeployed supply chain physical supply chain, some physical commodities something we've seen and we worked over the last two years. That's one of the reason why we set an all time record last year in our commodities complex portfolio of almost $1 $7 billion, rather than we're seeing the same thing a record first quarter revenue across ex energy and metals I think what we can say.
Speaker Change: Is that we've seen customers in this environment of uncertainty to Terry's point moved two pools have known liquidity and pools, where the U S was already restructured its export market for both W. T I and natural gas use in the U S. Just place every other country is now being the largest export or these products. So we think as.
Speaker Change: Our customers have reconfigured their supply chains. They are following their risk management tools, along with whether it's actually being supplied to the physical product for them. So our job is to continue to lever Julie's team globally mentioned growth in the middle East and Europe and Asia are the areas, where we're seeing the fastest growth across energy is up almost 30% between both APAC and EMEA and that's been a trend for them.
Speaker Change: Last two years, so I think it's a risk on environment customers don't know, where this is going to land and that's why they are actively using our products for breast manish.
Speaker Change: Thanks, Chris.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Michael Cyprus with Morgan Stanley. Your line is open.
Speaker Change: Hey, Good morning. This is Stephanie on for Mike, maybe just turning to cross Margining can you just update us on the benefits youre, providing customers today, what further steps can you take to enhance those efficiencies over the next 12 months and then we just looking out a few years, which products and asset classes do you think could be could be savings be most impactful.
Speaker Change: Thanks, Stephanie.
Speaker Change: Suzanne Yeah happy to take the question separately. Thank you so when our cross margin program with a fixed income clearing corporation. We continue to onboard new participants were up to 15 health accounts now at this point in time.
Speaker Change: And we also continue working together to be able to expand that to end user customers.
Speaker Change: Our plan is to be operationally ready to support that by the end of this year of course, we can't opine on regulatory approval timeline.
Speaker Change: I've heard a decent amount of interest from clients and being able to take advantage of those off that we've also seen an increase in clearing membership to be able to take advantage of the current house program.
So we continue to deliver upwards of $1 billion in savings for the health program and are committed to being able to expand that to the customer by the end of the year and stuff in there just to add to that it is important to remind everybody and I know you're going to say this a lot but we.
Speaker Change: We're at $60 billion a day in total offsets on March efficiencies today as it relates to all of our asset classes 20, some odd billion in rates alone I believe is the number the fixed income.
Speaker Change: The fixed number went up a price you see is probably the smallest of that 60 billion. So we are creating massive efficiencies for our participants and savings on cross margin and we want to continue to create efficiencies across the board to all of our asset classes. So even though that the relationship with Vic is massively important to see I mean, we're going to continue to build.
Speaker Change: On it we are still creating immense savings for our clients. So they can manage their risk the most cost effective way across all six major asset clusters.
Speaker Change: Yeah.
Speaker Change: Thanks, Jeff.
Speaker Change: Thank you. Our next question comes from Simon clinch with Redburn Atlantic Your line is open.
Speaker Change: Hi, everyone. Thanks for taking my question my question's been answered so I'll stick with a housekeeping one here.
Speaker Change: And then could you just walk us through the very good expense control. We saw this quarter and how we should expect that to ramp through the year and also break out what the Google spend was and any other factors you'd think it was worth calling out.
Speaker Change: Yeah.
Speaker Change: Sure Simon. Thank you. So if you look at the expenses for the quarter, obviously quite strong expense discipline.
Speaker Change: Do you expect over the course of the year that there will be some factors that will continue to grow. So if you look at the trend last year in technology, we're seeing increases in the technology spend as we migrate into March the Google cloud environment, So quarter over quarter, we were seeing that increase we would expect to see that again over the course of this year as we get more.
Speaker Change: Application into that cloud environment.
Speaker Change: I'd also say that the professional fees this quarter were a bit light those do tend to follow larger scale projects and that's just a little bit at the timing on when those kick off so I wouldn't expect to see that ramp up over the course of the year as well. We also typically have much higher spend in the marketing area in Q4 related to <unk>.
Speaker Change: Some of our large scale events.
Speaker Change: You will see that towards the tail end of the air and the last thing I would point out is on the on the merit increases for staff you get about half of that impact in Q1, and you'll see the full impact running through the remainder of the air.
Speaker Change: Just Google the total spend in Q1 was just under 20 million, let's see about $19 million of that coming through the technology line and a little under $1 million of that was in professional fees.
Speaker Change: Great. Thanks very much.
Speaker Change: Thanks, Kevin.
Speaker Change: Thank you. Our next question comes from Ben <unk> with Barclays. Your line is open.
Speaker Change: Hi, Thanks for taking my follow up Terry I was wondering if you could talk a little bit more about the launch of broker tech in Chicago through what are your ambitions. There. What's the you know anticipated customer type and what are your kind of thoughts on how to improve your competitive positioning I any color there would be helpful. Thanks.
Speaker Change: Thanks, but I'll I'll ask Mike Dennis to give a little color around broker Tech Chicago, and then I'll comment when he was like yes, thanks, Terry and Bryan Good morning broker talk Chicago. This was a project. We are very excited about is the second central limit order book that will be uniquely located right next to our core futures and options markets in there.
Speaker Change: Aurora datacenter, where clients have a lot of cat connectivity already but.
Speaker Change: But as the futurization trend has grown over the past several years clients have come to us looking for solutions to help better manage trading between cash and futures. So we received overwhelmingly positive feedback from the dealer community as well as from clients, who are very active in relative value strategies trading volt Treasury futures and silver futures ratios.
Speaker Change: Surgeries.
Speaker Change: This new central limit order book will help drive new client acquisition as well as allow us to be more creative on thinking about new trading modalities within our interest rate complex, though launches scheduled for Q3 2025 and client testing will be available shortly probably at the end of April.
Speaker Change: Our New York Club will continue to be the main venue for risk transfer and price discovery.
Speaker Change: You know one thing to say is it different traders different execution tools and different execution types offering both axis models will allow us to capture a broader set of clients. So if you think about the treasury cash on their own market in two segments, you have risk transfer trades clients seeking larger stacks of liquidity, which the broker Tech New York Club continues to address and then relative.
Speaker Change: Are you trading cash for future trades was positive we see inside pricing and transact in smaller size. So we're very excited and I'll turn it over to Terry I have some follow up comments yeah. No. I think you said it all correctly, Mike I think what's important here is we're trying to make sure as Mike said that we can make.
Speaker Change: Make sure every client is being.
Speaker Change: Having the ability to have the market to where they believe is in their best interest in the dealer community believes that having their one of their constituents among others that having that side by side against the Treasury Futures complex is the right place to be and we've analyzed this every way to Sunday and we don't disagree. So I think it's really important.
Speaker Change: That we looked at all constituencies and see what's in the best interest of the market I think what Mike said is really important and the reason I hesitate because I want to focus on this the futurization of that marketplace is critically important and it has been my focus for a number of years. The futurization of some of these cash markets and I think we're continuing to see that.
Speaker Change: Especially in the rates business, so having that set up in Chicago makes a ton of sense for CME going forward and I'm very excited about the future of our futures franchise no pun intended to.
Speaker Change: To move that and grow that business exponentially, we have seen brokerage that grow a little bit over the last quarter, but again I think we're looking at this for the long run and we wanted to make sure that all participants have access to the marketplace, where they feel comfortable in and that's one of the constituent seasoning us so long winded way of saying we want to make sure we have Paul.
Speaker Change: Great. Thank you very much.
Dan Fannon: Thanks, Dan.
Speaker Change: Thank you our last question comes from Brian Bedell with Deutsche Bank. Your line is open.
Speaker Change: Great. Thanks for taking my follow up actually I just wanted to Hum on that very last question. If you could just comment around you know to what extent is this designed for basis trading.
Speaker Change: Between between treasuries and futures, because you mentioned the relative value.
Speaker Change: Are you attempting to optimize practices around basis trading and maybe just just your overall view on on how that's trending with very high volumes in April versus sort of what what's what's happened more recently and then I did have a housekeeping question on just the.
The contribution from Australia in one queue.
Speaker Change: And the interest rates spread that you were keeping on the collateral balances is that still the 35 cents on the cash and I think 10 cents on noncash.
Speaker Change: Yeah. Thanks, Brian so on the basis right I wouldn't say that the decision at any bearing or putting broker tech Chicago and Aurora at all as it relates to the basis trade the basis trade.
Speaker Change: We all know how that works and having the pure protect Chicago I don't I don't think that's that was not our intent at all it was more for to give participants the choice of where they want to execute on their cash side versus theirs and their futures both in Chicago and in New York and that was really the.
Speaker Change: Genesis upbringing broker Tech Chicago to Aurora, nothing to do with the basis trade as it relates to own through all that and make a comment.
Speaker Change: Yes, so Brian the contribution of Australia in 2024 was $89 million in earnings.
Speaker Change: <unk>.
Speaker Change: Typically in the range of 20 to 22 per quarter somewhere in that area S&P doesn't report for a couple more weeks, though I won't get.
Speaker Change: So granular specifics on this quarter, but it was I think that's a pretty safe range, just looking at last year and kind of the range that we typically see and then on the spread on collateral, but the 35 basis points. This quarter are similar to Q4.
Speaker Change: That's on a cashback.
Speaker Change: Is it 10 on the noncash.
Speaker Change: No.
Speaker Change: Yeah, Yeah, yeah perfect. Okay, great. Thank you so much.
Brian Bedell: Brian Thank you.
Speaker Change: Thank you and at this time I'll hand, the call back over to management for closing remarks.
Speaker Change: Thank you all for participating in our call. This quarter, we look forward to following up with any questions. You have obviously will be reaching out or you can reach out to us have a good day. Thank you very kindly.
Speaker Change: Thank you for participating in today's conference you may now disconnect.