Q2 2025 CME Group Inc Earnings Call

Welcome to the CME Group second 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. I would now like to turn the call over to Adam Minick. Please go ahead.

Good morning. And I hope you're all doing well. Today, we released our executive commentary earlier this morning, which provides extensive details on the second quarter 2025, which we will be discussing on this call.

Speaker Change: I'll start with the Safe Harbor language and then I'll turn it over to Terry.

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

Speaker Change: Lastly, in the earnings release, you will see a Reconciliation between gaap and non-gaap measures following the financial statements.

Terry: With that, I'll turn the call over to Terry.

Terry: Thanks Adam, and thank you all for joining us this morning. Now, I'm gonna make a few brief comments about our quarter and the overall environment. Following that Lynn will provide an overview of our second quarter results. In addition, the win as usual. We have other members of our management team present to answer questions after the prepared remarks, our record-breaking performance in the second quarter, demonstrated the growing need for risk management globally. For the first time in CME group's history, average daily volume exceeded 30 million contracts.

Terry: With this quarter.

Lynn: Second quarter, average daily volume of 30.2 million contracts represented an increase of 16% compared to the same period last year and included all-time records in each month of the quarter.

Lynn: In an environment of heightened, headline risk. And macro uncertainties clients, clients are increasingly, choosing the transparency and capital efficiency of our essentially cleared Benchmark products. As they look to manage and mitigate risk.

Lynn: The strong growth, this quarter was broad-based with year-over-year, volume growth in all 6 asset classes, including all-time quarterly Vol records and interest rates, agricultural, Commodities, and metals.

Lynn: In aggregate our financial products, volume grew by 17%.

Lynn: And our commodity sector volume grew by 15%.

Lynn: This continues to be a risk on environment as evidenced by the continued growth in open interest or positions open on the books at CME up by 7% from the end of Q2 2024 and 10% from year end 2024, we are also seeing strong levels of large open interest holders with new records, in both interest rates and crypto Futures set earlier this month.

Lynn: We had our highest ever quarterly Vol from our international business.

Lynn: Which averaged 9.2 million contracts per day up 18%. From the prior year, this was led by record 6.7 million, average daily volume from a Mia, which was up, 15% and a record, 2.2 million contracts per day from APAC or up 30% this record. International volume, was driven by growth across all asset classes and customer segments, and reflects our deep integration into Global markets.

Lynn: In recent quarters, we've talked extensively about our growing focus on retail Traders and highlighted some of the large retail. Broker partners that have joined our multi-asset class Marketplace to meet the increasing demand from this particular segment.

In the second quarter over 90,000 new retail Traders, participated in our markets for the first time a 56% increase versus the same period last year.

Lynn: These new customers contributed to our micros ADV record of 4.1 million contracts in Q2 and demonstrated the appeal of our products to a broader base of users.

Lynn: The micro e mini NASDAQ 100 Futures. Contributed 1.7 million of those 4.1 million contracts year to date.

Lynn: NASDAQ, 100, Futures and options trading. Volume at CME Group has climbed to more than 2.5 million contracts per day or up 22% versus last year.

Lynn: Also, we're pleased yesterday. We were able to announce a 10-year extension.

Lynn: Of CME, group's exclusive license to offer Futures and options on Futures based on the NASDAQ 100 and other n. NASDAQ indexes. This license will go through 2039

Lynn: This extension ensures that our customers will continue to have the ability to trade NASDAQ Equity index products. Alongside our S&P, Dow Jones and footsy Russell products and benefit from the related capital and operational efficiencies for years to come

Lynn: in addition to the impressive impressive volume records.

Lynn: We delivered record Financial results for the second consecutive quarter.

Lynn: I'll now turn the call over to Lynn to review our financial results in more detail and look forward to your questions.

For joining us this morning. During the second quarter see me group generated revenue of 1.7 billion up, 10% from the second quarter in 20124, the average rate for contract for the quarter was 69 cents resulting in the highest quarterly clearing and transaction fees in our history of 1.4 billion up 11% year-over-year.

Lynn: Data Revenue, also reached a record level of 13% to 198 million.

Lynn: Continued strong cost discipline led to adjusted expenses before 491 million for the quarter and 395 million excluding license fees.

Lynn: Are adjusted. Operating income came in at a record. 1.2 billion of 14% year-over-year.

Lynn: Are adjusted operating margin for the quarter was 71% up from 69.1% in the same period last year.

Lynn: Amy group had an adjusted effective tax rate, so 23.3%

Lynn: Driven by the strong demand for our risk management products. We delivered the highest quarterly adjusted net income and adjusted delivery diluted earnings per share in our history at 1.1 billion and 2.96 cents per share. Respectively, both up 16% from the second quarter last year.

Lynn: This represents an adjusted, net income margin for the quarter of 64%.

Lynn: Capital expenditures for the second quarter were approximately 19 million and cash. At the end of the quarter was 2.2 billion.

DB group, pay dividends of 455 million in the second quarter. And approximately 3 billion, over the first half of the year.

Lynn: Turning to guidance, we now expect total adjusted operating expenses for the year. Excluding license fees.

Lynn: The approximately 1.635 billion.

Lynn: That is 50 million below our prior guidance and represents 3% growth from last year's adjusted expense levels. Although their guidance remains unchanged.

Lynn: We're very proud to deliver the highest quarterly Vol Revenue operating income and diluted earnings per share in our history. These strong results are the continuation of the growth in demand for our products over the last several years.

Lynn: Following 3, consecutive years of record annual earnings and double digit earnings growth. The need for our products is driven at 14% earnings growth, in the first half of 2025.

Lynn: We now like to open the call for your questions. Thank you.

Lynn: 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. If you would like to ask a question,

Speaker Change: Our first question will come from Owen law with Oppenheimer. Your line is open.

Owen law: Hi, good morning, thank you for taking my question. Uh, SO trading volume and hedging activities, were very strong in the first half. CME had uh, record quarter again, but could you please talk about the macro backdrop for the second half? What are the key drivers that can sustain these strong hedging activities going into the second half? Is it going to be interest rate Commodities crypto or something else? Thanks a lot.

Terry Duffy: So it's Terry. Duffy your question is about the second half of the year, I assume right in total, not just a quarter.

Terry Duffy: Correct. Second half, correct? Yeah, and so it's obviously it's really hard to predict

Terry Duffy: Volumes. Um, we've always said that since the day we took this company public is difficult to predict

Terry Duffy: But we have seen without doubt. Many things going wrong globally that need to be managed and mitigated through risk management, the markets have been massively resilient through a lot of those.

Policies that have been going through whether it's on tariffs or other issues in the United States. But it doesn't negate the fact that we were sitting at record levels of debt, not only here in the United States. We're sitting at increasing levels of debt throughout Europe. Now, I just you just saw the other day where the UK government had to issue more debt to to continue to run this country. It it is

Terry Duffy: Doubles that. I think they're unprecedented.

Terry Duffy: And I think that people are going to need the manage and mitigate that risk. The question is, how does that transition into volume? It's really hard to predict, but I think that unless I miss something, um, in the news, there's still massive unrest between Russia and Ukraine. There's still massive unrest between Israel and Palestine in the West Bank there. And so, there is so many different things going on right now, politically that could have impacts on multiple different asset classes. We feel very strongly that we can be here to help mitigate manage at risk. Now, we're not hoping for any disasters, I'm only pointing out factual things that are in the news and that are fundamentally math problems. Such as debt and issuance going on right now. So,

Thanks a lot Terry.

Thanks a lot.

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

Brian Bedell: Oh great, thanks. Uh, good morning folks. Thanks for taking my question. If I can just put bundle 2 into 1, um, so it's a 2-part um, and and focused mostly on retail and then the crypto ecosystem. So, so Terry you've talked a lot about retail, uh, emergence and your, your, um, you know, your bullish views on on how this is. This is, uh, you know, becoming a much bigger, uh, client base. Um, can you just talk about the recent take up, you said 90,000 customers and a new Traders. Um, how are you measuring that? Um, and are you seeing that from new online Brokers come? You know, uh, new researchers from online Brokers coming in and maybe, um, how you expect them to trade different asset classes within the CME ecosystem? I, I think mostly equity and crypto and then the second question is around the crypto ecosystem. Broadly, how you see that unfolding over the next several years? What would CMEs role be?

Speaker Change: In that um, could that include, you know, listing Perpetual, futures or um, you know, uh doing some Acquisitions potentially on the tokenized front or or um, you know, establishing a tokenized capability um, at CME, if if, if that's something you believe in.

And thank you for that 2-part question. Um, appreciate it. Uh it seemed like a little more parts than 2 but that's okay. So let me try to address it and I'll ask my team to join in. We're I think they're all bigger so taking some notes on some of your points. So Julie and Tim mccort will both join in as well and the others. But let me say a couple things 1. In my prepared remarks, I referenced 90,000 new users for the first time which I think is something that I've been here a long time. It's really not, it's very unprecedented to see that type of growth. I think it's up 56% is what I referenced. So to me, that is very, very exciting from the retail perspective in the growth. I don't believe that it's going away, I've said this to you, Brian and the rest of the analysts and others that cover us, the these people want access to markets and we're going to make certain we give it to them. And I'm very very optimistic about this segment. I'm not, I'm never trying to predict the direction of markets so I will never do that. But I, I will say that people have access to markets.

They never had before, and I don't see that slowing down. I think it only accelerates for many more years to come. As people start to participate in different markets. As far as the different asset classes, I think Brian was part of your question. Do they go from Trading crypto to maybe gold or other asset classes here at CME? I think, as people evolve, you know, people always seem to evolve into different asset classes. And as, you know, Brian very well, when 1 asset class teams to be getting a lot of attention, you know, a lot of people followed right now. We're seeing a lot of people follow the crypto. We can talk about some of the legislation that has passed and reasons why they're following crypto. So we've seen a massive uptick in the crypto markets and as others. So not a surprise um we saw a lot of people attracted to Gold when gold hit 3500 dollars announced just a few months back. So that is not a surprise when crude oil traded up to 125 dollars a

Speaker Change: Bill, you see a lot of people, uh, this was several years ago going after that trade. So I think that there is not any 1, particular asset class. That's the beauty of CME. We have multiple different asset classes and people will follow up, but they also follow things that are.

Speaker Change: That have attention to him at that given moment in time and they have the ability to do that. Now where maybe 10 20 years ago they did not so they can move from asset class to asset class relatively quickly. And seamlessly that was 1 of your questions. So I think they participate in all of our asset classes.

Speaker Change: depending on what's going on fundamentally uh your other question was around crypto, I believe as it relates to what we continue to um accelerate our entry into crypto you know from my standpoint right now we are

I think is 1 of your other questions. I thought I heard you say perpetuals are something that are illegal in the United States of America. They do have them in Europe. Uh, so the question is, we will have to wait and see how the the regulations shake out on perpetuals. There are certain products that are not conducive to perpetuals. Mainly deliverable products are not conducive to perpetuals. So cast settled, maybe more. So such as the crypto markets could be more of a Perpetual type contract but there are many products that just would not

Speaker Change: Be efficient as a Perpetual as it relates to risk management that are deliverable. So when you look at energy, you look at REITs, you look at all these products that are physically delivered, and people are counting on that delivery mechanism in order to manage the risk to take delivery or make delivery perpetuals do not work. So I think it'll go back and forth and we'll see how the rank shake out. That's about what I heard. Maybe the team wants to pick up more Julie or

Julie: Yeah, I mean, Brian thanks. Um, for the the call out on the retail business, I I think I'll just double click a little bit with some additional stats to support the points that Jerry was making earlier. You know, this was another record quarter for the retail segment. Um, we certainly did see a extremely robust

Julie: Uh entry of of new traders to that 90,000 that we talked about earlier and and this is now our fifth consecutive quarter of double digit retail client acquisition growth and what what has been fundamental across. This is just that that 3 pillar strategy that we've talked about on previous calls which is partnering with those not of Futures Brokers that you reference expanding Market access and and that is because of our diverse product suite and also enhancing our Trader education. So a few other things, I mean total participation across our Marketplace. Um, for retail saw, significant 16% increase this quarter as well. And what was also great to see was overall growth across all major regions. So we saw North America and leading that uh with a 19% increase in total participants, but very healthy growth coming out of a Mia as well as aipac. So those strategic Partnerships with those new and Futures Brokers have

Julie: Been um, thriving. I would say instrumental and instrumental in driving growth as well. Yet, if we look across our top 25 Partners, um we are seeing strong performance throughout all those Partners. They are a key part of how we are able to continue to grow the complex, and reach, retail Traders. And on the product side, we mentioned the micro, um, records earlier, you know, certainly 4.1 million across the whole Suite, 3.6 of that in ADB was from equity.

Speaker Change: But I will also call out, you know, gold which was up over 37% among retail crypto with micro Bitcoin up 94% micro ether up 212%. So we're seeing that retail Traders are accessing far more than just our micro Equity Suite, which is great. And we also saw a nice jump in our rate for contract. We are up 7% from q1 to 304.9 cents. So, you know, we're happy with where things are at and, and clearly highly focused on the educational aspects of what we're doing with our Brokers as well, we held over 100 client events, just in Q2 to help, educate Traders. So, we feel pretty good about the Outlook going forward in the second half of the year. Thanks, Joel. I'm going to have Tim real quick to comment on crypto or anything else that Brian referenced and then we'll get on to the next question. Great, thanks Terry. And thanks for the question. I think the 1 thing just to just to add to

Tim: It was about 190,000 contracts traded up over 130% year-over-year. Just want to point out that momentum continues here in July. We're through. Sort of end of last week we're doing almost 260,000 contracts per day in our crypto complex, which is over 12 billion dollars of notional. Alliance of the complex continues to grow. It's now over 26 billion dollars of emotional about 232,000 contracts here in July, and just reinforced cherries earlier, comment with our new record.

Tim: Heard large open interest holder. In the complex of almost 800 large Traders. A great momentum is continuing here in July and we look forward to continuing to serve the needs of our clients in the cryptocurrency complex as 1 of the most trusted exchanges doing so

Speaker Change: Thanks Dan. Thank you Brian, thank you, thank you.

Speaker Change: Thank you. Our next question comes from Chris Allen with City, your line is open.

About uh, prioritizing uh, BuyBacks first dividends, just giving with the stock is any thoughts on inorganic growth opportunities in the current environment?

Thanks Chris. I got a little siren in the background here in Chicago. Sorry about that. But I think we caught your question. I'll ask Lynn if you've heard it to go and respond. Yeah, of course. Thanks Chris. I, you know, I think the way we're thinking about Capital deployment has not changed.

Speaker Change: The buyback program we've we've discussed that, that's going to be an opportunistic program, but we still have our variable dividend structure and the ability to return cash through that valve. And we have the addition of the share repurchase that we can look to utilize if we see some disconnects in terms of trading versus performance. So, I think that's going to be our approach when we think of that mix, and it will be dependent on Market activity on the inorganic side. As you know, um, we always get approached just given our, our capital structure and our size, um, kind of ability to participate in those type of activities. Um, it is always difficult in the exchange space, particularly in, in kind of international.

let's say we, we look

Speaker Change: As much as we always have. Um, we just tend to be a bit a bit more. Um,

Speaker Change: To the, in terms of when we pull that trigger, but we may look at other ways to execute on growth initiatives. Things like the joint ventures, we've executed or things like our commercial agreement and the extension with NASDAQ yesterday that you saw. So we look at growth opportunities not just in the m&a lens but all different types of structures.

Speaker Change: Thank you.

Thanks Greg.

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

Craig Sean: Good morning. This is Eli beaudin for Craig. Thanks for taking the question. Can you discuss the impact of tariffs on your physical Commodities business? Um, specifically has the growing basis between your products and some of the European Alternatives affected trading, particularly in the commercial Channel,

Speaker Change: Yeah, uh thank you for the question. I'll ask Eric sammon, who a heads up that part of our business for us.

Speaker Change: Hey, what are you seeing in over there? Yeah thanks Eli. Uh appreciate the question when you look at the uh uncertainty across the globe right now whether its tariff related especially for your question or geopolitical uncertainties ongoing Middle East and rest in Ukraine, Russia tensions that Terry reference

Speaker Change: Um, trade disputes, all of this is leading to a realignment of a number of the global physical Supply chains with the benchmarking markets, we run. And the fact that us is now exporting record amounts of energy, uh, we're seeing that that is leading to the record results, not just for the first half of this year across the Commodities complex, a energy and metals on the volume side, but also record revenues there as well. Um, when you specifically drill down into the Tariff impacts themselves, it's leading to 2 effective impacts on 1 side.

The Tariff impacts are creating both short and long-term dislocations in markets. Uh, it creates a cost basis of differential that all needs to be risk management. Uh, we're seeing our volume and activity increase across all of our client segments. Uh, and we're seeing record activity, across both, APAC up, almost 40%, and EMA up over 22% this year. So we're seeing Global participation increase. Not only did we see record activity in April, when a number of these tariffs were announced, but we actually saw that perpetuate through into records in metals and energy in June. We're seeing that particularly expressive self in options, but specifically to the question of the tariffs themselves. Um, that's leading to a differential in price between our futures markets, and the cash Market. That's known as a basis and that we're seeing that reflected in, um, increases levels of what was called the efps or exchange of physical. And that means that managing the price between spot, uh, physically delivered contracts and Futures moves around. We've seen volatility in that and that is, what is leading to our record activity in particularly, on the options.

Across each of our asset classes. So we're seeing that, uh, both on the institutional side with the commercial business at record levels. We're also seeing that create opportunities for folks that are looking to gain access to that price activity. You heard Julie mentioned that before record activity in gold, as Terry mentioned. But recogn, activity in our gold micros through the retail community. So, uh, it's a risk for some and they come to see me group, to manage that basis risk, and it's an opportunity for others. And we see that in activity from uh, the speculative side as well. So, the Terry's point we're here to solve customer risk, no matter what side of the trade they're on. And our focus is on the lit markets, across geographies across client segments and in each 1 of these markets and physical Commodities, it's a risk on environment. And we see that in the record activity, this quarter and, uh, and first half of this year,

Speaker Change: thanks Derek. Thanks Elite.

Thank you.

Speaker Change: Uh, thanks. Good morning. So, given all the records that you guys have had in the first half of the Year curious. Uh, what drove the expense guide? You know, take down. So in terms of priorities Lynn is it's just timing in terms of spend or their other changes in terms of expense Outlook that you guys are making proactively.

Yeah, thanks. Jen.

Speaker Change: On the Google migration. So we have been looking to optimize that spend and as we're getting kind of more applications into that environment, we're finding ways to minimize the incremental spend. So, certainly just a refinement on kind of the the uh, additional expense load from new applications moving and also a a refinement of the model in terms of timing and levels. Increased spend from new things that we expect to come on over the course of the year. The other area I would point out is we are coming in a bit later on the Professional Services. Um, thus far this year. So we're using a bit less of Consulting um help not just on the migration project but overall across the farm. So those 2 items are leading to that 50 million change in guidance.

Speaker Change: Anything else?

Speaker Change: Nope, that's it. Thank you.

Speaker Change: Thank you.

Alex Graham: Thank you. Our next question comes from Alex. Graham with UBS. Your line is open.

Alex Graham: Yes. Hey, good morning everyone. Um, 2 of the I guess newer buzzwords are topics over the last few months has been stable coins and tokenization. I think Brian actually mentioned tokenization. This question. I don't think you really responded to that, but not sure if I have a really smart question on the topic, but just wondering from your perspective, you know, where are you spending your time, where do you see opportunities on both of those issues and and are there any potential risks as well? That you that you that you see here any efficiencies you could gain as well? Sorry. Thank you.

Alex Graham: Yeah, Alex. Thank you. Uh the risks and benefits will be cautious. Not to speculate on those but I do want to give you an update where we're at as you know we put out a press release as it relates.

Alex Graham: To some of the stable coins that we're looking to implement. So I'll ask Suzanne Craig, who's been spearheading that on behalf of the company where we're at and, uh, how it's progressing. So, this is that. Yeah, thanks Jerry. And thanks for the question, Alex. So we are primarily focused on our partnership with Google. Um, we did announce as Terry mentioned earlier this year. Um, the Google Cloud Universal Ledger partnership initiative, that we're progressing with Google to be able to bring to

Alex Graham: Market tokenization technology to enable 24 by7 movement of value. So for us, we're starting with thinking about tokenizing cash and other non-cash assets for our current ecosystems. We're not really looking at the clearing clearing space to start and we've now entered the second phase of testing efforts. Um, focusing on our relationship with settlement Banks and then eventually extending that to clearing members and clients

Alex Graham: So we are very optimistic about our ability to bring to Market a solution and 2026. We haven't necessarily refined the use case that will launch with at this point in time, but recognize there is a lot of momentum, uh, with tokenization overall and that the movement of value on a 24, by by 7 basis. Um, can really bring increased efficiencies into our ecosystem, which we always focus on

Yeah, and now it's just to add and not that I need to because Suzanne said it but I don't want to be overlooked.

the word efficiency is critical as it relates to our efforts here on stable coins and tokenization if we get on that path,

Alex Graham: For us to create additional efficiencies as you know, we've created Capital efficiencies but we also need to create other efficiencies and we will continue to do so and we believe with our multi-asset class exchange with the benefits that we have already. This could increase our value to our clients on a stable coin is especially as a race to risk management and token.

Alex Graham: Some of the cash. So we're very excited about this.

Alex Graham: But we will do it in a way that makes sense. And for the long run, not just to get something pushed out there for the short term.

Alex Graham: Makes sense. Thanks guys.

Alex Graham: Thanks Alex.

Alex Graham: Thank you. Our next question comes from Ken Worthington.

Morgan.

Ken Worthington: Mine is open.

Maintained um to what extent, the 10 basis points contribute as well and then can you just give us average cash and non-cash collateral balances for the quarter, please?

Speaker Change: Thanks Ken uh Lyn and Susan. Yeah. So can you you're right? Because can you soft minimum went into effect in April April 1st. Um, 1 thing to keep in mind, obviously the beginning of April and coming into the quarter. There's also a lot of volatility coming into effect at the same time that this new policy went into place. So we've seen a couple of things 1, the overall level of collateral that's been posted increased, um, pretty significantly between first quarter and second quarter. So our total collateral posted this quarter average 316 billion that was up from about 290 billion. Last quarter of that. About 133 billion was in cash and 145 billion was in non-cash collateral.

Speaker Change: The required amount. You had almost 48% posted in cash.

Speaker Change: I would note that the floor or the soft minimum was placed at 30% and we obviously saw a lot higher than that, this quarter in times of high volatility, It's Not Unusual in suzan, can comment on this maybe a bit more for us to see more cash posted at the Clearing House. So some of the shifts that we saw and that increase in cash, balance likely was the result of of that volatility and

As we progress through the year as our customers, get more accustomed to that soft minimum, we may see more of a right size and closer to that that 30% Target. Yeah, I think it's hard to anticipate for the remainder of the Year, given all the variables. We've talked about already that contribute to uncertainty in the environment, but generally in periods of higher volatility and more uncertainty people do stay more liquid. So I think that does explain why we continue to see those elevated levels even now that we've backed off some of the earlier volatility in April,

Speaker Change: Great, thank you. I appreciate it.

Speaker Change: Thank you. Our next question comes from Patrick moly with Piper Sandler. Your line is open.

Patrick Moly: Yes, good morning. Thank you for taking the questions. So I had just 1 on the trial, that's currently ongoing with your former Floor Traders, the damages that the plaintiffs are seeking at least in the media seem to be rather large.

Patrick Moly: You know, 1 billion to 2 billion, plus, to the extent that you're able to comment on it. How are you thinking about this trial, your ability to win, um, and how should investors think about, you know, your reserving for any potential damages and whether that's at any impact on your Capital return appetite in the near term, thanks.

Patrick Moly: Patrick. Thanks for the question and and I, I don't mean to be short with you, but I'm just going to say we cannot comment on pending litigation. We are. As you just noted, we are in the middle of this trial now. So it's it's way too early to speculate what we would or would not do. We have said from the beginning that we have not a crude anything to date for this and that's all we can say that we've already said publicly but I'm not going to say anything further on the trial.

Patrick Moly: Okay, understood. Thanks for that.

Speaker Change: Thanks Patrick.

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

Speaker Change: Great, thank you. Good morning. Uh, maybe just a question here on 24/7 trading. Just curious to hear your views on what you see as the major hurdles and roadblocks today for bringing that to the marketplace. Maybe talk about some of the steps. You might take to overcome that including even with stable coins, I think you're relating to before, maybe elaborate on the role. How you see that perhaps helping catalyze 24/7 trading and then what ultimately might be the time frame that you think that could bring uh, to the marketplace. And then just remind us with extended trading. Our Google trading hours today just how meaningful that is as we think about maybe thinking about the sizing of demand that you might ultimately see over time for that. Just curious any views around how how you might see that demand and uh use cases shaping up for 24/7. Thank you.

Michael. It's Jerry Duffy. Let me just again, make a couple comments. But again, we're speculating a little bit here on the 24/7 about what the demand may or not. Be on the hours that are the markets are not open today because you don't know. Uh, first of all, there is a cost associated with the firms in order to, uh, staff up for these, uh, 24/7 type of trading that, you know, especially on margin products. You have to be staffed up if you don't have a fully funded type of a contract,

Speaker Change: So I I think it's going to be difficult lift for the firms and so they're going to have to make a decision. Is it worth?

Speaker Change: For to your point, is the demand there for it. So I personally believe that 24/7 trading will eventually happen globally. I just don't know what asset classes and when it could be 10, years down the road, 20 years down the road or 2 years. I don't know, I don't know. I, I think the way that you look at the evolution of markets, you would think that it would have to come there. A certain products may not be conducive to certain governments that they oversee that they would allow a 24/7 trading on. So you might see more like we do today with the crypto markets being more in that realm. But I don't know about some of the other like uh interest rate products how central banks would feel about that foreign exchange how, uh, central banks would feel about that how certain energy companies would feel about that. You know, there's a whole host of constituents that have to have an input input into what they believe is in the best interest of going forward. So I, I think it's a difficult question to answer.

Speaker Change: Other than I think certain products will certain ones won't and the timing is yet to be determined and anybody on my team, you're not allowed. If you have a different Viewpoint that, I'd be interested in myself to hear.

Speaker Change: So that's kind of how we see it Michael. So I I don't know, I think you're right about the demand, but the cost for the demand is going to be something that people are going to have to analyze and if the demand is there, it will support the cost and I assume people will do it. If it's not, I assume they will not, but I think it will be asset class by asset class driven more than anything else.

Speaker Change: Any particular asset classes? You think this could be more conducive for and any other hurdles beyond the demand side.

Speaker Change: Yeah, I think I said it already. I think crypto will be the asset class that's already basically there today. The question is do crypto Futures uh you know on a regulated platform. Do they go there or not? You know, again I don't know the answer to that but right now the cash Market is we all know it goes 24/7 today. So uh, again that that would be the asset class that appears

Speaker Change: Headed in that direction.

Speaker Change: Thank you.

Speaker Change: Thank you.

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

Speaker Change: Hey, good morning everyone. Um, just curious if you could get an update on FX spot plus and how the client up uptake has been since it launched in early uh second quarter, I know early days, but any sizing of how additive it's been to the broader FX franchise as far and how you'd frame the opportunity from here.

Terry Duffy: Thanks Kyle. I'm asked Mr. McCord to make a comment on FX spot plus temp. Yeah. Thanks, Terry, and Kyle. Thanks for the question. No FX spot plus is something that we introduced back in April that is the combination from a technology perspective.

Terry Duffy: Of a spot and Futures FX markets and it's really gone exceedingly well in the roll out. So when we look at some of the, the notable metrics of the spot plus offering,

you reached a single day, volume of 2.7 billion dollars, uh, which is great for a contract. That's only about 3 months old, or an offering only 3 months old. But I think what's more impressively noted is that nearly 50 entities had actively traded on this new Marketplace, including a few dozen banks that are not previously interacted with our FX Futures market. So that remains a central hypothesis of this offering that we could bring new participants through FX spot. Plus enjoy the benefits of both liquidity pools on the spot and future side and Avail. Futures-based liquidity or semi group continues to be a leader, alongside our primary markets, designation in the spot Market. That's a powerful combination for the marketplace and our clients. It's something that we also think to point out while still early days, we're very pleased with the market quality. This has been able to deliver where we have been able to improve the competitiveness, and the market quality of a, few of our spot based currency pairs that

Terry Duffy: Historically see me through our EBS and FX spot, offerings have not been the leader. So we're very pleased that we're seeing new participants better Market quality and significantly added volume to our complex, all as a function of rolling out spot Plus

Terry Duffy: Thanks.

Kyle: Thanks Kyle.

Speaker Change: Thank you. Our next question comes from Benjamin Buddhist with Berkeley. Your line is open.

Speaker Change: Market, thank you.

Speaker Change: Yeah, thanks Ben for your question and I'll ask Mike Dennis to respond to that mic. Yeah, Ben appreciate the question. Um, you know, just to start off, broker Tech had an exceptional Q2

Mike Dennis: Our average daily. Uh, notional volume of 949 billion was up 24%.

In April, we saw 1 of the highest volume months since February 22. Um,

Mike Dennis: of edv about 151 billion which was up 39% year-over-year and furthermore on April 7th,

Broker Tech had 1 of the highest volume days. Reaching 322 billion in US Treasury active traded on our platform which proves our theory that you know, broker Tech is the primary venue for liquidity, price, Discovery and risk transfer. Now when we compare ourselves to, you know, others in the marketplace we look to uh compare ourselves to like Central limit order books that offer US Treasury On The Run active.

Mike Dennis: there's a lot of different ways to

Mike Dennis: Look at, uh, cash government security trading our platform, again only has On The Run US Treasury active. You don't to off the runs, you don't do bills. And so, when we look at competitors in that space we think our market share is flat. Uh,

you know, from the first half of this year versus last year,

Mike Dennis: It's it's also important to just understand that broker Tech is more than just us. Treasuries, um, we have a strong repo offering and we saw another record quarter.

Mike Dennis: Of 362.9 billion 80v. Um and we also have RV curve which had a second 2sec of record quarter at 2.7 billion. So some of the things that we're looking at uh relating to

Mike Dennis: Um, competition is broker text Chicago. And obviously announced uh broker Tech Chicago which is the second matching engine that'll sit next to our futures. In the Aurora data. Center wants to schedule for September 15th, uh, we're very excited about it. We've had a lot of clients over to reach out, uh, to connect to the new API and start testing. And we do think that this can help with new client acquisition uh where clients are trading in sharper, take your comments on other platforms. And we do think it will bring new uh participants into the cash markets.

Speaker Change: Okay, great. Thank you very much.

Speaker Change: Thanks Ben.

Speaker Change: Thank you. Our next question comes from Alex, bluffing with Goldman Sachs, your line is open.

Alex Graham: Hey everybody. Good morning. Thanks for the question. Um, I was wondering if you guys could come in on changes in Bank Capital requirements, following car and potentially other changes related to SLR and a couple other things that could perhaps um you know allow Banks to expand balance, sheet size and just curious how you could see your ecosystem impacted by this whether it's in the rates business or any other products could could potentially benefit from that. Thanks.

Speaker Change: Thanks Alex. Um,

Speaker Change: As you know I'm sure you do know as we've been very vocal that.

The SLR requirements and some of the other requirements on banks has been owners.

Speaker Change: And we believe that, you know, the the capital that was originally deployed and continues to be deployed for risk management. Post Frank is adequate and to be adding to something on top of that seemed like

Speaker Change: Doubling up on something. You didn't need to have done. So actually I was quite pleased to hear some of the

The recent uh announcements coming forward, especially on the supplemental, leverage ratio, as you, as you uh commented on and what, how does that translate into us? I hopefully it frees up your balance sheet and others so you can continue to do more risk management and have a more prudent way and not have as much Capital tied up for regular issues. That is probably unnecessary.

Speaker Change: Um but again I think what's important is making sure the system is safe and sound and that is the overriding opinion. But I think that from our standpoint the way we look at it if there are changes, I see it as a a net positive for us. Mike do you want to comment any further? Yeah I I think just to add uh to what Terry said. There's there's been no formalization yet on SLR. It's currently in uh public comment period but we do think that SLR relief could provide some balance sheet, flexibility for Bank clients. But the actual impact is going to depend uh, you know, on the bank and how the final rules calibrated

Speaker Change: Great. Thank you.

Thanks Alex.

Speaker Change: Thank you. Our next question comes from, Simon clinch with Rothschild and Co your line is open.

Trader is you have on the platform and as you bringing on like these 90,000 new Traders this quarter, um, do you typically see those Traders? Come on and, and trade? Very, very actively straight away or, or is there some level of graduation? Um, um. And before these, these these kind of retail Traders reached some level of maturity and activity, thanks,

Speaker Change: Yeah. Thanks Sam. And it's a great question. It's almost unanswerable though, because when you look at a new participant to say that they have hit their stride or their peak, in the first week of trading, is kind of, uh,

Speaker Change: That's not possible, right? I mean you do, there is a curve for everybody that's new into any Market, whether it's your foray into Equity, Equity options, Futures ETFs, whatever you're participating in. You're not going to go all in to begin with. So, when we talk about 90,000 new, participants, you know, we

Speaker Change: Want to make certain that we participate with our clients that have a very good educational uh system. So they understand. And because we want to preserve their

Speaker Change: And help them grow into, whatever they're going to eventually.

Speaker Change: B, but to say that they're mature enough on day 1 to, to maximize their value it, it'd be a bit of a stretch. And from someone who participated in the markets and when I started in 1981, I assure you. I was trading a lot smaller in 81 than I was in 2001 before I became chairman of CME. So it's just, it's just a, a attrition of a Trader and how they go forward and depending on what they are used to trading. So, um, I think that's really important to have longevity in, in this client base. Uh, it's a, it's a massive client base, but I want to make sure they're educated and they have a good understanding of what they're getting into. So I I would hope they're not

You know, going all in to begin with because I don't think that's a good thing for the future. I think what's good is they continue to participate for a longer period of time, which will be beneficial for them and we've done enough issues for CME. So I'll ask Julie Winkler to comment further.

Speaker Change: I think Terry said it. Well, you know, I think.

Speaker Change: Traders come to us with with different Journeys. Uh, critical part for us as well as our retail broker Partners is that education point. I think what we've seen in the last 5 years is that the traders that do come to our doorstep are far more sophisticated and educated on products in general than what they were preco. And some of that is is come from the growth of simulation environments, the use of better technology within those environments trading simulators like the 1 that

Speaker Change: That we just launched. Um, a new 1 on July 12th. You know, all of these tools are just equipping. These retail Traders with more data, more analytics, so that when they do start and fund their accounts, they are more ready to trade. And as Terry pointed out, we also are highly focused on client retention and and for us, that means making sure they continue to get exposure to new products. They understand the content. Uh, we have an extensive, um, you know, client education event process that I talked about earlier, as well as we work with like 85 different external traders in, you know, that speak 13 different languages. So that we make sure we're meeting these retail Traders, where they are and helping to bring them along in that journey. I think you can also say, like with most things. Um, you know, the the traders that are the largest um, you know, that is that is probably the 80/20 rule where they are making up, um, you know a lot

Large percentage of that, that day-to-day activity and yet, again I think the goal is to, you know, help those Traders mature, along their journey. And for us, a lot of that is about product introduction. And I think you're already seeing that in the Q2 results where they may come to us first from a micro Equity perspective, but our partners in CME, have been highly effective at getting them and cross-selling them into other products, like crypto and metals.

Speaker Change: Simon. Hopefully that gives you a little flavor and color about how we're looking at the retail today and going forward.

Speaker Change: That's great. Thanks very much.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Bill cats. With TD Cowen. Your line is open.

Bill Cats: Okay, thank you for taking the questions this morning. Um, just maybe a bit tough question to answer, but I'm sort of curious just given the interplay of sort of a rising non us, Rising retail opportunity, set relative to the to the base business. Um, and so the volume growth, how you thinking about maybe the the projection for RPC looking ahead. Thank you.

Bill Cats: Think about as we continue to expand our our International presence that does tend to be non-member activity. So that does um, tend to be at a bit higher RPC on the flip side, when you're talking about the retail activity, they may be participating in more of the smaller contracts, some of the microbes uh which does have a dampening effect on the average rate per contract. So you know, for us, we are not focused on growing RPC. We're focused on growing that Revenue base and growing kind of the opportunity set that our clients have to trade. So I would, I would focus more on that overall Revenue picture than the RPC growth per se.

Bill Cats: Okay, Bill. Thank you. Answer your question.

Ashish Sabadra: Thank you. Our next question comes from Ashish sabadra with RBC Capital markets. Your line is open.

Ashish Sabadra: Hey, good morning guys. This is V on first use of Audra, I appreciate you taking our questions today. Uh, maybe just wanted to double click on the international markets. There continue to see great momentum. Uh, wondering if you guys could provide a little bit more color on the drivers, uh, from Geographic segments, uh, maybe also how that sales coverage and efforts are progressing on those major geographies as well.

Speaker Change: Thank you for that question. Julie. You want to talk a little bit about the sales and international business real quick? Sure yeah I mean I think the

Record quarter of 92.

Speaker Change: You know, 18% increase as Jerry mentioned earlier, you know what was great? Was the fact that we saw International records, uh, really across nearly every single asset class rates up 14% Equity indices up 38% energy 23%. Um, you know, a 3% and metals 14%. So, I would say solid, um, performance across all of the diverse asset classes and across Sparky, customer segments as well. So, you know, we saw EMA leading the charge there, you know, with with that, um, 80v up up 15% and what we saw similar to q1 is significant growth from all of those, those Tier 1 countries. So those areas where we have our sales resources, most focused on sales execution. So countries such as France, the UK, Switzerland, UAE, and the Netherlands.

Speaker Change: But also, you know, I think in in APAC uh a a great second quarter of of volume up 30% and you know significant increases their from Singapore, India and China.

Speaker Change: In terms of what are the drivers behind some of that you know Derek mentioned it a little bit earlier in his answer. Yeah definitely is commercial participants um, continuing to diversify their Commodities hedging. We're seeing the sell side that are seeking Global benchmarks. Uh the ones that we offer and the liquidity that we are able to provide around the clock and also really some strong performance from the buy side.

Speaker Change: So I think, you know, our our seeking the capital efficiency um offering that, that we have here, um, particularly after the, the Tariff announcement. So you know, we see a lot of um, growth initiatives. Still on the horizon, you know, certainly retail is a, is a key aspect of our International volume but also just the Investments that we're making in other key, strategic markets and leveraging things like you know, other incentive programs to acquire new clients and and continuing to offer regionally relevant products and expanding our data services. So continued, focus on that going forward and we believe that that will help to continue to fuel that International growth and just to add to what Julie said. What what Julie and her team do is no different than what they do here in the US. As far as doing the sales getting out there, she has a sales team that's Global. It's just not a us-based team. The education is critically important, especially internationally. And when you look at

Speaker Change: When you go out there with your teams on sales and education and you show them the tools of liquidity, that's very attractive for any participant anywhere in the world. And again, what we talked about all the time, these people see the market deficiencies that they can achieve by trading. CMS products is again, a very attractive component for our International clients, and they're seeing more and more of it on the daily basis, because the Julia and her team. So thank you for your question.

Speaker Change: Thank you, appreciate it.

Speaker Change: Thank you.

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

Speaker Change: There's no changes to the economic structure of Eli, just the extension. That's correct.

Speaker Change: Thanks.

Thank you. Thank you.

Speaker Change: And our last question comes from Benjamin Buddhist with Berkeley. Your line is open.

Speaker Change: I thank you for taking my follow-up as well. Uh, just wanted to Circle back on the uh, collateral balances and curious, if you could unpack a little bit, how cash versus non cash, uh, traded month over month. Um, I think you mentioned in the prepared remarks or perhaps earlier in the Q&A that, you know, given the higher volatility in April, you saw a bigger influx of cash, what is the exit rate? Sort of look like into Q3 just as we're trying to calibrate our models. For the next quarter? Thank you.

Speaker Change: so early then, but so far in um, July the average cash balance has held relatively steady at about 132 billion or 1 133, I mentioned for Q2

Speaker Change: Um, we have seen a bit of an increase in the non-cash collateral that's up to 153 billion so far in July and the total collateral average is at 321 billion.

Speaker Change: Very helpful. Thank you so much.

Thanks Ben.

Speaker Change: Thank you, we have no further questions. I would like to hand the call back to management for closing remarks.

Speaker Change: Thank you all again for joining us. This is CER, we appreciate very much, we're very excited by the results. We were able to produce again, record a quarter. Uh, we will continue to stay focused on creating efficiencies bringing new clients to our Marketplace and all the other initiatives that we discussed today. So thank you again and have a great day, be safe.

Speaker Change: thank you for participating in today's

Speaker Change: if you may disconnect,

Speaker Change: It's time.