芝加哥商業交易所 (CME) 2018 Q3 法說會逐字稿

Good day, and welcome to the CME Group Third Quarter 2018 Earnings Conference Call. At this time, I would like to turn the conference over to John Peschier. Please go ahead, sir.

Good morning, and thank you all for joining us today. I'm going to start with a safe harbor language, then I'll turn it over to Terry for some brief remarks followed by your questions. Other members of our management team are here also and will participate in the Q&A session.

Statements made on this call and in the slides on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any of these statements. More detailed information about factors that may affect our performance can be found in our filings with the SEC, which are on our website. Also, on the last page of the earnings release you will find a reconciliation between GAAP and non-GAAP measures.

With that, I would like to turn the call over to Terry.

Thanks, John, and thank you all for joining us today. We appreciate your interest in CME Group. I hope you've had a chance to read through the third quarter earnings commentary document we provided earlier this morning. We have made good progress with several initiatives during the quarter, so let me share a few of those highlights.

The diversity of our deep liquid product offerings was important during Q3, as trading generally slowed on exchanges around the world following a very strong first half of the year. At CME, we saw particular strength in treasuries, equities, emerging market FX curves and several commodity products. This offset a bit of a slowdown in global energy trading based on market conditions and fundamentals. More importantly, we gained traction in new offerings, including our SOFR and SONIA interest rate futures contracts. We saw rising volume in open interest as well as our record volume in our S&P Select Sector Futures in September. We set new daily records in our new monthly FX Futures and CME FX Link offerings. This totaled approximately 50,000 contracts on a single day in September.

Within our commodities complex, we announced a Q4 launch date for physically-delivered WTI Houston crude oil futures contracts. This helps to reinforce the strength of our global benchmark WTI Cushing contract.

In metals, we also saw continued growth in the copper options. We had record Q3 average daily volume in our red winter wheat options and also records in our livestock options complex. We continue to make investments in our global sales effort.

In September, we launched a new interactive CME Liquidity Tool to help market participants analyze liquidity, including current and historical bid-ask spreads, book depth and cost-to-trade statistics across the CME asset classes. Customers can analyze activity during U.S., London and Singapore trading hours, helping to create new trading opportunities.

CME's new liquidity tool has attracted a large amount of interest from clients across the globe. This is available on CME's website, and I encourage all of you to take a quick look at it. We're also pleased to announce the extension of the exclusive NASDAQ futures license through 2029, ensuring market participants worldwide will continue to have seamless access to our suite of NASDAQ products and benefit from the capital efficiencies by trading alongside our industry-leading equity index complex.

Finally, with respect to our NEX transaction, we're pleased to announce that the Department of Justice approved -- that with the approval of the transaction, we continue to expect the deal to close before the -- before year-end. We've been working diligently over the last few months on a high-level integration planning with the NEX team.

Our trading volume has picked up nicely so far in October. We are up 41% quarter-to-date versus last year. I mentioned product diversity earlier, and it's nice to see interest rates equities that are up significantly in Q4 so far, with the other 4 product areas growing just as well.

With that short summary, I'd like to open up your call for your questions.

(Operator Instructions) Our first question will come from Brian Bedell, Deutsche Bank.

Maybe can you just talk a little bit about the equities complex, and do you see the RPC drop in that area a little more than we expected? If you can talk about the development of some of the new contracts, it looks like as you outlined, the BTIC, TACO and the return in Bitcoin was only about 3% of that. I mean, it was a very good development, but it's only about 3% of that total equities line, so I don't know if that had any influence on the RPC. I would have thought actually it would have been positive. Maybe if you can just address those drivers?

Brian, it's Terry Duffy. What I'm going to ask John to do is talk a little bit about the RPC, and then Sean can you give you a little bit more flavor on the fundamentals of the overall equity market. Is that okay?

Yes, yes. It's great.

Okay. Go ahead, John.

Brian, yes, we did have -- we did see a sequential decline in the RPC from Q2 to Q3. It was driven by -- primarily by 2 things. One, we had a higher proportion of member volume and we also had lower activity in our premium priced privately negotiated products than last quarter. If you take a step back, overall, we're very pleased with our RPC performance in the equities complex, when you consider that we have had both higher volume and a higher RPC compared to Q3 of last year. And as Terry alluded to in his prepared remarks, we've seen a very strong start to the fourth quarter with equities up more than 115%. I'll turn over to Sean to talk a little bit about some of the activity in some of our newer products.

We're very excited about a lot of the new products that we've launched. So on the BTIC or Basis Trade Index Close, which was launched now a couple of years ago, last year, you'll recall probably that we did around 13,000 contracts; this year, we're doing 36,000 contracts, and it's got nearly a $3 RPC. So we're very excited about the developments there. Other developments, we've announced that we had extended the NASDAQ contract. We're excited about that. We recently had an all-time record day in the NASDAQ contract, and we're seeing huge growth year-over-year in those volumes of over 50%. So we're extremely excited about that, extremely excited about the success there. Another thing that we've been doing that we've talked a lot about, as you know, delivering margin capital and total cost efficiencies to the marketplace. One of the areas that we've done that, in particular, with the advent of the uncleared margin rules in OTC space is we've offered total return futures on our S&P complex. We currently only offer those products out to 18 months, so relatively short. Nonetheless, we got huge traction. We now have over 200,000 contracts open interest in our S&P 500 total return futures. The total return market -- total return swap market, I should say, trades out to 10 years very actively. So we are looking to extend that product beyond the S&P 500 to add additional indices. We're also looking to extend and add additional futures contracts that will extend the product out in terms of the maturities. So we're very excited actually about those developments in the equity market.

Thanks, Brian. The other question you had was on Bitcoin. Is that right?

Yes, yes. And then what, I guess, I'm getting at -- I mean, it's definitely good development of these products. I would think they would be accretive to that RPC. I know Bitcoin is and BTIC is. So maybe just your thoughts as you develop those into 4Q, clearly the member side of it might swing things around, but can we expect an uptick and sort of an wind down in that equity RPC?

Yes. John?

Sure. Yes. I think really what you saw this quarter, Brian, was more member activity trading than we saw then in Q2, which obviously today, they have a lower RPC. Also because there was more member activity, they hit more of the lower priced tiers, which also has an impact to the RPC. One of the things I also mentioned was the privately negotiated trades were down as more people were using Globex than the privately negotiated trades, and Globex has a lower RPC than those privately negotiated trades. Sean, do you want to add anything to that?

Yes, no, I fully agree with what John said. If you look at the year-to-date RPC last year versus the year-to-date RPC this year, it's up substantially. So it was similar to Q3 events when, as you know, we saw very low volatility. If you again look at October, October has been a phenomenal month, with our equities complex up well over 100% on a year-over-year basis in the month. In addition to that, I might mention in terms of large open interest holders, Q3 obviously was a very quiet quarter, if I could say that. October, we're growing, if I could say very, very strongly across all of the asset classes, in the financials unit in particular. One thing I'd like to mention, one of the things that Derek and I say continuously is, we look to grow our complex in any volatility environment. So I think we're very pleased with the fact that we reached a record number of large open interest holders in each and every one of the financials asset classes during the month of September. Remember again, Q2 was relatively quiet. So -- but we had a record in FX, we had a record in rates, we had a record -- new all-time record in equities. So bringing new participants in, we're getting deeper penetration with our existing participants and we're growing much stronger base to grow from.

I want to add one more thing only because it's opportunistic, Brian, and John referenced it and I think it's important. When John talks about the lower rate per contract in the equity complex due to some ex-pit transactions that are now migrating onto Globex, that is a extremely positive story for CME Group. Everything we've talked about since this company has gone public is about the liquidity coming to a central limit order book place to be the most cost efficient marketplace in the world. This is validating our model. So I want to make sure we understand, this is a good story, not a bad story in that rate per contract because of where the business is going.

Yes. That's really helpful. And then maybe just to add on one on the interest rate side, Sean, while you're added on the equities. Maybe if you can talk about the development of the SOFR contracts and you've launched the SONIA as well? And maybe just describe what you think might be a substitution effect versus the Eurodollar and the futures, the Fed fund futures? Or do you think the launch of these contracts will be additive to the overall volume? In other words, it will be a multiplier effect rather than a substitution effect.

Yes, we definitely see right now and it is completely additive. So right, we see the opportunity with the new interest rate benchmarks to keep basis trading, in particular, between that benchmark and the existing benchmarks, right. CME Group, with our huge open interest in Eurodollar futures, Fed funds futures as well as the Treasury futures, is the place to trade the basis between the new index and so the SOFR index, if I can say it, right, relative to those other indices. We've offered intercommodity spreads against our Eurodollar futures, for example, and our Fed funds futures. That means that it is the single most efficient place from an execution standpoint, so minimizing your execution cost to trade the basis between SOFR and LIBOR, or SOFR and OIS, or SOFR and Fed funds. In addition to that, we have obviously the -- with the large open interest in Fed funds and Eurodollars in addition to that, the most efficient from a capital margin and total cost perspective relative to the clearing with up to 85% margin offsets against our other futures contracts. So in addition to that, in regard to SOFR, we now have over 80 participants trading the SOFR contracts. We've got over 40,000 contracts open interest. That is the equivalent of over $155 billion in notional terms and we're trading about 8,000 contracts to date this month. So we are excited about that. In terms of SONIA, we have an ADV this month of 3,400 contracts. So we're also getting very, very good traction there. One -- another unique value proposition that CME Group has that no other firm has, no other clearing house has in the world is, we're both clearing the SOFR industry swaps and we're clearing the SOFR futures. So we did announce -- we did start clearing SOFR interest rate swaps. We've cleared interest rate swaps for 5 different institutions. There was a great, if you've seen our press release, some of the top rates institutions in the planet have already started clearing the SOFR interest rate swaps with us. So we also have that unique value proposition of having both the futures and the swaps, and we have that both for SONIA and SOFR.

Our next question will come from Dan Fannon, Jefferies.

Terry, some of your domestic peers here are dealing with some regulatory scrutiny, and obviously, it's from the SEC and not your primary regulator. But just wanted to get a sense of the dynamics or the rhetoric that with the CFTC or anyone else is really changing and what you're focused on from a regulatory perspective at this point?

Dan, it's a good question because I think there can be a little bit of confusion between the 2 different regulators and the 2 different models. So I'm assuming you're referring to some of the SEC rulings as it relates to pricing on market data, for one. And I'm assuming you're also talking about what we're dealing with from a regulatory standpoint from European equivalence on the other. Is that a fair way to categorize your question?

Yes.

So on the market data and how we work with our regulator, our regulator does not approve any pricing at CME Group, where the SEC obviously does. We have proprietary products that we invest a tremendous amount of revenue and tremendous amount of manpower into developing these contracts. You just heard Sean Tully talk about the selling of the SOFR, some of the other, the BTIC products that we have come up with and him and his team did to add value. So we don't go down the path of having to get approval from the CFTC on pricing of these, and that includes also our market data. So that's different from the SEC model. On the equivalence issue you saw, the Chairman of the Commodity Futures Trading Commission, a week or so ago, get very aggressive with the Europeans, letting them know quite well that the U.S. will not be a political football for it, using my words, not his, in this game between the U.K. and the EU, as it relates to central clearing houses being able to do business in certain jurisdictions. So as the commodity exchange modernization act was written in 2000, our sole regulator is the CFTC, and we cannot actually comply with what is being proposed out of EMIR 2.0 by ESMA to be in that Tier 2 section because it would be technically against U.S. law. So I think what's going on now is cooler heads are starting to prevail, and we'll start to get the deference that the Chairman has been calling for here in the U.S. And that's where I see that. Outside of that from a regulatory standpoint, I think, as we said earlier, we're thrilled about the Department of Justice and their approvals on our transaction and we're just going forward. But outside of that and from a regulatory side, I think, CME and I've said this for a long time, the headwinds of CME are now behind us on regulatory issues. We dealt with this between 2009 and, say, 2013, '14 before all the rules were finalized. But the rules of the road here in the U.S. are very clear, and I think that's been a great benefit to not only exchanges like ours but the banking system in United States as well.

(Operator Instructions) Our next question will come from Kyle Voigt, KBW.

I guess, one just on energy open interest and just looking at your WTI futures open interest, specifically that looks like as of yesterday, it was tracking down about 10% year-on-year. And I think WTI, one of your 3 largest contracts by revenue, and you posted a very strong growth over the past 4 years in this contract. So just wondering, I guess, why the turn here for the open interest? And I guess, I was wondering what do you think's causing that and what do you believe the structural growth for WTI is still intact?

Derek?

Yes. Kyle, it's Derek, thanks for asking that. Yes, I appreciate the opportunity. The TI contract has been a huge growth driver for, yes, over the last 4 years for us and continues to do so. We saw an industry-wide slowdown in Q3 this year. If you actually get the year-to-date market shares between sort of the growth of ours WTI contract, year-to-date, we're down 2%. We're seeing ICE's Brent contract down about 4%. In line with that, we are seeing some pullback in open interest. We hit a peak open interest level of about 2.6 million contracts in mid-May. We've seen that track lower. We're down just about 2.2 million, pretty much in line with where our Brent OI is as well. So we're not seeing anything other than, I think, what has been a quiet period trading. Generally, when you look at sort of the conditions of trading in the energy market through a Brent, through a WTI, a market where you got high price, low volatility and where you see that TI Brent spread move out, generally, that's a set of combination of factors that really kind of tends to provide some pullback for some market participants. So we're not necessarily surprised. We are seeing an industry slowdown a little bit. What we're very pleased about is we're seeing the continued participation and strength of the commercial participants. If you go back to probably 2012, '13, '14, we were probably under-penetrated with the commercial client base. And the work we've done over the last 4 years, driving a lot of the growth that you just referenced in our TI contract has been predicated on getting into and being relevant and also having the participation of those commercial participants. They're the contributing factor to record OI and TI up above 2.6 million contracts. So we've had a good start to Q4. I think our energy volume is up about 10%. We're seeing continued participation from the commercial participants. And you also saw us announce that we have a November 5 launch date for our Houston physical crude contract. So we're excited about what that brings to the overall completion of the physical kind of value chain from Cushing into the Gulf for the export market participants, and we've been working very closely with the commercial participants to get to that launch. So certainly a slowdown in Q3. We're seeing that pick up again along our nat gas volumes year-to-date and going into Q4 as well.

Great. And then if I can ask a follow-up. Just wondering if you give some high-level thoughts as to the -- just because there's -- or a heightened investor attention around this, around the expected resiliency of your earning streams through a cycle? And there maybe are some potentially like obvious impacts to in an adverse economic scenario, maybe to your net investment income or the S&P Index equity income that you have right in the income statement. But just trying to get a sense of really how you think your volume would hold up in that type of environment, just given that during the financial crisis, we did see some large declines in open interest and volumes in certain product classes?

Sure. Pardon me. I'll start Kyle, this is John. Then I'll turn it over to Sean to comment on some of the financial products. But generally speaking, as you know, we've got a very resilient model. So even during the toughest times during the crisis, we still were very cash generative. We still had very good margins. And it's really a function of the need even in these -- in those periods of time for people to hedge. So one of the things that Sean had mentioned in his comments is really developing the markets -- developing the markets with regard to the volatility environment. So what we've done is we've been able to grow, even on the slowest days, our volume. So if you look at our slowest 10 days, you see that increasing over the last several years. So really, we're becoming embedded in our customers' day-to-day operations. In terms of our financial profile, I would say, you would see us taking a strong look at our expenses with our several line items, which we can take a look at with regard to a slowdown. The variable portion is, you see in our -- in terms of our bonus, you also see in terms of our license fees. Those are 2 items -- 2 line items that would decline in a situation where we have declining volumes. Also, in terms of our interest income line, that's really a function of where our customers want to invest their money. If there is a crisis and they want to invest their money in cash, we certainly would earn as they move to cash from fixed income. Also, in terms of other factors that we would take into consideration, it would be really around why the recession is coming. So generally speaking, if it's a highly volatile situation, we'd see an uptick in volumes followed by obviously a slowdown should there be a recession. Sean?

Yes. So we continuously look, as John said, right, and I mentioned it earlier, in every environment to grow our complex, right, for the record number of large open interest holders in each and every one of the financials asset classes. During the Q3, when volatility was lower, is I think a good example. Another good example is, during Zero Interest Rate Policy in the United States, we continue to launch a lot of new product and continue to grow the rates complex. If you look today actually at our treasury futures complex, over the last 52 weeks, we're now running at over 111% of the average daily volumes of the cash treasury bond market. That number, if you recall, was in the mid-50s just 5 or 6 years ago. So huge growth there. In addition to that, in terms of new products, we talked about SONIA and SOFR. We also launched some new Eurodollar mid-curve options this year. Those are traded, the new contracts, a fifth quarterly as well as some term mid-curves at 3, 6 and a 9-month contract, and that's traded over 0.5 million contracts. I didn't mention actually earlier anything on the FX complex, but we're having very good success with our new monthly futures. Our new monthly futures recently had a day of 33,000 contracts. We also traded at a spread to the quarterlies another 12,000, so on that day, those new monthly contracts added 45,000 contracts to our FX complex. The Fed obviously -- if you think about our FX complex, it only does about 1 million contracts a day, so that's a very significant impact on the overall growth. We've also launched FX Link. FX Link recently doing about 9,000 contracts a day. This allows participants in the OTC FX swap market to move their positions into standardized listed lower total cost alternatives. So we're very excited about that. In terms of the financial crisis, I think the overall system is in a completely different place today. Bank balance sheets are strong. Economic growth is strong. And in a very strong environment where you see large price volatility, we see a lot more volume. And you can see that in October, where our interest rate complex year-over-year in the month is up 43%, equities complex is up 116% and the FX complex is up as well. So it is a very healthy volatility.

Just one last thing is, Kyle, just to put an explanation point on what Sean was saying. If you look at our volume over the last 40 years, there's only been a handful of times where the current volume was less than the previous year's volume. So only a handful of times, and that's through a myriad of economic and financial conditions. So as I was saying at the start, our model is very resilient, and I think we are in a much better place today than we were even before the crisis.

Our next question will come from Brian Bedell, Deutsche Bank.

Thanks for taking my follow-up. Just a couple of clarifications. Can you talk about the spread income that you're getting on the cash collateral held at the Fed and sort of the outlook into the fourth quarter after the September rate hike in terms of what you're getting and what you're paying out, and maybe the cash collateral balances, the client collateral balances held at the Fed at the end of September?

Sure, Brian. If you take a look at our financial statements, overall earnings from managing cash was up about $1 million, with returns on corporate cash offsetting lower earnings related to cash on deposit at the clearing house. Those deposits were down about $1.5 billion on average versus the second quarter and our earnings were down about $2 million sequentially. Now the rate of decline in terms of the average balances held at the clearing house has slowed compared to the decline between the first quarter and the second quarter, which was down about $7.5 billion. We've been retaining 0 over the last couple of Fed hikes and returning all that to our customers. We want to be competitive in terms of other investment alternatives that our customers have. So looking at so far in the month of October, we saw -- we've seen those balances come down about another $1.5 billion from the end of September to today.

Okay. And then just on the some of the non-GAAP items in the FX losses and the losses on derivatives and the debt cost for the acquisition. I just guess going into fourth quarter, are we going to be sustaining any of those Fed costs relative to NEX? And then maybe if you could just characterize the derivative losses and FX losses in your hedging programs there?

Sure. The loss on derivatives line in our non-GAAP reconciliation is the loss on the FX currency hedges that we have for NEX. So those would end once the transaction gets closed. In terms of the debt costs, we will roll those -- those will start to roll in once the transaction closes. In terms of the other FX changes, that is -- that those will change a bit based on our go-forward hedging views, which we'll provide you some guidance on that once the transaction closes.

Okay. Great. And then just lastly on the annual variable dividend, it looks like you have $1.4 billion in excess cash less the $700 million, I think, that you typically earmark? So should we just think about that balance plus the free cash flow that you'll be generating in the fourth quarter? And is it just the October or November, because I think you decide that in December, or is it the full 3 months? Is that an accurate way to think about the variable?

Yes. I would think about it, you hit that right on the head. We have $700 million in excess of our $700 million minimum. We will use cash plus commercial paper to fund the balance of the transaction. And we do -- that's a board decision in terms of the annual variable dividend and that's -- we usually review that with the board end of November and early December when we set the level for the annual variable dividend. And we take a look at the entire fourth quarter when we do that.

Our next question will come from Michael Carrier, Bank of America Merrill Lynch.

This is actually Sameer Murukutla on for Michael. Just a quick question. Given the recent defaults of one of your peers' clearing houses, Terry, can you just give us thoughts on how you think the European regulators would respond? Would there be any increased call for skin in the game again? And how do you see the European reviews spreading across the pond, albeit with the more friendly regulatory environment here in the U.S.?

Sameer, I think it's really difficult to answer that question right now until all the facts are analyzed by NASDAQ and their counterparties. One of the things that we do not have here at CME, as you know, we don't have anybody who does not come through an FCM. So there's an extra layer of protection that comes into our clearing house. And as far as skin in the game goes, I'm always a big believer that you don't want to create a mortal risk or a mortal hazard by letting the exchanges who are agnostic to the price going up and down, having then -- have someone have their capital put at risk first. We're big believers in people that introduce risk to the system should be putting the moneys into the system, and that is to protect, in my opinion, the smaller FCMs that are part of the default pool. If you look here in the United States, some of our smallest FCMs are clearing some of the most important business around, which is how we all eat in this country, produce food and other products, and the banks don't clear those particular clients. So if, in fact, a large bank or somebody else was to have a major default and take down some of these smaller FCMs, we think that would obviously be more catastrophic than what happened in Europe. So as far as skin in the game goes, we do believe that people who bring the risk, introduce the risk should be putting up the money to protect the entire system, and that for me is the fairest way to look at it. CME today, Sunil can comment, we have roughly across all our -- about $400 million. How much we have in the default funds?

$250 million.

$250 million in our default funds across our businesses. We think we have a significant amount of money in skin in the game. Is it going to trickle back here to the U.S.? I think what I just laid out for you in a very short argument will hold. I will say that many more times, I'm certain for months to come, but I've been saying it for years already, and I think the argument is extremely valid that whoever brings the risk and introduces it needs to make sure they put the money up to protect the rest of the system.

Thanks, Terry. Appreciate the detail. As a quick follow-up, given the new roll out of just the quick fault or derived data set, can you provide us any update on what kind of inning you're in in the derived data product? Maybe an overall on the market data product, what kind of attrition you're seeing? And just in the quarter, what kind of audit fees you saw?

Yes. I'll let Bryan Durkin comment on that for you. Bryan?

Thank you. In terms of the derived business, we're very pleased in the context of the pipeline of demand that we have for our data to develop proprietary products, and we see that as a continuing trend. So we're tracking according to our plan with respect to derived. In the context of overall market data and how we're faring there, we're actually quite pleased in the context of that. As you know, the fee increase took effect April 1. Our customers have now had a good 7 months to absorb and adjust to that pricing change. As we look at the attrition, our attrition levels are much lower than what we had contemplated or projected. So we're quite pleased with how the market has reacted to that. And I think it underscores the validity of the product, the services, the market data platform that we introduce for them to be able to consume this data efficiently. So from that perspective, we feel good about where things stand in the trajectory that we're on. In the context of the audits, the audits are performing what we had hoped, which is compliance with our program. So you will see, from time to time, a chunky increase in the context of audit findings. As I've tried to make clear in past reports, audit findings will be sporadic, though they may not be every quarter. It's based upon when the findings are completed and resolution of those cases with the firms. What's more important is the context of correcting behavior. So as you look at the attrition levels, and those levels have actually decreased if you compare it to the past, I think that underscores that we're in the firms, we're helping people correct behavior and we're seeing people increase in terms of complying with their subscriber requirements.

So just to highlight something. We had about $2 million in audit findings in Q2 that we didn't have in Q3. So the sequential -- the balance of the sequential decline was a very small amount of attrition, to Bryan's point, much less than we had anticipated. Also, in terms of the go-forward, I would just highlight again that we -- it will be sporadic in terms of when we find the audit findings and when they're going to be recognized in our financials.

Real quick, I just want to backtrack on one thing you said earlier that I actually said. I want to make sure that I was clear and I wasn't. We don't allow a single individual clear when it comes into our books. That was the scenario that played out on the NASDAQ power exchange that happened. It was a single individual clear. We don't have that at CME. So I just want to make sure we have that, that was what I was referring to.

Our next question will come from Chris Allen, Compass Point.

Most of the questions have been answered. I guess, one quick one. Just on the NEX deal, I think the last approval was the competition authority, and I believe that deal lapses if they do -- if they send it to a second review. I just wondered what happens in that scenario?

What -- so Chris, I'm sorry. What happens in the scenario with what?

If they push it to a second review -- second level review with competition committee.

Right.

So -- yes, so technically, it would lapse, but obviously, we would be looking at our alternatives at that point. So we'd address it should that happen. I think what -- as we said, and we do believe that the transaction will be closed before year-end, so we feel very good in terms of where we stand with the regulators.

Ladies and gentlemen, at this time, we have no further questions in the queue. So I'd like to turn this call back over to management for closing remarks.

Let me thank all of you for participating in the call today. I know some had problems getting through and I apologize for that. If there's any questions that we didn't answer, please feel free to reach out to myself or John, and we will make sure we get to those questions. Otherwise, I want to thank you all very much and look forward to talking to you throughout the quarter.

Thank you very much. Ladies and gentlemen, at this time, this now concludes today's conference. You may disconnect your phone lines. And have a great rest of the week. Thank you.