芝加哥商業交易所 (CME) 2003 Q2 法說會逐字稿

Good day and welcome to the CME second quarter financial update. This call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Mr. John Peschier. Please go ahead, sir.

Thank you for joining us. Jim McNulty, our President and CEO, and Dave Gomash our CFO will spend a few moments highlighting the second quarter and then we'll open up for questions. Terry Duffy, our Chairman of the board is also here and will participate in the Q & A session. Before they begin, I'll read the safe harbor language. Statements made in this call that are not historic facts are forward-looking statements. These statements are not guaranteed guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ material materially from what is expressed or implied in any forward-looking statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, including our most recent annual report on form 10-K, and S-3 available on the web site. Now I'd like to turn the call over to Jim.

Thanks very much, John, and good morning, everyone. we had a strong quarter at [CME] most bolstered by high volume. Interest rates, equities and foreign exchange. Overall this produced record volume that approached 2.7 million contracts per day and represented a 23% increase from the second quarter of last year. This activity produced record revenue of 142 million dollars. Our operating margin was above 40%, and our net income was 35 million, was up 67% from the same period last year. Earnings per share came in at 1.03. On this conference call I'll provide additional detail on our products and then give an update on recent activities. Following my remarks, Dave Gomash will elaborate in more detail on second quarter financial results. Let me previously review the performance of our major product areas. Within our interest rate volume grew each month during soak, we had a record month in June, averaging 1.5 million interest rate contracts per day. Activity picked up significantly related to the quarter of a point fed interest rate cut and were positively impacted by continually mortgage refinancing activity which is often hedged with Eurodollar futures and options contracts contracts.

Our electronic volume during the quarter averaged approximately 42,000 per day, versus 34,000 in the first quarter of 2003, and during the month of June electronic interest rates reached almost 53,000 per day. Electronically traded contracts were about 3% of our total interest rate volume. Our E-mini equity daily volume of 936,000 was up 57% compared to the second quarter of last year. Sequentially compared to the first quarter, volume was down by about 2% as equity volatility measured by CBO, index declined from 34 in the first quarter to 24 in the second quarter. It is worth noting that the[ victor]remained relatively low in June about 22. During that time. Averaged 1.04 million contracts per day in our E-mini equities, the second busiest day for that line in our history.

In addition to growth through distribution to new customers we have seen some benefit from a change we made recently to the E-mini tick size and more using these rolling these over electronically into the next period. Next, encouraged by the strength in foreign exchange arena arena. We continue to grow following a strong first quarter. During the second quarter we averaged 137,000 foreign exchange contracts per day, up 33% from 103,000 in the second quarter of 2002. We continue to see a pickup in electronic electronic FX trading [which average] 56,000 second quarter up from 45,000 in the first quarter this year. Foreign exchange continues to be a strong area of focus for European marketing team. In July, we announced an important customer cost saving arrangement in FX product when appointed Citigroup global transactions services to provide [CME] this settlement arrangement which begins in September will focus initially on Euro FX and then on to others. It will pry continuous settlement of [CME’s] foreign exchange future transactions, delivery process will be the same as the FX delivery process used by major trading banks around the world.

Now, let me turn to OneChicago, our single stock joint venture. During second quarter, OneChicago averaged 604,000 contracts per day compared to 4,700 per day. In June, OneChicago rolled out 15 micro sector index futures-- micro sector, included five of the most actively traded stocks. This brings product numbers to 106 as of July 18, open interest had grown to about 135,000 contracts, up from 45,000 at the end of March. Since inception last November, OneChicago has traded over 950,000 contracts in total. Now let me give you an update on other recent initiatives. As we discussed, we continue to enhance distribution of products. In the past three years, opened access to GLOBEX, increased the speed of trading, established a telecommunications hub in Europe and increased number of independent software vendors and data centers that offer GLOBEX interfaces. We believe broadening access and distribution has expanded both customer base and trading volume. In terms of distribution, we added six network customers to London since last earnings call in April and now have 36 financial institution network connections in place and 80% increase since the beginning of the year.

Another effort underway is to make easier to end user to trade and in this vein we've made recent announcements worth noting. First, we've expanded the telecommunications alternatives for users of our GLOBEX platform, clearing 21 system and market data. Our new programs will reduce connectivity costs and enable customers to obtain connections to CME more quickly. Customers now have choice between telecommunications vendors, allowing them to use their existing internal networks. As an alternative to a direct connection to CME, customers can also opt for our new client Internet link, allowing them to access our trading and clearing platforms, or market data using a high band width Internet connection from anywhere in the world. Access to CME systems through an Internet connection can be set up in as little as one to three days, much faster than our previous alternatives. Additionally, we've announced a program to help our floor- floor-based members incorporate electronic trading into overall business strategies. Our transition committee developed a comprehensive program consisting of several initiatives that provide education, training and mentoring to current floor traders and personnel. Later this year we plan to open an electronic trading resource center which replicates electronic trade room including [work stations offering front end software offering]several ISVs. Simulators will allow practice trading without incurring actual risk of trading.

Another initiative will allow members to use trading floor GLOBEX work stations and new services to trade on GLOBEX after regular open outcry trading hours. This allows leverage of trading platform around the clock and as you may know we're the only exchange that runs 23 hours per day. Another area of growth for CME is providing transaction processing to third parties. During our last call we discussed our cheering agreement with the CBOT, our respective teams are working closely together around the clock on this project and we are on track to begin clearing CBOT's equity and commodity products and some interest rate products in November with remaining products going live in January of 2004. As we've discussed in the past, with this additional CBOT team, CME will be the largest delivery clearing organization in the world processing more than 1 billion contracts per year assuming current volume levels. In addition, the CME, CBOT common clearing link will provide substantial capital and [operation for our clearing funds] for our clients. In June, certain CME shareholders completed secondary sail sale of shares upon expiration of June lockup period. 1.2 million shares was sold increasing float to 6.7 million. The company did not sell any shares or receive any proceeds from the sale of stock by its shareholders in the offering. Now I'd like to turn the call over to our CFO, Dave Gomach who will provide for detail on the financial results. Dave?

Thank you, Jim. I'm going to start by providing more detail on volume. Which averaged close to 2.7 million contracts per day in the second quarter. Our average daily volume was up 23% compared to the second quarter of last year and up 11% from the first quarter of this year. Interest rate volume surged to a record 1.3 million contracts per day, that was up 7% versus Q2 last year and up 24% compared to the prior quarter. Our E-mini equity volume was 936,000 contracts per day, increase of 57% compared to Q2 of last year and down 2% sequentially. Volume in our standard sized equity products was 134,000 contracts per day, a decrease of approximately 5% compared to last year and last quarter. Turning to foreign exchange. Our FX volume continues to grow electronically and our volume of 134 [--] 137,000 contracts per day was highest since 1994. This represented a 33% increase compared to last year, and was up 8% compared to the first quarter. Commodity products averaged 34,000 contracts per day, up 7% compared to the second quarter last year and down 2% sequentially. We set records in all three venues during the second quarter.

GLOBEX averaged approximately 1.1 million per day and rose 63% from the second quarter of last year. Volume traded on GLOBEX represented 41% of total volume in the second quarter, versus 31% during the same period last year. And 44% in the first quarter of this year. Open outcry driven by record volume and interest rates was 1.55 million contracts per day in Q2. Compared to 1.47 million per day a year ago. And 1.3 million per day in the first quarter. Privately negotiated transactions, which include block trades and ESPs totaled 41,000 contracts per day, up 25% compared to last year and up 4% sequentially, driven primarily by foreign exchange. Excluding TRAKRS our aggregate rate per trade was 69.9 cents, down slightly from 70.4 cents in the prior quarter. This compares to 64.4 cents for the second quarter of last year, when a 5 million dollar fund for clearing firms reduced the aggregate rate per trade by 3.6 cents to approximately 61 cents.

This quarter, we had a favorable audit assessment of 2.5 million which increased the overall rate per trade in the second quarter by 1.5 cents. Of which 95% was related to interest rate products. The overall rate per trade, excluding the 2.5 million assessment, would have been 68.4 cents this quarter, and the rate per trade for interest rate products would have been 51.2 cents. Quotation fees totaled 13.6 million for Q2 up 1.6 million from the second quarter of '02 and up 1.8 million sequentially. This increase was due to a previously discussed pricing change which went into effect in April. We now charge 50 dollars for the first data screen at each location, and 20 dollars for each additional screen for our professional market data offering. In addition, we recently announced that in January of 2004 we will begin charging a flat fee of 30 dollars per terminal. No longer differentiating between first and additional terminals.

We also stated that we intend to sell enterprise licenses to our larger customers at a discount discounted rate. At the end of the quarter, we had approximately 32,600 first locations and 118,000 additional screens. Investment income increased approximately 1 million from the first quarter of 2003. Primarily due to our deferred compensation plan which is affected by the performance of the equity market. An equal and offsetting expense appears on the compensation and benefit expense line, so there is no bottom line impact. I will now take a few minutes to review expenses. Total operating expenses were $83 million during the quarter, this compares to $73 million in the second quarter of last year and $82.3 million last quarter. Which included an one-time expense of $5 million for our brand advertising campaign. Compensation and benefits came in at $38 million, up from $29.3 million last year, and $33.2 million last quarter. In addition to the deferred comp item I mentioned earlier, which added over 800,000 to expense in Q2, there were two additional contributors to this increase.

First, as we discussed in our secondary filing, our shareholders approved an annual incentive plan which ties the annual employee bonus expense to annual cash earnings. The same metrics used to determine our dividend. The compensation committee developed the incentive plan which is capped once the company reaches 120% of our cash earnings target. The new bonus plan differs in several ways from our historic bonus programs. In previous years the plan was not incentive-based or tied to any specific financial measures. Also, this new plan has been clearly communicated to employees who are more than ever focused on generating positive cash flow. In the second quarter, as a result of stronger than planned cash earnings, we booked approximately 8.4 million for our incentive bonus, after booking approximately 4.4 million in the first quarter. The second major contributor to the increase in compensation and benefits expense was strok stock-based comp which totaled 824,000 for the quarter, and included additional options and restricted stock granted to employees in early June.

Going forward, based on this grant, we expect stock-based comp to be approximately $1.4 million in the third and fourth quarters of 2003. During the second quarter, compensation and benefits were 27% of net revenue, approximately the same as Q2 of last year, and last quarter. At the end of June, head headcount 1,185, compared to 1,1 1,165 at the end of Q1 '03 and 1,072 at the end of the Q2 '02. In communications, computer and software expense, we booked a credit of 1 million dollars related to overbilling by a Telecom vendor. This thought follows a smaller credit received during the first quarter and completes our review of this vendor. Moving on to income. Operating income or income before taxes was $59.4 million in the second quarter, compared to $34.5 million for the same quarter last year. Our operating margin was 41.7%, versus 32.1% in the second quarter of last year. These figures illustrate the operating leverage inherent in our business model,. More specifically as revenues grew by 35 million versus Q2 of '02, approximately 25 million or over 70% fell to the operating income line. Our effective tax rate for the quarter was 41%, bringing our year to date tax rate to 40.7. Net income for the quarter was up 67%, to 35 million from 21 million in the second quarter of 2002. And our diluted EPS was 1.03 compared to 71 cents last year.

Now let me briefly discuss our balance sheet. At the end of the quarter, our balance sheet shows $393 million in cash and cash equivalents. Increase of $36 million since the end of the first quarter. With respect to capital expenditures, cap ex and capitalized software development costs were $13.9 million in the second quarter and totaled $25 million for the first six months. Cash earnings, which provide the basis for our dividend payment and the incentive bonus plan, totaled $34.7 million for the second quarter and $63.5 million for the first six months. Speaking of dividends, CME made its second quarterly dividend payment of 14 cents in June and third quarter dividend will be announced in the near future. I'd like to take a minute to review the financial impact of our clearing agreement with the Chicago Board of Trade. As Jim mentioned, the project is well under way and we spent 1.7 million during the second quarter on implementation. As part of the agreement, the CBOT will reimburse us $2 million dollars of which 1.2 million was billed in the second quarter, leaving 800,000 to be billed in 83 Q3. Expenditures beyond 2 million will be expensed and are expected to be between 2 and 4 million in 2003. Now, a quick update on July's volume.

Through the end of last week we were averaging about 2.3 million contracts per day, excluding TRAKRS. Interest rate products are averaging just under 1.1 million per day, E-mini equities around 950,000 contracts per day, equity standard contracts approximately 100,000 per day, foreign exchange 128,000 a day, and commodity products are averaging 37,000 per day. As you know, volume is available on our web site on a daily and monthly basis. To summarize, we had a strong second quarter, driven by record volume across all vendors. Due to considerable operating leverage we were able to deliver record net income and earnings per spare share. Our balance sheet remains strong and we continue to invest in growth. With that we would like to open up the call for your questions.

Thank you. The question-and-answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit 1 on your Touch-Tone telephone. If you are using a speaker phone, please make sure your mute function is turned off. We will proceed in the order that you signal us and we'll take as many questions as time permits. Once again, press star-1 on your Touch-Tone telephone to ask a question. And we'll pause for a moment to assemble the roster. We'll take our first question from Henry McVey with Morgan Stanley.

Mr. McVey your line is open.

: Hello, Henry.

Hello?

Can you hear me?

Yes.

It's Scott Patrick. Just a few questions here. You had indicated on the interest rate average rate that there was a favorable assessment in there that actually, you know, boosted the rate by a couple pennies. It seems, though, there's more going on there. The last time volumes were anywhere near the level we had in the second quarter, the rate was closer to 46 cents, so I was wondering if you could give a little bit of color on that. The second question is, you know, with the strong earnings you've been having, you really have seen a pretty significant increase in equity base and given the pending dividend taxation rules, would you consider raising your dividend? And then, the third is on the CBOT clearing arrangement, you had mentioned that some products could go live in November and I was wondering if could you give a little bit of color on that as well.

Sure. Scott, I'll take the first question. Dave Gomach. With respect to the interest rate pricing or the rate per trade, we have seen an increase, we mentioned last time we introduced a new tiered pricing structure which increased the rate per trade for our biggest liquidity provider. We had indicated that that -- we expected that to add about 3 cents per contract on the interest rate side and that would be reduced somewhat by the Eurodollar program. We've probably seen that come in a little better. In general, the [--] it's probably been in a little excess of 3 cents on the positive side, so we've probably picked up 2 cents. If you looked at the first quarter of 2003, we averaged 49 cents. This last quarter was 54 but if you adjust for the $2.5 million dollars assessment you'd be comparing 49 to 51. And that's primarily a function of that tiered pricing change.

So it's really 3 cents from tiered pricing offset by some higher volume?

Right, it might be even a little north of -- well, if you net the back month Eurodollar program out, yes.

Okay.

and on your second question, Scott, this is Jim McNulty speaking, we agreed that the cash position has increased and I think you know that our dividend patrols is based on cash earnings and so as cash earnings go up, obviously that has some effect on dividend. We look at dividend policy on a fairly regular basis at the board level, and I would expect that that will continue, that we'll look at it, but we don't have any announcements to make.

Okay.

Ext third piece, which is the CBOT clearing, one of the things that we wanted to do was bring the clearing out in three stages so in November we'll start with equity contracts at the Chicago Board of Trade and then we'll go to -- and also the agriculture contracts and some interest rates, and then in January we'll move all of the rest of the contracts on to the common clearing link.

and you had indicated 12 to 15 million of incremental net income in 2004. Do you stand by that guidance, still, and also what would you expect, you know, in terms of fourth quarter accretion accretion?

Scott, I think we indicated 10 to 15 million million, and that was based on board of trade volume. Last year growing at what would be their normal compounded growth rate. They've certainly have seen considerable appreciation in their growth and volume, but we're going to stick with the 10 to 15 million, and we will expect some impact in the fourth quarter, but it will not be significant. However, it will certainly help offset our expenses.

Okay, great, thanks a lot, guys.

Thank you.

and we'll take our next question from Charlotte Chamberlain with Jeffries & Company.

I'm trying -- in trying to put forecasts together for the third quarter, I was wondering if it's reasonable to, you know, to use the pricing that we saw in the second quarter, obviously absent the accounting adjustments. And also, I understand that your chairman is -- or -- Jack Sander, is going on the board of Etrade and I was wondering if there's any implication there of CME products going retail. And finally, I was wondering if you could give us some color on Eurex's entry into the U.S. for trading futures and options. Thanks very much.

This is Terry Duffy, I'm the chairman of this exchange, not Jack Sander.

I'm sorry, your former chairman.

Thank you.

Do you want to know about Jack's relationship with E-trade, is that what you're wondering.

Yeah, since he's going on with Etrade, if we should read that as a signal that the CME is more interested in attracting real retail involvement.

Well, I think there's no question about it that we think that market is a very big market but this is a personal thing that Jack sander has done, it's not promoted in any in any way by the institution. We're happy for Jack and I think Jack has been a great advocate for this institution for a number of years and he will obviously be promoting retail type trade with E-trade.

On or about, thanks, and about the pricing?.

Sure, high. It's Dave Gomach. The 69 cents or 70 cents including TRAKRS, once you reduce that by basically the 2 cents related to the assessment, you'd be at 68 cents, which is very much in line with previous quarters. The reason it's down a little bit from say Q1 of '03 was because of the tremendous growth we saw in our interest rate products which is our lowest rate per trade contract.

I see, okay.

It's going to continue to be a function of where the volume is. It's a mixed issue and you try to forecast the volumes is where the answer is.

Okay, great. And Eurex?

and Charlotte, on Eurex, we think that Eurex is a good competitor and of course we pay attention to all of our competitors. However, I think that when you look at the kinds of price pricing that we have in place, for example, for our Eurodollar contract, where most of our biggest liquidity providers are trading and arranged between 4 cents and 8 cents per contract, that makes it a very tough contract to compete with, especially given the deep pool of liquidity doing over a trillion dollars a day in that contract. In the case of our equity products, obviously, having some licensing in place with S&P, and NASDAQ is an important factor to keep in mind. And also the pricing there for the liquidity providers is extremely low. The big prop firms that are clearing members here are paying 7 and a half cents per contract and 50 dollars a day to trade the product and of course you can see the volume growth on the back of that structure. So I think it will be a tough job for them to get traction traction, nevertheless we have great respect for them.

Great, thanks.

Thank you.

and we'll now move to Bill Tanona. with J.P. Morgan for our next question.

Hi, guys. Can you hear me?

Hi, Bill.

I just wanted to ask you guys a couple questions on the compensation and benefits. Incentive comp under the old plan it was something like 18 million?

17.5 million last year.

Okay. And under the new comp it's capped at something like 23?

Capped at 27.3.

27, okay, so you took additional 4 million in the first quarter -- second quarter.

We took 4.4 in the first quarter and 8.4 in the second quarter.

Okay, perfect. Can you talk a little about any of the success you've had in enhancing some of the liquidity in the further out contracts in Euro dollars?

Sure, in fact, Bill, I think you know we put in place a plan last year that rewarded some of the biggest liquidity providers in the back end, and in the concept was to create more and more liquidity in the further maturities. And just to put it in perspective, in the back months, which would be the 2 to 10-year Euro dollars, the average daily volume was 104,000, in the second quarter, versus 70,000 in Q1. So we've already begun to see this move in the right direction for us to continue to grow.

Perfect. Thanks, guys.

Sure.

Once again, if you would like to ask a question, please press star-1 on your Touch-Tone telephone telephone. And now we'll go to Joel [Gomberg] with William [Blair].

Thanks. Just a couple quick questions. One, on the higher tax rate this quarter, what can we expect going forward, and then the sequential decline in the pricing of the Eminuteies, is there anything unusual' there, change in pricing? Thanks.

on the tax rate, year to date rate is at 40.7, second quarter we are at 41%. We had some permanent adjustments that we could not get a deduction for specifically our secondary costs, so that's why the rate was a little high there. You could probably use 40.7 as your go-forward rate. For the balance of the year. In terms of the E-mini. What we're seeing there is more of our users are hitting the cap and that's what's putting most of the pressure on the rate op the downside. So the expectation, I guess, is that more people will continue to hit the cap as the volume continues to grow.

Okay. And then, Jim, on the [links], the connections, which have grown very strongly this year overseas, do you continue to see that type of growth or what can we expect there?

We can't forecast the growth, but there's no question we are seeing the benefit of having five multilingual marketers now in Europe. They're seeing a tremendous number of prospects and current clients and we're seeing the business grow around that activity. And one of the areas that you're seeing that growth, of course, is in the foreign exchange business, and one of the things that I like about it the best is a lot of that growth is happening when you're home asleep and that means we're getting great leverage out of our GLOBEX trading system.

and then finally, the last -- you know, on the E-mini side, the growth in the ETF market has been very strong, what are you doing to try to penetrate those ETF traders over to the E-mini products.

Joel, that's a really good question, and if you look at where the ETFs have been particularly strong, it's been in the spiders and in the Qs. And if you look at the value traded in the spiders and Qs and compare that to the notional value traded in our E-mini S&P 500 and the -- and our NASDAQ 100 E-mini contracts, what you see is in the case of the S&P 500 we're doing about 7 times the notional value each day and one of the reasons is a lot of the ETFs are hedged directly back into the E-mini contract, in fact there are a number of our members who are also broker dealers and they have automated systems set up where they can make prices in the ETF& then do automated hedges right back to the CME. So that growth is actually -- has been good for our products products.

Thanks.

Sure.

and we'll now hear from Lauren Smith with KBW.

Hi, good morning.

High, Lauren, how are you?

Terrific quarter. Most everything has been answered but just a quick, I guess more color on the non-comp side, you know, you took the sequential decline was pretty meaningful on a go- go-forward basis. Sort of 45, 46 million quarterly run rate, sustainable in your view?

in terms of the comp, what specifically you said --

Non-comp.

Non-comp, okay. On the expense side?

Yeah.

I guess you want to go through the different lines on the P&L?

I'm just looking at the quarter was about 45 million, first quarter was 49 million so that's a meaning meaningful link quarter decline and I'm thinking as we look out and you know, try to model, is 45 million quarterly run rate on the non-comp side, you know, reasonable expectation in.

Well, we don't give any projections for operating income or any earnings projections. So most of our expenses other than the comp are relatively fixed so they're relatively easy to model. We had in the first quarter, the big branding event on the public relations side. There's nothing significant like that planned going forward. And our communications line, of course, in the second quarter we had the $1 million dollar refund from the [--] or credit from one of our Telecom vendors. That will be nonrecurring. Also, on the professional fees, we did have some expenses related to secondary which will be nonrecurring. And on the other side we will begin to see some of the expenses related to our board of trade common clearing link get in the second quarter -- third and fourth quarters this year. Other than that, there's nothing specific. Again, the bonus, I know you were talking about non-comp, will be linked pretty much with where our cash earnings go.

Okay, thank you, that's helpful.

Thank you.

Once again, if you would like to ask a question, please press star-1 on your telephone keypad. And we have a follow-up question from Charlotte Chamberlain with Jeffries & Company.

Yes. Loan rates have come up quite a bit but short rates have stayed relatively flat, and I was wondering if could you just go over with us again, if in fact short rates went up so that the broker loan rate and the margin rates went up, how would that affect your business and what I'm thinking about, as I understand it, you know, all of your business is on margin, and people put down a certain amount of margin money to control contracts. Is it true that if short rates ran up, that the number of contracts they could control then would go down, for same, you know, for the same margin deposit?

Charlotte, let me take that in two pieces. In the case of the interest rate contracts, one of the things that we have seen over the years is that the Eurodollar contract had traditionally been a liability manager's contract, and so generally speaking you saw banks and investment banks and corporations even countries using Eurodollar futures and options as a way of hedging against rising interest rates. Then, when they stopped issuing -- when the treasury stopped issuing long bonds in the U.S., we began to see asset managers also discover the Eurodollar contract, and that's why we saw so much volume in the period of 2001 as rates declined. As you know, in the past couple of years, with low general interest rate levels we've seen tremendous mortgage re refinancing, and that of course is linked to the liability manager's side, and so futures and options on Eurodollars have been extremely useful to people in the mortgage re refinancing business over the past two years. So all of that said, if we see interest rates go up from this level, with the kind of open interest we have today, we would expect that quo to be volume creating for us. Especially after having several years of declining and now steadily sideways interest rates.

So, that side, let's leave that aside and now go to the question of would it [--] would higher interest rates give people pause in terms of how much they put on because of margin. And in fact, I think what you will see with the CBOT, CME/CBOT common clearing link that the capital savings that comes from putting all of those contracts into one clearinghouse would probably overwhelm any interest rate consideration in terms of slightly higher cost of money over the next year.

but am I correct in viewing it that all of the things being equal, say the CBOT [--] say the CBOT clearing arrangement was already [--] was already done, that for a given margin deposit in cash, if interest rates go up, the number of contracts that can be controlled goes down, if interest rates go up. Is that a reasonable way of thinking about it?

I would say maybe only in the smallest possible way, and keep in mind that people generally don't put up cash when they put up margin deposits. They're generally putting up securities.

Okay. I.

I just think it's a very, very small marginal effect.

Okay, great, thank you.

Thank you.

and we have one more question in the queue, with Shane [Denomore] with UBS.

Hi, guys.

Hello, Shane.

Do you have any data as to how much of the Euro dollar volume is mortgage related?

Shane, I don't think there's any way for us to break that out specifically. But clearly it's one of the -- clearly it has an effect on us, you can see that in the growth of the Eurodollar options and also Eurodollar futures have been very active, despite the fact that suspect rates have been relatively stable for the past year.

Thanks.

Thank you.

It appears there are no further questions at this time. Mr. McNulty, I'd like to turn the conference over to you for additional or closing remarks.

Thank you very much Susan, thanks for joining us and thank you for your continued interest in the CME and we look forward to talking to you next quarter quarter. Bye bye..

That concludes today's conference, thank you for your participation.