芝加哥商業交易所 (CME) 2012 Q4 法說會逐字稿

Welcome to the CME Group fourth-quarter and full-year 2012 earnings call.

(Operator Instructions)

At this time I'll turn call over to Mr. John Peschier. Sir, you may begin.

Thank you, and thank you all for joining us this afternoon. Gill and Jamie will spend a few minutes outlining the highlights of the fourth quarter and then we'll open up the call for your questions. Terry, Brian, and Derek are on the call as well and will participate in Q&A session.

Before they begin, I'll read the Safe Harbor language. 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 and 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 forward-looking statements. For a detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.

Also note, the final page of our earnings release contains a reconciliation to our GAAP results for the quarter. Now, I'd like to turn the call over to Gill.

Thank you, John, and thank you, everybody, for joining us this afternoon. I'm going to highlight CME Group's 2012 major efforts and then share some thoughts about this year. Afterwards, Jamie will review our Q4 financial results. Despite facing a low volatility and difficult environment in 2012, we made significant progress across several key areas as we are embracing the changing regulatory and global landscape.

Looking forward to 2013, we remain cautiously optimistic about the trailing environment relative to last year. Based on what we had been working on, we feel we are very well-positioned to benefit most when we come out of these challenging cycles. We experienced improved activity in December 2012 and January of this year in comparison to what we saw during much of 2012.

Average daily volume in December was up 1% year over year with an increase in many asset classes. January average daily volume was 11.4 million, a nice jump from the 10.5 million contracts per day we averaged during the second half of last year. In addition, open interest is up 13% since the end of the year and is currently above 79 million contracts.

Turning to interest rates, the last two months were each up versus the prior year. January average daily volume was more than 5.3 million contracts per day; the highest volume level since June of last year, and up 24% from the 4.3 million average during the second half of last year. The short end of the interest rate curve is still hindered by the zero interest rate policy which has negatively impacted year-ago activity.

On a positive note, our Fed Funds futures product is currently indicating a rate increase during Q4 of 2014 which has moved up from mid-2015. At the long end of the curve, our Treasury products are performing well, with January 2013 average daily volume up 30% versus the same period last year. On February 1, we traded a record number of Treasury options, approaching 1.2 million contracts with more than half of that volume on CME Globex. Clearly, market participants are watching economic data very closely for the yield on the 10-year rising above 2%, recently.

Longer term catalysts for our interest rate products include the OTC mandate beginning in March, driving more revenue and swap clearing, as well as increased activity in our futures products, the continued resolution of regulatory uncertainty, and improved confidence about the economy.

In light of these catalysts, we are building our interest rate product suite and our focus remains on driving activity out the curve, examining new interest rate products, and building our OTC swap business which could potentially drive greater use of our call futures and options products.

Moving on to OTC. We have seen a ramp up in activity leading to the CFEC clearing mandate with Phase I set to begin in March. So far, over 60 institutions have cleared trade at CME, comprising a wide array of market participants, including asset managers, hedge funds, insurance companies, GSEs, and proprietary trading firms. Since the launch, we have cleared 1.6 trillion and open interest is above $850 billion.

2013 is off to a good start, with many new customers on-boarding and clearing their first trades, and many existing customers increasing their activity. January 2013 average daily notional was over $12 billion and this compares to $6 billion in the fourth quarter and $4 billion in the third quarter of last year. We also added eight additional clearing members in 2012 bringing our total to 23.

Overall, there are three ways for us to help customers navigate the regulatory changes. Cleared swaps, existing rate futures contracts, and a new innovative product set we are currently developing and have developed and we are executing on all these fronts.

We've now cleared the seven major interest rate swap currencies that account for 95% of the market, 51 CDS indices, and the 12 most active emerging markets NDS. In addition, we received regulatory approval to implement portfolio margining for all market participants. Initial results are promising as these participants have seen significant risk offsets that account for margin savings of over a $1 billion.

Looking forward, we expect to grow the list of cleared OTC products as well as launch interest rate swaps clearing out of our European clearing house in Q1 well ahead of the mandate there. We also had a successful deliverable swap futures product launch in December with very strong buy- and sell-side support.

There is significant interest in this innovative product and it is off to a great start with approximately 65,000 contracts traded to date, representing $6.5 billion in notional value, and the current open interest lies above 12,000 contracts, which represents about $1.1 billion in notional value. Although we have had nice volume following the launch, many potential clients are focused on the first roll in March and the upcoming clearing mandates in March and June, which will focus more attention on the benefits of this product compared to the alternatives.

In addition, we received CFTC approval for swaps data repository for credit default swaps, interest rate swaps, commodities and asset classes. Our FDR will offer customers the ability to optimize the existing connections to CME clearing for automated FDR reporting, which will facilitate straight- through processing, providing further value to our clients. We are excited about this as a natural extension of the clearing and processing services we offer to both sell- and buy-side clients, providing a compliant, efficient, and low-cost way for market participants to access an SDR.

Turning to FX, January 2013 average daily volume was up 21% versus the prior year. We are seeing particular strength in the yen and British pound contracts, up 160% and 41%, respectively. FX options continued to be particularly strong with quarter-four ADV up 17% versus the prior year and up 56% in January compared to last year. We also hit multiple open interest records for the Japanese yen last week.

In terms of open interest, we experienced record levels of FX open interest ending 2012 up 15% compared to the end of 2011. In addition, FX products hit a new all-time high of large open interest holders in December of 890, which is up from 860 in September, indicating that more customers are holding increasing amounts of FX risk at CME Group.

Average daily volume in our FX business in December 2012 surpassed the volume of all the OTC FX platforms for the second time in six months. This speaks to both success in building and diversifying our participant base, as well as the FX markets increasing adoption of exchange-traded and cleared products in the form of CME FX futures and options.

We also continue to see improvements and new opportunities within our energy complex. On January 11, the Seaway Pipeline increased its capacity to 400,000 barrels per day from 150,000 barrels per day and saw a tightening of the WTI-Brent spread, and look forward to further tightening in the future as more WTI reaches market.

In addition, since the eleventh we have seen more volume traded in CME's WTI futures than our competitors' Brent contract. Looking forward, there's significant increases projected in US production. Could lead to more hedging base on TI and lower imports, which are typically linked to Brent.

We believe there will be three global crude benchmarks going forward. Our WTI, Brent, and the DME Oman contracts. We intend to be successful in all three. Although still early in development, we have recently hit record volume levels in our Brent and DME contracts, and open interest in Brent continues to grow.

Also, DME Oman is going to be included in the new US-based commodities fund, the United States Asian Commodities Basket Fund, which will give investors exposure to Asia's rapidly growing demand for raw materials. This inclusion recognizes the critical benchmarking role DME is playing in the expansion of the East of Suez markets, providing transparent price discovery and reflecting economics of the Asian region like no other crude oil futures contract.

We are making a very concerted effort to meet the hedging needs of our global client base and expand our market share in 2013 and beyond. Shifting to our globalization efforts, we accomplished a lot in 2012 and look to build on that momentum this year.

In 2012, we continued to ramp up our sales and marketing efforts on a global basis and we have launched a number of regionally specific products, including Black Sea REIT and Chinese Steel Rebar Swap Futures, which are directed to its meeting unique risk management needs in particular geographies.

We also continued to expand our global footprint and apply it to the Financial Services Authority, or FSA, to register a London-based derivatives exchange, CME Europe, which we anticipate launching in mid-2013. In addition, during 2012 we strengthened our international partnerships, including implementing our cross-listing and cross-licensing arrangement with BM&F Bovespa, and increasing our stake in the Dubai Mercantile Exchange to help build the new benchmark for crude oil in the East of Suez that I referenced a short while ago.

Lastly, we advanced our efforts in India and China, including helping to facilitate operational readiness of several Chinese SCMs to trade our products and recently launching Indian rupee futures.

In addition to our globalization efforts, we continue to enhance and further diversify our core. We completed the acquisition of the Kansas City Board of Trade and our integration is progressing well since closing the transaction at the end of November. The Hard Red Winter Wheat ADV was up 25% in December versus a year ago, and the implied inter-exchange wheat future spread became available on CME Globex on December 10.

Our customers will realize further efficiencies as we complete the largest two milestones of the integration in the coming year. In mid-April, we will consolidate clearing services and the CME clearing and we plan to transition all floor trading to Chicago beginning on July 1, subject to the review of the CFTC.

Additionally, in 2012 we launched the next generation of CME Globex, reducing order entry and market data latency variability, along with increasing capacity and cost efficiency. We also launched CME Direct technology for online trading of both exchange traded and the OTC markets.

In addition, we closed our joint venture with McGraw-Hill, securing the long-term exclusive license on SMP Futures and OTC swaps. And finally, we launched our Co-Location business to create a valuable new revenue stream and had a successful first year. In summary, we remain extremely focused on future opportunities while investing in the right places and maintaining financial discipline to reward our shareholders.

We have a lot to be proud of as a Company, but a lot of important work still needs to be done. 2013 is going to be a busy year for us, given all that we have planned as we position the firm for future growth. We are prepared for what lies ahead of us and we look forward to continuing to build upon our world-class businesses. Now, I will turn the call over to Jamie to discuss the financials.

Thank you, Gill, and good afternoon, everyone. Today, I'm going to review the results of the quarter and provide you with details around how we are positioning ourselves for 2013 and beyond. So, jumping right in, excluding the tax entries mentioned in the release, our earnings per share would have been $0.63.

Turning to revenue, the rate per contract for the fourth quarter was $0.831, up 2% from the fourth quarter of 2011 and up 1%, sequentially. Compared to last quarter, a larger percentage of the business was from non-members and we saw lower volume discounts and incentives, which are correlated with volume. Within the market data line, we saw a sequential drop of $3.5 million related to a reduction in screen counts due to an intensified focus on headcount and cost reduction in the financial services industry as we closed the year.

Total fourth-quarter operating expense was $285 million. It is important to note that in the fourth quarter we reclassified 2012 clearing house bank facility fees of $8.6 million from other operating expense to interest expense in the non-operating section of the income statement. Otherwise, expenses would have been $294 million.

Breaking down operating expenses in more detail, starting with compensation and benefits, this line item was $113 million, down from $118 million last quarter. This was due to a $1.4 million sequential benefit from lower deferred compensation expense and favorable vacation accruals and severance costs.

Our bonus was $12 million for the quarter, similar to the prior quarter. Our annual bonus in 2012 was down approximately 25% versus 2011. Our headcount ended the year at 2,566, basically flat for the year, with small net hiring at our technology center in North Ireland, Northern Ireland, which results in lower overall expense due to less reliance on outside consultants.

Turning to non-compensation expense, the main items that increased sequentially were marketing, as we projected last quarter, and technology support services driven by greater annual maintenance costs. Many of the other items came in favorably relative to our expectation from last quarter's call.

Turning to non-operating income, we received $6 million in dividends from our various investments, down from $10 million last quarter. Interest expense jumped to $44 million, driven by the reclass of the credit facilities costs I already mentioned, and by a full quarter of interest expense related to the $750 million note issued in September 2012.

Capital Expenditures net of leasehold improvement allowances totaled $42 million in the fourth quarter and $140 million for the full year, down over 10% from the prior year. The pro forma tax rate was 40.1% in the quarter.

Turning to the balance sheet, we had $1.7 billion of cash and markable securities at the end of December. Despite the headwinds throughout the year, we continue to generate significant cash returning more than $1.2 billion to our shareholders in 2012. Our dividend yield for 2012 approached 7%, or 4.5% if you exclude the accelerated variable fifth dividend paid in December. We have received positive feedback in our novel dividend policy and will continue to consider and pay out a fifth dividend for each year.

Let me now turn to guidance for 2013. First, on revenue, starting with the access and communication fees line, at the end of 2012, our Co-Location customers had an opportunity to modify their infrastructure footprint upon renewal of their contracts.

As this was their first opportunity to do so since the initial commitments they made in late 2010, many customers took the opportunity to adjust, reflecting current business needs. While the number of customers has remained fairly consistent, we expect a reduction of about $3 million per quarter in 2013 within this expense line, driven by both Co-Location and other access fees.

Turning to expense. For 2013, we expect approximately $1.25 billion of expenses for the year based on our assumption of top-line growth. In addition to normal inflation, there are three primary areas to point to including bonus expense, investment in growth initiatives leading to higher staffing, and new marketing campaign.

In 2013, as we do every year, we are resetting our bonus estimate to the target level of approximately $68 million. Remember, bonus expense had seen a significant pullback in 2012 based on lower than expected cash earnings. Each year, we reset the cash earnings target to reflect current and projected market conditions and business goals.

After remaining relatively flat over the last 12-18 months in terms of headcount, we expect to resume hiring in 2013, including additional technology employed in Northern Ireland, additional staffing of our European exchange and clearing house, and some new positions related to regulatory compliance efforts in clearing and market regulation.

The other driver of the expense increase is a branding and advertising campaign to rebuild confidence in the derivatives market. The incremental marketing cost for this campaign is approximately $10 million in 2013. Our expense projection assumes cash earnings growth in 2013. Should 2013 cash earnings come in flat versus 2012, we would project expenses to be approximately $1.23 billion.

For interest expense, we are projecting $39 million per quarter, which includes the costs associated with the increase in the size of both our corporate and clearing house credit facilities. Interest expense will decrease once our debt maturing in August is retired, but may go back up temporarily if we decide to pre-fund the debt maturing in February of 2014.

In terms of tax rate, we expect between 38% and 39% in 2013, down from the prior year due to the full year impact of the Illinois state apportionment change and other tax efficiencies. Lastly, in terms of Capital Expenditures, in 2013 we expect CapEx to be approximately $140 million to $150 million, the same guidance we had going into this year.

In summary, we continue to focus on investing for the future. In particular, we want to position ourselves to fully take advantage of the changing regulatory and competitive landscape. As always, we remain intensely focused on generating and returning excess capital to our shareholders while also investing in our future. With that, we would like to open up the call for your questions. Please only one question and one follow-up.

Thank you. We will now begin the question and answer session.

(Operator Instructions)

Our first question comes from Rich Repetto with Sandler O'Neill. Rich, your line is open. You may ask your question. And there is no response from his line. We'll go ahead with the next question and that's from Jillian Miller with BMO Capital Markets.

Hi guys, thanks. So, there's this contentious issue being debated currently on how the SDRs are going to handle swaps data. And, you've applied to the CFTC to allow you, basically, to automatically report all of the CME cleared swaps automatically to the SDR.

But competitors are fighting hard against that. So, maybe you can just run through exactly what you're hoping to achieve with respect to the swap data, how you might potentially monetize that data, and how you think the CFTC is looking at the issue?

Ms. Miller, this is Gill, I'll take a shot at it. I'm sure there will be a lot of folks who want to talk, but ultimately the idea behind us applying for approval of this rule was to make it as efficient as possible for our clients if they're going to clear a swap at CME. And to not do anymore work than they have to, and we reported directly to our own SDR and, like I said a short while ago, it's straight-through processing at its best.

And, in terms of monetizing the venture, that was not a priority for us when we launched it. Operational efficiency was the main goal behind what we were doing.

Okay, so is that data something that you would charge for or is it something that you would just be collecting, reporting to a central facility, and you wouldn't be directly keeping the market data from it?

No, we are going to keep the official record of the swap that we clear and we have announced that we will not charge at least for awhile.

Okay, got it. And then, moving on to another topic that's also kind of regulatory. It sounds like some of the commissioners are considering whether the block levels that you guys have set for energy futures might be too low. And I know that virtually 100% of the clear port business is transacted off exchange in block transactions.

So, just wanted to get an idea for what type of impact a larger block size would have on that business? If you could tell us what portion of your trades are coming from the smaller end of the block spectrum? Anything that could help us quantify the potential revenue that would be at risk if block thresholds were moved higher?

You know, it's Terry Duffy, I'll start for a second. As you know, we transitioned our ESF business on ClearPort to the smaller blocks in a very short period of time at the end of last year because of the CFTC mandate. While we did that, we had a few issues with the CFTC, because they were supposed to address the swaps, the SEF rules, before they were even supposed to get to these ESF rules which they didn't.

They went out of reverse order and kind of caught us a little off the curve and our customers. So, at the same time, now that we've transitioned to these smaller blocks, we have been working with the Commission on a day-to-day basis to say that we need, the market needs time to adjust and adapt to these new smaller block thresholds versus an ESF system.

And, for them to go and adjust block thresholds in the very near future, could cause just as much harm as if they were not to give us the extents to the end of last year. So, I do believe that the Commission understands that and they don't want to be disruptive to the overall marketplace and they will give us more time to evaluate what the appropriate thresholds are for these block -- for these products.

Again, I think we're talking about a handful of these products that are the majority of the revenue, so I don't think we're going to have any impact as that relates to that, even if the blocks were changed.

Okay, that's very helpful, thank you.

Thank you. The next question comes from Rich Repetto with Sandler O'Neill.

Yes, I'll try again. Can you hear me?

Hi, Rich.

The technical problems somewhere. But, anyway, my question is, Gill, you mentioned that the OTC clearing has doubled, literally quarter-over-quarter but, really, it jumped December to January double. So, can you give us the color, is there any certain clients or what's -- I'm sure in anticipation of March, but the reason that it just doubled from December to January and in December it was pretty much even that whole quarter?

Yes, Rich, I'll start and I'll ask Bryan and Derek to join in here. This is one of the major focus areas for us in what we have been seeing in the last quarter, that has continued on through this last month, has been an onboarding of both clearing members as well as accounts as more and more accounts are testing and more and more accounts are putting positions on live for us.

And, so, I think the mandate -- the March 11 mandate is being taken very seriously by everyone and they are preparing for not just the March mandate, but the bigger push of clients coming into us will occur in June. And we're seeing a healthy mix of both of those sets of clients that are coming into us now.

It's Bryan. I was going to add to that point that as the March timeline comes up, it affects more so hedge funds, but we are seeing a nice mix across asset manager's hedge funds, insurance companies, GSEs, proprietary trading firms that have either come in clear trades or are well into the testing module. And, so, that adds to I think the significant pick up that we've seen this past month.

Okay, that's very helpful and just one follow-up. On OTC as well, I guess, initially, I think at least Terry you were more conservative about the clearing opportunity. But as we get closer to the mandate, the March mandate and the phase-in period, I guess can you give us any view on what you think the revenue opportunity is especially with futurization, and especially without the SEF rules and the clearing mandates still looking like it's going to go through?

I'll start and I'll let Jamie take over more on the revenue side. But I think from when we first put together our clearing offering for OTC, we did it for a whole host of different reasons. Obviously, to offer services that needed to be offered because of the new law but also to help bolster and continually build on our existing core model which is our futures trading, Rich.

So, I do think when we put this into place, it wasn't just for the revenue that we could derive from it. It was more to enhance our core business and offer the services that our clients would need. So, I could let Jamie address the revenue but I think we've addressed that in prior calls what the cost of it is going to be to clear it per million.

If I can just add before Jamie talks about the financials, I think we are the only exchange that has the value proposition for the capital efficiencies across all six asset classes that we have. I mentioned a short while ago that the cross-margin savings that we have seen in this very early stage has exceeded a $1 billion up to this point in time.

And, so, I think some of our client base is taking advantage of those capital efficiencies. It is the most capital efficient solution anywhere out there among any of the exchanges or clearing houses that are providing this service.

Rich, it's Jamie. Just from the financial perspective, remember that a good chunk of the expenses associated with us being able to perform this OTC clearing are already embedded in our expense base. So, going forward, the revenue coming in is on the margin, a high margin revenue.

And, then, the other thing to remember is it's very early in the game. Obviously, hard to pick out any trends as yet. If you look this past quarter, we generated about $2 million of OTC revenue from the straight swaps and CDS, and that came in at a lower rate than the past quarters because of that incentive program that we've got in place to attract some of those high turnover customers that we weren't necessarily targeting previously.

So, and that's new business as well. So, too early to give you any other information.

Got it. Quick last question, are the Blackhawks going to go undefeated this season?

They're so far so good, Rich. (laughter)

Thanks.

Thank you. The next question comes from Roger Freeman with Barclays.

Hi, good evening. Just on the client-side portfolio margining. So, is this fully rolled out from your end or is it just larger customers and is that what we're seeing drive the volume increase in January?

The service itself for cross-margining has been rolled out. The issue at hand that we have is the preparation on the part of the firms that are offering.

Right.

So, customers want it. Customers want to receive it and they've got several firms in the pipeline that will be in a position to offer full cross-margin for the client base in less than a month.

Yes, and this is Derek. Adding to that, the bulk of the focus right now for the SCMs is just getting the firms connected, getting these guys in place, making sure the flows work across-the-board. We've had some impact and some uptick so far on the house margin side that Gill mentioned before, but we expect that will be coming over the coming months.

So, we're prepping for it. The SCMs had a lot of work to just to onboard the core clients, and then the next focus from there on will be the cross-margining.

Okay, great, thanks. And, Jamie when you were talking through the puts and takes on the interest expense, one of the pieces in there is the entire credit facility costs tied to the clearing house. Can you just expand on that and how much is that and what's being required? Just higher credit lines to back?

It's actually, yes, Roger, there is no problem. It's actually what we did is we renewed our corporate facility this year and extended that out and we also renewed the clearing house facility which is a 364 day facility. In terms of the clearing house facility, we increased the amount of it from a $3 billion facility to a $5 billion facility.

That was really to enable us to accommodate the potential for more and more collateral coming in, in our OTC offering, so we can provide liquidity in those cases where there's an issue in the clearing house, although we've never had to tap into these lines. And on the corporate side, we increased our line from roughly a $1 billion to roughly $1.75 billion.

Again, that was driven a lot by regulatory requirements and making sure that we had the requisite liquidity available to meet those requirements. So, those -- it was the increases in the amounts of the line that's really driving the increase year-over-year.

Did the CFTC push for the higher limit on the clearing house?

No. It's a risk management decision made by our clearing house.

Driven by need, yes.

Okay, great. Thanks a lot.

Thank you. The next question comes from Alex Kramm from UBS.

Hello there. Just going back to the guidance. Jamie, maybe you can flush out the comment on the Co-Location a little bit more? I think you said that the users are basically unchanged in terms of the magnitude of the users, but they're revisiting their footprint.

So, is this more guys looking at this saying okay, we thought this business will be bigger and maybe we don't need as much capacity because there's just not enough volume or is there people exiting the business all together? New players coming in? Maybe just a little bit more color?

Yes, it's really driven by the existing footprint of participants shrinking, in some cases, their individual footprints. Because, remember, Co-Location was new for them, new for us a year ago, so I think people were being probably a little bit conservative in terms of the amount of space they wanted to take to make sure that they were covered for the coming year.

And then, obviously, last year wasn't the best of all years in terms of volumes and what not so I'm sure people have pulled back a little bit. But, in general, I would say that it's the same customer base and, going forward, we're going to look to drive more new customers there, obviously, and as the markets recover we would expect existing customers to grow their footprints back.

Okay, good and then just--

I wanted to clarify, we're not seeing drop off in the client base in co-location.

It's a net increase.

Right.

Smaller increase in clients.

Okay, great, thanks. And, then, maybe just going to the OTC side, too, for a second here. Obviously, pretty early when it comes to the deliverable swap future, but I'm just curious if when you talk to clients, how is the marketing effort actually organized? Given that you I think, Gill, you said yourself you have three different offerings.

You've got the clearing, you've got the existing product, and you've got the deliverable swap future, so are you actively educating your clients? Are you working together with the FCMs? Are you saying, hey, this is really the best thing to do or maybe you should use existing parts? Maybe you can just differentiate a little bit what fits for whom and what is actually the best thing for you to push, I guess, if you could put it this way?

You know, what we do a good job on is to articulate the features of the products that we have and it's up to the clients themselves to pick the products that they want. And there was an interesting survey conducted by your bank not too long ago that actually articulated some of the needs that some of these folks had.

So, the very large guys who are being serviced by the banks and would probably be able to clear on day one, they would be focusing on onboarding their swaps. For some of the client base that may be left out of the first wave of clearing and still have risk management needs, they would probably be the ones that would be attracted to the deliverable swap futures in the first instance.

Or, there may be clients on both sides that would find an interesting need to cover some of your sub-risk and the deliverable swap futures might actually help, too. So, for a variety of reasons, the product appeals to almost the entire client base.

And Alex, I'll jump in there. It's Derek again. To the extent you asked how we're engaging our clients? We're engaging them from multiple levels. As we walk into clients talking about solutions and customer choice, to Gill's point, we could provide clearing solutions for them, we can offer them our existing deep pools of liquidity and our Treasuries and Euro-dollar complex.

We can offer them now these hybrid solutions, the deliverable swap future, and we find often times that we rarely have a conversation about any one of those things in isolation. As soon as you talk about clearing, we say, well, if that doesn't suit you, because that's a complex set of events that need to happen in relatively short order, let us tell you about the operational or capital efficiencies of our futures pool, and let us tell you about this new product out there that maybe you've heard something about.

So, we're engaging them directly from our clearing house sales level, our clearing solutions level, we're engaging the clearing firms and their sales forces. They educate their clients on the impact of their business, and we're also engaging some of the research folks at some of the banks to provide trade and opportunities, and just a level of education to get people comfortable with this pretty significant market structure shift that kicks off in March.

Okay, very good, thank you.

Thank you. Next question comes from Howard Chen with Credit Suisse.

Hi, good afternoon everyone.

Hi, Howard.

Jamie, on the expense guidance I was hoping to better understand your comment that if 2013 cash earnings come in closer to last year, your expenses would be, I think, $1.23 billion. As, I guess, I view expense as a component of cash earnings, so could you expand on that or perhaps frame that guidance in a different way? Maybe volumes or revenue growth?

It's very much tied to cash earnings. I can't put any volume growth on it or revenue, because we don't provide that sort of guidance, but the main drivers that would push it down from the $1.25 billion to $1.23 billion would be bonus and license fees, likely, that are very much tied to our volumes.

Okay, thanks. And, then, you mentioned a few times, the guidance is predicated upon some recovery and revenues, so I was just hoping you all could maybe walk us through some high level thoughts on where you're relatively more or less constructive across all of the major product complexes you trade and the major customer types who trade all with you? Thanks.

Sure. It's Derek. I'll give you a quick highlight from the financial side. From the rates perspective, I think you probably followed the action in our rates markets over the last week with the pretty significant volumes that we saw going into last week and through non-foreign payrolls on Friday. We saw a couple of records hit particularly in the Treasury options.

We saw an overall record in Treasury options which is a record that stood since 2007, just a shade under 1.2 million contracts. And interesting to note there, that about 70% of those, of that option record, was actually in puts indicating that there is starting to be building positions for what might likely be a change in the rates environment there.

So, very healthy growth over the course of last week. On the Euro dollar side, we talked about the challenge in the front end of the curve, in the STIR complex, we've seen a nice build in our open interest since the December expiration in Euro dollars. That's up about 43% through yesterday at about 12.5, 13 million contracts. So, we're seeing that build nicely and that really was coming through last week and that's built relatively quickly.

On the FX side, we heard Gill talk about some pretty significant moves in the FX market. The one area I'd point to there is probably in the yen. I think as folks are probably aware, that dollar/yen has been pegged during that 78-80 level for about two years with the central bank intervening. We've seen that reverse dramatically with some moves by the Japanese Government and the dollar/yen level has gone up to about 90 yen to the dollar.

That is directly linked to our 160% increase in yen volumes and the record level in yen options. So, on the financial side, we're seeing sort of global recovery story and some rates expectations moves built into some of the volumes we've seen. Good, healthy growth across our client segments and we've seen open interest and large open interest holders impacted positively as well. So, from the financials side, there's just some of the things we're seeing in these last couple of weeks, first few weeks of 2013.

And then on the energy side, we're seeing good trends as well in the context of both our crude, particularly, our crude oil complex and a lot of that is driven by the increasing production that we're seeing in North America. As you're well aware, we talk quite a bit over the past year or so about the infrastructure changes and the investments that are being made in North America and with the activities of the reverse load, the Seaway pipeline and other infrastructure investments that are under way in extending pipelines to the Gulf.

In addition to the expansion of rail transport to the East Coast, this is increasing the production capabilities, opening up the flows of business, and making it waterborne for our crude complex. We are seeing positive trends in the context of the narrowing of the spread and uptake in volume, and if you look at that over the last course of the last several days, it's weighing in positive for that marketplace.

In the context of equities, we feel that the volume and participation trends will get better when the fix picks up off its five year lows and we're seeing indicators to that direction, as well as unemployment improving will be good for our rates complex and products overall.

Great. Thanks a lot.

Thank you. Our next question comes from Dan Fannon with Jefferies.

Good afternoon.

Hi, Dan.

I guess on the M&A front, does just thinking about what's going on in the industry and the pending ICE NYX transaction, does that change your outlook for M&A? And, even if you think about the competitive dynamic, how you think that might impact you on a longer term basis?

Dan, this is Gill. It doesn't change anything that we have shared with you in the prior months. Our strategy remains the same. You know? The only caveat which I will repeat is that we will, as always, remain opportunistic but, for now, we do not see any large M&A opportunities.

Okay, and then just expanding upon some of the OTC commentary. How prepared do you think the end customers are for this transition coming? It seems like you've seen a pick up in volume, the conversations are picking up. Do you expect that ramp to continue into the March date or are people you think kind of behind the eight ball a bit here or just any color there would be helpful?

I'll ask Derek to comment, but because these dates have been widely known and the FCMs have been scrambling, I think they have resorted to choice where they are selecting their clients by waves. And for those clients that do believe that they may not get there in the first wave, there are alternatives that they look for and that's one of the main drivers behind the development of the deliverable swap future contract that we've put out there.

So, I think by and large, the awareness factor among the client base is extremely high. We have never seen the client base as prepared as they are now. Having said both of those things, there's going to be some lag and how that lag is going to be treated by the clients themselves remains to be seen. They may shift firms, they may shift the product that they trade, or they might just get on board.

This is Derek. I'd echo that. To the extent that these dates were kicked off in August last year when we knew started the clock for this March deadline, remembering that the clients are coming into the mandate in Category 1, 2, 3 and 4 each of through Q1-Q4 of 2013.

What we see is, dependent on what numbers you would believe, 15%-20% of clients right now are already actively clearing, but a significant chunk outside of that are in active preparations based on where they believe they fall into which category. What we have heard definitively is that many of the customers are really following the lead from their dealers knowing the dealers are the Category 1 clearing entities caught on the mandate.

So, therefore, they're looking for a lot of guidance from not only their dealers and their clearing firms, but from us as well. So, we've put a lot of effort into not only supporting the end-user client directly connecting, but also working with our clearing firms to provide the extra resource to them.

So, we're seeing a significant increase in engagement, we've talked about the pipeline of client clearing firms that have been connected to us, so we're seeing a lot of focus and I think a lot of core focus by the clearing firms to cater to all of these things.

Can I just put a little exclamation point add? It's Terry Duffy. Over the last couple years as Dodd-Frank has evolved and working with the Gov, especially the big banks, they talked about how their operational readiness would take them years to be in compliance.

As dates start to get put out, as Derek put forth, and we have a future meeting with these guys, they say how they can be operationally ready by tomorrow. So, the point being is, I think that no matter what you're hearing on the street, I think the readiness is a lot higher than what's being advertised.

Great, thank you.

Thank you. Next question comes from Chris Harris with Wells Fargo securities.

Hi, everybody.

Hi.

So, first question on your interest rate complex. So, we know you guys should get some volume benefit assuming we get higher volatility on the interest rate side. But, I guess what we don't know at this point is how much the decline in volumes you've had in this complex are simply due to users really not hedging their risks anymore?

And wondering if you guys have a sense of that magnitude because, really, I want to ask it because I think it might help us visualize what kind of upside there is in the complex, assuming we start getting interest rates going higher here?

It's a little difficult to answer that one. I wish I had the crystal ball in front of me. What you've heard us tell you before, and the actions you've seen us take, have been to invest in product across our curve to build into the parts of the curve where there is volatility and where there is uncertainty.

That was our big push into the ultra bond, to give the very far end of the curve solutions when you found that the long bond was not tracking to its true 30-year risk. And you saw us do that in the weekly treasure option, short-term volatility, and then the mid-curves and the Euro dollar curve.

What we don't know, and I can't answer the question how many folks are no longer hedging, what we do know is that issuance and the plans for what we think growth in the underlying cash markets are going to be driving a pretty significant increase in demand for the products we have now. The breadth of our product scope now versus what we had three years ago, significantly larger and more diverse.

And you add to that the fact that 300,000 of our rates ADV last year came from products we've launched in the last two years. More importantly 12% of our interest rate open interest emanates from those products, tells you how we're positioned for return in volatility, I think.

And, Chris, if I could add to what Derek just said. If you look at the products that we offer right from the short end of the yield curve to the long end, it's safe to assume many of our clients actually trade along that entire spectrum. And, so, to the extent that the volatility is very low in the short end, the product development effort that Mr. Sammann talks about, that yielded us 300,000 contracts a day last year.

And the actual client base itself hasn't shrunk. The things that they trade have shifted around so they are trading along different parts of the yield curve and at the fundamental that the Fed has pegged, like the unemployment rate that Bryan talked about a short while ago, should have dropped below 7%. You'll start seeing activity across the entire spectrum of the yield curve, so the customers haven't gone away. They've moved on along the curve itself.

Okay. That makes a lot of sense, And, then, my follow-up question would be on the swaps opportunity. Correct my figures here if they're inaccurate, guys, but it seems like LCH is doing a bit more buy-side volume than CME at this point. And I know, look, I know it's really early days but I would think your margin offsets might give you an edge here. So, can you maybe help explain this dynamic a little bit?

I think I'll ask Derek to talk about it. I don't have 100% visibility into what LCH is doing but I can tell you a couple of things here. We are not sure how LCH would count. Was it a pure dealer-to-client volume versus what we might traditionally call D-to-D when two banks deal with each other. On the other hand, I think more than half of the volume that they have put in there has been in the so-called OIS swaps and we'll have that capability in a few short weeks here. And so that will put us back to par.

The final point I will make there is the volume that's going through LCH is not translating into a substantial amount of open interest. Which tells you that there's a lot of high frequency shops that are doing trading there are trying to offset their longs and shorts there. I think that would be at least a partial explanation as to why you might see some differing numbers.

I think you're comparing apples to oranges to the extent that you've got different definitions of what constitutes a clients in the D-to-C equation there. But I think to the extent that the parity of portfolio clearing service capabilities between LCH and CME, as Gill mentioned, one thing that we're working on and those short-dated OIS swaps is a big chunk of that turnover, by definition, very short-term.

So, when we think about what the opportunities and what the value proposition is, the first point of order for most these guys is getting a cleared solution in place. Then they're looking at the capital margin efficiencies and that's, as you've heard us say and the point of your question, a significant driver of choice over time.

So, as we look at and are able to grow and expand our open interest and our pools of offsetting liquidity, and where customers can clear all three of those choices of product, we think got a compelling long term solution for our global client base. Also, worth noting that we will be bringing out our interest rate swaps clearing capabilities in Europe this year and very close to doing that as well, so talking about globalizing our footprint in the clearing solution side as well.

Very helpful, thank you.

Thank you. Our next question comes from Patrick O'Shaughnessy with Raymond James.

Hey, one more on the OTC clearing business, if I can beat that one to death? So, as you're talking to customers and they're deciding where they want to send their volume to be cleared, who is making that decision at the customers? I think I might have asked this last quarter as well but is it the buy-side guys saying you know what, I get the capital efficiencies that seem eager if I want to send it there? How much of a role is the clearing firm playing and where do you see that going?

Mr. Duffy can confirm this but I think the law requires that the buy-side fits where the trade clears.

Yes, right.

Are you seeing the sell-side exert much influence over that or are they pretty much just leaving it completely up to the buy-side?

As you might imagine, the sell-side, like any other good business which shared their opinions with their clients and is up to the client to decide what's in his or her best interest. And, at the end of the day, ultimately, the client has at least now 23 FCMs to choose from and that number is growing. So, it used to be a small number like 10 or so and that number has gone up a lot.

Okay, that's helpful. And then for my follow-up, so the CEO of the Japan Exchange Group was talking today about M&A and threw out a few potential partners that he would be interested in teaming up with or talking with in the future. I guess kind of big picture, how far away do you think we are from consolidation with Asia?

I know that historically there's been regulatory roadblocks and maybe some other issues have gotten away. Do you think we're getting closer to a point where North America and Europe are going to start to team up with Asian exchanges?

That's not clear, Pat. I think at the end of the day, Asia, as you know, is made up of a bunch of nationalistic societies. So different countries have different policies that are in place and, so, it really depends.

I can't really speak to what Saito-son was saying that you read about in the press. But, I think that CME's approach to doing business in Asia since 1984 has been an approach that has worked for us with the link that we put in with the Singapore exchange, having extended the relationships with the Korean exchange, the Bursa Malaysia, and in time to come others.

Many of the exchanges in China and the FCM in China, our entities at CME have a close relationship with, and I think for now as many of these exchanges are trying to find their feet, it's the best approach for us at this time. And it allows us access to a client base and it allows these exchanges access to our technology as well as some of the expertise that we may have that they may need.

That's helpful, thank you.

Thank you. The next question comes from Ken Worthington with JP Morgan.

Hi, thank you. First question, really on the equity business, and you mentioned volatility being down, but cash volumes are up and interest in domestic equity products is up, so how does the positives kind of work its way through either E-mini volumes or standard volumes? And can either of those products work if volatility remains at low current levels?

Hi, Ken. This is Gill. I think the positive news on the cash side, when you saw the net inflow of $3 billion or so that came into the equity market early this year, is actually slightly an offset against the amount of money that left last year or, in fact, the last year-and-a-half or two.

We are very enthusiastic about the prospects of the products that we have, but an extremely key indicator for volume pick up there is going to be volatility both on the derivative side as well as on the cash side. I would call a lot of the activity that has occurred in the last month more positioning than anything else at this time.

Yes, the VIX is still close to five year lows right now and if you actually track it with the correlation with volumes and volatility it's pretty closely knit. It is interesting, we have heard over the last couple of weeks some more calls for potential sector rotation out of fixed income into equity. Certainly that would be something that we would welcome.

We think that would indicate a shift in positive trends for each of us, but we have been following the flows back into equity funds but we'll see if that has any impact on the volatility. That will be an additional driver to look at.

Okay, thank you, and then wanted to just probe into the enthusiasm for cross-margining. To what extent can you cross-margin non-dollar swaps with your dollar-based futures product? Like is that something that resonates with investors or is it really the dollar-based swaps that you cross-margin with the dollar-based futures?

No, actually, it's exposure to exposure. So, to the extent that you have non-dollar exposure that you're trying to offset against dollar exposure, if you find the common currency give a haircut to that currency for risk management purposes and understanding the characteristic of the instrument that you're trying to cross-margin, cross-margining dollar versus non-dollar exposures equivalent to cross-margining dollar versus dollar exposures. It's simply exposure on your books. You have to take different things into account.

Yes, Emit, there's going to be even to that point as you see from our energies complex, even between our, say, metals and foreign exchange, we do have margin reductions for people that want to trade that as a spread, say Aussie dollar against gold, there's a correlation of the crime the current house allows for some margin reduction there.

It's all risk-based, so to the extent that they run correlations and back test and make sure they've got an ability to risk manage that appropriately, that's the basis upon which cross-margining happens. It's a minimum correlation threshold that anything that is supposed to be cross-margined has to cross and that threshold is very high. Once it crosses that threshold, the currency of denomination is actually irrelevant.

Okay, great. Thank you very much.

Thank you.

(Operator Instructions)

Our next question comes from Niamh Alexander with KBW.

Well, thanks for staying on the call. The futurization of swaps, it's just a growing den of industry participants, outside of the exchanges kind of appealing to regulators maybe better harmonized correlation or margin requirements for swaps versus future. It just seems like there's a lot of people seem to be quite concerned that even just the margining requirements are going to be enough to maybe encourage people to trade some futures instead of swaps.

So, help me understand your perspective on this? Clearly you'd benefit if you did see more futurized swaps or even your soft deliverable futures did well. But is there an opportunity for them to replace a lot of the softs felt volume and if not why not?

The reason our perspective is very straightforward and very clear that the five day requirement on swaps or the one day requirement or the two day requirement on the futures is a function of what I'll call visibility. If you have a default on your hands and you're trying to get rid of a portfolio, if you have visibility which the futures markets have, it is that much simpler to exit a portfolio from your books.

During the Lehman crisis, we sold a multi-billion dollar book within a half-an- hour and within three hours of announcing the sale, it was taken off the books in an auction. In the same crisis, it took several days for the Lehman swap book to get transferred out from LCH, so the margin requirement is a reflection of that one phenomenon.

No visibility is going to be more difficult. You'll need four or five banks, maybe more, to basically bid with visibility your options for getting rid of a portfolio immensely improved. So, ultimately, take for example LCH. When they margined their swap book and have been doing this for the last 20 some years, they had margined it on either five day or even more basis.

By the same token, LCH was margining EUR LIBOR which they still do and that's always done on a one day basis. The comfort level there is no different than the comfort level they should have when you're talking about a futures contract against a swap. It's a question of the function of visibility.

And, so, take the swap futures, for example. To the extent their brand new contract, and there's some parts of the contract that is still not clear to folks and there's some concern that our risk guys have, they may, at their option, look to margin it on the two day basis. Which, I believe, for the historic -- for the deliverable swap futures, we have done what the deliverable swap futures has and the cleared swaps don't have yet is the trading platform where buyers and sellers can come on by and actually you can get a price.

And even if there was a block trade done within minutes of that block trade occurring, the price is known to everybody. That level of transparency and visibility is the only thing that drives the margin requirements difference between a swap and the future. Does that make sense?

It does, Gill, but I guess if this doesn't change, then I guess it makes the argument stronger that maybe people should trade these futurized swaps or these deliverables swap futures. It's a stronger argument for these things to almost replace the swaps and I was trying to understand what's the counter argument to that that you don't actually see? Rather than cleared swaps growing as we've been talking about maybe just more of these deliverable soft futures or futurized swaps growing instead because collateral requirements are going to be lower.

They will be, I think, at least initially. I can't talk about, or no one knows how the market might evolve with respect to execution facilities down the road, but the one thing that swaps have, that deliverable swaps futures by their design don't have, is an extremely high level of customization.

On the hedge accounting benefit then I guess?

And that's what you'll find the very sophisticated swap users are going to continue to use, right?

I was just going to emphasize your point, Gill. I think that's really what is said, Niamh. To say that we can just transition the entire OTC market into a listed futures market, I don't see that to be a possibility because of some of the customization that are with some of these products. The opaque nature that they trade.

They're just going to have to trade as a swap and they're going to have to fall under the requirements of the five day or, if they're uncleared, the 10 day requirements. And that's just the way it's going to have to be. So, you will get some people that can get enough correlation between a swap and the future, transitioning into futures because of the economic efficiencies associated with it, and, I think, that we're seeing today and we'll continue to see more of that but I don't see the overall market going away completely.

Okay, thanks for taking the time.

Thank you. Our next question comes from Alex Blostein with Goldman Sachs.

Great. Thanks a lot guys, good evening. Wanted to just follow-up on the last question one more time. When you think about the three options that you're offering clients right now, whether it's clearing swaps, swap futures, or your interest rate futures product, can you give us a sense of how the economics are different, the net economics are different to you and whether or not you sort of care in which way clients will start to ship their business?

Yes, this is Jamie. I'd say if you look at our, obviously, the futures contracts we have the stated rate card out there, on the deliverable swap futures the rate is very similar to our Treasury contracts, and then on the interest rate swaps, for most customers the average is going to be in the $5 to $6 per million range.

Now, you can normalize all of that when you think about you having to do strips of our base futures contracts, for example, to equal a swaps contract -- or a swaps OTC contract, so we tried to take all of that into consideration as well as rolls and that sort of thing.

I would jump on that. You see a large percentage of our contracts get rolled so not only is there the execution at the outset but then there's a roll process. And then some of the cleared swaps price and we've accounted for that with different up front fees. So, you need to think about how long these are going to stay on their books. The standard rate swap is five to seven year, so just that is the difference in terms of how the economics hit.

Got you, thanks and just my follow-up. I know it's still early in the year, but when you think about return of capital for this year, I know last year you obviously provided a little bit of color on how much cash you see yourself having by the end of the year and how much you need to have. But, I guess capital requirements at the clearing house, you obviously increased the size of your credit facility recently. How do you guys think about the minimum for that you feel comfortable within terms of cash flow this year.

Our minimum cash target for the balance sheet hasn't changed. It's $700 million is what we're looking to hold. Now, over time, as capital requirements evolve, that maybe impacted somewhat but I don't see it being impacted in a very significant way.

Great. Thanks so much.

Thank you. Next question comes from Chris Allen with Evercore.

Hey guys, just one quick question. On the market data revenue line, I was just wondering if you could give us some color in terms of how much the screen of decline year-over-year? And thinking about next year and further out, one of the themes that people have been talking about as the over-the-counter markets transition more towards an electronically traded market is reducing the human capital element with the technological trading of these markets, so that might argue for fewer screen counts moving forward, just wonder if you could provide any color on that?

I can start and then maybe some of my colleagues can jump in but if you look over the longer term, I'd say over -- if you look at our peak terminals back in 2008, we're down over 20% versus that peak. So and that, I do really feel that the key driver there is you just keep seeing the headlines every quarter about more and more layoffs on the street and certainly they are very large users of that service. You do hit on another area that we're thinking hard about is that we do today provide a fee waiver on our Globex terminals for market data.

I think the fee waiver portion of this has been in place for at least the past 12 years, Chris, so that is not going to be a driver of whether market revenue goes up and down. I think Jamie hit the nail on the head with respect to what's going on there. Just a normal and ordinary business cycle.

Okay, thanks a lot guys.

Thank you. Our next question comes from Ed Ditmire with Macquarie.

Good afternoon guys.

Hi, Ed.

You guys make a significant amount of money, maybe about a tenth of your transaction revenue, from clearing over-the-counter energy swaps which Slide 8 shows is an extremely small portion of the over-the-counter swap market and its a market where you split the opportunity with other firms. What kind of hurdles are out there over the next couple of years in the medium term to take your progress and all the business you're doing and interest rate swaps and turn that into a new significant profit driver like that ClearPort energy swap facility?

This is Gill, Ed. I think it's too early to say how the market might evolve. I think if you look at the asset classes on the futures side that we had and you look at the potential opportunity that exists for us, not just in the rate side and the energy side, but potentially across all the asset classes and the significant need for capital efficiencies among our client base, I think I'm really optimistic about how the OTC swap marketplace might grow in either one of the three forums. But it's too early to tell when and it's too early to tell how.

Got you. And one follow-up question. With the incentive programs you have around this over-the-counter clearing product, how long term are these incentives and can you envision a time where a critical mass has reached that you think the network effects take over as a real compelling reason and then incentives become less important?

Ed, this is Jamie. It's just, for us, it's just too early to tell. It's way too early in the game to judge when -- judge how that will play out. And, you know, it may be that we need those incentives for a particular type of customer for a very long period of time because it's reflective of the type of business that they do.

They're not -- the incentives that are in place today in the interest rate swaps arena are for high turnover customers. So they are not putting on positions and holding them in the clearing house for a very long period of time, so it's not real taxing to the clearing house for each particular trade.

Ed, if I can add, these incentives are not extraordinary in any way, shape, or form. They are just part and parcel of incentives that we would put out there for any kind of new product or service that we would put out there.

Okay, thanks guys.

Thank you. Our next question comes from Brian Bedell with ISI Group.

Good afternoon, folks.

Hi, Brian.

Just one more on the OTC and interest rate. Maybe for Derek. What's your sense of your ability to convert customers over from the swaps to the futures in a sense of the timing? Obviously, you don't need to convert a large part of this market to be -- to contribute significantly to the revenue stream.

But what's your sense of to what extent a lot of the education that you've done and conversations with the clients will have an inflection point around the March 11 time frame, or at one of the other points during this year? Or do you think it's a really a much multi-year effort before we see traction in the traditional interest rate futures complex as a result of that effort?

Well, I think it's a couple of things and remembering that March 11 is not a big thing. We're going to phase in clients every quarter for March all the way through to December of this year and the Phase 1s, for the most part, are the biggest largest entities out there, so the dealers and maybe some of the biggest hedge funds, and then you'd be phasing in clients behind that.

So, there have been a lot of folks that once the news came down in August said all right, I've got a date to work towards but they are looking to their clearing fund to give them guidance as to where and how they should expedite their process for readiness. And, as Gill has mentioned before, a lot of work is being done right now by us, by our clearing house folks, by our sales folks, engaging both the clients as well as the clearing firms for readiness on both sides.

There are reports out there indicating different levels of readiness across the client base. A year ago, you would have seen a very, very low level of preparation. But now that we're really looking at the kickoff date in March, we're seeing probably close to 75% of the folks that are at least working towards readiness over the course of this year.

In terms of what products they end up in, all I can tell you is the time we spend with customers talking about futures, these hybrid deliverable swap futures, and clearing services is about equal and that tells us there's an appetite to understand what suits their book and what product would be the best product of choice for them.

So, there's an appetite out there? We'll just have to really watch for progress over the course of the year?

Yes, and I think you'll see that process happen and then the more that we see firms take up our offer of cross-margining and, I think, that will be a compelling value proposition. And as Gill mentioned, we've got clearing service across every major asset class.

Okay, great. And just a very quick follow-up for Jamie. The second wave of the build out of the Co-Location, I know that you didn't really give a time frame initially on when you'd do that, but given your guidance on that is it safe to say that that's not an effort this year?

Yes, we did some preparing last year in terms of infrastructure and as the demand pulls, we'll revisit it.

Okay great. Thanks so much, guys.

Thank you. And this concludes the question and answer session of today's call. I'll turn the call back over to the speakers.

Thank you all very much and we look forward to speaking to you in the next quarter. Thank you.

Thank you. And this does conclude today's conference. We thank you for your participation. At this time you may disconnect your lines.