洲際交易所 (ICE) 2008 Q4 法說會逐字稿

We are about to begin. Good morning, ladies and gentlemen, and welcome to the fourth quarter and year-end 2008 IntercontinentalExchange earnings conference call. This call is being recorded.

I would now like to turn the presentation over to your host for today's call Ms. Kelly Loeffler, Vice President of Investor Relations and Corporate Communications. Please proceed.

Good morning. To obtain a copy of the fourth-quarter and year hend earnings release and presentation, visit the Investor section of our website at theice.com. These archives already archived, and our call will be available for replay.

Before we begin, please be aware that our comments may contain forward-looking statements, that represent our current judgement, and are subject to various risks, assumptions and uncertainties, as outlines in the Company's filings with the SEC, including our Form 10-K that we expect to file this week. For a description of the risks that could cause our result to differ materially from those that are described in the forward-looking statements, please refer to those filings. Actual results may differ materially from those that are expressed or anticipated in any forward-looking statement.

We will also discuss adjusted net income, adjusted earnings per common share, adjusted EBITDA, and adjusted operating expenses. These are non-GAAP financial measures that exclude certain nonoperating charges that we believe are not reflective of our normal operating performance.

The reconciliation of adjusted net income and adjusted earnings per common share to the equivalent GAAP results, and an explanation of why we deem these non-GAAP measures meaningful, appear in our press release and earnings presentation, the reconciliation of adjusted EBITDA and adjusted operating expenses to the equivalent GAAP results, and an explanation of why we deem these non-GAAP measures meaningful appear in our presentation.

With us today are our Chairman and CEO, Jeff Sprecher, Scott Hill, Chief Financial Officer, and Chuck Vice, President and Chief Operating Officer. At the conclusion of the prepared remarks, we will take your questions. I will now turn the call over to Scott.

Thanks Kelly. And thanks to everyone for joining us this morning. We are pleased to report solid fourth quarter results, capping off a strong year, despite a challenging economic environment.

We delivered our fourth consecutive year of record consolidated revenues, net income, and cash flow. In addition to record financial performance, ICE accomplished each of the strategic objectives we established in 2008. These initiatives included achieving the integration and synergies related to our acquired businesses, the continued evolution of our technology infrastructure, the launch of ICE Clear Europe, the transition of Russell Index Futures, and new strategic acquisitions.

During 4Q '08 and for the fourth consecutive quarter, more than 100 million contracts were traded in ICE's marketplace, resulting in the highest quarterly revenues in our history. We also established our eighth consecutive record quarter in our market data segment. We believe that these significant accomplishments particularly amid this challenging operating environment, speak to our focus on meeting customer needs, and executing on innovative strategies.

Let's turn to slide 4, and review our fourth quarter performance. ICE's consolidated revenues of $207 million rose 30% over last year's fourth quarter. Consolidated operating income was $97 million, and our operating margin was 47%. Excluding a $16 million noncash charge related to our investment in NCDEX, non-GAAP net income was $60 million, and earnings per share were $0.82.

You may recall that in the fourth quarter of 2006 we invested $37 million for an 8% stake in the National Commodities and Derivatives Exchange, or NCDEX, in India. Given the change in valuations for publicly traded exchanges, and the possibility that we, like other investors, may be required to reduce our stake to 5%, due to a recently enacted Indian law, we believed it was prudent to reduce the carrying value of our investment to $21 million. This charge is reflected in the other expense line of our 4Q '08 income statement.

Finally though not reflected on the charts, our tax rate for the fourth quarter on a pro forma basis excluding the impact of the NCDEX charge was 38%. This is roughly 2 points above the tax rate in prior quarters this year, with each point roughly worth $0.01 per share of earnings in the quarter. This increase largely reflects the year-end true-up in the fourth quarter to our final full-year tax rate of 36%.

While our 2008 tax rate remains much lower than many of our peers, it was on the high end of our guidance, this was primarily due to an increase in the percentage of income taxable in the US at higher statutory rates, particularly New York. Looking forward to 2009, we anticipate that the combination of our expected business mix and lower tax rates in of our nonUS jurisdictions will result in a tax rate in the 34% to 36% range.

Moving next to slide 5, we will detail each of our three business segments. During 2008, 484 million contracts were traded in our futures and OTC energy market, surpassing last year's volume by 30%. This helped drive record revenue and operating income in 2008. The pie chart on this slide shows the increased product diversification we have achieved, which has allowed us to gain a foothold in new large markets, including equity indexes, foreign exchange, agricultural commodities, and credit Derivatives. You can see that our transaction revenue was split about evenly between futures and OTC.

The details of our revenue and expense categories are shown on Slide 6. Fourth quarter transaction revenues totaled $178 million, up 34% year-to-year. This includes nearly $36 million of revenue from Creditex, $57 million from our OTC energy markets, and $86 million from Futures transactions. ICE's Market Data revenues increased 16%, to a record $27 million for the fourth quarter.

On the expense side, fourth quarter consolidated operating expenses were $110 million, compared to $63 million in the fourth quarter of 2007. The $47 million increase in quarterly operating expenses, was primarily driven by $39 million of expenses related to credit apps, and $6.5 million related to amortization of the Russell license agreement, the fourth quarter was the first full quarter for both of these expenses.

As we discussed when we announced the Creditex transaction, and just as we have with all of our prior acquisitions, we have already identified opportunities to improve the operating leverage at Creditex. Given the current economic environment, our efforts to operate more efficiently extend across our entire business. We will tightly manage all discretionary spending and resource growth. We remain, however, a growth company. You will see us continue to invest in a disciplined manner, that any expense growth should continue to reflect and support our strategic initiatives.

Starting with slide 7, I will provide additional detail on our futures and OTC segment. Average daily volume, or ADV, for ICE Futures Europe 569,000 contracts, up 3% versus Q4 '07. Fourth quarter rate for contracts, or RPC, or Energy futures was $1.42. Our RPC included execution fees, and two months worth of clearing revenue in the quarter. In addition to the benefit of in-house clearing, growth in the energy futures was driven by crude and refined oils futures products, as well as our newer coal and emissions market.

We continue to see strength in our Energy Futures business in January 2009, with ADV up 14% from a year ago. This was driven by our benchmark Brent and Gas Oil contracts, and a great way to start the new year despite challenging comparisons. The three-month rolling average RPC in January, which now reflects three months of clearing revenues, was $1.54 at ICE Futures Europe.

Let's move to slide 8 to discuss the performance of our North American Futures business during 4Q. ADV was 362,000 contracts per day, up 65% year-to-year. This strong growth was driven by trading of our Russell Index Futures and options contract. 4Q RPC for agricultural commodity futures were stable at $2.25, and RPC for financial futures averaged $0.78.

Last week, we reported that January average daily volumes at ICE futures US was down 24%, the first quarter of '09 will be compared against what remains the strongest quarter on record for ICE Futures US. However the difficult compare will be mitigated somewhat by Russell volumes. Also while open interest in our ag products declined, due to the challenging market conditions in 2008, we are pleased overall with the growth at ICE Futures US.

Since we acquired the trade New York Board of Trade two years ago, Russell, Futures, and Options now trade exclusively on our exchange, Ag and soft commodity open interest is up 19%, and we have achieved double-digit compound growth in our global benchmark sugar contracts, and all of this growth is now supported by a much leaner operating model.

Turning to our OTC business on slide 9, you can see that the segment now includes Creditex revenues for a full quarter. OTC transaction revenues totaled $92 million in 4Q '08, an increase of 54% compared to 4Q '07. In ICE's OTC Energy business, an unprecedented 95% of our contract volume was cleared during the fourth quarter, and we have launched or will launch by the end of the current quarter over 70 new cleared energy products.

For the fourth quarter, average daily commissions in our OTC Energy markets were $872,000 per day, this is a 4% decline compared to 4Q '07, when we established what was at that time a quarterly record of $913,000. However with the exception of 2007, the fourth quarter has typically been the slowest quarter due to the holiday season. This year's fourth quarter was particularly impacted, given the tough comparisons and typical seasonal slowdowns, exacerbated by very challenging global market conditions.

However, our OTC Energy activity has picked up meaningfully in January and into February 2009. While the year-over-year comparisons and market conditions remain challenging, our OTC Energy performance through the first part of the new year, gives us confidence that the severe dislocation in the fourth quarter, was not indicative of any new trend or run rate.

Turning to Creditex. CDS transaction revenues $36 million, roughly flat compared to Creditex's stand-alone fourth quarter 2007 revenues. However, unlike the OTC Energy markets, the OTC credit markets have remained soft in January, as customers await greater clarity on the market structure, and regulatory matters currently under discussion. Overall, we remain confident in the growth opportunities available in the global credit markets, and in our position to best benefit from those opportunities. Jeff will discuss this in greater detail in a few minutes.

Now let's go to slide 10, and I will touch on a few 2008 highlights from a financial perspective. ICE's consolidated revenue increased by 42% in 2008 over 2007. Over the course of the year, ICE's futures ADV increased 10% for energy, and 52% in our agricultural and financial products. Our OTC business segment delivered 61% growth in revenue. Our strong revenue growth and disciplined approach to investment and spending in 2008, helped us generate a record $375 million of operating cash flow, an increase of 30% versus 2007.

We ended the year with $287 million in unrestricted cash and short-term investments, and our leverage remains low. Last September, we initiated the first share repurchase program in ICE's history. During September, we spent $300 million to repurchase 3.2 million shares of our common stock. Our share repurchase program remains in place, and we will continue to evaluate the optimal use of our available cash, across the numerous opportunities we see.

We have a diverse model with a healthy capital structure and good cash generation, which we believe enables us to withstand changes in the business cycle, and continue to invest to generate growth. The value of a company ultimately rests in it's abilities to generate cash and positive returns to it's shareholders. This is particularly true in times of economic turmoil.

You will see on the right-hand-side of this chart two key measures of cash generation, operating cash flow and adjusted EBITDA. We define adjusted EBITDA as operating income with depreciation and amortization expenses added back, less capitalized expenditures, capitalized software, and ongoing Russell royalty payments. The bars on the graph reflect the annual revenues, operating cash flows, and adjusted EBITDA we have generated. The percentages show a strong and consistent trend of year-over-year growth across each measure, and in each year.

On a compound growth basis, each measure has increased more than 70% over the past four years. ICE has consistently delivered not only strong revenue growth, but importantly strong cash growth. We are confident the business we have built will sustain our ability to grow revenue and generate solid cash flows, and we will continue to focus on these key measures throughout 2009.

In closing, please refer to this morning's earnings press release, or the Appendix at the end of this presentation for updated guidance information. This guidance includes information on charges that we expect to take in the first quarter, related to certain headcount reductions. Given the uncertainty in the global markets, as I mentioned earlier, we are focused on all areas of spending.

We also believe it is prudent to accelerate our efforts to improve the efficiency of our business, and realize the synergies related to our recent acquisitions. These actions will result in a 5% to 7% reduction in our workforce during the first quarter of this year. We expect to take a $2 million to $3 million charge in the first quarter, and expect annualized savings of $8 million to $10 million starting in the second quarter.

Thus start the new year with an even more efficient and integrated business, that is well-positioned to continue to enable the growth strategies Jeff will discuss. We expect to file our 10K this week, and I will be happy to address any questions during the Q&A. Jeff, over to you.

Thank you, Scott. And good morning, everyone. There are a number initiatives under way at ICE, so I want to take a few minutes to describe these to you with an update.

First, I would like to address the market environment in which ICE operates today. I will also talk about our core over-the-counter and futures markets, and finally I will discuss our clearing initiatives, which include our efforts in the credit to fall swaps market. It is clear that the global recession and it's impact on businesses and markets will continue to occupy headlines for much of 2009.

Over the past 18 months, market participants have been faced with extreme levels of market volatility, reduced access to capital, and a contracting global economy. Virtually every firm has been impacted in some way, which has increased the level of risk aversion, and driven a focus on capital presentation. Amid this financial backdrop, however, ICE has continued to execute on our strategic plans, which include delivering solutions that can support the recovery of the markets.

While the breadth of today's financial turmoil is unprecedented, ICE has experience in addressing a difficult environment. Following the collapse of Enron, we saw a significant decline in credit and market liquidity within the broad energy markets, and as a result, an extended decline in OTC Energy trading. This came at a time when energy was our only business line. ICE was able to successfully weather the downturn in energy volumes, and we actually created solutions, such as OTC Clearing, that significantly aided recovery, not only for our business but for the market as a whole.

In this downturn while we haven't seen the same dislocation in our energy markets, we are clearly seeing it in other market segments, and are taking the same solutions-oriented approach by leveraging the assets we have established over the past few years. We are very well-positioned to address today's challenges, as you can see from our 2008 performance.

If you turn to slide 11, you will see the mix of our transaction revenues for 2008. As the leader in a global derivatives marketplace, ICE today captures approximately 30% of it's revenues from outside the United States. Throughout 2008, we saw steadily increasing connectivity to the ICE platform from countries around the globe, and we continue to see new users in 2009.

This historically high level of participation extends to our Market Data business, where we saw another record quarter of revenues, and growing demand for our data. We view continued demand for ICE data as a positive leading indicator of the high level of interest we have in our markets. In addition, you can see that the composition of our market participants, including commercials, financial institutions and banks, and liquidity providers, remained consistent over the course of a very volatile year.

Our 2008 statistics for OTC Energy markets are in-line with prior years, and participation was also essentially in-line in the fourth quarter as well. As we have long stated, Commercial market participants remain the dominant set of customers that we have in our market. In light of the overall market conditions, our fourth quarter OTC business volume held up relatively well. Our average daily commissions declined a modest 4% year-over-year. In addition, we were up against the strongest comparison that we had experienced to date, in a market that had been largely dislocated by credit challenges.

In terms of monthly performance during the fourth quarter, while October and November were solid months, we saw substantial decline in activity in December. Capital Markets participants across the board pulled back at year end, beyond anything we have experienced in recent years. While the holidays typically produce lower volume, financial market conditions caused OTC Energy market participants to take risks off the table in the month of December.

There are signs of stability however, and as Scott noted, January showed significant improvement. First, our open interest in the over-the-counter markets increased 31% in 2008, from 7.2 million contracts in January 2008, to 9.4 million contracts as of the year end. As a result, we believe that the lower level of activity at the end of last year reflected a short period of risk aversion, rather than participants exiting the market. In January, as they have each January in our past, traders did return to the OTC Energy market, and we saw a more normalized level of activity.

In January and into February, our average daily commission have returned to the $1 million level, and are up sharply from December levels in particular. We now have many opportunities to grow our over-the-counter markets, including our refined oil products, as well as our leading OTC gas and power markets. As many of you know for over a year and a half, and after we terminated our clearing agreement with LCH.Clearnet, we were unable to launch any new Clear contracts. With the launch of ICE Clear Europe, we will now deliver more than 70 new OTC Energy products by the end of the first quarter, with more to come in the balance of 2009.

Now turning to our Russell Index Futures markets, which are on slide 12, we have included some charts to I will state the progress for the new contract on ICE. Our Russell Futures Index volume remains healthy, and since the late September transition of the contract to ICE, we have consistently maintained an approximate 6% market share, relative to the S&P 500 futures contract. We see growth potential for the Russell complex, and are continuing to transition new and existing market participants to our market.

One point we would like to highlight are the prevailing market conditions. These have been somewhat less attractive for trading indices, where differentiation is made among investment styles, such as small cap, growth and value, relative to a general market basket. The chart on this slide demonstrates the lack of distinction among the PE levels between index styles since last September. With the small cap growth in value and large cap indexes all converging at roughly a 10 times PE, a situation which is unprecedented.

We are talking with our customers about the right time to launch our additional Russell indices, most likely when the markets began to differentiate again between style indices and the broader market. In the meantime, we do not see a substitution effect for the Russell by major hedgers in the equity space. We do see opportunities to grow through attracting new customers over 2009, as we expand this product suite.

With regard to ICE's agricultural futures, these products are distinct, with respect to the needs and issues in each market; however, credit dislocations have generally impacted agricultural market participants, resulting in less activity, particularly by commercial players. While we don't know what the year will ultimately shape up to, we are confident in the longer-term growth of the franchise. Since we acquired the New York Board of Trade in 2007, we have seen an increased average daily commission and profitability.

In addition, we have both quantitative and anecdotal evidence that the conditions in the Ag markets are improving. Each of our five agricultural commodities futures, and each of their related options contracts, have had rising open interest in January, reversing last year's downward trend.

Anecdotally, customers have acknowledged that there are signs of improvement, though we remain cautious until broader market conditions improve, and make credit available to small Agri business customers. In our futures market, our ICE Futures Europe volume are held up not only in the fourth quarter, but have shown strength into January and February. In fact January '09 average daily volume grew 14%, despite challenging comparisons.

ICE's Gas Oil set new average daily volume records in January, and ICE Brent contracts had their second-best month in it's history. As you may have seen from headlines in the 'The Wall Street Journal' and 'The Financial Times,' interest in the Brent crude contract is growing rapidly, due to the increasing importance of Brent as a global benchmark. Overall our crude and refined futures markets share remains stable at approximately 50%.

If you will turn to slide 13, we will now move to the topic of clearing, where we have a number initiatives well under way. In November, we launched our European Clearing House, ICE Clear Europe, which we started developing more than two years ago. We gained the support of the industry, and successfully transitioned 100% of the open interest. ICE Clear Europe is now capitalized with roughly $16 billion, and is on-track to deliver meaningful incremental revenues in 2009 and beyond.

Since it's launch, we have announced dozens of new products, which are now even more relevant, due to the increasing demand for over-the-counter clearing. In fact ICE Clear Europe is now working together with market participants, to bring a European clearing solution to the credit Derivatives market, so as to operate under the jurisdiction of European regulators. We will bring you more information on our European CDS clearing plans as this latest initiative unfolds.

Staying on the topic of credit default swaps, I want to provide a brief update of where we are today. Last fall we announced plans to acquire The Clearing Corp., to extend our footprint into the OTC credit markets. Over the last several months we have been working to build the newly established ICE Trust to clear CDS. Our progress has been tremendous.

While we set out with the intention of forming a new clearinghouse, we have extended our plans into working with the industry and with regulators, to establish not just a clearinghouse, but a new sound market structure for the operation of the global CDS markets. While ICE Trust is operationally ready, and testing with major dealers has been completed, we are now involved in a broader CDS restructuring discussion.

One of the interesting things that we are working on how is modifying the structure of the contracts, and of the market themselves, so that they become more standardized and more tradable. This should facilitate greater liquidity and improve risk management, and is just one of the steps we are taking to solve the complexities, in this nearly $30 trillion market.

So while the clearinghouse is ready to go, it is only as good as the products, the data, the mark-to-market, the default settlement procedures, and the risk management tools we surround it with. As we continue to make progress in settling these varied issues, we are confident that we will gain regulatory approval for ICE Trust in the very near term. The timeline is predicated on our work to solve a range of structural issues, that once resolved will create a new risk management framework, enabling the credit industry to grow.

This has required a significant amount of discussion with regulators, banks and funds. Our bank application was approved by the New York State Banking Department in December, and when we do finalize our plans and gain necessary and final regulatory approval, we will certainly announce a launch date, and initial financial impacts to the extend possible.

On that note, I would like to update you on the broader CDS market. It is ICE's view that the credit default swap market is a vital operating part of the credit market today, and it brings substantial economic value to market participants, similar to traded instruments in other asset classes. In the case of CDS, debt is increasingly priced off credit spreads, relative to the traditional practice of looking to LIBOR or credit rating agencies. Credit default swaps are highly relied upon by global market participants, and represent another important tool for managing risks.

Importantly, CDS instruments have worked as advertised. Our credit subsidiary together with markets have completed more than two dozen auctions of defaulted debt over the last few quarters. Each auction has facilitated the orderly pricing and liquidation of instruments. We believe that CDS protection is and will remain a valuable tool, as both the private and public sector, work to encourage more lending, and the extension of credit.

As Scott noted, the Creditex integration is on-track. We have integrated our technology groups, and are working on establishing synergies, with our marketing, finance, and professional services team. Our common culture of growth, innovation and customer service has facilitated many intangible synergies. We will continue to leverage our respected platforms to obtain further cross organizational benefits.

Operationally, Creditex continues to expand it's trading platforms capabilities and liquidity, and today more than a third of it's transactions are conducted fully electronically. In addition to our leading electronics CDS platform, innovative products like T-Zero, compression and credit event auctions, have positioned us to benefit, assuming CDS trading levels reaccelerate with the addition of Clearing. We are also fortunate to have Creditex's talented brokerage team, with deep product knowledge and strong customer relationships.

I mentioned previously that there are structural issues in the CDS space. One important key to well functioning markets is the effective and reliable back office processes and tools. Historically, these have been virtually manual functions in the CDS market, however, today our T-Zero interface is one of the few available that allows firms to meet new requirements of fully electronic back offices.

During 2008, there was a substantial increase in the connectivity to T-Zero, by both buy side and sell side market participants. During the fourth quarter alone, we connected over 100 new buy side firms to T-Zero. And for the full year, T-Zero nearly doubled it's connections. Today all of the major dealers, banks, and over 350 buy side firms are now connected globally. These firms are connecting to manage their current bilateral positions, as well as to prepare for their clearing through ICE Trust.

I would like to leave you with a key consideration on the topic of CDS. I would like to encourage to you consider the totality of the credit derivatives market structure that ICE has created, not just one facet, such as clearing, regulation, or technology. It is really about repackaging the risk, and making needed changes in the product itself, to support the growth and the health of a very important market. And we are involved in each of these aspects with the credit Derivatives industry.

So to conclude on slide 14, I would like to share our outlook on our operating environment. Lately the word 'headwinds' have been used with respect to growth in our sector, however, as we have in the past, ICE used many of these so-called headwinds as opportunities. We have tended to see change in dislocations as opportunities to expand, and serve unmet needs.

We continue to believe that growth avenues in the immediate term do exist, and that our longer term opportunities are numerous, and they extend far beyond market share gain into innovation and into new markets. Just as we have put initiatives in place well before the most recent cyclical downturn, Today we are advancing initiatives that will take us into 2010 and 2011. Our approach has been highly evolutionary and opportunistic. And we will continue to innovate and execute to ensure that we remain a growth leader in our sector.

So I would like to thank you all for joining us on the call this morning. And with that, I will now turn it back to the operator to moderate a question and answer session.

Thank you. (Operator Instructions).

We will go to Rich Repetto of Sandler O'Neill.

Yes, good morning, Jeff and Scott.

Good morning, Rich.

First, thanks for the transparency on the OTC commissions. I guess my first question would be just to clarify. There were articles about how Brent market share and the OTC business at ClearPort, which has been going very well. Is the Brent business that they are doing, is that just all new business taken from banks, that just wasn't out there before in the exchange OTC market?

Thanks for the question, Rich. First of all, I think you are aware that we are the home for the Brent crude oil Futures market, and in fact that is a cash settled market that settles on an index that our colleagues here at ICE provide. Just to put it in context, yesterday we traded electronically 323,000 Brent Futures contracts. Our competitor traded 158 contracts.

In other words, we have far more than 99% market share of traded Brent Futures. We don't consider market share to be something called 'open interest.' That is an inventory number. The amount of open interest that is being referred to, we traded in one day yesterday. So we don't get paid for warehousing positions in a clearinghouse.

We get paid on our revenue model which is a per-transaction fee, and is highly sensitive to the velocity of trading. So we have focused our OTC clearing work on trying to roll out, first, new products that we think will have velocity and will create an annuity, so that when you look at our cleared volumes, and think about a forward-looking view of the Company, that you can see revenue and earnings growth.

With respect to the open interest that you are referring to, market share I think is an unfair comparison. We don't have many of those products available for clearing. And in fact, as I am alluding to, they are not our highest priority, in terms of rolling out new products. Warehousing, low velocity, long-dated derivatives on behalf of the industry is a very important thing, but in terms of prioritizing on ICE, it is not where we believe that we will be able to grow revenues.

That is very helpful. And my one follow-up would be, just more on Creditex. All the feedback is that the market is, like you said, in front of the regulatory anticipated changes, is slowed. And I am just trying to see of the headcount, where the run rate, maybe the EBITDA margin of Creditex. I know it was 25% initially, and on the headcount reductions, there are a bunch targeted at Creditex or not?

Thanks Rich. With regard to the headcount reduction, you may recall that when we announced the Creditex transaction, we had said we anticipated synergies in the range of 9 million to $14 million, half of which we thought would come from expense. So if you look 80% to 90% of the headcount reductions we will take in the first quarter relate to Creditex, and we will actually deliver somewhere between 7 million and $10 million of expense synergies at Creditex on an annualized basis. As opposed to the original guidance of 5 to 7 million, we will be closer to 7 million to $10 million for that business.

It is worth noting that in the fourth quarter on a cash basis, the Creditex business is actually neutral to us. And we still think in the back half of '09, we can get to cash accretion, and as we look to our previous guidance, overall GAAP accretion within 18 months.

Okay. Congratulations on a solid quarter, guys.

Thank you.

[Alex Cram] of Barclays Capital.

Hi, good morning. I want to come back to the OTC business, and dig in a little deeper. You obviously gave a little bit of color for January and February, but can you maybe slice this down a little bit? I mean when talking with some of the market participants, in particular the commercial participants, it sounds like people are not really that willing to hedge these days, given where natural gas prices are.

But obviously you have a lot of other things going on, you have to benefit from the internalization of clearing, you have exclusivity of some of the newer products, and new products that you are introducing. So is the base business growing as well? Or is it all new additional things that are growing these January and February volumes?

That is a good question. I think you have a very good perspective on what is going on. And it is very, very hard for us to thread the needle, as to specifically what trend is driving growth, but it is fair to say that many of the prices of the energy commodities that we trade in the OTC space is at very, very low prices, and oftentimes, people have the view that they are going to remain low. It causes people to back away from hedging.

And there have been a number stories written recently, for example, that some of the airlines that were very, very hedged on jet fuel going into 2008, today are almost unhedged. So we have actually been quite pleased with the results of OTC Energy trading beginning in January and February, because it has dramatically increased from December, and it does seem to reflect underneath it the idea that people have started the new year with a fresh view, and are starting to put positions on, and take a view about the longer-term trends in energy.

By the way, we see a similar trend in agriculture as well, with people going unhedged. And our sense is that that is not sustainable. The good news there is that we do not believe customers have left our markets. We believe they are still in our markets. We believe they have just backed away their hedging, particularly in the fourth quarter of last year, and are starting to take a fresh view.

As I mentioned in our prepared remarks, we have some anecdotal evidence that people are feeling better about the creditworthiness they need in order to finance hedge positions, and that we are starting to see early signs of that activity. We certainly are not hearing anecdotally from our customers the sense of gloom and doom, like we were in the fourth quarter, particularly in December, with it almost seems like traders threw up their hands, and just said, I am tired of the year and I am going to go home.

All right. Very good. And then let me just shift to the CDS platform here. Now, you say you are going to have this running very soon in the first quarter perhaps. Now are you able to share any sort of pricing methodologies with us at this point? You have a competitor out there that has a platform running. They actually gave their pricing, although there is not really any volume there yet. And when talk to some industry participants, it sounds like you communicated something in the, I want to say 0.05 basis points of notional value per site, so can you comment on these levels, and how you are thinking about pricing in general?

Alex, it is Scott. As Jeff said in his prepared remarks, we haven't announced any specifics with regard to pricing. When we do close this deal and open the clearinghouse, we will provide additional guidance and updates, but there are not really any comments that we can provide at this time.

Okay. I had to try. Thank you.

We will go to Ken Worthington of JPMorgan.

Hi, good morning. First, there is a GR consortium bid to acquire LCH.Clearnet? What do you think the impact is on your ability to offer clearing services for new OTC products if this acquisition goes through? Does this have an impact on your outlook for those growth opportunities?

That is a good question. I think you particularly are well versed in this area, and are probably aware that there has been a working group related to capital markets, that has been responding particularly to demands by the New York Fed, on how to improve transparency and counterparty credit in the broad derivatives space, and that in writing, a large group of market participants had indicated some time back, that the view was that interest rate swaps would be cleared through LCH.Clearnet, expanding on the current swaps clear offering that is there.

And I think what you are seeing in terms of the tension that is going on around the ownership of LCH.Clearnet, is getting prepared to meet the commitment that that group of industry participants made. I said facetiously recently that right now LCH.Clearnet is owned by a group of banks, and the DTCC, who has made an offer is owned by a group of banks, and this new consortium is a group of banks. It is largely the same market participants, but what is going on trying to get the right syndication of market participants, and the right Board and governing structure, and forward-looking view of how to roll out that platform.

So anyway, with respect to ICE, we are very, very interested in acquiring The Clearing Corporation. I will tell you that the reason it hasn't happened yet is we are only interested in acquiring The Clearing Corporation, if it has a license to be able to clear CDS trades. So it's closing is tied to our final regulatory approvals.

But the reason we would like to own it is the platforms that are in there have really been designed for derivatives clearing, and the work flow processes that exist around it are very much tied to the way the industry right is now settling a broad range of derivatives. We view our footprint as an opportunity to expand, and I think we benefit from the fact that there is a lot of uncertainty right now, about exactly how LCH is going to be owned, and that may play out for some time. And thereby creating opportunities.

Thank you. And follow-up. On ICE Clear Europe. I know there are a lot of moving parts. Can you tell us how much it contributed, or even approximately how much it contributed to fourth quarter results?

The only thing I can do is point you back to our Rate Per Contract which is, as you saw as added the clearing revenue in, it went steadily up from October to November, and then closed the year at $142 in December, and 154 in January on a rolling three-month basis. That is the best indication I can give you of the impact that clearing is having, because we are not going to break the execution and the clearing out separately.

Okay, I know that was one part, I wanted to get the rest. Thank you.

Thank you.

Next to Howard Chen of Credit Suisse.

Good morning, everyone.

Good morning.

Thanks for all the color this morning. Aside from the headcount reductions, Scott, can you discuss what type of variable expense leverage you have, particularly with respect to the Creditex franchise? How many of those broker contracts are locked in versus variable, vis-a-vis activity levels as we go through an uncertain '09?

Howard, for competitive reasons I wouldn't want to go into the specifics of our broker contracts, what I would tell you is that imbedded in the headcount reductions we announced this morning, included in that is about a 20% broker reduction.

We have got a terrific leadership team that is running the broker desk at Creditex. And that team has done a very good job at looking at the key performers and keeping those key performers in, and those who aren't delivering the level of performance, shedding those resources. The broker performance generally, as you know, is not particularly variable. There are guarantees in some of the contracts. But I think we are taking actions with the resource reductions to address the lower performing brokers.

In terms of general efficiencies, the broader part Jeff mentioned it in his remarks of what we are doing is combining our technology teams, combining our finance and accounting staffs, our legal staffs, looking for synergies really across the organization, and frankly, we are doing that across our businesses. As we look at ways to become more efficient and our staff functions that support the business.

And then frankly, as I mentioned in my remarks, we still are investing in growth. We have got a number products, some we have discussed externally, some that we have not, that we continue to invest in, and should things get worse in the market, we have the ability to delay or suspend some of those projects, but as we sit here today, as Jeff mentioned, we see numerous growth opportunities, and we think now is a good time to invest to seize those opportunities.

Thanks, Scott. As my follow-up, Jeff, historically ICE has grown both organically and through acquisitions. What does the M&A environment look like right now? What are build versus buy capabilities, and how do you view that vis-a-vis where your own stock is at now? Thanks.

It is an interesting market that we are in right now. For a while, a lot of private companies that could have been acquired, had not reset their expectations of their own value, and with the unfortunate prolonged downturn that we have had, people are getting realistic in the private markets about valuations, and looking at them relative to public companies for the first time. So I think the private market is actually improving.

The public market obviously has broadly hurt the financial services industry, and as I pointed out, and you can see on the slide that we have related to just the Russell indices, notwithstanding that, for example, that ICE last year had a 42% rise in revenue, and a 28% rise in adjusted EPS. Probably some of the best performance of any financial services company in the United States, the PEs of all companies have collapsed. So it makes using stock as an acquisition currency complicated, not impossible, but complicated.

The good news that we have seen lately, and I am talking about maybe the last three or four weeks, is that one of our competitors recently did a refinancing of their debt, and in connection with that, many of the banks and participants in that offering have been through here, and talking to us about our borrowing capacities, our current debt, and credit lines, and what have you, and we really do see an improvement in the debt markets right now, to the extent that one would want to tap them.

We feel much more comfortable about our balance sheet now than we have over the last year, and I do think that all that taken together may create some opportunities for doing deals going forward. You pointed out correctly that we have a buy versus build mentality here. And we do have some ideas that Scott pointed out for growth that we are investing in internally. To the extent that other external parts would accelerate us at the right price, we will certainly take a look at those.

We will go next to Mike Carrier of UBS.

Thanks, guys. Just one question on all of the product launches. You guys, and a lot of the competitors have been recently launching a lot of products on the OTC side. Just wondering, one, is there that much customer demand, or is it all just more innovation on your side? And then just given the pickup in the commissions in January, February, is there any related to any of these new products? It is hard to gauge since we can't see it on a daily basis, in terms of the commissions or volumes on any of the new products. Just trying to get a sense of if any of them are really taking hold?

This is Jeff. I will take the first half of your question, and then ask Scott to take the second half. In terms of the new product launches, because we were unable for almost two years to launch new products, we developed a very extensive backlog, that came from talking to customers over a very long period of time. And we put priorities into those, and our priorities have been to find products that play to our strength, with largely our products where there could be electronic trading, and can be repeat business.

As opposed to an important service, but not one that is as high valued for our shareholders, and that would be of just taking, longer data swap positions, and parking them in clearing. Unfortunately, the revenue model that exists in this industry is that you get paid one time when a position comes into a clearinghouse, and you can tie up a lot of risk and balance sheet, by parking positions that don't move, and you receive very low revenues. So we have announced a broad range of products. They are actually rolling out over time.

We have to give a lot of forward announcement, so that people can get ready with their systems and risk modeling, but those are starting to come out now. I would tell that you generally, the performance that we have seen in our OTC markets, is largely related to the historically existing product suite, and will just now start to see some contribution from new products.

Mike, just to kind of round that out. We do track the activity we have on our new contracts, we don't tend to talk about the volumes of any single new contract, because volumes aren't necessarily indicative of revenue levels that you get. I would tell you in January, for example, we had a contract that did over 11,000 units, and didn't deliver a lot of incremental revenue, but generally they are additive. The other thing I would tell that you is more difficult to measure, is that a lot of time these products fill out the portfolio that traders want to trade.

To the extent we add these products they may be more inclined to trade existing products, and we are not really able to measure that clearly. We do track it. It is not a meaningful revenue amount as we sit here today, but as we launch more of these products, I do believe it will contribute directly, and will contribute to the trading of other existing products.

Let me make one last case. We have been able to around the edges launch some interesting futures contracts, and where we really think we can get volume, we tend to try to put them in that venue. Our emissions contract is doing really well, and our new coal contracts we have been able to launch are doing very, very well. They don't get a lot of attention specifically from the marketplace, but they are very, very important products for us that are growing.

Okay. That is helpful. Just as a follow-up, on the Creditex side, or the CDS side, you indicated, sort of what the OTC on the energy side, the commissions were in January. I guess, any color on the credit side? And then just on Creditex, just given that it is a different model, I guess going forward, do we continue to see some pressure on the reduction in volumes for the industry? I guess is there a way that we should be thinking of just the compensation line going forward? It is just different, versus how we used to think of ICE? Any color there?

Again I will take the editorial part of your question, and let Scott give you the numbers. The color on CDS. I think that I spent a fair amount of time in our prepared remarks talking about CDS, is that I want to set the tone with you for sort of the flavor of how we are thinking of the CDS markets, and this is that, it is not to us just about moving OTC bilateral positions into a clearinghouse.

And increasingly now the whole industry has come to the same realization, and that is that we really need to restructure the design of the product. And make it so that it is more clearable, if you will, so that it can be netted, and so it can be more standardized. We need to standardize some of the actual default procedures that are in this space, to further improve it, based on anecdotal evidence that came around some of the two dozen or so defaults that happened, particularly in the fourth quarter.

The work going on in the clearinghouse and the clearinghouse has served as sort of a forum and venue for these kind of discussions with the industry, and with the regulators, are about that restructuring. So it is that that I think ultimately is the value proposition that we have built and invested in. It is about having clearing. It is about having electronic execution capability. It is about having voice capability. It is about having straight-through processing and post trade capability.

All of those are being simultaneously worked on by us, to position ourselves for what we think is going to be a very different market going forward. And I will just add to that I think there is a false perception in the market, that somehow we at ICE created some kind of application, and turned it into regulators, and we are sitting here waiting for regulators to approve this. That is not the case. What has happened is there has been an interactive dialogue going on around the restructuring of the CDS industry, and how some of these pieces can come together.

And it is that ongoing dialogue that involves many, many regulatory agencies, many, many market participants, and our clearing and post-trade infrastructure, that is trying to get put into place, so that can all be solved at the moment in time that this launches. And I think we are at the tail end of that. A lot of decisions have been made, particularly in the month of January that I think will lead to a much enhanced market structure.

And in terms of business efficiency opportunities with Creditex, I think they come in a number of flavors. There obviously are efficiencies from the staff integrations that we talked about. There are efficiencies and profitabilities improvements by continuing to keep the top performing brokers on the team, and those underperforming, letting them go.

There is also a continued shift to a number of the innovative electronic offerings that Jeff discussed in his remarks, whether it is compression runs, delta neutral auctions, credit default auctions, all of those carry substantially higher incremental margins on each dollar of revenue, which obviously helps the overall operating margin. So I think there are a number ways that business will continue to become more efficient.

As I mentioned I believe in an earlier answer, we remain confident that despite the revenue declines we can still achieve our overall target of GAAP accretion within 18 months, and actually assuming some modest pickup in the back half of the year. We believe we could get cash accretion in the second half.

Okay, thanks, guys.

We will go next to Niamh Alexander of KBW.

Hi, good morning. Can I just switch over to the regulatory side of things for bit, because we are expecting quite a lot of headlines, but I read through Mr. [Ganter's] responses to, okay, some of the politicians' questions, but it looked like he was kind of ready to go back and revisit the whole speculative position limits and speculative limits in the commodities trading area, and I guess another subject area. I would like your views on that, and then the other area would be just the CFTC SEC merger? What are the risks if any that you see to ICE from that situation?

Sure, thanks, Niamh. First of all, we are obviously aware of those responses as well, and a couple of points that you may not be aware of. First of all, as a result of now a number years of working both with the CFTC and with Congress, ICE has instituted reporting large trader reporting, increased reporting to the CFTC, and position limits and accountability standards across our major products.

The kinds of things I think are being visited there, are really in my read intended to take the kind of work that ICE has done, and make sure that anyone else coming into this market in a similar position, would be obligated to do these kind of things. I said before as we were going through this, and I am sure you will recall, that we don't have any one large customer.

We have a very diverse customer base that tend to hold smaller positions, and so some of the nuances that are being discussed as to how accountable limits and position limits may be set, and whether they are done by exchanges, or by Congress, or by working groups, or by the CFTC itself, that is more of a detail, as opposed to any kind of a headline risk that we see. I think it is fair for Congress to continue to look at this issue. We were heightened and you may have also seen that the GAO came out with a report recently, that indicated that they did not see signs that speculators themselves were driving prices. Our own studies did not suggest that speculators were in and of themselves driving prices.

So I think moving on to the second part of your question with respect to the CFTC, SEC merger, we think there will be broader financial reform obviously, and we see various committees in Congress, and various Senators and Congressmen staking out positions, that as opposed to actually expecting those Bills, or those actions to be passed, tend to indicate to us that these are people who want to be a part of the overall discussion and debate, and they are putting their areas of concern forward, so that they can be dealt with by a broader Congressional action.

So I wouldn't get too concerned about any one headline, any one Bill, any one comment by a regulator, or what have you and think of this as being in the context of what will roll out in a broader regulatory reform that we are very, very well-positioned for. And lastly I would just suggest to you that part of our move into the credit default swap business and into the derivative business in general, is to make the assumption there will be more regulation, more transparency, more standardization. Those are all facts that play to our positioning. And we are literally amazed, while we were thinking about this two years ago, the need for clearing and need for infrastructure for more derivatives trading and transparency, that it is coming so quickly on the heels of the kinds of investments that we have made.

That is helpful, Jeff. Thank you very much. Just a follow-up to go back to the credit derivatives that you have just alluded to. You have been helpful giving us color on the discussion of the standardization, and it lends itself to, what is changing with respect to the dealers' position, or what can you do to encourage maybe more electronic trading of these credit derivative products, maybe the indexes especially if they are far more standardized? Should we think about a structure similar to the clearing, where there is sharing economics? How should we think about them?

Sure. First of all, I think it is interesting that particularly in the last 30 days or so, I really feel like there is a broad recognition on the market, that the current product is broken. There are people right now that are making a lot of money trading credit default swaps, but is largely because of forced liquidations by people in the market, and very wide spreads, and difficult counterparty relationships. And so while people are making money right now, there is a general sense that is not sustainable.

That is a process of people going out of business and leaving a market. And so what we have seen is a movement particularly around our clearing infrastructure, to not only standardize the contract, but figure out a new way that we can create price transparency to mark positions to market. And as you may know, what trades right now, and what you can see on various realtime tapes is typically a five-year CDS product, and there is price transparency in that liquid part of the market.

What exists in the backlog on everybody's books is something other than a five-year product. It is a product that is off the run that has decayed, and for which there is no price transparency, and a lot of issues on how to mark those positions to market. So the debate that has been going on is very similar to what we have seen in the broader idea of creating a bad bank for derivatives in the CDO space, and that is, we can move these positions into a clearinghouse, and the intent of ICE Trust is to move the legacy positions very quickly into the clearinghouse, but how do you mark them to market.

The answer is increasingly moving toward creating some kind of end-of-day auction process, this would create transparency and realtime trading of that. And that is where we are a part of the debate. That is why this clearinghouse has not yet been approved. We are working on the details of that with the industry. We are fortunate that Creditex is the industry's choice of platform, where default auctions and price transparency takes place, and so we are very well-positioned as these products become standardized, and there is more electronic price transparency given to the discovery of prices, that we will be able to benefit.

One thing that I would add to that is just in relative positioning, to the extent that the standardization does move things more electronic. We have a very well established electronic trading platform at Creditex. 36% of the business in 2008 was done electronically. Well over 70% of the business in the UK was done electronically. So to the extent it does moves more electronic, we are well-positioned for that. To the extent some of it stays in the voice broker market, as I mentioned earlier, we still have a very talented broker team at Creditex, that is positioned to handle the business that way.

Okay. Thank you very much for taking my questions.

Sure.

We will go next to Dan Fannon of Jefferies & Company.

Thanks. Most of my questions have been answered.

Sure.

But just wanted, again, maybe for you to give a little bit of color of the differentiation amongst your customers base within the OTC segment? You gave some comments around some of the commercial users, but can you talk about the banks and Iiquidity providers have started to act here, thus far in 2009 as well?

We only have a month in 2009, but what I can tell you we looked at 2008, and this is true for the fourth quarter and the year. Our customer mix is pretty stable, and on the charts we showed in the presentation 2007 and 2008, I tell you, if you look back to 2005, 2006, you would see basically the same thing. We have consistently had a 45% to 50% mix of commercial users. That is still the case. We have consistently had the banks at the 22% to 25%, and the liquidity providers around 30%. So we have been very stable with our overall customer base.

I think one of the reasons as Jeff alluded to, there is no single customer that tends to dominate, so it has been a stable mix. And we continue to see demand. You can see it in our data revenues, which were up again in the quarter. You can see it in the number of log-in IDs that we look at each month. So there remains a great demand for the products we trade in our OTC markets, and a very consistent, very stable mix of customer participants.

Okay. Thank you.

Jonathan Casteleyn, Wachovia Securities.

Thanks, I will try to be quick here. Jeff I know you indicated the broad strategy and positioning for the business, but just wondering what you think is the best opportunity for '09, either existing product line or new opportunity?

That is a tough one. Thanks, Jonathan. If you really look at our performance last year in 2008, I am very proud of what the business has been able to do, but the new initiatives that we are talking about are back-end loaded. We just closed on Creditex in the last half of the year. We just launched our clearinghouse in November in Europe. We just transitioned Russell to the Company in September. So a lot of the things that my prepared remarks were speaking to, were the fact that we are starting this year with an interesting new arsenal. My job as CEO is to be looking at 2010 and 2011.

I am actually quite excited about some of the other things we have not announced yet, that will continue to position us well. And so that is not to say that 2009 isn't going to be very interesting because of those three products.

We pointed out the fact that Russell is really style indices, and right now the market is not differentiating, but again, that is not sustainable in my view, and eventually people are going to again pay for growth and differentiate value, and there will then be hedging and trading activity, we believe, around Russell indices that will accelerate. We obviously believe that there are going to be more OTC products that are coming into clearinghouses, and we obviously believe that the credit markets are fundamental, and are going to restructure, become regulated, standardized, and more transparent.

So which one of those happens in which quarter? And which one contributes the most? I don't know. But the totality of all of those is so interesting, I think, relative to some of our competitors, and I am very proud of what my team here has been able to put together, and the way we have positioned those for growth.

Okay. Thanks. I appreciate that. Just quickly I don't want to parse words, but Scott, are you saying the averages for January and February in OTC are at back to 1 million per day, or over 1 million per day? I wanted to make sure I had clarity on what you said there?

I am not really sure we have been specific, but they have been over $1 million.

Got it. Okay, thank you.

We will go next to Michael Vinciquerra of BMO Capital Markets.

Thanks, Jeff, just one clarification on your comments regarding the standardization in the CDS market? Sounds to me like you are in very close conversations with the regulators, and it almost sounds as if the standards that you set in those conversations, may become the default for the industry. I am just curious if there are other parties, other competitors, I guess, involved in these conversations that are trying to help set the standards, or if you guys essentially become the standard and then other markets will have to go by whatever you guys develop with the dealers and the regulator?

Sure. I think it is fair to say that ISDA, which really sets broadly the standards on behalf of the industry, and it is the forum where historically things are adopted, and where agreements, the ultimate settlement, and what have you in the agreements are manifest. That process is going on as well.

Just that in order for us to launch the clearinghouse, we have to have the issues resolved from the first day, and we cannot necessarily wait for the ISDA process to play out. So what we have been doing with the regulators and with a broad group of market participants, are solving for these problems, putting them in our rules and risk models, and then if the industry through ISDA adopts what we have done, nothing will change at our clearinghouse.

If ISDA somehow modify that process, then we will go back and change to conform with the broad industry group, but it is part of our application, and it is part of our thinking with the banks that have initially joined us, and now with the new bank that has joined Barclays, that we are going to take their existing position immediately, and backload them into the clearinghouse. That means from the first day of operation, we have to have transparency into, and price discovery, into the legacy positions, and these are, you read every day in the newspaper that there are real problems in price discovery of ilIiquid derivatives.

I would say to you that it is unique in that Creditex is the venue that ISDA has selected for price discovery. It has long been established. We have agreements with ISDA and with the market that date back to 2005, of how we go about doing price discovery, and it is a revisiting of that that is going on with the regulators. Our clearinghouse will only be as good as the marks that we put in.

The minute we put marks into that clearinghouse, there will be pays and collects between various market participants, and cash will move based on those marks, and people will have to take P&L charges based on those marks. It is very, very important to the industry and to the regulators, that from the very beginning we get that right.

So it is true then, if you get SEC approval, you can start trading these products. You don't have to wait for ISDA to actually confirm the standards that you have set?

Yes, we have a group of market participants that have agreed to use our platform, and are in the process, and agreeing to use those marks. So I believe it is such a large amount of open interest that will move quickly in, that it is very, very likely that our marks and our standards, will be adopted broadly, but I don't want to prejudge what others may bring to the ISDA process. That is a longstanding process of multiple voices and compromise, and that will continue to operate through it's own course.

Very good, thank you.

We will go next to Patrick O'Shaughnessy of Raymond James.

Good morning.

Good morning.

Quick question I had was going back to the Russell contract. I kind of understand the premise that you have stated about 5% market share of the S&P 500 eMini for the last several months, but kind of if you look back a little bit further, it was trending around 10% market share, when the contract was previously held at the CME group. My question would be, what can you guys do to kind of the getting trading volumes back up to levels where they have historically been, or to get that market share back up to levels where it has historically been?

I think the short answer is nothing, because a lot of that is volume that we are not interested in. A lot of that delta is volume that existed on an open outright trading floor, and we are not prepared to launch these things open outcry. Secondly, it was volume that was, there were many, many people who had a deal that they paid $50 a day for all they can trade, and we are not willing to put in these highly differentiated price structures for various people, that really don't provide any revenue for the Company. So we do not manage ICE for volume growth.

We manage ICE for revenue growth, and as long as there is deep liquidity in a marketplace, we are happy to have a smaller volume at a higher revenue, where the prices that our customers pay are transparent and fair, so that we don't get some kind of tiering of prices, and sense inside our customer base, that somehow some people are advantaged, and others are disadvantaged. That is the main reason that we, on the first day that we moved that contract over, we did not bring that customer base along.

All right, that makes sense. Thanks a lot.

We will go to Patrick Pinschmidt of Morgan Stanley.

Good morning, guys.

Good morning.

Quick modeling question, in terms of the targeted broker headcount reduction within Creditex. Is it fair to anticipate some sort of revenue slippage there, or is the plan to kind of migrate these broker books to electronic platforms, and therefore keep the revenue?

We as we look at the broker reductions, as I said, this wasn't a let's go take 15 or 20 brokers out. It was a very thoughtful analysis on which brokers are producing, and which are not. And that is reflective of the fact as Jeff alluded to earlier, we don't manage for revenue, we manage for profit. We wanted to keep the efficient brokers on board, and we have done that, and we have got a a very talented remaining team, so the less efficient go away.

A long-winded way of saying, I don't expect that the reduction in the brokerage business in and of itself, will result in a particularly negative impact to revenue. The revenue issue we are dealing with right now, is frankly a soft market, just waiting to see what will happens on the clearing and the regulatory front. When that comes back with the broker team we have got and the electronic platform that we offer, I think we will not only benefit from the clearing initiative we are working on, but also from the more traditional execution business that Creditex brings to us.

Okay. Great, thanks.

At this time, I will turn the conference back to management for any additional remarks.

Again, thank you all for joining us, and we look forward to talking to you again next quarter.

That concludes today's conference. Thank you for your participation.