CME Group Inc. (CME) Earnings Call Transcript & Summary

Okay. Thanks, everybody, so much for joining us again. If anybody doesn't know me, I'm Ben Budish. I'm Barclays' brokers, asset managers and exchanges analyst. And for this session, we've got a wonderful group from CME. We've got John Pietrowicz, CFO; Derek Sammann, current Global Head of Commodities, Options and International Markets; and on the end, Lynne Fitzpatrick, who is the current Deputy CFO. So thank you all so much for being here.

Maybe, John, we'll start, kind of just a high-level question. What's the current macro update in terms of what you guys are seeing around the world? In some ways, it feels like the rate outlook is more certain versus a year ago, but in some ways, it feels like the future is even less noble than it ever was. What are your kind of thoughts here?

Sure. First off, it's great to see everybody here. So thank you for joining us, and thank you for your interest in CME Group. We had a very strong start of the year. For the first half, if you adjust for OSTTRA, which is our joint venture which we launched in the fourth quarter of last year, our revenue is up 12.3%. Our margins expanded to 66.4%. Our net income on an adjusted basis grew 21%, and revenue was driven by a 22% increase in volume. We saw that strength continue into the third quarter with -- driven by our financial products. Interest rates were up 21%. Our equities complex was up nearly 50%, and our FX complex was up 26%, for an overall growth rate of close to 23% for the third quarter. So seeing that continued strength based on our highly diverse asset classes and also the uncertainty in the environment. So if you break down the -- our growth into the key asset class areas, in terms of interest rates, we're seeing uncertainty around the Fed moves, also inflation, which we haven't seen in a decade. And that's really provided a lot of strength in volumes in the short end of the curve. The long end of the curve has some tailwinds with quantitative tightening, which -- or the Fed doesn't hedge into our markets. But once those instruments go into hands of people who can hedge, so we think that's a strong tailwind. When you look at the amount of quantitative tightening, we're at a level 3x the amount of quantitative tightening that we saw in 2018. So we think that there's a good amount of tailwinds there. In terms of our equity complex, we're seeing dramatic swings in equities. And when you look at CME Group's equity business, we have the exclusive rights to all the major indices. So that's the S&P 500, the Dow, the Russell, the NASDAQ. And our markets operate 24 -- almost 24 hours a day. So we are the place to go if you want deep liquidity in equities. In terms of FX, we've got disparate views of Central Bank policies. So that's positive for the -- our FX business, and that's what's helping drive the 25% increase in FX. So very strong tailwinds in terms of our financial products. We're seeing a lot of volatility in our commodity products that I'm sure Derek will touch on a little bit later.

Great. Well, Derek, this next question perhaps for you. Maybe, again, a high level kind of what you're seeing across commodities. I wanted to also ask about what you're seeing in Europe as to what extent geopolitical conflicts are going to continue to impact global volatility. But maybe those 2 questions kind of rolled up into one, a little bit separate, but...

Yes. No, it's a great question. There's a lot happening in the commodities complex, physically delivered commodities, whether it's energy, agricultural products or metals. We're in the middle of a commodity super cycle right now for sure. Now that's been slightly interrupted by a war in Ukraine, an invasion of one sovereign by another sovereign country. That has created some challenges in some of the physical supply chains. So markets love to trade, fundamental supply and demand, cyclical struck all market challenges. When you come to warring countries with one another, that has created some very unique challenges in our physical commodities markets, not just the CME Group, but across the broader landscape as well. What I can say is what we've seen very specifically is the risks that have been introduced by, for example, cutting off natural gas flows from Russia into Europe or crude oils from Russia into Europe or the rest of the world has actually substantially reinforced the positioning of our 2 global energy benchmarks, whether it's WTI crude oil or Henry Hub natural gas, as global benchmarks. We've certainly seen in the U.S., for example, we're now producing, I want to say, close to 12 million barrels a day, exporting a record 4 million barrels a day. That's back up above the pre-pandemic record, centering the global energy universe around WTI physically delivered oil in some market we own 90% of. Similarly, in natural gas, you're seeing a market that has had a real problem of importing gas from Russia into Europe. The TTF natural gas market in -- as a European marker has been significantly disrupted. Increasingly, what we're seeing is the market turning to the U.S. as a swing producer in the global natural gas market, which is important, not only for today's energy environment, but as a transition fuel for the next 30 years. That's a market we own 80% of right now in terms of volumes and open interest. And what we're seeing is the U.S. right now is the single largest exporter of natural gas in the form of liquefied natural gas, LNG, coming out of 5 liquefaction pads here in the U.S., about 4 or 5 more permitted. So over the next 10 to 20 years, you're going to see increase in amounts of Henry Hub-priced natural gas, liquefied, shipped out of the U.S. in the form of LNG to Europe and Asia. So the disruptions in the short term have actually been a real significant structural positive for our benchmarks of Henry Hub and U.S. crude oil WTI.

Great. Very comprehensive. Thank you. Maybe, Lynne, on kind of on the rate side. Can you speak a little bit about what's the latest in terms of the LIBOR TO SOFR transition? To what extent is this driving volumes to -- what are your expectations as LIBOR kind of approaches its final retirement next year?

Sure. Yes, we're definitely very pleased with how the migration has progressed over the course of this year. We actually saw in August more trading in our SOFR complex than in Eurodollars. So our SOFR futures, we're trading about 160% of the level of Eurodollar futures. And so for options, we're at about 120% of the trading volume of Eurodollars. So we've definitely been focused as the year progresses, trying to incent that migration, making sure that we're offering our clients that same level of depth of book and liquidity that they've come to expect in our Eurodollar complex in SOFR. So with a fairly long runway still here to go until the LIBOR cessation, we think we're well on that way. The other thing I would note is that, over time, we do expect the RPCs, so the rate per contract, for SOFR to converge to where we are on Eurodollar today. We are incenting that migration. As I mentioned, we want this to be as easy for our customers to make the switch as possible. The last item that's important to know around SOFR is that we were named the SOFR term rate benchmark administrator by the Fed and the Alternative Reference Rate Committee. So that means we're now licensing out that SOFR term rate. We have over 1,300 individual firms under license as of the end of Q2 in 74 different countries. We view this as an important step. As we go forward, this is potentially a source of new customer acquisition for us as some of these loan originators might not be actively hedging in futures markets, but that's definitely a possibility down the road.

Okay. Great. Maybe one more kind of just like a little detail question on rates. Maybe for John, can you perhaps remind us like what is the sensitivity to rates given your margin deposits that you hold?

Sure. Yes. When you look at our clearinghouse, when you take a position on the exchange, you have to put up collateral. And we've seen a substantial increase in the amount of collateral posted at the clearinghouse, reflecting the environment that we're in. And you can put -- when you put a collateral to the clearinghouse, you put out a number of different instruments, provided it's approved by the clearinghouse. So it could be cash, it could be treasuries, it could be gold warrants and the like. So when the Fed rates were at near 0 or at 0, the amount of return a client can get by putting cash up at the clearinghouse, and then we, in turn, invest that with the Fed, was very attractive. So we saw a significant percentage of our collateral posted at the clearinghouse in the form of cash. Now as rates increased, we dividend or rebate back to our clients a portion of the -- of what we earn by posting the cash at the clearinghouse. So at this point, we're earning about 25 basis points, and the client is receiving about 215 basis points. So basically, they have a choice of what instrument to post. And what they'll do is they'll look at what they can earn on a treasury, as an example, versus what they can earn in terms of cash posted at the clearinghouse. And the noncash collateral is very attractive to clients today. So you've seen a migration from cash to noncash collateral as the interest rates have increased because those instruments are more attractive to the client. So what we've been doing is we try to optimize the amount that we can return -- we can get as a return for ourselves. So we -- like I said, we're earning about 25 basis points on cash put up at the clearinghouse. Noncash, we're earning 7 basis points. That's up from 5 basis points in -- before July. So in July, it went to 7. And so basically, the limit in terms of what we can earn on cash put up at the clearinghouse is really the alternative that our clients can earn with other instruments. So that's the sensitivity around the -- what we can earn on cash posted -- collateral at the clearinghouse.

Very helpful. Thank you. Perhaps, Derek, kind of interestingly, when I first started looking at this space, the major topic of conversation was default in London with the LME and kind of copper futures. Can you sort of remind us what sort of -- what impact does it have on you guys in terms of opening up more doors? And it's been some time since then, but how are those conversations kind of progressing? And perhaps could you also explain, what would it take for CME to start offering like a copper futures product? What's involved in a lift like that?

Sure. No, great question. There was -- yes, back in March of this year, for those that don't follow the industrial metals market very closely, the London Metals Exchange had a problem with their -- it was actually the nickel market that was a fundamental problem for them. There was a dislocation in the market. Market was closed for a number of days. Reopening had some challenges. And it exposed some risk management challenges within the London Metals Exchange. Our COMEX Metals business is about a $250 million business. About 75% of that comes from precious metals, 25% in the form of base metals, whether it's copper, aluminum, steel, et cetera. When we saw the problems at the LME back in March, the first thing we did is get a series of phone calls from customers saying, "All right. Well, I now understand how the LME's risk management principles work, and that doesn't work for me given the dislocation of the market. How can I move more of my industrial metals business over to your COMEX metals franchise?" So we certainly take those phone calls and listen to both what their concerns were and walk them through the risk management principles and prudent risk management in our clearinghouse, everything from position limits to how we manage moves in our market, using things like velocity logic or stop logic to make sure that markets don't run away, making sure that our clearinghouses will oversight over all positions in our markets, and we know what position they have on exchange as well as off exchange. And that has led to a number of customers saying, "Well, I want to be in a position to move a larger proportion of our base metals business over to CME Group." Now we built our copper market share in COMEX from about 10% 5 or 6 years ago to close to 40% now, and we have about an 80% market share of the electronically traded copper market. So that put us in a position to talk to customers about the challenges they're seeing in the rest of the base metals business given the problems of the LME. So short answer is that we are -- we put ourselves in a position to service a client base that's looking for the best prudent risk management in the metals industry. We believe that's CME Group. And we're seeing customers now quadruple their aluminum business with us while we also work with them to talk about what needs we might be able to serve in the nickel market, specifically, to make sure that if they're going to move their business, we build the right market solution for them so they can be in the best position they can to grow their business going forward, and we expand further our footprint into base metals business.

Makes a lot of sense. Taking across the pond still, perhaps, John, it's been about 4 years since you guys acquired NEX. Can you maybe give us an update on where is that business today? What sort of changes have you implemented since you acquired it and migrated onto Globex? And where do you kind of see it going?

Sure. We've done a lot to increase the value or the value creation for NEX and for our shareholders. The first thing we did is we achieved our synergy target. We had a synergy target of $200 million in run rate expense synergies, and we achieved those in October of last year. So that's the first thing that we did. Secondly, we created OSTTRA, which is a joint venture with IHS Markit, and now S&P Global, to create the leading company in post-trade and optimization services. So we're very excited about the strategic direction that the optimization businesses that we contributed to that joint venture, and along with the businesses that IHS Markit contributed. And we think that positions ourselves really well with the client base, and we'll be able to offer a lot more services for those clients. We've also migrated the cash markets, so that would be BrokerTec, which is cash treasuries; and EBS, which is a spot FX, onto Globex. And what's really exciting about this is that those markets will now be able to leverage what is arguably the best trading system in the world in terms of CME Globex. So think about the technology and the distribution that they're now going to be able to leverage is very exciting for the clients. This also does a couple of things. One is it creates efficiencies for clients of both platforms, right, because you really are dealing with one technology stack. Secondly, it allows us to better cross-sell between the cash and futures and offer new enhancements and new products across all those markets. So examples of the technology that they're going to -- that currently is being offered in the futures that are also offered in the cash, which wasn't there before, would be things like implieds, which is an important technology that we have on Globex, which creates liquidity in certain contracts because it's implying that liquidity. So that's something that we're able to offer our clients, for example, in BrokerTec, which we have in the futures side of the house. In terms of further investment that we're making in the cash markets platforms, one example is streaming. We're developing what we think is a world-class streaming platform for EBS, which is, again, the spot FX markets. And we're going to be able to leverage that into BrokerTec, again, an example of what we've learned from the futures side where we can develop a new technology or a new enhancement to the system and then apply it to multiple markets. So we're excited about that as well. We're also offering new features, such as in BrokerTec RV trading, which is relative value trading or spread trading. Think about spreads between the 2-year and the 5-year or the 5-year and the 10-year, which wasn't offered on BrokerTec before. So investing in the business, offering new enhancements. Cross-sell is also another thing that we are seeing the benefits of. When you look at our treasury complex in futures, we are able to port over some of those clients to the cash side of our business in BrokerTec. So we are cross-selling futures to traders who haven't traded cash and are now trading our cash markets. And that accounts for about $4.8 billion per day in new activity on the BrokerTec platform that wasn't there before. And so that's a great example of that cross-sell. And last, we're working on increasing the capital efficiencies offered to our clients of BrokerTec and our futures platform. We are working with the DTCC, where cash treasuries are cleared, to provide more capital offsets between our futures clearinghouse and the cash clearinghouse at DTCC. So improving the capital efficiencies. So at the end of the day, our clients are getting a better system with more features, that are more operationally efficient for them and provides more capital efficiencies. Now we are -- we have just completed the migration of EBS, which is the FX platform, just this year. So it's still early days, and we still got more work to do to drive the total strategic value that we see by bringing cash and futures together, but I think it's -- we're seeing some good results so far.

Great. Sticking with the international theme for a second. Derek, perhaps you could speak about the international business more broadly. Where do you see the greatest opportunity? Where is demand picking up the most? And could you, along the same lines, talk a little bit about how perhaps the sales process is different outside the U.S. versus domestically?

Yes. The non-U.S. business for us has been a significant source of strength for the last 10 years, and we see that definitely accelerating through going forward as well. If you look back over the last 10 years, our non-U.S. business has outperformed our domestic U.S. business growth in terms of volume and ADV by about 6% to 8% a year. We're seeing that again this year with significant growth, record growth. We had a record second quarter, a record first half for our non-U.S. business, 6.8 million contracts a day traded outside the U.S. for the first half of this year. That's bigger than most global exchanges traded in regions where we compete in Europe and Asia, particularly. We saw particularly strong growth across client segments. Our retail business is up 43% in the second quarter. Banks were up 31%. And within our non-U.S. growth, we saw pretty significant growth across the profile. Our APAC business, up 34%; our European business, up 15%; and LatAm, up 40%. And why we're excited about this is because we're seeing significant growth, not just across the asset classes, but across individual countries as well. So we are hub and spoke. We're set up with our global sales force. For the first time, as of 2 years ago, we now have over 60% of our sales staff outside the U.S. When I joined the firm back in 2006, we had 10 people in London and 3 people in Asia. And the bulk of the sales force, probably 95% sat not only in the U.S. but sat in Chicago. Since then, we've arrayed a global sales force by client segment. We have a team that only sells to buy-side clients, hedge funds, asset managers, pension funds, et cetera; a team that only sells down to retail customers, a team that only sells to banks and the needs of bank customers. And so we've arrayed that sales staff globally, and the results are significant. Not only are we seeing significant growth in our main centers of London and Singapore, but when you go out and look at the growth this year, we're seeing significant growth in other locations. Our South Korean business first half of this year, up 41%; our Brazil business, up 95%; our business out of the Middle East, primarily Dubai, up 53%; Taiwan, up 54%; India, up 57%. So it's broad-based growth. It continues to outperform the growth of the domestic business. And that sales process is, again, putting boots on the ground. The non-U.S. business tends to be higher-margin business for us, comes at a higher rate per contract for us. And so we're seeing that that's both a differentiator for us, but also areas for marginal growth going forward. To put just sort of an overall view on it, I would probably say, our client penetration in Europe is probably middle innings, to use a baseball analogy, fourth inning, something like that, maybe fifth inning. And in Asia, we're probably early innings, second inning, third inning. And that's before you even talk about the potential opening of large markets like China and India. This is growth in fully open economies right now, where we still have significant room to grow, acquiring new clients, cross-selling those clients and then upselling those clients in and across the franchise.

Fantastic. Kind of a different topic here, maybe one for Lynne. Can you kind of remind us where you currently are in the partnership with Google and kind of the journey to the cloud that the company is on? I know in the past, at the company, you really emphasized it as a partnership, not a client-vendor relationship. Can you maybe expand a little bit on what that means exactly? And in 10 years' time or whatever, sort of the relationship is up for renewal or comes to an end, what does CME look like? What are the kind of -- how does it look different versus today?

Sure. I'd probably split the agreement into 2 pieces. The first is your more traditional cloud migration. So moving our infrastructure to the cloud, we think, will have a lot of benefits for us in terms of being more flexible, more nimble, able to launch new products and services faster. We expect that to cost us about an incremental $30 million per year over the next 4 years until we get to a breakeven point and, ultimately, cash cost savings. So that's kind of the more traditional maybe vendor-type relationship that others might have. Where the partnership comes in is really our agreement to co-innovate with Google. So if you think about Google's capabilities and their strengths, obviously, machine learning, artificial intelligence, big data, their ability to really provide analytics is something that we found very attractive. And working with them, bringing our strengths in terms of understanding the financial markets, the infrastructure there and being able to create products and services for the financial markets that capitalize on those 2 strengths, we think, is going to be really powerful. So Google also sees that potential. It was part of the reason that they agreed to invest $1 billion in CME. So it really is more than just us moving to the cloud. It's really thinking about how we can work together to create these new products and services.

Great. Maybe just following up there in terms of the products. Maybe, John, you talked a little bit about the OSTTRA JV. Lynne, could you perhaps speak to that JV as well as your S&P Dow Jones Index JV. I think a lot of the S&P JV, I think last earnings call, you guys called out, this has grown at like a low to mid-teens CAGR for almost a decade now. Kind of what's driven that growth rate? And what sustains it going forward? And then also, could you comment a little bit on OSTTRA? What are the kind of key drivers there? And it's been obviously a much shorter period of time, but how do you see that progressing going forward?

Sure. Maybe start on the S&P Dow Jones Index JV. We did put that together back in 2012, and it has grown substantially since that time. There are a couple of main drivers for that business. One is the shift from active investing to more of index investing. So the growth of assets under management tied to that index has really increased over time. So that's a positive for that JV. The other thing that they benefit from is growth in the derivatives trading related to those indices at both CME and [ CBOT ]. So as that increases over time, that's a positive for that business. Just recently, in June, we did expand the scope of that joint venture to include some credit and fixed income indices. So the iBoxx, iTraxx and CDX. What that should add is not only the current profile of those indices but also the ability to create cross-asset class indexes that they didn't quite have under the existing JV today given the equity focus. So we're excited about that going forward. The other key component of that JV is it does give us access to 2 of the main drivers of our equity index derivative complex. So having access to that IP as long as we have ownership of that JV makes not only the financial aspects of the JV important but also the strategic element as well. You asked about OSTTRA as well. So maybe to shift gears, that was established about just now a year ago. It is a 50-50 joint venture, John mentioned, related to post-trade services. So we contributed our assets that we acquired as part of the NEX acquisition, TriOptima, Traiana and Reset, and combined those with MarkitSERV. It was originally set up with IHS Markit, but since they are now owned by S&P, it's another JV with our partner at S&P Global. So we've seen some good traction there. Those are businesses that really benefit from scale. It's important for clients to have that capital efficiency and also a decrease in the number of vendors that they're connecting with. So we've seen a lot of benefit of bringing those assets together. In addition, we were able to identify synergies that we would not have been able to achieve just given the overlap between those complementary businesses.

Great. Maybe John, moving back over here. Can you perhaps talk a little bit about M&A? It's been a little while since you had a major transaction. How do you think about or encourage investors to think about what may be in the pipeline, what your capital priorities are in terms of build versus buy and what we may expect over the next few years?

Sure. Thanks for the question. In terms of mergers and acquisitions, I think we've done a tremendous job in terms of putting together this great platform that we have at CME Group through the acquisitions and mergers with the Board of Trade, the NYMEX, Dow Jones, and now we've got 2 joint ventures with S&P Global, really put together a very diverse, globally relevant set of asset classes, all with key benchmarks that matter to clients around the world. So I think that differentiates us from our peers, who might not be as broad based as we are. So our focus, really, is to bring on as many clients as we can, offering them as many new products as we can, which really creates this tremendous business model we have because the more client -- we're very much network -- we've got very much of a network effect. So the more clients we bring on, the better it is for everybody on the platform. So when you think about a company like ours with high barriers to entry and tremendous network effects, when we look at M&A, we look at it with that lens. And we -- because we're sitting in a position of strength, we can be very selective in the M&A that we perform. So when you think about things that we've done, really, it's with the objective to create capital efficiencies, create operational efficiencies and to increase that network effect. What we did next, that ticked a lot of those boxes, and we're in the process of maximizing the value of that combination. So when I look at M&A, a couple of things strike me. First is large-scale, cross-border exchange-to-exchange M&A is very difficult to do. So from that perspective, I think that is tough to get done, and you've seen a number of cross-border M&A transactions that have failed. Not to say that it can't be overcome, but those have been very challenging. So when you think about the M&A that we have done, those are the -- that's the lens which we look for in terms of standing in the seat of -- or sitting in the seat of our clients and asking ourselves, have we improved their efficiencies and have we improved the experience for our clients? In terms of build versus buy, in terms of how we allocate capital, we've got, I think, a really good capital return policy that is very positively received by the investing community. So that's something that we think is -- has served our investors well. When we look at -- we've got very low capital intensity. So -- and I think the transaction that Lynne described with Google is a great example of how we're constantly improving the experience for our clients and how we are creating new and innovative products for our clients to use to, again, create the higher barriers to entry and speed the volume of transactions going around -- going across our platform 24 hours a day. So that's kind of from an M&A perspective. It's a little different than our peers because I think we're sitting in a different seat than our peers. I know our peers have taken different tacks in how they've approached mergers and acquisitions, which works for them. I think we've got a good track record, and it's a tool that we'll use when we see that it can speed to market, and it could improve, like I said, the experiences for our clients.

Okay. Yes, makes a lot of sense. Moving back over to Derek. Can you maybe talk a little bit about retail trading? I think you mentioned this earlier. The current products that -- what sort of demand are you seeing? Are you seeing increased interest from retail investors and being able to hedge their own kind of portfolios and investments? Or are people sort of retreating more? I think in the traditional equities market, we're seeing some softness, which is to be expected with higher inflation and lower and more volatile markets. But in terms of the derivatives side, what are you guys seeing?

Yes. We continue to go from strength to strength on the retail side. One of the benefits of walking into a client's office, whether it's a hedge fund, asset manager, bank or a retail broker, is that we have a benchmark liquidity in every single asset class, futures and options, lit screens, 23.5 hours a day. We have a lot to sell to any particular customer. So we walk in and retail is particularly [ rich ] client base because we tend not to speak to the end retail, a very kind of small mom-and-pop investor. We tend to define retail in a funky term we've made up. It's a new term that we like to use called protail, professional retail traders. These are folks that are not just the individual "swipe a credit card, put $50 into an account," but these are traders that are largely using trading as their vehicle for their primary job. Maybe they're a small proprietary trading group, but these are folks that are professionally trading markets across geographies, across asset classes. So we typically work through our channel partners and distribution partners, whether it's Interactive Brokers or Think or Swim or TD Ameritrade or Charles Schwab or some of the -- Kiwoom Securities in South Korea, where we are actually partnering with our distribution partners and sort of training the trainers in how their customers can access our markets. We rolled out a product suite, what we call our Micro product suite, that has been extremely successful in the equity space. So successful that we launched the Micro WTI contracts 18 months ago, actually about 15 months ago, that's now traded about 150,000 contracts a day. So we have worked with our partners, built products specifically to serve their needs in bite-size pieces. And then we worked through our retail distribution network for them to sell our products out to their customers. One of the strengths we're seeing in the retail community is our options business. Options traders in our retail segment is up 60% this year, on track record for a next record year of volumes in our options complex. Options continue to grow faster than the overall complex as a whole. Year-to-date, options were up 26%, futures up 20% and retail is a part of that story as well. So retail is a story of right-sized products and right-sized products that meet the [ specification ] needs of customers to access across all asset classes.

Great. We've got about 2 minutes left. Maybe one last question kind of on pricing, broadly, maybe for Lynne. Can you maybe talk about, at a very high level, kind of the decision-making process? I think earlier, you mentioned with SOFR, there is sort of introductory pricing that is beginning to roll off. Well, maybe at a high level, it seems like in this business, there's almost -- at least for you guys, there's almost never pricing pressure. But just at a high level, the approach to pricing and perhaps any kind of near-term opportunities or other factors we should be keeping in mind?

Sure. When it comes to pricing, we definitely look at alternative ways that our customers could use to hedge their exposures. So if that's an OTC market or a cash market, we'll look at the total cost of trade in those venues and compare that to our market. So we'll look at not only the transaction fees, but data fees, capital requirements, the desk spread. And then if we are looking to make any changes, we tend to be very targeted. So we're not making sweeping changes across the whole product set. We will look at an individual product within that asset class and then adjust accordingly. Typically, we review our pricing as part of our annual budgeting process, and we'll look at these comparisons to make sure, really, that we are driving the incremental volume to our exchange. As John mentioned earlier, we're really looking to get as much volume and velocity of trading through our platform at all hours of the day as possible because each incremental trade is a positive to our network in terms of decreasing EBITDA spread and making our network more sticky.

Great. Well, we have about 30 seconds left. Maybe a very quick follow-up. To what extent are there pricing increases that are inflation related that you can pass through? I understand your business is very like transactional. But how should we think about that? And any other potential P&L impacts from inflation, whether it's the cost structure or anything like that?

Well, I mean, with 6 seconds left, 5 seconds left, 4 seconds. So all seriousness, we manage our expenses very actively. And from our perspective, we're certainly seeing inflationary impacts. In fact, our guidance was slightly higher than what we had in the past. Generally speaking, if you look at our expense growth rate, it's about 3%, if you look at 2018 and adjust for the next acquisition to today. And then -- but for 2022, we're about 3.5%. And we have got some additional costs in there for the Google transaction, plus an improving business environment. But that said, we very much actively manage our expense base. We are -- from a pricing perspective, I wouldn't connect inflation increases to pricing changes because we approach it, like Lynne said, which is very much how do you get exposure to other marketplaces and what's the value we're creating for our clients, and we adjust pricing accordingly. On the expense side, I would say it's more actively managed in terms of making sure that we are achieving the -- our objectives in terms of cost management. And also the Google transaction over time, we think, will be helpful from a cost management perspective.

Great. Well, again, thank you all so much for being here. What a pleasure. Really appreciate your time.

Well, thank you, and thanks, everyone. It's great to see you, and thank you very much for your interest in CME Group. Thanks. Thank you very much.