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

All right. Good afternoon. Welcome, everyone. Thanks for being here. My name is Ben Budish, I cover the Brokers Asset Managers and Exchanges at Barclays. For our next session, very pleased to have Terry Duffy, CEO of CME Group. Terry, welcome. Thanks so much for being here.

Thank you, Ben. Appreciate it very much.

Maybe just start off, it's been a very interesting year from a macro perspective, expectation for rates have swung meaningfully throughout the year. The political environment continues to evolve. Can you talk a bit about how that has been impacting the different segments at CME?

Well, it impacts everything, and it's fairly interesting when you talk about the impact of rates and what it means to the world and there's so many different factors. I think 1 of the -- 1 thing that's not being priced in, not only on rates, but on equities, is the geopolitical concerns. I think there's a lot of people that have looked at geopolitical over the last year, and we've kind of gotten used to tanks being on the ground. We're fighting a ground war in Europe since for the first time since World War II, troops on the ground. We just haven't seen this before, but the market seems to dismiss it. So rates have a big impact because, obviously, that's all we talk about, what's the equity market going to do when the Fed finally starts to move. So we've had a big impact across all of our asset classes because there are people managing risk. And why is that? Well, when you start to see things like durational risk, which happened over the last year or so, with SBB and some of the other banks, people need to understand they need to mitigate and manage that risk. So it's been a very active year at CME Group that we're seeing not only a REIT complex, but across all the different asset classes. This is the first time I've been at CME for 42 years now that I've ever seen all 6 asset classes have record open interest to cause every single asset class. So it tells me that people are mitigating and managing risks throughout the year at the complex.

Let's talk about the rates comp. Biggest, markets are now pricing in meaningful Fed cuts over the next 12 months. And one thing that investors tend to worry about is that declining rates could be a headwind for your business. You guys have disagreed. So in your opinion, why is the SKU incorrect, and what do you think the key like longer-term drivers are for growth in the rates futures business? What should investors be looking at here?

Yes. And I think when you look at rates today, and people have said historically that if, in fact, we have a rate cut, but that means that the volumes on the rates business is going to go down, okay. So that was a study done by Raymond James in 2009 of Raymond James is here, I apologize, but I don't know where the hell made that study up, but they -- if that philosophy or that logic was the whole true, then why is Macy's smaller than Amazon? What happened then has nothing to do with today? So 2024, we're sitting at $35 trillion of debt in this country. We're sitting at a deficit spending of $1.9 trillion. Anything -- everything has got a borrowing component associated with it. So whether the price of oil does X, Y or Z is irrelevant because there's a cost to borrow across all these different asset classes. So from our perspective, we've seen an entire year -- an entire year of literally no movement by the Fed and seen record business. So that doesn't jive with saying that if rates go down, then volumes are going to be associated with it. So I think that no matter what happens, I mentioned duration risk a moment ago. You cannot manage duration risk in the cash market of the U.S. treasury. You need to manage it in the derivative market. So I think, again, people are going to be out there managing that risk whatever the rates do. So I disagree with the premise that if rates go down, volumes go down. I just don't see it. I think it's a different world, and I think there's a lot of more different factors than what were going on in 2009 versus where we're at today. So I'm very optimistic about the future volumes of the U.S. treasury complex.

Got it. Maybe talking about competitive dynamics now. So you've got a competitor launching their U.S. rates platform this month. They think that they're going to be able to take market share. You face new entrants before. So maybe before we dig a bit deeper, just kind of remind us around the moats of your rates franchise. And maybe touch on the latest developments with your expanded...

Yes. And I think -- listen, we're one of those shiny objects. People look at 69%, 70% operating margins over the projected period of years. That took CME public back in '02. We've been continue to take the market up and to the right, and we've been very blessed to do so. So when you have those kind of operating margins, there appears very attractive to want to compete with it. But you have to remember all of the steps that we've taken, not just now, but historically to where we're at today, whether it's doing a transaction with the [indiscernible] board of trade to put both the long and the short end that occurred together to create those efficiencies. So these efficiencies that we create that working with DTCC that took us 5 years to get that through. And it wasn't because DTCC is owned by a certain constituency of components, you have to get approval from the government, not just from DTCC. So I know that whoever is looking to compete with me suggests that they'll do it in a year or 2 because these are his partners. Well, that's great. There's the SEC has partnered too. I don't think so. So the SEC determines how long that's going to take before that goes forward. And that took us 5 years to get the offsets against our cash versus futures. We've done that. Again, these moats $20 billion a day in efficiencies. So if you're thinking that you're going to just go ahead and launch a product and replicate those efficiencies overnight, I think that's a bit of a stretch. And I got to also ask, why would people want to give up the efficiencies they're achieving today for their portfolios. Leverage markets are so difficult. They're so tight, money -- you have to make sure you can make it extend longer without extending risk, and I think people have been able to do that in CME. So if you look at just our futures and options businesses over $10 billion a day in efficiencies, you look at our swaps portfolio versus our future, that's another $7 billion to $8 billion a day. And then our offsets with DTCC, which we just launched, just got approval for since 2018 is now exceeded over $1 billion a day. So we're about $20 billion a day in efficiency. So that's a very strong moat. And we didn't do it over a 3- or 6-month process. We did this over a tremendous amount of years, and also what's extremely important is the technology associated with it. I'm sure some of your Investors know that we did a deal with Google to transition all of CME's business on to Google's platform. We're the only exchange in the world that's gotten to this point. Google invested $1 billion in CME. They saw what I saw as far as the future goes. This is going to allow my clients to do so many different things with that technology, whether it's rates related or any other products, foreign exchange to test those products in a simulated situation so they can better manage their risk and get those products out there for development. So it's an exciting time for us. The moat that we've built, people also don't talk about is the options business. Options on futures, those are strategy trades associated with risk rates. When you do strategy trade, this is large pools of open interest that don't know we traditionally move very easily. So again, I think this is a big part of the moat of CME, but this is years and years of working. And I know people have talked about, well, that means CME needs to lower the rates as a competitor. Okay, so we have done so many things, as I've just referenced, to make sure as competitors come and they do come, then all the time that we are prepared, and we're not just prepared because of this announcement. We've been prepared for years and will continue to be prepared.

Got it. I want to ask you some more on this kind of topic, but maybe just on the DTCC, you mentioned ability savings. Where are you in the process? What does that look like in 2, 3, 4 years? Is there a lot more kind of room to go there as more partners kind of join that partner or more of your customers join that partnership? How does that evolve?

I think it continues to evolve. We've had probably 10 to 15 participants who are enjoying that $15 billion of efficiencies today. I think many more will be continuing to get signed up in and again, to achieve the efficiencies. Where that ultimately goes to as far as the number, I'm not quite sure. So I would be just guesstimating at best to see where it's at. But to show that a handful of participants can generate $1 billion a day is very powerful. And we haven't even gotten some of our largest clients on this yet. So it's coming a long way.

Got it. So maybe moving back to the competitive discussion. Your competitors talked about having cross margining agreements, allowing investors to cross margin futures with LCH cleared interest rate swaps. So to what extent is that perhaps a threat, the sort of pool of swaps, collateral at LCH? And maybe could you talk a little bit about the nature of futures trading. So as you see it, how much futures trading is related to the hedging of interest rate swaps versus broader portfolio and risk management, speculation on set activity, things of that nature?

Well, first of all, I think when you look at the hedging of swaps, referring to the London Clearing House dollar-dominated swaps portfolio versus CME's dollar denominated swaps portfolio. And we achieved, as I said earlier, $7 billion to $8 billion a day of that. We just transition, as everyone in this room knows from one benchmark being LIBOR to another benchmark in the U.S. being SOFR, the secured overnight financing rate, very difficult hundreds and hundreds of trillions of dollars benchmarked to LIBOR that needed to get moved to something else because it was going away. And we've achieved those efficiencies with our SOFR futures and our dollar swaps portfolio offering to that number. So I guess I would ask the question, as I said earlier, in a very capital-intensive world that we live in, why in the world would you not take advantage of portfolio margin or margin offsets between swaps and futures and not have -- if you have a swap -- or futures position open today, why would you not move your swaps that you have to offset that? And that's what we are seeing. So to say that the swaps portfolio is larger at LCH falls under no kidding, we get it. But it doesn't mean that you need to have the largest swaps portfolio in order to create the efficiencies. You need to have the size of whatever that futures market is, it creates the efficiencies for those swaps, not how big this is, is going to manage how big the futures get. It doesn't work that way. There's so many futures contracts that will get the efficiencies and the market is what it is. And I think people are achieving that today as this market has grown to the largest market in the world. So we are seeing that today. So we have those offsets. So I think when my competitor says that they're going to have this gigantic large swaps look at LCH, which gives them an inherent advantage, I would have to ask the person in this room who's managing an interest rate portfolio. Why are you not achieving that portfolio margining at CME today? The answer is, they are. And if there's another futures contract that needs to be opened tomorrow, they will also be doing it at CME to benefit that risk offset because it's the only place in the world you can get it. So it doesn't go by the size of the swaps book, it goes by the size of the futures book to get the offsets. And the second part of your question was?

I think you covered it. Another question, sort of same topic. You mentioned earlier the thoughts on competition around price. So again, your competitors indicated they're willing to compete aggressively on price tick size. And how do you think about responding in that regard. We've talked about the inherent moats of the business. What about -- and again, I'm sure you're not going to disclose any ongoing conversations, but how do you high level think about responding tactically?

Well, again, doing what I'm doing, what I said just a moment ago, I think we create efficiencies for our participants, and I think that's critically important in the world that we live in today. So being around for 180-plus years, 170-plus years in the Board of Trade. And CME in 1898. We have a lot of experience going through this. The Board of Trade started the U.S. Treasury futures market. Again, we are going to continue to monitor work with clients. I think we're 1 of the more customer-focused institutions as far as exchanges go. And as far as tick size, you're going to compete on that tick sizes move all the time. I mean that might be the easiest thing in the world to do is the tick size. So that's not a competitive advantage for anybody. And if someone says that is, they just don't understand the market because we can move -- we move tick sizes all the time. It goes by what the client wants. There are certain constituted clients that want a smaller one, some want a bigger one. you have to find the sweet spot that meets everyone's needs. And that's what we try to reach in every day. So we don't compete on that because it's so easy to move. So that's not a competitive advantage. The other advantage on pricing, again, I'll say it, and I'll say it again, the smallest cost to any participant is the cost you pay for that transaction. The largest cost is when -- in the bid offer. If the bid offer starts to lighten, that cost is dramatically higher than whatever you're going to charge a participant to trade on CME Group or most other exchanges. So that's a fool's errand to say that you can charge less and do better because if the spread is wider, I guarantee is going to pay multiples or whatever the exchange cost is for that trade.

Maybe one last question on competition. Just on the BrokerTec side, as a business people lost some shares since you've acquired NEX several years ago. And how would you describe what's happened there? What's your view on the importance to BrokerTec to the broader CME franchise?

It's important. But when I did the transaction with Michael Spencer at NEX, I was looking at having cash and treasury and futures on a single platform, seeing the benefits of it. But to be brutally honest, one of the things that I saw that I still believe in today and I am not hidden this is, I truly believe that more and more people are looking from the cash markets into the futures markets for the efficiencies that futures give them today and the ease that they can transact and the openness, the central limit order book, things of that nature. So yes, we have lost some market share on our cash platform. But look where we gained the market share. We gained it in our futures contracts, on the treasury side. So to me, it goes to show that when we were looking at the futurization of cash to futures is actually panned out dramatically, and has been happening ever since if you look go back to Dodd-Frank when Dodd-Frank was passed in 2010, in the futurization, in the future from the cash markets continue to accelerate. So to me, this was just another acceleration into our futures complex. Again, we lost some of the business to be brutally honest to streaming because the market got -- as we all know, the market was very static for a lack of a better term, the volatility was not there. So the streaming platforms did quite well. We were integrating the platforms at the time, and we did not have the streaming like others did. So I think FMX and some others in the streaming side did better than we did, obviously, we lost some, but we lost them to ourselves, which is not a bad thing. As I said, we lost it to our futures complex. And I think that's important because I think it will continue down that path.

Got it. Maybe one last question on the rates franchise and we'll talk about the other parts of the business. But just on the cash treasury side, you filed an application to centrally clear treasuries, probably it's going to be some time before we know the outcome of that process. But maybe just talk a little bit about why you did this and what advantages CME might have, what role you could play here?

I never like to forgo an opportunity. I don't know -- when I filed for this application, I don't know what's going to happen come 2026 in this marketplace. And I'm certainly not going to wait for my participants to find out come 2026, if I should have an application in place or not. So I was the first one that raised my hand saying, "I am going to file an application." And the second thing I did was I called DTCC, and I remind them how much I appreciate the partnership that we have today, creating the efficiency we have. And I think they will be the incumbent. And they are the incumbent. And I think they will prevail in this marketplace. But I don't know if they're going to. And if they're not, I want to make sure that I'm in a strong position to do so. Right now, the investment into this is very small for CME, very, very small. So to me, it's a free option, but I really believe that the benefits is what I am achieving today. You asked me about the growth of the offsets with FICC or DTCC earlier. I think that's going to continue to grow. And I think ultimately, DTCC will be the prevailing clearinghouse to clear cash treasuries. It doesn't mean that the rest of us won't open these up, and we are. So again, what's the opportunity? Not sure. I think, again, it's a free option for CME, but I'm going to make sure that I'm not doing it come 2026, I'm doing it now. So I am ready once the mandate goes into place which is in 2026 by the SEC. So I didn't write the rules, I didn't push for the rules. I didn't do any of the above. But at the same time, I want to make sure that we're always prepared.

Understood. Okay. Let's move to some other parts of the business. The energy complex is growing quite nicely. It was up, I think, 22% year-over-year in August. Maybe just high level again, what's sort of been driving the strength here?

I think the energy complex, as I referenced earlier, I don't think we've ever seen some of the geopolitical factors we have that we'll talk about what's going on in Russia and Ukraine, but I mean that's got everybody really nervous. And then -- you look at what's going on politically domestically here between policies, President Biden and what his policies were when he first became President and maybe where Vice President of Harris' policies are today, they seem to be a little bit different than where they're at. And then you look at where President Trump is where he's been all along, which is to become more and more energy independent here in the United States. We are one of the best producers of energy in the world already today. So again, I think we are in a very strong position with our energy businesses. I think the volatility, I think there's people that got to priced at 120, there's people got to priced at 40. And unfortunately, for energy, we've been sitting between 70 and 80 for almost 2 years now. We started to break out to the downside just last week when we took down, I think, 66 or 67 on [indiscernible] might have got just below 70 upticked a little bit today. So I think it's pretty interesting right now because we're doing a lot of volume in a very, very small range where traditionally, you don't do that in a debt type of a range with [indiscernible]. So I think the market is looking to find a place where policies will dictate what the new price levels are? Are they much higher? Are they much lower? I don't know. But I know one thing. They don't stay static forever. So I think they're going to continue to move, and we continue to distribute our products around the world.

Got it. Maybe honing in specifically on WTI. So can you talk a bit about what you've seen since WTI was added to the Brent index. And I think in the last quarter, you talked about WTI trading from European customers, and particularly, I think, up over 40%. So -- how do you see that continue to evolve? And how would you describe your kind of ongoing sales efforts in Europe. I have a bunch of questions, but I think all kind of related to each other.

Yes, Europe is strange right now. I mean, I think that joining -- putting in the basket was good. It gave European producers the opportunity to take a deeper look at CME's West Texas Intermediate contract, which is the deepest most liquid West Texas Intermediate contract. Intercontinental Exchange also has a contract, but they've been pretty static since 2008 when we acquired NYMEX. Not much has changed there. . So we see that market, but it's given us an opportunity to get some European clients. I think what's disturbing a little bit is when you look at Europe, just in general, energy included, how are they going to continue to get their energy? Who are they going to get their energy from. And then when Brexit happened, this is a classic situation where 1 on 1 might have made 3 with the union now when you've taken these 2 apart with the union in the U.K. I think it's hurt both the union and the U.K. So the question is, what does that mean for energy prices? What does that mean for a lot of things over there. So I find that really interesting as far as the dynamic that's set up over in Europe. The least is probably the energy, but where they get it from, where they continue to get it from? What's Russia's role in this? How do people treat that? You get cold, your mind changes, when it warms up, maybe your mind feels differently. So I don't know it's going to be really fascinating to see how this all plays out.

Interesting. What about on the Henry Hub side, you kind of mentioned where is the -- the energy coming from in Europe. The U.S. is becoming an increasingly important exporter of natural gas. How do you think about the correlation between production and consumption and hedging? Like how does that all translate into volumes on CME, what's kind of the outlook for that product?

Again, I think the hedging component, you always think what does it mean for future volumes. You have to look at the open interest right now, CME has about 80% of the Henry Hub market, and we've been very dominant in that and that's been a static number between 83% and say, 79% over the years is sitting around 81% today, and the options is up significantly, 66% up in the options growth on Henry Hub options. Again, these are strategy parts of the trade, which I think are really fascinating. People are looking at this natural gas and what does it mean for the future, not just for the United States but for the world. So we got the LNG contracts that are -- listen, these are interesting contracts, but they're difficult to move. They're very expensive to set these ports up there in order to ship this and to liquefy it and to ship it across. But again, I think hedging is going to continue because of the volatility in natural gas because it seems like we're shipping more and more into natural gas. And then when you look at some of the policies, as I said earlier, geopolitical for the folks that live in Pennsylvania. I mean we've already seen the fracking argument getting switched around a little bit. So it will be pretty interesting to see how this all plays out.

So speaking of demand for natural gas, AI has been such a big story this year. And we're hearing on our side from like electric utilities talking about increased and low demand growth over the next 5 to 10 years versus flat for the last 20 years, driven by demand for electricity from data centers, which -- a lot of which is going to be powered by natural gas. So how do you think about that as an opportunity? Do you think this could be a material factor in terms of at least demand for energy products, which again could [indiscernible] hedge it is?

If it is, Ben. I think it benefits us because as I said earlier, the percentages that CME enjoys today, with natural gas. The question is, why I think hedging is going to be really critical and natural gas with AI is because we don't know what it mean yet. We don't know what the capacity is going to look like for AI. We all hear about it. We like NVIDIA go up for 12 months and then down for 3 days, which was pretty teeth-rattling to watch that little game. But the point is we don't know what AI capacity means yet, which tells me that you need to hedge this more now than ever if you believe that the data centers are going to be driven with AI by natgas. And if that is truly the case, we haven't seen the regulations. We haven't -- no 1 -- I don't know if anybody really even understand this stuff from a congressional standpoint, what kind of rigs are they going to create. And as we all know, when Washington talks, the market goes this way, then it goes out, we really quick because the ideas are so far crazy, both ways and then they got to work themselves into a middle and that takes quite a long time. So I think -- when you look at what AI is going to mean as it relates to the power associated with it, I would not want to be unhedged in that marketplace because I think the volatility could be fairly dramatic back and forth. So I think it's an interesting story. And I think it bodes well for people that are in the business of managing risk of natgas. But I think when you talk about it as far as AI, again, it's going to be really hard to predict because I'm not quite sure -- people are saying, AI is going to be 10x bigger than the Internet or it's going to be 10x smaller than Internet. I think you could argue either side equation. But the point is the regulations, we don't even have the good regulations on the Internet yet, and we're going to have regulations for artificial intelligence. That's going to lead to what the capacity issues look like. How much do you want to invest? Right now, data centers are doing they're popping up all over. People want to invest in them. I get it. We have a huge one. We're building a new 1 with Google right now. This is the bespoke data center just for CME. These things are expensive and they're big. I don't know what the future is going to look like. Maybe technology says we don't need the data centers for AI. Maybe AI will tell us we don't need it.

All right. Perhaps shifting maybe quickly to the metals complex. You've also seen very strong growth here. What's driving the strength there? It looks like there's certainly been some share gains versus competitor, but do you think this strength continue. It looks like it's been happening in kind of your core products as well as some newer ones?

I'm not a gold bug, but I own gold. I think this stuff is fascinating. And I'm not a Bitcoin person, and I don't own Bitcoin, but we list it. I think, as I said earlier, with so much uncertainty, what's going on with our debt. And when you look around about how do you protect your assets, whatever those assets may be, people are looking for multiple different hedging vehicles to do so. And I think metals has finally got people's eyes on them to a point where they become a little bit more mainstream. I think people were very distracted with crypto over the last couple of years as that was the replacement for gold as a hedge against not only inflation, but a whole host of other issues, including -- if the U.S. was never the reserve currency, what would that mean for us? There's a whole host of issues out there. So I think metals I don't think that trade is going away for a while. And I'm not saying the price is going up or down. I just think people are going to keep a very close watch on both the gold -- precious, especially gold and silver. And then as it relates to the other market we have, which is Bitcoin, I don't know if you're going to talk about Bitcoin, but I'll just make 1 reference about it. When you look at Bitcoin, and I was sitting in my office the other day, and I'm thinking about the whole premise around crypto. And after I had that run in with Sam Bankman-Fried several years ago, I mean, quite an interesting character. But I will say that since Bitcoin, and we've all gotten over a little bit more, it seems like the story has always been what's next, what's next. So what's next is CME list futures on Bitcoin in 2017, bam, validated. Okay, what's next? We're going to have potentially an ETF on Bitcoin. Great, bam, what's next? It seems like the price is trying to be accelerated by the distribution of the product to the masses to whether it's fidelities or whoever is offering it today at more of a mainstream. So I like to ask the question, what's next, if that's the case. It's kind of a bizarre because it seems to me, if you look at the pattern of what's next as far as a hedge, it's been about the access to the product. Where is the use case for the product. Give me the use case like you gave me the access case. The access approval case has been proved out now over the last 8 years. Give me the use case now for everybody in this room on a daily basis. Is it truly a hedge like gold is and silver? Or is it something separate? So I think it's an interesting dynamic going on with those 3. So I think the -- why tied Bitcoin to your question because I think it ties in with the metal straight.

Interesting. Well, if you feel like sitting around til tomorrow, we've got Mike Novogratz from Galaxy Digital, if you want to hear him give his view, but that will be the use case. When you talked about increasing access I've heard you say in the past you think there's a meaningful opportunity to engage with retail traders, for retail traders to increasingly engage with futures. Now can you expand on this a little bit? How do you think the potential launch of futures on Robinhood could impact the business later this year? And what does the product road map look like for CME? Does this sort of necessitate the evolving of more E-mini's products? How do you guys kind of think about approaching this?

Underline Robinhood because I want to get back to that, and I don't want to forget it because I think it's important. So let's talk about retail real quick here and what does retail look like going forward? Because I think this is the most fascinating topic that I've seen in a long time. Traditionally, we've all looked at retail as whatever the fad of the day is. So whether they're bell bottoms, now we're going to go to skinny genes because bell bottoms are out. So retail is done again. It will come back just wait a little while and it will come back again. And that's kind of been the dynamic of retail, right? I have everybody we talk about retail and then it goes away. And we thought retail and it goes way. You look at the proliferation of technology today. And if you look at the people who are going to be controlling the financial system as we know it over the last 10 years -- over the next 10 years, those people are probably anywhere between the age group of 25 and 40 at max right now. They're going to be controlling that. They've been born and raised with different tools than what I was born and raised with. And I think that they are going to continue to take the tools they've learned and apply them themselves at a different cost basis than hiring somebody to do it. No disrespect to all the money centers out there and the investment firms. But it's just a fact that when you can pick up your phone and you can have access to anything you want, and artificial intelligence, we talked about a moment ago, everybody is going to have access to the same information at the same time. The only difference is going to be how much money do you have. So if I'm running $1 billion and you're riding your bike, delivering a pizza. We're going to have the same d*** information. The only difference is I'm going to be able to outlast [indiscernible] because I got more money. But the information flow is truly amazing. So I think the future for retail and when you look at institutional, it's going to become blurred at some point, and it's going to be an even larger financial system because of that. We lost so many people after '08 in the financial world because you know what, nobody want to be in financial services because we were looked at as a bunch of criminals. The market has now evolved into a different place. And I think the retail and institutions are going to clash and I think they're going to grow. And I think people are going to be the masters of their own domain, and they're going to drive this. And I think it's a massively exciting component of the financial market and the market in general is retail. Hence Robinhood, let's talk about Robinhood. They're going to open up roughly probably 100,000, 125,000 futures accounts that trade use futures. Why is that? Well, you look at their business plan today, Robinhood has a couple of things that they do. They obviously, they have payment for order flow, which people buy their flow. And then they make money on the vig. Everything else is, hence, the name, right? Robinhood is free. Well, it's really not free because you're selling your -- the flow to somebody, so you're making money and how are they making money so we can all optimize that. But the point is Robinhood is a very interesting proposal going forward. The question is, what are they going to do to be sustainable for the futures. And we've seen the volatility in their own stock going forward. So I think they're going to look at -- when they look at my world of futures then, I think they're starting to understand the better, and I think they're seeing greater opportunities in that world compared to either making money on the vig or making money on payment for flow. Those are 2 things that could fluctuate dramatically and they have on them. So I think they're going to continue to grow, and that bodes well for the retail story than which I was referring to earlier. So I kind of tie all that together and this is where the world wants to go and I think it's really -- I'm speaking at Georgetown next week, and I love speaking at universities because every time I do so, I don't like to go up there and talk to them as a 66-year-old guy that's been in the business for 42 years and say, this is how it should be done d*** it, and you should do it too. I would like to get ideas of from these people, and I've been doing this for years. I absolutely find it fascinating because every generation thought the next generation is a bunch of idiots. But if you look at the world the way it's at today, where we've gone up and to the right forever, and that's a really strong point. And I think the younger people today, whether they're going through Robinhood today or doing different retail participants, they're going to take this world up into the right, the problem is there's going to be bumps along the way, just like there has with every other generation, but a fascinating time, for Robinhood, fascinating time for retail.

Very interesting. All right. Maybe switching topics, M&A capital allocation. So there's some, I think, media reports a few weeks ago that CME and S&P might be exploring the sale of the OSTTRA JV. I don't know if that's something you can speak to, but is there anything you could share about that? And then maybe any broader thoughts on M&A potential divestitures, pieces you'd like to add?

So real quick, just so you folks know OSTTRA, which is the dumbest name ever, but whatever I didn't come up with the name. OSTTRA is a combination of our back-office services that we acquired from the NEX businesses. So all the different TriOptimas and Tris and all that, we put them together with IHS and we created a joint venture. This was 1 of those situations where -- it was a very commoditized business. When we acquired NEX, we were not looking at these TriOptima and the rest of the OSTTRA business. So we are looking at the cash businesses, as I said earlier. But anyway, these are good businesses. but they're fairly commoditized. But when we did the deal with IHS and then subsequently, they were acquired by S&P Global, 1 on 1, I go back to my European and Brexit example, 1 on 1 with this business turned into 3, and it was the first time I actually could see these businesses starting to come alive again when we put them together. So the efficiencies have even got greater and greater. So there's been some speculation that we may be looking to sell these businesses. I'd sell it. The price is right, but I don't have to sell it. So I don't normally talk like that about anything as a public company CEO [indiscernible]. We don't need to have them, but they're actually doing fine, and we don't need to sell them. So I think it's pretty interesting. But there was reported that we were looking to sell them. So that's where that's at. Not doing either or right now. So as far as capital allocation goes, listen, CME has been a dividend paying stock. When I took CME public not knowing what I was doing in 2002, and I said I wanted to pay a dividend, everyone says you're not a growth stock. I said, why am I not a gross stock if I'm paying a dividend? Well, you can't be both. I said, okay, I think we can, but okay. We've walked our dividend up to a point, as you know, and we paid a tremendous amount of -- billions of dollars of dividends over the years, got a variable dividend and has been quite successful on free cash flow. We also did it during the time, as we all know, I talked about it a moment ago during Dodd-Frank and the interest rate is sitting at 0 for a very, very long period of time. So to get the yield of CME made a tremendous amount of sense. This is it always makes sense to have the same structure. I think you have to look at the market in general. So I think with the rates where they're at today, and we are evaluating how we should be returning capital to our shareholders. We like our dividend policy, but it doesn't mean that we're not entertaining or talking about some kind of conversion into a bit of a potential share repurchase to some degree or not. Don't know. We haven't made that decision. I'll walk through with my Board. When the time is right, but we're open to that type of discussion. And the only reason I'm open into it because I think the rate market is different than where it was over the last 10 years. And I think that would make prudent sense for the people who own CME. And that's my job is to do the right thing on behalf of my shareholders.

Understood. Pivoting again to the technology aspects of the business, which you kind of weave throughout the conversation. So on the Q2 call, you talked about taking the next step forward with the Google partnership, building this new colocation facility in Aurora, Illinois. Maybe talk a little bit about this project and the long-term benefits for CME from a cost saving [indiscernible] perspective?

Interesting, interesting proposal. The Google has never built a bespoke data center for anybody. They're building 1 for me. And when I say bespoke, it's going to fit CME's needs, which is really interesting to think a company the size of Google, who traditionally builds the cookie cutter type data centers for all their clients to come in there and do business with. They're building a bespoke 1 that fits my needs and my clients' needs for colocation and things of a nature that fit markets. I think they really are starting to understand markets quite well. And I think they're looking at this as an opportunity to be introduced into a whole host of new clients to the financial services industry by partnering with CME and bringing this bespoke data center. We're excited about it. It's literally right next door to our existing ones. So the cost will be basically nothing to move it over. We -- we said from the beginning when we did this transaction with Google that we would help facilitate any kind of transition for our clients. That was part of why Google investing us. We're going to use some of those monies to do so. So we think we're also with the way the markets are moving so fast and technology is moving so fast. They have proprietary technology and not have the capabilities and abilities of the cloud and big tech is almost going to be potentially a thing of the past. So we need to make sure that we are on the cutting edge. We think Google is. We love our partnership with them. And I think it's going to be an exciting time because they are really embracing markets. We're going to be able to go to market with new products in a matter of days where it could be a matter of months in today's world on your own proprietary technology. So it's exciting. And you'll know if things are working or not pretty quick. And I think having Google as our partner will bring dividends to CME for many years to come, and I think we'll be bringing dividends to Google as well.

Maybe just weaving AI back into it, uses within CME, how is Google going to help? Is it a cost save, top line. How do you think about deploying it internally?

We're using it now. We're using it very discretely now with a handful of our people just on a test basis with Google's technology of AI. It's fairly fascinating according to my folks, and we only have like 6 or 8 people that we've got authorized to use it. But the things that you'll be able to do as it relates to markets, I think we'll create massive efficiencies for the users. And listen, I keep saying this in a capital-intensive world, you have to figure out how to take $1, make it look like $5 and take the risk of $0.75 because you cannot introduce more risk into the system, but you have to introduce risk our leverage into the system that goes further because of the advancements that you can do by risk management and technology. And this is another example how I believe that Google can do that with us with our risk people. And that's the beauty of the model that we have at CME.

Fascinating. We've just left with a minute left. Maybe 1 more kind of last random topic. Just coming back to kind of your product suite, the S&P 500 futures, we talked about kind of energy. We talked about rates. Kind of coming back there, a similar question, what are you seeing more recently. One of the other kind of concerns we've heard about is competitive dynamics with the options franchise at your other Chicago neighbor, thoughts [indiscernible]?

[indiscernible] has done a great job. Done a great job. I don't know if Freddie is here, he was here this morning, Freddie Thomas, good guy. And I think that when you look at the 0 dated options is what you're referring to, 0 dated options are not something that are new. It's been a very retail-attractive driven product. And I think when we compete with that product, 0 dated options at CBOE, just so we all know they settle into a cash settlement where CME's 0 dated options settle into a futures contract. We've heard loud and clear that some of our clients would like to see that go into a cash product, and that is more retail-focused versus institutional focus because the institutional focus, they would rather have the futures contracts. So we're looking to have both, and we will apply to make sure that we can have that. But it's basically -- I think when you look at the market share today, it ebbs and flows, and I talked about it earlier, retailers continuing to grow. So we want to make sure we're a part of that. We want to make sure we can offer it to them. But at the same time, I don't ever want to lose my way as far as my vertical goes with my institutional client base. And we'll continue to focus on that, build on it, at the same time, get our retail going. So I think our market share has gone back and forth, but interesting times as far as 0 dated options. So they've done a good job.

No doubt.

Yes.

Anyway, with that, we're out of time. Terry, thank you so much for [indiscernible].

Thanks man. Appreciate your time.

Appreciate it.

Thank you, sir.