Intercontinental Exchange, Inc. (ICE) Earnings Call Transcript & Summary

All right, we are live. Good morning for at least another 20 minutes here in Eastern Time zone. I'm patrick O'Shaughnessy, the capital markets analyst at Raymond James. Up next, we have Intercontinental Exchange, and on their behalf, we have CFO Scott Hill. Format for this is going to be a fireside chat Q&A. Feel free to use the chat functionality of your online console. You can submit questions, I will try to integrate them into the conversation as appropriate. And with that, let's go ahead and get started. So Scott, good morning.

Hey. Good morning, Patrick. Thanks for having us. As you were saying in the earlier session, it would be nice if we were in Orlando in person, but this is always a really good conference for us. So thanks for having us back.

Great. Well, we appreciate you making it, I think, especially in light of yesterday's press release. So why don't we start there? The news came out yesterday that you're going to be retiring as CFO in May. What can you share about your thought process behind this announcement and the timing?

Yes. I think the most important thing I'd want to share is it's been a very thoughtful process and a conversation that Jeff and I had been having for a long time. I've got 2 kids, a son that's in graduate school in Oxford, and a daughter who turns 18 today and is graduating from high school this year. And I had told Jeff about 2 or 3 years ago that I really would like to have been in a position to be done for her senior year. She's a basketball player, I didn't want to miss a game, didn't want to miss events. Fortunately, this one positive impact of COVID is travel has really been restricted, and so I was able to kind of continue in the role without the travel. We -- when we first started talking about it, we weren't thinking Ellie and we did the Ellie deal, and I thought it was important that I stay around and make sure that we had the capital structure well in place and that we had a good, clean path to the delevering that the integration for the corporate functions was heading in the right direction. And so in close consultation with the Board and with Jeff, I'd kind of indicated that this was when, professionally, I wanted to be done. And it is professionally -- this -- I thought 14 years ago, when I met Jeff, I was interviewing from my first CFO role, it turns out I was interviewing for my only CFO role. And it's been great. The fact that a large portion of our compensation at ICE is in stock. And if you look at the stock from '07 to where we are today, that's allowed me to make this decision at a relatively young 53. But it's just a good opportunity for me to move on to what's next. And frankly, immediately, over the next couple of years, we're building a place in Texas, and I'm going to go back home and learn to be a cowboy, maybe do a little guest lecturing, maybe join a corporate board or two. But I'm done in the C-suite because I just -- there would never be a better job. I could never have a better partner or boss than I did in Jeff. And I just -- I don't think there's a better company out there. So it's something I've always wanted to do, that the timing from a family standpoint is right. And the adventure at ICE has been awesome and, financially, has put me in a position to make the decision. And the Board and Jeff have been extremely supportive in doing so. And then the last thing I'd say is it's been awesome. We conducted a comprehensive search looking outside, looking at colleagues, at senior colleagues in the company across the business, and then within my team. And one thing I'm really proud of is the fact that we've gotten Warren to agree to step in behind me because he quickly established, early days after joining ICE, that he fully got the culture and he lives and breathes it. And he knows our space, has been an integral part of all our M&A discussions, our finance and accounting matters as we've worked on resegmenting and communicating. So he's an outstanding person to fill in behind me. He will bring great continuity to our CFO team. He is well-respected among the senior colleagues that run our businesses. And I just think it's great that a company that, when I joined, was 300 people and is now 10,000, is able to look to its bench for the future leader. And so really proud of Warren. And really fortunate, as I'll be a long-term shareholder of the company, really glad he's the guy stepping in behind me.

That's really helpful. And congratulations to you and to Warren. And Warren's a reformed sell-sider, so there's hope for all of us.

We've broken him of that.

So kind of shifting gears to the business here. Obviously, when we met a year ago, you hadn't bought Ellie Mae. That was a big acquisition in the past year. That's enabled ICE to really create a scaled mortgage technology provider. Why is ICE the right owner of that asset? And how is the revenue and earnings opportunity for this business improved by ICE owning it?

Yes. It's a really good question. I think if you look at what the company is today, it's a far more diverse business. We've strategically expanded the markets we're in. But if you look at what we do, what we do is we own and operate critical financial networks. And we bring great technology to those networks to make them more efficient. We put proprietary content into those networks to facilitate the activity in those networks. And we harness the data that emanates from the activity in those networks to make them stronger. Jeff started the company doing that in the energy space, we moved and broadened into the commodity space. We then subsequently have moved into the fixed income network. And really the pricing around that network and the move into indices and related fees in those businesses. And when we looked at the mortgage space, we felt like it was an example of another network that lacked automation, that was kind of old school. And what it needed was it needed better technology and it needed the ability to harness all of the information within that network to become more efficient. But there wasn't anything out there that really did it end-to-end. We had -- our first investment was in MERS. And that really, Jeff's referred to it, is kind of the clearing. It's the final settlement. It's where the mortgage sits. It's the DTCC of the mortgage. It's that golden record. And as we rebuilt the technology at MERS, we started to get a sense of the inefficiencies that are in the mortgage space. And we, to some extent, from the real end of the process, started to swim upstream a bit and swam next to Simplifile, which was a way of electronically filing the mortgage in counties. And the value of that business, I think, to us, it was clear when we made the acquisition. But I think it became even more clear to the market in the middle of COVID. When you had people meeting in parking lots to sign mortgages and throwing pens out the window when they were done. And then once that was done, you went down to the county and there's nobody there. And so you can't file it. And so you've signed it, but it's not filed, it's not official. Simplifile has spent years. As Ben likes to say, they've been paving all the dirt roads in the mortgage space so that it can efficiently get to the counties. And in a world where the clerk isn't there or you don't have somebody at the law firm who can print out the docs and run them down, you can push it in electronically. And that then also gave us the opportunity, because Simplifile is a partner in the expansive Ellie network that's a critical part of that solution. And so we could then see further upstream. So we knew what it took to kind of get the record into MERS, to get the record into the county. And we knew that a lot of the records that made its way down the production line weren't able to do that efficiently because they weren't electronic, they weren't amenable to those processes. And so again, our thought was, "Why not put everything together?" Really put together, stitch together an end-to-end network where it starts with somebody who wants a mortgage, that loan gets originated, attached title insurance and flood insurance and consumer product pricing engine, and then flow it into the county and then put it into MERS. And that's where we felt like we could bring together the technology road map because it's what we're good at. And we can harness the data within that. And the data in the mortgage space today is largely 60, 90 days old. We see -- I know today, what's going on in applications. I know today, what's going on with interest rates and how that's been trending. And that type of information will facilitate the necessary automation that goes on in the industry. And so our core competencies of technology, of harnessing data, we all thought were critically important to an end-to-end solution that will allow the $8,000 cost of a mortgage to come down by at least 30% over time, will allow a mix of $5,000 of people-related expense versus $500 of technology expense to completely flip. And as we gained share and as we're able to capture some of that value, we're going to take $1 billion business and double it. And so we think the core competencies we bring with the established position Joe and the team at Ellie had built with Encompass and the associated network were the perfect combination. And we're really excited because we're seeing the positive results of that already, not just in the volume environment, but look at the annuity numbers, up 30%. That's people moving on to the platform, valuing the network. That's the key measure to watch, and it's why we believe, regardless of what happens with volumes over time, this is a business that can consistently grow.

Got it. And after buying MERS and Simplifile and now Ellie Mae, do you feel like you have the entire capability set that ICE needs to succeed in the mortgage technology space? Or is there still some filling in to accomplish?

It's a great question. And Patrick, you've followed us for a long time, and you've seen kind of our playbook. And the playbook has been, make the big move into a network and then make the network better with better technology, with better content. And we've done that through a mix of organic and inorganic. And so from a big picture standpoint, we have the end-to-end solution, right? We have from the thought of I need a mortgage to the mortgage is done and it's recorded in MERS, end-to-end capability. We have the ability and are developing the ability to electronify that, to do an e-close, all the way from, it starts as an e-note and it goes all the way through as an e-close. Again, not 4 pieces that you kind of work your way through, but one seamless, end-to-end solution that we'll be rolling out. Within that, I would be loath to tell you, after owning the business for 6 months, that we've got it all figured out in terms of what the content is and what the technology capabilities are, and whether or not we can build it or maybe we need to buy it. I'll give you an example. We thought about e-notary, which is an important part of e-close. We evaluated it, should we buy e-notary or should we build e-notary? And what we ultimately decided was we can build that, and we can do it quick and we can get to market fast. And we were able to evaluate the alternatives because they're on our network. And so we've got this unique visibility into the M&A space because of the thousands of -- or nearly 1,000 partners that are on that network. It allowed us to look at, for example, Optimal Blue. And ask ourselves the question, "Do we need to own that product pricing engine?" Well, as it happens, we ultimately concluded, why pay a massive multiple to buy that business when, guess who the #2 is? Ellie. Ellie is the #2 in the product pricing engine. Let's just build and make that better. And so the large -- if not all deals in Ellie's history, the vast majority of deals have come from looking into that network and saying, is it more valuable to just partner and do a rev share? Or to build a competitive offering? Or to take that competitive offering out through M&A? And so as we think about M&A moving forward, which is kind of at the heart of your question, similar to what you've seen in the past, where we did the IDC deal and we bought [ SPSE, CMA ], we bought the Bank of America Merrill Lynch indies and we added content and we established the exchange in the clearinghouse early days. And then we bought the ag markets and we bought life and we added the content and improved the technology with things like Yellow Jacket. That's going to be the approach going forward. So big picture, end-to-end, we have the assets we need, but I'm confident there will be -- that strength will be supplemented organically and inorganically as we move forward.

There's always more. And as you're building out that B2B mortgage origination network, how confident are you, whether it's the software or the network or other factors, that this business, mortgage technology, is a business that ICE is going to enjoy a durable competitive advantage?

Yes. So I think, again, it goes back, Patrick, to what I was talking about earlier. I think the durable competitive advantage is the strength of the end-to-end nature of the network, right? It's the Encompass platform, for sure. It's the great technology that underpins Encompass, the efficiency of it being a cloud-based solution. But then it's the network that attaches to it. The unmatched network that attaches to it. The nearly 1,000 partners that offer all of the services you need around the loans. And you see that in the fact that many people that use that network don't necessarily -- they aren't Encompass customers. Many are. Through 2019, Ellie had 44% share. But we also -- Rocket is a user of the network. And there are other peers that use that network because of the value embedded in it. But it's unique. That network is uniquely constructed within Ellie and will be really difficult for others to replicate. And that's where I think the competitive advantage lies. And so it's also why we're excited about -- so at 44% -- we don't have 2020 numbers yet, but I'll use the '19 numbers. At 44%, there's another 20% to 25% share of independent mortgage brokers. And our pitch to them is not we want to take business from you, it's we want to take the technology headache away from you. And you already use our network, come use our platform. You can originate here, you can attach all this, and you can do more of what your business is, which is write mortgages. And so you do well and we do well. And again, that's embedded in that annuity growth that you've seen over the last couple of years. Those are new customers doing more activity. And then what happens, the multiplier effect, is those same customers generate transactional revenue by attaching in the network, they generate transactional revenues because above their minimums in high-volume periods, they're writing more mortgages. And so we're excited because of the strength of the network, and again, the unique position we put ourselves in to have it end-to-end. And I think it will be very difficult for anybody else in the space to bring together the end-to-end. And then just one last point on that, that you'll probably remember on the deal call, we were asked the question, hey, what about some of the larger banks? We know some of the regional banks, et cetera, are on the platform. What about some of the larger banks? And at the time, we said that's kind of not on the road map. We've got really good relationships, but not on the road map. But the reality is that's pretty quickly moving into the road map because we've gotten calls where, again, just like those independent mortgage brokers, a number of those banks are saying, "It's not any longer strategically important for us to try and distinguish our technology. That's not where we're making our money. And so why wouldn't we use something that's a little closer to a utility or an industry standard? And it seems like you guys have that. Let's have a conversation." And so I'm encouraged because, again, that wasn't a part of our business case. But given the strong relationships that we have at the top of the house and the number of these, Wells and Chase and Bank of America, I do think that -- again, that's not going to drive growth this year and it's not going to drive growth next year. But in a world where we said 8% to 10% for a decade, it's nice to know that those types of opportunities also exist because of the strength of the network.

It's really interesting, it kind of reminds me in some ways of Broadridge and what they do as a utility for post-trade processing for the big banks.

Yes.

So I mean, you spoke about the annuity revenues. And certainly, I think people generally are buying into the long-term growth thesis for this business. But you do have rising interest rates. There's a challenging comp for refinancing activity that you're going to come up against in the back half of 2021, at least from an optical perspective. So how are you thinking about the puts and takes of market share gains and other growth drivers versus a more challenging market backdrop over the coming next few quarters?

Yes. It's a good question. And I will tell you that we spend very little time focused on what the next quarter or 2 hold. This is about the 10-year view. It's about building e-close, it's about going after that 20% to 25% share of the market of those independent mortgage brokers, it's about communications with some of the larger banks that are thinking about the move. And by the way, a lot of that's on the $4 billion of origination TAM out of the $10 billion. So that's important, and that can allow us to grow. Forget volumes, right? That's taking share, that's adding customers. It's taking volume. It's almost like our natural gas business in TTF, where even if the market is not growing, the fact that the OTC market is moving into futures, we're getting growth because we're picking up share. And it's a similar thing there. But then on top of that, there's a whole other $4 billion in that $10 billion that is the use of data and analytics and the ability to do -- to assess mortgages and determine, does it have the right information? Does it meet the right state regulations? And so that artificial intelligence and machine learning, we also think, as more people are on the platform, they will start to leverage those analytics, and that's already begun with our offering in AIQ, to become more efficient. And then you have the opportunity of the data, which, again, 60 to 90 days old versus real time, I can tell you what's going on in your MBS portfolio, which mortgages are being refi-ed or paid off or whatever other dynamics. And all of those are ways that we can grow regardless of the volume environment. And that's why we said on the deal call, our expectation was, in '21 and in '22, that volumes would be down 20-plus-percent. And we still think that's the case. If you look at industry estimates, they're somewhat in line with that, although they were much more aggressive in terms of the decline this year and they're kind of getting to where we were. That notwithstanding, we said we're going to grow this year. And again, that doesn't necessarily mean that it's every single quarter, but for the year, despite volumes going backwards pretty quickly, we're still going to grow. And next year we'll grow. And over a decade, 8% to 10% a year, a $1 billion business will become a $2 billion business.

Got it. That makes sense. And then coming back to the notion of durable competitive advantages. ICE's fixed income data and analytics business continues to put up steady mid single-digit revenue growth, and it sounds like the sales pipeline is trending favorably. That said, there are some new start-ups in the fixed income pricing data space. You have IHS Markit has some content and they're merging with S&P Global, trading venues such as Tradeweb and MarketAxess have ever-growing trading volumes, upon which to inform fixed income pricing tools. How do you view the ICE solution as differentiated from some of those challengers?

3 million securities priced and 33 million securities with reference data. Nobody close to that. As you look at what trades on Tradeweb and MarketAxess, it's single digits. Maybe in corporate bonds, a little more than that on a given day or a given week or a given month. But every single day, we can price 3 million securities. And every single day, we can sell you reference data on those 3 million securities and another 30 million that are -- have -- or no longer -- you need the data but don't need the price. And so that's really the competitive advantage that we have to build on. And so what does that allow? It allows us to go compete against Refinitiv when they're busy worried about whether or not the LSE deal is going to happen and now worried about how LSE is going to save hundreds of millions of dollars and what that means to their job, we can go compete successfully because of the breadth of that offering. And we can point back to the COVID crisis and the quality of our prices in the low tracking area and the responsiveness of our pricing team as a means of competing against Refinitiv and winning. At the risk of sounding like Trump, we're winning on a consistent basis against Refinitiv. I mean, in addition to that, the quality of those prices are now the building blocks of our index business, which is now nearly $100 million revenue business for us. We now have over 20% assets under management benchmark to those indices that was less than 10% when we bought it. And we're able to compete on price and quality because we're not protecting anything, we're growing something. Our feeds business, hey, in a world where people are trying to have fewer vendors, if you need -- and you do, our proprietary content, our 3 million prices, and by the way, our energy data and other things, and I can also sell you feeds from other vendors. Why wouldn't you narrow down to a vendor? And that's almost $100 million business for us. And so those are the types of things that, the quality of the prices, the breadth of the prices, the breadth of the reference data, the quality of the indices, the move from active to passive, all of those or reasons why the pipeline is full, the sales have been really good. And then you put with that a little bit of the backdrop of continued regulatory requirements. I think it's FRTB that is due in Europe in 2022. Nobody is waiting until 2022 to figure that out from a vendor standpoint, it's happening right now. And Lynn feels very good about our European sales this year because of that opportunity. The U.S. business has been really strong. Asia is small but has continued to grow really well, and there's an opportunity to consolidate there. So it's regulatory tailwinds against the backdrop of a really strong competitive position. I don't want to avoid the first part of your question, S&P and INFO, I largely look at them more as partners than competitors. Platts is a strong partnership of ours. We use the CDS Indices, the RED Indices that Markit sells in the CDS space. But those companies really target different spaces than we do. In fact, right after we did the IDC deal, S&P sold us a municipal bond pricing business because they really didn't want to be in that pricing business, they wanted to be in the distribution business. And so we were happy to say, "Yes, we want to be in the pricing business, and then we're happy to sign an agreement for you to distribute that information." And so I look more at those companies as partners than I really do competitors. And I don't think that either of them individually were particular threats in terms of fixed income pricing, and I don't think the 2 of them combining does anything to make that threat even more -- or any more significant.

Got it. That's helpful color. You're not playing defense, you're playing offense in that business, it sounds like. And then at least to me, the call option in your FID segment is your fixed income execution platforms, generated about $70 million of revenue in 2020. So not overly big right now. What needs to happen for those businesses to turn the corner and become more meaningful for ICE?

Yes. It's a good question. So we said in the beginning that starting -- or buying TMC and BondPoint and then going head-to-head with Tradeweb and MarketAxess wasn't a winning strategy and wasn't our strategy. We felt like that the strength of our business was the existing pricing franchise that we acquired with IDC, with the significant existing relationships with the large banks and financial institutions. And that we believe that we could create -- and take that trading activity and -- or the trading platforms and put them together inside our ETF Hub to really create a unique entry point into the execution of bonds, and the creation and redemption process, which is just buy-sell. And we've been pretty successful building that. We've got all of the large APs that are attached to it and have been very complementary with the APIs have been written and deployed, the platforms have been integrated. And so really, the big step for us this year is to add additional issuers. But because we're also -- we were very transparent when we started this, that if ultimately, we built the ETF up for BlackRock, that wasn't success, that we needed it to be a utility that all issuers saw. We've got a broad set of partners on our advisory committees helping us to build it out so that it's not viewed as a BlackRock solution, although BlackRock continues to be an important partner in it as well. And that's really the key to -- and I -- by the way, I think you 100% said it right. I do think it's a call option. It's 10% of our fixed income segment. The defensible, growth-oriented parts that I talked about are that other 90%. But the opportunity for that 10% to become more meaningful for us is really built around the success of ETF Hub and leveraging things like ICE Select and the connectivity that we've gotten to the institutional side. But it's that ETF Hub that is really the key to success. I'd be lying if I told you that I don't feel like we're behind where I thought we'd be. But at the same time, given the APs that are hooked up to it and the quality of the technology and the conversations we've got with a few additional issuers that are happening right now, I'm optimistic that we'll start to see some acceleration as we move through this year.

Got it. And I think ETF Hub is a good segue to your Exchanges segment. I think there, I would probably characterize natural gas and emissions is probably your best secular growth opportunities, at least in the futures and options space. As we move toward a lower carbon emission world, how is ICE positioned to take advantage of that transition?

It's a really good question. And I can't help but start with, don't give up on oil for a long time. [ Brent OI ] is at a record level. We're about to launch IFAD where ADNOC, for the first time, is going to be a strong Middle Eastern participant who's going to price their oil based on what the markets say. That's incredibly important. If you look at Shell or BP or whoever is doing the latest write-down on the value of their assets, they're not writing oil down to $10 a barrel. They're writing it down to $30, $40, $50 a barrel. A 10% move on $30, $40, $50 is not nothing, and so there's going to be a need to hedge. And so the reality is the oil franchise has never been stronger. We're now sitting in the high 60s in terms of our share of oil trading activity and energy revenues. And so that's a very strong franchise, and it's durable -- I like the word you've been using. It's a durable, sustainable, competitive advantage for us. But the reality is the world is looking to move more away from oil. And there's going to be a spectrum, right? They're going to be -- it will start with, okay, yes, that country can move away from oil, but all these others can't, and so therefore, there's risk that I need to hedge. The next natural progression is to cleaner fossil fuel, and that is natural gas. And I totally agree with you, from a secular growth standpoint, that is, I think, our most significant growth driver in the energy business. The TTF contract that we acquired with Endex, I guess, gosh, it's now been probably a decade-plus ago. It has emerged as the Brent of global natural gas. We see U.S. commercial participants, Asian commercial participants, joining that market. We see speculative interest, financial interest, moving into that market. That means that, that market is becoming real. And importantly, a decade-plus ago, less than 10% of the natural gas around TTF traded in the futures market. It was all OTC. This past year, that exceeded 40%. If you look over the more recent months, it's exceeded 50%. And there's something really important and I think encouraging that's embedded in that. First of all, we've had volumes growing on average over the last decade, about 40% a year. On average. It's one of our highest-priced contracts, it's been a key contributor to revenue. And it's grown to over 40%, and that's driven it. But it's only 40%. And there's not another mature energy market that I'm aware of, where over half of that market happens in the OTC world. And so that says there's still likely strong momentum and growth opportunity. And I mentioned it earlier in my answer, trying to drag the conversation into exchanges around mortgage. There's this opportunity for us to grow even if the market is not growing because the market is coming into the cleared world of futures. And so not only is it oil progressing to natural gas because it's cleaner, but it's the OTC market moving into the security of clearing, it's the OTC market moving into a more liquid futures market and it's TTF emerging -- not emerging, emerged, as the global benchmark. And so lots of tailwinds in that business. And one of the reasons why our energy open interest overall is at record levels. Our share of energy revenues is in the high 60s versus historically, it's kind of been mid-50s. More recently in the 60s, but now high 60s. Natural gas is a big part of it. And then moving down the spectrum, you've got emissions markets. And we run -- I think 95% of the trading activity in emissions markets around the world happens on an ICE platform. We operate the largest emissions market in the world in EU. We're about to replicate it by launching a U.K. emissions market on a similar basis. And we run regional North American markets in those same emissions markets. I think there is, without question, a great opportunity for growth in European and U.K. emissions markets because those geographies are well ahead of the rest of the world in terms of a commitment to and a determination that the emissions offsets or the way to do it, a commitment to reducing emissions and using our markets to do that. I think a big question for us is that, without question, will continue to grow. Can we also catch a little bit of lightning in the bottle in North America? The oil industry came out, I think it was yesterday, or recently, and said that they're now going to lobby for trying to determine the cost of emissions. Okay. That's what our markets do every single day. And so I think the question within North America is does that mean we're going to tax it? Are we going to let the market determine a price in a more market-oriented manner? And again, we run the markets that exist in North America today. We would be -- just like we established ourselves in TTF, thinking it would globalize, we've established ourselves in regional markets, thinking that to the extent it nationalizes, we're the winner there. So emissions will grow regardless of what happens in the U.S. because of Europe and the U.K., but I do think that there's a great opportunity to potentially see an accelerant to that growth overall if the U.S. starts to move towards a similar type of emissions pricing.

So you mentioned don't give up on crude. Platts recently added WTI to the basket that comprises Brent crude -- the Brent crude price calculation. What are the ramifications for this on your Brent crude franchise, if any?

I think it further establishes that Brent's the global benchmark. Because now you're having to look at WTI as a component of global oil but not a determinant of oil prices. The other thing that's really important, right? Because WTI, it's a thing, but it's not, right? The WTI that we're talking about moving into that basket is a pure Permian WTI that moves to a ship and can be deliverable like the North Sea oils. It's not Cushing WTI. It's not landlock, questionable quality, Cushing WTI. It's Permian WTI, which is different, and I think could lead easily to the emergence of a more interesting U.S. marker along the Gulf Coast. And so I think it opens up an opportunity in the U.S. I think it further stabilized -- or further solidifies Brent as the global benchmark, and I think, starts to drag more trading interest out of the U.S. onto the Brent contract versus the TI because that's where global oil prices are going to get set.

Very interesting. Yes, we'll see how that plays out. Maybe a timely question here. Gary Gensler had his confirmation hearing in front of the Senate yesterday. And he spoke about a willingness to look into a financial transaction tax. How are you thinking about that as a potential threat for your various businesses? Obviously, the SEC doesn't regulate the futures business, but certainly it's something Congress would -- could potentially take up. So how is ICE kind of broadly thinking about an FTT as potential risk?

It's a good question and a timely one. And we've been fairly publicly involved in the debate in New York and in New Jersey, particularly recently. There's 3 realities of FTTs. First of all, they tried them in Europe, they didn't work and they stopped them. So there's a demonstrated track record of failure of the financial transaction tax. Second thing is that it's just demonstrably true is, if an individual state tries to do it, where the transaction happens will move immediately. We, NASDAQ and others have demonstrated that a data center and a machine and a data center can -- Texas, open up a data center in the back part of my ranch, maybe, and put some computers there. So at the end of the day, the transaction can move. And if it goes at the federal level, first of all, it's -- and I'm assuming cash equities now. But even if you put it out into the futures world, it's going to make returns on pensions lower, it's going to make the cost of investing higher. If you moved into future, it's going to make consumer goods more expensive. And oh, by the way, it's not going to impact us because it's going to get passed through to those end users. And so very little impact financially to us. In terms of the trading activity that it would impact, it's more likely to be the high frequency, the larger liquidity providers. And as you know, we don't make much money in our cash equities markets, we pay money for that activity. And so again, the financial impact to our business is small. We think it's a terrible idea. We think it's been proven to be a terrible idea. But in terms of the direct impact to our company from the FTT, we think it would be modest to immaterial.

Very helpful. And maybe time for one last question here, another current events type question. SPACs are the new hot thing. Multiple SPACs a day, it seems like. How does that benefit you guys? Presumably, there's probably a tailwind for your listings revenue, maybe at least to additional trading activity over time. How are you guys thinking about that as an opportunity?

I think, Patrick, to me, it's yet another innovation that you've seen the New York Stock Exchange work with the market to deliver. Direct listings, direct listings with capital raises, SPACs. One of the things we've said for a long time is that a lot of wealth creation is happening for a small number of people because companies aren't coming to market soon. It used to be private companies wanted to get to the public market, and that was success. Hey, I succeeded. I IPO-ed. We won. But then subsequent to Sarbanes-Oxley and all of the heavy regulation that's been put on it, it's gone to the other end of the spectrum, which is I'm going to do all my capital raises. And by the time I go public, everybody's made their money. And so we've been working really hard, and Stacy's been on this a lot publicly about -- and again, there's no question we benefit from what we're saying, but we think we should encourage more companies to get more -- to get public faster. And so we've worked on ways, innovative ways, to try and encourage that. Again, whether it's direct listings or direct listings with capital rates or SPACs. The interesting thing about the SPAC is, as you guys know, it's kind of a shell that then goes on the hunt for what its deal is. And so it facilitates companies going public faster because you've got the money that's looking for the deal. For us, the SPAC itself, when it lists, it pays lower fees than a traditional company. It does help with listings revenue, but at a lower fee. But we feel like it gives us the opportunity because now we know the owners of that SPAC and have the opportunity or kind of the advantage of the early conversations on. Okay. And when you go get a deal, you should stay listed at the New York Stock. You chose to be here as a SPAC, why wouldn't you bring the company public also on the NYSE. And that's when the opportunity that you mentioned comes, which is the more traditional IPO fees, the trading activity, et cetera. And obviously, we're believers in it because ultimately, as we thought about really unlocking the value of Bakkt, we determined that we would do that through a SPAC because we think it works. And as you know, that's a business that's fairly nascent. If you look at the SEC filings, it's one, in its first year, is going to lose a lot of money. And again, it's one over the last decade that probably would have stayed private for a long time. But now through the SPAC, some time April, May, the public is going to have an opportunity to invest in that and hopefully realize that the value that we see in it. Not value that we brought a lot to the table, which is why we're spinning it out, but clearly, a space of value. And we think, competitively, Bakkt is well positioned and therefore used the SPAC to do it a little quicker than we might otherwise have been able to do.

All right. Well, on that note, I think we are up against the clock, so we will wrap it up. But I think we covered a lot of ground today. Scott, thanks for joining us. And again, congratulations with the retirement.

Thank you very much, Patrick. And thanks again for having us. And it's been good partnering with you over all these years. Thank you.

All right. My pleasure.