CME Group Inc.

Good day and welcome to the CME Group second quarter 2021 earnings call. At this time, I would like to turn the conference over to John Pescher. Sir, please go ahead.

Good morning and thank you all for joining us today. I'm going to start with a safe harbor language, then I'll turn it over to Terry and John for brief remarks followed by your questions. Other members of our management team will also participate in the Q&A session. Statements made on this call and in the other reference documents on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement. Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website. Lastly, on the final page of the earnings release, you will see a reconciliation between GAAP and non-GAAP measures. With that, I would like to turn the call over to Terry.

Thanks, John, and thank you all for joining us this morning. As John said, our comments will be brief so we can get to your questions. We released our executive summary this morning, which provided extensive details on the second quarter of 2021. Also, as John said, I have John, Sean, Derek, Sunil, and Julie Winkler here. on the call with us this morning, and we look forward to addressing any questions you have. We delivered solid volume during the second quarter of this year, as we averaged more than 18 million contracts per day. We saw strength in our rates and agricultural businesses relative to Q2 last year. Equities and energy volume were down with less volatility in those markets compared to the prior year. So far in July, we are up 29% month-to-date compared to July last year, with particular strength in rates, which has more than doubled compared to a year ago. We have seen a rebound in energy, which is up more than 25% month-to-date. In terms of products, we had a record ADV, or average daily volume, in SOFR futures, total Bitcoin futures and options, and copper options in Q2. We had a highly successful launch of our micro WTI, which was the most successful commodity product launch in the history of CME Group. On August 1st, we will begin trading nature-based global emission offset contracts. In addition, our new micro treasury yield contracts will be available for trading in August. In the second quarter, non-US ADV was 5.2 million contracts, up 6%. We saw 9% growth in Asia Pacific, 8% in Latin America, and 6% in Europe. Across all regions, the growth came from increased rates, activity, ag products, FX, and metals. This was also supported in how our clients interacted with our digital properties as ags, metals, and FX saw double-digit growth in new users from all regions. The main point is we are constantly finding ways to assist our clients with the world's most diverse product offerings across all the critical global asset classes. With that short introduction, let me turn the call over to John, who will discuss some of the financial results.

Thanks, Terry. During the second quarter, CME generated almost $1.2 billion in revenue with average daily volume of more than 18 million contracts. Expenses were very carefully managed and on an adjusted basis were $427 million for the quarter and $373 million excluding license fees. CME had an adjusted effective tax rate at 24.1%, which resulted in an adjusted diluted EPS of $1.64. Capital expenditures for the quarter were approximately $40 million. CME paid out more than $300 million of dividends during the second quarter and cash at the end of the quarter was approximately $1.2 billion. Turning to guidance, we now expect total adjusted operating expenses for 2021, excluding license fees, to come in at approximately $1,560,000,000. That is $15 million below our prior guidance and virtually flat with last year's adjusted expense levels. All other guidance remains unchanged. We project CapEx to be in the range of $180 and $190 million, and our adjusted effective tax rate to be between 23.2 and 24.2%. Finally, we are on track and have a very good line of sight to achieve our targeted $200 million in cumulative run rate synergies by year end. Please refer to the last page of our executive commentary for additional financial highlights and details. With that short summary, we'd like to open up the call for your questions. Based on the number of analysts covering us, please limit yourself to one question and then feel free to jump back into the queue. Thank you.

Thank you, sir. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will pause for just a moment to allow everyone the opportunity to signal for questions. I think our first question will come from Rich Rapeto with Piper Sandler.

Yeah, good morning, Terry and John and team. I guess my question is going to be sort of on new products, but you know, you're definitely expanding the micro, you know, the micro e-mini products and pretty impressive on the Bitcoin results, you know, which are, you know, it's only half the price of the regular future, but, you know, about 150th, I think, of the size of it. But anyway, the question is, how are you building, is this a broader, you know, the build-out of micro going towards retail or is it, really institutions using the product as well? And is there going to be any other, you know, expense or investment to market if it is more oriented towards retail, Terry?

Well, here, I want to start, and I'm sure everybody will have a little something to say about this because some of the people in this room will receive some of those micro products. But in general, Rich, When we list some of these micro-contracts, we do it for fundamental reasons to address the concerns of the market participants. There's many a times, as you know, we can look at the micro-equity contracts, and because of the valuation of the certain underlying equities, it made sense for us to go ahead and list smaller contracts, whether it was the E-mini, now down to the micro. And so that was a driving force for that. And then we look at the demand for other products associated with it. On the crypto, you could almost say the same story with the appreciation in Bitcoin going upwards of $60,000 at one given point. It made sense to have a smaller contract to address an audience to make sure they can mitigate and manage their risk. On the West Texas contract that was just listed, I think that was just a demand from different participants, both on the commercial side and the financial side who wanted to participate in that market in just a bit of a smaller contract. So the question is, are we going to invest more in that sector of the business? we will continually look at the needs of the clients and make that decision as it comes. So I don't want to prejudge it and say yes, but I wouldn't want to rule it out either. So I'll let some of my colleagues go ahead and jump in. Maybe Mr. Pachowicz would.

Thank you, Terry. When you look at our micro-products, we've done a few things. One is we really found a position in the market where these really resonate, to Terry's point, in terms of meeting clients' needs. One of the things we've also done is we've adjusted the pricing on the micros, as I mentioned, last quarter. So when you take a look at the micro equity products, we saw an increase in the rate per contract from $0.154 to $0.176 of about 14%, which reflects the full quarter impact of the pricing adjustment plus the launch of our highly successful micro a Bitcoin contract that has an RPC about $1.57 to $1.59. So a huge success there. We also saw an increase in the micro gold RPC, which went from $0.397 to $0.446 when you look at first quarter versus second quarter, for a 12% increase. What's very exciting is we have built a $100 million a year business so far. that didn't exist just a couple years ago with our microproducts. So it's pretty exciting, you know, in terms of addressing a client need and really having the product set which allows us to offer a wide variety of microproducts.

Maybe I'd like to have Derek, just for one second, touch on the newest product, because as I referenced in my earlier remarks, the West Texas Intermediate Contract, was the most successful commodity launch we've ever had here, which is impressive in and of itself. So, Derek, maybe you could just give a couple sentences as it relates to what you're seeing in the new contract at Westex.

Yeah, it's gotten off to a good start. We traded over 450,000 contracts in just the first 11 trading days. What's most interesting about this, as Terry said, this is actually a new client acquisition tool for us. This is bringing in customers that would like to participate in our markets and found the institutional size contracts a little bit too big And the key stat there is that we've got over 2,600 participants in our microcontract that have never traded any other crude product with CME Group before. So this is functionally and practically brand new business to us in this asset class. We're seeing a higher participation percent of non-U.S. participants, about 26% for microbusinesses trading from outside the U.S. versus the average of about 20% coming from outside the U.S. in our main contract. Open interest has grown. We're seeing steady liquidity participation across the global trading day. Sixteen liquidity providers have been in there every single day. And we've got 6,200 unique users trading the contract and 75 individual unique trading firms. So broad participation, global participation, net new client acquisition, really strong start. And so we're excited about what this can mean for the business. and what this means for liquidity provision globally.

So just to finish up on your last part of your question, Rich, yes, this is part of our strategy as it relates to retail, new client acquisition, but it's not the only component of our strategy as it relates to retail. So the microcontracts are a component of that, but not the only piece. So hopefully that gave you some color as it relates to the questions that you asked.

Very helpful. Thanks, Terry. Thanks, Rich.

Thank you. Our next question comes from Alex Crom with EBS.

Hey, good morning, everyone. I'm curious if you can give us an update on the broker tech integration and what you've seen so far. What I'm particularly interested in now that it's been a few months is like any tangible evidence that this has been driving some new revenue opportunities for you. I think broker tech revenues year over year were basically flat. Futures revenues and interest rates obviously up a lot. Question is, is that being driven by anything that you've done for clients or is it too early to point to anything? Thank you.

Yeah, it's a really good question. This is Sean speaking. I greatly appreciate it. So, yes, we are excited about the initial uptake of new products and services that we are offering across that platform that we have talked about previously. Obviously, you know, larger picture, there is a lot of direct streaming going on in that. in the cash markets in general, both in the treasury markets as well as in the foreign exchange markets, and we're investing very heavily there. One of the big investments we're making is in what we call QDM 2.0, quote-driven markets 2.0. We are launching that now. We're in the middle of doing that on our FX business, and after we launch that in our FX business, we will be launching it in our treasury's business. We do expect that to be a state-of-the-art and the best in-class direct streaming platform, so that should help. But even before that, I talked a lot on previous calls about RV trading. RV trading is still getting uptake, and we are excited about the progress so far. So it did 280 million average daily volume in the month of June. Last week, we did 530 million average daily volume, and last Wednesday, we did 1.1 billion. So it is starting to show the results that we had hoped. This is in an environment where The bulk of many of our participants, actually the bulk of our participants do not yet have automated APIs connecting to the functionality. So this is manual users who are taking advantage of it at this point. So we don't have the bulk of the electronic community in there yet. We did have a major ISV last week for the first time offer to their customers testing in the new functionality. So we are very excited to see what that has to offer in the coming months. In addition to that, we reduced the three-year minimum price increments, three-year note minimum price increments that have a very significant positive impact. If you look at three-year notes, they went from a typical average daily volume of $10 billion a day to $16 billion a day. So we saw on a relative basis relative to the entire platform, a 60% increase in that individual security So very excited about that. There are also other moves that we are taking relative to optimizing commissions and other things that are having a positive impact. If you look at the overall industry, while over the previous couple of years, Berkertek had lost significant market share in the dealer-to-dealer space. If you look at QFU, sorry, the fourth quarter of last year, first quarter of this year, and the month of June, we have flattened out that market share level. So if you look at the fourth quarter, we were at 59%. First quarter, we were at 59%. And in June, we were at 58.5%. So we are getting traction in the new products and services. It has stabilized the relative share of that platform. And we do expect it to grow further as there's greater uptake in the new functionality. Thank you for the question.

Sure. Very quickly, and have you, just to my first part of the question, and have you attempted to put any of the things that you've just talked about in revenue terms so that we can think about the benefits that we've seen so far a little bit more in terms of, hey, this is what the deal is contributing on the top line?

We have not put them in revenue terms so far. You can look at, you know, there isn't a separate charging for any of these. So the overall volumes that a participant does, no matter what functionality they're using, are charged similarly. So it wouldn't have a different impact.

Okay. Thanks again.

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

Thanks. Good morning. My question is for you, John, just with regards to expenses, the guidance. Obviously, we see the reduction, but it still implies decent step up in the second half so if you could talk about where we would with those anticipated you know kind of costs and where those are coming in and then also could you update us on just what the realized synergies are as of 2q I understand what you said by the end of this year what to expect but just kind of where we are today sure Dan thanks for the question yeah as you heard from my prepared remarks pardon me um you know we reduced our guidance by 15 million dollars and

The entire team at CME has done an excellent job in managing our costs. With the revised guidance, we're holding expenses virtually flat with last year and just under $80 million below 2019 levels. When it comes to the expenses, the second half of the year is traditionally higher than the first half. Marketing and advertising spend tend to occur later in the year, and we also tend to see higher project spending in the second half as well. Spending this year reflects the same pattern, but we had anticipated a higher-than-normal spend in the second half of the year when we built out our spending plans. During the year, we also chose to delay some of the planned first half spending to the second half of the year as the environment became clearer. For example, we brought back our employees and we're seeing some of our clients also return to the office. In terms of the type of costs, marketing and advertising reflects just under half the increased spending between the first and second half of the year. We'll be targeting a portion of that spending on our successful micro-products. The balance reflects higher technology spending as we continue to advance the integration of EBS, which will also drive higher depreciation. And finally, we anticipate contingent labor spending for accelerating some of our projects. As Sean indicated, we are investing in some of the streaming platforms in our cash markets businesses. So that gives you an idea of the change in first half versus second half. And then in terms of realized synergies, We realized approximately $9 million of synergies in our P&L for 2021. And just to finish off on that, you know, we've got a very strong line of sight to achieving our $200 million in run rate synergies by year end.

Great. Thank you. Thanks, Dan.

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

Hi. Good morning. Thank you for taking my question. As we think about the actions that CME is taking to drive greater utilization of its products, where do you see as the most important themes or actions to help encourage open interest and volume growth, say, over the next three to five years? So in the past, you've focused on globalization. In Rich's question, you talked about the microizing of products, you've changed minimum price increments, and you've done acquisitions. So as we think about the future, where you're focusing your resources to drive that next level of growth as we look ahead.

Ken, thank you. I'm going to have Julie Winkler start and give her thoughts on that, and then some of us will chime in as well.

Yeah, thank you for the question. I think Those themes that you pointed out are something that we have utilized to very successfully drive not just new product adoption, but continued growth for the business. I think as we continue to be in this hybrid environment, our ability to reach our clients digitally, to be able to customize more of that experience has been something that we've been pretty focused on. over the last year and a half as many businesses have. And so what's happened is it's far easier for us to reach those global clients than it even was before. So there will be continued investment in those digital properties, that personalization, the education that we do, and that really relates back to the work with our broker partners in the microspace as well. We've been extremely active with them in terms of investing in the educational effort. As one such example, our partners alone have increased over 123% the education of traders in the first half of this year, reaching over a million retail traders. you know, that is how we make, you know, people continue to be successful in trading in our markets. So we're going to continue to see that investment. As Terry pointed out earlier, a lot of this is about understanding client needs. We know that there will be a continued work as we move towards SOFR and that transition. And the last thing is just continuing about capital efficiencies. I mean, it has been a hallmark of our business for many years, and that continues to be very top of mind to clients. So continuing to work with Derek, Sean, and Sunil on how we can deliver that going forward for our clients.

And I think, Ken, just to expand upon Julie's comments, she did touch on them, but the capital efficiencies theme is something that resonates throughout this organization. We're constantly looking at different ways. Sean touched on it a little bit earlier with the broker tech question. We're going to continue to become more and more efficient. as we get offsets against our futures products, which will, again, lend people to adding more open interest. One of your questions was around open interest. The EBS integration onto the Globex platform, we're talking about multiple participants who've never traded futures before in FX. We believe we have a good opportunity for them to participate in the FX markets. Another additive into the open interest pool here at CME. So a lot of the things that we've done can be very additive, and that doesn't even include The environment that we're all living in, which we know is one of the most riskiest environments this world has ever seen. So we feel confident that the open interest can continue to build with the capital efficiencies and some of the acquisitions we did with the cash products and the futures products, along with people needing to manage risk in all of our asset classes.

Great. Thank you.

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

Hi, this is Sherrick filling in for Alex. Can you provide us an update on the joint venture and how is it progressing so far and how should we think about any financial or implications of the joint venture for the CME business as a whole? Thank you.

Yeah, thanks for the question. This is John. You know, we're making excellent progress on the formation of the joint venture. The integration planning has gone extremely well. and we believe we are well-positioned to hit the ground running when we get the necessary approvals. In terms of the approvals, we continue to move through the regulatory approval process. We've received all antitrust approvals, and we are waiting on one financial regulatory approval. So we are really poised to launch this joint venture, and I think what's very exciting is we've got a great relationship with IHS Market, You know, we met with them just a week or so ago. And so, you know, I think everybody has a common vision for the joint venture and a strategy which we think should be winning for the clients. We've also got a great relationship with S&P Global. One of our, you know, this will be the second joint venture with them. So we've got, you know, we're excited about working with them, you know, once their merger with IHS Market has been completed. In terms of the financial implications, we'll provide an update in terms of the financial implications once the joint venture gets launched. We don't anticipate from an earnings perspective any material changes. You will see some geography changes on our income statement where revenues and expenses for the contributed companies will be netted. into equities and unconsolidated subsidiaries, which is the same location we have the S&P Dow Jones joint venture. So really excited about the joint venture, what it could mean for the marketplace. We will be the leading provider of risk mitigation and post-trade services. And I think we're going to be very well positioned to accelerate the earnings on that business.

Got it. Thank you so much. Thank you.

Thank you. Our next question comes from Owen Lau with Oppenheimer.

Good morning. Thank you for taking my question. Could you please elaborate a bit more on your strategy to launch more analytical tools? Do you have all the pieces you have in this area, and what are the gaps you would like to fill? Thank you.

Sure. This is Sean Johan. We are very excited about the new analytical tools that we have launched in particular over the last year or so. On the rate side, for example, we launched the new Treasury Watch tool. Treasury Watch tool has had now over 8,000 unique users look at it every day. It's really where the marketplace goes to look at the U.S. Treasury government issuance, the Federal Reserve's purchase of security, and as well as the activity in our Treasury futures, as well as on broker tech. So That is a tool that has gotten significant traction and we think offers an enormous amount of value to our customers and helps to cross-sell our products from the cash markets to the futures and futures into cash. In addition to that, on the foreign exchange side, we launched three new tools last year. We launched our FX market profile tool, our FX swap rate monitor, and our FX options vol converter tool. Those tools, likewise, with several thousand each in terms of unique If you look at our FX market profile, 863 different companies represented. FX swap rate monitor, 630 different companies represented. So you're seeing an enormous penetration of our customers and potential customers for new client acquisition and cross-selling get value out of these tools. So all those are growing very positively. This is just where we have been over the last 12 months, though. If you look at it on a go-forward basis, One of the great value propositions that we have is the ability with the acquisition of our cash markets and with our derivatives markets to combine this data and synchronize this data for the very first time. We have seen, as I said earlier, good uptake on our FX market profile tool. We are actually just in the process of launching version 2.0 of that, which shows 10 different order levels in terms of the order book. And it really shows participants how not only they need to use both liquidity pools, both futures and spot markets, cash spot markets, in order to optimize their execution in foreign exchange, but in addition to that, much greater depth in how to do that. We will be launching later this summer the initial treasury market profile tool, which will likewise synchronize for the first time our treasury futures data with our treasury cash data. So those are a significant development. If you look, though, at what we plan on over the next year, that will turn into a full-blown TCA tool. So we already have on EBS, EBS Quant Analytics, a TCA tool that allows you to look at three different ways of executing your foreign exchange. You can look at it in the central net order book. You can look at it on our direct streaming platform with your existing liquidity providers. Or third, you can look at it on direct streaming with an alternative set of liquidity providers. What we're going to be adding to that once we move EBS over to Globex is the ability to look at it in futures equivalent terms as well. So we have started to take advantage of and we have started to provide analytics to our customers that is unique relative to this unique set of assets in order to create new efficiencies, which is really behind everything that we do, But over the next year, we're going to be able to provide much, much more.

I think another part of this is a lot of the work that we've done in our world's largest multi-asset class options business. We have built our leading options analytics capability with our QuickStripe Bantics capabilities. That has led to our third consecutive record quarter of monthly utilization. We're on track right now to deliver the highest record revenues ever through our CME Direct front end where we embed our QuickStrike analytics. As you know, we are now publishing 40 CME volatility indices based on the benchmark liquidity in our options business. We found this has brought more options customers to us for customers looking to manage specific risk in each individual asset class. Those benchmarks reside at CME Group. So the work we continue to do to build up market leading analytics in our front end is bringing us new customers generating new options business, which generates new futures business as well. So we'll continue to push down that path.

Thanks, Eric.

Thanks, Sean. Thank you very much. Thank you.

Thank you. Again, as a reminder, please press star 1 to ask a question. Again, that is star 1 to join the queue. Our next question comes from Michael Cypress with Morgan Stanley.

Hey, good morning. Thanks for taking the question. I was just hoping you could talk a little bit about the opportunity set that you see to grow in data and information services revenues over the next couple of years. Which existing offerings would you say have the most meaningful growth potential, and what new offerings could you bring to the marketplace to enhance the growth profile of the market data and information services revenue pool? And if you could also just touch upon the impact that the pricing change as well had in the quarter looked like. I think that went through in April. But the revenue there only went up about $1 million sequentially. So maybe you could help flesh out some of the moving dynamics pieces there. Thank you.

Thank you for the question. Yeah, market data had really another great quarter. And so one of the things that we're seeing is this stabilization across the professional subscribers that are utilizing our real-time market data. And we did capture in its entirety that price increase that you mentioned of the $5 per user per DCM. What happened in Q2 is that we had a little less in audits in Q2 over the Q1 results. And, you know, as we continue to stay on that front, you know, we work with our customers to ensure that they have the right data, the right licenses for their business needs. Yet, you know, as we have audits, that is going to flow up and down depending on where we're at in the process. So it's largely driven with the audit results there. In terms of other areas of growth and what's really exciting us about market data, we've made some changes in our non-display policies and pricing. We've got all that cash market data that Sean referenced earlier that is now part of our product portfolio. as well as a number of new benchmarks, the C-Vol indices, et cetera. And so we're seeing a lot of interest from clients of making sure they're taking advantage of all of those products and services. Our derived business is also performing quite well. And the other thing that we've talked about on some past calls that still is continuing to be very interesting for clients is accessing our data through the cloud. And so with the Google Cloud Platform being launched now, We've added new users. We're now up to 21 global clients that are in production there, and we have nearly 60 more that are in that certification process. And so this is how our clients, and these are new users to CME data, that they like the ability to be able to turn on and off their connectivity and take the data that is most relevant to what they are interested on. We're working to expand that in data products presence really in the cloud later this year. So that is something the team is working on. And so I think it's a lot of additional work being done with Sean's team on the analytics front of saying, you know, what other tools and capabilities can we deploy? We have a lot of very, very valuable data and assets, and that's what we're working to monetize.

Great. Thank you. Thank you.

Our next question comes from Simon Clinch with Atlantic Equities.

Hi. Thanks for taking my question. I'm kind of curious as to your thoughts around the crypto markets and the products you're launching here. Just what kind of opportunities you see to broaden out in the next couple of years, particularly but also how you're seeing your products being used by a split between institutional and retail clients.

We are seeing a combination, obviously, of smaller active clients as well as very large participants. And the reason, again, for launching our micro-Bitcoin was in order to better penetrate a small active trader community. As you'll recall, the micro-Bitcoin won 50th of the size of the Bitcoin futures. and half of the scheduled fees. So that did allow us to deeply penetrate a new community, and we're very excited about that. If you look overall, I did start talking, I believe it was the last earnings call, I said I would start talking about crypto differently than I had in the past relative to the growth in volumes and revenues that we've achieved. If you look today, our Bitcoin RPC is $5.45 in the Second quarter, we're running around 11,500 contracts ADV. MicroBitcoin, John said it earlier, $1.57. $1.57, obviously, when we initially launch a product, we have significant incentives. As I said earlier, the rack rate fees are half. So over time, we typically reduce those incentives. And historically, if you look at whenever we launch a new product, actually, if you look at, for example, our micro e-minis, those RPCs grow over time. And there we're doing 23,000 year-to-date. In the second quarter, we did more like 25,000 a day. So a very, I think, a huge success there, honestly. Either futures, $2.53, and 2,600 contracts a day. So if you look at those RPCs against those average daily volumes, you'll see that we've now grown a substantial business and we're very pleased with it so far.

Thanks.

Thank you. Our next question comes from Kyle Voigt with KBW.

Hi, good morning. I know you highlighted some better energy volume in July specifically, but I guess even inclusive of some of the July volume, your energy ADV 2021 to date is on pace to be the lowest volume year since 2015. So just curious if you can give some more color as to all the factors that are driving or the big factors that are driving the weakness this year. How much impact has the pandemic had versus other factors? And then more importantly, I guess, what do you see as the catalyst to kind of reaccelerate structural growth in that product segment as we look out over the next few years?

Yeah, thanks, Kyle. That's a good question. I mean, last year was really a tale of two different years. We saw the first half of the year with all the disruption in the first half of the year and then significant trail off in the back half of the year. We saw both the significant destruction demand coming from what we actually saw from the demand side of things. And it was a very, very unclear picture for certainly U.S. shale when prices were languishing. Back half of last year, kind of around 45, which is right at or slightly below break-even for a lot of the U.S. shale producers. What we've seen over the last couple of months now that the OPEC and OPEC Plus agreements have come in, we've actually seen a stabilization of oil prices, exactly what they wanted, well above those break-even levels. And what you've actually seen, and you've picked up on the comments before, our June WTI volumes are actually up 6% year-on-year. Our July WTI volumes are up 46%. What we've actually seen from a volume perspective is overall the market has picked up in the back half of the year. Our market share in volume terms of our WTI contract relative to Brent is pretty much stable year on year. Where we've seen a real outperformance has been in the open interest side of things. When you look back to November of last year, we saw the WTI open interest bottom out at about 1.95 million contracts or so. We have now recovered on the WTI side back up to almost 2.5 million contracts. That's sitting at close to three-year highs. We all know that you're bringing in commercial customers. They are the outsized performers on the open interest growth side of that. So we've had a significant return of the commercial participants back into our market over the last couple of months. That is what we focus on. We focus on the end user customer needs. We focus on what they are looking to manage their business with, and they are increasingly coming to see me group. What's interesting about that open interest share is typically, and you can go back and look at the numbers, The WTI open interest market share would hover between 42% and 48% when you compare the sum of WTI at CME versus ICE Brent. We're actually sitting at about 50% market share in open interest terms. So we're above almost our historical high point right now. So we think the strong fundamentals that we've seen, we've seen gasoline demand reach record high of 10 million barrels per day in the weekend of July 2nd. TSA checkpoint travel numbers are reaching the highest levels, red in 2021. Just two weeks ago, traveler throughput at 2.23 million. So we're seeing the early stages of airline recovery. That has been missing during this whole demand side of the crude oil market. Saudi Arabia, UAE came to an agreement in OPEC+, so we think there's a little more stability there. That's certainly probably raising some specter of less concern about the 100 calls being in the money over the next couple of months. But it also means that there's greater stability, and the shale guys like where that's going. So we're reading that in the open interest participation. We're seeing the work that we're doing to bring new customers into the crude oil market with, as Terry referenced before, the WTI microcontract. And we're unleashing those customer capital efficiencies across the full range of products. And we're also preparing for the energy transition as we're pushing out both our global emissions offset contracts and our new nature-based global contracts. emerging offsets contracts as well. So not only are we expanding our customer base, we're preparing for energy transition as well. So we feel good about what's going on. Fundamentals are strong. Open interest is three-year highs. So we like where we're at.

And I just want to add to that, Kyle, that when you look at, you referenced 2015 levels of trading. You got to look at what just happened just a year ago. You know, we were in a complete lockdown in the world when demand was going absolutely zero. And we are just rebuilding that. And I think Derek pointed out a few highlights, such as the airline industry now getting ramped up again, the TSA numbers and so forth. So I really think the measurement of 2015 to where we're at today is a tough one, because in between that, only a year ago, we had a lockdown situation that we've never seen before.

Well, that's really helpful, Derek and Terry. If I could just follow up on that just real quick. Just curious, are you seeing any – like now we've had a couple quarters pass since the event with kind of negative WTI pricing. Do you think you're seeing any lingering effects from that, even from certain users, or is that open interest trends that you pointed to kind of speak to the fact that you haven't seen anything material?

We haven't seen anything material. I think that, again, when you look at what happened on April 20th of 2020 – We were at the height of a perfect storm, as I like to say, at that time. We had complete lockdown. We had, at the same time, production being ramped up right before that. And then all of a sudden, like I said, we locked down in zero demand and a tremendous amount of product with nowhere to put it. So that was a perfect storm at that given moment in time. I think that people understand that. And now they are looking at the business in a different light, hopefully. But there's still some headwinds as far as the pandemic. We keep talking about Delta variants and things of that nature. So I'm assuming there's some trepidation just in general about what could potentially happen around the world again. So no one's predicting any pricing here, but that is still a lingering effect. We are not out of this pandemic yet, and I think that's what people need to realize.

Yeah, I think the only points I'd probably add to that is when we talk about the OI indicator being the strongest marker of increased participation, the key stat in there, Kyle, is the fact that commercial participants are the biggest growth driver of that increase from the 1.9 million to the 2.5. So three-year highs sitting with the commercial participants themselves, the physical participants being the biggest participants in that growth, I think tells you where the market's hedging its risk right now.

Great. Thank you very much. Thank you.

Thank you, our next question comes from Alec Blostein with Goldman Sachs.

Hi, this is Alec again, filling in for Alec. And this one is for John. Can you tell us as to what was the ending Fed balance in 2Q?

Sure, great question. So when you look at, I'm gonna make it just a couple of quick points on the other income portion of our income statement because We've got a couple of items that are performing very well there. The first is the cash held at our clearinghouse. We saw an increase sequentially of about $3 million. The average balances were up $27.7 billion, and our returns were up about one basis point from last quarter. I just want to remind everybody that there was a change in the IOER on June 16th from 10 basis points to 15 basis points, and our share of the returns on that investment activity increased from two basis points to five basis points, and you'll see that full quarter impact in Q3. The performance of our JV, S&P Dow Jones JV, also has been performing extremely well, and we're up about 14% from the same quarter last year. So that kind of gives you some highlights on the other income portion of our income statement.

Okay. If there's no further questions?

There are no further questions at this time, sir.

Okay, thank you very much. We want to thank everybody for joining us on the call this morning. Once again, we wish you and your families all the health and safety that you can have. Be safe, and we look forward to talking to you next quarter. Thank you.

Thank you, ladies and gentlemen. This concludes today's teleconference.