CME Group Inc.

Good day and welcome to the CME report quarter and year end 2021 earnings call. At this time, I would like to turn the conference over to John Peter. Please go ahead, sir.

Thank you. Good morning, everyone, and I hope you are all doing well today. I'm going to start with the safe harbor language. Statements made on this call and in 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 FCC, which are on our website. Lastly, on the final page of the earnings release, you'll see a reconciliation between GAAP and non-GAAP measures. With that, I would like to turn the call over to Terry.

Thanks, John. And let me echo John's comments in hoping that you and your families are all safe and healthy. So again, thank you for joining us this morning. We released our executive commentary earlier today, which provided extensive details on the fourth quarter of 2021. I have John, Sean, Derek, Sunil, and Julie Winkler on the call this morning, and we look forward to addressing any questions you have. Before I begin, in addition to John, who will discuss the financial results, I'm going to have Sean and Derek make some comments as we did last quarter. Trading activity was strong during the fourth quarter with average daily volume of 20.5 million contracts per day, up 26% versus fourth quarter last year and up 15% sequentially. We also added 26% ADV growth during the month of December versus the prior year. We saw tremendous year-over-year strength in our interest rate business, which was up 56%, including record quarterly SOFR futures ADV. As we continue to assist clients with the transition from LIBOR, equity index ADV increased 15% and energy ADV rose 16% compared to fourth quarter last year. In addition, options ADV grew 58% to 3.7 million contracts. The strong finish to the year supported record annual ADV in total of 19.6 million contracts, up 3% from last year. as well as record annual non-US ADV of 5.5 million contracts, or up 4% compared with 2020. In the fourth quarter, non-US average daily volume was up 24% to 5.7 million contracts per day. We saw 26% growth in Europe, 15% growth in Asia, and 45% growth in Latin America. As always, we continue to launch new innovative products, tools, and services to support customer needs. We executed on targeted sales campaigns for recent launches during Q4. Microether futures were launched in early December and surpassed 100,000 contracts within the first two weeks. We also began trading e-mini Russell 2000 Monday and Wednesday weekly options contracts. as demand for the more short-dated options continues to grow. Additionally, we recently announced our plans to launch a new 20-year U.S. Treasury bond future in early March 2022, which is pending regulatory review. Over the full year 2021, new products launched since 2010 generated approximately $500 million in revenue, or up 30% from 2020. And finally, in line with our longstanding history of innovation, we are extremely excited about having signed our 10-year strategic partnership deal with Google Cloud. This will allow us to transform derivative markets to cloud adoption and co-innovation to deliver expanded access, new products, and more efficiencies for all market participants. As far as activity to date in 2022, we averaged 24.6 million contracts per day in January, up 28% compared with January of 2021. Equity index and interest rates continue to lead the way, with year-over-year growth of 56% and 33%, respectively. Options ADV growth was also strong, which was up 39%. With that, let me turn the call over to Sean and then Derek to give you a little more color on each of these areas. Sean?

Thank you, Terry, and thanks again, everyone, for joining. while volatility across financial asset classes remained well below normal historical levels in 2021. Interest rate and equity index volatilities were around the historical mean in the fourth quarter, and FX market volatility generally remained below the 20th percentile. In that somewhat more normal environment in the fourth quarter, as Terry mentioned, we saw strong rates and equity volumes. We saw rates options of 94% year-over-year, equity index options of 68% year-over-year, and FX options of 18%. In terms of our customer penetration, every financials asset class saw an all-time record average annual number of large open interest holders in 2021, as more customers used more of our financial products than ever before. In addition, we are pleased with our continued progress in financial product launches. new product adoption, and strong commercial results from these new products. January 24th, new financial products achieved a volume of more than 10.5 million contracts, making up over 30% of the entire exchange volume that day. Among our new products, we achieved an ADV record in our micro equity e-minis in January of 3.7 million contracts, up 64% compared with January of last year. Our newly launched microether futures achieved an ADV of 21,500 contracts in January, and our crypto futures in total reached a record 57,900 contracts in January, up 229% year-over-year, equating to $2.87 billion average daily notional traded. With strong growth in our equity index and crypto futures, we initiated a fee adjustment beginning on February 1st. We increased our e-mini and micro e-mini member fees by one penny per contract, and we increased our non-member e-mini and micro e-mini fees by a nickel per contract. Likewise, we increased our Bitcoin and our Ether futures member fees by 50 cents per contract and our non-member fees by $1 per contract. We are also pleased with new product growth in our rates business. Putting our new 20-year U.S. Treasury note futures announcement into perspective, Our ultra 10-year futures achieved a new all-time high annual ADV of 372,000 contracts in 2021. As we progress through the LIBOR transition, our SOFR futures now represent 95% of the average daily volume of all exchange-traded SOFR futures and 98% of the open interest. In January, our SOFR futures products overall grew exponentially. SOFR Futures achieved 731,000 contracts ADV, up 645% year-over-year. On February 3rd, our SOFR Futures and Options achieved an open interest of 3.4 million contracts, up 406% versus a year ago. Adding the open interest from our SOFR linked contracts, which is how we refer to our Your Dollar Futures and Options that reference a LIBOR, which will be finally set after June 30th, 2023, to our SOFR futures and options open interest, the combined open interest is currently running at 17.45 million contracts. Regarding our term SOFR index, we have already licensed 600 firms across the globe and across the financial, banking, manufacturing, and other industries. And with that, I'll hand it over to Derek.

Thanks, Sean. Looking at our commodities portfolio, we drove strong 2021 results across our global benchmarks with particular strength in the fourth quarter in energy, which grew 16% year on year. In addition to hitting record agricultural products volumes in Europe and Asia in 2021, we also hit a new record monthly average daily volume in our micro WTI contract in November and set multiple records in our industrial metals portfolio made up of copper, aluminum, and steel. On the client side, we continue to focus on expanding commercial customer participation, and in 2021, these end-user open interest holders were our best performing client segment overall. Additionally, to better serve our clients' accelerating focus on environmental and sustainability concerns and the emerging risk management needs of these customers, I'm pleased to announce that we have created a new environmental products portfolio. This portfolio aggregates the full range of our existing and planned environmental and sustainability-linked products such as our market-leading global emissions offset contracts, biofuels, such as ethanol and other renewables, and battery metals like cobalt and lithium, and will serve as a catalyst for our continued expansion across asset classes in this rapidly evolving space. Customer demand is increasing for carbon and environmental products that facilitate broad participation and risk management needs across diverse industries and geographic limits. Our focus is on building tools to effectively manage their environmental risks and achieve their goals through the energy transition. Turning to our global options business, we delivered strong results again in 2021, up 6% versus 2020, finishing the year with a robust first quarter, fourth quarter, up 58%, as Terry mentioned. Our outstanding fourth quarter results were led by strength in our interest rates, equity index, and FX business lines as macroeconomic uncertainties and rate rise expectations filtered across global financial markets. Our options growth was again driven by outsized growth outside the U.S., led by APAC up 23% and EMEA up 4%. Most importantly, our fastest growing options client segments were commercials and buy-side customers, which reflects our consistent focus on attracting end-user customers to our markets. Our overall options growth was accelerated by the continued global adoption of our electronic front-end CME Direct, which hit a new record number of active users in 2021 and drove a record for Globex revenues on this platform. CME Direct continues to be a key driver of our non-US growth, the average daily monthly users trading or booking via the platform in the fourth quarter, increasing 50% in Latin America, 18% in Europe, and 10% in Asia versus fourth quarter 2020. Finally, turning to our international business, having just taken over responsibility for this business in November, I'm excited to optimize this team structure and mandate to ensure that we can continue to deliver outsized growth outside the US to unlock the next leg of our global growth story. As Terry shared, we reached record annual non-US ADV in 2021, which was bolstered by our strongest fourth quarter ever of 5.7 million contracts. Given our success in finding and onboarding new global clients, we've specifically invested in new client-facing headcounts in Asia, to further strengthen the on-the-ground commercial resources, which will further accelerate this growth. Overall, we are very pleased with the continued success of our non-U.S. business, and with 2021 revenues in excess of $1.1 billion, I look forward to generating continued outsized growth in both futures and options as we continue to add resources to this critical part of our global growth story. With that, I'll turn it over to John to discuss the financial results.

Thanks, Derek. During the fourth quarter, CME generated more than $1.1 billion in revenue, with average daily volume up 26% compared to the same period last year. If you adjust for the impact of the creation of OSTRA, our joint venture with IHS Market, our revenue would have been up approximately 11% for the quarter. Market data revenue was up 2% from last year to $142 million and up 6% for the full year of 2021. Expenses were very carefully managed in an adjusted basis were $429 million for the quarter and $369 million excluding license fees. For the year, CME had adjusted operating expenses excluding license fees of $1,468,000,000, which is $32 million below our revised guidance of $1.5 billion. CME had an adjusted effective tax rate of 22.1%, which resulted in an adjusted net income attributable to CME Group of $607.5 million, up 22% from the fourth quarter last year and an adjusted EPS attributable to common shareholders of $1.66. The issuance of the Class G non-voting shares in November in conjunction with our partnership with Google impacted the calculation of EPS attributable to common shares. The Class G non-voting shares have similar rights to common stock with the exception of voting rights and are convertible to common shares on a one-to-one basis. Had the Class G shares been converted to common shares at the date of the issuance, the adjusted EPS attributable to common shareholders would have been $1.68. We expect the EPS for the Class G and common shareholders to be the same going forward. Please refer to the financial results page of the executive commentary for further information. Capital expenditures for the fourth quarter were approximately $29 million. CME declared $2.5 billion of dividends during 2021, including the annual variable dividend of $1.2 billion and cash at the end of the quarter was approximately $2.9 billion. Turning to guidance for 2022, we expect total adjusted operating expenses, excluding license fees, to be approximately $1,450,000,000. We are expecting an improving business environment, and our guidance reflects that expectation. In addition to our expense guidance, we expect the investment related to the Google partnership and the move to their cloud platform to be in the range of $25 to $30 million. A portion of these costs may be capitalized, and we will update the guidance as the engineering and migration plans finalize. Capital expenditures net of leasehold improvement allowances are expected to be approximately $150 million, and the adjusted effective tax rate should come in between 22.5% and 23.5%. With that 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. We will now take our first question from Dan Fannin from Jefferies. Please go ahead.

Thanks and good morning. John, I guess first with you on expenses, if you could maybe talk about what drove the Delta versus your guidance and, or just a conservative kind of start from, I guess, where you ended the year in the fourth quarter and versus where you said you'd end up. And then as we think about 2022 and the Google partnership, maybe beyond that, you know, maybe the size of the scope of the investment on a multi-year basis and how we should think about that scaling or escalating from the numbers you gave in 2022.

thanks Dan appreciate the question yeah in terms of the in terms of the Delta from the guidance you know as as you know we were as I said in my prepared remarks down about 32 million dollars from our revised guidance of 1.5 billion and that's 60 million dollars below our the guidance that we gave at the start of the year it's it's the the difference is driven by three things one is that we achieved our run rate synergies earlier than expected and So our realized synergies were higher, and that's about a third of the delta. And if you recall, last quarter we announced that we hit our $200 million in run rate synergy target that we had set at the start of the next acquisition. We still had limited travel and in-person events, and our marketing spend was lower. That's another third of the difference. And the balance is really good expense management across the entire organization, including careful use of contingent labor Also, we did experience some delays in delivery of technology equipment that led to lower technology expenses, and that's the balance. So that's the difference between the $1.5 billion revised guidance and the $1,468,000,000 that we came in at. In regards to your question around the Google multi-year investment, based on current trading activity, I would expect to invest on average a net of $30 million per year for the next four years as we look to move to the Google Cloud Platform, after which we would expect to be in a net positive cash spending position. We're going to update annually as the cost could fluctuate based on the order that applications are moved to the cloud and the speed of the migration. So if we are moving to the cloud faster, you would see our expenses tick up in order to move quicker to the cloud, which would be a good outcome as we want to move there as quickly as possible, really to enjoy the benefits that we see of getting onto the cloud platform. So we look forward to bringing in new products to market faster, innovating quicker, and being more flexible and nimble than we are today. Like I said, that's an annual, that's on average the $30 million. And like I said, it will fluctuate. Also, it's important to note that that's a cash outflow. A portion of that could potentially be capitalized, and I would expect some of it to be capitalized. And we'll update that as we get closer each year.

Great. Thank you.

Thank you, Dan.

We will now take our next question from Alex Cram from UBS. Please go ahead.

Hey, good morning everyone. Since you were just talking about the Google Cloud partnership on the cost side, maybe you can also talk about it around the revenue side and the opportunity set there and maybe the excitement there. What new sources of revenue could you theoretically generate or how might your clients be able to engage with you easier and then specifically, Any change for co-location revenues? I mean, that's a nice income stream. So just wondering if anything could change there over time, given that you're moving to the cloud.

Alex, I think you asked a couple of different questions around the revenue opportunities associated with Google. So I'm going to ask Sunil and Julie to comment on the co-location, which was your final question. I believe John and I can tackle that. Why don't you start, Sunil?

Thank you. Thank you, Terry. So I think for the... First phase, we are aggressively focused on migrating clearing and enterprise business applications to the cloud. And as far as clearing applications are concerned, we are focused on actually moving foundational services to the cloud. One key service that is client facing that we intend on delivering this year is CME's margin calculator. It complements an online risk engine that we already offer. but this one would be a calculator that would run on the cloud as an app, and it would allow our clients, our service providers, our clearing firms to actually spin up these calculation engines on demand as necessary throughout the day to calculate risk in real time. So in terms of services, that's what we plan to offer. I will pass on to... Julie, to talk about the data side, on the market data side.

Yeah, so as Sunil points out, we have been engaging with customers since the announcement in November. And one of the things that they definitely have highlighted is the need to manage risk more in real time. And so we are really allowing our customers to help us prioritize this work. The second area is really in market data. And we see significant opportunities to you know, deliver value to our customers in new ways. And, you know, we have an existing service that is live with GCP today with our SmartStream product. We have 25 global customers that are in production. We have about 70 more in the pipeline. And so what's really planned next is really an acceleration of the data and products that we put within that offering. So we'll be looking to add real-time options data onto that platform, which we know there are a number of customers in the pipeline that have an interest in that. And then also looking at other ways that we can use Google tools, such as BigQuery, to make some of our large and certainly interesting data sets available to our customers through that offering. So it's really a blend of both our data and our intellectual property being used with Google tools and making us really kind of build that solid data foundation. to make it easier and adding analytics to that as well. So a lot of that planning is underway now and we're quite excited of working with them.

So Alex, on your last question around the co-location revenue, which is a very nice revenue source for CME, I think it's a bit premature to judge what that revenue is going to look like one way or another. We have a lot of work ahead of us over the next couple of years, as we've already outlined on moving markets to the cloud. So there's a lot to be done between now and then with that revenue potentially impacted. But I will say, as we did this transaction, and I work closely with John on this, we understand that the co-location revenue could be impacted down the road. Saying that, I also believe the savings and efficiencies of moving us into the cloud will well offset the any expected revenue coming out of co-location. So I do believe the future is much brighter on these efficiencies and costs associated with the co-lo business. So John, do you want to add to that?

Yeah. To your question, Alex, also, what differentiates this relationship with Google versus a client-vendor relationship is the innovation framework that we have set up with Google. Yes, we're moving to the cloud, but also we have a framework set up so that we co-innovate with Google new products and services to deliver to our clients. It's too early to say what that is going to be, but we have a framework so that we'll develop business plans together, we'll develop products and services together. You're starting to see a little bit of it. Julie talked about utilizing some of their technology, like BigQuery. Google has invested significantly, obviously, in their technology footprint, and we get the benefit to leverage that in a way that others can't because it's a partnership versus a client-vendor relationship. All right.

Very helpful.

Jumping back in the queue.

Thanks. Thanks, Alex.

We will now take our next question from Richard. from Piper Sattler. Please go ahead.

Yeah, good morning, Terry. Good morning, John. And congrats to the strong start in January with your volumes. So I guess my question is more about here and now, or not the Google Cloud, but more 2022. And your stock is the only U.S. exchange stock up year to date. And I think everybody's looking at anticipating a bigger tailwind than you've had in regards to volumes. So I guess, can you add, we all can do our studies on the global financial crisis and interest rate cycles, but I guess, Terry, is there anything incremental that you can give us or your investors about this year and the macro environment that gives us more comfort that, say, the 24, 25 million contract in January is more sustainable this year?

Yeah, Rich, thank you, and I hope you and your family are well. It's really hard to predict future volumes, as we've said since day one of taking the company public, Rich, and I know you're aware of that. I will say the following. I don't think any of us have ever seen The way the markets are setting up right now as it relates to pandemics, supply chain controls, inflation, nobody has seen this in the last 20 plus years, especially on the inflationary front. So I think the way our markets are situated, we've been able to continue to invest in different products, as I mentioned in my earlier comments, to generate revenues outside of our core product lines. which have grown this company. But when you look at what's in front of us, I would suspect that our core product should continue to be very active like you saw in January. Why is that? Because of all the fundamental factors that are not here just in the U.S., but across the globe. So this is something, a setup that I have not seen in my career in a very, very long time. I think the last time I saw something like this I didn't know what it was because I was a young trader in the early 80s. But this is the last time I can remember seeing a setup like this where the potential for risk management is going to be extremely critical because I don't – and I'm going to let Sean comment in a moment because he traded these markets from an interest rate perspective from the bank side. But I don't think we've ever seen a setup like this in modern times, Rich. So I'm – Again, I'm not sure if I'm happy about this or sad because there's a lot going on in the world right now, but we need to make sure that we're focused on managing the risk through our clearing division, putting out our data through Julie's division, making sure people have access to markets through our technology, and offering efficiencies through our product sets. But I don't think I've ever seen a setup like this going forward. So I can't predict the future. I will say one thing. This is a very dynamic setup for us.

So, Sean, you may want to add to that. Yeah, so thanks, Terry. Yeah, this is something we've been talking about, I think, throughout the entire pandemic, which is that we saw that this cycle was completely different from the previous cycle. Yeah. that the amount of stimulus coming from both fiscal authorities as well as the monetary authorities was completely unprecedented relative to the size of the problem. And we've seen it now in the outcome. You've got an unemployment rate at 4%. You've got a record number of open positions in the United States that need to be filled. You've got an inflation rate running at 7%. You've got year-over-year wage growth at 5.7%. And you've got the Federal Reserve still buying securities and at 0% or near 0% overnight rate. It's really unprecedented, I think, in our history. We've got now five tightenings priced into the curve for the coming year. That's the first time I've seen that in a very long time. This reminds me during my trading career of late 1993 and what happened then in 1994 with 300 basis points that the Fed tightened in 94. and all havoc broke loose in 1994 with some of the largest bankruptcies in U.S. history. So let's see what happens. I think the setup is very strong. I think with five tightenings priced in for this year, I think every single Fed meeting could be in play. That means that not only do you need the risk management on inflation around the long-end Treasury futures, not only do you need our long-term options, But you're also going to need to manage that FOMC meeting at every FOMC meeting. So across the entire curve, whether it is each of the FOMC meeting results or its CPI releases or its long-term inflation expectation, you're going to be needing our products, especially as the Fed now reduces its balance sheet and actually starts tightening.

So, Rich, I don't want to belabor the point because there's a lot in front of us here, but I want to give you one example, which I think is real-time. It's not just interest rates. This is the reason why CME's multiple asset classes are critically important to risk management. When you look, literally 20 months ago, April 20th of 2020, the price of West Texas Intermediate was minus $37.50. They were paying you to take the product. Today or yesterday, whatever it was, the market traded upwards of $92, $93 a barrel. This is how fast it can turn in a cycle that no one's ever seen before. So just put a pen and paper not only to one asset classes but across the world in multiple asset classes. So that's why I said what I did at the outset of my comments about I've never seen this set up before, and I think that's just a reflection of how volatile things can become from one day to the next.

Got it. Thanks. That's very helpful, Terry. Thanks, Benny.

We will now take our next question from Brian Patel from Deutsche Bank. Please go ahead.

Good morning, folks. I have a few questions, but I'll just ask one right now and then get back in the queue. Maybe I'll start with switching gears to the environmental products portfolio that you talked about. Can you just talk about maybe just if we can sort of carve out that portfolio and think of the ADV portfolio that you're currently generating and then talk about the potential for product innovation in this range of products given that there's a lot of obviously new adoption in the profile of U.S. users versus the international users as well and whether it touches other categories like financials. I know you have S&P, ESG futures for example.

Brian, let me turn it to Derek Salmon, who will address those. Derek.

Thanks, Brian. Good question. A couple of questions. I'll focus on the environmental piece of that that are specifically addressing sustainability and environmental risk management. And Sean can talk about the reference and exposure.

Brian, you may want to hit your mute button. I think everybody might be getting a little feedback off you, but go ahead.

I'll turn it over to Sean to cover the indexes that track the sustainable companies themselves. So you may have seen a press release from us yesterday announcing a new product launch in our Global Emissions Offset Futures product suite called a C-GEO contract. That complements our GEO contract launched last year, so Global Emissions Offset Contracts. We followed that with an NGO, which is our nature-based Global Emissions Offset Contract. And we announced yesterday our C-GEO contract, and this is our core Global Emissions Offset Contract. This is a contract that actually tracks and aligns with the core carbon principles, which is an emerging set of transparent and consistent standards around the supply chain of carbon credits overseen by the Integrity Council of the voluntary carbon markets. This is a rapidly evolving space. Brian, what you typically see us do is look at underlying physical or cash markets, and as they get to a point of liquidity, we then assess that and determine now is the point in time to accelerate the growth of that market by overlaying derivatives on top of that. This market is moving so rapidly based on the commitment that global companies have made to sustainability and managing carbon footprints that we have partnered exclusively with the largest voluntary carbon offset spot trading market, Expansive CBL, to be the exclusive provider of derivatives contracts on the back of these in the carbon market. Overall, these products that we've launched last year have been a tremendous success in a market that literally the spot market didn't exist two and a half years ago. This is a different market from the cap and trade programs that you see in Europe and in different states in the U.S. This is a voluntary or free market carbon offset that allows customers to have validated carbon credits that are validated by U.N. entities to then use those credits to offset risks globally. So think about this as a free market fungible product that can cover risks whether you're in Europe, Asia, U.S., or otherwise. There's also a vintage associated with these, so these track the viability of those offsets over time. This is an early stage in the development of this market. As I said, the cash market didn't exist two years ago. So we identified the leader in the space. We wanted to move forward aggressively and make sure that we were the go-to platform to embed environmental products, carbon specifically, into our markets. And our success there has been very strong. When you look at what we've done since launch in 2021, we had over 57 million tons of CO2 equivalent traded between our two contracts that were live. our geo and NGO contract, and over 6.5 million offsets were delivered through seven successful cycles. So this is a physically delivered product. These are emerging needs. We are going to see this become more and more a portion of every global company's risk management toolkit. Right now it's early days. We're developing these markets. We have a long history of seeing opportunities, seeing around corners in markets, investing in them, and making sure that we're the winner. So with that, we'll turn over. And turn it over to Julie.

Yeah, Julie, you want to talk about the ESG S&P or Sean? One of the two of you want to comment on that?

Thanks, Derek. Yeah, so this is Sean jumping in. On the financial side, CME now hosts the world's largest ESG contract by nominal value, the S&P 500 ESG Index Futures, which have reached an open interest of more than $4 billion in notional value. In January, we had a record volume day on Globex of 7,943 contracts. more than 1.5 billion notional traded that day, which was very encouraging. Thanks, Sean.

Thanks, Brian. Appreciate your question.

We will now take our next question from Ken Wardington from JP Morgan. Please go ahead.

Hi, good morning. Over the last four years, we've been in various market environments, various volatility levels, rate environments. Futures volumes have been constant in 18, 19, 20, and 21 after rising a lot in 17. What should we think of as the natural growth rate of futures volume when holding all the macro factors constant? And as we think about CME initiatives from new products to new customers, what should that add to annual growth to futures volumes

over time? Well, I'll start and I think Sean and John and others can jump in, but when you say the volumes have been constant, you're correct in your analysis, but the comment I made earlier is what I truly believe this is we're setting up for something that a lot of us have never seen before. So what does that mean for the out years going forward, as you just pointed out, from 17 going on through 18, 19, and 20? So I think it's going to be interesting to see if that pattern continues, or do we see a whole new pattern of trade between the multiple asset classes for people to manage risk because of the fundamental macro factors that are going on throughout the world so it's going to be quite interesting i will say the following though ken when you look at the efficiencies that cme has been able to effectuate for clients over the years it's been quite a benefit for the clients to be able to make their capital more efficient for them to manage their risk here so i you know i anticipate uh us to continue down that path and to look for greater efficiencies. As you know, we're still finalizing some opportunities with our friends over at Depository Trust Corporation to get margin offsets with our broker tech platform against our futures. That's out of our hands. We've done all we can from our side. We're waiting for the DTCC to finalize the approvals from the SEC. But that will be another efficiency that's going to be very effective for clients to manage risk going forward. So, again, liquidity begets liquidity. We think this is another way that we will look at the markets going forward. But I think when you look at just the setup right now, It's very interesting for the out years, and I'll ask some of my colleagues to comment as well.

Yeah, so this is Sean. I'll jump in. As I started in my prepared remarks, 2021 volatilities across financial asset classes were significantly below normal. If you look at, you know, euro-dollar, for example, the euro versus dollar foreign exchange rate, it's at the 12th percentile going back to at least 2007. Yen at the 14th percentile. Sterling at the 21st percentile. If you look at the S&P 500, it was at the 39th percentile. If you look across our rates complex, it was generally around the 30th percentile going back to 2007. So volatilities were extremely suppressed and depressed relative to a zero Federal Reserve interest rate policy, overnight rate policy, as well as their purchase of securities. And as I said in my prepared remarks, in the fourth quarter, we saw more normalized volatility, in particular closer to normal in both equities and rates, but foreign exchange remained well below historical norms. So I think you have to take the volatility environment into account. If you look at interest rate policy itself, 2016, 2017, 2018, the Federal Reserve was tightening. So that's why we saw much higher volatilities in those years than we did last year, hence the reason why our volumes and our revenues remained relatively flat. It was in a much, much lower volatility environment. We did have on the back of that, as Terry mentioned in his prepared remarks, $500 million last year in that lower volatility environment that came from new product launches in 2010. With the growth of large open interest holders, the growth of customers, and with new product growth as well as a more normalized volatility environment, I would expect the results to continue to grow. Julie?

I think adding to that, you've heard us talk a lot about the evolution of our commercial model and also our focus on new client acquisition. When we look specifically at those new institutional clients that we were able to add to CME Group volume and revenue last year, you know, 10% of those net new institutional clients came to us and were trading crypto. Another 16% were trading the microsuite. And so I think it speaks to that product innovation is helping to attract new customers. And when we look over both our institutional and our retail new client base, we've generated over a billion dollars over the last five years that is completely net new revenue and new customers that are trading here. And so we believe with our commercial model, we can continue to expand that. You know, we're advancing our digital capabilities and personalizing things in ways, you know, that other companies are doing as well, but doing it in an accelerated fashion. So I think I'm optimistic about what we can continue to do in the future. And, Don, do you have anything?

Yeah, I think two other points. One we didn't really touch on here, and that's innovation, right? Part of the hallmark and one of the things that Terry has really instilled into the business is innovating. And when you take a look at products launched since 2010, we're generating about a half a billion dollars per year in products that have been launched since 2010. So meaningful innovation that's driving meaningful revenue. Second point, and Derek touched on it, and that was the globalization of our business. We've invested in Salesforce, as Julie talked about, but that Salesforce is around the world. And right now we're approaching, we're right around 29% of our volume is coming outside of the United States, generating close to about 38% of our revenue from sales. 28% of our revenue from electronic trading from outside the United States. Also, I did want to point out, and Sean touched on it, and that's pricing. He mentioned in his prepared remarks a couple of points around price increases that we've done in our equity complex. When I take a look at price adjustments we've made, and obviously we take a very targeted approach, all with the eye of not impacting volumes. But we did make pricing adjustments across almost all of our asset classes. And assuming similar trading patterns as last year, we would expect, you know, 1.5% to 2% price adjustment, you know, against our revenues. So the fees go into effect in February. As Sean mentioned, the largest portion of the fee adjustments is in our equity complex, and our equity complex is growing at 55% so far this quarter. It's up in our micros, where we also made some adjustments, is up over 65% so far this quarter. Awesome. Thank you so much.

Thanks, Ken. Thanks, Ken.

We will now take our next question from Simon Clinch from Atlantic Equities. Please go ahead.

Hi, everyone. Thanks for taking my question. I'm really interested in your thoughts around, I guess, inflation. Obviously, inflation, the exploitation backdrop is fantastic from a volume perspective for you guys. And I'm curious as to how you're feeding that into, I guess, into your operations and your expense expectations through fiscal year 22, based on your guidance. certainly noting that your compensation and salaries, for example, I think were held flat last year. So I was wondering what, I guess how sustainable that guidance for expense in fiscal year 22 is and how we should think about that.

Thanks, Simon. We appreciate the question. John, why don't you touch a little bit on our expenses as it relates to inflationary times that we're all dealing with?

Sure. Yes. Thanks, Simon, for the question. When you take a look at our guidance and you adjust for, Ostra, and you adjust for our Synergy Capture. When I take a look at our core expense growth rate, our core expenses are growing at approximately a little over 3.5%. That's been at a higher expense growth rate than we've seen historically. We generally have been around the 3%. growth rate. So you certainly are seeing some upward pressure on our costs. Secondly, when you take a look at our guidance for next year, we also included approximately $30 million in costs related to an improving business environment. So that would be about half of that $30 million is really related to increased travel and in-person events. And we've seen that starting to come through in the first quarter with more conferences, for example, being in person. Also, we're expecting a higher marketing spend in next year. The second half of that, or the other 15 million, is related around growth initiatives that we have, specifically customer-facing employees globally. and also focused on new customer acquisition programs. So those are the two kind of pieces. It's something we certainly are working diligently on in terms of managing our costs. Our team has done a wonderful job across the entire organization in terms of managing our costs over the long run. In fact, if you take a look at our cost base in 2018, and you adjust for Ostra, you adjust for the synergies, the 200 million in run rate synergies that we achieved last quarter, and you assume that we had next for the full year in 2018, our costs have grown on a compound annual growth rate, assuming we hit the 1450 in terms of our guidance, at less than 3% per year. We've got a long history of being able to manage our costs across the entire organization. The entire team does a great job ensuring that we manage our costs as efficiently as possible.

Thanks, Simon, for the question. Appreciate it. Thank you.

We will now take our next question from Alex Bonstein from Goldman Sachs. Please go ahead.

Hey, good morning, guys. Thank you for taking the question. I was hoping to dig into market data a little bit more. The revenue trends have been flat. It's really over the course of most of this year. I know it's a big growth initiative for the business. So maybe give us an update on how you're thinking about the growth prospects into 2022. And then, you know, as a sort of related follow up to that, I guess the discussion around Google with respect to market data and new analytics and tools you're planning to roll out. What's the timeline when you actually think these initiatives could help the revenues?

Sure, no, thanks for the question. You know, I think just a little bit in terms of the performance in Q4 of the market data business, you know, as John pointed out, certainly up over Q4 of 2020, but on an annualized basis, you know, up almost 6%. And so in Q4, what you're seeing a little bit is some of the true-ups that we had from a drive data licensing perspective that hit in Q3. We had a number of... you know, agreements that we reached with some banks. And so, you know, that's something that then is built into the baseline, but is not something that we were able, you know, replicate in Q4. So those types of things are just a little bit lumpy, as we've talked about in the past with audits. You know, our data business is strong, you know, as we look across both the professional data subscribers, which is the 70% of that revenue, continues to be very solid, and a lot of the policy and pricing changes that we have made have driven that uplift in revenue that I talked about. So we feel very good about the direction of the business as well as the innovation we've been able to drive in putting our historical data on the cloud. Your second question on where we will see some of that, I mean, as I mentioned earlier, we hope to be able to get that real-time options data in the JSON format onto that feed within the next six months and are getting close there and believe that will help drive additional clients into that production environment. And utilizing a lot of these other tools with Google, as we mentioned, these are off-the-shelf tools that Google has today and it will be relatively easy to put that into use as it relates back to SmartStream. A lot of the innovation that John spoke with earlier is definitely focused on our data and our information. So we believe there are definitely better ways that we can be packaging this data and information. And we'll be working with some of our clients this year for them to preview some of that and we'll eventually be scaling it out to other customers. Definitely, I would say a building year, but also something that we will have new products in market in 2022. All right.

Thanks, Alex.

We will now take our next question from Owen Lau from Oppenheimer. Please go ahead.

Hey, good morning, and thank you for taking my questions. So on digital assets, could you please give us an update on your recent traction and conversation with investors for your Bitcoin and Ether futures product in light of the recent trading environment? And then on the new product launch, could you please talk about whether you have any near-term plan to launch more crypto derivatives products? And it would be great if you can explain a little bit more on the approval process and and the typical timeline from, say, having a plan to actually launch on the new product on the crypto side. Thank you.

Thanks, Owen. On the digital assets, let me ask both Sean and Julie to make some comments, and as it relates to new products, also with Julie and Sean. So that's kind of in their domain. So, Sean, you want to start?

Yeah, as I said earlier, in January, we had an all-time record in our total crypto average daily volumes. And, you know, we see our Bitcoin futures doing well at 8,900 contracts here at 880V, our Ether futures at over 5,000 contracts, our micro Bitcoin at over 17,000, and our new micro Ether actually at over 23,000. So all of these contracts are doing quite well and thriving. In addition to that, as I mentioned earlier in the prepared remarks, we also recently increased our fees on both members and non-members. on both our Bitcoin and our Ether futures. That, again, starts on February 1st. In addition to that, we are, of course, planning new products. And we do have a very strong new product pipeline across the financials asset class. And we do have a strong product pipeline within our crypto area. We have not announced any new products recently, but I can assure you we do have a strong product pipeline, as we always do. in this asset class as in other asset classes and we will be announcing those as appropriate. In terms of the time it takes to get the approvals, you know, and in particular in some cases you do need CFTC review and in some cases you want the CFTC to approve. But I'll hand it over to Julie to comment on that.

Let me just jump in for a second because I think your question, Owen, on the approval side is interesting because there's been a lot of noise and rhetoric around the cash side of cryptos with the SEC. Our process, as Sean laid out with the futures, can either be a self-certification process or a full filing. So the self-certification process can be done in as little as 10 days to two weeks. The full approval, which the commission would have to find it novel and complex to go down that path of a full, could be several months. But again, the clock runs on this unless there's an issue with the commission. As you saw when we launched cryptocurrencies with Bitcoin, the first or the second exchange to do so, I believe in 2017, that was a self-certification process. So you can kind of see the path that we go down as it relates to the derivative side of the crypto asset classes. So Julie, I'll turn to you.

Yeah, I'll just zoom out a bit. I mean, I think in 2021, you know, we launched over 75 new products, which is very consistent with what we had done in past years. And the success rate for those products just continues to trend higher and higher. And I attribute a lot of that to the active engagement we have with our clients before we roll those products out. And I think Ether and the entire microsuite of new things that we introduced last year with the micro WTI and treasury yield, these were some of the fastest growing products at CME Group, and they have brought new participants to the exchange from around the world that we pointed out. I mean, the one thing that I think is interesting specifically as we looked at the crypto activity, you know, from the first quarter of 2021 versus to what we saw in January, we're now seeing a double digit participation on a percentage basis from the buy side. And so we have, you know, this is a key value proposition of our crypto suite that we are highly regulated, you know, margined, cleared, risk-managed shop here, and this is attractive to those buy-side clients that are looking for access to that asset class. And the numbers here really point that out. And I also think the whole experience that we're bringing customers, we are just seeing over 2 million visitors just to our website. just to look at what our crypto offerings are. It's driving thousands of new leads for us. We're supplementing that with crypto events and social posts and digital media. And that's all part of how we're going to continue to grow this business and be relevant to customers in the crypto space.

Owen, hopefully that gives you a little... Thank you. Appreciate it.

We will now take our next question from Carl Voigt from KBW. Please go ahead.

Hi, good morning. I have a two-part question on net investment income. So first part is just on the cash performance bonds. It looks like those increased to $158 billion in the fourth quarter. But if we go back to pre-COVID, so in 4Q19, they were at $37 billion. So I guess you're over four times higher today. So I guess as the Fed begins to tighten more meaningfully, should we expect that level of cash collateral to decline meaningfully? from the current levels and just trying to get any sense of some normalized level there. And then the second part of the question is just around the net investment income capture rate. And, you know, is the last rate cycle still a good proxy to look at where I think you reach roughly 30 basis points in that capture rate at the peak of the rate cycle? Or is there something different to note for this hiking cycle?

Thanks, Kyle. Let me turn it over to Sunil and give you some color as it relates to that.

Thank you, Terry. So when it comes to cash margin posted at the clearinghouse, it is a function of both the risk exposure and client's choice, right, among all the assets that they can post at the clearinghouse. We have a very flexible program, and clients today choose cash. You're right that the interest rate or the opportunity to earn a return does play a role, but it is very hard for us as the clearinghouse to actually forecast what it's going to be in the future as the Fed changes rate. When it comes to the capture rate, again, it's very hard for us to give you an indication of how to model that because the rate that we are paid for deposits at the Fed or at the discretion of the Fed, and there is no guarantee that it will track any one of the publicly disclosed rates. So this is one of the reasons we cannot give you a view into what to expect going forward. But at the moment, what we have is around, you know, it fluctuates. The cash margin is between $140 to $150 billion. That is in U.S. dollar equivalent terms, and about 96% of it is that.

Just to build on that for a moment, because you asked about the capture rate, currently IOER is at 15 basis points. We rebate back to our clients 10 basis points, and we earn five basis points on those funds. To your point, we did see an increase in average balances of about $6 billion. We went from about, on average, in the third quarter of $144 billion to $150 billion on average. So we did see an increase. So the amount of funds we earned from a CME perspective was about $1 million more this quarter than we did last quarter. Historically, if you look at over time as You know, as the Fed increases rates, you know, we often make adjustments as well in terms of our capture rate. But to Sunil's point, we're always looking at what are the alternatives that our clients have to invest their funds. So we want to be competitive to, you know, to keep the cash levels up at the clearinghouse because it's good for the risk management perspective, but also, you know, we earn on that as well.

Thank you. Cal, hopefully that gave you a little flavor.

Yeah, thanks. I was just, you know, if I could just follow up real quickly, just on the, I think I'd asked about, you know, last cycle was around 30 basis points. Was the net capture where it reached to? I mean, I guess, has anything changed in terms of what you want to pass through, I guess? That's essentially the question, just because it is such a big line item now, so I just want to make sure that 80-90%, is that still a rough guide frame for kind of what you want to pass through to the end clients?

Yeah, I would say that's the case. We haven't changed our point of view in terms of how we're managing that. Again, we are mindful in terms of what our clients can invest elsewhere, and that also governs how much we rebate back to our clients. But we haven't changed our point of view in terms of how we manage that.

I think just to add to this, and I thought about it, but John's point earlier about clients have alternatives. We want to make sure from a risk management perspective, we are balancing this in an appropriate way, not just to try to earn an extra $500,000 or a million. There's a lot more to it than just that.

Got it. Thank you very much.

Thanks, Cal.

We will now take our next question from Chris Allen from Compass Point. Please go ahead.

Good morning, everyone. Thanks for taking my question. I was wondering if you could provide some color just on plans for deployment around the $1 billion from the Google investment. CapEx this year is $150 million. Obviously, you have a healthy amount of cash generation. Just wondering how you plan on deploying that, whether there's going to be a shift in capital priorities given the cash balance is where they stand right now.

John? Yeah, thanks, Chris. You know, as we indicated, you know, at the time we did the transaction with Google, that the billion dollars was really going to be used to invest in the business. So part of that investment includes obviously the migration onto the cloud platform. which we were very excited about. I kind of gave some highlights around what that would entail. Also, we are going to be looking at ways to accelerate the growth of the business through investing in the business. And we don't really have anything to share with you at this point, but we think that the focus is on is on growth here. And that's what we're, that's what we're intending to do with the cash.

Just a quick follow-up on ways to accelerate with that. Would you consider inorganic or just organic opportunities?

You know, we're not limited in terms of how we're viewing the opportunity to invest in the business. You know, I've been working with Terry for almost 20 years here now in terms of M&A, and I don't think our view around inorganic opportunities has changed at all. We are always looking for ways to deploy capital, whether it's in the business, internally, organic growth opportunities or inorganic opportunities. We think about it from the point of view of how can we help our clients And so we always look at things from our clients, you know, in our clients' shoes. Also, you know, when we look at the M&A landscape and our opportunities to deploy capital, you know, we're in a very strong position. We kind of highlighted today why we are... know pretty optimistic about about the future here and we want to and you know so we are in a strong position as we look at opportunities thank you all right thanks chris we will now take our next question from craig sickenhauler from bank of america please go ahead hey good morning hope everyone is doing well this is eli filling in for craig

So I was wondering, given that Fed funds haven't moved yet, even though they will and energy prices are already up a ton, I just wanted your perspective on the potential lead time between energy volumes and the rates volume curve. Our guest said differently, do you think energy volumes are going to be peaking well before rates volumes? Just on timing. Thanks.

Thanks, Eli.

Derek, do you want to? talk about the energy?

Yeah, great question. I think this cycle is a little bit different from previous cycles for a couple of different reasons. Structurally, the global energy market is in a very different place than it was last time we had changes in rate cycles. If you look at whether it's a combination of what we talked about earlier, greenifying the balance sheets of a lot of companies, companies moving away from or trying to be part of the sustainability initiatives, it is it has promoted a lot of decisions to decrease capex in the development of oil infrastructure. So coming out of the pandemic, we have just reached the pre-pandemic levels of demand in crude oil, but yet we have not reached the level of production. So one of the major reasons we're seeing elevated prices here is we're seeing Demand outstripping supply, and I think structurally you're going to see less supply going forward than you had previously. So I think there's a couple of items going on. Number one, you're seeing crude push up through 1992. You're seeing demand outstrip supply. I think you're also seeing a divided world within energy of seeing what the future of crude oil looks like versus what the future of natural gas looks like. Certainly the Russian-Ukraine tensions has created a whole new view of what a global benchmark looks like for natural gas. And unquestionable, the U.S. is a swing producer in global crude oil market and absolutely in the nat gas market as well. The cap on demand or I should say access to natural gas right now is a function of the LNG facilities coming online in the Gulf. There's three facilities online right now. There should be two more coming online in the next two years. The U.S. is pumping at max capacity, liquefying natural gas based on Henry Hub pricing. That's a market we own 80% of. And certainly in a world in which you're seeing global energy concerns at the forefront of domestic policy in Europe, you'll see a greater push to see imports of U.S.-sourced LNG priced on Henry Hub, that market that we're 80% market share of, as a continued demand. The last piece of this, and this is why it's different from previous years, Europe has actually just deemed both natural gas and nuclear as green fuels. So this will be not only the natural gas story isn't just the story of transition to sustainability, that is a long-term part of the overall energy story for a long time to come. So we'll continue to grow and expand our footprint there, and you'll see us continue to accelerate global adoption in our markets. And your last point, we've seen an acceleration of volumes and participation in Q4 and coming into Q1 in energy. So we're excited about that. We think we're well positioned.

Thanks, Derek.

Thanks, Eli. I appreciate the question.

Thanks, guys.

We will now take our next question from Michael Suprise from Morgan Stanley. Please go ahead.

Hey, good morning. Thanks for taking the question. I wanted to ask about crypto. You guys have Bitcoin and Ether futures and have been successful there. I guess just broadly, how do you think about potentially extending into the underlying physical token market? And to what extent can it make sense for CME on that front, but even potentially opening up your platform to bring retail investors in more directly with your exchange, perhaps even with crypto wallets on the physical side, which gets to a broader question around how do you see the market structure developing in crypto versus other asset classes? And what do you think it's going to take to be successful, to be a dominant player within the trading of digital assets?

Well, Michael, that was a lot of questions and comments in one question, but I will say that, listen, the crypto space, and I've said this over the last several years, appears to be here to stay, and we are here to facilitate the risk management of these products. As Sean referenced a moment ago, we're looking to roll out new products. We have not announced what those crypto products are yet, but we have been successful, as Julie pointed out, in the ones we have to date. As far as You know, going into the cash side of the business, that's a very crowded field right now, to say the least, in the cash crypto trading. We are a dominant listed on the crypto side in the futures point of view. So we want to maintain our presence in the listed market and the regulated market. So we'll wait and see as it relates to how it shakes out on the cash side. One of the things that we've been very successful at is to create with our next transaction in marrying cash markets with futures markets and creating efficiencies. This is something that I will have the team continually look at. It's not saying that we're going there, but we will look at the efficiencies and the growth of this market. But it's a very crowded market right now on the cash side. Again, on the listed side, I think we're doing quite well. And again, we're a walk before you run in this asset class. That's been the way I wanted to approach it. This is a contentious product line. And so we're a highly regulated entity. And reputationally, I want to make sure that we're always doing the right thing. So we are doing everything I believe that we can do at this particular moment. with our eyes set at new opportunities going forward. And as it relates to the retail, our micro contracts are already attracting that retail crowd that you're referencing today that are trading some of the cash platforms. They're trading the futures on the smaller crypto products that we have listed. So I think the short answer is, Michael, more to come as it relates to some of our newer products. But again, the only way that I would look at the cash side is if we can create efficiencies against our futures portfolio. So not saying we can or we can't, but that is one thing I'm looking at. Great. Thanks so much.

Appreciate it.

We're going to take a follow-up question from Alex Cram from UBS. Please go ahead.

Hey, hello again. Sorry, I realize we're way into overtime here, but a couple of follow-ups to squeeze in here, and those should be quick. You mentioned the SOFR term license and how many people you've licensed it out to. I would assume this is kind of like a utility kind of benchmark like LIBOR was, but maybe elaborate if you're actually generating revenues of that and if there's opportunity for maybe some analytics products, et cetera, and if you're looking at this as a revenue opportunity. And then another very quick follow-up to the question earlier on cash deployment is, With the S&P Global IHS market deal closing here imminently, just wondering if you could estimate how big the check will be that you'll have to write them to keep your stake in the index franchise JV unchanged. Thanks.

First of all, let me answer the last one first. I don't think anybody announced that we're writing a check for the increase with S&P Global yet. That is something, obviously, we'll talk with them as they close their transaction. It's a little premature to make that assumption just yet, Alex, so I would be careful with assuming that until that deal is closed. I agree it should be closing shortly, but, you know, we've been hearing that for quite some time now, so we'll wait until that is done. We do like the indice businesses. We've been very successful with it. We think that the credit indices that are coming in from IHS and S&P Global could be very attractive for CME, and we're We do like those businesses, so there's no question about it. But again, I don't want to get over in front of us until that deal is closed to talk about what kind of check we may or may not be writing. There's a lot more to it than just that. Let me also revert back to Julie on the first part of the question.

Yeah, thanks for the question, Alex. As Sean pointed out in his remarks, we have licensed, just since July, over 600 entities for the term SOFR. And so that's going to apply to licenses across both real-time and historical data. And it is generating seven-digit annualized revenue for us and another almost 400 firms in the pipeline. So what the opportunity is here is both for direct data revenue as well as we believe cross-sell opportunities. So we're seeing really strong traction with global investment banks, regional banks around the world, both in the U.S. and APAC, and also just getting into some new areas with people that CME has not traditionally worked with. So global trade finance, commercial real estate firms, export, import, and development banks, structured finance. And so as we are engaging with those customers specifically to license them, you know, those become the new client opportunities that, you know, our sales team will be very actively talking to them about the whole suite of products and services that we offer here. So, you know, we see this as a great opportunity and continues to be a key part of really supporting the growth and transition from LIBOR to SOFR that Sean and his team are working on with us as well.

Okay, Alex, does that address both of your questions?

Fantastic.

Thanks for the answers. Thanks, bud. Appreciate it.

We will now take our next follow-up question from Brian Bedell from Deutsche Bank. Please go ahead.

Great. Thanks. Good morning, folks, for taking my follow-up. Just a quick two-parter, hopefully. Just one, I want to just circle back, Derek, on your comments on the environmental. I don't know if you had the ADV from just that environmental products portfolio that you cited, maybe just for January, just so we could base growth off of that. I realize it's very early still. And then the second part is just, Sean, we talked a lot about the short end of the curve, but maybe your view on the potential for an increase in supply of hedgeable treasuries into the market after quantitative tightening over the long term.

Thanks, Brian. Go ahead and start, Derek, and we'll go to Sean on the deliverables and supply issues, or the supply of treasuries.

Yeah, thanks, Brian. So when you look at specifically just the carbon products alone, for example, right now this is a brand-new market. I mean, the leading cash market out there, CBL Expansive, is trading, you know, a couple hundred million dollars a day equivalent in the spot market, and that's the largest market we have. So right now those volumes just in the carbon market are in the kind of low single hundred digits right now, open interest records around 10,000. right before we close that at year end. So this is a low – it's going to be a low build, which is why we're saying this is an investment in making sure that we're locking up the best partners right now. Plus, this energy transition could be decades long. So we're making sure that, as we always do, seeing around corners, seeing how the market's evolving, working with our customers, understanding what their needs are so that we can position ourselves as the risk management tool and price discovery center of choice. we'll start to be presenting that environmental products portfolio view out to you differently in the coming months because we're going to be wrapping in there products that have rather substantial volumes right now in the biofuels, ethanol products, alongside battery metals, et cetera. So we've developed it to be able to manage it as a portfolio, so we'll be able to present that to you a little bit differently as we manage it and grow that globally. But right now this is the low single hundreds, low single thousands ADVs, and the open interest in the tens of thousands right now. So growing, but it's going to be a slow build. Thanks, Derek.

Sean, on the supply, after the Fed decides to lighten up a little bit. Yeah, thanks, Brian, and thanks, Terry. You know, we are very pleased last year with all-time record volumes in our Treasury futures, our ultra-10-year Treasury futures, in terms of the upcoming potential for quantitative tightening as well as supply. The Treasury did announce a slight reduction in the long-term issuance in the most recent release, However, that will be offset with the expectations of the Federal Reserve in reducing their quantitative easing. And then in the coming year, probably moving towards a quantitative tightening. So, you know, in the very short term, you know, probably it looks like the amount of quantitative easing that the Federal Reserve is doing may offset the, you know, the reduction in quantitative easing. It will offset the reduction in issuance. Longer term, you know, remember what happened with our volumes in 2018, 2017, 2018, that period of time when the Federal Reserve actually started to sell U.S. Treasuries, you know, and we do expect in this cycle that that will happen at some point, and that with the combined record debt, record issuance, and potential for quantitative tightening, that our products will be needed much more than ever before.

You know, as Sean has always said, Brian, that the Fed doesn't hedge their balance sheet. When they sell them, the people that buy them, they have no choice but to hedge that balance sheet. So to Sean's point, when you saw the increase of volumes in the time period he referenced, that's a portion where the Fed is not increasing their balance sheet. They're selling treasuries, and the folks that are buying them need to hedge those. That's why we do quite well in that scenario. So again, there's no guarantees, but we believe it's setting up in a very similar pattern.

Yeah, no, that's agreed. Thanks very much for the answers. Great call. Thank you. Thank you.

That concludes today's question and answer session. I would like to turn the call back to management for any additional or closing remarks.

Well, let me thank all of you for joining us on today's call. We appreciate it very much. Obviously, we're excited by the quarter. We're excited by the beginning of 2022. As I said, the landscape, the way it's setting up, we are in a position to continue to help people manage their risk through these most difficult times that we all live in. So please all stay safe and healthy, and we look forward to seeing you all soon. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.