CME Group Inc.

Welcome to the CME Group first quarter 2025 earnings call. At this time, I would like to inform all participants that your lines have been placed on a listen-only mode until the question and answer session of today's conference. I would now like to turn the call over to Adam Minnick. Please go ahead.

Good morning. I hope you're all doing well today. We released our executive commentary earlier this morning, which provides extensive details on the first quarter 2025, which we will be discussing on this call. I'll start with the Safe Harbor language, and then I'll turn it over to Terry. 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, in the earnings release, you will see a reconciliation between GAAP and non-GAAP measures following the financial statement. With that, I'll turn the call over to Terry.

Thanks, Adam, and thank you all for joining us this morning. I'm going to make a few brief comments about our record quarter and the current business environment, and then I'm going to ask Suzanne and Sunil to comment on our market operations during this high volatility environment. Following that, Lynn will provide an overview of our first quarter results. In addition to Suzanne, Sunil, and Lynn, we have other members of our management team present to answer questions after the prepared remarks. This quarter represented the highest volume, revenue, operating income, and diluted earnings per share in the history of CME Group. Our quarterly revenue cost $1.6 billion for the first time, and we also exceeded $1 billion in adjusted net income. Our record-breaking performance in the first quarter demonstrated the growing need for risk management globally. The first quarter averaged a volume of 29.8 million contracts. Not only was the highest quarterly ADV in CME Group's history, it also increased 13% compared to the same period last year. This strong growth was broad-based. with year-over-year volume growth in all six asset classes, including all-time quarterly volume records in interest rates, equities, agricultural commodities, and foreign exchange. In aggregate, our commodity sector volumes grew by 19%, and our financial products grew by 12%. This quarter highlighted the strength of our product diversity and the ability for customers to manage risk in times of uncertainty. It also reinforces our past comments about the importance of deep liquidity, especially in times of market stress. This was also a record quarter for our international business, which averaged 8.8 million contracts per day of 19% from the prior year. This strength was driven by growth across all asset classes, and including quarterly volume records in both EMEA and APAC. We also continue to innovate and evolve our product offerings to meet risk management needs for our clients. We recently announced several new offerings that will create opportunities for stronger links between cash and futures markets. Later this year, we plan to launch BrokerTech Chicago, a central limit order book for cash U.S. treasuries, that will be located, co-located next to our U.S. Treasury futures and options markets. Just last week, we launched FX Spot Plus, which enables Spot FX participants to tap into CME FX futures liquidity and gives FX futures users broader access to OTC liquidity. Looking forward, we continue to see very strong volumes to start the second quarter as market participants look to hedge exposures to terror policies and geopolitical dynamics. Our open interest today is 7% higher than at the same point last year with strong open interest growth in our interest rate, energy, and agricultural complexes. The strong open interest trends tend to indicate that despite the high level of volatility, market participants are not leaving the market, but rather continuing to use our products to manage their risk exposures. Risk management and resiliency is paramount at CME Group. With record activity this past quarter leading into April, I'm going to ask Suzanne Sprague to give you an update on margins and Sunil Coutinho to give you some color on our resiliency during some of the most unprecedented times that we have seen. With that, I'm going to turn the call over to Suzanne.

Thanks, Terry. In response to the heightened levels of volatility earlier this month, we proactively increased margin requirements in various products across all asset classes and incremental steps over the course of April to ensure adequate collateral coverage. Liquidity demand due to margin increases are typically a fraction of the size of mark-to-market cycles attributed to daily price moves. We've got a new single-day record for moving cash associated with mark-to-market on April 9th collecting $32 billion from firms with losses that day and pinning out $32 billion to firms with gains that day. This far exceeded our previous record of $22 billion. In comparison, increased collateral requirements due to margin increases on April 9th totaled $7 billion. Our members and settlement banks have been performing well given the increased volatility and liquidity. Growth management is of utmost importance to our business And we're monitoring risk on a real-time basis every day, regardless of market conditions.

Thanks, Roseanne.

I'm going to ask Sunil Coutinho now to comment on the technology and the resiliency of our markets. Thanks, Terry. Despite the high volatility and record activity in our markets, including seven straight days, over 40 million contracts, our systems functioned as designed, ensuring market continuity during a period of extreme volatility. During the period, during the week of April 7th, we saw record order entry volumes on Globex exceeding 13 billion messages over the course of the week. The system's ability to handle record volumes underscores its resilience.

Thank you, Sunil. I ask both Sunil and Suzanne to comment because I think it's critically important for Analyst and investors understand what we do here on a daily basis. Sometimes it doesn't get quite asked, but I think during the unprecedented times that we have seen, especially over the last six to eight weeks, I want to give you just a little bit of a flavor of how we are operating at CME Group, which I think is really important for you to understand that. And we look forward to your further questions during that part of the presentation this morning. So thank you both to Suzanne and Sunil. Now I'm going to turn the call over to Lynn to review our financial results in more detail.

Thanks, Terry, and thank you all for joining us this morning. As Terry mentioned, during the first quarter, CME Group generated revenue over $1.6 billion for the first time, up 10% from the first quarter in 2024. The average rate per contract for the quarter was strong at 68.6 cents, down 1% from the prior year on 13% volume growth, resulting in the highest quarterly clearing and transaction fees in our history of $1.3 billion, up 11% year over year. Market data revenue also reached a record level, up 11% to $195 million. Continued strong cost discipline led to adjusted expenses of $475 million for the quarter and $378 million excluding license fees. Our adjusted operating income came in at a record $1.2 billion, up 14% year over year. Our adjusted operating margin for the quarter was 71.1%, up from 68.9% in the same period last year. CME Group had an adjusted effective tax rate of 23.1%. Driven by the strong demand for our risk management product, we delivered the highest quarterly adjusted net income and adjusted diluted earnings per share in our history at $1 billion and $2.80 per share respectively, both up 12% from the first quarter last year. This represents an adjusted net income margin for the quarter of over 62%. Capital expenditures for the first quarter were approximately $12 million and cash at the end of the quarter was $1.6 billion. CME Group paid dividends during the quarter of approximately $2.6 billion and $3.8 billion over the past year. We're very proud to deliver the best quarterly earnings in our history and to see this strong start continue into the second quarter with year-to-date volumes of 20% versus 2024. At CME Group, we continue to focus on providing the risk management products needed by our clients and driving earnings growth for our shareholders. We'd now like to open the call for your questions. Thanks.

Thank you. We will now begin our question and answer session. If you would like to ask a question, please press star 1. Star 2 if you would like to withdraw your question. Again, that is star 1 if you would like to ask a question. Our first question will come from Kyle Voigt with KBW. Your line is open.

Hey, good morning, everyone. Maybe if I could just start by asking one on the operating environment. In some prior periods of extreme volatility and increasing margin requirements, we've seen deleveraging occur by market participants. As you kind of just mentioned in your prepared remarks, it doesn't seem like the open interest data really supports that there's any type of significant deleveraging occurring. I think open interest total OI is up since the start of April. However, there does seem to be some pockets with OI down meaningfully in April, particularly in ag futures. I was just wondering if you could talk about what you're seeing and hearing from market participants in terms of health, why you think we haven't seen any broad-based deleveraging, and what is happening in some of the small pockets where you are seeing OI decline a bit in April?

Thanks, Kyle. So the question is, What are we hearing from clients of why they're not deleveraging during this time period? And what are we seeing with some of the smaller contracts that relate to agricultural products that have seen some open interest drop? Is that a fair way to categorize your question? Yes. All right. So, Derek, why don't you address the commodity issue, and I'll address the butters. Yeah, I'm with Suzanne and others.

So, thanks, Kyle. When you look at the overall ag business, we came off a record year of just under $600 million generated in ags last year. When you look at the first quarter of this year, we set another ADV record, not just in futures but in options overall. The business up 23%. You'll look at the OI trends overall. We've set multiple records in OI, not just in options, but the aggregate options plus futures. In fact, we just set a record of 5.1 million open interest in options just last week on the 21st of April. So you look at the aggregate story, options plus futures, we're actually seeing record levels of open interest. We're on track to exceed the record that we set in February with another record, assuming we continue the trends over the next couple of days. When you look at the pockets that you're talking about, yes, we have seen some trailing off in futures, but we've seen that more than offset in the pickup and open interest in options, hence the overall record levels. We did see some pullback in livestock, particularly feeder cattle. In the futures side, options grew, but overall in aggregate, this is very much a risk-on environment in ags, and that's the benefit of having a market where we've got the grains and oilseeds, we've got the dairy, we've got the lumber, and we've got the livestock in ag markets overall. We're coming off a record quarter, record OY, options record, and we're seeing record levels of non-U.S. activity. So I would say the deleveraging is not something we're seeing in aggregate across ags. In fact, it's very much the opposite. It's a risk-on environment. We are seeing some shifts between products inside the ags market overall.

So, Kyle, let me address some of the other questions about the broader markets and just talk about some of the fundamentals that we're seeing that I don't know. I've been in this business for probably as long as anybody, and I have not seen some of the fundamental factors that we're seeing today. So our open interest, as Derek referenced, is up 7% across the board in total. So I think that's an important factor. You're also looking at the reason why people may not be deleveraging. It's very difficult to take risk off or deleverage your hedges when probably the most uncertain times we've ever seen in our history. No one's ever traded through these tariffs in the marketplaces to any extent over the last 30 plus years. We've never had $38 trillion of debt on the books of the United States of America. There's debt on books of countries all around the world. there is so much risk out there associated with margins being massively thin that if you do not participate, I don't think you have the luxury of not participating in this volatile time just because if you do not participate, you could be out of business the next day. That's how quick these markets are moving, and that's the size of the moves associated with them. So I think that's a big part of the reason why we're not seeing deleveraging like you may have seen And like I've seen 25, 30 years ago, when the markets got very volatile and people just kind of put their hands in their pocket and tried to wait to see when there's some clarity. You don't have that luxury today because of the fundamentals that are not only here in the United States, but globally. So I think that's a big part of why we're not seeing the deleveraging. And I think that's why our products are critically important for our user base today.

Thanks, Terry.

Thanks, Colin.

Thank you. Our next question comes from Dan Fannin with Jefferies. Your line is open.

Thanks. Good morning. I was hoping for some historical context. Can you talk to what happens historically when you guys have raised margin requirements and then ultimately volumes thereafter? I know this period is pretty unique, but if we focus on maybe the largest asset classes, is it reasonable to assume some level of slow down after the raise in margin requirements, and also if you could provide just kind of where those challenges on the collateral side sit currently.

So, Dan, I think it's really important. It's hard to give you a one answer on that because every situation is different with margins. So if you want to talk about margins during the 08-09 crisis, that's a fundamental issue why you might move margins up or down. Why you're moving margins up or down in 2025 going on with the geopolitical events of boots on the ground wars in Russia, Ukraine, the issues going on in the Middle East, and the tariff conversations that have been going on are completely different than what was going on in 08 with the housing crisis. So it's hard to pinpoint what exactly can or cannot happen. I will say on margins, though, and it's one of the reasons – You know, I pay a lot of attention to what Suzanne and Sunil are doing because it's really important that when we talk about margins and when we work with our clients on margins, we want to make sure we do it in a very judicious way that we're not just being reactive on margins because I think that can be disruptive to markets, and that's what puts people on the sidelines when you're disruptive. I think when you're deliberate, like we have been, and proactive like we have been, you lessen the chance of the reactionary market activity of people walking away from your marketplace because not understanding what margins mean to it. So I believe, Dan, there's no one simple answer, and I promise you I'm not dodging it. You know me better than that. I just think that fundamentally the markets are different today than they were in historical trends that we've seen when we've moved margins up or down. And Suzanne, if you want to comment, you're happy to.

Yeah, I would agree. I think every situation is different, but in periods of increased volatility, people are looking for central counterparties to be a place to come to manage their risk in a safe manner and relying upon the collateralization that happens in our ecosystem. So we have seen record levels of overall margin requirements and collateral in the system that seems to be consistent with the activity increases that we've seen over the past couple weeks as well. So again, we can't speculate what's going to happen in the future, but it seems in this case that people appreciate the level of safety that you get from margin collateralization and a clearinghouse like CME.

And again, Dan, I think that's one of the reasons why we invested the way we did in Span 2 technology. It helps allow us to make some of these decisions. But again, it's an art, not a science all the time. And we do work with market participants to make sure that everybody's comfortable. It's a mutualized system. And it's critically important to all market participants that we are doing our job correctly. So we take it very seriously. And as Suzanne said earlier, this is real-time risk management. This isn't T1 or T2. This is real-time risk management.

Appreciate your question, Dan. Hopefully that answers it for you.

Yep, thank you.

Thank you. Thank you. Our next question comes from Patrick Moley with Piper Sandler. Your line is open.

Yes, good morning. Thanks for taking the question. So you recently announced that you're going to be selling the Ostra JV with S&P Global for $3.1 billion. of which I assume you are going to receive about half of. So I was just hoping maybe you could comment on what you plan to do with the proceeds from that sale and how that informs your capital allocation priorities for the rest of this year and into next year. Thanks. Thanks, Patrick. Go ahead, Lynn.

Yeah. Thanks, Patrick. So you're right. It is a 50-50 joint venture, so we would be splitting the proceeds of that. I would note that the expected close is probably about six months out. we have to go through the regulatory review. So that does take some time. So on the use of proceeds, we're going to hold off on kind of making any statements on that just given the amount of time between now and the close, but certainly we'll keep you updated as we get closer to that point on those use of proceeds.

Let me just add one thing, Patrick. On the regulatory approvals, we are not anticipating, we've not been advised that there's any hurdles

time-consuming process okay great thank you thanks doctor thank you our next question comes from Ken Worthington with JP Morgan your line is open hi good morning thanks for the question I'd actually like to follow up on Ostra can you talk about the decision you know why you decided to sell Ostra and maybe what your thoughts are on post trade and going forward after the sale?

So, Ken, let me just say a couple things. When we acquired that business back in 2018, you know, the business, you know, it's an interesting back office business, and it's a decent business. It became much more attractive when we were able to do partnerships with then IHS Market, And then ultimately, when S&P acquired them, have another JV with S&P. So we're, as Lynn said, we're only one side of that trade. So it's a decision process in these JVs about how you want to go about them. Listen, I think it became very... lucrative for CME as we put these properties together and we thought it was a good opportunity for us to monetize those gains on behalf of our shareholders and we would not be putting ourselves at any disadvantage whatsoever by not owning them if in fact we still wanted to use some of these services instead of running them. So I think it was a very smart business decision and that's what we did with it. Great.

Thank you. Thanks, Ken.

Thank you. Our next question comes from Ben Budish with Barclays. Your line is open.

Hi, good morning, and thanks for taking the question. I just wanted to follow up on some of the margin questions. Just curious with the pricing change going into effect at the beginning of April, any early reads on, you know, the sort of shift from cash to non-cash, or non-cash to cash collateral, or is it perhaps like too volatile to really see what the longer-term decisions of your clients will be?

Yeah, thanks, Ben. Len?

Yes, so just to give you a few data points, Ben. For the quarter, our average cash balances were $79 billion and we had average non-cash collateral of $173 billion. In April, the month to date, our average cash balance is up to $131 billion and the fee eligible non-cash is $140 billion. Now I would note, as Suzanne talked about, the overall level of activity and margin is up in April. And we're also very early days in terms of the new soft minimum being in place. So this is an item that we do report on on a monthly basis in our volume tracker. So I would keep an eye on that as we're putting out that data over the next few months. Because we need to see when people are more used to the cash minimum and, you know, as we look at levels of activity as we go through the year, we could see some changes there. But to date, we're seeing the vast majority of participants meet that 30% soft minimum in cash.

Very helpful. Thanks so much. Thanks, Ben.

Thank you. Our next question comes from Bill Katz with TD Cowan. Your line is open.

Okay, thank you very much for taking the question. Maybe to shift gears a little bit, Steve, the non-U.S. opportunities continues to grow rather nicely year on year, quarter on quarter, and across the different regions to which you're participating. I was wondering if you could unpack some of the drivers for that growth, how much that might be sort of onboarding new users versus maybe penetration of that user base and how to think about the outlook going forward. Thank you.

Thanks, Bill. That's a great question. And we have been very pleased with our growth internationally. And I'm going to ask Julie Winkler, who heads up that division, to give some color on that for you.

Yeah, thanks for the question. You know, certainly Q1 was another record in terms of average daily volume of 8.8 million contracts. You know, that was up 19%. What was great to see is that we saw double-digit growth across all asset classes. In particular, energy ags and foreign exchange products were extremely strong. What I also like to see is that the growth came from every international customer segment, which speaks to the growth and also the need for our products and for our clients to be able to risk manage here at CME Group. That was led by commercial participants that were up almost 30%. And so we often speak about the health and diversity of our client base and how critical those hedgers are to our marketplace. And so that is a great... trend that we've continued to see. Also just point out, you know, it was a record quarter for non-U.S. options growth, you know, 1.5 million contracts in ADB. That was up over 20 percent year on year. So this has been another strategic initiative that we've talked about is increasing that penetration in options. All, you know, APEC was strong. EMEA was strong. I think the other trend that we're seeing is certainly from the buy side community. That was strong in both EMEA as well as APAC. You know, what we're seeing is, you know, the quant funds in APAC, they're continuing to further expand their trading strategies. And so things like that, you know, we have a lot of resources across the world to really engage with our customers and help to drive that trading activity and work with our customers. So we have a good outlook going forward and are happy with the performance in Q1.

Thanks, Hillary. Thank you. Thank you. Bill, thank you.

Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.

Hi, good morning. Thank you for taking my question. So on retail, your micro equity index and micro ethics ADV went up quite a lot in the first quarter. Could you please talk about how much of it is driven by your partnership with Robinhood and how much more you can do with them and launch more products through their platform. Thanks a lot.

Let me just speak a little thanks to the question about the retail performance and address your point on micros and also our new to futures brokers, partners which are important. Q1 in general was a record quarter for our retail segment. We saw growth across a number of key metrics. So certainly revenue was up 10%. That's a key metric for us. But also we've spoken about the importance of new client acquisition or NCA. This surged by an impressive 44% to over 83,000 new traders in Q1. So this is the fourth consecutive quarter of that double-digit NCA growth. We also saw a 17% increase in total participation. reaching over 350,000 traders globally. The good news as well is that we saw that growth across, you know, all three regions, and so I think that continues to speak to the global nature of our partnerships and, you know, the importance of our microsuite. So, total microvolume, you know, 3.8 million in average daily volume in Q1. This was up 13 percent, and, you know, to see that that's happened in the micro equities, as you pointed out, and also we saw a really robust demand for our micro metals and also our micro cryptocurrencies. So that continues to speak to the diversity of our product base and also the fact that we're continuing to educate these retail customers and cross-sell across equities into these other more diverse asset classes. The market environment that we've talked a lot about on this call was a key part of creating those opportunities for retail engagement. And we've also talked about the new strategic partners, including Robinhood, Plus 500, Webull, and eToro. These partners are critical for us to be able to go out and seek new customers. They are educating customers. They are onboarding them quickly. and also, you know, dishing up to them market opportunities, which there were a lot of them in terms of trading opportunities in Q1. So we feel positive about that going forward, and we'll continue to, you know, work with them as well as we see a need for product innovation in the future. And lastly, you know, we launched, you know, new things like micro-ags as well. So this is about combining the partnerships with also the product innovation to continue to fuel this growth going forward.

Thanks, Julie. Thanks, Owen.

Thank you. Our next question comes from Alex Cram with UBS. Your line is open.

Yes, good morning, everyone. A quick one from me on market data. Really strong revenue performance. I know you gave the audit numbers already in the prepared remarks, but can you maybe break down the remainder of the growth between some of the price increases, but also core subscription growth and any other one-timers you would point out? And on the subscription growth, of course, maybe talk about where you see new subscribers come from in particular. Thank you.

Okay, I'm going to ask both Lynn and Julie to comment. Lynn?

Yeah, so a reminder, Alex, on the market data front, we did have a 3.5% pricing increase that went into effect in January, so that is going to be part of that. We also saw strong subscriber growth, and maybe, Julie, you can comment on some of the resale participants and how that has been impacting the overall growth as well. Yeah, I think to the question, Alex, as Lynn pointed out, you know, biggest move, I'd say, was among our professional subscribers to our real-time market data. And so that was both, you know, we saw an uptick in demand, so we saw more users, and then we also had that price increase of 3.5% that took effect on Jan. 1. The other major trend was outperformance from the nonprofessional. And so these are retail users needing access to our market data. and also saw some growth in our derived data instruments as well, and so that was combined with that. I'd say, you know, on the non-recurring revenue side, you know, it was an uptick and increase over Q1 and, well, 2024 and also up over Q4. There were about 3.5 million in audits and some other additional true-ups, but as we've stated in the past, you know, those are pretty difficult to predict and are just a timing element from our side based on how we work with our clients on that front. So I'd say the biggest kind of new trend is this continued demand from retail and that nonprofessional subscriber usage, which tends to grow relatively significantly and I think coincides with what we're seeing on the volume side with our retail business.

Thanks, Julie. Thank you, Alex. Very good, thanks.

Thank you. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Hey, good morning, everyone. Hope you're all doing well. Have a big picture question. So in the quarter, you generated about 30% of your ADV from international customers. And we wanted an update on how these businesses compete with the non-US futures exchanges, especially given the emerging trade conflict So how do you think of the risk of share losses versus the potential for gains from domestic exchanges in these markets?

So, Craig, just so I understand your question, you're saying where do we compare against the foreign exchanges on a percent basis?

So it's about 30% of your total 80 of 8. But I just want a general big picture commentary on how you compete. with the international futures exchanges. For example, there's five in mainland China. Yeah, we got it. Thanks, Craig.

I can start and then others, Julie and others, can jump in. So thanks, Craig. It's Lynn. You know, I think as we look at it, we have a unique product offering, kind of the breadth of our offering, the contracts that our customers are able to come to us to risk manage. not just the places where we have IP protection over those contracts and they are not offered on the local exchange, but also the depth of liquidity that you can get in our markets on a 24-hour-a-day basis. So getting access to the major U.S. indices or trading on the whole treasury curve or the whole U.S. rate curve, our energy products, these are unique to CME, and you have not only that product diversity but the depth of book. where our customers around the globe can be trading in those markets and have the same trading experiences during their U.S. hours. Yeah, I think just to put some data behind Lynn's point on the benchmarks, I mean particularly in equities internationally, we saw outsized volume goes up 33% year on year. And that was largely driven by, you know, the buy side in EMEA, APAC props and retail business, and also LATAM on the sell side and buy side. So, you know, users are continuing to come to our markets. The depth of liquidity is unparalleled. And, you know, they feel, as Suzanne correctly pointed out earlier, right, safe in trading in this environment and with CME Group. You know, we've just, you know, I just returned from the Middle East. My head of sales was just over in Asia over the last week as well. And the sentiment is that, you know, even among this market volatility and the tariff turmoil, clients are reiterating the importance of really that trusted partnership they have with CME Group to access our liquidity and manage risk. So, you know, we feel strong about the relationships that we've built with our customers and the fact that we have such a diverse product suite that they're able to take advantage of.

And Craig, I would just add that the one measuring stick that you have to look at is we, as we announced earlier, the record volume coming from outside the US is really the measuring stick how we look at ourselves versus other entities. So at 8.99 contracts a day, that is a record for CME Group. And I think that's something that we're very proud of and we're continuing to build on.

Thank you. Thanks, Craig.

Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Oh, great. Thanks. Thanks. Good morning. Thanks for taking my question. Maybe just to come back to retail, if we think about the surge that we've been seeing in micro futures, can you comment on to what extent retail users may use other contracts outside of micro, like how good of a proxy is micro for retail? And as we think about volume tiers as well that you called out in the commentary, should we be thinking of that mostly in interest rates, or is that quite diversified by product line, including equities, of course, since we've seen the volume surge in April there really pick up?

Thanks, Brian. So I'm going to ask Lynn to comment on the volume tiers and that would have the impact on the RPC as you saw. And then on the micros, I'll ask Julie to comment, is it a proxy as it relates from the retail going forward? And then I have an opinion on that as well. So go ahead.

Yes. So volume tiering, Brian, you will see in the individual asset classes in the individual product. Those are separate. It's not across the board where it's the total volume over our complex. You would need to look at the volume within each asset class. And, you know, for instance, there will be volume tiers for treasuries. So you would need to look at the performance of those various parts of the asset classes. So when we have not only record overall volume, our highest quarter in history, but we also had our highest quarter for interest rates, equities, TAGs, and FX. you will see more of the impact of tiering when you're at those high levels of volume. That is intentional. We want to make sure in these high periods of volatility that our customers can continue to manage that risk and that exposure. And make it cost effective for them to do so and continue to trade. It's obviously highly profitable for us as we see that increase in volume coming across the system. We have very high operating leverage and get high incremental margin on that trade. So it is something that we've built into the system to make sure that we are capturing that maximum velocity of trade. I think in terms of the micro question, I mean, it was a very deliberate decision on our behalf to introduce those products. And, you know, the thinking at the time is the same as it is today. We wanted to find a product that had the correct size for the retail customer. Clearly there is a spectrum of retail customers in terms of those trading with the smaller account size where micros very much fit into their portfolio in just the right size. There are also retail accounts that are much larger than that and people are hedging relatively large stock portfolios where they may be able to get into our e-mini and have actively traded that in the past. So we monitor this and are certainly seeing as well that as new to futures brokers come into the marketplace and even our existing partners, there is more product diversity in what they are trading. So I think micros are a good proxy. However, retail traders are not limited to just trading micro equities, and I think that's where – We do see, you know, and saw that in Q1, they're trading the full-size gold contract. They are in trading the full-size cryptocurrency contracts. And so, again, I think it speaks to the breadth of our product portfolio, but it also is heavily dependent on the size of that individual trader who is accessing our marketplace.

And just to add to that a little bit, I do think when you look historically at micros and you look back at the equity markets going back 25 years ago when the multiplier of the S&P 500 was cut to 250, that was a smaller contract, and the E-mini came out of that. Now the E-mini is the large contract. The value of a contract sometimes determines where the participant may or may not go, to Julie's point. They can go in different size contracts, and I think that's very important. So to say it's a proxy would be a bit of a stretch, I believe. And right now you're seeing institutions trade micros and you're seeing institutions trade the large contracts, depending on what their needs are. And again, we're trying to have a structure to allow all participants to participate at their a comfort level, but you've got to remember that a lot of this is depending on the price of the actual product to determine the risk associated with that product. So if gold's at $3,500 an ounce versus $1,000 an ounce, obviously the contract's much more expensive than it was at $1,000 an ounce.

I was just going to say, when we look at what the uptake is on the micro gold side that you talked about, that's actually a market. To Terry's point, we saw gold go from $2,000 to $3,500. That's a market that has tracked up a lot of not just retail but small institutional participation. That is such an important product right now that we've actually exercised some pricing power. increased fees on those starting February 1st.

And that is a very important point. So on these smaller products that maybe larger participants are trading, we are adjusting the pricing associated with them, just like we did with the equity market over the last 25 years as the E-mini became the dominant size contract for the equity market. So we're very aware of that, and we don't price them on notional value like we did when they first came out. We price them on what we believe the participant is using them for.

Right. Right. That's all great color. Thank you so much. Thank you.

Thank you. Our next question comes from Alex with Goldman Sachs. Your line is open.

Hey everybody. Good morning. I actually had another quick followup on retail for you guys. You talked about retail in the context of just kind of volume contribution in the business. Can you help break down the composition of retail in terms of just the revenues where that stands now both on the trading side as well as the market data? And if you look at the market environment in April, obviously a lot more volatility. It sounds like retail continues to be fairly engaged. But as you sort of assess the health of retail and why this time around might be different from other drawdowns, I'd love to get your perspective on what's sort of been driving a bit more durability in retail trading so far in April, which, again, seems to be still relatively engaged.

Yeah, Alex, thank you. I appreciate it. First of all, we don't give up the information of the breakdown of the participants, whether on the revenue of market data or their trade. But let me comment as it relates to why I think the retail is different today than it may have been a year ago or 10 years ago. The retail today has many more tools to allow their participation into our marketplace as well as many others that they did not have just a few years back. So when you look at retail brokers today offering futures, we didn't see that before. There was a comment earlier about Robinhood now offering futures contracts of CME. That was not around a few years ago. So the size of the retail market is so much bigger and diverse than it was years ago. I think that's one of the reasons why we're seeing not the takedown in retail, why we still see the uptick continuing. And it's just the distribution of that product, the technology that allows people to participate, People have access to it. They want access to it. And I think that's the big difference that we're seeing today than we just saw in recent times. And I don't see that going away. I see that only continuing because of the way technology allows people to participate in different markets around the world, including CMEs.

Great, thanks. Thank you.

Thank you. Our next question comes from Ashish Sabhadra with RBC Capital Markets. Your line is open.

Thanks for taking my question. I wanted to drill down further on the energy, similar to other asset classes. We saw some really strong volumes in April. How do you think about the puts and takes going forward? And then maybe just on the same topic of energy, how do you think about any updated thoughts on WTI versus Brent and the same on NatGas? Thank you. Thanks.

Derek, do you want to comment on that? Yeah. Looking back at 2024, we put up a record year. I think we generated in excess of $800 million of revenue last year. We've started strong this quarter. To your point, we've put up a first quarter volume of up 20%, led by options up 34%. We're seeing record individual months, and for options overall, In terms of open interest overall in the Henry Hub Complex, we've seen volume records in options and futures, open interest levels we haven't seen in over 10 years. So we're seeing multiple records over the course of Q1 that have carried over into 39% growth in April as well. When you look at where and how that business is scaling, when you look at the client segment perspective, every single client inside our portfolio, our props, banks, buy side, commercial customers, all up double digits. When you look at where the business growth is happening, as you heard from Terry at the top of the call and Julie earlier, energy contributed to record revenues outside the U.S. and non-U.S. business. That is a new all-time record for energy contributing as it was for ags as well. When you look at the positioning of both Henry Hub and WTI, I think everything we've been talking about for the last two to three years has been a structural shift, positively positioning both Henry Hub and WTI as global benchmarks. We see that in our client participation numbers. We see that in the regional growth. A question was asked before about regional participation. We're seeing net new energy customers in Europe and Asia expand participation into our WTI and Henry Hub products as the U.S. continues to produce and export these products at record levels. So when we look at our position going forward, we think very firmly CME is in the right position with benchmark products. When you look at the growth, it's a risk-on environment right now. When you look at the competitive metrics, I would say that our WTI share relative to ICE and Q1 was about static, about 73%, basically unchanged from last year. Henry Hub about the same in the future, 77, 78 percent. We did see our share actually grow in WTI options relative to ISA up to 91 percent, and we saw an increase in Henry Hub option share up to 71 percent from 66 percent. So we think to the points made earlier, global benchmarks adopted, given the liquidity, given the infrastructure, all the conversations we've been having about the benefits of what CME Group presents to our customers. That is totally the story of global client adoption. We think a strong positioning going forward through what is an unbelievably difficult, challenging environment for our markets where our job is to help customers manage that risk with the products and tools we give them daily.

Thanks, Eric. Thank you, Ashish. Thanks.

Thank you. Our next question comes from Chris Allen with Citi. Your line is open.

Good morning, everyone. Thanks for taking the question. Most stuff has been covered. But one question we've been getting is how to think about the implications for resolution of Ukraine-Russia, specifically in the energy complex. And I also wonder if there's any other implications for other areas, maybe ags as well. So any color there would be helpful.

So the resolution between, say, Russia and Ukraine?

Yeah.

If there is a resolution, obviously.

Yeah, and what does that mean for the energy market? Is that what you said, Chris?

Yep.

Yeah, again, I'll let Derek comment, but I think that the resolution of that is not for anybody in this room to try to figure out. There's a lot of people internationally that work for governments that are trying to deal with that issue. All we can say is we hope that it comes to a resolution soon. because no one likes to see what's going on with all the bloodshed in these regions. So as far as the price of the product, I think that it could take some time before the Russian market gets back into the world market, if in fact it does. I don't know that, but that would be my political take on it, that it would take a little bit of time for them to be more accepted back into the world global marketplace. So what does that mean for the price? I don't know. I guess we have to see what the supply is going to look like and also the demand, and that will help us more with that. I think that there's many parts of the world that are producing energy today, especially the U.S., that help facilitate, you know, what's going on in Russia. And, Derek, I'll let you comment more on it, but that is my take on it. I don't know if it's going to have a massive impact on the price of energy once that's resolved. I just hope it gets resolved.

Yeah, I think, Chris, you raise a good question. I think to Terry's point, we don't actually know, but it is talking to our customers and seeing how they have basically redeployed supply chains, fiscal supply chains, and fiscal commodities, something we've seen been reworked over the last two years. That's one of the reasons why we set an all-time record last year in our commodities complex portfolio of almost $1.7 billion of revenue, and we're seeing the same thing, a record first quarter revenue across ags, energy, and metals. I think what we can say is that we've seen customers in this environment of uncertainty, to Terry's point, move to pools of known liquidity and pools where the U.S. has already restructured its export market for both WTI and natural gas using U.S. displays. Every other country has now been the largest exporter of these products. We think as customers have reconfigured their supply chains, they are following the risk management tools along with where they're actually being supplied with the physical product from. So our job is to continue to leverage Julie's team globally, mentioned growth in the Middle East and Europe and Asia, the areas where we're seeing fastest growth across energy, almost 30% between both APAC and EMEA, and that's been a trend for the last two years. So I think it's a risk on environment. Customers don't know where this is going to land, and that's why they're actively using our products to risk manage.

Thanks, Chris.

Thank you. Our next question comes from Michael Cypress with Morgan Stanley. Your line is open.

Hey, good morning. This is Stephanie on for Mike. Maybe just turning to cross-margining, can you just update us on the benefits you're providing customers today? What further steps can you take to enhance those efficiencies over the next 12 months? And maybe just looking at a few years, which products and asset classes do you think could these savings be most impactful? Thank you.

Thanks Stephanie. Suzanne?

Yeah, happy to take the question Stephanie, thank you. So in our cross-merging program with the fixed income clearing corporations, we continue to onboard new participants. We're up to 15 house accounts now at this point in time. And we also continue working together to be able to expand that to end-user customers. So our plan is to be operationally ready to support that by the end of this year. Of course, we can't apply it on regulatory approval timelines, but we have heard a decent amount of interest from clients in being able to take advantage of those offsets. We've also seen an increase in clearing membership to be able to take advantage of the current house program. So we continue to deliver upwards of a billion dollars in savings for that house program and are committed to being able to expand that to the customer by the end of the year.

Stephanie, just to add to that, it is important for us to remind everybody, and I know you're going to say this a lot, but we are at $60 billion a day in total offsets on margin efficiencies today as it relates to all of our asset classes. Twenty-some-odd billion in rates alone, I believe, is the number. The fixed income, the FIC number, FICC, is probably the smallest of that $60 billion. So we are creating massive efficiencies for our participants and savings. savings on cross margin, and we want to continue to create efficiencies across the board to all of our asset classes. So even though that the relationship with FIC is massively important to CME and we're going to continue to build on it, we are still creating immense savings for our clients so they can manage their risk the most cost-effective way across all six major asset classes here at CME.

Thanks, Seth.

Thank you. Our next question comes from Simon Clinch with Redburn Atlantic. Your line is open.

Hi, everyone. Thanks for taking my question. At least my question has been answered, so I'll stick with the housekeeping one here. Lynn, could you just walk us through the very good expense control we saw this quarter and how we should expect that to ramp through the year and also break out what the Google spend was and any other factors you think are worth calling out?

Thank you. So if you look at the expenses for the quarter, obviously quite strong expense discipline. We do expect over the course of the year that there will be a few factors that will continue to grow. So if you look at the trend last year in technology, we're seeing increases in the technology spend as we migrated more to the Google Cloud environment. So quarter over quarter we were seeing that increase. We would expect to see that again over the course of this into that cloud environment. I would also say that the professional fees this quarter were a bit light. Those do tend to follow larger scale projects and that's just a little bit of the timing on when those kick off. So I would expect to see that ramp up over the course of the year as well. We also typically have much higher spend in the marketing area in Q4 related to some of our large scale events. So you will see that towards the tail end of the year. And the last thing I would point out is on the merit increases for staff, you get about half of that impact in Q1, and you'll see the full impact running through the remainder of the year. So in terms of Google, the total spend in Q1 was just under $20 million. You'll see about $19 million of that coming through the technology line, and a little under $1 million of that was in professional fees.

Great. Thanks very much.

Thanks, Simon.

Thank you. Our next question comes from Ben Budish with Barclays. Your line is open.

Hi. Thanks for taking my follow-up. Terry, I was wondering if you could talk a little bit more about the launch of BrokerTech in Chicago. What are your ambitions there? What's the anticipated customer type? What are your thoughts on how it improves your competitive positioning? Any color there would be helpful. Thanks.

Yeah, thanks Ben. I'll ask Mike Dennis to give a little color on BrokerTech Chicago and then I'll comment when he's done. Mike?

Yeah, thanks Terry. And Ben, good morning. BrokerTech Chicago, this is a project we're very excited about. It's the second central limit order book that will be uniquely located right next to our core futures and options markets in the Aurora data center where clients have a lot of connectivity already. As the futurization trend has grown over the past several years, clients have come to us, you know, looking for solutions to help better manage trading between cash and futures. So, we have received overwhelmingly positive feedback from the dealer community, as well as from clients that are very active in relative value strategies, trading both treasury futures and SOFR futures for US cash treasuries. This new central liminal order book will help drive new client acquisition. as well as allow us to be more creative on thinking about new trading modalities within our interest rate complex. So launches scheduled for Q3 2025 and client testing will be available shortly, probably at the end of April. Our New York Club will continue to be the main venue for risk transfer and price discovery. You know, one thing to say is that different traders need different execution tools and different execution types. Offering both access models will allow us to capture a broader set of clients. So if you think about the treasury cash on the run market in two segments, you have risk transfer trades, clients seeking larger stacks of liquidity, which the broker tech New York club continues to address. And then relative value trades, cash for future trades, which clients typically seek inside prices and transact in smaller size. So we're very excited for it, and I'll turn it over to Terry to have some follow-up comments.

Yeah, no, I think you said it all correctly, Mike. I think what's important here is we're trying to make sure, as Mike said, that we can make certain every client is having the ability to have the market to where they believe is in their best interest. And the dealer community believes that having, they're one of the constituents among others, that having it side by side against the treasury futures complex is the right place to be. And we've analyzed this every way to Sunday and we don't disagree. So I think it's really important that we look at all constituencies and see what's in the best interest of the market. I think what Mike said is really important and the reason I hesitate because I want to focus on this. The futurization of that marketplace is critically important. And it has been my focus for a number of years, the futurization of some of these cash markets. And I think we're continuing to see that. especially in the rates business. So having that set up in Chicago makes a ton of sense for CME going forward, and I'm very excited about the future of our futures franchise, no pun intended, to move that and grow that business exponentially. We have seen broker tech grow a little bit over the last quarter, but again, I think we're looking at this for the long run, and we want to make sure that all participants have access to the marketplace where they feel comfortable in, and that's one of the constituencies that does. long-winded way of saying we want to make sure we have both.

Great. Thank you very much.

Thank you. Our last question comes from Brian Bedell with Deutsche Bank. Your line is open.

Oh, great. Thanks for taking my follow-up. I actually just wanted to, on that very last question, if you could just comment around, you know, to what extent is this designed for basis trading between Treasuries and futures because you mentioned the relative value. So are you attempting to optimize practices around basis trading and maybe just your overall view on how that's trending with the very high volumes in April versus sort of what's happened more recently? And then I did have a housekeeping question on just the contribution from Astra and 1Q and the rates, the spread that you're keeping on the collateral balances. Is that still the 35 cents on the cash, and I think 10 cents on non-cash.

Yeah, thanks, Brian. So on the basis trade, I wouldn't say that the decision had any bearing of putting BrokerTech Chicago in Aurora at all as it relates to the basis trade. The basis trade, we all know how that works, and having the... BrokerTech Chicago, I don't think that was not our intent at all. It was more for to give participants the choice of where they want to execute on their cash side and their futures, both in Chicago and in New York. And that was really the genesis of bringing BrokerTech Chicago to Aurora. Nothing to do with the basis trade. As it relates to OSTRA, I'll let Lynn make a comment.

Yes, so Brian, the contribution of OSTRA in 2024 was $89 million in earnings to CME. It's typically in the range of $20 to $22 per quarter, somewhere in that area. S&P doesn't report for a couple more weeks, so I won't give too granular specifics on this quarter, but I think that's a pretty safe range to use looking at last year and kind of the range that we typically see. And then on the spread on collateral, it was the 35 basis points this quarter, similar to Q4. That's on the cash side.

On the cash side. Okay. And is it 10 on the non-cash still?

Yes.

Yep. Yep. Perfect. Okay. Great. Thank you so much.

Thanks, Brian.

Thank you.

Thank you. And at this time, I'll hand the call back over to management for closing remarks.

Thank you all for participating in our call this quarter. We look forward to following up on any questions you have.

Obviously, we'll be reaching out or you can reach out to us. Have a good day. Thank you very kindly.

Thank you for participating in today's conference. You may now disconnect.