CME Group Inc. Q3 2008 Earnings Call Transcript

| About: CME Group (CME)


Q3 2008 Earnings Call

October 29, 2008 5:00 pm ET


John Peschier - Director of Investor Relations

Craig S. Donohue - Chief Executive Officer

James E. Parisi - Chief Financial Officer

Rick Redding – Managing Director, Products and Services

Kim Taylor – President, CME Clearing


Analyst for Roger Freeman – Barclays

Richard Repetto - Sandler O'Neill & Partners

Patrick O'Shaughnessy - Raymond James

Niamh Alexander - Keefe, Bruyette & Woods

Mike Carrier - UBS

Robert Rutschow - Deutsche Bank Securities

Christopher Allen - Banc of America Securities

Michael Vinciquerra - BMO Capital Markets

Howard Chen - Credit Suisse

Mark Lane - William Blair & Company

Donald Fandetti - Citigroup

Jonathan Casteleyn - Wachovia Capital Markets

Daniel Harris - Goldman Sachs

Edward Ditmire - Fox-Pitt Kelton


Good day, everyone, and welcome to the CME Group third quarter earnings call. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. John Peschier.

John Peschier

Thank you all for joining us. Craig Donohue, our CEO, and Jamie Parisi, our CFO, will spend a few minutes outlining the highlights of the third quarter. And then we will open up the call for your questions. Also joining us for participation in the Q&A session is Terry Duffy, our Executive Chairman; Rick Redding, our Head of Products and Services. We have Phupinder Gill and Kim Taylor calling in from New York.

Before they begin, I will read the Safe Harbor language. Statements made on this call and in the accompanying slides on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and 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 forward-looking statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, including our most recent Form 10-K and Form 10-Q, which are available on the Investor Relations portion of the website.

During this call, we will refer to GAAP and non-GAAP pro forma results. A reconciliation is available in our press release, and there is an accompanying file on the Investor Relations portion of our site that provides detailed quarterly information on a GAAP and pro forma basis.

With that, I would like to turn the call over to Craig.

Craig S. Donohue

Thank you for joining us this afternoon. The third quarter has seen many key developments in our business, including the completion of the NYMEX acquisition, record volumes in our equity and FX product lines, and the announcement of our CDS initiative, which will facilitate migration of existing CDS transactions to our clearing house, allow for submission of bilaterally-executed trades into clearing, and provide an optional electronic platform for execution and clearing of new CDS trades.

I will discuss each of these items in detail in a moment, but first I would like to share a few thoughts regarding the recent and unprecedented market turmoil. Throughout September and October tumultuous market conditions were driven in large part by concerns about counter-party credit risks. The ensuing upheaval in financial markets has affected us all and continues to prompt regulatory and legislative action from governments around the world.

CME Group’s proven risk management and financial safeguard techniques have allowed our markets to continue to operate above the fray of counter-party credit concerns. During September and October our markets remained deeply liquid, daily pay and collects took place on schedule and without incident, and has always been true over our 110 year history, no customers lost any money due to counter-party failure.

What we are most proud of is that this is business as usual for us. Our markets, our clearing methodology, and our technology are designed for robust, seamless functionality during the most chaotic conditions imaginable. These systems are backed by management and staff with extensive experience and a deep commitment to principled, transparent, secure, and efficient markets.

While we are pleased with our track record and historical performance, by no means do we feel complacent. We continue to look for ways to build on our proven strength and create value for our customers and our shareholders. I would like to now discuss our third quarter accomplishments and our future strategic plans.

First of all, we are very proud of the successful completion of the NYMEX acquisition on August 22. With the addition of NYMEX, which contributed $204.0 million in revenue on a pro forma basis in the third quarter, or 26% of total revenue, our already diverse product set now includes energy, metals, and the ClearPort over-the-counter clearing platform.

The NYMEX CME Group combination offers many strategic benefits and we are very focused on executing on these benefits. To that end, NYMEX integration is well underway. We have been able to apply many lessons learned from our successful CBOT integration, which was completed ahead of our original schedule and which will achieve our $150.0 million annual synergy target on a run-rate basis by year end.

We met an integration target last week when we communicated our staffing decisions to employees, which was an early step on our way to achieving $60.0 million a year in operating synergies. We are excited about the growth potential of NYMEX’s energy and metals complexes and the ClearPort over-the-counter clearing platform when coupled with CME Group’s established global capabilities and strategic momentum.

We see tremendous opportunity in energy derivatives. To highlight, for 2007 energy was 72% of the Goldman Sachs Commodity Index, but global energy futures were only 6% of overall futures volume compared to commodities weighted at 18% of the index and comprising 9% of derivatives volume.

We believe that energy is a globally significant product and we will be actively pursuing growth strategies for this important asset class.

Another NYMEX asset that we are tremendously excited about is ClearPort, which shows considerable strategic capabilities. The platform’s value is underscored by recent market events and we believe that market dynamics have aligned to drive increased usage of ClearPort’s central counter-party clearing and swaps performance guarantee services.

Customer recognition of the benefits of centralized clearing to reduce counter-party risk and multi-lateral netting to alleviate balance sheet constraints has never been higher. Besides year-over-year volume growth of 40% for the third quarter, we have seen a 25% increase in customer registrations year-to-date through September on the ClearPort platform. These statistics highlight the value of these services during market uncertainty.

In addition to ClearPort, we have been working actively on other initiatives to bring security and soundness of CME’s proven clearing services to the OTC markets. The benefits of centralized clearing have never been more apparent. As the world’s largest derivatives clearing house and with a 110 year history of no defaults and no customer loss of funds due to a default, CME is ideally positioned to provide increased security and safety to those transacting in the over-the-counter markets.

We maintain a financial safeguards package that at the end of the third quarter includes over $100.0 billion in posted collateral, nearly $10.0 billion of which is in excess of requirements, all protected by a proven 24/7 risk monitoring and financial safeguards capability.

As an example of the scope of our clearing operations, our twice daily mark-to-market resulted in average daily pay and collects of nearly $5.0 billion in the third quarter.

As part of our over-the-counter initiatives we are excited to be rolling out our flexible and open credit default swaps initiative, which provides the benefits of central counter-party clearing and netting while supporting existing over-the-counter trading paradigms.

The initiative will facilitate migration of existing CDS to our clearing house, allow for submission of bilaterally-executed trades into our clearing house, and provide an optional electronic platform for executions and clearing of new CDS trades.

We believe we are further advanced than our competitors in our operational readiness and preparedness to launch our services and like all of our competitors in this arena, we are subject to regulatory review and approval.

As with any new product that we clear, we have devoted significant resources to determine the appropriate margining and risk management practices for credit default swaps. Since CDS margining techniques are an important consideration, I would like to make a few observations on our abilities and methodology.

In 2007 CME cleared 2.3 billion contracts with notional value exceed one quadrillion dollars. The notional value of our open interest at the end of the third quarter was 35 trillion. The notional value of outstanding CDS contracts is estimated at 55 trillion to 64 trillion and it is important to note that those are gross figures which would be reduced significantly in a central counter-party clearing environment.

These numbers speak to the scope and scale that CME brings as a clearing provider. As to risk management and margining methodology, we recognize that credit default swaps have some unique characteristics and we have developed a robust framework to ensure effective protection of customers.

CME will apply our traditional time-tested risk management practices to CDS, including twice daily mark-to-market and daily margining. CDS will also be subject to enhanced risk management practices, including periodic default drills, account level profit and loss reviews, and CDS specific stress testing.

We will be using a multi-factor model for margining which addresses seven unique risk factors, including several components of macroeconomic risks and liquidity risks, among others. Our clearing team has conducted extensive testing of sample CDS portfolios using these margining models with recent market events providing many worst-case scenarios against which to test. We are pleased that the results of these tests confirm our abilities to manage CDS risks through even the worst market conditions.

Full details on margining methodology and the testing that we have conducted have been shared with the regulators.

Beyond counter-party risk management, centralized clearing also provides balance sheet relief to CDS market participants from multi-lateral netting. We have been in active discussions with both the sell-side and buy-side market participants and believe that we will need to assess the various CDS offerings with many factors, many of which include financial safeguards, creditworthiness, clearing expertise, established track record, and operational readiness.

As we have described above, our initiative offers several substantial benefits in each of these areas and addresses current issues in the market place. We have structured the offering to allow market participants the opportunity to be founding members and share an equity stake in the platform, as well as to benefit from certain market maker privileges. We are confident that our initiative has tremendous benefits for all market participants and look forward to launching the platform.

Next, I would like to discuss our volume for the third quarter. Our diverse product set saw several key records during the third quarter, even as interest rate volumes were lower. October overall trading volume to date are trending approximately 15% higher than October of last year. On a pro forma basis third quarter average daily volume was 13.2 million contracts per day with multiple volume records across our diverse asset classes. Overall, volume was down 7% year-over-year, largely due to reduced activity in interest rate products, which I will address.

Our interest rate products have seen impact due to the ongoing credit crisis and were down 25% year-over-year. There are many factors affecting interest rate volumes, including the de-coupling of LIBOR from Fed Funds, a trend to the shorter end of the yield curve in Treasury products, a slowdown in corporate debt origination, difficulties in the agency market, and a decrease in mortgage-related transactions. We continue to see these factors as essentially cyclical in nature.

Offsetting the effects of the interest rate products, however, was very strong third quarter performance in other asset classes. Our E-mini equity indexes averaged a record 3.6 million contracts per day, up 19% versus the prior year. FX products also have record quarterly volumes of 710,000 contracts per day, up 12% year-over-year. Additionally, we believe CME’s FX futures are gaining strength versus the over-the-counter FX markets and one data point we note in the third quarter is that our record average notional value of $97.0 billion per day was up 24% while EBS was up only 10%.

We are pleased with these records, both as an indicator of the growth potential and strength of the individual asset classes and also as an indicator of the diversity and strength of our product base.

NYMEX and COMEX also had outstanding volumes with NYMEX trading 1.8 million contracts per day during the third quarter, up 23%, and COMEX metals averaging 250,000 per day, up 66%.

Finally, we cleared 492,000 contracts per day through the ClearPort over-the-counter clearing platform, up 40% compared with the third quarter of 2007. October to date ClearPort clearing has also been strong with average daily volumes up 54% versus last year.

As we mentioned previously, this strong growth underscores the value of ClearPort’s central counter-party clearing model, including its performance guarantee of over-the-counter swap transactions.

Given the severity of the recent financial crisis, we recognize that certain potentially negative trends, including de-leveraging, hedge fund redemptions, and customer consolidation, are occurring. But we firmly believe that the forces causing these phenomena highlight the strengths of CME’s business model and the strategic opportunities on which we are well positioned to capitalize.

First, I would like to discuss customer trends that we have observed to date. While it is difficult to classify our volumes by customer type, we have insight into certain firms that participate in special programs or which are clearing members and we can track their volumes closely.

We have noted in the past that bank proprietary trading has historically been 15% to 20% of average daily volumes and it remains within that range in the third quarter. While banks use our markets for many reasons, it is important to understand that a considerable amount of their transactions is hedging, related to their ongoing proprietary swap [ceiling] activities.

We also have insight into the volume of 25 hedge funds that are our largest hedge fund customers and we have seen their participation decrease only slightly from the first quarter to approximately 10% in the third quarter. This modest decline has been offset by increased participation by high-velocity proprietary trading organizations.

The volatility of the markets as well as the low carrying cost of trading strategies involving rapid moves in and out of the markets make conditions ideal for this style of trading. We have always noted the strength of our diversified product set as well as our diversified customer base and we look forward to working with them to bring our products and services to market.

Diverse customers and diverse asset classes are a key element of our strong business model and there are additional positive factors that we see for the business in the coming months.

We continue to implement technology upgrades that provide speed and functionality enhancements for our customers. This coming weekend we will complete server upgrades for out interest rate match engines. These upgrades will allow for sizeable speed improvements and they will allow us to launch implied inter-commodity spreads for Treasury futures and swap futures in mid-November. This product should provide customer benefits including increased matching opportunities, concentrated liquidity, and reduced legging risks for customers.

There are many secular factors that we believe create favorable long-term conditions for growth. Recognition of the need for risk management has never been greater. Exchange traded in cleared markets offer compelling value propositions compared to over-the-counter markets. Growth and interest from global customers continues. The next year should see an increase in Treasury issuance and increase the need to hedge Treasuries.

These factors all contribute to growing world-wide demands for our markets. Finally, we have long recognized the security transparency and efficiencies that our exchange model could bring to the over-the-counter markets. The success of ClearPort demonstrates the market’s desire for these services and we look forward to extending our capabilities into the credit default swaps and cleared interest rate swaps market.

We are also excited about our global progress to date, the opportunities we see in the global strategies we are pursuing, which I will discuss now.

Our non-U.S. hours trading volume has remained at 17% for the third quarter and we see this as a positive reflecting the entrenched nature of the customers using Globex during non-U.S. hours. We have been working very diligently on our global marketing strategy following the NYMEX acquisition. We have been able to hire for several key global positions and have identified others that will be critical to the strategic cross-selling plans that we have in place.

Additionally, we have been actively engaging CME management with NYMEX customers to foster those relationships. We are using customer feedback to further hone our cross-selling plans and our product innovation and will continue to develop globally compelling products.

During the quarter we also made progress with our order routing agreement with BM&F. several ISPs have established connectivity while others continue to make progress. We have successfully routed some volume to BM&F and are working actively with them on additional components of strategy such as the roll out of the south-to-north order routing in Q4.

We are pleased to announce our telecommunications hub in Brazil is now operational, bringing our total hubs to seven globally. Plans for a joint clearing structure are in place and we are pursuing required regulatory approvals to launch this.

Finally, we are working closely together on a joint product development and as a first step we have shared settlement prices for select CME FX products in order to create better trading opportunities for BM&F currency pairs.

We also continue to pursue long-term opportunities through strategic partnerships with exchanges around the world, such as KRX where we have an agreement to list possibly 200 futures on Globex and OSE where we have an MOU to jointly develop products and services. And finally through equity stakes, such as our investment in the Dubai Mercantile Exchange.

To conclude, market events over the last year highlight the value of both our business model and our market model. Our market is well regulated and transparent with regard to participants and position reporting and provides a deep pool of centralized liquidity. Our central counter-party clearing services reduce systemic risk and benefit all market participants.

Throughout extraordinary market turbulence CME Group has been one of the best functioning parts of the financial services markets. We believe recent events create tremendous strategic opportunities for CME Group and we intend to leverage our core strengths to actively pursue over-the-counter opportunities, global growth opportunities, and the expansion of our core business.

With that, let me turn to call over to Jamie.

James E. Parisi

Despite the turmoil brought about by the credit crisis, CME Group turned in a solid financial performance. The third quarter was also a busy one from a financial perspective. We closed the NYMEX transaction, entered the debt markets, began our share buyback program in mid-September, completed the sale of the legacy CBOT metals business, and started winding down FXMarketSpace.

Today I will go through the details of Q3 on a pro forma basis as if we owned NYMEX and CBOT for all periods considered. We have also posted a view of the quarter, including the NYMEX revenue expense and shares from August 25 forward on our website as I know some of you model the business that way. Finally, I will touch on a few of the non-core and merger-related items included in our GAAP statements.

Let me start with the pro forma results. On a pro forma basis we generated $787.0 million in revenue for the quarter and $518.0 million of operating income. While average daily volumes were down 7% year-over-year, driven solely by interest rate volumes, a strong rate per contract in Q3 and disciplined expense management more than offset the cyclical volume decline.

The rate per contracts for the legacy CME business was $0.659, up 2% sequentially and up 6% versus Q3 2007. The primary mix drivers of the increase of the increase were a lower percentage of interest rate products and a slightly higher proportion of non-member activity.

On the NYMEX side the average gross rate was $1.57, up 1% both sequentially and year-over-year, driven primarily by a larger percentage of trades cleared through ClearPort, a higher percentage of COMEX metals volume, and a higher percentage of non-member volume.

Now turning to the quotation data fees. They were $92.0 million for the quarter, up 24% from Q3 2007. This increase is explained by the year-over-year price increase that went into effect at the beginning of this year and to a market data audit assessment in the current quarter totaling $4.0 million. At the end of the quarter we had approximately 437,000 users who subscribe for the base devices across CME, CBOT, and NYMEX products.

I will now take a few minutes to review expenses. Total pro forma operating expenses were $269.0 million for Q3, down 3% both sequentially and versus Q3 last year. Our largest expense, compensation, was down about $1.0 million sequentially to $90.0 million. Our combined headcount at the end of Q3 stood at 2,337 people. We announced approximately 150 headcount reductions related to the NYMEX acquisition with the vast majority of reductions occurring in 2009.

Compared to Q3 2007 compensation expense is down 10%, driven by lower annual bonus estimate, lower earnings on deferred compensation, and synergies from our merger with the CBOT.

Non-compensation expenses were down about $8.0 million sequentially, due primarily to the expiration of the CBOT electronic trading contract with Life. This was an important expense synergy which drove a reduction in the technology support, depreciation, and communication expense lines.

This savings was somewhat offset by increased marketing spend, primarily driven by our efforts to highlight the benefit of our centrally cleared model during a period when users are becoming justifiably concerned about the counter-party credit risk and capital efficiency.

Looking forward we expect pro forma operating expenses for Q4 to come in at $270.0 million to $275.0 million. Q3 pro forma operating income was $518.0 million, resulting in an operating margin of 66%, up from 63% in both the prior quarter and the year-ago quarter.

This was the second highest margin in the history of the combined company, which illustrates the operating leverage in the model even during periods when volume may be impacted by cyclical head winds.

Within the third quarter non-operating expense category we had a few positive and a few negative impacts. On the positive side, we received a dividend of $9.0 million from BM&F which increased investment income, while within the securities lending area we accrued a $6.0 million loss due to an investment in a money fund that had Lehman exposure.

Pro forma net income was $278.0 million and EPS was $4.13.

For Q3 our pro forma effective tax rate was 43.3%. In Q4 and in 2009 we would expect an effective tax rate of between 41% and 42%.

So basically, if you offset the quotation data fee, audit assessment, and BM&F dividend with the securities lending loss and the temporary increase in our effective rate, the pro forma EPS would have been a few cents higher.

I know some of you did not have a full pro forma model. Instead you had NYMEX business included from August 25 through September 30. A view of the third quarter using that methodology is available in the historical Excel file on our website, but let me give you the highlights.

Bringing in NYMEX volumes on August 25 resulted in average daily volume for Q3 of 12.2 million contracts. Pro forma revenue totaled $673.0 million. Operating expenses would have been $231.0 million with an operating margin of 66%, still the second highest quarterly margin ever. Net income would have been $245.0 million and EPS would have been $4.07 per share with share count at just above 60.0 million shares.

There are a few items on the GAAP income statement that we have excluded from the pro forma view that I would like to mention. We are writing off our investment in FXMarketSpace, which you can see in the processing services, depreciation and equity and losses of unconsolidated subsidiaries line.

In addition, we are impairing our original in Swapstream, which you see in other expense and depreciation.

We have shifted our focus to more of a cleared-only solution and we are very actively meeting with dealers and buy-side clients.

With respect to the ERP guarantee, there was an $8.0 million credit due to the proposed settlements between CBOE and CBOT members and we also had a $7.0 million gain in our BM&F currency hedge for the quarter. That hedge has been terminated as the counter party was a subsidiary of Lehman Brothers, who as you know, is in bankruptcy.

Upon termination we retained possession of the cash collateral associated with the hedge. The cost to set up a new hedge is currently uneconomical so we continue to examine our options.

Turning to securities lending, NYMEX had a $25.0 million investment in the Sigma Fund, which is currently valued at $2.5 million. $16.0 million of this loss is recognized in CME statements while the remainder was recognized in NYMEX’s pre-acquisition financials. We were well aware of the potential for this write-down when we completed the NYMEX transaction and accounted for this in our valuation work.

Lastly, we revalued our deferred tax liabilities as a result of the merger and had a non-cash adjustment of $48.0 million in income taxes.

Moving on to the balance sheet, as of September 30 we had $700.0 million of cash and marketable securities and total debt of $2.9 billion, resulting in a net debt position of approximately $2.2 billion.

With regard to our debt, we issued $1.3 billion of public debt with maturities of one, two, and five years and we have a three-year $420.0 million term bank loan.

In addition, we currently have approximately $1.6 billion in commercial paper outstanding, which is backstopped by a three-year revolver and a 364-day bridge facility.

We have fixed the rate on our public debt, as well as on our term loan, and we currently expect to pay a blended rate of approximately 4% across all of our debt, including the amortization of all upfront fees.

On the bridge, we are scheduled to pay a $6.4 million cash continuation fee in mid-November, based on our current structure, and we are currently working on various alternatives to replace the bridge on more favorable terms. If we replace the bridge we will avoid the $6.4 million duration fee and accelerate certain one-time upfront costs that have already been paid related to the bridge. This acceleration will result in additional interest expense of approximately $9.0 million in the fourth quarter.

Capital expenditures, net of leasehold improvement allowances, totaled $40.0 million in the third quarter, driven by $37.0 million of technology investments, including $17.0 million of construction related to data centers.

In Q4 we expect capex to range from $85.0 million to $95.0 million, primarily related to data center and staff space construction.

Now turning to other matters, at the end of June we announced that our Board had authorized a share buyback program of up to $1.1 billion over the next 18 months. Through yesterday we have purchased approximately 284,000 shares of stock for a total of $100.0 million. So far in October we are averaging 12.7 million contracts per day, up approximately 15% compared to the full month of October last year.

In summary, this was a busy quarter in which we met many challenges and continued to execute on our plans while turning in a solid financial performance.

With that, we would now like to open up the call for your questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Analyst for Roger Freeman – Barclays.

Analyst for Roger Freeman – Barclays

The first question, I hate to harp on the volume issue, which obviously has been around for more than a year now, but you gave a lot of color on the interest rate side so I’m hoping that you could just give a little more in terms of what you think are the biggest factors and what you would be looking for in terms of the normalization of that market.

And then, related to that, there has been a lot of focus on the hedge fund community and you also gave a little bit of color there but with all the redemptions that they are probably facing, de-leveraging and so forth, maybe you can give us a little more clarity around how your hedge fund customers break down, how much of the volume they are and how much is really concentrated in the biggest guys, arguably the ones that maybe are better positioned, and maybe not so well positioned hedge funds out there.

Rick Redding

As far as the hedge funds are concerned, what we have seen in the market place is a lot of the smaller funds having difficult times and actually a number of them shutting down their operations. But I think it is important to note that those typically are not our customer base. Most of the hedge funds that are our customer base are in these larger hedge funds that are well established and are mostly in the global macro and multi-strategy areas.

What we said was their volume was around 10% and that was, on a percentage basis, down very slightly from previous quarters. So as much talk as there is out there in the market about the health of the hedge funds, we have seen a very little change in their volumes over this year.

I think the bigger issue with the hedge funds is actually the lack of conviction a lot of them have in investment themes. So a lot of them are sitting on tremendous amounts of cash, both anticipating redemptions at the end of the year, but also when that gets out of the way, there seems to be an awful of cash that something is going to have been with it.

So that likely will be moved in one of the asset classes and this is a time where it’s very fortunate that we are in every asset class so we will be able to take advantage of whatever asset class they find or the asset classes they find attractive.

A little more color on just kind of the overall volumes. As we said, with as much said with the banks and with a couple of banks going out of business or being merged out in the third quarter, they were still in that 15% to 20% of volume from the proprietary side. We essentially didn’t see an aggregate change in their volumes.

Obviously one or two of them went out of business but again, on the aggregate, there is still that same percentage. So they’re still utilizing our markets because quite honestly, these are some of the most liquid places that they can transact in because of all the dislocations in the markets.

A little more color on the first part of your question is what’s going on in the interest rate space. Craig laid that out pretty clearly that the short term part of the market, the rates have de-coupled, Fed Funds and LIBOR have de-coupled. Over the last few days you’ve seen that spread come in but it’s still at extremely high levels.

What you have also seen in the Treasury market is people trading on the shorter end of the curve. I think you see this in the cash market, you also see it in Europe as well. We are tracking with the overall market on the Treasury side.

The other thing that I think you have to understand what’s going on in this crisis is, the volatility in the short end of the market, volatility in Euro dollars, has just exploded. And I think that has caused a number of strategies that used to work in earlier parts of the year not to work during this crisis.

And the other thing that Craig mentioned was the Treasury issuance. Obviously with the government taking on all this debt, we see some opportunities that people will have to manage that debt going forward.

Analyst for Roger Freeman – Barclays

And just shifting gears a little bit to the CDS side, which obviously is a big focus right now as well, can you talk a little bit about the reception you have gotten from both the sell side and the buy side. I mean, you would argue that the market right now is dominated by 10 or 12 players so their support is very important. In particular can you talk about not only the reception but the concerns you’ve heard in particular from the sell side and how you have been addressing those?

Rick Redding

First of all there has been an awful lot of work done, not just by us by others as well, in a fairly short period of time, to try to bring solutions to the CDS market that include central counter-party clearing services. We have been working very extensively with the regulators on that as well as bringing our offering to market in terms of marketing to both the sell side and the buy side.

And I would say that there is an awful lot of interest in discovery that people are doing right now to try to understand how these competing offerings will work, what the risk methodologies will be, what’s the structure of the entity, what’s the creditworthiness of it, how can they participate, etc. and I think that process is still reasonably early.

We literally have people who are working very hard to get out and talk to the sell-side community as well as the buy side to help them understand those different issues. So it’s still early stages yet. I would say that there is a divergence of views among the sell side and the buy side on issues like product construction, breadths of solution. For example, should the products be limited to indexed products or should they extend to single-name, should they be Europe- and U.S.-based or more limited. Should there be an execution facility or only a clearing facility. So one of the things we are doing is talking to people and trying to gain input on that.

I think also one of the key issues we’re finding as we’re out talking to many people on the buy side is whether a solution that doesn’t include the buy side in the central counter-party clearing service is really effective in that obviously many of the buy-side participants are concerned not just about limiting systemic risks between and among the dealer community but also between the buy side, or the client segment of the market, and the dealer community. And that is certainly a key advantage that we provide.

So I think the best answer is that we are working hard to try to make sure people understand our offering, understand the comparative differences between what we provide and what the other competitors in the market place will be providing. And we’re working hard to try to generate support for what we’re doing.

Analyst for Roger Freeman – Barclays

On the acquisition of the synergies, you have a lot of moving pieces obviously, so do you have a set number for the $150.0 million on the CBOT and the $60.0 million of NYMEX, how much of the expenses you have actually realized to date in the run rate?

James E. Parisi

Right now on the run rate we are at about $137.0 million in the third quarter and by year end we should be at the $150.0 million run rate for the Board of Trade synergies.

It’s still very early in the game on the NYMEX synergies. We will realize those over the next 12 to 18 months and as you have seen we did announced the staff reductions of about 150.


Your next question comes from Richard Repetto - Sandler O'Neill & Partners.

Richard Repetto - Sandler O'Neill & Partners

Just a follow-up on the CDS. Just trying to understand what’s the process here? It’s very much in the press about the New York Fed. But what would you expect to come, what would be the best-case scenario, the process that could get you into business here, as you work with the regulators?

Craig S. Donohue

It’s a good question but it’s difficult to answer in part because we can’t speak for the regulators. What I think is fair to say is we’ve working for quite some time with the various regulators, which include the New York Fed, and the SEC and the CFTC, and we are trying to work through that process with them. Ultimately they will determine the time frame within which they will act on the various requests that we have in front of them.

A lot of work and time has been put into this, not just by us, but by those regulators as well. And I know that they have a sense of wanting to see these solutions come to market as quickly as possible, subject to making sure that they have satisfied themselves on how these things will work.

So I don’t have a great answer for that. I mean, operationally we have already indicated that we are prepared very imminently to implement this. But it will require regulatory approval.

Richard Repetto - Sandler O'Neill & Partners

A month from the time that you talked about it would be about next week, am I correct?

Craig S. Donohue

Correct. And so it’s just a question now of getting the regulatory approvals that are necessary.

Richard Repetto - Sandler O'Neill & Partners

Our investors are definitely trying to sort out what is cyclical and what is secular and I appreciate the information on the customer mix. Do you see any secular changes here? I’m hearing about the percentage mixes not changing between bank proprietary and hedge funds, but could we just have the coincidence where the secular changes are driving everybody down in the same percentages?

Craig S. Donohue

There is no algorithm we can give you on that, but I do think that many of the longer-term secular drivers of growth in the industry remain. We have increased volatility, increased uncertainty, and I think it’s fair to say increased need for risk management products, hedging, risk-transfer products.

I think we’re still finding, in our own marketing and sales efforts, that there’s increased sophistication among investors about how to use these products for a broad range of trading strategies that even go beyond hedging and infringement. And it is clear to us, anyway, that the globalization trend is continuing and that we will see tremendous growth in these markets on a global basis, certainly including emerging markets, over the course of the next decade.

So I don’t really see those things changing for the long run.

Rick Redding

And I think one thing that we did see in the third quarter and we continue to see is the high-velocity algorithmic guys actually increasing their activity. But that makes sense, in these high-volatility markets and also as people’s ability to hold positions for long periods of time has been affected by the credit crisis.

So kind of all the things that you would expect to see, given the market conditions, we are seeing.

Richard Repetto - Sandler O'Neill & Partners

On the buyback, I do the math and it looks like the average purchase price per share was $352. Were you blacked out in October from purchasing your own shares?

Craig S. Donohue

Basically what we’ve done is we’ve put a plan in place shortly after we closed the NYMEX transaction and so that plan is in place and operating and there’s aspects of that plan that are opportunistic in nature.


Your next question comes from Patrick O'Shaughnessy - Raymond James.

Patrick O'Shaughnessy - Raymond James

Curious if you can tell us about how do you think the decision making process is going to work as far as the CDS clearing offering, who do you think is going to be making the decision here? Is it the dealer community? Is it the regulators? Are they going to make it in conjunction? How do you think that’s all going to work out?

Craig S. Donohue

I think it’s very difficult to speculate on that and I don’t think we want to be presumptuous about what the regulatory community will ultimately decide. I think it’s fair to say that their interest is in helping address some of the risk issues that exist in the way the market is currently organized and functioning and it seems to us, anyway, that they are working well with everybody to try to facilitate their ability to bring these solutions to market. And we are expecting that that will be the case. There will be more than one competitor in this market, that we will be one of them. And that ultimately our success or failure will depend on whether the market participants find value in what we’re offering.

Patrick O'Shaughnessy - Raymond James

And a follow-up CDS question. How would you say that your CDS clearing offering would differentiate itself from some of the other offerings that some of our competitors are throwing out there? You have mentioned that you are probably farther along in the development process, but how else would you say that what you have is differentiated from what other people are suggesting?

Craig S. Donohue

Well, to speak to our virtues and without criticizing others, we certainly feel like we have tremendous financial capacity. I think if you looked at the amount of collateral that we hold on a daily basis, which exceeds $100.0 billion, the fact that we have a financial safeguards package worth $7.0 billion, the fact that we do daily pays and collects of approximately $5.0 billion, and the fact that we have been in this business for more than 110 years with a tremendous base of experience in dealing with volatile products and tumultuous market conditions, and I think an extraordinary reputation for risk management capabilities, I think that’s a significant distinguishing factor.

The other thing that I would say is that we have been aggressively working on this for quite a number of months and we are doing that prior to the time that we started to see the melt down in the financial sector and the defaults in the financial services sector and so that does provide us with some time to market advantages that are significant.

We also have a very inclusive approach that we think is valuable not just to the sell side but to the buy side as well. And where the large buy-side participants in the credit defaults swaps market could participate and help reduce counter-party credit risks as between themselves and the dealer community in a way that I think our have not yet facilitated, we have a very strong reputation for neutrality and independence and establishing risk management policies and in making sure that the marks, if you will, as part of the valuation of exposures, are independent and objective.

And we also offer I think the most flexible solution in that we are providing for firstly a migration facility for existing gross exposures in the CDS market, we are contemplating allowing access to clearing-only services, where market participants can continue to transact bilaterally in the over-the-counter market but submit those exposure and trades to the clearing house for a central counter-party guarantee.

And then lastly and I think very uniquely, we are also offering an execution platform, both the central limit order book for highly standardized indexed products as well as an RFP transaction platform for single-name products that many not normally be deeply liquid and subject to a high turnover or transaction frequency that could also be centrally cleared and that might enhance the liquidity in the market and improve price transparency but also improve the quality of the marks that the clearing house can use in properly determining the value of the exposure.

So I think we have a very, very strong advantage in all of those respects.


Your next question comes from Niamh Alexander - Keefe, Bruyette & Woods.

Niamh Alexander - Keefe, Bruyette & Woods

The open interest declining, Rick you guided us earlier in the year to say that historically that may have been a good precursor to volume but it looks back now and it looks like open interest peaking last year was a bit of a precursor to volumes slowing. Is there anything you can point to or anything you see in detail of open interest, a kind of place maybe it’s flattening out, or it’s a specific type of customer that’s just pulled back with all the volatility or anything like that?

Rick Redding

I think one of the big areas of the decline had been in couple of the options products. Obviously the Euro dollar options being the biggest one. But you have seen some decline in open interest and other interest rate products but yet in other products you have seen actually increases in open interest.

So it’s a very mixed bag of what’s going on out there right now. And a lot of it has to do with how the underlying markets are trading and whether they’re functioning properly more so than what the future’s open interest is.

So I do think you have to look at it on a product-by-product basis, I think you have to put it in context of what’s going on in the market. So it is difficult to use those numbers because if you look at that as the sole factor just because there’s so much else going on. If you look at them over a short period of time, they actually become negatively correlated.

So we’re refining our forecasting on this as well but there’s lots going on.


Your next question comes from Mike Carrier – UBS.

Mike Carrier - UBS

Obviously the volume outlook is pretty challenging. It just feels like there’s more head winds, not just for you, just for the overall industry. So when you look at budgeting for next year, versus like the past seven years, how do you look at the expense base, particularly given all the ongoing investments, with the possibility of having significant volume decline? I guess what I’m just getting at is when you look at the expense base, ex the synergies, where could you pull back if we are in an environment where volumes are just going to be flat to down 10% or 20%?

James E. Parisi

It’s a good question. It’s certainly an area that we will be very focused on as we go through the budget process. We have been disciplined throughout our history on the expense side and we will continue to engender that.

One of the things we will have to do is we will have to look to see what the cost benefit is of reducing certain expenses. You don’t want to cut expenses that lead to growth down the line. So it’s somewhat of a balancing act there.

So it’s something we will look at through the budget process. Some of the areas which naturally move with volumes because volumes are tied to cash earnings, the bonus line would move, along with volumes and license fees are a variable expense so those move with volumes as well.

We also have discretionary expenses that we would take a harder look at, probably in the marketing area or some of the expenses we use in prospecting. And then we would also look on the major capital spends.

But I think right now all is very well and we will just be very careful in our budgeting.


Your next question comes from Robert Rutschow - Deutsche Bank Securities.

Robert Rutschow - Deutsche Bank Securities

Following up on that question, can you tell us what your expectations are for next year in terms of volumes and what you are budgeting there?

James E. Parisi

No, we don’t give out volume guidance.


Your next question comes from Christopher Allen - Banc of America Securities.

Christopher Allen - Banc of America Securities

Some of your customers have raised concerns that putting CDS positions on the clearing house would pose a risk to their capital. How do you answer that? And would it be necessary to raise additional capital to clear CDS contracts?

Craig S. Donohue

A couple of comments on that. First of all, there have only been a couple of people that have commented on that and they have done so in a kind of preliminary fashion, reacting just to people talking about what we are proposing to do. But I want to be careful to say that we have a risk committee which we will have a discussion with them about the risk modalities that we will use here for the credit defaults swaps market.

We will also certainly have more substantive and detailed with our clearing member firms about the risk management protocols that will be used here. But suffice it to say that we have done a tremendous amount of work here. We have very specific protocols that we are going to be putting place that are unique to CDS. And so I think we will be able to satisfy and address those legitimate questions that people have once we have the opportunity to get into the specifics and the particulars of that.

I think we have both Phupinder Gill and Kim Taylor on the phone in New York, both of whom run the clearing house and they may want to amplify on that.

Kim Taylor

I wanted to just add to what was said about the risk management protocols that are being applied to the credit product.

One of the things that we looked at in considering whether it was appropriate to include these products in the existing financial safeguards package or whether it was more appropriate to establish a separate financial safeguards package was whether or not ultimately the risk profile that the financial safeguards package is exposed to would change significantly from the addition of the product.

And what we found is that we were able to control for differences in the risk profiles that these products present with the specialized margining protocols that Craig mentioned and also some specialized suitability requirements for who would be allowed to participate in clearing these products.

So we think that we have adapted for the differences in the risk profile accordingly and that the pool of the financial safeguards does not face a significantly different risk profile than it faced before. That’s the important thing.


Your next question comes from Michael Vinciquerra - BMO Capital Markets.

Michael Vinciquerra - BMO Capital Markets

Craig, you talked about you are pretty enthusiastic about what’s going on with ClearPort right now. I noticed in the last couple of days you have introduced a number of new products on that platform. Can you talk about the outlook there? It seems like you think it is going to be one of the growth engines over the next couple of years.

Craig S. Donohue

We are really excited about ClearPort, certainly the more recent performance has been outstanding. We have also been, and I will ask Rick to comment because he’s been particularly active in getting out and talking to the customer base that is using ClearPort, as well as the dealer/broker community.

I think there is a lot of enthusiasm for ClearPort and how it works. There is a lot of interest in expanding ClearPort beyond the current product set of primarily oil and gas swaps, a much broader range of product that people are interested in.

We are seeing a significant increase in customer connectivity and registrations as well. One of the things that we are trying to do on an operational level as the consequence of integrating the two companies is try to reduce bottlenecks and constraints on bringing new product to market in a very timely fashion.

So all of that is very positive for us from a growth perspective.

Rick Redding

One of the things that we wanted to demonstrate to the market is we could get a number of those natural gas basis swaps out there, which we launched on Monday. And we looked to other products as well. I think NYMEX and COMEX had a number of products in the pipeline that we are moving forward to getting those into the market and all of these are what customers are asking us for.

And then the other area that Craig mentioned was expanding the product category and the asset classes that we could put on to ClearPort because I think ClearPort has been a hugely successful product but in this environment we are getting lots of clients talking about putting more assets on there because of the credit crisis. People are really attuned to credit risks right now and I think there are products such as agricultural products and metals that we can continue to roll out and those are very important for what people are looking for.

I think you saw just the other day that we’ve now done as much volume on ClearPort in the energies on one day as we did in Globex, which is something we’ve never seen before. So this is heightened in customers’ minds. I think one of the things that Craig mentioned was the number of new people registering.

But it’s also the type of entities that are coming onto ClearPort, too, ones that a year ago you never thought would have need for a central counter-party clearing mechanism and now they’re there and very thankful that this is being offered.


Your next question comes from Howard Chen - Credit Suisse.

Howard Chen - Credit Suisse

A follow-up on the customer break down. Of those 25 major hedge funds that comprise 10% of the volume, could you provide a general sense of order breadth, i.e. opening versus closing of positions and if that breadth is disproportionately skewed in one direction in the other. And I guess more broadly, with all the increased worries of counter-party risk, is there any particular reason we haven’t seen a major end user become an active clearing member of the CME and execute and clear their own volumes? Is this of any interest to you?

Craig S. Donohue

Just to clarify your question, are you asking whether there’s a difference in the open interest trend versus the volume trend for hedge funds?

Howard Chen - Credit Suisse

Right. Of that 25 major hedge funds that you broke out 10% of volume. I was just trying to get a sense, is there any evidence that that’s a net closing out of position?

Rick Redding

I’m interpreting your question as can we tell if people are liquidating to get out of the market. I think that’s very difficult for us to see because a lot of these positions are offsetting other exposures that they have so you don’t know if they are mitigating the risk that they have on or if they are exiting positions. That’s very difficult for us to see.

Craig S. Donohue

I would say that you have to remember, too, that a number of these larger hedge funds are more algorithmic proprietary trading operations and it doesn’t appear to us that there’s any trend like that, at least in terms of the significant volume contributors.

Rick Redding

In this environment what you tend to see is people doing these shorter-term strategies where a lot of them are literally getting closed out before the end of the day, so again, it’s very difficult for us to aggregate that up and give you a general trend.

Craig S. Donohue

On the second point, I do think there are a number of entities that are inactive clearing member firms currently that are examining the opportunities for them to become full self-clearing, active-clearing members of the exchange.


Your next question comes from Mark Lane - William Blair & Company.

Mark Lane - William Blair & Company

I understand that you have limited visibility into the types of customers that are trading, but beyond the bank proprietary trading group and the 25 large hedge funds, can you give any further insight or detail on the contribution from other users?

Rick Redding

I think one thing to pay attention to in this quarter, to give you some general feeling is, non-member volume as a percentage went up. So whether that’s an asset manager or a pension plan, you’re seeing a bigger percentage of that customer base coming on to exchange. That helped drive the RPC.

Craig S. Donohue

I think I understand your question to be can we give sort of a quantitative range or break down, percentage contribution from other customer segments. That’s extremely for us to do. We have special membership categories and fee programs that pertain to hedge funds, electronic proprietary trading groups and banks and when you start to get into the areas of asset management firms or insurance companies or mutual funds or pension and retirement systems, we just don’t have membership categories or fee programs that allow us to really see that. And unfortunately we don’t have a lot of visibility because we’re generally trading through the clearing member firm.

Mark Lane - William Blair & Company

Those were just those two categories where you have insight into.

Craig S. Donohue

I would say the bank proprietary trading, the hedge fund clearing, or corporate member and the inactive electronic proprietary trading group areas are the ones that we have the most visibility in. We, I think, shared with you today as much insight as we can on that.

Mark Lane - William Blair & Company

On the CDS are you dedicated, is your solution dedicated to a buy-side model with a central order book and electronic front end or if the market doesn’t want that or you can’t get enough dealer support, would you potentially go in a different direction?

Craig S. Donohue

I think that that is a key area that we want people to understand is the flexibility of our offering which is that it does not require that you trade on the platform in order to clear through a CME clearing house. You can continue to transact bilaterally in the over-the-counter market and submit that transaction to the central counter-party clearing system. So I think that’s the most flexible of all worlds.

If the demand is simply for clearing, then we I think are the best positioned clearing provider. If there is interest, or if overtime the market evolves to one that involves more centralized execution with some degree of price transparency, either in indexes or single-names, then I think we are in a strong position to provide that equally. But it’s not necessary, it’s not required.


Your next question comes from Donald Fandetti – Citigroup.

Donald Fandetti - Citigroup

A question about the algos. It’s my understanding that they could contribute up to maybe 40% of volumes. How should we think about the risk of those entities? All of your customers have some type of risk. Can you talk a little about that and the concentration there?

Rick Redding

The algo guys can be the proprietary groups, they can be part of a bank proprietary desk, they can be some of the hedge funds. We kind of lump all those together. A lot of that, they do have very tight risk exposures, and unlike some of the longer term strategies that losses can accumulate, a lot of these things are very short-term oriented and a lot of them turn these things over many, many times a day.

So most of the exposure they have is literally in milliseconds, sometimes in seconds. So it’s usually a function of where the next tick is. I mean, if markets completely come unwound and there’s no bid or offer out there, that’s a problem.

But you also have to understand, the markets they trade in tend to be the more liquid markets, because their type of trading, high-velocity strategies, do not work in markets where you have disjointed bid/ask spreads. So that’s why they tend to gravitate in some of the larger asset classes. In the most liquid products.

Donald Fandetti - Citigroup

And just to confirm, your hedge fund percentage 10% for Q3, is it fair to say that’s carried through into October?

Rick Redding

We don’t have that information yet.


Your next question comes from Jonathan Casteleyn - Wachovia Capital Markets.

Jonathan Casteleyn - Wachovia Capital Markets

There has been an acceleration in the fodder around the potential CFTC and SEC merger. Just wondering, is there risk to the existing set up of the exchange or would it just be on future products and ventures, in your estimation?

Craig S. Donohue

It is very difficult to speculate on those kinds of things. We’re in an environment right now where many, many things could be talked about in terms of financial services markets and regulatory proposals and regulatory reforms. I just think it’s incredibly difficult to speculate on that.

At an appropriate time, when people are not dealing with the exigencies of the current situation, I am sure there will be a very thoughtful discussion in Washington and in Congress about how all this should work. And I think we have a strong and principled position on those issues that we have articulated for many years. And I think it’s very clear that the CFTC has done a very good job. This has been, objectively speaking, the best functioning part of the overall financial markets. We’ve had tremendous continued functioning of the market, deep liquidity, price transparency, no disruption, and safety and soundness. And the guarantee of the clearing house on every trade. So we’re standing in a good spot from that perspective.

Jonathan Casteleyn - Wachovia Capital Markets

Just so I understand, when you mention balance sheet reliefs in your CDS product, does that mean there is no new capitalization required in your clearing house, if you were to bolt on CDS? Is that basically the interpretation?

Kim Taylor

It doesn’t mean that there is no need for additional funds, because our pool always scales automatically with increased exposure to the clearing house. So as the margin on deposit grows with our regular product or with the credit product the pool size of the guaranteed fund would automatically grow.

In addition, with respect to the credit products, Craig talked quite a bit about the different margining protocols associated with those products and to a large extent what that results in is kind of a higher per unit margin deposit or margin requirement for a unit of credit, notional, as opposed to a unit of other product.

That will actually weight the pool over time more heavily toward contributions from those people holding credit-related exposures.

What it does mean, though, is that you don’t need to start from scratch and you don’t need to reseed the pool, so if, let’s say, the pool needed to be $2.0 billion, for example, to cover the risk exposure of a book of business that included the credit products, our pool is already at $1.7 billion so there is a significant efficiency in adding, diversifying the default risk, basically, that is covered under that pool. We would only need to increase the contribution by $300.0 million, whereas a provider starting from scratch in a startup clearing house would need to start from zero and raise the $2.0 billion.

So there is a significant advantage in a couple of ways. One is that the default profile of the clearing house is diversified and that is a better position for systemic risk protection than a default profile that is facing the clearing house that one-product, single-product oriented. It also, though, is a capital efficiency to the market participants who are participating in the clearing process because they get an efficiency from the capital that they have already put up to support the business.


Your next question comes from Daniel Harris - Goldman Sachs.

Daniel Harris - Goldman Sachs

I was hoping you could spend a minute going through somewhat of a post mortem on FXMarketSpace. I’m thinking back to when you launched it, and what you’ve learned from the experience of trying to enter this OTC market, having it not work, what you could have done different and how that sort of shapes what you’re thinking about with regards to your CDS opportunity and that’s more I guess specifically focused on the trading side rather than the clearing side.

Craig S. Donohue

I think one of the things that became apparent early with FXMarketSpace is that many of the market participants were actually looking for a solution that would provide efficiencies in terms of net settlement through the CLS system and ultimately the FXMarketSpace management took a conservative view on that and we continued to facilitate transactions on the platform that were centrally cleared, but that were settled through CLS on a gross versus a net basis.

And that would have been, I think, an innovation that had we been able to get to some kind of a net settlement, that might have made a difference. Apart from that, I think the other lesson is one that was obvious from the beginning but always difficult to overcome and that’s creating an entirely new kind of business and market model and processing model where you have business that’s being done in a particular way and when you begin to centrally clear a spot for an exchange transaction, that has significant implications for the bank community in terms of their own systems capabilities.

And that proved to be difficult in an environment where the banks are challenged in terms of their legacy systems and their development resources. And while we would like to try to hang in forever and ever and ever, we just weren’t able to get to where we wanted to go in the time that we wanted to get there. In terms of operational preparedness.


Your final question comes from Edward Ditmire - Fox-Pitt Kelton.

Edward Ditmire - Fox-Pitt Kelton

Given what you’ve studied and the existing over-the-counter market and credit term swaps, do you think users would have to post more margin or collateral under the CMA solution or less than what the status quo is?

Kim Taylor

Can you repeat the question?

Edward Ditmire - Fox-Pitt Kelton

I’m assuming you have done extensive studies on the status quo over-the-counter market and credit default swaps. Can you tell us whether your system would require users to post more margin than they were posting in collateral under the status quo system? Or would it be lower amounts that they would have to post?

Kim Taylor

I think that on a participant-by-participant basis one of the problems that is facing the over-the-counter credit default swap market now is that collateral arrangements are kind of bespoke so there are different arrangements that apply to different counter parties, different arrangements that apply to different customers and so there’s not a kind of disciplined, standardized approach to collateral requirements. And I think there is also a lack of transparency on the part of the customers, the dealers have the ability to basically change the margin requirements or the collateral requirements kind of at will.

So our approach to risk margining for these products is the same kind of conceptual approach that we have in all of our products, which is we are looking to do a risk-based portfolio-based approach to margining where we are looking to ensure that our margin covers what we consider to be the worst case loss the portfolio would suffer over the relevant time period that we would need to liquidate the position.

So some of those elements are very different for credit products than they are for futures. I can answer your question kind of generally in that we have looked at our margin requirements with different market participants versus what they pay now and we have found in some cases they are slightly higher, and in some cases they are slightly lower. They’re in the range of reasonability and I think that each participant’s experience might be slightly different depending on the bespoke nature the deal that they had.


I will turn the call over to Craig Donohue for closing remarks.

Craig S. Donohue

Thank you very much for joining us today. We look forward to being with you next quarter.


This concludes today’s conference call.

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