TMX Group Limited (TMXXF) CEO John McKenzie on Q1 2022 Results - Earnings Call Transcript

TMX Group Limited (OTCPK:TMXXF) Q1 2022 Earnings Conference Call May 3, 2022 8:00 AM ET

Company Participants

John McKenzie – Chief Executive Officer

David Arnold – Chief Financial Officer

Paul Malcolmson – Managing Director Investor Relations

Conference Call Participants

Geoffrey Kwan – RBC Capital Markets

Etienne Ricard – BMO Capital Markets

Graham Ryding – TD Securities

Jaeme Gloyn – National Bank Financial

Brian Bedell – Deutsche Bank Securities

Operator

Good morning, ladies and gentlemen, and welcome to the TMX Group Limited Q1 2022 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time you're in this call you require immediate assistance, please [Operator Instructions] for the Operator. This call is being recorded on May 3rd, 2022. I would now like to turn the conference over to Mr. Paul Malcolmson, Managing Director Investor Relations. Please go ahead, sir.

Paul Malcolmson

Well, thank you, Operator, and good morning, everyone. I hope that you and all of your families are staying well and safe. Thank you for joining us this morning for the first quarter 2022 conference call for TMX Group. As you know, we announced our results late yesterday and a copy of our press release is available on tmx.com under Investor Relations. This morning, we have with us John McKenzie, our Chief Executive Officer, and David Arnold, our Chief Financial Officer.

Following opening remarks, we will have a question-and-answer session. Before we start, I want to remind you that certain statements made on today's call may be considered forward-looking. I refer you to the risk factors contained in our press release and reports that we have filed with inventory authorities. And with that, I'd like to turn the call over to John.

John McKenzie

Thank you, Paul and good morning, everyone. Thank you for joining us this morning for the discussion of TMX Group's financial performance for the first quarter of 2022. And I'm very pleased to be coming to you directly from the office in Toronto for the first time in 2 years to do this call. On behalf of all of the TMX, we'd like to wish you also the best of health to everyone listening this morning. Now as Paul mentioned, we announced our results last night, and David will join us in a few minutes to take you through the first quarter numbers in more detail. But my comments this morning will focus more on our performance during the quarter.

The progress we are making across the enterprise throughout 2022 would add to advance our global growth strategy. And important adaptive steps TMX is taking to address the needs of the modern marketplace to empower clients across our dynamic and diverse capital markets ecosystem, and to compete every day. Now to set the context for a discussion of the quarter ended March 31st, 2022, I want to open with a quick look a little further back. Although it may seem like yesterday to some of us, April 23rd marked the 25th anniversary of the last floor trade on the Toronto Stock Exchange as we became the very first Exchange in North America to go fully electronic.

Since 1997, the digital age has transformed all aspects of our world in more ways than we could have imagined at the time. But the truth remains, our markets have a proud history of innovation. And today's TMX is dedicated to living up to that legacy of innovation by helping to define new sectors, reaching into new asset classes in jurisdictions around the world, and delivering groundbreaking data and analytic applications. We see these as a key defining elements in fulfilling our role as an engine of opportunity at the heart of the market, serving modern issuers and participants, investors and traders in Canada and around the world.

Now, turning to our first quarter results. TMX reported revenue of $287.1 million of 14% increase from Q1 of last year due to higher revenue from derivatives trading and clearing Trayport and capital formation, and partially offset by lower revenue from equities and fixed income trading and clearing. The higher revenue included $33 million of revenue from BOX, which we began consolidating in January 2022, as well as an 8.8 million revenue increase from revenue from AST Canada acquired in August 2021 and 0.6 million from trade signal, acquired in June 2021.

Now on adjusted basis, diluted earnings per share was a $1.82, a decrease of 3% from Q1 of 2021 and our total operating expenses increased 22% compared to Q1 of last year or 2% when you exclude those expenses related to BOX, AST Canada and trade signal. Now, these are results that our team can be quite proud of given that more challenging global capital market ecosystem that we have seen in 2022. Geopolitical events, including the ongoing conflict in the Ukraine and macroeconomic factors have negatively impacted markets here in Canada and across the world. But as we consider how these events impact our business, let's first pause to give our thoughts and support to all those directly and indirectly affected by this conflict.

Now, despite the effect of these near-term headwinds on some of our key core business drivers, including capital raising and equities trading activity, TMX, as I said earlier, delivered solid first-quarter results. Overall, TMX's Q1 performance reflects the depth of strength in our business model and underscores the efficacy of our long-term diversification strategy. And as we look to the future, the capital market's ecosystem, this powerful core engine of opportunity remains strong and prospects bright when conditions again normalize. Now, moving on to our business areas.

Revenue from capital formation in Q1 was $63.9 million, a 5% increase from the first quarter of last year, reflecting the inclusion of revenue from AST Canada and higher revenue from initial and sustaining fees, partially offset by a decrease in the number of financing transactions and dollars raised on Toronto Stock Exchange and TSX Venture Exchange when compared to Q1 of 2021. It is no secret that we are in the midst of a challenging conditions for capital raising. Global uncertainty around inflation and interest rates, or pull back in valuations in some sectors and increased volatility have affected the ability and appetite for companies to come to market to raise capital.

And while the IPO market slowed in the first quarter, there were some encouraging signs for our unique two-tiered marketplace. Overall, new listings on the TSX Venture Exchange were up 23% year-over-year, including 23 new capital pool companies, a 156% increase from Q1 of 2021. The most popular means of going public on TSX Venture, the CPC path, allows companies more latitude and flexibility than the traditional IPO process in terms of timing. And most importantly, from our prospective, our pipeline remains very strong.

And as always, we are in regular dialog with companies across all sectors, as well as our stakeholders across the ecosystem, including bankers, venture capitalists, or private equity firms about potential IPO candidates within their portfolios who will come to market when the conditions are right for them. TMX markets are a proven breeding ground for the next big thing. This ecosystem has a proud history, a 170-year track record of helping to build generational companies. And we are committed to doing everything in our power to help fuel that next wave of game-changers.

Now, turning to derivatives, excluding BOX, revenue from derivatives trading and clearing was 38.5 million in the first quarter of 2022, up 3% from Q1 last year. The increase was driven by 13% higher revenue from CDCC due to repo dealer activity and fee changes, and partially offset by a 2% decrease in revenue from Montreal Exchange, despite higher overall volumes due to both clients and product mix. Canada 's derivative markets continue to build on a strong 2021 in the first three months of this year with 3% growth in total volumes on an X, and 20% growth in open interest.

Volume growth was driven by sustained client interest and developing product areas and increased investor demand for tools to manage risk during turbulent market conditions. Our average daily volume traded an equity options increased 28% compared to Q1 2021, driven by higher activity from both institutional and retail clients, particularly in the energy and financial sectors. Volumes on MX single stock or share futures grew 28% in Q1 compared to the first quarter of last year.

And as product awareness continues to grow among our client base and our business development team continues to work, we will compete building that new pipeline for more prospects. Our index futures were up 15% compared to Q1 of last year as clients move to manage positions and exposure to markets and major indices. And MX's global expansion strategy continued to gather momentum. Trading in the extended hour session synced with markets in the UK and Asia currently makes up about 6% of MX's overall daily trading volumes. The extended hour session generated robust activity during February, accounting for approximately 10% of daily volumes.

And in parallel with our move to make our derivative markets available nearly around the clock, MX's efforts to attract more global participation to Canada's markets is having a positive impact. Approximately 20% of MX volume is derived from participants who have connected to our market in just the past five years. And looking as we continue to explore new ways to enhance our product suite to meet investor demand with a focus on new areas, including sector futures and crypto futures, which we expect to launch later this year. Now, revenue from Trayport in the first quarter was $40.7 million, a 9% increase from the first quarter of 2021, driven by a 7% growth in the average number of total subscribers.

The conflict in Ukraine and the corresponding sanctions continue to have a significant impact on global energy commodity trading markets driving sustained volatility. And Trayport's core network plays a vital role in Europe's energy trading markets, particularly during periods of extreme turbulence, providing access to more than 50 execution venues and clearing houses across more than 20 power and 20 natural gas markets. Thus far in '22, Trayport has also taken important steps to execute on its global strategy, to diversify and expand into new asset classes and geographies.

At the end of March, we announced in collaboration with IncubEx the successful launch of The Voluntary Climate Marketplace, or TVCM. TVCM offers carbon offset projects from five of the leading offset registries, which are tradable with live bids and offers through Trayport's Joule platform. Our teams are working together to build liquidity in the physical voluntary carbon market. And this is an important and unique initiative for Trayport, and as applications across TMX's ecosystem. For companies like us looking to achieve their ESG commitments and achieve net zero targets, the voluntary carbon market provides price discovery and efficient access for trading carbon credits.

Ourselves, TMX Group participated in the first trade on TVCM last year, as we purchase credits to offset our 2020 and 2021 emissions, and to enable us to meet our 2021 net zero target. And just last week, Trayport and Tradition, one of the world's largest interdealer brokers in OTC financial and commodity related products announced the successful adoption of Trayport's technology across Tradition's global refined oil operations. This move to expand Joule's refined oil trading network is squarely aligned with Trayport strategic objective to meet the diverse needs of market participants, and support the continued growth and digitalization of energy markets around the world.

Now in closing, I want to briefly outline what I can confidently describe as TMX's decisive edge. During 2021, we laid the groundwork for the next stage of our organization's evolution, which included an in-depth, company-wide internal exercise to build a high-performance culture and define our corporate purpose. We make markets better and empower bold ideas. Those eight words define our reason for being, our reason for getting up in the morning. And while they sound great, they truly capture the spirit of the organization. They're not just words and they cannot alone determine our future.

Our people will ultimately define our success. And in any quarter, and in all market conditions, it's the dedication of our people that is the great source of pride and our perpetual driving force. They are TMX 's prevailing competitive advantage. And I'd like to take the opportunity to thank our employees all around the world for their steadfast commitment to serving our clients with excellence and for bringing our purpose to life in the work every day. Now before I turn the call over to David, I also wanted to thank David directly.

This is his fourth quarter and I want to thank him for the leadership over the past four quarters in terms of our leading our finance team. But separately also want to thank David for his leadership of team TMX as we embark on the first ever ride to conquer cancer as an organization. And I want to thank him for bringing this as a whole so we as an organization can continue to give back to causes that matter in the community. So with that David, my finance leader, my captain, over to you.

David Arnold

Thank you, John. And good morning, everyone. As John said, it's good to be back in the office again. So as John mentioned, we had a solid start to 2022 in the first quarter with revenue growth of 14%. This was driven by the inclusion of revenue from three businesses, namely: The Boston Options Exchange, or as I'll refer to it throughout today as BOX, which we consolidated on January 3rd, 2022. AST Canada, which we acquired August 12th, 2021 and Trade Signal which we acquired June 1st, 2021.

Revenue excluding BOX, AST Canada, and Trade Signal was down 3% in the quarter compared with a record first quarter last year. There were revenue increases across all our businesses with the exception of equities and fixed income trading and clearing. We reported an increase of a 179% in our diluted earnings per share this past quarter, which was largely driven by gains resulting from the revaluation of our interest in BOX upon acquisition of voting control on January 3rd, while adjusted diluted earnings per share decreased by 3%. We managed costs to below the rate of inflation in the first quarter with operating expenses excluding BOX, AST Canada, and Trade Signal up 2% compared with Q1 of 2021.

179% per little earnings per share growth in this quarter, as mentioned earlier, reflected a $177.9 million, with $3.16 per share gain on the revaluation of our interest in BOX, as well as an increase in income from operations of $9.1 million when compared with Q1 of 2021. Turning now to our businesses and I'll start with those that saw revenue increases this quarter. As John said earlier in his remarks, revenue and capital formation grew by 5% this quarter, which included approximately $8.8 million of revenue related to AST Canada, excluding AST Canada, revenue in the quarter decreased 10% in capital formation, primarily driven by low additional listing fees in the quarter due to decreases in both the total number of financings and the total financing dollars raised.

The decrease on TSX reflected a 28% decrease in the number of additional listing transactions billed at the maximum listing fee of $250,000 and a 5% decrease in the number of transactions billed below the maximum fee when compared to very strong levels of activities in Q1 of last year. This decrease was partially offset by higher initial listing fees in the quarter when compared with Q1 of last year. Sustaining listing fees also increased in the quarter, reflecting an increase in the market capitalization of TSX and TSX Venture issuers at December 31st, 2021, over the prior year, turning to derivatives trading and clearing.

This quarter's revenue grew by 91% when compared to Q1 of 2021. As a result of the consolidation of BOX, we recognized 33 million of BOX revenue in Q1 of 2022. Volumes on BOX increased by 51% compared to Q1 of last year. And BOX's market shares in equity options grew to 6%, which is up 2% from Q1 of last year. Derivatives Trading and Clearing revenue excluding BOX was up 3% in the quarter, driven by 13% increase in CDCC revenue, and partially offset by a 2% decrease in revenue from the Montreal Exchange. While volumes on MX increased by 3% compared to Q1 of last year, there was a lower revenue per contract reflecting changes in both clients and product mix.

In Q1 of 2022, there were higher rebates related to new commercial programs, which resulted in lower revenue per contract. In addition, the volume increase was partially driven by contracts with lower yields, such as single-stock futures and equity options. Revenue in our Global Solutions & Insights and Analytics segment was up 6% over Q1 of 2021, with increases from both Trayport and Datalinx. Revenue from Trayport was up 9% in Canadian dollars or 14% in pound sterling. The increase was driven by a 7% growth in total subscribers in the quarter compared with a year-ago. And $600,000 of revenue, which was a contribution from Trade Signal, which we acquired on June 1st of 2021.

Organic revenue growth in Trayport in Canadian dollars was therefore 8% when compared with Q1 of 2021. Revenue in our TMX data links business, including co-location, grew 3% driven by increases in co-location, data fees, and professional subscribers. The increases were partially offset by decreases in usage base quotes, as well as benchmarks and indices Q1 of 2022 compared with last year. The average number of professional market data subscriptions for TSX and TSX Venture products increased slightly in the quarter compared with last year and subscriptions on the Montreal Exchange were up 5%.

Revenue from our equities and fixed income trading and clearing segment were down 10% in the quarter. Equities and fixed income trading revenue decreased 15% in the quarter compared with Q1 of 2021. This decrease was driven by 37% decline in the overall volume of securities traded on our equities marketplaces. Trading volumes of TSX securities decreased by 17% in the quarter, while volumes on TSX Venture Exchange and TSX Alpha Exchange decreased by 62% and 40% respectively when compared with a very strong Q1 of last year. There was also a decrease in fixed income trading revenue reflecting lower activity in swaps in the quarter, partially offset by increased activity in government of Canada bonds.

Revenue from our CDS business was down slightly reflecting lower clearing and settlement revenue due to lower volumes and lower revenue from account transfers online from our account transfer online notifications product compared with Q1 a year-ago. Turning now to our expenses, operating expenses in the first quarter increased by 22% compared to Q1 of last year. There were approximately 24.5 million of expenses in Q1 of 2022 related to BOX, AST Canada, and Trade Signal, including 2.8 million related to amortization of acquired intangibles for AST Canada and BOX and 1.3 million related to the transitional services agreement with AST, as well as 1.2 million of AST Canada integration costs.

Operating expenses, excluding BOX, AST Canada and Trade Signal increased by 2% in the quarter compared with Q1 of last year. The higher expenses reflected higher headcount and payroll costs increased long-term employee incentive plan costs of approximately 1.5 million, higher legal fees as well as increased expenses for travel. These increases in costs were partially offset by lower short-term employee incentive plan costs of 5.5 million, lower severance and $600,000 of acquisition and related costs related to AST Canada in Q1 of last year. We continue to expect integration costs related to AST Canada of approximately $20 million over the 12-month period from September 1st last year to August 31st of this year.

And expect total revenue and technology cost synergies of approximately $8 million, which will be substantially achieved by the end of 2024. We now expect at least $3 million of these cost synergies in 2022, including $700,000 realized in Q1 of 2022. Looking at our results sequentially, revenue increased $34.7 million, or 14% from Q4 of 2021 to Q1 of 2022. This was mainly due to the inclusion of $33 million of revenue from BOX. Excluding BOX, revenue increased 1% from Q4 of 2021 to Q1 of this year. This increase was driven by higher revenue in Equities and Fixed Income Trading, and Global Solutions & Insights and Analytics, partially offset by lower revenue in Capital Formation and CDFs.

Operating expenses increased $9.1 million or 7% from Q4, including an increase of $11.7 million relating to BOX and AST Canada in Q1 of 2022 compared with Q4 of last year. Excluding BOX, operating expenses decreased 1% from Q4 2021 to Q1 2022. This decrease was driven by lower short-term employee performance incentive plan costs of approximately $5.8 million, lower information technology spends, lower severance, lower marketing spends, and decreased consulting fees partially offset by our highest salary and payroll taxes of $5.2 million and higher long-term employee performance incentive plan costs of $3.1 million.

Turning now to our balance sheet. In the first quarter of 2022, we spent $12.4 million repurchasing 94,819 of our common shares under our normal course issuer bid program. Our debt to adjusted EBITDA ratio was 1.7 times at the end of the quarter and we also held over $421 million in cash and marketable securities at the end of the quarter, which was about $207 million in excess of the $205 million we target to retain for regulatory and credit facility purposes.

Last night, our board approved a quarterly dividend of $0.83 per common share payable on June 3rd to shareholders of record as of May 20th. In the first quarter, we paid about 46% of our adjusted earnings per share, which is slightly above the midpoint of our target payout ratio of 40% to 50%. And now I'd like to turn the call back to Paul for the Q&A session.

Paul Malcolmson

Thanks, David. Operator, could you please outline the process for the question-and-answer session?

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we now conduct the Q&A session. [Operator Instructions]. Your first question comes from Geoff Kwan with RBC Capital Markets. Please go ahead.

Geoffrey Kwan

Hi. Good morning. Just wondering if you can give an update on the M&A landscape. Obviously, we've seen the markets move around and tech evaluations may have moved too. Just wondering if there's any -- anything new on that front.

John McKenzie

Thanks, Geoff. And I appreciate the question that start off. You're absolutely right there. We have got -- our team is actually quite active looking at another opportunity. But obviously I can't give any guidance in terms of the specific opportunities that we're looking at. But I will reiterate as we've said in the past, we're looking at businesses that helped accelerate our strategic growth. So ones that are focused on both expanding our presence in data analytics, expanding the capability of what we can do with Trayport, expanding the reach of what we're doing with our issuers.

So very much like AST that we closed last year, Trade Signal when we closed last year as well. So we are looking at a number of things of various sizes. And I think you are correct that there is potentially more opportunity with some normalization of valuations, but that'll still take some time to flush into the market. The other piece, as David talked to is our balance sheet is an extremely good position. So relative to a lot of organizations in the industry, we've got not only the cash capacity Dave talked about, but also debt capacity and a relatively strong equity. So we've got the ability to transact in size if the right strategic opportunity presented itself with the right investment conditions for the investor.

Geoffrey Kwan

Okay, that's helpful. And then just my second question was on BOX, when your kind a take a look the net income, profit margin and, I mean it can vary quite a bit quarter to quarter and obviously the volumes can be variable quarter-to-quarter. I mean, is there a way to think about the operating leverage to the business or how to kind of think about how certain level of revenue might translate to a certain level of earnings.

John McKenzie

Yeah. I apologize on this, Jeff, I'm going to be a bit circumspect because we have tried to give good guidance and visibility to box, but it is in a very competitive marketplace. With some of the box data it is more commercially sensitive, where guide you to though is very much like other parts of our ecosystem. It is largely a fixed cost operation and actually runs on technologies that we built for it through the Montreal Exchange. It is a very scalable business. So really guide you to looking at those U.S option volumes and on options market share is that kind of guideposts in terms of what will drive revenue in what is largely a fixed cost operation. That's the best guide points I can give you without giving any more commercially sensitive information.

Geoffrey Kwan

Okay. Thank you.

Operator

Thank you. Your next question comes from Etienne Ricard with BMO Capital Markets, please go ahead.

Etienne Ricard

Thank you, and good morning. On pricing at TMX Datalinx, can you please share what considerations went into seeking regulatory approvals for pricing increases. And should we expect this to become a more recurring development going forward.

John McKenzie

Yeah. Etienne, thank you. That's a great question. So even before thinking about regulatory approvals, anytime we think about pricing, we're actually thinking about value proposition and the value we provide to clients. And so particularly with respect to some of our data products, there are data products there that we hadn't looked at pricing in a number of years. So we looked at what is our relative pricing to the industry, global competitive, and where can we make some changes that are justified by the value that we provide to the industry. So the pricing that we did was not broad-based.

It was targeted to specific products on average across the overall Datalinx business. It represents about 2% to 3% in terms of total increase, but it's actually higher on the products that are affected. And products that are already at a premium, we didn't touch those. So those are all part of the regulatory considerations and making that submission to the regulators to show that what we're doing is cost-justified, it's reasonable, it's commercially fair, and it's competitively appropriate. As we go forward, we actually throughout the organization look at pricing consistently across all our businesses that way.

I think in other parts of our franchise, we actually have it built-in directly. So Trayport, we actually have it built-in directly into our subscriber agreements where they have a -- an inflationary component that work through cost of living adjustment in those contracts. We're doing some adjustments within our derivatives franchise. We mentioned there's some pieces around the OTC markets that we did. And we are looking at other parts of the organization as we go forward.

John McKenzie

The other piece I will leave you with is there are parts of the franchise because we price based on value, that actually have some natural inflationary pricing built-in. Within our capital formation space, because we price both sustaining fees and listing fees based on value as those values grow over time, that generates incremental revenue opportunity for us as well. It is a strategic approach to pricing that we're looking at right across the organization.

Etienne Ricard

Understood. On capital formation. The TSX has been holding up better than most global equity industries year-to-date, given the strong commodity markets. Looking over the rest of 2022, what is your outlook on listing fees? In other words, should we expect that pick up in financing activity from commodity-related markets? And maybe strength in that sector could offset slower capital raising technology, for example. Is that a fair description?

John McKenzie

I think that's a really insightful comment. You have answered it for me, so I always appreciate the question that's got some of the answer in it. Our stock list between both the Venture Exchange and the TSX is actually one of the most diverse stock lists in the world. And so while last year was very -- the highlights were very much around technology companies, we also saw strength in industrials and financials.

So as you go into 2022, you are seeing some sectoral rotation where there's not as much capital going into technology with valuations coming off, but commodity prices are strong. Now, there's still other uncertainties around particularly the energy markets, they are probably keeping capital from flowing into that sector as robustly as it could at these valuations. But there's also other sectors that have potential as well, like industrials, like life sciences. If you look to next week, we have one of the largest life science IPOs that are history going with the Bausch and Lomb IPO coming.

And that's the potential to be a bit of a bellwether. If you go back two years ago to the early stage of the pandemic when we got all a lot of volatility the market and there wasn't financing transactions getting done, green for life came to market and priced their deal amidst that uncertainty and what it did is that it actually created a benchmark for other deals to come to market later on. And that created some confidence for people to price their deals. So we know our long-term pipeline is extremely strong in terms of potential new IPOs.

We had a number of companies in the first quarter that we were working with that have deferred what they'd like to do because of that market uncertainty. So certainly, if conditions normalize as we see improvement in volatility in the market, there are a number of companies that could come and finance. Unfortunately, I can't predict it in terms of the timing and impact, but the conditions are still strong and our pipeline is very good.

Etienne Ricard

And just as a follow-up. I mean, relative to a year ago, have you seen -- are you seeing more interest in Canadian markets from non-domestic investors.

John McKenzie

It's harder for us to see through that because it -- the interest from international investors gets mingled with the domestic participants, because it all gets amalgamate with them. But certainly when you see the amount of flow that we're getting out of both the U.S. and the UK and Asia, that sentiment is correct. We're seeing more international flow into the Canadian market.

Etienne Ricard

Thank you for your comment.

Operator

Thank you. Your next question comes from Graham Ryding with TD Securities. Please go ahead.

Graham Ryding

Hi. Good morning. Maybe we just start on derivatives at Montreal Exchange. I'm somewhat surprised that your volume growth is coming from equities and not sort of your interest rate products given the movement in rates and volumes year-to-date. Maybe some commentary around that. Should this not be the kind of environment that drives interest rate volume and activity trade.

John McKenzie

Yes, so what do Graham and David can jump in and help me as well. Let me dissect it for you a bit more. The actual results in a lot of the interest rate products were actually quite good in the quarter, but they're really masked by the impact on the BOX product. If you remind everyone that's the 30-day short-term money market products. It's actually down -- it's one of our largest products, but it's down 39% versus Q4 of last year and 35% year-over-year.

And the reason that one's down so significantly is when you've got so much really uncertain volatility or what I'll call more destructive volatility with the both timing and size of short-term rate changes that we've seen and the potential for further ones without a lot of predictability about when they could happen, or how big they could be, that takes some of the short-term traders out of the market. So that's been a really short-term challenge. And when you see some normalization in the rate regime then you are exactly right.

It's actually positive for the rate regime and the overall curve. Now if you compare that to some of the other products, the CGB, which is the 10-year product, it's up 11% quarter-over-quarter. The CGF, the five-year product, is up 9% quarter-over-quarter and I think in year-over-year is up 27%. So we do have strength throughout the yield curve at really as being offset by that really significant step-down in the short-term product that's all about short-term rate volatility. So when that normalizes and there's more predictability there, that product should stabilize as well.

David Arnold

And what I'll add, John, is the real positive over here for us, Graham, is the open interest overall for MX products has remained stable around 20%, and it's in line with other product trends. And as John said, really the majority of this BAX decline is being in the first year of maturities, and it's really the geopolitical uncertainty and it's made things more challenging for some of the investors. And we saw some pullback from the speculative accounts that seem to be a little bit more risk averse given the liquidity and volatility of the BAX contract. But as John said, if you look up further in the curve on the 2 to 5 year, there's really positive volume there.

John McKenzie

Yeah. And that's further reinforcing, because those of you remember those [Indiscernible] the two new products we added. Five-year, in first quarter was trading 40,000 contracts a day. That's up from 31,000 on average last year, 21,000 average the year before. The two-year, the CGZ product, which we really just launched last year did 10,000 a day last year. In the first quarter this year, it did 17,000, it was up 72%. All kinds of strength across the curve, all being offset by that real big impact in the short-term rate product.

Graham Ryding

Okay. Got it. Jumping to Trust, in AST. I think it was $8.8 million in revenue this quarter was from AST, is this a reasonable run rate that we should be assuming for this business before we start thinking about higher-margin income in a rising rate environment. And then if so, were there any factors that are weighing on AST in the quarter.

David Arnold

So what I would say, Graham, is we're not going to really guide you. But what I can say is that you are correct. There is upside in the revenue line as we get increases in interest rates so that -- you've touched on that so factor that in, but more importantly is the balances are growing. And as balances grow, as well as the rates rise, we can see upward movement and upside potential in the AST Canada and acquisition in the trust business. But there's also a lot of other stuff that on the management team we're working on that's really trying to propel and leverage putting the two businesses together.

So we do see upside and that's one of the things we guide you to in our investor brochure, is we see this to be a high single to low double-digit growth business. So maybe that's the best way for you to think about that. And then on the side, factor in assumptions on growth and balances, as well as interest rate hikes.

Graham Ryding

Okay. Understood. And then my last question will just be on BOX. The volumes are up I think 51% year-over-year and their market share went from 4% to 6%. Maybe just on that last piece, what's driving the increase in market share?

John McKenzie

BOX offers a really unique product opportunity in terms of the U.S. in terms of actually how it trades the price improvement features that the market does. And it's well regarded by some really key clients. So what you're seeing in market share as you've seen, a number of key clients. Some of which are both participants and also shareholders, some of which are just participants that we're looking to take advantage of that capability that increase the order flow going to the Exchange. So it is that simple in terms of a product that's tailored to the client needs and the clients are prudent, probably more flow to it.

Graham Ryding

Great. That's it for me. Thank you.

Operator

Thank you. Your next question comes from Jaeme Gloyn with National Bank Financial. Please go ahead.

Jaeme Gloyn

Yeah. Good morning.

John McKenzie

Good morning, Jaeme.

Jaeme Gloyn

First question is on the Trayport. Nice to see that rebounding in terms of organic growth, step up this quarter. I was hoping you could provide a little bit more color as to potentially what's driving that step-up this quarter, if there is anything seasonality-wise in maybe Q1, 2021 or how clean is this?

John McKenzie

I like the nature of the questions at the end, how clean is it? It's very clean, Jaeme.

Jaeme Gloyn

All right.

John McKenzie

So you're seeing a number of factors in there. I think we talked to the overall subscriber growth being 7%, but the trader subscribers are up substantially in terms of double-digits, I think, what's that? 14% to 17%? So you're seeing a number of things. We've had really strong renewals; we've had clients expand the usage when they renew. Certainly the volatility in the energy markets, often we will make actually the Trayport screen even more useful in terms of aggregating multiple products on a single-screen. And you know from the history on that, that once people are using Trayport, it is very sticky and the renewal rates are very high. So that's what we've seen across the board. Both net new clients. So David, correct me if I'm wrong, we had 10 additional net new clients and as well as existing clients that renewed with us at higher rates of subscribers.

Jaeme Gloyn

Great. And those net new clients are they coming on board for, just generalizing I'm going to call it like the core Trayport platforms or are they coming onboard because of perhaps some of the new product’s lines have been added recently, or some of the new securities trading information that's been added recently.

John McKenzie

Yeah. Thank you for actually you asking that follow up, I think it's a great question. It's really actually on the core platform and the broad product offering that's already there. And I want to differentiate that from what we talked about in terms of the relationship with tradition in refined oil. So it's not being driven by that yet, that's still very early stage in terms of putting traditions, refined oil products on the Trayport platform. Long-term that will drive additional trader subscriptions as we bring on global oil traders to trade against that product as well. So it's really more on the existing suite of energy commodities that Trayport penetrates, as opposed to some of the new ones that are still early stage.

Jaeme Gloyn

And the last call -- sorry. Go ahead, David.

David Arnold

What I just wanted to just add is so John was mentioning yeah, the number of new clients was around 13 in the quarter.

Jaeme Gloyn

Good to clarify. Last one, just a follow-up on the Trayport as well, from a geographic standpoint. Again, a think back question, is this coming from the core geographic areas, or are you starting to see a little bit more inroads into maybe Asia or the U.S.

David Arnold

The majority of its still coming from the core area. For the Asian -- the Japan power contract trading and strong, we are getting more traction in the U.S. but those are still a smaller piece of the pie that the bulk of that growth is coming from the core European energy market.

Jaeme Gloyn

Great. I'll leave it there for now. Thanks.

Operator

Thank you, ladies and gentlemen, [Operator Instructions] Your last question comes from Brian Bedell, with Dutch bank, please go ahead.

Brian Bedell

Great. Thanks. Good morning, folks. Maybe if I could just go back to BOX, maybe a question for you, David, on just on the financials. I appreciate that, obviously for competitive reasons, you don't want to disclose too much here, but just in terms of modeling that is it fair to say the first quarter results for BOX in the consolidated revenue and expenses were at least on the expense side, fairly normal. So we can think about that as a normal run rate to project off of. And then was there any other additional noise within the non-controlling interest or should we be thinking about that as the 52.1% offset to BOX on a modeling basis going forward? Appreciating that, of course every quarter we need to model the volumes.

David Arnold

Absolutely, Brian. So pretty normal, pretty clean. So absolutely key off of our disclosures. And as you rightfully pointed out. Look to see what gets published in terms of monthly and quarterly statistics in terms of volume and market share, which is publicly available. But yes, the numbers are clean, and your interpretation of non-controlling interest at roughly 52% is correct.

Brian Bedell

Okay. Great. And then maybe just more strategically, John, I guess for both BOX and I was just thinking about competition broadly in the U.S. options markets. And then of course, up in Canada with Cboe, the pending acquisition of NEO. Maybe if you can just talk about what your competitive strategy might be on pricing. If you think you need to alter pricing whatsoever in Canada. And then similarly, I guess on the offensive side in Options, is there capability to -- or is there a desire to alter pricing within the U.S. Options markets to gain more share there. You're -- is that mostly up to the BOX folks or do you have discretion to do -- to steer that as well.

John McKenzie

So let me start with the latter question first. That very much is up to BOX. While we do have the technical consolidation in terms of the 50% voting on BOX. It is operating as an independent entity with an independent board that we participate in, and they make their own and operational and strategic decisions that way, which we support through the board participation. So the BOX would look at that in terms of what's the right strategic approach to them. It is more of a premium service in the U.S. market because as I said earlier, it provides a unique service to the clients in more of a premium product.

Within our kind of domestic competitive environment, it's all about serving the clients. I mean, our focus is making sure that we've got the product suite, the capabilities, the technology offerings to be the best marketplace to serve the clients. We do that very well. I believe that across the board that we are already priced competitively so I don't see material competitive pressure around pricing and particularly on the things that are the easiest to compete in. In terms of the lowest barriers to entry, like things like equity trading, our pricing is competitive North American wide.

We're not just competing with the venues here in Canada, but, but the venues across North America for that interlisted flow as well. We think we're in very strong position and when you think about the other parts of our franchise, our capital formation regime or listening regime has very strong competitive dynamics because we only trade those companies that we lift. So if a company wants to access to the deepest pool liquidity, they need to list with us.

John McKenzie

We have that partnership agreement in terms of the index. So their primary Index benchmark, the S&P, TSX 60 encompass that you need to be listed on TSX to participate in those indices. Again, we got very strong competitive dynamics there. And then when you look at other parts of our franchise, like our domestic derivatives, futures and auctions businesses, we operate that as a vertical. So we control our own clearing, we control our own regulatory structure. And that's -- if someone wants to compete with that, they have to build those capabilities for themselves. We are certainly not resting on our laurels. We look at all those pieces regularly, but it really goes back to that beginning point of ensuring that we're serving the clients the best of any of the providers out there and I've got confident our teamt continue to do that.

Brian Bedell

That's great color. And maybe if I could sneak one more in just on the crypto futures that you mentioned, any thoughts on timing of that. And then what you're hearing from users. I mean, typically you develop products based on user feedback. So are you seeing a ton of demand for these? And then I guess would you start pricing off? Typically, when you start a new futures product with anyone, does that -- there's low pricing to start off and then you build into that over time. Just any thoughts on that?

John McKenzie

I got to say, this is a great closing question because this has been a suite of some of the most insightful questions that we've had on a call. So thank you for that. The Crypto future we're looking to have that launched in the back half of the year. I don't have specific timing yet because it does have to work through both the regulatory and the risk management structure. It is based on client demand and where the client demand is coming from is I wanted to remind everyone that Canada was the first market to launch crypto based ETFs. You've gotten now ETF providers and fund managers that are holding crypto in their products, but don't have good pricing or risk management tools around them.

So the crypto product we're looking at would be based on similar index and benchmarks for crypto pricing that would allow that pricing certainty for asset managers that are holding those in their products. So that's very much the design that we're working towards, and very much to that point in terms of how you price it off, off reliable indices that are being used in other products. So it's actually -- even though it's a new area, new sector, it's using the all the same futures principles that we would have used in any other futures product we brought to bear like the fixed income ones

Brian Bedell

Great. Thanks so much.

John McKenzie

My pleasure. Thank you.

Operator

Thank you. There are no further questions at this time, Mr. Malcolmson, over to you.

Paul Malcolmson

Thank you, everyone for listening in today. Just a reminder that our annual and special meeting of shareholders will be taking place this afternoon at 2:00. If you have any further questions, contact information for media, as well as Investor Relations is in our press release and we'd be happy to get back to you, stay well and safe, everyone.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.