Earnings Call: Q1 2021

May 12, 2021

Earnings release

Good day and thank you for standing by. Welcome to the TMX Group Limited First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Malcolmson. Please go ahead. 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 Q1 2021 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 are once again joining virtually and have with us John McKenzie, our Chief Executive Officer and Frank D'Lizzo, our Interim Chief Financial Officer. Following opening remarks from John and Frank, we will have a question and answer session. Before we begin, 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 the regulatory authorities. And with that, I'd like to turn the call over to John. Well, thank you, Paul, and good morning, everyone. Thanks for dialing into the call today to discuss our TMX Group's financial performance for the Q1 of 2021. I do want to start by wishing the very best of health to you and your families. And on behalf of us at TMX, I want to send sincere thanks to those brave people in the front lines, including healthcare workers and first responders, who continue to fight to save lives and contain the impact of the current wave of COVID-nineteen, the crisis in our own communities. Now with spring of 2021 arriving, there is a sense of hope and renewal in the air, and it brings us one step closer to a return to normalcy. Now as Paul mentioned, we announced our Q1 2021 results last night. Frank will take us into a deeper dive into the Q1 results in a few moments. But to put it simply at the outset, Canada's capital markets are thriving. It is no accident, it is something that all Canadians should take great pride in. Our markets are among the best in the world, fair and transparent, liquid and competitive and feature a diverse and deep set of great companies and investment opportunities. TMX's work in support of the sustainable success of our markets is fundamental to who we are and core to our mission, to serve as an engine of opportunity, a catalyst for growth for our clients here in Canada and across the world. The focus of my remarks this morning will be on the key factors that drove TMX's strong performance in the 1st 3 months and initiatives that we have undertaken to innovate for and with our clients to address their needs and help set the stage for future success. I will close with a brief update on the progress we have made in our priority growth areas. Now turning to TMX's operating results for Q1. Revenue was $252,000,000 in the quarter, an increase 14% from the Q1 of 2020 and earnings per share was up 37% or 23% on an adjusted diluted basis. The strong start to the year extended across much of the enterprise with overall growth driven by an increased revenue from capital formation, equities and fixed income trading and clearing. GSIA including Trayport and all that slightly offset by lower revenues from our Derivance business. Operating expenses were up 9% from Q1 2020, largely due to higher costs related to our short term employee performance incentive plan and sales commissions, given the strength of TMX's performance so far in 2021. Now taking a closer look at the performance of our business areas. Revenue from capital formation was $61,100,000 up 52% from the Q1 of last year, driven by a surge in new listings and issuer financing activity. It was a tremendous quarter for the Toronto Stock Exchange and TSX Venture Exchange, the best first quarter in 15 years with over $20,000,000,000 in capital raised by our issuers and 19 corporate IPOs on the 1st 3 months of the year. And a quick look at just a few of the Q1 highlights illustrates the impressive overall strength of our listing franchise. New listings were up 45% on the TSX and 50 7% on TSX Venture compared with last year. Our markets ranked number 2 in the world in new listings according to the World Federation of Exchanges. IPOs were up 25% on TSX in Q1 and IPO financing dollars raised on TSX equaled more than half of the total dollar amount raised in all of 2020. Total financing dollars raised by issuers was up over 100% on TSX and over 200% on TSX Venture compared with Q1 of 2020 and equal nearly half of the total financing dollars raised in the entire year of 2020 across both exchanges. It was also a record breaking quarter for the innovation sector as TMX's exchanges continue to fortify our reputation as a premier destination for cutting edge companies in all stages of maturity and from all regions of the world to access capital. In less than 5 years, the TSX and TSX Venture Innovation Sector has more than tripled in size. And at the end of the Q1, the sector topped $500,000,000,000 in total market cap, surpassing the mining sector for the first time ever. Q1 also featured some important milestones. TELUS International raised $1,400,000,000 in the largest tech IPO in Toronto Stock Exchange history, and they joined our market in February. And the Toronto Stock Exchange also home already of the world's first ETFs back in 1990 launched the world's first publicly listed Bitcoin and Ether ETFs in the quarter. Overall, companies in the sector raised $10,700,000,000 in equity capital in Q1 and technology companies alone raised $7,300,000,000 nearly reaching the full year record of $8,100,000,000 which was set just last year in 2020. And our innovation indices continue to be among the top performing indices across the world. 1 year total returns through March 31 were 70% for the TSX S and P Tech Index and 88% for the S and PTSX CleanTech Index. The momentum has continued also into the 1st few weeks of Q2. Last month, we welcomed Thinkific Labs to Toronto Stock Exchange, The Vancouver based software company as a software as a service company IPO raised more than $160,000,000 in total proceeds. And Waterloo cybersecurity startup Magnet Forensics debuted that same week on TSX, raising $100,000,000 in their IPO. Investor appetite for these and other new IPOs has been strong and the pipeline of companies looking to go public on both TSX and TSX Venture remains robust. Now turning now to equities trading. Revenue from equities and fixed income trading and clearing was $68,700,000 in Q1 2021, up 18% from last year driven by higher volumes across all of our exchanges. Overall volume 50% compared with the Q1 of 2020 led by 175% gain in volumes on TSX Venture Exchange. And within the numbers, we are seeing specific investor interest in technology and life sciences, as well as the resource sector and a surge in volumes from retail investors. There's been a great deal of attention on and speculation on the impact of the rise of retail investing on the markets in 2021. Retail trading compromised 35% of total equity trading back in 2019. Vacation levels reached an average of 46% with a peak of 48% in February. In Canada and for TMX, the importance of retail segment of our marketplace extends beyond the new cycle of the meme stock phenomenon that occurred in the U. S. In February. The increase in retail investing as a proportion of our trading volumes represents a meaningful shift and a development we've been tracking closely over time. And the Q1 shines a bright light on the important role that a healthy retail market plays in a vibrant and growing market ecosystem. Increased retail activity helps to fuel strong valuations, making it more attractive for new companies to come to public markets to fund their business strategies, creating jobs and driving economic growth. And our equity trading team has been working hard to address the needs of our diverse range of clients. TSX Dark, Canada's fastest growing dark pool continues to move forward in a client engagement strategy with the launch of our new analytics reporting platform. And last month, we filed a submission with regulators to add conditional orders to TSX Dark, designed to increase user functionality and attract additional volumes to the platform. Our revamped market unclosed facility is on track for implementation this fall. The client feedback has been tremendously positive to the new and improved MOC and shows again the benefits of taking an inclusive collaborative approach across our stakeholders, including clients and regulators to address the ways in which we can make our markets better. Now let me turn to Trayport. The average number of Traders subscribers was up 4% for the Q1 of last versus last year and average total subscribers increased by 5%. Trayport continues to seek out expansion opportunities in the evolving global energy landscape. And this week Trayport announced an agreement to acquire TradeSignal, a leading provider of rules based trading and technical chart analysis software based in Germany. This is an important step forward in Trayport's growth strategy as we continue to seek out ways to meet client demand for data and analytics and to support the evolution of quantitative and automated approaches to trading. TradeSignal will integrate seamlessly with Jewel and combined with Trayport's data and analytics and AutoTrader solutions will offer clients enhanced charting and analytics capabilities to further enhance decision making and the overall trading experience. The transaction is expected to close in the Q2 of 2021, subject to customary closing conditions. In Q1 as well, Trayport also added to its refined oil offering on the JUUL platform, signing an agreement with a leading global interdealer broker. And the team is now in the process of rolling out refined oil pricing data to trading desks in London, Singapore and North America. And now let's turn to derivatives. Revenue from derivatives trading and clearing was 37,500,000 dollars down $3,000,000 or 7% from Q1 2020. And while overall MX volumes increased slightly year over year at a 2% growth, revenue per contract was lower due to an unfavorable product mix. And while the prevailing low interest rate environment has had that negative impact on volumes in some of Montreal Exchange's key products, particularly the short term interest rate products, we are seeing some important signs of growth within the numbers, including momentum on our single share futures, higher volume in equity and ETF options and increased overall open interest. Frank will go into more detail on MX's results for the quarter in a few minutes. But before that, let's talk about Asia, where MX has set a launch date for the second half of twenty twenty one for our Asian extended hours initiative. And we are in the process of obtaining regulatory approvals and working with regulators and all stakeholders to ensure the industry is prepared for that implementation. Canada offers a compelling value proposition for investors in Asia and all over the world, including access to highly liquid, world class markets and a leading global economy. Now before I close off my remarks today, I want to specifically highlight progress we are making in 2 of TNX's priority growth areas, enhancing our talent and culture and ESG. And as the world emerges from the grips of COVID-nineteen and our industry continues to prepare for the post pandemic operating environment, TMX is dedicated to building stronger, better than a return to what was normal. We are striving to better serve our clients and stakeholders and to help propel our industry forward. And true progress requires talent, motivation and collaboration. We're fortunate to have great people here at TMX. So I'd like to thank our dedicated employees in Canada and around the world for adapting to remote working and living in the environment during the COVID-nineteen pandemic. Our team's effort to meet the demands of a busy market and the increased workload that brings with it has indeed set an impressive new standard of excellence. And over the past year, we have taken significant steps forward in TMX's evolution as a public company to enhance our talent and culture. Cindy Bush, TMX's Chief Human Resource Officer joined in December and really hit the ground running, embarking on a deep dive into our workplace culture, asking the important questions and identifying opportunities to bolster employee engagement and purpose. We recently completed our 1st Equity, Diversity and Inclusion survey to gather demographic data on our workforce. And based on the survey data, an EDI Council composed of a diverse group of employees across TMX is developing our long term strategies around EDI in TMX. Today also marks the issuance of our 2nd annual ESG report. The report, which will be available on our website under Investor Relations, details the progress that we have made in our sustainability journey over the past year as we work to integrate environmental, social and governance objectives into our corporate strategy, business processes and investment decisions. This year's report again includes Sustainability Accounting Standards Board or SaaS B aligned reporting. And in 2021, we are committed to incorporating the recommendations of the Task Force on Climate Related Financial Disclosure or TCFD. And TMX is not alone in this journey. We're playing an active role in positioning Canada as a world leading marketplace for sustainable investment and finance, empowering clients to become ESG leaders in their own right through educational tools, products and services. And to that end, we just signed a new agreement with IHS to facilitate broader ESG reporting and data distribution for issuers listed on the Toronto Stock Exchange and TSX Venture Exchange. Under the terms of this initiative, TSX is endorsing the IHS market ESG reporting repository to provide benefits to both issuers who are new to ESG disclosure practices as well as those who are more advanced on their ESG disclosure journey. Now in addition to the Q1 financial results from last night, we were also very pleased to announce a 10% dividend increase from $0.70 to $0.77 per share payable on June 11, 2021 to shareholders of record at the close of business on May 28, 2021. This is the 4th increase in TMX Group's dividend in 3 years and it demonstrates our proven ability to generate increasing cash flows over time in all market conditions as well as our continued commitment to delivering long term value to our shareholders. Now in closing, I want to mention the addition of another new leader to TMX and someone many of you will get to know very soon. Last month, following an extensive and expansive search process, we were pleased to name David Arnold as TMX Group's new Chief Financial Officer effective June 1, 2021. David joins us from CIBC, where he served in various roles over his 20 years and most recently as Executive Vice President, Enterprise Programs, Technology and Operations. He has a proven track record in leading large teams and large scale initiatives. And most importantly, David brings key TMX attributes to the role, including an innovation mindset and a collaborative approach. David will join us for his first TMX Group Analyst Call following the Q2 earnings in early August. And before I turn the call over to Frank, who many of you listening this morning have gotten to know since he stepped up as Interim CFO in August 2020, I want to take this opportunity to thank him for the tremendous job he has done in leading our finance team in the interim and for his valuable contribution to the senior management team throughout this interim period and beyond. Frank's leadership has been and continues to be instrumental within the organization. And I know he will play a significant role in helping David quickly acclimate to TMX and further strengthen our team and success into the our team for success into the future. So with that, I will turn the call over to you, Frank. Thank you, John. We delivered another strong quarter in Q1 2021, reflecting the continued strength of our diversified business model with revenue growth of 14% from Q1 2020. There were revenue increases from capital formation, equity, fixed income trading and clearing as well as GSIA, partially offset by decreases in derivatives trading and clearing. Operating expenses were up 9% over Q1 2020 driven by higher employee related costs in the Q1. Our adjusted EBITDA margin increased to 61%. Diluted earnings per share grew 37%, which included an increase in deferred income tax liabilities related from a change in the UK tax rate in Q1 2020 of 7,400,000 dollars or $0.13 per basic and diluted share. Adjusted diluted earnings per share increased by 23%. Our share of net income from Box in Q1 2021 increased by approximately $4,700,000 reflecting higher Box revenue driven by 146% increase in volumes compared to the prior year. The revenue growth in capital formation was primarily driven by higher additional listing fee revenues on both TSX and TSX fee in Q1 2021 relating to both an increase in the number of financings and the total financing dollars raised. The increase on TSX reflected the 100% increase in the number of transactions billed at the maximum listing fee of $250,000 as well as a 28% increase in the number of transactions billed below the maximum fee. There was also increases in TSX Trust, sustaining listing fees and initial listing fees compared to the prior year. We continue to estimate that the increase in market capitalization at the end of December 2020 has resulted in an increase in sustaining listing fee billings of approximately $5,000,000 for 2021. In equities and fixed income trading, revenue in Q1 'twenty one increased 23% compared to the Q1 2020 driven by a 50% increase in the overall volumes of securities traded on our equities marketplaces. The impact from the higher volumes was somewhat offset by a less favorable product mix in Q1 2021 compared with Q1 2020. Trading volumes on TSXV securities were up 175% in the quarter, which has a lower capture rate as compared with a 5% increase in volumes on the Toronto Stock Exchange securities. There was also an increase in fixed income trading revenues reflecting an increased activity in swaps. Revenue from CDS was up 11% in Q1 2021, reflecting higher clearing and settlement revenue due to higher volumes, increased depository fee revenues as well as higher international revenues. Now revenue in our GSIA segment was up 7% over Q1 2020 with increases from both Trayport and our traditional data business. Revenue from Trayport was up 11% in Canadian dollars and up 9% in Sterling. The increase reflected a 5% increase in total subscribers, increased sales of additional products and higher enterprise license renewals in Q1 '21 compared with the prior year. Revenue in our traditional data business was up 3% driven by an increase in both professional and non professional subscribers, usage based quotes, benchmarks and indices as well as co location. The average number of professional market data subscriptions for TSX and TSXV products was up 3% in Q1 2021 compared with last year and MX subs were up by 2%. The higher revenue was partially offset by an favorable impact of approximately $1,400,000 from a stronger Canadian dollar relative to the U. S. Dollar over Q1 'twenty. Now, driven trading and revenues driven trading and clearing revenues declined by 7% from Q1 'twenty to Q1 'twenty one. While volumes on MX were up 2% compared to last year, there was lower revenue per contract attributable to an unfavorable product mix. In addition, there was a decrease of approximately $900,000 in revenue related to our agreement to provide transitional services to Box, which ended in June of 2020. Now operating expenses in the quarter increased by 9% compared to Q1 last year. The increase reflected higher costs related to our short term employee performance incentive plan and sales commissions of approximately $5,100,000 increased severance costs of approximately 1,200,000 higher headcount and payroll costs and increased software licenses and IT costs. The increases were somewhat offset by a decline in long term employee performance incentive plan costs, lower travel entertainment expenses, legal fees and marketing costs. Sequentially, revenue was up $32,500,000 or 15% with Q4 2020 attributable to increases in revenue across all of our operating segments. Operating expenses were up $5,900,000 or 5% from Q4 2020, reflecting increased payroll taxes of $3,800,000 increase in pension expenses of $2,900,000 higher headcount, higher short term and long term employee performance incentive costs and higher sales commissions. These increases were partially offset by lower severance costs of $2,800,000 the write off of discontinued initiatives in Q4 'twenty and lower IT costs in Q1 'twenty one. In February, we financed $250,000,000 of the pensioners at about 2% due February 2031. A portion of the proceeds from the Series F debentures was used to repay $160,000,000 of our commercial paper. We also renewed our normal course issuer bid program in February, allowing us to purchase up to 560,000 shares or approximately 1% of the common shares outstanding between March 4, 2021 March 3, 2022. In Q1 2021, we spent $28,900,000 repurchasing 226,600 of our common shares under our NCIB program. With the increase in our debt from the Series F debentures, our debt to adjusted EBITDA ratio was 1.9 times as of March 31, up from 1.8 times at the end of 2020. We also held about $381,000,000 in cash and marketable securities at the end of the quarter, which was about $260,000,000 in excess of the $165,000,000 we target to retain for regulatory and credit facility purposes. Yesterday evening, our Board approved a 10% increase in the quarterly dividend from 0 point $0.77 per common share payable on June 11 to shareholders of record of May 28, which is our 4th increase in the dividend over the past 3 years. At 41% of our adjusted EPS, this is consistent with our target payout ratio of 40% to 50%. And now, I would like to turn the call back over to Paul. Thanks, Frank. Operator, could you please outline the process for the question and answer session? Your first question comes from the line of Geoff Kwan with RBC Capital Markets. Your line is now open. You may ask your question. Hi, good morning. My first question was the $5,000,000 sales commission expense that was booked in the quarter. I'm just trying to understand which part of the business was that getting driven from just hasn't been a line item that kind of gets flagged very often around what happens in the compensation expense. I'm just trying to understand how to think about how this may play out in future quarters. Yes. Justin, this is Frank. You can take that. So the combination of both short term incentive plan costs and sales commission costs. So the primary businesses of the sales commission cost would be related to our Global Trading business, which includes Chorcan as well as our Archery Port business. Okay, thanks. And then just my other question was on the CDCC kind of monetization. Just wanted to get some insights as to why the costs have generally been kind of creeping up and the completion date seems to get pushed back? Is it something where the expected payback period or how do we think about what that payback period is? Or is it something where this is something you really need to do, just because the alternative of not doing anything is more costly? Yes, it's a great question, Jeff. The real nature of what's the challenge in terms of bringing this to the finish line and we actually have on the flip side of your question, we actually see the silver lining that we are getting closer to the finish line of the initiative. The challenge in the stage we're at right now is the completion of what I would call user acceptance testing of the program and getting ready to take it to these, to the clients for them to test themselves. And as you can imagine, one of the things that's been the most challenging through the last year under a COVID environment is to be able to do that work around user acceptance testing. We can't have our people travel. Normally, we would have our people travel to join the team in India with TCS that's doing the work to do that last leg of work. So that testing phase has been extended in terms of getting that completed. TCS is a phenomenal partner here. But as you can imagine, India is quite challenged by COVID. So there is some risk that we're managing through there. So when we look at the path to completion, this is really just a question of time. So we're not putting additional capital into the program. There's not additional material external expenses. It's around extending the timeframe, so we can complete testing and have a good program with The Street to do the proper implementation and testing for them that works with their schedule and their timing. And the cost as we build today. And again, it's just us extending really our internal resources over a larger period of time. So I see it, Jeff, more as an opportunity cost related to the go live date as opposed to really a bigger CapEx spend for the firm. Okay, great. Thank you. Your next question comes from Nick Prieb with CIBC Capital Markets. Your line is now open. You may ask your question. Good morning, Nick. Okay. Good morning. Just wanted to I was wondering if there's any additional detail I could ask you to share on the TradeSignal acquisition. Maybe just either in terms of the general materiality of the transaction value or whether this business should be expected to produce a positive earnings contribution? Just maybe some additional insight around that transaction would be helpful there. Yes, I'm happy to give you some more insight. And obviously, when we close this quarter, there'll be some more detail in there. But you should consider this strategically similar to the deal we did with VisoTech a year and a half ago in terms of acquiring a capability that we can integrate and deploy across it. And size wise, this would be smaller than the VisoTract transaction. So not material from a size standpoint to TMX. We do anticipate it will be accretive from an earnings standpoint, but again, it's not going to be materially into the size, but we do expect to be able to grow it. So TradeSignal is actually a partner we know really well already. We actually do deploy their software through to some of our clients as a preferred partner today. So we know their team really well. We're extremely excited to be able to bring them into the Trayport and TMX family. And what it will allow us to do is to take their advanced analytic capability and really deploy it across JUUL to more Trayport clients, exactly the same scale up as we did with the VisoTech AutoTrader program. And we've talked about in our M and A strategy about the potential sometimes acquiring smaller businesses, integrating them and scaling them up. The other piece that's really interesting and exciting about what Trade Single does is analytics and charting capability is not specific to the energy sector. So there will be opportunities to look for where we can use it throughout the broader TMX franchise as well and we're excited to get the opportunity to do that now that we're closing. Okay, that's helpful. And then can you tell us a bit more about the agreement you signed with a broker to use Trayport screens for refined oil products? I'm just interested to hear what that arrangement would entail and whether you consider that to be a material opportunity for Trayport? I consider to be the 1st step in a long term material opportunity. So as we've talked before, very much when you're building out new markets with Trayport, it's building blocks of adding more liquidity over time to get to that critical mass. So this is a really important piece. The type of arrangement is going to be similar to other broker arrangements that we've got with Trayport. And as you remember, we've got brokers that are partnered on gas, on power, on other products. So this is really that first foray in terms of having a material broker light up the screen with refined oil in multiple jurisdictions. That gives us the opportunity and ability to sell and deploy to get more traders, subscribers tied into that as well and start building liquidity. And we would anticipate from that beachhead, you will see both more traders and more brokers come on to interact with that liquidity. So very much as we've talked about how we build out Nodal in the U. S, it's piece by piece. This is another example of doing that. But it is a long term strategy. So we've got to build this over time. Yes, makes sense. Okay, that's good. That's it for me. Thank you. Your next question comes from Brian Bedell with Deutsche Bank. Your line is open. You may ask your question. Great. Thanks. Good morning, folks. Good morning, Brian. Good morning. Maybe just John, if I could come back to some of your comments on the retail activity. If you want to if you could spend a minute just to maybe outline how you see this different from the trends that are happening in the U. S. We are seeing somewhat of a slowdown in retail in U. S. Part of that seems to be back to work type of mindset in terms of improvements with COVID. If you can talk about maybe some of the differences that you are seeing in the structural change in retail and whether the 46% or something in the 40s percentage points of that volume you think can be maintained during the year? Yes, it's a great question. And I'll give you my perspective, which of course is my perspective and I won't be able to crystal ball what this will actually shape out to be. But some of the differences that we see north of the border with in terms of retail trade also is tied to the structural difference in our marketplace. So as you know with both TSX and TSX Venture, the Venture market as a small cap market is a high retail participation market in general. So where U. S. Saw the lift more around some of the meme stock phenomenon and push around single names in our venture market, which is 1600 plus small name companies, we've seen that lift about 175 percent in terms of that trading activity. So it is more broad based and it also helps to fuel a new issue market. So we continue to have new issues that are coming to market that I want to participate in that liquidity. So there is some self sustaining components to it. And as you indicated, as we've gotten through kind of March April, while we have seen that total activity start to normalize somewhat, it's been normalizing more on the senior market, where I think year over year we're up about 5% and that's off the big base of Q1 of 2020. We're in the Venture Exchange and in our alpha market, which is our inverted market, which also caters to retail, they continue to be quite strong. I think 80% -plus in alpha and 170 ish percent in Venture. So some of those structural pieces around investor participation are continuing. We're still seeing elevated levels of clearing volumes. And what I don't know yet is what's going to be that new normal that we get to, but we do believe it's going to be at a level that is above pre COVID retail engagement. And it goes to those pieces around more retailers with direct access, better tools, low cost of capital and higher discretionary spending for people at our home. The other piece in terms of the return to office environment you're seeing in the U. S, that will be longer in the Canadian marketplace in terms of the both the rollout of vaccines and the lightening of restrictions. So we do expect that environment to continue likely at least through the summer. Right. That's good context. And then maybe just a second question, also on activity, obviously additional listing fees were extremely strong in the Q1 due to the surge of activity. Maybe just your outlook on how that's trending, if you're almost seeing a similar type of structural theme helping that as well as we move into the next few quarters? Yes. And part of our visibility goes to the pipeline and workload of our team that actually manages that file activity. And that pipeline has not abated at all. So the teams in our capital formation groups continue to be very busy working with companies that are looking at new issues. So it's an area where it's very difficult to give a long term visibility, but in that near term visibility, we continue to see that pipeline quite strong. Yes, great. Great. Thank you so much. Your next question comes from Graham Ryding with TD Securities. Your line is open. You may ask your question. Hi, good morning. Good morning, Graham. Yes, just start on the compensation side. Can you just I think you might have mentioned in the prepared remarks, but I didn't capture at all. Like is there any seasonality here in the compensation in Q1, either just normal seasonality or perhaps elevated comp related to the strong revenue in the quarter? Yes. So Graham, this is Frank here. The seasonality aspect in Q1 would be related to the payroll taxes, up $3,800,000 quarter over quarter. So that would be decided going forward. And the other pieces, as you mentioned, the short term incentive plans, those are going to be tied to our revenue and EBIT performance. So that's something that would obviously continue as long as the revenues and EBIT perform at the same levels. Okay, understood. And the on the derivative side, just trying to get a little bit better understanding on what's driving the capture rate. So I looked at interest rate volumes in particular, those were down year over year and so were equity index futures, but then in contrast, your equity option volumes were up quite a bit year over year. Are those some of the key factors that are driving the lower capture rate when I look at things year over year, even quarter over quarter? Yes, Graham. Go ahead, Frank. Yes, you did mention the 2 big factors being the lower interest rate mix. So down year over year, those will carry higher capture rates as well as the index derivatives portion of that. So those are the 2 main areas. And then just to mention also that box was down about $900,000 in the quarter as well, given that contract expiry. But Graham, what I don't want to lose sight of in the fact there is so the biggest driver is, as Frank said, is the short term interest rate product, the Backs product is down about kind of 25% year over year in the interest rate environment we're in now. Plus Q1 of last year was a very strong quarter for those products before we had kind of the COVID cliff on rates. But there's a really good story in here because the strategy we've been pursuing over a number of years of adding new product, particularly around new single stock futures, our new 2 year fixed income future product, those have all been part of the growth side. So in historical MX terms, a turndown in the short term rate environment would just be a decline in the franchise. We're seeing a more broad product mix, so we can see lift in other parts of the franchise that are continuing to grow. And in 2021, we've also had some new exciting product launches as well that are contribute to future growth. So our launch of, as I said, the 2 year product earlier in this year, that one's trading over 10,000 contracts a day now. We've launched a dividend futures product. And very recently now we've launched ETF options on Bitcoin and ether. So that was a new development in our ETF franchise and now we will have options on those that will contribute to future growth that you'll see in quarters going forward. Okay, understood. And then my last question would just be the refined oil product that you've added to your Trayport screen, it sounds like you're partnering with 1 dealer in particular. Is that a global rollout? And then secondly, is it related at all to your push or your partnership into Nodal in the U. S? So it is a global rollout. So it is multi region. It's a global inter broker dealer that we are working with. I do not suspect it will be the last one. We anticipate getting other brokers signed up to be complementary with that as we also build the trader subscription around that as well. It is complementary to what we're doing with Nodal in the U. S. Because it is adding more product to Trayport screen. Nodal is much I mean their business is really on gas and power. They're not in active and material way in refined oil. So it's complementary and continue to build out more demand for the Trayport screen in North America. So that's the way I would consider it. Okay. That's helpful. Thank you. Your next question comes from Jaime Goin with National Bank Financial. Your line is open. You may ask your question. Yes. Hey, good morning. Good morning, Jaeme. Hi, May. First question is just on the trust services line, obviously a nice little bump there in the quarter. Can you break down exactly what was driving that in terms of is that just the higher activity in capital formation in general that's helping to support that and I guess that would be sustainable through the next quarter? And then a follow-up on that after. Yes, there's really 2 components to it. And then I'll ask Paul to jump in here if I don't get all of it. But remember when we talked about trust last year when activity levels were lower, but at the same time we were building a much larger client base. So we were continuing to add new clients to the trust platform. And on the expectation when activity started to resume, we would see that lift. So you're certainly seeing that lift in activity in terms of trust and transfer agent activity and now across a larger client base than we would have had a year or 2 years ago. But it's also complemented with the work we are now doing around our ability to support dealers. So we've got the dealer capability in terms of supporting them with the Trust franchise as well. So it adds a new element of growth that wasn't there a year ago. Paul, anything you want to add to that? No, those are the components, John. Okay, great. And then the follow-up is just related to the AST acquisition. You provided some high level revenue and EBITDA numbers at the time of the acquisition. Would it be fair to say that those numbers have also increased just in line with the increased activity that we're seeing here? Or is there anything you can share in terms of an update around the contribution from ASP when it closes? Not at this stage, Jamie. It's something that we will update on when we get to closing. Okay, great. Second question then is around capture rates in the equities and FI trading buckets, obviously quite a bit lower this quarter as you're seeing pretty good trading volumes on Venture and Alpha. I guess my assumption here is that capture rates are going to continue to be somewhat depressed as you're still seeing pretty strong volumes there. Is there anything else in that number this quarter that would maybe want to direct me otherwise? Hey, Jamie. It's Frank here. I think you captured the main elements there, the rise in TSX Venture being at a lower capture rate to TSX. There's another portion in there in Alpha itself given the high retail volume, especially with securities less than $1 they do carry a higher credit. So there's also an intra product mix within Alpha as well that's contributed to the overall lower cap rates as you indicated. Okay, great. And last one is just in the GSIA bucket and looking at subscriptions, pretty decent growth in both TMX or TSX and the MX. Do you think that's primarily related to just increased activity on the retail side or is there something more sustainable there in terms of the GSIA revenues? What actually those subscription growth are generally across the board. So there is certainly an element that's driven by that driving retail activity and more eyeballs on that activity. But you do see that you're seeing lift across the market depth products as well. You're seeing the lift across the MX subscriptions, which tend to be more professionally oriented as well. So it is more broad based. And one thing to add there, John, also is on our usage based quotes, given again the high retail activity, that's something that you're seeing as well as not reflected in the underlying subscriber growth numbers, Jamie. All right. There are no further questions at this time. I will now hand the call back to Paul Malcolmson. Well, thanks, operator. Just a reminder that our annual and special meeting of shareholders will take place in a virtual format at 2 o'clock this afternoon. We invite all of you to join us through the Lumi webcast. And thank you everyone for listening today. If you have any further Thank you. And that concludes today's conference. Thank you all for joining. You may now disconnect.