We're on. We're live. We get started here. For important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. Note that the taking of photographs and the use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. All right, we're into the home stretch here on day three, into the afternoon of our Morgan Stanley Financials Conference. Welcome, I'm Michael Cyprys, Morgan Stanley's brokers, asset managers, and exchanges analyst. We're excited to have with us here Brian Schell, Chief Financial Officer and Treasurer of the Chicago Board of Options Exchange, or Cboe, as it's known. Cboe is a leading provider of market infrastructure and tradable products, delivering trading, clearing, and investment solutions to market participants, increasingly all around the world. Brian, thank you so much for joining us here today.
Thank you for including us.
Great. Why don't we kick off with the macro? We've seen some record volume days this year, particularly during the banking turmoil. As we approach potentially an inflection point on getting more clarity, such as this afternoon, on rates, although there'll be probably continued debates over the next couple of months, just around where are we gonna see peak terminal rates and broadly the path of the overall macro environment. Just how do you anticipate Cboe's volumes can continue to grow from here, given this macro setup? Which products do you think we might be able to see any sort of usage begin to shift?
Yeah. I think that's a terrific question, and I think the focus there, as far as that growth, is obviously primarily around the options suite, right? Taking a step back and looking at all of the asset classes, you know, many of us have seen the various equity, large equity geographies, the U.S., Canada, you know, call it North America, Europe, down 10%-15% relative to prior year, given the turmoil and what we've seen and the invasion, Russian invasion in Ukraine last year and some of the things that we're creating there. The other thing that we're seeing up, really, as you've mentioned, is the options complex, primarily index, as well as FX to some extent, right?
Given the different central bank moves and probably competing priorities around rates and around growth and what they see in their economies. I think what we've seen as far as, you know, the activity and where we're going, is the shifting and the momentum is with the, I'll call it, the debt ceiling and other, we'll call it, more unknown events. Maybe getting a little bit more clarity, maybe people coming around, more of a consensus on maybe where the Fed terminal rates are going to be. I think you're seeing a decline in the level of the VIX Index, right? Because that 30 for...
30-day forward look, and you've seen that from over the kind of a high over the last 12 months of that 33-35 level, down to more of a 13-15 level that we're seeing more recently. As you've seen that decline, you're seeing increased shifting to more VIX Index options as it has become a very effective tool, right? The, the comprehensiveness of the suite of products Cboe offers around risk management tools, particularly around the S&P 500 complex, is very important. You're seeing that show up in the incremental VIX suite. You're continuing to see the incremental volume in SPX, which I know we'll spend some more time talking about.
Those are some of the primary shifts we're certainly seeing, at least immediately, and would expect to see kind of that as we go forward for a lot of, I'll call it, you know, kind of product-unique dynamics.
I want to dive in more specifically into the index option side. This has continued to demonstrate robust growth here into 2023, even as volatility generally lower year-on-year in the equity markets, which is an interesting sort of surprise, still to see that growth year-on-year. Under the hood, maybe you could talk about what's driving the strength and what gives you confidence and the sustainability of growth specifically in the index options?
The primary response is, I'll call it, the diversity of the volume, right? We have a diversity of trading strategies and a diversity of the actual clients that are using the product at the end of the day, right? When we look at We've seen an incredibly level of consistent pattern of SPX usage, right? We've seen a consistency of roughly a third of the clients using, you know, put call spreads. We've seen the ratio over the last nine months of, call it, a 0.96 ratio to 1.1 over the last nine months, right? A pretty tight range. We haven't seen a lot of variability, even though, as you mentioned, a significant change in the level of volatility across that market.
We see that kind of consistency, even though we've seen different levels of it. As we talk about the various strategies, what are we seeing that makes us feel confident about that, right? We see a consistent strategy of a, you know, a defined outcome, right? We're seeing a lot of people who are basically buying the short-term puts or calls at the end of the day, that have a defined outcome with a small premium that they're paid. They know what their loss is going to be, if there's a loss, and then they know what their potential upside is. There's a higher delta there as far as the upside goes. We're seeing, as I mentioned earlier, a steady stream of consistency around harvesting yield off of selling spreads at the end of the day, right?
We're seeing plenty of that. We're seeing the directional ability to express a directional point of view around buying a single-leg put or call. Again, same-day expiration, small premium, but allows them to look to a specific time frame, a specific event for the utility. That's, I'll call it, a diversity of, I'll call it, usage given there's no concentration of strikes, there's no concentration of one particular strategy, and it's remained fairly consistent across both different levels of the S&P 500, as well as different levels of volatility.
There's a level of people get it, they're finding flexibility in the tool, and it's not similar to, say, a meme stock, you know, kind of, herd mentality that we may have seen in the past, maybe the, as akin to some of the equity markets that we've seen maybe over prior periods. That's what gives us some level of confidence about the sustainability and where we are. Then obviously, the client diversity, which we can talk about, was, we're still seeing plenty of that as well.
Speaking of client diversity, I guess, which customer set would you say is driving most of the growth? I know we hear it's from these retail platforms such as Interactive Brokers and others, but maybe you could just help flush that out a little bit.
We could probably spend the rest of the time talking about what we're seeing around the ecosystem, around these customers, and this, the virtuous cycle and the ecosystem that continues to build overall. Just a little bit of history on this, right? As we introduce the incremental expiration based on customer feedback, based on institutional feedback, while we could really use that incremental utility of filling out the entire week, and it was more than just, yeah, maybe you're getting this incremental volume we may have seen on a Monday, Wednesday, Friday, but yeah, you can expect that on a Tuesday, Thursday. It actually is above that, right? Because it's even exponential utility of what we're seeing, right? When we introduced this, we saw a pretty significant pickup in the retail brokerage platforms.
Again, behind a lot of these retail brokerage platforms are professional traders. Again, many of these firms are obviously know their client and obviously make sure they're right qualified to be able to invest in this. So as we look at who's doing what's the mix? What we're seeing is that roughly 51% market makers, you would expect roughly half, obviously, to be on the other side of that, to be able to make the spreads and make that happen. You're seeing the firm side, we call it 7%, we call it the banks, right? As far as facilitating those trades. Then you're seeing the customer side, that remaining, call it 42%, that to your point, 90% of that is the retail brokerage platforms.
That's really stepped up. We're seeing that strong participation, again, with a known risk parameter, right? I think maybe we looked at the numbers, and our best estimate is roughly 5% are actually selling, right? The options where they're kind of exposed. A lot of times one would think that that's over a covered position as we look through that. This is something that we're seeing kind of across the board, and it's really kind of doing a nice job of feeding itself as far as what we're seeing. What has been the surprise or what we continue to see this grow and that uptake to your question about the clients, is that as this ecosystem has continued to build in the uptake of retail, we were a part of a panel.
Cboe was part of a panel last week, was part of a market maker and part of a retail firm. Another part that we're seeing incremental growth in the ecosystem is a market maker, said that they were because of the tight spreads and the improved liquidity, increasing liquidity, is they were taking some of their hedging and what they were doing, some of their volume out of E-minis, and they were putting it back in SPX. He said they found that as a more economical way to hedge their risks in their market-making activity, which again, continues to increase the overall ecosystem, right? We're also seeing more and more folks coming in as they see this incremental volume, institutional flow starting to come in.
We see people wanting to purchase Open-Close Data to start modeling their entry into it. We're seeing some clients that are more traditionally just vol trading in the VIX space, incrementally add some SPX because they see the realized spread versus the implied as far as the volatility goes. We're seeing this ecosystem grow kind of across the board. Again, oddly enough, initially suggested by the institution community, really picked up by the retail brokerage and now finishing it off with the rest of the ecosystem, with everyone else in the space.
Let's dive into that a little bit more. I think that's really important. When we think about the institutional client usage today When we're talking about the SPX index options here, institutional usage or 0DTE options, I think it's around 15%, but for the non-0DTE, it's more like 30. Maybe talk about how you are engaging with these institutional investors. I think you mentioned something about data here. Maybe kind of layer that in. You know, what are you providing? What's the timeframe you think that it takes for them to do the back testing? When do you think we might be able to see some uptake accelerate? What sort of green sheets are you looking for, and sort of what are you hearing from customers?
Yeah, what we're seeing is that, again, they're looking at that same sustainability at the end of the day. Not just the institutions, but also some of the market makers. We've actually seen, and a point I didn't make earlier, is we're seeing some of the folks who are maybe more traditional equity, taking a look at options, given the liquidity and the growth in the markets and seeing a potential opportunity for their own firms to deploy capital efficiently. From the institutional side, what they're seeing is they're seeing the base case or the business case for the flexibility to be able to more precisely dial in protection, say, through today's Fed event, for example.
Whereas before, the introduction of the weekly expiration on every single day of the week, they may not have been able to do it. They may not have been able to do it. Same premium level to be able to do it and say, "I really just want to make sure I understand what's going on. I want to put my risk on for the day of the Fed announcements, where they're going. I have a point of view." We're seeing more and more of that engagement as an incremental tool, either from a pure hedging or from, like I said, a directional point of view of this is what we think we're going to be able to do to create some incremental premium at the end of the day. We're seeing more of that.
We're seeing more demand, say, for a 5th week versus the first 4, and saying, Well, then let's take a look at that. How much of that can we leverage from the institutional market that wants more utility from this incredibly deep pool of liquidity and risk management tools, that, again, continues to build upon itself?
Sticking with the index options, let's come back to retail. You guys are waiting for FINRA approval on the XSP options to be written on by. Maybe you could just give us some context around, you know, how are you thinking about that opportunity set, why you're taking those steps, and how are you thinking about the overall path forward from here?
Yeah, we're quite excited about this, and this is just a market structural improvement, we'll call it, because our broader approach, which we embarked on a couple of years ago, was: How do we improve access at the end of the day, right? Improving access both through trading hours, so we're expanding global trading hours. How to improve access to Now, it's the foreign jurisdictions to be able to say they're here? How do we do it through contract size, so we make it easier to digest? As we look at expanding that, increasing that access, again, and the last part of that being the number of expirations.
On that notional size, we knew that this can be a terrific product in a smaller notional size for that more traditional retail platform user that can utilize it, right? Because it's a tenth of the size. The problem was with the XSP contract, and a lot of them have an underlying SPDR position, for example, right? Is they want to maybe overwrite that. Maybe they want to have some yield harvesting on it with a covered option. The problem was the margin treatment that the firm, because of the OCC, said, "Oh, those are two different naked positions. Those do not offset." In reality, they obviously do. The SEC approved that treatment. Now we're waiting for FINRA to be able to approve that treatment. We're going to see...
The client is going to see incredible margin compression and, again, capacity that allows them to basically leverage what they already have in their account. This is something working on 12, 18 months because we knew the utility of that margin treatment was important and allows us, yet again, an incremental educational tool around the benefit of a cash-settled option, the margin treatment, and the tax benefit, we thought really make this a very nice tool to utilize to be able to change their profitability profile, with the use of this option.
Any sense on timing for the approval? Could that be a 2023 event, or is that 2024?
We're very hopeful it's 2023.
Okay.
We're very hopeful it's shorter than longer, for sure.
Okay.
It's hard to predict regulatory approvals on a couple of things that we've had in the hopper, but this one we definitely expect in 2023.
Just looking through to once you ultimately assuming you get the approval, what's the go-to-market strategy from that, just in terms of is there any tech build required on the part of platforms? How do you sort of enable it, and how can you help sort of make it more seamless and easy for that end customer to be, one, aware that this is available, and to then actually execute on that?
Yeah. This will be a, I'll call it, joint, and each brokerage firm will be slightly different. Most of the retail brokerage platforms their systems allow for cash-settled options. There's still a couple of larger ones that do not, but, you know, we've been told that they're working towards that, in, say, call it the next 12, 24 months, whatever their time frames are, not for me to comment on, but they've told that they're interested, they've seen the utility that these options can have. A lot of times it's more of a back office and the overall margin treatment, and as far as their risk controls that they put on the various accounts based on, you know, their risk designation.
It should be, for many of these firms, pretty quick to be able to implement. Our go-to-market approach is, I'll call it, joint marketing. Make sure they understand the benefits of index options, cash-settled options, again, the tax benefit and the lack of having to manage the underlying asset and be worried about it being sold out from under you, because you may not have managed that, closed out that position, with a normal non-cash settled option, and therefore, also potentially creating another adverse tax consequence by, say, your underlying having to be sold out. Like I said, marketing dollars with that in advance, working in conjunction with the retail brokerage platforms. We're very excited about that rollout.
Great. Maybe just more broadly on product development, maybe just talk to the overall process at your Cboe Labs around product development. You know, how do you sort of approach it, and what else is in the pipeline?
Yeah. Again, long history of innovation with first listed, first index, first FLEX LEAPS. There's a long history of that, and then obviously, with most recently with the contracts expiring every day. Labs was meant to try to harness that innovation more centrally, a little bit more organized and focused, with primarily derivatives focus on an innovation. They do touch some other items. We did help support, and you may have seen the press release on secured financing transactions that we're doing in our Cboe Clear Europe. But the focus here has been on derivatives and really that complex suite, right? They recently issued the One Day VIX Index that came out. One of the things in their pipeline is...
How they're working on developing what becomes the tradable product? Right now, it's just an index, it's not tradable. How do you develop and how do you create a tradable product based on that one-day VIX, right? That's a big part of their mandate and what they're doing there. Developing Dispersion Index, right, is a big part of taking something that exists, call it OTC, and bringing that into the futures market, and being able to help clients from a capital standpoint. Variance Futures, right? Moving that bilateral OTC trade potentially on exchange. Again, helping out with capital treatment and having those returns and better being able to manage some of those things. Finally, as part of the more R&D, but anymore, not as much, it's been around tokenization, working with digital asset.
This was, I think, mentioned in a couple of other press reports, looking at how do we make capital markets even more efficient, kind of leaning into a little bit of that digital asset. They've got a lot in their pipeline. Then I guess I'll conclude with other pipeline items for that team is, you know, options on our, on our various futures products, including VIX futures and the iBoxx products that we have.
Great. Why don't we shift gears and talk about data and access solutions. You recently reiterated your 7%-10% organic growth guide for the DNA part of the business for 2023. First quarter, though, was a little bit slower, you pointed to some upcoming initiatives that should help reaccelerate growth into the back half of the year. Maybe you could just walk through some of those initiatives. Which ones you think are going to be most additive to really drive that reacceleration, and what sort of traction are you seeing so far?
Yep. I would say as far as that broader plan for second half and then into 2024 is, we've kind of talked about the launch of the Cboe One products. Started out with U.S. equities markets. We added Canada, looking to add options. We see that having real traction on a go-forward basis. At some point when that, you know, kind of looking for those approvals and client uptake. That's one element that we see helping to build some of the growth. The recent migration in Australia of the technology trading platform. A lot of times when we see a technology platform, we will see an accompanying incremental request for market data and access based on the new technology. We are looking. That was completed in March.
We have scheduled for Japan for November. Again, that's probably more of a 2024 as far as the impact we'll see in the DNA business. We see continued cloud momentum as far as what we're seeing there, as far as being able to hook in, capturing the cloud data. The other that we see is... And this is a little bit more of looking specifically into the pipeline as far as looking at clients when we see contracts coming on board, is our continued index work around, creating indices for various asset managers, participating in some of the AUM as a piece of that, as far as the licensing fee goes. We're seeing distribution as a service as part of that, and seeing incremental benefit coming online there.
The risk management analytics, which is kind of part of one of the acquisitions we made early on in 2020, that essentially is looking to really deploy that analytics framework that we have, you know, helping to value, understand your pre-trade, post-trade kind of risk position, and we're seeing global pickup of that product overall. You mix in a little bit of price, you have a projection for the second half that we think gets us to that targeted range that we guided to earlier in the year.
Any sort of risk to the upside or downside around that, or how are you feeling about that?
No, I mean, that's something that it was. This was something I should have been clear. You know, mea culpa here is that this is actually perfectly consistent with our plan. I probably should have just given everybody a heads-up, "Hey, the first half is going to be a little bit lighter." This is all very much right with what we thought things were going to happen as far as the growth was going to occur, was poor second half loaded, and it was just one of those messages that I should have addressed prior to the quarter. There's still feeling confidence from the team that we're going to hit that guidance level.
The softness there, at least to the street perceptions, was not a surprise to you?
Correct.
Okay, interesting.
Which is shame on me. I should have done a better job of setting that expectation. At the end of the day, we knew that's why we needed to make sure that the street, and you knew that we're good. This is what we're still planning for the second half of the year.
Fair enough. Maybe just more longer term, what do you envision for data and access solutions in terms of, you know, overall growth? Where do you see the biggest opportunities? The medium-term targets would seem to suggest that you believe you're under-penetrated, which some would view as maybe a surprise for largely mature end markets...
Mm-hmm.
in cash, equities, and derivatives. Just curious how you're thinking about that.
Yep. That's one point of view. The way we think about it is, the most valuable data is the most unique data, and it can be the most usable as far as helping them trade efficiently. We know that some of the most valuable data we have is that U.S. data, particularly around proprietary products. We still see that as a huge driver of future growth at the end of the day, right? There's this new thing with the Open-Close Data, which we just did off of SPX. That's a brand-new revenue stream that people hadn't even thought of last year at the end of the day, right? We looked at it, like, people want to understand. They want to understand and model it.
Here's a separate stream of data that now can be purchased to just look at that as far as helping them model, understand the exposure, how it works with, you know, 0DTE. As we think about that still being the most valuable, we still believe the most valuable part and where the growth is going to come from is that U.S. data that is going to be requested not just domestically, but then internationally as well. Call it, you know, the non-domestic entities, right? We've talked about briefly that we see a lot of retail brokers platforms going into a lot of the foreign jurisdictions that we actually entered into not too long ago, right?
We're seeing, Australia, Japan, Canada, Hong Kong, and based on our conversations with a lot of those retail brokers platforms, we know they're expanding there, not necessarily to create growth of those domestic products, but access to the U.S. products. We believe that non-domestic access to that data, to that access, to those products, we think can be very, very powerful. We still think that has a lot of legs and a lot of momentum on a go-forward basis.
That's more on the derivative side than the.
That's on the more on the derivative side, correct?
Okay, all right. Why don't we go around the world? Let's start with Europe, just given the expanding footprint that you have at Cboe these days, although Europe, you've been in for some time with Bats. European derivatives, that's new for you guys. Activity there has more than doubled year-on-year in the first quarter. You're expecting to launch single stock options on European companies in November. What's your long-term aspirations for the European derivatives market? How competitive is that, and what edge would you say you have versus some of the local peers?
Yeah, it's definitely a competitive market, right? There's definitely some entrenched. There's some terrific products there with the exchanges they have today. Our goal is actually not to take share from them, so to speak, is to actually grow the pie for that community. It's really more of what our offering is, not so much as a replica of a similar, you know, index that closely replicates the exposure. It's more about a market structure enhancement around I call it more screen-based liquidity versus call it upstairs, and that you can't necessarily access. It's screen-based liquidity and being able to trade similar to the U.S., and the other one is being able to offer a clearing solution that is centralized that gives you a Pan-European approach.
It's really those two elements are the key theme behind offering, the indices as well as single stock options.
Maybe moving on to APAC. In March of this year, you completed the tech migration of Cboe Australia. You alluded to that earlier. You launched Cboe BIDS in Australia. What's the opportunity set ahead in Australia and elsewhere within APAC?
We're excited about Australia, because we've actually seen market share growth even before the migration. Now we're continuing to see that migration, which is somewhat unusual for, well, except unless you're, I guess, Cboe, and that sounds a bit cocky. We've seen that with this technology team, to be able to just like, assume a technology migration is going to happen, but we've done it every single time, and they delivered exactly what they said they were going to deliver, when they said they were going to deliver it, without much of a blip, if any, at all. We're seeing incremental growth in the data side.
We're seeing incremental market share, we're very excited about the incremental, I'll call it data execution consulting, that we're bringing to that market, saying, "Here's why this venue, you can do better on your execution costs," and looking at the pure data as far as their own trading data, and like I said, helping improve where they're going and the analysis of what they see. I think there's positive regulatory tailwinds of encouraging more and more competition in the Australian market.
How do you think about the longer-term market share opportunity there? Would you envision, and maybe this is a question across the world, too, but would you envision taking your market share that you have in the U.S. and cash equities and options and seeing that you can get to that overseas?
I think there's definitely a possibility, right? I think as we continue to potentially grow our listings franchise, right, across the board, I'm not saying that that's immediate, but as you know, with listings, when you have a listings, you tend to attract. Obviously, you can get options volume, you tend to attract a little bit more volume around the listings franchise itself. I think, you know, we talked about the incremental data and the approach. It's the same thing going on in Japan as far as we have the technology migration coming up. I think you have an even more, I'll call it regulatory, tailwind, as far as encouraging competition, Best X. And the regulatory community there has been very supportive of continuing to facilitate competition to improve overall market dynamics.
As you know, and the history and where we come from, we embrace that competition, and we think we do well, and so we're continuing to see that growing. Same thing for Canada, is that with that network effect of adding BIDS, adding market structure, adding incremental listings, adding all of those elements, we think continues to help drive market share broadly across the board.
Well, you addressed my next question on Canada. Why don't we move on to expenses? You're currently guiding to expense growth of 19% at the midpoint for this year. What are some of the key investment initiatives you guys are focused on that's driving that robust expense growth?
Yeah. One of them is, unfortunately, is outside of our core, is has been with CAT. CAT has been a big part, and as a little bit smaller exchange relative to some of our peers, as far as the actual PNL, it's becoming a bigger percentage of our overall growth rate. We're hoping that diminishes over time as far as the actual growth rate, as that gets to call it steady state.
CAT being the Consolidated-
The consolidated, yes.
Audit trail.
Exactly. Thank you for that. That being a, kind of an unusual one we called out. As far as the overall investments, right, we're ramping up our marketing, some of which I talked about with XSP, with our rebranding exercise. We have a little bit of celebration in there as far as the 50th anniversary and really leaning into that, trying to introduce Cboe to some of the other jurisdictions that may not be as familiar with, particularly with the launch of the index products, XSP and the joint marketing that we're seeing around there. We're seeing incremental growth in some of our sales force around DNA and derivatives. Finally, I talked about listings a little bit, right?
You have to do a little bit of investing with some folks to get that up and going, and then some of the R&D efforts that we talked about. Again, over the next one, two, three years, we expect to see that revenue starting to chunk in, similar to what we did when we started in 2021, seeing that revenue growth starting to hit last year and this year.
How do you think about the pace of expense growth, that 19% expense growth? How do you see that trending as you look out over the next couple of years? Is a double-digit expense growth, you know, in the cards, possible, viable for 2024?
We see the growth rate going down at the end of the day, right? We expect to see, you know, we've had some high conviction initiatives that we wanted to engage in. We felt very strongly about getting them started and getting some traction and getting that going. We feel like we've made terrific progress, and we expect to see the rate of that growth to decline going into 2024.
What is the scope for margin expansion in the coming years? Is that something we could see in 2024?
That is something that we would be targeting, would be expansion in 2024.
That's bold.
At the end of the day, right? If the high conviction expense targets, you know, and what we're doing and around the revenue growth. If we can maintain a similar level of revenue growth, and if we can actually curtail the growth rate of the expenses. Again, I'm going kind of by math definition.
Sure.
is that our goal would be to have margin expansion. You've seen that, right? We've been very clear about our desire to want to, you know, invest. We want to grow. We're going to sacrifice a little bit of margin along the last couple of years, but ultimately, then we need to turn that into margin expansion. Taking a look at it, we'll give that assessment, we'll provide that guidance, when appropriate. At the end of the day, if that expense growth rate diminishes and we maintain that revenue growth rate, we would expect to see margin expansion.
Great. Maybe we shift and talk about M&A. A little bit of time left here. You've done a range of acquisitions over the last couple of years. Maybe just give us a sense of, is there anything outstanding left for you guys to do, and how you're feeling about the integration, and digesting what you have done so far?
We'll take this in reverse order. I think on the integration side, right, that's why we do M&A, is that we're just not a portfolio organization, holding company. I think what we look at is if we're gonna do this, it's we're going to integrate not only the matching engine, which is critical to the front end, the revenue, but that allows us then to get the global network effect of being able to link in BIDS. Global clients understanding that if I trade this, I understand how the system works, subject to the various regulations in Australia, as is in Canada, as is in the U.S., as it is, and then Japan eventually.
Also then with the BIDS and the efficiency it gives us, supporting the network across the globe obviously shows up in the margins at the end of the day. You go through then the back office, right? Whether it be the GL, the Workday, the payroll systems, all of those things also then have a little bit of a tail that we would expect to be fully completed here by the end of this year. As far as the M&A front, we're always going to look at something or anything that's going to continue to add shareholder value, that we think that's within our core, where we compete in an open market, that we can compete in, and basically, the asset classes that we're in, that make sense, right?
Around that spot cash, the derivatives and the DNA that makes sense, that we continue to drive the growth of the business.
Transformative M&A, is that in the cards anytime soon?
You know.
We saw some others this week.
We did see some others this week, and, hey, look, you know, we don't need to go out and do a transformative M&A. We like the path that we're going on. I can't say that that's never gonna happen in the future, but basically right now, we're happy with the organic growth and executing on what we've done.
Maybe in the last 40 seconds we have left, buybacks. You guys were a bit more active in the first quarter. Can we expect that that could persist into the rest of this year? How are you feeling on.
Yeah. I would say that what we've always done is that share buybacks have always been an opportunistic approach for us, is that, you know, you can look at our trading metrics relative to peers based on expected cash flows, the belief of the sustainability around what we're doing and everything else there. Our capital priorities have not changed. We will continue to buy back shares opportunistically, looking to always grow our dividend annually and make sure that we fund our organic activities.
Great. Well, I'll have to leave it there. Thank you very much, Brian.
Thank you.