All right. We'll go ahead and get started. Good morning, ladies and It's my pleasure to welcome you to the 2018 Annual Meeting of Shareholders of CME Group, and I call this meeting to order. I'm Terry Duffy. I'm the Chairman and Chief Executive Officer of CME Group and I will be presiding at this meeting.
You notice a little small record today, it's just Kathleen and I. Well, that's also in the audience are members of the CME Group's Board of Directors and management team and Kathleen and I will conduct the business of the company. Our representatives, Mertz and Young, our independent registered public accounting firm is also present at the meeting and will be available to answer your questions regarding their representation as part of proposal number 2. A representative of Broadridge Financial Solutions has been appointed to act as our independent Inspector of Election and is located immediately outside of this room. One of the things that we normally do is meet with shareholders throughout the year.
And so I didn't want to do a presentation today. I thought we just conduct a normal business that we have to do formally and then I'll be happy to take any of the questions that you have for myself, the management team or my Board. That being said, I'm going to turn it over to Kathleen Cronin, and she will present. Kathleen?
Thank you, Terry. All shareholders of record at the close of business on March 12, 2018 are entitled to vote at this meeting. An affidavit has been provided by the Inspector of Election attesting to the fact that notice of the meeting, the proxy statement and the CME Group Annual Report were furnished to all shareholders of record beginning on March 20. A list of registered shareholders
entitled to vote at the meeting has been available at our offices for the past 10 days and is available for examination during the meeting from the Inspector of Election. I have been advised that
a quorum is present for all proposals
either in person or by proxy with the exception of the election
of the Class B-1 directors and the Class B-1 nominating committee. The meeting is duly constituted with the other proposals and the business of the meeting may proceed.
On the basis of the secretary's report, I declare that this meeting is duly convened with the exception of the election of the Class B-1 directors and the Class B-1 nominating committee. The proposal for the Class B-1 shareholders is adjourned and will reconvene on May 23 at 2:30 pm Central Time at 20 South Wacker Drive. The polls for voting on all matters are hereby open at this time. It is now 10:10 am. If you have previously voted, there is no need to vote today.
If you still need to vote, please raise your hands and ballots will be provided to you. Anybody that needs a ballot, we'll be happy to get you a ballot. Okay. No ballots? The polls will close after all the proposals have been presented and discussed.
All votes submitted today during the meeting will be subject to final verification by the Inspector of an election. The next order of business is a description of the matters to be voted on at today's meeting. Kathleen, please present those matters now.
At today's annual meeting, there are 3 management sponsored proposals. All proposals are described in more detail in our proxy statement, copies of which may be obtained from the Inspector of Election. The first item is the election of 14 Equity Directors. The following persons have been nominated as Equity Directors of the company: Terrence Duffy, Timothy Bitzberger, Charles Carey, Dennis Jacathian, Anna Dutra, Martin Goetzmann, Larry Gerdes, Daniel Glickman, Deborah Lucas, Alex Pollock, Terry Savage, Bill Shepherd, Howard Siegel and Dennis Uskine. The second item is the ratification of the appointment of Ernst and Young as our independent registered public accounting firm for 2018.
The 3rd item is the approval of an advisory vote on the compensation of our named executive officers. Item 4 is the election of 2 Class B2 directors and 1 Class B3 directors. The nominees for the Class B2 and B3 directors are described in the proxy statement. Item 5 is the election of 5 members to each of the B2 and Class B3 nominating committees and information on these nominees is also contained in our proxy statement. The Board of Directors has recommended shareholders vote for items 1, 2 and 3 and no recommendations were made by the board in connection with items 4 or
5. This concludes the introduction of the proposals to be presented at the meeting. The floor is now open for questions or comments from shareholders relating to the proposals being voted on at today's meeting. As a reminder, a separate discussion period has been scheduled later in the proceedings for general matters relating to the company. Please limit your questions to a couple of minutes or less.
If you wish to speak, please raise your hand, wait to be recognized. Once recognized, please identify yourself stating your name indicating whether you are a shareholder of record or a proxy holder in the proposal you would like to discuss. So I will be happy to take any questions as it relates to any of the proposals that were outlined by our counsel. Okay. No questions on the proposals.
Okay. We will now proceed with the next item of business, Kathleen. That's still me. If you have not that's still me. If you have not returned your ballot, raise your hand and someone will collect it for you.
As there appears to be no more votes outstanding, I hereby declare the polls to be closed at 10:12 a. M. Now I'd like to ask Kathleen to present a preliminary unaudited report of the Inspector of Election. Kathleen?
The Inspector of Election has tabulated the preliminary voting results relating to the proposals presented, which remain subject to final verification. In accordance with SEC rules, we will file a report containing the final tabulation with the SEC within 4 business days. The preliminary results show that Proposals 1 through 3 were approved as recommended by the company. In the election of 2 Class B2 directors, Ronald Panckow and David Westcott have been elected. And the election of 1 Class B3 Director, Elizabeth Cook, has been elected.
In addition, the results of the election of 5 members to serve on the B2 and B3 nominating committees will be distributed to our members as soon as possible following the receipt of the audited Inspector of Election Report. As a reminder, the election of the Class B-1 and directors and the Class B-1 Nominating Committee was adjourned to May 23.
The report of the corporate secretary and the preliminary voting results is accepted and that completes the formal business of the shareholder meetings. I hereby declare the 20 18 Annual Shareholders Meeting adjourned as of 10:14 a. M. The floor is now open for comments from shareholders relating to general business of the company. And I'm happy to take any questions that any shareholders would like to ask about the general business of the company.
Well, the unders are going to win on this one. Anybody have any questions? Yes, ma'am.
Thank you. Good morning. Could you touch on the progress being made in cybersecurity, global market impact and gender equality? Thank you.
On cybersecurity, you can imagine it's a very sensitive subject, which we don't broadcast a lot of the things that we are doing in order to protect the systems that we have. I will tell you that the management and the Board has authorized a significant amount of shareholder monies related to this to protect the integrity of our marketplace and the users thereof. Gil Vega, as you may or may not know, has been hired by Kevin Cometer to head up our cybersecurity. He has a government background in cyber. He has done an excellent job hardening the systems of the CME Group and and it's never going to go away.
So we are keenly aware of that and and it's never going to go away. So we are keenly aware of that. And at the same time, we there's a couple of things that I get really focused on. Obviously, risk is something that I'm very focused on. Cyber is another issue I'm focused on because they all lead to the credibility of this company.
If I don't have credibility, I don't have you all sitting in the audience. So take it very seriously, Matt. So thank you for that question. The other one, gender equality, I think is what you also talked about. So first of all, we are, I believe, a very progressive institution.
We're an old institution, but a progressive institution. We're the 1st exchange in the United States to go public in 2,002. I was proud to lead that IPO with my fellow colleagues. And I think we've come a long way since 2,002. If you look at my management team just in general, it's pretty much about 40%, 45% women.
And so that's the way and they're in high level positions, up and down the management team from my Chief Operating Officer, Chief Commercial Officer, my General Counsel and my human resources. So those are significant roles in this organization. So we take that very seriously. We have a very young workforce here at CME Group. I think our average age of Hillis here is probably less than 44, and it's a very diverse workforce in general.
So that's something I'm very and it's a very diverse workforce in general. So that's something I'm very proud of. I pay attention to that. Secretary Glickman, who's a member of our Board, who's not here today, is very passionate about diversity and not at the Board level, but reminds me of that at the staff level. So Brian Durkin and myself and the rest of the management team very focused on equality for all, including male, female, black, white, it doesn't matter.
We want to be very focused on making sure we have a good diverse population of people here. And I think you asked one other question. The global growth strategy has been amazing. You look at CME, our revenue, I think John, where's John at? I think is 50% coming from outside the United States last quarter.
About 25% of our volume comes from outside the U. S, about a third of our revenue. A third of our revenue is coming from outside the United States compared to several years ago, that was nowhere near those percentages. So the global story has been really amazing here for CME. We have offices throughout the world.
We have roughly several 100 people working for us outside of the United States and outside obviously outside of Chicago. The announced acquisition of the NEX Group is going to be another piece of that puzzle on the global story. Their presence in parts of Asia and other parts of Europe is something that we don't have on the customer side. So that's something we're very excited about. And it's another piece of the puzzle as building this business to take it to the next level.
So we're very excited about the complementary nature of the NEX acquisition that we announced. So we I think the global story is something that we pay very much attention to, but at the same time, there's great growth here in North America and other places. So I don't want to be dismissive of that or take that for granted and I don't. So I'm very focused on the client. I have an initiative in place right now called Growth 100s with Julie Winkler, who is our Chief Commercial Officer, who succeeded Brian Durkin to bring in a new client acquisition.
And the new clients that we brought to this institution is coming at a rapid rate. And that's something that's the lifeblood of this institution. You have if I don't have a good client, good strong client base, I don't have shareholders to give anything to. So I'm very focused on bringing in new clients. Our complacency will never be there And that's an initiative that I think is very exciting for the future of this company.
And a lot of it's coming out of Asia, Europe and here in the United States. So good growth story from that standpoint, too. Thank you, ma'am. Yes, sir. I'm sorry.
Go ahead. Go back to the next one.
I thought I missed it. I'm Terry Brady, spelled not quite the same as you, but I'm a shareholder from Yorkville. This company and the CBE down the road has been in the news a lot lately Bitcoin and blockchain, particularly Bitcoin. I keep I don't really understand it. I was wondering if you just might speak a few words on that activity and what your position is on it?
Jerry, I will say you're not alone in not understanding virtual cryptocurrencies. It's a very new asset class coming in. One of the things that I was very passionate about when the team was looking at Bitcoin was taking a very methodical slow approach before we listed it. So Bitcoin, obviously, being a cryptocurrency, being something new, being unregulated, especially on the cash market side. We are a regulated institution.
I was answering a question earlier about the credibility of this institution and how passionate I am about risk and making sure that we don't ever divert our attention from that. So when you're bringing in a new asset class like a cryptocurrency, you have to have a good understanding of it. And I have a good team here that has a good understanding of it, but I don't know anybody who's got a great understanding of it, because there's a diverse group of opinions as it relates to Bitcoin. So what we did was, I think, a very prudent thing. We came in with very high initial margins at 47%.
We came in with very tight limits as it relates to the trading of Bitcoin to rein in the volatility of that product. So we were not going to let it run away from us because if it's a potential bubble, we don't want to be a part of that. But at the same time, we don't want to ignore what the rest of the world is looking at. Bitcoin is there's been a lot of things thrown at Bitcoin for the last 8 to 10 years since it was conceived in 2008, 2009 over in China, yet it still went from tulips to continuing to stay around. So we can't be dismissive of that.
If we did, we would still be fighting to try to protect the 1936 Act of Trading Onions, And we're not doing that. We progressed into the next asset classes and we move forward into the financial futures and others. So I'm not saying that Bitcoin is the next financial futures, but I am saying that you have to pay attention to these things, but we're going to do it in a very methodical approach. So the premise behind Bitcoin is to give people exposure to different types of form of payment that they're looking at to do their commerce. I like to say today that if you took some money and threw it on the street, most people would walk by and kick it out because they don't want to touch it because it's 30.
They don't even know what it is. The form of payments today has changed dramatically from cash to credit to other types of currencies and crypto could have a place there. We want to make sure we're at the forefront of a regulated marketplace to trade Bitcoin. So it's you look at Expedia, you look at Overstock.com, there are some commercials that are accepting this and you're seeing more and more commercials accept crypto on a daily basis for commerce. Doesn't mean it's going to be ultimately successful, but it seems like the blockchain that's associated with Bitcoin something that we're very excited about for the efficiencies of the back office of our marketplace.
So this gives us an entry into that space and we're excited about it and I'd love to give you a better explanation of how Bitcoin works because if I walked out on the street right now and try to give somebody Bitcoin, I would not know how to do it. Thanks, Jerry. Sir?
Stu Wanger. How are you doing, Terry?
Hey, Stu, how are you? I'm sorry I didn't recognize you.
There is I was just curious, are you starting to see an influx of interest for whether it be institutional interest to become clearing firms, full clearing members of the CME?
I'm sorry, a new interest or an institution?
New interest, a renaissance of interest in becoming full clearing
number of firms of the C&P. So is Sunil here? No. So what is
our account
right now, Julien, clearing members? 72? 71, 72 full clearing members now, I believe, is what we have, Stu. Listen, I'm always concerned about concentration of risk, whether it's participant in the marketplace or an FCM. So I always want to see more FCMs get into the marketplace and come to the CME.
We have done a lot of different things to encourage people to get into that business to facilitate it. The world's changed dramatically, those 2. You know this as well as I do. The volatility has gotten much larger. The exposures are much bigger.
The risk of running a clearing firm is different than it was maybe in the '80s. You know that a lot of these clearing firms were based on a business model, making money off of interest, off of other people's money. When rates are sitting at the levels they're doing, that's a very difficult business model to compete with. So the bigger ones got bigger and the smaller ones got forced out of business. That's not something that I like to see.
So I'm hopeful that we can continue to get new clearing members. We're working with the CFTC on a host of different issues as it relates to looking at different standards as it relates to clearing members. We have brought in some new clearing members to the Asian community, especially through Singapore with Philips and a few others, that we historically never would have had before. Our products are so attractive. I'll go back to the woman's question about globalization.
Because of our globalization, we are attracting firms that want to become clearing members from different parts of the world that we never would have done if we did not have a globalization effort over the last several years. So that is an attractive viewpoint from a clearing perspective. But again, the original model, as you know, Stu, is very difficult in order to maintain business with the risk profile that we see. We see moves in the markets today that we did not see in a year's time that we are seeing in 10 minutes' time. So that is a very difficult proposal for somebody that's not highly I don't know if I gave you a good answer, Stuart.
I was giving you what we're seeing more than an answer. But I'm hopeful that we'll continue to look at different types of clearing memberships to get people in here to clear business because it is critically important. So I don't want to have a concentration of a handful of clears. When you look at and I'll expand a little bit on that. When you look at the makeup of our business, you look at so many participants, everybody the banks are a big part of it, but there's also another side of the trade that the banks want to trade with, but the banks don't want to clear.
So that's an issue. So we have a handful of smaller firms that are clearing probably 50% of the ADV. That's a concern also. So we want to get more of those people in the business and grow that business significantly. So there's obviously fundamentals in the marketplace will change, risk profiles will change and hopefully that will continue to grow.
Thanks, Stuart. I'm Bill Lerchick. I got a CME and I1B. And Terry, would you tell us a little more about the NEX acquisition and how it will affect the value of the B shares?
Well, I don't know how it's going to affect the value of the B shares, Bill. I'll be very cautious on my comments around NEX. As you know, we're going through a process right now. It has been announced and has been announced and we've given guidance to what we think we can achieve as far as the synergies go with the transaction. We are still waiting.
The approval is coming out of here in the United States and London. These things have to be approved. We cannot we will not and we don't we will not gun jump as a legal term for acting as one single company before the approvals have been done. So there's certain information we have to still get into. But as you know, on the next transaction, the BrokerTec division and the EBS division are cash platforms, not futures platforms.
These are the next platform today under BrokerTec is a cash treasury platform that's only open today to dealers and prop firms alone. And that's the market structure that has been set under the BrokerTec and they've been very successful with it. We do not want to do anything to disrupt that business and the revenue of the shareholders that have put the money up for that acquisition. On the EBS component of BrokerTec, as you know, that's a cash foreign exchange. They have roughly 3% to 3.5% of the overall $5,100,000,000,000 a day FX market.
We have roughly 3%. We think that there's going to be great growth opportunities. What does that do for a B share? I will never try to predict what that will do for a B share nor an A share. I think what's important here is we're going to look to create opportunity.
I was trying to answer questions earlier where I think that the equation that I look at as the Chairman and CEO of this firm is, if I don't have a good client base coming from all over the world, I can't give the shareholders anything. So I'm very focused on the clients. Whether they own memberships or not, I want to make sure that they have an opportunity to participate in our marketplace. That's my goal. That's my objective.
I will not violate or go against any of the provisions that are embedded in the B Share rights today, but I can't predict what that will do as far as the value of a membership or a share of stock. No, they are not. They're not futures of cash.
Yes, sir. Stuart Ellison, I'm a shareholder. Could you briefly comment on the pending lawsuit and ongoing negotiations mandated by the courts between the seed holders and the CME?
I will not comment on any pending litigation as it relates CME Group, other than there was a recent litigation as it relates to 14 year old litigation with Deutsche Borse and the Eurex division thereof, of which the judge vacated the dates for that trial, which were scheduled for June 4th. We look at that as a very much of a positive. The judge has yet to written his formal opinion on the Eurex litigation. At the same time, we felt very compelled. And our CFO will tell you that we never accrued any money against this type of transact this lawsuit because we felt very strongly and we were prepared to go to trial.
As it relates to I know where you're going with this, as it relates to the Langer the Langer lawsuit. There is no information for me to give. Kathleen, if you want to comment at all, you're happy to, but
No. It just goes through the process, and there's nothing further we can say about it at this point.
Are there negotiations going on now?
We don't comment on any negotiations, whether they're as a public company, you can imagine, whether we're dealing with a company like we did with Next, we didn't comment about that prior to the announcement for legal reasons. And if there's a legal issue as it relates to the company on litigation, we would never comment about that publicly. Thank you. See all the questions you got going here? You got another one?
Very good. Any other questions or comments the shareholders like me to answer? Okay. Ladies and gentlemen, let me make a few comments. Let me thank all of you.
I see some friendly faces that I haven't seen in a lot of years and it's wonderful to see you. You've been a long time shareholders of this company. Some are brand new shareholders to this company. Everybody is critically important to this organization. We are CME born in 18/98, Board of Trade born 18/57, Charlie, 18/48.
18/48. You talk about a company that's been around for such a very long time, but yet it's brand new. And the excitement is just it's systemic throughout this whole organization about where we're going, about the ability of this company to continue to navigate to the next level. And I am convinced that if we did not have some of the people in this room and the guidance from original shareholders, original members, board members, staff, we would never have gotten to this level that we're at today. I look forward to the next several years as we continue to build on that.
I thank each and every one of you for being here. And again, I'm very passionate, and my management team is passionate and my board is extremely excited about the future of this organization. So thank you very much for coming today. We are adjourned.