Hello, everyone, and welcome to the ICE third quarter 2022 earnings conference call and webcast. My name is Charlie, and I'll be coordinating the call today. You'll have the opportunity to ask a question at the end of the presentation. If you'd like to register your question, please press star followed by one on your telephone keypad. Please note that we'll be taking one question and one follow-up from each participant. If you wish to ask a further question, please return to the queue. I'll now hand over to your host, Katia Gonzalez, Investor Relations Senior Analyst, to begin. Katia, please go ahead.
Good morning. ICE's third quarter 2022 earnings release and presentation can be found in the investor section of ice.com. These items will be archived, and our call will be available for replay. Today's call may contain forward-looking statements. These statements, which we undertake no obligation to update, represent our current judgments and are subject to risk, assumptions, and uncertainties. For a description of the risks that could cause our results to differ materially from those described in forward-looking statements, please refer to our 2021 Form 10-K, third quarter Form 10-Q, and other filings with the SEC. In addition, as we announced in May, ICE has agreed to acquire Black Knight. The transaction is pending customary regulatory approval, and we expect to close in the first half of 2023.
In connection with the proposed transaction, ICE has filed with the SEC a registration statement on Form S-4 to register the share of ICE common stock to be issued in connection with the transaction. The registration statement includes a proxy statement of Black Knight that also constitutes a prospectus of ICE. Please see the Form S-4 filing for additional information regarding the transaction. In our earnings supplement, we refer to certain Non-GAAP measures. We believe our Non-GAAP measures are more reflective of our cash operations and core business performance. You'll find our reconciliation to the equivalent GAAP terms in the earnings materials. When used on this call, net revenue refers to revenue net of transaction-based expenses, and adjusted earnings refers to adjusted diluted earnings per share. Throughout this presentation, unless otherwise indicated, references to revenue growth are on a constant currency basis.
Please see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain items. With us on the call today are Jeff Sprecher, Chairman and Chief Executive Officer, Warren Gardiner, Chief Financial Officer, Ben Jackson, President, and Lynn Martin, President of the NYSE. I'll now turn the call over to Warren.
Thanks, Katia. Good morning, everyone, and thank you for joining us today. I'll begin on slide four with some of the key highlights from our third quarter results. Third quarter adjusted earnings per share increased 4% to $1.31, which is on top of 30% growth in the third quarter of 2021 and marked the best third quarter in our company's history. Third quarter net revenues totaled a record $1.8 billion, up 3% year-over-year. While transaction revenues were flat on a year-over-year basis, our recurring revenues, which accounted for over half of our business, increased by 6%, with all three of our business segments contributing to this strong year-over-year growth.
Third quarter adjusted operating expenses totaled $727 million and were $16 million below the low end of our guidance. These better-than-expected results were driven by favorable FX trends, continued operating efficiencies, and a handful of non-recurring items within professional services, SG&A, and technology. Shifting to the fourth quarter, we now expect adjusted operating expenses to be in the range of $730 million-$740 million, with the increase relative to the third quarter largely reflecting the reversal of one-time items. As you begin to think about 2023 expenses, the midpoint of our current full year guidance, or roughly $2.948 billion, is a reasonable base to build upon. Despite the dynamic and uncertain macroeconomic backdrop, the diversity and, importantly, durability of our business has enabled us to invest through cycles.
While taking the current inflationary backdrop into consideration, we expect to once again invest in our people and the many medium and long-term growth opportunities that exist across our expanded business. Third quarter adjusted operating income totaled $1.1 billion, up over 6% year- over- year, and is on top of 13% pro forma growth in 2021, while adjusted operating margin expanded by nearly 180 basis points to approximately 60%. Through the first three quarters of 2022, adjusted free cash flow has totaled over $2.1 billion, up 7% year- over- year. Now let's move to slide five, where I'll provide an overview of the performance of our exchange segment. Third quarter exchange net revenues totaled $1 billion, an increase of 8% year- over- year.
In addition to higher levels of collateral at our clearinghouses, and thus higher member interest revenues, this strong performance was driven by a 54% increase in our interest rate futures, a 23% increase in our equity derivatives, and a 13% increase in cash equities and options revenues. Importantly, total open interest, which we believe to be the best indicator of longer-term growth, ended October up 11% versus the end of last year, including 7% growth in energy and 18% growth across our financial futures and options complex. Recurring revenues increased by 5% year-over-year. This growth was driven by strong demand for our energy exchange data and a continued benefit from our record 2021 listings performance. While recent market volatility has led to a pause in new listings business, both the backlog and our conversations with potential partners remains robust.
Througn the end of October, a record 19 corporations, representing a combined market cap of nearly $40 billion, have chosen to transfer to the NYSE. Turning now to slide six. In our fixed income and data services segment, third quarter revenues totaled a record $534 million, a 14% increase versus a year ago. Transaction revenues increased by 84%, including a 122% growth in ICE Bonds and 75% growth in our CDS clearing business. Similar to last quarter, this strong growth was driven by market volatility and rising interest rates, customers allocating additional capital to CDS trading, and our continued efforts to build institutional connectivity to our bond platforms.
Recurring revenues, excluding the Euronext migration, grew by 4% in the quarter, driven by demand for additional capacity on the ICE Global Network, as well as double-digit growth in both our Consolidated Feeds business and our Derivatives Analytics. Somewhat offsetting this strength were asset-based revenues in our index business, which declined by double digits year-over-year as investors shifted out of higher fee risk assets such as equities, munis, and corporate bonds and into Treasury ETFs. In addition, extended fixed income market volatility is also impacting growth in a portion of our end-of-day fixed income pricing business as reduced new issuance has driven slower growth in the number of outstanding bonds available to be priced. Absent a sharp reversal of these macro trends, we would expect fourth quarter growth to be similar to our third quarter performance. Shifting to mortgage technology on slide seven.
Third quarter revenues totaled $276 million. Recurring revenues, which accounted for nearly 60% of segment revenues and totaled a record $163 million in the quarter, increased 14% year-over-year. These strong recurring revenues continue to drive outperformance versus an industry that experienced a nearly 60% decline in origination volumes. Importantly, data and analytics revenue increased 22% year-over-year, with underlying recurring revenue increasing by over 40%. Similar to last quarter, it's worth noting that industry unit origination volumes were similar to those in the first quarter of 2019. However, our third-quarter 2022 mortgage technology revenues were over $100 million greater, growing at a CAGR of approximately 17% when compared to the pro forma revenues in Q1 2019.
This is a clear testament to the continued automation and growth in customer adoption of our solutions across the origination workflow. I'll conclude my remarks on slide eight. Year to date, we've grown ICE revenue by 6%, adjusted operating income by 10%, and our adjusted earnings per share by 9%, representing the best year-to-date performance in our company's history. Despite dramatically different macroeconomic environments, over a three-year period, you will see a similar story of compounding growth, with ICE revenues increasing at a CAGR of 8%, operating income at 11%, and EPS at 12%. Again, a testament to the resilience and durability of our platform and the all-weather nature of our business model.
As we look to the balance of the year, we're excited about the many growth opportunities in front of us and remain focused on creating value for our stockholders. With that, I'll hand it over to Ben.
Thank you, Warren, and thank you all for joining us this morning. Please turn to slide nine. In our financial markets, rising inflation and central bank activity across Europe and the U.K. continued to drive increased hedging activity, with interest rate average daily volumes increasing 40% year-over-year in the third quarter, including record Euribor futures. In our equity derivatives complex, ADV in our MSCI complex was up 17% in the third quarter as volatility levels continued to be elevated versus the prior year. In our energy markets, the third quarter was marked with a confluence of macroeconomic and geopolitical uncertainties that, when combined with high price volatility, made for a difficult trading environment. Despite these uncertain conditions, we have seen strength in areas like our options markets, our North American gas business, and our North American environmental complex.
Options contracts are a valuable tool in highly uncertain market conditions due to the ability to manage geopolitical tail risk and the lower associated capital requirements as we've seen historically. With open interest up 29% versus the end of last year, we are pleased that our customers continue to turn to our deep liquid options markets to manage their risk. The evolving energy supply chain in Europe is increasing the demand for global liquefied natural gas sourced from the United States, driving price volatility in our North American gas markets. Our commercial customers continue to rely on our markets to manage their risk, contributing to a 23% volume growth in our North American gas business year to date and an all-time record in North American gas open interest as we have gained 500 basis points of market share over the past year versus our peers.
Finally, although our European carbon markets are seeing headwinds due to the aforementioned factors, we continue to see growth in active participants in this market, with participation up 7% year-over-year. At the same time, the secular trend toward cleaner energy is also driving growth in our North American environmental markets, with volumes up 6% year-over-year in the third quarter. Because we offer the broadest suite of environmental products across the carbon cycle, we remain excited about our position to serve customers as they navigate the journey to cleaner energy and as the demand for transparent pricing in carbon grows. Importantly, as we look out over the longer term, we believe that the three secular drivers across our energy markets remain intact. First, increasing energy demand. Second, an evolving energy supply chain, and third, the clean energy transition.
Because we operate deep liquid markets across the globe with benchmarks in emerging markets across every source of energy, we feel very well-positioned to benefit from these factors. Moving to our fixed income and data services business, we delivered record revenues, which grew 14% year-over-year. Our comprehensive fixed income and data platform continues to deliver compounding revenue growth underpinned by both our recurring and transaction revenues. A testament to the strategic diversification of our business model and our ability to deliver growth through an array of macroeconomic environments. Turning now to our mortgage business. In the third quarter, our mortgage business once again outperformed the broader industry, driven by strong recurring revenues.
The strength and resiliency that we've seen in recurring revenues has been driven by our new customers continuing to adopt our digital solutions, increased demand for our data and analytics tools, and continued strong retention. Our customers remain focused on automation and efficiencies. This focus has led to increased interest in our data and analytics products, contributing to 22% growth year-to-date in our data and analytics business. Through our AIQ solution and analyzer tools, customers can save thousands of dollars per loan by leveraging our artificial intelligence and machine learning tools to drive automation in the loan manufacturing process. We are pleased that the value of our offerings continues to resonate with lenders, and we remain optimistic about the long-term opportunity to leverage our mission-critical technology and data expertise to accelerate the analog-to-digital conversion happening in the industry. I'll now turn the call over to Jeff.
Thank you, Ben. I want to start my prepared remarks by highlighting our vision of how ICE is contributing to both the U.S. home mortgage and U.S. equity markets to bring increased efficiencies to consumers in these two asset classes. To take you back, ICE was initially founded to build and operate digital commodity exchanges. Modern digital exchanges provide an essential service, efficiently matching buyers and sellers with operational neutrality. Our modern exchanges are regulated, but more importantly, their growth and efficacy depend on the industry's trust of our neutrality. ICE does not take a position on the price of any commodity or security. We simply provide the software and network that efficiently facilitates a buyer and seller finding one another and allows them to determine their transaction price.
Today, millions of traders, investors, brokers, and regulators around the world are attached to our exchange networks, and they all benefit from the transparency and standardization that we enable. We followed up our launch into the exchange business by building digital data networks to disperse information separate from our exchanges, networks that thrive on the neutrality and confidentiality of our data management. It is likely obvious to you that our data networks would contain financial information generated by our own exchanges, but it may be less obvious that our growth has been accelerated by opening these networks to third parties, including most of our global exchange competitors, who also access our customer base. Today, hundreds of third-party exchanges, brokers, and market data generators publish their data to users across our networks. Our growth in the U.S. mortgage industry builds on these same management tenets, trust, transparency, and neutrality.
Our mortgage software and network are open and impartial. ICE has been at the forefront of building a mortgage platform so that industry participants can better communicate with one another, reduce their costs, pass these savings on to consumers in the form of better prices, and appropriately implement the government's homeownership policies. It is in this vein that we have agreed to acquire Black Knight to connect their market participants to ours, open up its platform, reduce costs for mortgage origination, overlay the safety and soundness practices that we've developed for businesses like the systemically important New York Stock Exchange, and create new products and services for lenders to increase homeownership, including in underserved communities.
As a part of the budget that we previously guided you to, ICE plans a significant financial outlay to open and upgrade the Black Knight technology stack, a commitment that we believe would have been hard for Black Knight's other potential acquirers to make, potentially in a contracting mortgage environment. This is the same strategy and commitment that we made when taking over the Mortgage Electronic Registration Systems, which today has durable and scalable operations and technology built by ICE. Systems that are prepared to manage the difficult risk environments in the U.S. housing market. As shown on slide 10, these MERS processes can identify and deregister failed lending firms who become zombies to borrowers and regulators.
You may have recently heard Sandra Thompson, the Federal Housing Finance Agency's Director, lamenting how stakeholders in the mortgage manufacturing process seemingly lack the will to adopt technology that changes their entrenched methods. This is precisely the challenge that ICE is laser-focused on solving. Gillian Tett pointed out in her book, The Silo Effect, that the U.S. mortgage industry is so siloed that the federal government's past attempts to help troubled homeowners stay in their homes by reducing mortgage payments actually exacerbated the foreclosure problem because lenders lowered monthly payments and servicers mistook this as consumers falling behind and initiated foreclosure proceedings.
As Austan Goolsbee once said, "The silos were so strong they did the exact opposite of what everyone expected." With the explosive growth of the fintech industry over the last decade, the U.S. has seen a dramatic upsurge in the number of alternative home lenders and mortgage technology providers who, like ICE, are building solutions to benefit lenders and borrowers. Slide 10 also shows the number of new lending firms that just this year have registered to do business with MERS. Surprisingly, the number of lending firms has increased in a year where consumer demand for mortgages has decreased. This increased lender competition presents opportunities for ICE to take costs out of the mortgage manufacturing process so that these lenders can compete more effectively, passing those savings on to borrowers.
The high cost of manufacturing and funding a home mortgage that we target are particularly acute for the most marginalized borrowers, which further exacerbates the wealth divide in the United States. Our acquisition of Black Knight remains subject to review by the Federal Trade Commission. ICE has provided the FTC with extensive information and certified its completeness. As is often customary, we agreed to extend the FTC's statutory review period and intend to continue ICE's cooperation with the FTC staff. Our estimate is that the Black Knight merger will close in the first half of next year.
While we'll be unable to answer any questions on this call relating to our transaction with Black Knight, please know that our participation in this FTC review, coupled with the comprehensive conversations that we've been having with our customer base, has further convinced us that our merger will afford significant benefits to U.S. homeowners and industry stakeholders. While on the subject of regulators, I'd like to comment on the recent remarks from the Securities and Exchange Commission focused on the structure of the U.S. equities market. In his June 8th speech, Chair Gensler noted that key elements of the national market system rules haven't been updated since 2005. Since that time, the U.S. equity markets have become increasingly opaque. Today, most retail order flow is executed through off-exchange bilateral trading relationships with a small number of wholesalers.
These wholesalers are able to trade against customers without exposing those orders to competition. In some cases, wholesalers pay retail brokers for the privilege of this first look at their clients' order flow. This practice is known as price improvement, and it refers to occasions where a trade is made at prices better than the national best bid and offer ticker displayed by the public exchanges. Trades that often contain fractions less than one whole penny per share. What's often left out of this price improvement narrative, however, is the fact that public exchanges like the New York Stock Exchange, under current SEC rules, are actually prohibited from displaying orders at price increments less than one whole penny. As a result, public investors are in fact prevented from narrowing the national best bid and offer ticker to sub-penny price increments.
Ask yourself this: Is the national best bid and offer ticker really the best market price that we should all be relying upon if investors can routinely buy a share of stock cheaper than what's displayed? We measure the opportunity for investor price improvement savings to the tune of $1.8 billion a year if there were a simple harmonization of the quote and trade increments across the entire market. We hope that this opportunity will be considered by the SEC. ICE has been consistent in its strategy of promoting standardization, fair, transparent markets and networks using state-of-the-art technology. We embrace opportunities to transform businesses, to create efficiencies and lower customer costs, not only in home mortgage, but even in a 230-year-old business like the New York Stock Exchange. I'll conclude my remarks on slide 11.
The third quarter of this year has been marked by rising inflation, fluctuating interest rates and central bank activity, concerns over energy and food security, and global political uncertainty. I can't think of any firm that has been better positioned to help manage these risks than ICE. Our customers rely on our data, technology, and liquid markets to navigate through this environment. In the third quarter, we once again grew revenues, grew adjusted operating income, and grew adjusted earnings per share. These record-setting third quarter results against our extraordinary third quarter results of last year reflect the all-weather nature of our business model. We have intentionally positioned the company to provide customer solutions in numerous geographies and economic conditions to facilitate all-weather results. I'd like to end by thanking our customers for their continued business and their trust.
I wanna thank my colleagues at ICE for their contribution to this record third quarter, following up on our unsurpassed first half results. With that, I'll now turn the call back to our moderator, Charlie, and we'll conduct a question and answer session until 9:30 Eastern Time.
Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure you're unmuted locally. As a reminder, we will only be taking one question and one follow-up from each participant. If you wish to ask further questions, please return to the queue. That's star followed by one on your telephone keypad now. Our first question comes from Richard Repetto of Piper Sandler. Richard, your line is open. Please proceed.
Yeah. Good morning, Jeff, Ben, and Warren. And first, thanks for the comparison, Warren, on the mortgage technology performance versus unit originations. That's helpful. As we dig in, you know, you outperformed again against unit originations. Can you give us a little bit more detail on which lines, you know, in the mortgage, you know, are outperforming? Like data analytics, we'd expect that to be 100% recurring, and that's been, you know, outperforming. But like, the other has been flat, and we expected that to be all variable. The question is, you know, what's getting you to outperform the unit originations and within which lines in mortgage?
Sure. Hey. Hey, Rich, it's Ben. As you can appreciate, you know, our whole hypothesis on this deal and what we've been doing in the mortgage space is all directed towards a long-term view of taking one of the most analog asset classes that there are and turning it digital. That's what we believe over the long term will enable us to achieve that 8%-10% growth. The contributors underneath that are really, you know, we're very focused on product innovation and, in particular, helping our lender customers lower costs become more efficient. As we do that, we're hoping that the savings that those lenders achieve are then brought down to their clients, the end consumer, and will translate into better product selection.
It'll help to lower costs for the end consumer. It'll help enable them to get the best products at the most efficient prices to meet, you know, their needs and achieve the dream of homeownership. That's, you know, from a long-term perspective, what our focus has been and where we're making our investments. Overall, what's driving our ability to beat is the intentional shift towards subscription revenue. If you look across each of those segments that we have, we're pushing very hard to move more and more of the revenue in each of those reporting segments more towards subscription, when we can.
One of the things I'll highlight in terms of success this last quarter, even with all the headwinds that the industry has had, two-thirds of the customers that renewed in the third quarter renewed at higher subscription base levels by the end of that quarter than they were at the beginning of the quarter. The other thing I'd say is that it has been a difficult environment. Despite that, we only saw a small single-digit percentage of our clients not renew. Most of that's due to M&A, industry consolidation, and closing up shop.
One of the things we've seen as a positive for us with some of the backdrop of this industry consolidation, as some of these, you know, companies and their employees have been downsized, some of these impacted personnel have used it as an opportunity to become an entrepreneur and start a new lending shop. Those are opportunities that we compete for, and we've won some of that business on Encompass this past quarter. We've seen sales success in origination on Encompass, both in the smaller startup companies, the mid-market, as well as banks.
That fed a lot of what's going on in our origination process or origination line item and reporting line item, as well as the fact that we've moved more and more of that revenue to our subscription, and we have very low attrition. In the data and analytics area, what's really fueling our ability to beat there is the same. Data and analytics does have historically a transaction element to it. We have been moving this line item very similar to our origination line item, more and more towards subscription as clients renew. As we sign new clients, make sure that we're tilting those deals much more towards subscription revenue. The big piece of product that we have in that area is a product called AIQ. That's the product that's automating a lot of the underwriting processes.
That's a big area of where today we're generating around $1,400 of savings in originating a loan. A lot of it is anchored in this area of automating the underwriting process for our customers. I mentioned that in the second quarter, we signed JPMorgan Chase. That's going through an implementation on this. This quarter, we had several wins across different segments that we sell to from banks, non-banks, and credit unions. We had a significant win with loanDepot this past quarter, which they, like many lenders, are trying to get the efficiencies that our platform will provide to them. That's a little bit of a flavor in some of the segments of what we see under the covers.
Thanks, Ben, and thanks for the detail. My follow-up question would be in the exchange segment, and I don't know whether it's for Jeff or Ben. You know, the energy complex, you know, not just you, industry-wide, continues, like, at least to perplex a lot of us. You know, with the volume performance there. Again, it's not just you, it's the industry. Jeff or Ben, could you give us a little bit more insight into. You're making up a good part of the volumes growing, you know, financial futures and cash equities and options. But like the gas oil contract, I believe it's down 40% year-over-year, and this idea of higher margin causing corporates and speculators to pull back. Could you give us some more color into the energy complex and specifically gas oil?
Sure, Rich. It's Ben again. You alluded to it in the way that you asked the question. Around the way that we manage this business is from looking at the overall portfolio, and we have a wide lens on this, and we, you know, pride ourselves in having the deepest and most liquid futures markets to enable our customers to manage risk across the energy spectrum, also in the global rates environment. We manage our business as an overall portfolio, and that's the, you know, the nature of that all-weather aspect of our stock. In energy specifically, which is where you were going, we manage even the energy segment as a portfolio.
You know, we're proud to say that despite all these headwinds, our energy business itself, open interest is up when you look across the entire business. It's up 6% since the end of last year. This is in the backdrop of a confluence of all kinds of issues that the world's dealing with right now. You have this unfortunate war. You have on-and-off lockdowns in China. You have a push to move towards cleaner energy sources. You have under-investment in energy infrastructure. You have major releases from the Strategic Petroleum Reserve, all rearing their head at the same time. We're proud that now more than ever, our clients are coming to us to manage their risk.
I'll touch on a couple of the areas within energy, and you asked specifically about gas oil, so I'll touch on that as well. Broadly speaking, we position our business to help clients manage their transition towards a cleaner energy environment. That's why we have the most deep liquid markets around the globe in oil, natural gas, power, LNG, and environmentals. In oil, we have seen some headwinds. You focused on gas oil and you're spot on as gas oil has had some headwinds. Most of this is associated to the market needing clarity around how Russian oil deliveries into the contract would be handled because historically, Russian oil did go into that contract.
We worked with governments and customers to come up with a market-based solution to this, and also landed on a sanctions regime that we align to, that at the end of this year, Russian oil can no longer be delivered into that contract. Once we did that and provided clarity to the market for that, we have started to see open interest rebuild in that contract in calendar year 2023 and beyond. That's a positive. It's gonna take some time for that to play out, but we're seeing that, you know, on the horizon. We believe that that's gonna turn the corner. Within oil itself, you know, expanding further across what's going on in the portfolio, we've had some very positive developments. Our options contracts have done very, very well.
Brent alone has seen options volume up 14%, year-over-year. Part of the reason for that is that options contracts enable a trader to hedge a whole range of outcome. It enables them in an efficient way to manage geopolitical risks. There's also a little bit of a lower margin requirement associated with these 'cause if you're buying an option, your risk on that option is limited to the premium that you pay. All of that's incorporated into the margin models. We've seen a lot of success in our options markets, and we have new innovations. We continue to build our Murban contract that we launched, and we're continuing to hit records consistently with our Midland WTI American Gulf Coast contract that we launched earlier this year.
We're having some good success and continue to build on that. The other area I'd touch on quickly would be natural gas. Our natural gas business, you have to again expand the lens and look at it from a global perspective. I mentioned U.S. gas is at a record and up 23% in volume. Globally, our natural gas business is up 16% and 6% NOI. Some of the inputs to that is our TTF business has seen some headwinds because, you know, Russia has historically supplied 40% of the gas to continental Europe, and this supply has effectively been cut off. What's filling the void? It's U.S. LNG is filling that void for Europe, and that's fueling strength in our North American gas complex as commercial customers are trading our Henry and our basis markets significantly.
Also a lot of those LNG cargoes that are going to Europe are hedged via our TTF contract, our Henry Hub contract, basis markets, as well as our LNG markets. The last thing I'd say on gas markets is that we're innovating and working on market-based solutions with Europe as we understand the situation there. We announced just recently we're gonna be launching some new contracts, some new basis contracts in Italy, France, and Germany in gas to trade alongside our existing continental gas business. Then in Northwest Europe and Southwest Europe, LNG contracts that'll trade alongside our JKM contract. It's important that, you know, the feedback we're getting from our clients is that all of these contracts are likely to trade basis and relative to our TTF deeply liquid price benchmark.
Got it. Thank you for all the detail, Ben.
Thank you. Our next question comes from Ken Worthington of JP Morgan. Ken, your line is open. Please go ahead.
Hi, good morning. Thanks for taking my question. I'd like to spend a little time on the LIFFE business and the European rate complex. We've seen inflation in Europe and the highest rates in more than a decade. Maybe first bring us back, what was the peak of revenue generation for the European rate business back when rates were much higher? Then do you think the opportunity here is bigger or smaller today for that franchise given the underlying market? Then CME launched €STR Futures, I think earlier in the week, which I think seems like your turf. Can you talk about the potential for investment in the rates business and product development? Do you think this is sort of an attractive use of resources, and what are you thinking from here?
Hi, Ken. It's Ben. I'll start here. When you look across our rates business, you know, the way we look at it, we manage it as a portfolio. We look at, in particular, you know, the largest parts of our rate franchise are with our SONIA, gilts business as well as Euribor. And, you know, underneath the covers, when you look at what's been going on geopolitically and the overall environment, continental Europe has actually done a pretty good job of signaling how they're gonna handle this rates environment.
You know, the market has responded very well to that, and that's what's led to just a very solid year in terms of Euribor volumes, as well as open interest as that is up over 60% on a year-over-year basis. That part of the business has done extraordinarily well. If you look at the U.K. specifically and Gilts and SONIA, there's two dynamics going on there. With SONIA specifically, when you're comparing our performance with last year, you have to remember that last year we had both Short Sterling and SONIA trading side by side. This year, you know, and then those converged in December of last year.
This year you have SONIA only, there's a bit of an off comparison there as there was a significant amount of arb trading going on between SONIA and Short Sterling as that convergence was taking place, and now you have SONIA as a standalone. In The U.K., though, specifically, obviously there's been political uncertainty there. You've had the change of prime ministers, you've had uncertain rate hike expectations. You had the mini budget that shocked a lot of people. You had a potential currency crisis all hitting at the same time, and that definitely weighed a little bit on SONIA and Gilts, but we're already seeing signs that the market is stabilizing as the environment has stabilized there. We feel very good about that overall rates portfolio that we have.
It's definitely an area we're continuing to invest. You know, we have our own SOFR contract that we've launched as well. It's an area that we're gonna continue to invest and we see opportunity.
Okay. If you recall the size, you know, is there a lot of opportunity to grow it versus what it was a decade ago, or is that sort of the peak of what you think this can be?
Ken, we'll go back and get you the exact number there, but I think it's certainly approaching where it was years into. I think the record would've been sort of 2008, 2009, that kind of a range in terms of the revenues. We've certainly made some adjustments to RPCs in that complex too, and there has been some pressure from FX this year. I think we're approaching to where it was, and we're around those levels. But I do think that the world is a lot bigger and different than it was back then.
I think as you think about the future, there's certainly room in what is effectively, you know, certainly on the Euribor, so the second-largest reserve currency for that complex to grow well into the future regardless of what the prior level would've been.
Great. Thank you very much.
Thank you. Our next question comes from Daniel Fannon of Jefferies. Daniel, your line is open. Please go ahead.
Thanks. Good morning. A couple questions just on the fixed income data business. The execution, as well as the clearing has seen, you know, really pretty strong activity this year. You mentioned higher rates. Is it? Can you talk about just participation levels, customer growth, other areas, or are these really more just kind of external factors kind of finally more as a tailwind?
Hi, Dan. This is Lynn Martin. Thanks so much for the question. Absolutely volatility has been a tailwind for the execution side of the business with record levels of CDS clearing so far in 2022. We continue to be really excited about the pickup of activity in our ICE Bonds platform, where, as a result of the continued Fed rate hikes, you've seen tremendous volatility in fixed income markets globally. ICE Bonds is a beneficiary of some of that volatility, particularly in our treasury, our muni, our corporate bond, our CD business, where you've seen record levels of activity and volatility. In fact, activity measured on a volume perspective is almost 200% up in Q3 versus last Q3. A very important factor, though, is how we broaden out the participation in those platforms, particularly focused on institutional customers.
In Q3 alone, in our muni markets, you saw the levels of institutional participation grow by 192%. That just continues on a trend that we've seen as a result of thinking about particularly the muni markets as an ecosystem and driving additional institutional participation across our platform.
Understood. On the data and analytics side, I think, Warren, you mentioned fourth quarter being kind of flattish with the third quarter in terms of growth and citing the, I think, lower bonds outstanding as a factor. I guess could you remind us of the pricing model? I thought this was more of a subscription-based model, more recurring revenue associated with customers, not bonds outstanding. I guess provide a little more clarity or understanding in terms of how we think about the outstanding bond versus the kind of customer growth and other things in terms of drivers of revenue.
Dan, this is Lynn again. I think I'll start off and then turn it over to Warren. Thanks for the follow-up question because I think what you're pointing to really illustrates how we build businesses to be all-weather businesses. You know, we talked about the volatility in the markets being a significant tailwind for our execution side of the business. But it's been a bit of a headwind for our fixed income data and analytics line, whereas Warren said in his prepared remarks, if you think about our index business, we've seen assets flow out of our higher capture indices, specifically equities, corporate bonds, and munis, and assets flow into indices where we have a lower capture rate, specifically our treasury indices.
In fact, if you look at the AUM benchmarked against our indices, it's actually at an all-time high, but the mix has significantly changed, which impacts the revenue. As Warren said, another headwind we're seeing that's affecting the fixed income data and analytics line is the new bond issuance, which slowed in fixed income this year. That has impacted the growth rate of our legacy PRD business, which has continued to grow, albeit at a much slower rate.
That said, volatility, again, has been a tailwind for the other part of our data services, particularly our other data services line, where you see various factors increasing to what we believe is outsized growth in that line, including 22% increase in demand for capacity in our ICE Global Network as volatility continues to require customers to have reliable, resilient connectivity and higher bandwidth connectivity, double-digit growth in our Consolidated Feeds business, double-digit growth in our data analytics business, which provides transparency to opaque asset classes, and outsized growth in our desktop platform, specifically our chat platforms, as ways that customers interact with our markets continue to modernize.
Daniel, I'll just add to that just to give you a little bit more color on the consumption of price. There is a subset of customers that do take or consume, I should say, based on the number of securities that are priced in the fund holdings that they have. It typically will be custodians and participants such as that. There. A lot of them honestly holding most, if not all, of the bond market, if you will. As the bond market in size fluctuates, and this isn't necessarily related to refinancings, which will be sort of canceled and replaced. It's more around new issuance and the growth of the overall bond markets, whether it's corporates or munis or structured products.
As that fluctuates, and it tends to be sort of low single-digit growth over the years, that will help, or to some extent hurt, the growth in that component of our subscription business. Again, it's only a portion of the overall PRD business and the overall data business at the end of the day that applies to.
Understood. Thanks for the detailed answer.
Thank you. As a reminder, we'll be taking one question and one follow-up from each participant. Our next question comes from Kyle Voigt of KBW. Kyle, your line is open. Please go ahead.
Hi, good morning. Just wondering if you could comment a bit more on the health of your customers in the mortgage tech segment. You mentioned earlier in the call that there were some customers that didn't renew, mostly to shuttering or consolidating, but we're really in the beginning phases of what could be a long and challenging volume environment. I guess the question is, if the current mortgage environment remains extremely challenging over the next year, do you still believe you can grow the recurring revenues year on year in that segment and offset client attrition, or should we expect some slowdown on that part of the business as well?
Thanks, Kyle. This is Ben. We do feel confident in our ability to grow the business over the long-term horizon of that 8%-10%. I think this past quarter is a perfect example to point at. You know, you had the market down year-over-year close to 60%, and sequentially it was down north of 25%. Very tough environment for clients. Yet, as we approach them about shifting more of their the economic model that we have with them more towards subscription
Even if it costs us some transaction revenue, they're willing to do that. That's why we were able to get two-thirds of the customers to renew. In this environment, you know, low single-digit customers didn't renew. I think that's a very good sign and a testament to the resiliency of the business, but also the mission-critical nature of the technology that we provide. From that standpoint, see it as all positive. The other thing that if you go back to the slide that Jeff referred to in his comments, and you see what's happening with some of the churn and new lenders that are starting up, as some of these, you know, personnel are impacted, they're starting up new lending shops. We're seeing growth in terms of new lenders this year.
It's the population from that MERS graph that Jeff showed is higher than it was last year. That is a testament that there's new start-ups coming up on the scene. As these folks start up, they want to adopt automation and the most efficient way to set up their businesses, and we're well-positioned to win that business, albeit it's a competitive environment, and we compete with others for that. We had wins in that environment. We expect some of that churn to continue, but where there's customers that potentially go out of business, there's also start-ups that happen on the backside of it.
This is Jeff. Let me just, you know, in the past, earnings presentations, we've shown you the demographic trends that are going on in the United States. You know, yes, there are higher interest rates. Yes, there are supply chain issues for home builders, uncertainty for home builders. There is a unbelievably large demographic of people in this country that are starting new households, having children, getting married, moving on with their lives. That demographic trend, one way or another, has to be satisfied with a place to live. I think, you know, what you're really seeing on a macro basis is us building solutions to deal in part with that population.
Understood. In terms of follow-up, I just wanted to follow up on Dan's prior question just regarding the fixed income ASV growth decelerating to 4% in the quarter versus 5.5% last quarter. I appreciate the additional color on the index business and the headwinds that's facing. But just in terms of quantifying that, was that really the entirety of that kind of deceleration that we saw from 5.5%- 4%, or were some of the other aspects that you mentioned also playing a role into that when we look sequentially?
Sure. Hey, Kyle, it's Warren. There are a couple of things there. I mean, certainly the macro headwinds we talked about on the AUM side and some of the pricing business, but also don't forget Euronext is part of that as well. But if you adjust for those, yeah, I mean, look, ASV adjusted for those was around 5%. It was closer to 5% for the quarter. We feel pretty good about that business given what's going on, you know, within fixed income markets at the moment. Again, don't lose, and Lynn mentioned this, but don't lose sight of the overall segment results where the segment was up 14% year-over-year from a revenue perspective. We're up 12% year to date in that business.
Operating margins in the quarter or operating income in the quarter, I should say, was up about 30%, and margins grew by six points. Overall, we're very happy with the performance of that segment. A lot of the factors that are weighing on what we're seeing on the pricing side and on the index side are what's benefiting for us on the trading side. Those results this year are some of the best we've had ever. We're pleased with the results of the business overall.
Understood. Thank you.
Thank you, Kyle. Our next question comes from Alex Kramm of UBS. Alex, your line is open. Please go ahead.
Yeah. Hey, good morning, everyone. Wanna come back to Rich's question on the energy performance. Ben, in your answer, you know, it almost sounded like you blamed, you know, Russia-Ukraine situation almost entirely for what you're seeing, the underperformance there. That almost sounds a little bit structural. Just wanted to make sure there are other factors that you can maybe isolate or even point to some green shoots. I don't know, is it margins having to come down? Is it volatility maybe coming to more normal levels? Or what would you think needs to happen for maybe that business to in its current form perform a little bit better unless it really is structural and something has changed? And then quickly, there's more talk of price caps in Europe as well.
Just wondering how you view those in terms of impacting your business 'cause generally speaking, somebody interfering in market forces is usually not good for volume. Just maybe those two additional areas in energy.
Thank you, Alex. Yeah, I think what you're seeing, and I'll give a little more color on some of the things underneath this. What you're seeing is that a lot of these sanctions regimes have not been put in place and are being put in place, the example of gas oil earlier. It's at the end of this year that those oil deliveries cannot happen. You have some traders with comp month coming up right now on end of the year that just won't touch those contracts until this gets through.
That's why I also highlighted in the earlier question that we're starting to see open interest build, 2023 and beyond in the gas oil contract as an example. In natural gas, I think the things that I look at and that are encouraging to me is that when you look at our TTF business, and you look at October of last year versus October of this month, you know, that just passed, the number of active market participants that we have in TTF is exactly the same. We haven't lost any market participants that are trading TTF. So that to me is a sign of longer-term strength in the business as the situation clears.
We've also, at the same time, grown our data subscriptions in TTF double digits in that same period of time. There's more eyeballs and more people paying attention to it. From a longer-term perspective, we feel good about the positioning of these contracts. As I had mentioned, we're launching new contracts with those new basis gas locations in Italy, Germany, and France, as well as the Northwest Europe and Southwest Europe LNG contracts. Feedback from traders, they're all gonna price relative to TTF, so we feel good long term about that as well. On price caps that you also mentioned, I mean, look, we understand the severity of the situation in Europe.
We are in very active dialogue at the table with government and with regulators and commercial customers to forge a market-based solution to these issues. We know, you know, our role is to create deep liquid futures markets to provide important price signals on supply and demand dynamics, as they're changing, to make sure that people have the best pricing tools to hedge and manage their risk. Through our discussions, you can also see through media that's happened over the last couple weeks, there is acknowledgement broadly of the issues with price caps and a general agreement that they don't wanna disrupt the price discovery.
A lot of the issues that are being highlighted in these articles and that we've been expressing and commercial market participants have been expressing as well as several governments are that an artificial price limit on the commodity makes it very difficult to accurately hedge commodity price risk. Second would be that if you put price caps in these markets, you could end up having the unintended result of taking volume and liquidity from transparent lit markets and moving it to the OTC markets, reversing more than a decade of progress that's been made here.
If you create an artificial price in the settlement in the clearinghouses, it makes it difficult for clearinghouses to manage the accurate risk that you know we're exposed to if it's dislocated from what the real market price is of that position. It can create an artificial price that may over-encourage consumption, which is not what people are looking for right now. Obviously these markets are global and supplies can go elsewhere. That's why we're at the table. You know, we're encouraged that recent rhetoric is they understand a lot of those issues and risks, and we're in the middle of putting forth market-based solutions, which is why we're you know proactively launching all these contracts in December and are continuing in the middle of the dialogues to help the situation settle.
Thank you. I appreciate the incremental color here. Just one quick one for Warren then. It seems like your revenue is benefiting from higher rates directly more. So I was just hoping if you can remind me what the magnitude is, I think in the OTC and other line on the exchange side, and then on the CDS business, you got net interest income. So maybe some underlying data you can give us in terms of the balances and the rates you're getting, what rates you're mostly sensitive to in Europe and in the US, 'cause obviously, you know, the rate picture is fairly dynamic these days. So just wanted to make sure we understand how to model that better.
Sure. So in terms of OTC and other, if you look at the second quarter, about half of the increase would've been related to member interest. I'll just say, too, within not only just the CDS business, but also within our clearinghouses, we're not trying to be a bank. The service we're providing is clearing and risk management, and that's the value that we're providing to those customers. We're actually trying to lower collateral levels where we can. You know, Ben mentioned pushing people, or I should say, you know, leading people towards the benefits of options. We're working on trying to expand the different types of collateral that we accepted, such as accepted, such as with some of the emissions allowances.
We are starting to see a little bit of normalization in some of the collateral levels, as we sit here in October, but it's just difficult to predict where that's gonna go. You know, it certainly is a part of or a significant part of OTC and other, but there are a lot of other elements to that line item as well. So it's been the driver of some of the growth we've seen, but it's certainly not the vast majority, if you will, of the total line at the end of the day. The same would hold for the CDS business, where certainly it's helped, as collateral levels have built there.
We're also, as you would imagine, seeing really strong trading volumes across that business or clearing volumes across that business as certainly as the headlines around recessions and interest rates continue to build, the demand for credit risk and credit protection is increasing alongside that. That's been really a bigger driver of things over a longer period of time than anything else. Don't forget too, that in the third quarter, that's a roll quarter, as is the first quarter. We benefit a little bit from that as well relative to maybe the second and fourth quarter in that business.
The other area I would just point out, too, is if you go below the line, we're actually benefiting a little bit from the cash on hand, the interest that we're earning on the bonds that we have, or sorry, on the cash we have on hand. There's benefit from an interest rate perspective as well that's flowing through the income statement. In addition, of course, to the benefit we get on the futures side from higher rates, you know, within Euribor and some of the UK interest rate businesses as well.
There's a number of different things across the platform, of course, as rates are rising that we're benefiting that may be offsetting some of the areas that tend to not do as well during higher rates environments.
Right. Great. I'll follow up for some of the detailed rate stuff. Thanks.
Thank you. Due to time constraints, that was our last question of today. I'll now hand back over to Jeff Sprecher for any closing remarks.
Well, thank you, Charlie, and thank everyone for joining us this morning. I would really like to again thank my colleagues for delivering yet another record quarter and thank our customers for putting your faith in us during these very uncertain times. We appreciate your business. We look forward to updating you all again as we continue to execute on the opportunity set that we were able to talk to you about today. With that, I hope you have a good day.
Ladies and gentlemen, this concludes today's call. You may now disconnect your lines.