All right. Good afternoon, everyone. Thanks for joining us again. For this session, we have ICE, Intercontinental Exchange. I'm delighted to welcome back once again, Jeff Sprecher, Founder, Chairman, and CEO of ICE. Welcome back, Jeff, and thanks for participating in the conference.
Thank you, Chris. It's kind of interesting to be here and see all these gray and black suits in New York. It's like something I haven't seen in a long time. It's kind of old school.
I think you're wearing, like, a green jacket suit.
Yeah, I kind of decided to mix it up.
Sure.
You know, I get my suits out, like, twice a year now, right?
Right.
It's like owning a tuxedo. It's like: Oh, yeah, I guess I do own a tuxedo.
Before we get started, just a reminder, you can submit questions from Jeff, do it via Pigeonhole, our system. That's pigeonhole.at. Go to that site, the passcode is SDC2023, I'll try and get that to Jeff. Maybe, Jeff, let's just start at home of the house here and to talk about the long-term growth algorithm of ICE. A really strong track record from the IPO, 16% type EPS growth CAGR. It's felt like that's slowed in the last couple of quarters here.
Mm.
How are you thinking about sort of intermediate-term growth for the company? Are there any self-help measures the company can take to sort of get back to that level of long-term growth?
That's a good question. I really view my job and the job of any chief executive of, you know, setting a five-year plan and on a plan of growth. Really, for us, we've been thinking a lot about creating an all-weather kind of stock that can grow in any environment, you know, not knowing what the environment is going to look like. And we're able to somewhat do that during, you know, these boom times, the 0% interest rate.
So that now we have a portfolio that can grow in our minds in a high interest rate environment or a low interest rate environment or recessionary environment and have some sort of equilibrium around it that somewhere in the world where there is growth, that we have a position in it. I actually say: How do I think about it? I think well about it because I feel like we have a lot of tools as managers. Also, you know, a lot of luck in the sense that the first exchange traded contracts to go electronic in this country were in the late seventies, and those contracts are still growing today. It's amazing, you know, an analog to digital conversion.
It's amazing how long the legs of it are. It kind of defies logic. The base business that I helped create in year 2000 is still a strong growth driver for us. It's still having. We have record open interest. We're having fantastic quarter last quarter. We're making some upward price adjustments, and that's like, you know, this kind of business that you would think at some point will have aged out, and we just don't see any signs of it. Anyway, long-winded way of saying, feel pretty good about the way we've positioned ourselves for a number of different eventualities.
Great. I want to dig into sort of the energy business and what you just talked about, but let's just quickly talk about capital allocation. You know, you've acquired a few businesses over the last few years, and I thought you made an interesting comment in the last quarter call around potentially pruning the portfolio. Just talk through that. How are you thinking about opportunities to trim, reallocate resources, any particular businesses?
Sure.
Just kind of help us think through that.
Sure. I think, first of all, when I step back and look at the macro environment, the macro environment for M&A is, I think, gotten much more difficult. We're in the middle of a, what would I call it? A disagreement with the U.S. government over our trying to buy the company, Black Knight. I've. Maybe it's kind of immediacy bias, but being immersed in that process, we're also seeing, you know, other companies having M&A issues in the U.K. and the EU. I built this company, my colleagues and I built the company in an environment where, particularly for the last decade, we had pretty low cost of capital, very low cost of capital, and pretty open opportunity set in terms of doing M&A.
It feels like that window may have closed or be closing. That said, you know, doing dispositions as well as acquisitions, you know, any potential buyer may face that same dilemma on shedding assets. We're doing a lot of thought about, you know, what should our footprint be? Are there future businesses that we should acquire, or can we build, and are there future businesses that we should shed, or should we reduce capital to them if we can't shed them? You know, that balance is something we kind of enjoy because we're known.
We've done over 50 acquisitions, so we're known, and we think of ourselves, our DNA is looking at other businesses and thinking about how we would operate them better or more efficiently, including our own businesses. Things can kind of age out or the environment can change, we really do think a lot about pulling capital internally from businesses that aren't growing and putting them in areas where we do think we can organically grow. It's kind of a non-answer other than the sense the environment, I think, is a bit different right now for everybody in the financial services.
Let me try. I'm trying to pin you down on a more-
Okay
Specific answer. Any of the segments where this would be more impactful? Is that exchange segment, mortgage segment, fixed income?
No, I think, you know, in doing a lot of acquisitions, you know, part of the skill set there, that domain knowledge that we have as a company is convincing other entrepreneurs and business executives that our businesses, coupled together, would be more valuable to our customers than us apart. we, you know, we look at all of our businesses thinking if our own businesses were paired with another management team or another asset pool, would they perform better? Would we? You know, I started ICE. I was the 100% owner, and I diluted myself down to be a minority owner.
So my own mindset, I, you know, and I did this in the dot-com era before you could have Class A and Class B shares and all this other stuff. My own mindset has always been I'd rather be a smaller owner of a better business than a big owner of something that's not that interesting. So I don't have a bias that we need to manage it or own it, and haven't since we started the company, honestly. So it's more about, as an owner, more about how do we create more value?
Okay. Let's dig into your sort of energy business. A few challenges in 2022, Russia, issues in Europe. 2023 has been.
I would call that a challenge.
Yeah. Yes. 2023 is off to a, you know, a pretty good start here. Just talk through what's changed, then talk through how you think about the outlook for the energy markets and energy in general.
Sure. You know, if you don't follow us closely, we have about 1,000 listed commodity contracts on our exchange. To put that into context, we acquired the International Petroleum Exchange of London in 2001, and it had four contracts. In the last 20 years, the market has dramatically expanded the amount of tradable assets in the energy space. You know, the flagship contract used to be crude oil for energy.
It still is crude oil. If you say, "What are those other 999 contracts?" It is all about an energy transition that's going on, you know, particularly energy transition away from petroleum products in the West and still emerging markets, China and Indonesia and Vietnam and other areas that are still projecting growth, that are still consuming largely fossil fuels. There's this kind of. You know, we really represent a portfolio of products that the world can use to try to grow and transition simultaneously. There's been so much more focus on that in today's world than there was 20 years ago that it's broadened the opportunity set. Consequently, you know, going back to my opening comment, which is amazing how sometimes these markets can grow.
It's really been growing by more product that is of interest to more people. We've never felt better about the energy complex. I throw in that, you know, environmental products, renewable energy, carbon emissions, SOx and NOx emissions, all of that is part of a broad portfolio of energy transition. Which was tested last year by the Russia conflict and Europe having to scramble to, you know, and sort of doomsday scenario, where they weren't gonna have enough energy, and people were going to have problems freezing in the winter and essentially, chaos in society, due to access to energy. They navigated through that. A lot of it was this movement to a greener energy with globalizing natural gas.
Simultaneously, Europe has a carbon cap and trade program, and there was a lot of talk, and the market price of carbon went way down because there was a lot of talk that Europe was going to be forced to abandon its emissions and energy goals. Both a society and a government, they did not abandon those. Now you see, energy, you know, transition products coupled with the emissions products are kind of doing, you know, record volumes. It was kind of the ultimate test, if you will, of, you know, would some of these products survive?
The answer, I think, is overwhelmingly yes, which gives us tremendous confidence, I think, and the market, tremendous confidence that this portfolio of products has got a lot of upside potential.
Right. kind of one of the products that, I think you've spoken about in terms of, long-term opportunities, nat gas-
Yes.
The potential globalization of that product. Where are we in that evolution?
Yeah. Natural gas, you know, when we first started, the company was a regional product and delivered in pipeline in whatever region the pipeline went to. But now we always thought it was gonna go global, which means that all prices get benchmarked against other prices, relative to transportation costs and delivery costs. The market was very calm about it, if you will. You know, at one point, the Europeans said, "We're gonna put price caps in and some other financial controls," and none of that had to be used. The market worked, you know, pretty flawlessly, actually. I think to say, where are we?
I think, you know, the globalization got tested, and it worked. The supply chain so quickly. You know, we all kinda got used to, after COVID, supply chains being interrupted. The energy supply chain, if you think about what went on in Europe, it, you know, quickly, tankers turned, went another direction, you know, gas was liquefied and moved, and God, it was almost instantaneous supply chain changes. I feel like it validated this notion of having a globalized energy market in ways that weren't necessarily obvious to everybody before.
Is that more of an opportunity, revenue opportunity for ICE?
Yeah, absolutely. Absolutely. It's not just natural gas. We trade a crude oil grade called Brent, which is the world's price of oil in our mind. Brent was a oil field in the North Sea off of Norway, and there's really no more Brent in the Brent index that we trade. We just recently, with the industry, are adding U.S seaborne crude oil to Brent. Now Brent is really the price of global oil, including U.S. oil. It really has evolved now. We always thought of it as the global price of crude internally, you know, 'cause we had that ego. But now it truly is.
It is amalgamation of all these various grades, high-quality grades, that can be moved around the world. That U.S. crude will come out of the Gulf, be shipped out of the Houston area and make its way into the world. You're having a more globalization of oil, globalization of natural gas. I would tell you that, you know, this cap and trade regime for carbon trading, which is a European regime, has now been adopted after Brexit by the U.K. Because there's a lot of interest in voluntary reduction of carbon, you're seeing, you know, voluntary use of these regulated markets that we trade, which is global.
Okay. You mentioned taking some price in action in your energy business.
Yeah.
Can you just talk through, maybe feedback that you've heard so far from the industry? Longer term, are there other opportunities to take more pricing, maybe more frequently, across all your trading businesses?
Yeah. Well, the second part of that question is, I don't know. The first part is, you know, for example, this Brent crude oil contract, which we've traded now for 22 years at our company, we have never touched the prices, essentially. Never really even thought about it. Particularly, again, recently, in more than a decade of a zero interest rate, low inflation environment, it sort of never crossed our mind, and it's only been recently, and I see this in other companies that are in our industry. It's only been recently where we're looking at our own costs rising due to inflation, where we've started to say, "Well, gee, maybe we should be raising our prices and passing those on.
Everyone else is raising prices on us, and our costs have gone up." We've just started that. Part of your question is, you know, what have we heard? The only I've heard is in meetings here today with people that are running spreadsheets, but no customers. I mean, you know, our price increases have been quite modest. Certainly, if you run a business like ours, where you have cloud costs and, you know, every once a year, the cloud provider comes in and tries to shock you at how high they can raise cloud prices, this is nothing.
Mm-hmm.
I think we've all, you know, I think in financial services, gotten used to, okay, there's increased pressure on costs, particularly in some of these tech areas, and, you know, maybe it's time we pass those on.
Does that inform you in terms of your pricing power and ability to take more pricing?
Yeah, I mean, I don't necessarily think of it as pricing power, but I do think there's an understanding by the financial services industry that we're all having to deal with our cost structures changing. You know, we have a bunch of employees that come in and say, "Well, we're gonna get 7%, 8% raises this year, aren't we?" You know, you go like, "What?" Anyway, I think there's a broad appreciation by our client base that we're all dealing with the same thing, and we're all gonna be adjusting prices, so.
Let's switch over to your mortgage business. Just curious, where are we in terms of fully digitizing the U.S. mortgage process? Then how the sort of investments you need to make to get there?
The U.S mortgage market is in one word, it's a mess. You know, we wanna digitize it. It's the most complicated transaction that a consumer will ever go through for a deal where they have the best collateral and a validated income against, you know, the borrower. Like, it's crazy. Like, we, you know, we can all go buy stupid stuff and get free credit, and walk out of the shop with it or drive out of the shop with it. When you go to buy a house that has a foundation that can't move, it's part of Maslow's hierarchy of needs on safety and security, you know, we're treated like, you know, we're aliens and, you know I don't know about you, even though it's like, well, I have 20% down.
Anyway, that's what we're tackling, and that's the root of Christian's question. You know, we have been working, going state by state, to lobby and change laws that will allow you to enter into a mortgage that's not a wet signature on a piece of paper. There's still, you know, a number of states that don't allow you to do a digitized mortgage. You know, pretty much everything else you can do, you can run off to Vegas and get married in a, in a drive-through lane, but pretty much everything else you can do, you know, you can click on something. A mortgage, in many instances, you have to have a lawyer by law. You have to have paper documents. You have to have a wet signature.
Those paper documents go into a box with a barcode into a mini storage warehouse, and are just sitting there collecting dust, waiting for you to default or refi, for somebody to go figure out where that box is and try to go get it. It's still early days. There's only a, you know, a single-digit percentage of mortgages today in this country that have gone through a digital note process. That's the opportunity. We've developed the digital note. We work with Fannie and Freddie. They accept our digital notes. A number of early adopter lenders that wanna cater to people that don't wanna buy a suit and go to a law firm to buy a house have been exploiting that.
I think, you know, COVID accelerated that the change in laws in a lot of states. It's a huge opportunity. You know, our goal is to be able to provide software that can underwrite a mortgage while you're filling out the application. Right now, it's about a 60-day process, even for the most eligible and capable. God forbid, you already own a house, and you just wanna refinance it, you know? I mean, I have a friend that was with one of the big banks. They said, "Can you send us your bank statements?" My friend said, "Well, you know, I only have one bank account, it's with you." They said, "Yeah, you know, can you print them out and send them to us?
Right. Speaking of big banks, you recently signed, I think, a large deal or deal with a large bank to replace their mortgage systems, clearly, if it's a friend's bank, we can see why. Can you talk through the sales cycle of sort of that kind of transaction, maybe what resonated most with them for them to make that move? Then, you know, I guess I'd never thought about large banks as really addressable markets.
Yeah.
Is that now becoming part of the addressable market?
I mean, going back to this monologue about the mortgage industry, it is a standardized transaction. I mean, you know, 99% of all mortgages are highly standardized. They get sold to Fannie and Freddie in the capital markets in standardized forms that people in our industry all understand. Yet, for some reason, you know, thousands of lenders have all thought that they need to develop their own code and software and what have you. Our view is, and has been, we should standardize this process, and for, you know, some high number of people, 80% of borrowers, you should be able to put them in a standardized product with this, you know, digitized information that could be readily available to the decision-makers.
A lot of that sales cycle is just going into these big banks that have these massive legacy systems and convincing them that this isn't all that hard, and you don't really. You know, by the way, the rules, these are regulated federally, state, and locally. The rules are constantly changing. Having a company like ours with broad resources that can be in all these jurisdictions, and as soon as these changes are required, we can make them on behalf of the industry. We can drive standards. We've stood up with Fannie and Freddie, the need to develop standards on data standards so that systems can talk to each other and people can understand each other.
We don't have to, you know, be emailing documents and sending PDFs to one another, in a, in a common database about a borrower. That is what resonated ultimately, and, and our value proposition has been that, you know, my company owning the New York Stock Exchange, we have connectivity to almost everyone in financial services, particularly in the Western world. We have contacts, relationships. We have developed trust. You know, the notion of the New York Stock Exchange, just as a, as an icon, is that it's open, transparent, regulated, that, you know, we have cyber overlay. We deliver on what we do on time. I mean, we have completely rebuilt the New York Stock Exchange over the last five years. There's...
The technology that's inside that company is not what was there five years ago, but, you know, nobody had to. It didn't fail. Nobody had to do big investments. Like, we did that, you know, in a, in a way that built confidence, I think, in the banking sector, that we can handle complex projects, and you won't, you know, we'll take care of it all. You just plug into it. We'll deal with all of that and make it easy for you. I think it's a, it's a, it's a combination. The sales cycle was a bold vision to let's really standardize this on behalf of the industry and make the capital markets more efficient, and we have the credibility to do it.
We built the credit default swap clearinghouse and took all the credit default swaps off the books of the banks after 2009. When the government said they were toxic, we rebuilt the New York Stock Exchange. We bought this company called Interactive Data, and completely moved it off of mainframes and into our own private cloud. I mean, we've just had these kind of major projects that have involved a lot of major market participants, and over time, I think, earned their trust.
That deal, is it like a point solution, or it's a more comprehensive solution, so it's an upsell over time?
Yeah, no, I think it's a canary in the coal mine for, you know, building standardized software and mortgage has had a lot of allure over the last few years to a lot of fintech startups that could just start a company, and we could say, "Hey, you can be in the mortgage lending business. Like, just plug into this thing, and you don't have to worry about anything. We have built it all for you." It's moved upscale, and now what we've really shown the industry is that a major bank can abandon their own internal systems and just go with the standardized.
I think, you know, it's opened up the opportunity set for other large banks and some of these super regionals that have these complicated systems that were built in a different era and really aren't designed to scale with all the changes in regulation that are going on right now.
Let's talk about linking your mortgage business, your exchange business.
Yes.
Recently, I think, launched, rate lock features.
Yes.
I can get into the mortgage trading area. You know, what's industry feedback been so far? What's traction been so far?
Mm.
We could talk about, I know, longer-term opportunities for mortgage trading.
Yeah, it's gone well. The rate lock feature is basically, you know, what is the price that people entering into a mortgage today? What is the interest rate that they paid today? That information was around, but it lagged. We have such a big footprint in the mortgage market, we can put that data out in real time and show people: Here's today's rate. Better-informed consumers and better-informed lenders who are, you know, competing with one another to provide the lowest rates. The way the market is somewhat set up today is that there's a wholesale market that provides funding to the lenders, and a wholesaler will say, "You know, I'll buy your next 100 mortgages."
They basically just take a sequential number of mortgages, and then they say, "Here's the wholesale rate that I'll give you for those 100 mortgages." Knowing that right now, the average time to enter into a mortgage is almost two months. You've got the industry doing a two-month forward contract against 100 anonymous loans that, without any regard for geography or creditworthiness or anything else. We really believe you can collapse the time to enter into a mortgage to basically near real time. You take that two-month lag out of there, and at the same time, provide both borrower and lender more transparency into what the market price is. That's that rate lock feature. It's growing. We're out educating our clients as to, "Hey, if you are gonna.
If you are gonna take a 60-day forward risk, you can actually hedge that with one click, and get rid of that risk, and thereby you don't have to price it in. You know, we all as all those of us that have mortgages are. You know, we pay for that risk, right? It's priced into a mortgage. If we can get that out, you'll give the people that are savvy about hedging that risk, an opportunity to be more aggressive. We're seeing early adoption. We had this same thing. You probably remember this, Christian, when in the oil industry, none of the airlines hedged their fuel risk, but yet they were selling tickets forward and locking in the pricing, but not the fuel. Today, you know.
That was a lot of work on our part to educate people how to, how you can hedge, and today it's commonplace. So we're kind of seeing that same adoption rate in the mortgage space. I think ultimately, with a collapsing of the time period, with better data and information, the notion of just somebody buying 100 mortgages sequentially will go away and the capital markets will be able to become more selective, particularly at targeting capital to low-income households and geographically, you know, disadvantaged places, which is what a lot of housing policy is about. The infrastructure to implement that policy is poor, and I think the capital markets can fix that. I think we're going a long way towards fixing that.
That's great. Do you think of that, the mortgage business, obviously, the rate dynamic, does that allow you to get into a broader interest rate business in the U.S. again, or is it just the mortgage-?
Yeah.
Mortgage ambitions?
No, I think, you know, exchanges broadly, if you say, why is it a company has the word exchange in their name, why is it in the mortgage business? Exchanges broadly are in the interest rate business. Most exchanges, including ours, but most exchanges, the core of their product set is interest rate. You know, we've talked about energy, which is not directly interest rate specific, but is highly inflation specific. You know, commodities, by their nature, will reflect inflation. To the extent you say inflation and interest rate policies are directly correlated by federal banks, central banks, then really almost all exchanges and capital markets are in the interest rate business.
We've gotten used to, and probably most of the people in this room have gotten used to the idea of a whole market for corporate borrowing called bonds. In our case, we also have credit default swaps, which is protection against default protection against corporate borrowing. There really is very little in consumer borrowing that has made its way onto exchanges or, you know, other than mortgage-backed securities, which tend to get bought by interest-oriented fund managers. You know, the whole consumer side of interest rate capital markets still feels immature.
If you say, "Well, what are you doing in mortgage?" We're standardizing the cash market, the same as a standardized bond market, which, you know, I have colleagues that are very big in our industry, that are very big in an analog to digital conversion of corporate debt. No one's really focused on consumer debt. That's an area where we really feel it's been underserved, a lot of opportunity, and that's at the cash market level. A lot of what I described on how the hedging works and how the MBS market works, I think will dramatically change if we can bring more transparency to the cash market.
My company's in a tremendous position to help lead change and innovation in the capital markets, which could be many multiple times more valuable in terms of scale and size than the cash market.
Okay. I hear sort of a new sort of market, consumer rates, as opposed to challenging CME's monopoly and-
Yeah.
Functional rates.
Well, I, you know I mean, when I got into the business, I learned about CME. They're incredibly, you know, they own the U.S. trading markets, and one of their big markets was Eurodollars. I, you know, I came from outside finance when starting this company. I didn't know what I didn't know, and I was like, "What the hell is a eurodollar?" I thought it was a euro versus a dollar. I thought it was a foreign exchange pair. It's a name for an interest rate, and a eurodollar is used to hedge all kinds of stuff. It gets used, you know, to hedge people that have equity portfolios who use it for some interest rate hedging.
Anyway, it's a pretty crude. It's a great product, and I don't mean any aspiration, you know, anything negative against CME, but it's a pretty crude. It's like a one-size-fits-all product. I actually think, you know, we used to have four energy contracts, now we have 1,000. I actually think that there will be much more specificity in the ability to create products in the interest rate environment that will be much more targeted. In the area of consumer debt, particularly mortgage and lending, you could extend that to automobiles and other kind of consumer behavior, but there. I don't know. It's a pretty crude market right now that I think can be some differentiation.
Honestly, as there is more differentiation, just like there's more differentiation in energy, Brent crude is trading at sort of all-time volume highs. I think, you know, eurodollars may trade at all-time highs, too. In other words, these things can be additive and cause the whole ecosystem to grow.
Interesting. You mentioned the CDS market. That's been a real boost to growth in sort of recent quarters. Is that sustainable? Is it just a function of we're in a higher rate environment, or is there something more that's driving that growth?
Yeah. Well, credit default swap is default protection. In a zero interest, going back to our all-weather concept here, you know, mortgages do great in a zero interest rate environment. Credit default swaps do terribly because nobody believes anyone is gonna default on zero. Now you've seen this kind of shift, right? Where, okay, consumers at 5% interest rate environment don't wanna take out a 6% or 7% mortgage. Or they're doing that less and less, unless there's a real need of moving or family formation or what have you. But similarly, there's more concern about corporate credit, and so people are buying more protection. I think, you know, that market can grow, honestly.
I think, you know, there's a lot of exposure to corporate debt in the world that we've taken on as a society, as a Western world, a tremendous amount of debt over in a zero interest rate environment. You've seen people sort of saying, "Wow, maybe I should buy a little protection." Just as an aside, we don't. One thing that we don't host is buying protection against the U.S. government's debt, but pretty much every other debt. You know, hopefully, we'll have a good outcome here on. We don't have a direct exposure to that. No one has been willing to insure that in the market yet.
Great. Okay, let's switch over to technology a little bit. There's a few questions from the audience, let's just do technology first.
Okay.
Cloud, certainly your peers have made a lot of noise around strategic partnerships. CME, ICE, CME, LSEG, have all done, Nasdaq, have all partnerships with the major cloud providers. You have not, unless I've missed something. What's your strategy with cloud? Why do you think it's better or worse than what your peers are doing?
Yeah, our strategy, as long as I'm around, my strategy is to not do a deal with a cloud provider. I've gotten an opportunity to meet some of my colleagues that on the management team, we've gotten to meet a lot of very senior people that sell cloud, who don't like us talking about this. I'm kind of sad that you asked me in a public forum, honestly. It's the one cost that we just cannot control these costs, that we do touch the cloud. The rate of growth of those costs is double-digit. Where we do touch the cloud, they have us over a barrel, and we have tense negotiations, and I don't wanna put my colleagues in that position.
We wanna be cloud agnostic. We basically run our own cloud. We have the luxury of having this, the massive data center infrastructure, partly because of the New York Stock Exchange. Pretty much every financial services company in the West is hooked to us. We have a massive data business. We package the, you know, and resell the data from most of our competitors and most of the people in financial services. Most brokers are on this network. It's very hard to think of somebody that isn't connected to us.
We basically say: If you wanna come to us, if you customer wanna come to us on your cloud provider and attach to our network, we'll happily be cloud agnostic and let you take our stuff on your cloud, but it's your cloud, and you're paying for it.
Right.
I'm also, just separately, you know, the cloud providers are also now dabbling in this realm of language intelligence, loosely called ChatGPT. You know, we're in the business of providing information and data, and I don't really wanna be, you know, providing in, you know, the sustenance for those things until we understand, you know, what the ownership and the copyright and revenue model is around those things.
How do you think about AI and ChatGPT broadly? Any opportunities?
We've prevented it from being used inside our ecosystem. We've cataloged all of our data sets and information and put custodians around them so that our colleagues can't inadvertently put our information into the public domain to be used by one of these things. We've been weary of them. I think they are I, they, you know, they are the future, but I just don't think that the contractual relationships around them and the AI providers, our customers, and us have been sorted yet. I don't wanna inadvertently put something of value into that ecosystem without full knowledge. We have been a massive builder of artificial intelligence tools.
We never called them that or thought about them as that, but our compliance tool, you know, If you trade on the New York Stock Exchange, you know, there are all kinds of tools that are looking at your behavior, that are looking for pattern recognition, that are learning about trading behavior in real time, identifying things to our colleagues. Compliance, particularly on all across Wall Street, has long had this kind of learning capability. We have a chat tool that used by over 100,000 customers that recognizes as you're chatting about Wall Street activities. It understands if you're talking about a trade, if you need, you know, it offers up.
It's a bit like one of the bots that you see sometimes where it says, "Are you really interested in buying a car today? Donna would love to talk to you." You know, it's one of those things, but it is artificial intelligence, and it learns from our own data set. we're leaning into our own capabilities because it may be rewarded by you all in the future. It's kind of been ignored, and it's been more of a courtesy for customers.
Crypto, you were very early invested in crypto-
Yes.
This is Bakkt, I guess what you use
Coinbase.
Coinbase as well. Yes. What's your view on crypto today? Obviously, Bakkt has had a lot of struggles, quite frankly. Would it make any sense to, I don't know, bring that back in-house, support it financially?
We got involved early out of fear. We, you know, we met a lot of these young, you know, talented, aggressive entrepreneurs that were starting to talk to us about, you know, deconstructing finance and distributing it globally. We thought, "Oh, my God, we're gonna go out of business, you know? We better learn about it, and if this is gonna happen, you know, we better deconstruct ourselves." We became convinced pretty quickly that this was not a threat to us, or any finance, that there was. Broadly speaking, the industry didn't understand compliance and regulation and the infrastructure of finance and frankly, you know, how distributed the infrastructure exists today.
Like, if you trade on the New York Stock Exchange, that information is distributed in, you know, a nanosecond, or I should just say in record time, to a whole number of people that need to know, including you. it's stored. You know, the notion of distributing a massively distributed database sort of already exists. you know, we do 350 billion transactions today just at the stock exchange, so it's done at scale and, you know, and records held for years and highly reproducible and so on and so forth. We quickly came to the conclusion that having an indelible record of everything you do is not really particularly valuable.
I got concerned that, you know, the only indelible record is your birth, your death, potentially your marriage or your property ownership. You know, the blockchain is ultimately going to be a human tracking device. I really didn't want to be involved in it, honestly. We decided to spin it out, and we decided that what we do, and it's a company called Bakkt, and we're a majority owner of it, but it is a public company run by others. The one mandate we had for them is stay within the regulated lanes of crypto and blockchain work. So, you know, they've done a very good job to their sadness, I think there hadn't been a huge demand for regulated crypto.
I think the market is coming to them. You know, they have a banking license, you know, a licensed custodian, a broker-dealer license, 50 state money transmitter licenses. Like, that's all the infrastructure that a regulated crypto infrastructure needs, and so I think they're well-positioned, honestly. The question is the timing right? They have about 6 million, I think, customers they're saying now, so it's, you know, it's nonzero. I'm proud of that mandate and that they've stayed true to it we all may.
As we all get, as these deepfakes, you know, if two years from now there's somebody that looks like me and sounds like me and wanes on and on and on about big thoughts, you know, you'll be able to check on a blockchain to see if it's really me.
Scary.
That's, where we're heading.
You know, time is really running out here. Let me just try and get a few audience questions in. There's a couple on the fixed income business. I guess one is around the execution business and fixed income.
Mm-hmm.
How are you thinking about growth there?
Yeah, we were late to that business. We've talked openly. I've talked openly about that. So we found a underserved space, which was in, you know, tax-exempt debt and government debt. If you think about that's, you know, Who wants, you know, tax-exempt bonds? It's wealth management, it's family offices, it's small institutions. They're taxpayers. So that business has been doing well in an environment when interest rates are going up, and people are worried about their taxes and, you know, tax rates look like people are thinking they may be paying more taxes, and it's harder to find yield.
it's done well when we've been able to broaden its footprint into more traditional institutions that are not ordinary taxpayers because they actually, you know, it is a debt instrument, and for funds and institutions that are looking to have a broad portfolio of asset holdings in the debt space, in the fixed income space, it's become an appeal. again, we're leaning into our network of knowledge of institutions on Wall Street and expanding that beyond wealth management. it's paid some dividends for us.
You know, I think that's a business where we hope that, you know, in a, in trying to create an all-weather name, that it'll continue to do well in a high interest rate, high tax environment, you know?
Right.
Where some of our other businesses may not.
Good. As with fixed income on the, on the data side.
Yes.
ASV growth has slowed from historical mid-single digits. Just thinking about growth prospects there and sort of pricing power, particularly because that business and IDC, it's a lot of mission-critical compliance data.
It is, yeah. It's funny 'cause it, you know, a little more than a year ago or so, a lot of the fund managers, many of you in the room may, you know, either be those or work with those fund managers, in fixed income, got kind of sideways, and we just saw, like, the market step back and say, "We're not gonna sign long-term agreements. You know, we don't or we don't know if our volumes are going up or down." There was kind of this pause. Now, it. Then we were all saying, like, "There's gonna be a recession. Oh, it's gonna be in the first quarter of 20.
You know, fourth quarter of 2022, the first quarter of 2023, first half of 2023, now, second half of 2023. There's kind of been this, I don't know, pause that we see when we're talking to like-minded, you know, executives, like many of you in the room. Suddenly, you know, now it feels like, all right, well, maybe we'll have a soft landing, or maybe there won't be a bad recession, or I'm tired of talking about a recession. Maybe there won't be one or whatever. I don't know, you know? It feels like suddenly as a society, we've gotten used to 5% interest rate, and, hey, it's not so bad, and I can live in this world.
If things feel a little better, I don't know. I don't know if you've sensed that, but it's kinda not all gloom and doom. Like, you know, if you go to a party and somebody asks you about a recession, you go, "Yeah, we might have one in the fourth quarter," you know? I mean, you kinda shrug it off. I don't know. Anyway, that, you know, that when you say: Well, okay, as you contract with people who put real money behind those thoughts, what do you see? It's that. Seemed to be a bit of a pause. Feels a little better now.
Good stuff. I actually have a bunch more questions, but we're out of time so, I'm gonna have to end it there. Thank you so much, Jeff, as always.
Thank you.