Earnings Call: Q1 2012

May 2, 2012

Good day, ladies and gentlemen, and welcome to your ICE First Quarter 2012 Earnings Conference Call and Webcast. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, today's conference is being recorded. I would now like to introduce your host for this conference call, Ms. Kelly Loeffler. You may begin, ma'am. Good morning. ICE's Q1 2012 earnings release and presentation can be found in the Investors section of our website at theice.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 judgment 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 the company's Form 10 Q, which was filed with the SEC this morning. With us today are Jeff Sprecher, Chairman and CEO Scott Hill, Chief Financial Officer and Chuck Veiss, President and Chief Operating Officer. We'll conduct a question and answer session after our prepared remarks. I'll now turn the call over to Scott. Thanks, Kelly. Good morning and thank you all for joining us on the call today. ICE is off to another strong start in 2012, delivering record results including solid revenue growth and double digit earnings and cash growth. These results are on top of last year's double digit growth and continue to differentiate ICE from our competition. I'd like to start this morning on Slide 4 with an overview of our Q1 performance. As a result of our focus on top line growth and expense discipline, ICE again delivered record revenues and record net income. Against what remains a challenging market and economic backdrop, we continue to deliver growth on top of growth. Revenues in each of our business lines grew, including in our futures business where strong revenue capture trends mitigated soft volume. Volatility in natural gas and the continued migration of bilateral oil business into clearing drove strength in OTC Energy And the addition of new clearing members and continued expansion of our electronic capabilities enabled our CDS business to grow. Importantly, a growing number of participants are looking to ICE to help them manage their risks and meet regulatory requirements in an efficient manner. So as we continue to develop and expand our existing businesses, we are also constantly developing the next set of opportunities with recent examples including our Brazilian Ventures, FX Clearing and efforts around European natural gas and power market. ICE remains focused on delivering current period growth even as we invest in these longer term enablers of our future growth. Moving to Slide 5, I'll detail our Q1 results. Consolidated revenues rose 9% over the prior Q1 to 3 $65,000,000 Operating margins expanded to 62% enabling operating income to grow 11 percent to a record $225,000,000 Net income attributable to ICE rose 15% to a record $148,000,000 and earnings per share were $2.02 up 16% year on year. Capital expenditures and capitalized software totaled $15,000,000 and cash flow from operations rose to $186,000,000 Turning to Slide 6, I'll review the components of our consolidated revenue and expenses for the Q1. As noted earlier, each product category grew during the quarter. Futures revenues rose 1% to a record $160,000,000 OTC Energy revenues increased 19% versus $123,000,000 on strong natural gas and oil volumes. And OTC credit contributed $40,000,000 the 3rd consecutive quarter of year on year revenue growth. Taken together, consolidated transaction and clearing revenues increased 8% to $322,000,000 Market data revenues grew 24% to a record $36,000,000 as our customer base continued to grow and expand globally. Let's move to the right side of Slide 6 for a look at our consolidated expenses. ICE's 1st quarter operating expenses rose 7% to $140,000,000 We improved operating margin to 62% compared to 61% in last year's Q1. Comp and benefits expense rose 10 percent on increased employee headcount, which supports our growth initiatives and regulatory reform implementation. SG and A expenses include $2,000,000 related to the cleanup of some UK indirect tax matters, which we anticipate will not be a part of our run rate expense in subsequent quarters. And finally, as previously disclosed, we had $3,000,000 of acquisition related expense reflective of the M and A component of our growth strategy. This amount was in line with the prior year and we expect this expense to again be in the range of $3,000,000 to $4,000,000 in the Q2 this year. Disciplined investment remains a core part of our growth strategy and we continue to expect 2012 expense growth in the range of 3% to 6%. We believe this expense level will continue to support our double digit earnings growth objective and our strategic initiatives. Moving to Slide 7, I'll walk through our future segment performance. While we achieved record revenue for this segment during the quarter, average daily volume or ADV declined 3%. The largest decline came in the WTI crude futures contract following the continued shift by customers to the benchmark Brent contract. In addition, this year's quarter saw reduced oil market volatility following the Q1 of 2011 geopolitical shock, including the earthquake in Japan and Middle East unrest. Nonetheless, we recorded double digit volume increases in Brent, European natural gas, emissions, U. S. Heating Oil and Gasoline. We also continue to grow our options complex. Gasoil volume declined modestly from 1Q 2011. This was primarily due to lower volatility, but also due to supply shortages that reduced physical inventory. We're working with our customers to develop a global diesel market through the new ICE low sulfur gas oil contract as the physical market begins to move to lower sulfur content product. We believe the relevance of this new contract will further enhance our leadership position in this market and anticipate the transition to occur over the next year or so. European emissions volumes rose 25% from the same period 1 year ago. This is on the heels of 23% volume growth in all of 2011. The catalyst for emissions continues to be Phase 3 of the European Union Emissions Trading Scheme, where more industries and companies such as airlines will be required to participate in the market. And building on the momentum we've established in this market, last month, Ice Future Europe was awarded the UK auction platform mandate to serve as the venue for auctioning Phase 3 and EU Aviation credits later this year. Moving to agricultural contract, we've seen improving levels of OI over the past few months, which has resulted in strengthening volume in many of our Ag contract. Sugar futures and options volumes were off 6% year to year in the Q1, but grew 14% in April, due in part to a slight recovery in the trade financing issues that have impacted that market. Ad revenues in the quarter generally benefited from strong revenue capture as you can see on Slide 7. Rate per contract in the quarter was $2.68 compared to $2.15 1 year ago as a result of a price increase in January. This increase reflects the significant enhancements in clearing and trading introduced at ICE Futures U. S. Since our 2007 acquisition. Building on our suite of agricultural contracts and at the request of market participants, we plan to launch corn and soybean futures and options on May 14 at Ice Futures U. S. And in January, ICE Futures Canada launched the Canadian wheat contract, which we anticipate will gain traction as we enter the growing season. Finally, due to volatility levels not seen in 5 years, our equity index and currency volumes were roughly flat for the quarter. The Russell futures contract, however, has outperformed among U. S. Equity index futures year to date in terms of growth and share gain. Importantly, open interest across all of our futures exchanges at the end of the Q1 was up 14% year to year, which supported April average daily volume growth of 21% as was reported earlier this morning. Turning now to Slide 8, I'll review our record OTC performance. Average daily commissions in our energy markets grew 20% to a record $1,900,000 North American natural gas revenues grew 26% over the prior Q1 to $81,000,000 and global oil revenues rose 39 percent to $15,000,000 in the quarter. In 2011, we added over 2 60 new OTC energy contracts and we continue to work with our customers to develop new products and clearing services. In the Q1, we launched 42 new cleared OTC energy contracts. The contribution from new products rose to $12,000,000 in the quarter, up from $7,000,000 in the prior year. OTC Energy open interest rose 44% year to year to a record $58,000,000 contract. In April, our OTC commissions were $1,500,000 up slightly from April 2011. In our credit derivatives business, 1st quarter revenues totaled $40,000,000 up slightly from last year's Q1. This included $24,000,000 from CreditX and $16,000,000 from CDS Clearing. We have now cleared over $30,000,000,000,000 in gross notional value of CDS and have open interest of over $1,600,000,000,000 Today, we are the only U. S. Or European solution to have cleared even $1,000,000,000,000 in notional value and the only clearinghouse to list single name and sovereign instruments. In total, ICE clears 345 CDS products, which is 200 more contracts than our nearest competitor. Finally, ISA's CDS risk model is compliant with anticipated Dodd Frank requirements, including 5 day margining and a guarantee fund that provides for the simultaneous default of the 2 largest members. We continue to await regulatory clearance by the SEC to provide portfolio margining, which the buy side community has identified as a key catalyst for them to begin clearing CDS at meaningful level. In the Q1, 62% of Creditex's revenues were electronic and Creditex's joint service offering of market known as credit fixing successfully provided settlement services for the auction of Greek sovereign debt. We are finalizing work on the development of our SEF platform for CDS as rules become final. Our experience, technology and customer relationships continue to position us well in the credit markets. Before moving to my final slide, I'd like to emphasize a very important point about our track record of growth. Our solid revenue growth in the first quarter was driven by strength in OTC Energy, despite futures volume declines and a soft CDS execution market. We've built the business though capable generating growth on growth without depending on any single product, asset class or business segment. As a prime example, our April revenues grew double digits despite a pullback in OTC Energy due to very strong futures volume. This balanced business model is yet another important competitive differentiator for ICE. I'll conclude my remarks on Slide 9 by highlighting our strong financial position. In the Q1, cash flow was $186,000,000 up 19% from 2011. We ended the quarter with nearly $1,000,000,000 in cash, no net debt, low leverage and access to a committed line of credit of $1,800,000,000 We repurchased $175,000,000 worth of shares at $113 a share in 2011. Today, we have over $330,000,000 remaining under our current share repurchase authorization. As a result of our strong balance sheet and cash generation, we are well positioned to continue to invest in key strategic growth initiatives and expand our existing businesses. And we will continue to opportunistically repurchase our own share. As always, our investments will be disciplined and driven by commitment to deliver industry leading returns on investment that create meaningful value for our shareholders. With that, I'll be available to answer your questions during the Q and A. Jeff, over to you. Thank you, Scott, and thank you all for joining us this morning. With record revenues and double digit earnings growth in the Q1, 2012 is off to a strong start. In spite of the economic headwinds and as we enter the 4th year of financial reform discussions, ICE's diverse businesses and customer base remains a solid platform for growth, enabling us to thrive amid uncertainty. Our strategic diversification has resulted in sustainable growth and earnings consistency. You can see that playing out already this year. While our Q1 was driven by the OTC segment, double digit growth in April was driven primarily by strong futures volume. We continue to focus on solving the complex problems that come with change so that our customers can do more business. We also recognize that as a company, we're not finished growing into our opportunity set. One example is supporting compliance with financial reform. This is an area where we've already added value. With rising demand for risk management and particularly in the area of commodities, ICE today is probably the best positioned exchange to support the continuing evolution of global markets. This is why I've been spending a lot of time in conversations with customers to understand their needs and also spending time with policymakers to help them understand our customers. So those are the 2 things I'd like to cover this morning. ICE's responsiveness to financial reform and the expansion of our futures and OTC product sets. Last month, the CFTC finalized certain of its rules on swap related definitions under the Dodd Frank Act. More information on EMEA and MiFID II policies were recently published in Europe. And Singapore published a rulemaking draft for comment. Each step in the regulatory rulemaking process is providing more visibility for market participants to adjust their businesses and we're working to support them. While a great deal of regulatory work remains, you can see on Slide 10 that ICE is working to finalize a number of compliant platforms and systems. We're developing SWAP execution facilities for energy and credit. And we've delivered a SWaP data repository for regulatory approval and testing for which we now have over 250 firms enrolled. We recently announced the results of our program to manage high frequency traders. Our innovative program encourages efficient trading and has proven extremely effective in ensuring high quality markets. During the quarter, ICE announced the expansion of our OTC clearing services into the market for non deliverable forward foreign exchange contracts. We signed agreements with 10 of the largest global players in the foreign exchange space, each of whom has made a commitment to the new clearing venture. Over the last year, we developed this clearing solution alongside dealers, buy side, FX trading platforms and connectivity providers to provide straight through processing support. We will initially clear 7 NDF contracts. This FX clearinghouse will have a dedicated guarantee fund and our customers are in the final stages of testing the margin calculators and other processes right now. We're seeing broad interest from participants that wish to voluntarily clear well in advance of regulatory mandates. And for the broader area of OTC execution, we work closely with market participants to solve for execution certainty and counterparty credit checks by introducing our PlusOne workflow that will be made available to SEPS. In the same collaborative practical way that ICE created the industry's leading CDS clearing solution, today we cleared the majority of clearable CDS at $30,000,000,000,000 in cumulative grossional notional value as of last week. We anticipate that ICE Clear Credit will be designated as a systemically important financial institution in the United States and we believe we're very well prepared for that based on our leadership in swaps clearing. We worked extensively with the Fed and with the CFTC and SEC. These are just a few examples of solutions and the experience that we have supporting our customer needs as it relates to regulatory change. Now like to talk a little bit more about how we're expanding our product set. In 2011, half of ICE's revenues came from outside the United States. So year to date, we've announced new products ranging from U. S. Agricultural contracts to Asian oil swaps. We've rolled out dozens of new cleared products already this year. And with a record $12,000,000 in new quarterly product revenue, you can see that these product introductions continue to be meaningful. In our North American natural gas markets, we had record volume in the Q1. Despite prices reaching 10 year lows, volatility was strong and it drove robust trading. We're now in the seasonally quieter shoulder months of April May, but we continue to see solid demand for hedging and trading of U. S. Natural gas. Please move to Slide 11. Let me update you on our oil markets. In April, ICE Brent Crude was the most heavily traded crude futures contract in the world. Brent continues to grow in its role as the most widely relied upon oil benchmark, pricing approximately 70% of international oil. Brent derived its physical price references from contiguous deepwater oilfields off the coast of Norway and the UK. This contract has continued to evolve since 1990. And as changes take place in the physical market, the role of our exchange is to ensure that our futures contract properly reflects this underlying market. So following extensive consultation with the industry last year, ICE Futures Europe created the BrentNX contract to reflect the extension of the physical price assessment window. We anticipate growth in the BrentNX volume in the back half of this year as we move closer to the December contract, which is the 1st monthly contract that we list. In April, rent futures and options volume increased 43% and reached a new open interest record. Volume in Brent options were up roughly 5 fold in April compared to the prior year. And while the Brent TI spread may temporarily narrow with the reversal of the Seaway pipeline, we believe that we will continue to see solid growth in Brent whether or not the active trading of the Brent TIR returns to our market anytime soon. Our gas oil contracts, which serves as the global benchmark for the middle distillate and diesel market, has overtaken U. S. Heating oil in trading volume, primarily due to the increasing importance of hedging transportation fuels. The physical diesel market is 3 to 4 times larger than heating oil, which has increased the relevance of gas oil as a hedging device. The gas oil contract serves as the basis for an active over the counter swap and spread market against other refined products like jet fuel and heating oil and is the pricing basis for imports from the Middle East, Asia and Europe. ICE's share of middle distillate futures trading grew from approximately 30% in 2,001 to roughly 70% today. Moving to Slide 12, I'll update you on our newer initiatives. We continue to build out trading and risk management infrastructure in Brazil, where we're supporting the development of local markets that are transparent and liquid. One area of focus is our involvement with Satit. We announced last week that our 2 companies are working together to develop and launch a Brazilian fixed income trading platform. The platform will launch later this year and it will bring automation and other efficiencies to the fixed income market. Also in Brazil, volumes on our BRICS venture for trading OTC Energy continue to rise at a healthy rate. We now have approximately 100 firms that are enrolled on that platform. Another new initiative relates to our global positioning in commodities. At the request of market participants, we will launch corn and soybean futures contracts on ICE Futures U. S. With the top 2 commodity exports from US to Asia being cotton and corn, this will round out our agricultural markets with key contracts. Because we can introduce contracts at low incremental costs, this is a natural product extension for the exchange and it's based on customer demand. The launch follows the introduction in Canada of wheat futures on Ice Futures Canada in January and it builds on our existing suite of agricultural products including sugar, cotton, canola and coffee. Last week, the Griffin's Market Group, a new firm that's founded by former senior executives from Spectrum Group announced that it will launch a multilateral trading facility or MTF in Europe with trading technology that's being provided by ICE. The management team at Griffin has deep experience in the European OTC Gas and Power Markets and they will launch a firm under the MTS designation within the changing European landscape. Griffin expects to begin in the Q3 of this year subject to approval by the UK Financial Services Authority. Our venture with Griffin follows on our past decisions to provide technology to NGX for bringing transparency to the Canadian physical natural gas markets, to interdealer broker iCap for use in electronifying the European oil swaps markets to the coal industry platform Global Coal for trading coal futures contracts in Europe to the BRICS exchange for trading Brazilian electric power to McGraw Hill Platte for assessing the price of global oil markets and Toussaintit for improving the processing of the Brazilian fixed income markets. Our robust technology and infrastructure capabilities are valuable competitive advantages, which is why we provide our technology to 3rd parties on a targeted basis. When we look at entering new markets, we make a buy versus build decision. And if we can find entrepreneurs that are more likely to be successful building a business than ICE alone, we back them with our technology under terms that are consistent with our long term goals and our long term revenue model. This idea of providing entrepreneurs with technology for startup initiatives follows, for example, the successful use of this strategy providing technology to the European Climate Exchange, which we acquired in 2010 and which for years has been one of our fastest growing businesses. We continue to grow by leading with our strengths across global exchanges, OTC Markets and clearinghouses. These businesses are delivering top line growth and our diversity is a strategic advantage. We remain focused on our 2012 double digit earnings growth goal and we began this year by delivering earnings that were up 15% on the Q1 on single digit revenue growth. Our top line revenue growth accelerated in April with double digit growth, giving us confidence that our strategies remain sound. In our annual shareholder letter this year, I posed the question, what is our business? While a basic question, in a dynamic environment this question is more important than ever. And having delivered the best revenue and best earnings quarter in the company's history, we cannot rest on this success. That's why this year we've already launched a swaps data repository, announced the FX clearing initiative, the Satip fixed income platform, the Griffin Energy MTF, the new grains contract and dozens of new contracts in our core markets. We cannot and have not waited for an economic rebound to deliver results. To conclude, I'd like to thank our customers for their business in the Q1. And I'd also like to send my best wishes to Craig Donahue on his retirement. And let's hope that he didn't get up early this morning to listen to this call. And finally, I'd like to thank the ICE team for delivering what is the best quarter in the company's history. So I'd now like to turn the call over to the operator to conduct a Q and A session and Scott, Chuck and I will be here glad to take your questions. Our first question comes from Rich Repetto with Sandler O'Neill. Yes. Good morning, Jeff and Scott, and congratulations on another record quarter. Thank you. I guess the first question, Jeff, and we got to ask it on the OTC Energy Commissions. Can you give us a little color on the $1,500,000 per day? Is that the trend from the last quarter? I know it was $2,000,000 in January or plus $2,000,000 in January. Is this something seasonal or is this just could you just give us a little bit more background on what you know about behind the number? Sure. It's all hard to predict volume as you know that and you're in the business of trying to do that unfortunately. The Q1 obviously started off very strong as natural gas in the United States broke below $2 I think at that point you had a lot of people that had shorts on the market and have been riding the price down from 14 and they decided to take their money off the table. But what we saw after that trend was that at this low price, the daily movement of natural gas on a percentage basis is pretty high. And so you have a relatively volatile commodity even though the absolute price is low. We're now in the shoulder months where trading is normally soft. We are up year over year. So there's still growth in these markets. We have high hopes that volatility is going to continue for a number of reasons as we move into the typically more robust summer season. First of all, we're going to be moving into the hurricane season. We haven't had hurricanes that have moved through the Gulf of Mexico for the past few years. But the April October APAC spread, which is a commonly traded shoulder month to shoulder month spread, had one of the highest delta prices that we've seen in a long time. So the market is expecting for gas prices to rise as we go through the summer. Having that expectation is a good thing because it means somebody will be right and somebody will be wrong and I suspect it will create volatility and you couple that with the potential or not for hurricanes. And I think we could see continued volatility and hedging and trading going on there. I would also mention to you that we've seen a number of analysts, including Goldman Sachs, come out and say longer term trends for natural gas is for upward price. So given that you have those view whether they're right or not given that you have those views in the market it will mean that people will be taking trading positions and all of that should lead to more volatility which ultimately should lead to more volume for us. And Rich, just the risk of being a little bit defensive too, I've watched all the notes fly out since we started the call about great quarter, but OTC at 1.5%. I'd remind people that OTC was good in the Q1 and futures were a little bit soft and we grew 9% and double digit earnings. We remarked both Jeff and I on the call that despite OTC being at 1.5%, which is growth year over year that we had 21% volume growth in our futures business and grew double digit revenue in April. So we don't actually manage the business to one number and certainly not the OTC number as a sole metric. We manage the business as a whole and we built the business that grows despite any single business on a constant basis. You look at the earnings performance across the competitors for this quarter and you would be hard pressed to find anyone else who put up any growth at all, much less growth on top of growth. So while we do recognize the importance of the OTC Energy business and we're happy to have a great January February in that number, We don't run the business just along OTC Energy lines and we feel pretty good about the 1st full months of the year. Okay. Your points are well taken, Scott. Just the one follow-up, Jeff, you're known for your innovation and you spent, I think, probably more time sort of outlining your OTC initiatives on in Slide 10. I guess the one question would be, can you give us the revenue model, where you see the revenue opportunities and the things that you're doing and just the basic general revenue model from any of the initiatives you think are the most important? Yes, sure. First of all, we recognize that the earnings power in this company is to have variable revenues against fixed expenses and that we need to manage those expenses. And so on any initiative that we do, we are not particularly interested in, for example, in licensing technology or software for some fixed fee. That's just not our model. We want to be market participants. We tend to do best in businesses that we can help create as startup businesses because we've been very, very good at developing new markets and we have great relationships with customers. So on all the things that I mentioned, whether it's the new clearing for FX or whether it's helping Griffin move into the OTC Gas and Power space in Europe or whether it's in Brazil in both energy and fixed income. All of those are areas where we have done licensing deals that are consistent with our model of driving earnings growth. I think all of them are important and largely they are you can put them all under one umbrella, which is there is an overarching trend of large institutional traders wanting more automation. They want to rely on technologies that they know and understand. There's a movement of business towards the good incumbents that are in the space And some of it is being driven by regulation and much of it, however, is being driven by cost control in a world where capital efficiencies are becoming king. So we're quite excited. This is quite a portfolio and as Scott mentioned in his prepared remarks, we continue to invest in the business. We continue to have a lot of new initiatives that are going on inside this firm that we hope we'll be able to talk about on future calls because the opportunity set during this time of change is unbelievably robust. Thanks Jeff and congrats again on the quarter. Thank you. Our next question comes from Alex Kramm with UBS. Hey, good morning. Good morning. Good morning. I wanted to start off on expenses actually. It seems like it came in a little bit higher than what we and most people expected. I obviously understand you had a really great quarter here in the 1Q and maybe on the comp side, maybe you already accounted for that a little bit more. Just wanted to make sure your guidance is unchanged at 3% to 6%. If I annualize the run rate, it seems like there should be a decline coming over the course of the year. So maybe Scott, you can just flush it out where there are areas that maybe you'll see pairing back a little bit or where there was upside in this quarter? Yes. One of the things I mentioned, Alex, in my prepared remarks, I think relative to most of the models that you guys have out there, the miss on $140,000,000 was $2,000,000 And I mentioned in my prepared remarks that we had some cleanup around some UK indirect tax items in SG and A that are not reflective of our run rate expense. So I think basically to the extent you had a model that suggests we missed by $2,000,000 or $3,000,000 it's that one item that drove it and it's not reflective of where we'd be on a run rate. I reiterated the expense guidance range because we're very comfortable as we sit here at the beginning of May that we will deliver on that. And as we've said often that mid single digit expense growth 3% to 6% will support a strong top line and double digit earnings growth. So I feel pretty good about the expense coming out of the quarter. The one line in terms of growth that was a little bit higher as well was around the comp and benefits line. As you guys know, we are making investments in building out our clearinghouse in Europe and building out our compliance functions and in building out all the various technologies to address the many opportunities that Jeff just alluded to. So overall, setting aside the $2,000,000 of SG and A that won't be in the run rate going forward, I feel pretty good about the way we continue to manage our expense base. Okay, good. Thank you. And then just going to ICE U. S, seems like a lot of things happening there right now with the pricing changes and also the introduction of corn and soybeans. So maybe on the second part, you mentioned customer demand was driving that. So maybe you can flush out a little bit more. So what exactly it is customers don't like in the common market? What do you think your value proposition is to add that and how quickly you think that could actually ramp up when you talk to your customers? Thanks. Sure. Look, we know when you step back the whole thing sounds kind of daft. But the reality is that we have just been inundated by customers that have asked us to do this. We have a current agricultural business as you know and so as we run that business and gotten to know people and our relationships have deepened, we just see more and more large agribusiness firms that are dissatisfied with the current offerings and there are a number of things and I don't want to go through them because I don't want to lose our competitive advantage. But suffice to say that even given the difficulty of competing with incumbents in this space, particularly good incumbents, we really feel that there is an opportunity here. And we have seen for example the growth of our U. S. Gasoline and U. S. Heating oil futures which are look alike contracts and have been surprised by our ability to carve out market share. We probably have about a 10% share in each of those contracts. And because of the low cost of introducing contracts that's all highly marginally efficient revenue for us. And so we see the same opportunity to work with our customers here. If it turns out that all of the shortcomings of competitors are changed and we don't get a lot of volume, we really believe that working deeply with our customers to solve problems is at the root of our success and will put a little notch on our belt that they owe us 1 and hopefully it will in order to benefits at some other point in time. But net net, we're a customer driven company and customers are demanding this from us. All right, very good. Thank you. Our next question comes from Matthew Hynes with Stifel Nicolaus. Hi, good morning. Good morning. You saw a strong jump in the market data this quarter, which seems to confirm the underlying growth in your customer base. And really two things. 1, just wondering if there was any price change there that may have helped? And then secondly, what's kind of the historical lag time you've seen between the growth of data in the user base and then their participation in your markets? So yes, I'll take that. So we definitely have seen consistently over the last number of quarters very strong performance in our market data business. As we've alluded to a number of times on the call that there are other metrics, number of trading IDs has been trending up, number of customers who log on to the platform have been trending up. All of these are very good leading indicators and along with the growth NOI give us confidence that we'll continue to be able to grow the business. We have continued to adjust our pricing model and data and did again this quarter to reflect the growing demand and the additional content that we build into the products that we sell. But I would suggest to you that a larger driver is, as you indicated, continued growth in the interest in our markets. I'd be hard pressed to tell you there's a 1 quarter, 2 quarter, 3 quarter lag in terms of when the market rate of growth translates directly into volume. But I can tell you that there is a strong correlation between the data growth that we've seen and the volume growth that we also see. So it's not a 1 quarter, 2 quarter lag answer, but it clearly is a leading indicator to go along with the other metrics that I mentioned. Okay, that's helpful. Thanks. And then as follow-up, we saw some growth in the CDS brokerage this quarter, which was nice to see, but then kind of a law in the clearing. Can you just speak to the trends you're seeing there in the CDS business whether there's still an expectation of a pickup on both sides of the business as the severals are finalized? Yes, I mean the CDS clearing business is actually up on a year over year basis, but it did slow a bit from the Q4. It's not unusual. You get a lot of holidays in January, not a lot of volume pickup. So we still feel pretty good about that business. We continue to add new members into that business and we're seeing clearing revenue increase from them on a year over year basis as well. We continue to launch new products. We recently launched the Latin American sobs and ice clear U. S. So feel good about that business. So the one area where we continue to work very closely with our customers on the buy side. As I mentioned in my remarks, one of the key We've been told by the buy side community that that is a We've been told by the buy side community that that is a key catalyst for them to begin clearing. I mean they obviously have started to dip their toe in the CDS clearing water a bit, but none of them have started to clear in any meaningful way and to a large extent that's because right now we can't offer them the most efficient clearing that they need via the portfolio requirement. So I feel pretty good about the CDS clearing business, the product offerings that we have, the margin models that we've got, the buy side interaction that we're seeing. And frankly, I think the opportunity, a big part of the opportunity is still in front of us with those buy side it's about what we're doing on the electronic side of things. The DNA business continues to perform very well. We continue to see more of the voice business happen around our screen. I mentioned in my remarks with 62% electronic in the quarter, which is up from 55% in the prior year. So that's really the story. What we our strategy has been and remained is to stay relevant, to stay a leader in the key products in that field. And then as the set definitions develop, as the electronifications continue to merge the very strong voice broker business we've got with our very strong technology background to position us as the SEFs start to take off, as that market starts to recover. So overall, the CDS business was a slight contributor to growth in the quarter. And we feel very good strategically about where we're positioned as that market starts to turn. I appreciate that color. Thank you. Our next question comes from Howard Chen with Credit Suisse. Good morning, everyone. Good morning. Congrats on the strong quarter. Jeff, with respect to Bricks, you noted the early success and having signed on approximately 100 clients. Is that better or worse than you'd hoped for? And how are you? And how should we be benchmarking success there? Thanks for the question. It's amazingly great. We went into a market that was not developed at all and helped to organize standard contracts, standard trading agreements and now electronic transparency. There were a lot of people that were resistant to that change because they made money under the old system. So the fact that it has so quickly taken hold, I think is just amazing. The next what we're doing right now is trading physical electric power between market participants that supply and demand electric power. That market will, we believe, grow when we can take the indices that we're now producing, which are increasingly being viewed as the market price and help the market create derivatives around those that would be cash settled and ultimately cleared. So that is the trend of that business. It follows the trend of what we did in the United States in the early days of ICE. But I would tell you that it's moving very, very quickly and seems to be coming institutionalized very quickly. It gives us some confidence as we move as we work with Sateep on a similar vein in the fixed income and bond markets that we hopefully will see similar success, particularly given that Satip was a fixed income bank and dealer consortium and as its formation and those people are very close to the company and many of them are still in the boardroom. And so working with Satip Management on exactly how that market will evolve. So we have high hopes for Brazil and it's been a very good emerging market for us. Great. Thanks, Jeff. And my follow-up, you all continue to be pretty constructive on the organic opportunity set for ICE. Can you just talk about how you're seeing the M and A landscape today? And what's your appetite to do a sizable acquisition? Thanks. What do I say? We're sitting on a lot of cash and we have very high expectations for when we invest cash on behalf of our shareholders that it should have a significant return. And if we can't find those opportunities then we owe it to our shareholders to return the capital so that they can go find significant returns. And so that's how we're thinking about it. I have suggested to you all on past earnings calls that I think there's a number of assets in the markets that have been mispriced. We're starting to see some pricing downside pricing pressure on certain public companies. We're starting to see the market really thinking seriously about financial reform and what really is a swap execution facility and who really is going to be able to clear OTC business and what are the swaps data repositories and what pipes are really going to get used as the OTC markets migrate onto more transparent platforms. So you're starting to see a rationalization in price which I suggested that you would see and I think there's a ways to go on some companies yet. And so we think there may be opportunities. I think there were companies that were mis priced to the upside and the expectation is there may be companies mispriced the downside at certain moments in time and we would like to be opportunistic if those letting that play out. Okay. Thanks for taking the questions. Thank you. Our next question comes from Chris Allen with Evercore. Good morning, guys. Good morning. I guess a couple of questions. One just on the NDF FX clearing, which you launched now with CME, do you see other opportunities within FX for clearing or is it that could be somewhat limited because of the existence of the CLS Bank over time? That's a very good question. And I think the market itself is trying to figure that out. The initial part of the market will be NDFs and options which right now are specifically required by Dodd Frank. The Fed under Dodd Frank exempted a large part of the cash market from being cleared under Dodd Frank. But I shouldn't say that they put out a paper suggesting they would exempt it and there's still a lot of debate and discussion about whether or not government itself is going to push more of the FX market into clearing. I think there's obviously a debate going on in Europe about the FX markets and the OTC markets in general and how they will be traded and cleared. And so we would expect for that to become more known over the next year and it may possibly include larger segments of the market to be clear just from a regulatory perspective. Taking regulation off the table as people become more capital constrained, as efficiencies in clearing houses are continued to be developed, particularly with things like Scott talking about on portfolio margining, fine tuning of credit models, which we've been doing in our CDS clearinghouse and the like. I think there is going to be a trend toward more clearing from a voluntary standpoint. And you may see a broadening of the footprint of FX. And I think CLS will continue to evolve in that case and work very closely with those clearinghouses that are taking on more of that business. Got it. And then just one follow-up. I mean looking at your platform, obviously a lot of growth opportunities within the existing product set provides nice balances we saw in the Q1, now again in April. I mean, how do you think about the growth opportunities organically within your existing asset classes? Or do you think there's a need to expand to other asset classes to provide additional balance and growth over the long term? It's a good question because we're a public company and because we're owned by shareholders that expect us to grow. The reason that the word growth is mentioned in our prepared script a number of times is very calculated because it's on the mindset of us as managers that we have an obligation to seek out growth for our owners. And so we do think that our core business has really got a lot of continued opportunity. There it is these are these commodity markets are some of the oldest trading markets in the world and they have customs and practices that date back for 100 of years. And so changing behavior is a slow process and however you can see the trend for the more than 10 years that we've been at it continues to grow. But then we do look at where do we have a footprint geographically, where do we have customer relationships, where do we have technology, where are our competitors missing opportunities that we could differentiate ourselves. We have the luxury of being a growing line right now and so we are investing in a lot of new initiatives and some will be successful and some I suspect will not. And however, that's the way entrepreneurship works. And so we do have a lot of other asset classes, a lot of other geographies, a lot of other technologies like moving into the bond business for example, that we think we can exploit and we have the luxury to do that and I suspect that our shareholders are demanding that. Our next question comes from Neeme Alexander with KBW. On the iSecure credit, thank you for the clarification. Jeff, you'd said earlier you expect the iSecure credit to be systemically important. Can you expand a little bit on how should we think about that maybe from additional capital? Do you expect that there'll be some liquidity ratios? Is it going to be ICE Clear Credit, specifically that entity? Or would there be some implications for ICE Group as well in terms of financial limitations? Yes. I think, Neve, that some of that is still yet to be decided in terms of what it would mean to be a CIFI. I think some of the things that are fairly clear is an expectation that you'll be able to cover for the simultaneous default of the 2 largest clearing members, which we've already done an expectation that you'll have a relatively cash oriented set of margin and guarantee fund holdings, which we've already got, that you'll have to manage towards a 5 day holding period, which we already do. And then I think to your question, our expectation is it will be entity specific. So it would be ice clear credit. But we feel like we got a trial run of what being a SIFI would mean as we launched ICE Trust under the supervision of the Fed a few years ago. And what that basically meant was not only were they interested in the specifics of how ICE Trust was run now ICE Clear Credit, but they were also interested in the corporate services that were provided to ICE Trust. What's your disaster recovery plan? What's your business continuity plan? What's your internal audit plan? And so we had a number of discussions under that review that were really specific to the corporation. So I don't think there's any ice level capital requirement that's likely to exist. As I said, there's still not full clarity with regards to what additional liquidity or capital may be required. There'll be more operational capital that's required. We've already moved from 6 to 12 months. So we're really already there. But again, I don't think it'll bleed too much into the corporate level from a capital standpoint, but from a business processes, business control standpoint, there's no question that the supervision will look through into the providers of that service, which is the parent. That's really helpful. Thanks, Scott. And then I know this is an area that you're interested in from hearing you on other calls and other notes. One thing about ICE is that I have never let Scott have this company be rated and I've never let the company issue public debt. We could have a lower interest rate component in this company if we did, but because we run clearing houses, I personally think it's a bad idea. The ratings agencies do look at the subsidiaries in rating the parent. We can argue whether that's fair or not. But as a result of that, we have not wanted to put our corporate debt at risk. And so all of the debt that we've done to date has been through banks and that's what we continue to do. That's very helpful. Thanks, Jeff. I appreciate the color there. I guess talking about debt and cash capital on a different subject, help me think about how do you appeal to targeted acquisition shareholders maybe when there is a bigger, more expensive or more cash rich buyer? How do you go about appealing there, considering that you have your bank debt line, but when maybe you don't want to pay as much, but you have certainly other things to offer? Well, that's a good question. I think generally speaking, you've seen a lot of failed acquisitions in the past couple of years where not every constituent was considered in putting the deals together. And constituents mean not just shareholders, but customers and regulators. And so we've been very good and very thoughtful about the deals we've done about threading the needle and finding a balance between rewarding the target shareholders, but also making sure that the end users of the businesses and the regulators and our shareholders also have upside. And that's the challenge and the skill, I guess, of being successful in M and A. Certainly there are businesses where the high price is the winner. But those tend to not be businesses that ICE goes after. We tend to go after businesses where our opportunity set in terms of providing technology, in terms of providing clearing, in terms of providing global regulatory support and distribution are meaningful to the companies that we acquire. It's interesting, I spent a number of years at IBM looking at acquisitions. And what tended to happen there is you go in, you buy the company, you'd integrate the product and you basically the people who sold it, all they wanted was top dollar so they could go and build something else that maybe IBM would buy later. In the case of most of the acquisitions we do, a lot of the people who are owners and sellers expect to continue to operate in those markets post acquisition. So while price is important, the ability to bring clearing capabilities to the table, the ability to bring global distribution of your platform to the table, the ability to bring technology innovation to the table, all those things matter because the day they get the check for the deal that's been done, the very next day they're back in those markets trading and they want to know that they've got a good market operator. So as opposed to others who could write a bigger check, we feel like we're better innovators and we're better market operators and that's an advantage that we think differentiates us in any deal. Okay. That's very helpful. Thank you. Our next question comes from Brian Bedell with ISI Group. Good morning. Jeff, can you comment a little bit more on the Brent WTI market share? Your share is now pretty close to 50% of the crude oil market if you just look at those two contracts up from about 30% a little over a year ago. If you can talk about sort of the near and intermediate term direction of where you think that might go given the 2A pipeline and then potential narrowing of the spread? And also how high frequency trading plays a role? I believe the WTI contract is a little bit more has more algorithmic participation versus the more commercially used Brent. Sure. Those are very good questions and they're quite things that we think about here. Last month may have actually been a tipping point in the Brent TI world. We saw Brent really out trade WTI at our competitor for the first time on a sustained basis. We have seen the ultimate end user, the hedger continually moving towards Brent. We've obviously been targeting them with marketing. We have for years, but it's really been paying dividends in the last year or so. And there was no options market on Brent, for example, a year ago. And today we have over 1,000,000 open interest in Brent's options. We have I have for years been saying we've been building options trading technology. We rolled that out in earnest about the beginning of this year and the results are amazing. And so it's pulling that portion of oil trading away from WTI to Brent. We benefit by having Brenton WTI in one clearinghouse for those people that trade the Brent TI spread. That trade has been broken for quite some time. You've got to have big goals if you are going to be trading the Brent TI spread because that can move against you very, very quickly. I think the reversal of the pipeline will help bring that spread back into some sense of normalcy, but the pipeline does not have the capacity to in it to really bring that market back into what was historical norm. So we expect significant volatility and we are not sure that we're going to see a lot of Brent TI spread traders come back into that market. We'll see, but it's not our expectation. If it does, it will benefit us. But Brent is just growing on its own and one of the things one of the lessons that you can see with respect to algorithmic trading and looking at other markets is that algorithmic traders trading against algorithmic traders is a zero sum game and eventually they get tired of losing money to each other and they go away. And so as you move the ultimate users out of a market, algorithmic traders eventually leave as well. And so we have never built a business that is dependent on algorithmic trading. We've never thought that selling co location services was a good long sustainable market. It's important that we allow co location and we facilitate it, but trying to profit from it, we've never believed in. I don't believe in selling technology services to algorithmic traders. I believe that they are going to go on into the world and find the best and in many cases develop their own. And so those are just areas that we have avoided that some of our competitors have not and I think you see the difference in our growth right now. And lastly, Chuck Weiss, who sits quietly next to me in each of these earnings calls has a team of people that study our markets and we watch how the markets operate and we put ourselves in the shoes of a customer that within the market and we want to make sure that people have a good experience. So we have introduced algorithmic trading all across our markets, but we've done so in a very thoughtful way, in a way that the algos can make money, but also actually provide true liquidity that the ultimate hedger would benefit from and that mix seems to be continuing to drive people into our markets. So I'm quite proud of the work that Chuck and his colleagues have done. And I think that work will be adopted in other markets over time because it is working. Great. Thanks. Those are very helpful comments on that. Maybe just my follow-up on capital allocation. Obviously, it's some large a large deal doesn't come through. And you alluded to a number of other potential smaller acquisition opportunities given pricing. Maybe if you could just talk about how you would view that against potentially establishing a dividend? It sounds, of course, as a growth company that, that might be off the table. Maybe if you can just sort of confirm that for now. And then in terms of organic initiatives, how should we be thinking about ICE potentially at some point in the future entering interest rate swap clearing? Thanks. Well, 2 tough questions. First of all, on the return of capital, I think as the company does do share buybacks. We don't view share buybacks at any price as a return of capital. Find your stock at a price above where it trades looks like a destruction of capital to me. So we are thoughtful about the way we return capital through share buybacks and we run our own stock through our own models and we make the assumption that we're buying our own stock like we would buy any other company's stock. And so we look for when it is mispriced to the downside. And it does from time to time as you know because it is a market. We haven't crossed the bridge yet of how and when we'll return additional capital. I think we visit this topic at every board meeting that we have. But as long as we continue to see opportunities to reinvest at significant rates, our large shareholders who we have a very good dialogue with have told us that they would if we can find those opportunities, they will support us in those opportunities. And so we continue to look for them. In terms of interest rate clearing, there's a lot of competition in that space. Obviously, you see the London Clearing House with IDCG doing a deal to bolster their U. S. Clearing presence. And there are other competitors in that space and generally the rates that people are paying for clearing are quite low. So it is a large asset class, but a lot of competition at very low rates at this point in time. It's not clear yet whether or not the market wants a multi asset class clearing facility. We have seen that in the initiatives that we've done that large clearing firms prefer to have separated default funds and they don't want these things co mingled. So the market has been willing and wanting to pay more to create circuit breakers between as the systemically important issues, as the systemically important issues roll through in the U. S. And the Bank of England is looking at similar kinds of things in the U. K. The whole treasury area and how you prevent this stuff from being contagious is going to be a focus. And so we're trying to build our clearing infrastructure on an asset class by asset class basis with different rules, different funds, different risk models, different risk members and cordon them off as best we can. Okay, great. Thanks very much. Our next question comes from Ken Worthington with JPMorgan. Hi, good morning. I wanted to just follow-up on, I think, Rich's question at the beginning on the OTC business in April. I wanted really more flavor on OTC power and OTC oil activity. Gas volume still seemed good in April, obviously not as good as January February, but it would suggest that power and oil have fallen off somewhat. So what's happening in those products, maybe not just in April, but what's the trend and why? Yes, Ken, I think we continue to see the oil performance be pretty good. Power has been soft and frankly remains soft today. And we've seen decent volume growth, but it's really been more of a shift into some of the many contracts that are trading that's driving that volume growth. We've seen decent uptake across all the products and options activity, which has been good. Natural gas was okay. The growth in April was modest, up a little bit versus last year. And again, I think it's not dissimilar than the contribution you saw in the Q1. Natural gas contributed a little bit, but its growth was a bit slower. Oil contributed a little bit and power remained soft. So I don't think we really saw anything in April that's all that different than what we saw in the Q1 other than what Jeff alluded to, the massive shift in the paradigm of natural gas prices and people resetting their positions. I mean the one good thing we haven't talked about that we did see in the Q1 in addition to the growth was a significant build in open interest. And so despite the fact that April was a little bit slower with not a whole lot of big price movements on the upside, we do have customers who have reestablished very meaningful open interest positions at these new lower prices. And so to the extent you do start to see weather events or other things that create volatility, there are large risk positions that are on that people will need to trade around. So I feel pretty good about where natural gas is headed in April directly to your question. I don't think the dynamics were all that different than what we saw in the Q1 other than the big slowdown in that gas. Great. Thank you. At the end of the market data, I think you had exchange fees went up from $65 to $75 per user per month. How much capacity is there for more of this type of increase? And I don't know if you give this up, but I'll ask it anyway. Screen count, where does screen count stand today versus a year ago? It's screen count, Ken, we don't put it out. So I can't give you a specific number, but I've talked about it trend wise a number of times. If I look at the screen count today, it's up from where it was a year ago. It's up significantly from when I started 5 years ago and it's been a steady trend. As the economic cycle dipped, screen count continued to grow. You guys know in your firms, the first thing people do, or at least I used to do at IBM and still do here at ICE, when times get tough, it's get rid of your Bloomberg screen, get rid of your Reuter screen. I'm sure that mandates going out with regards to your ICE screens and it doesn't happen. We do see attrition, but we see growth that offsets it. So screens are higher than they were a year ago, screens are higher than they were 2 years ago, 3 years ago and it's been a steady uptick. So our expectation, as I said earlier, is that market data revenues will continue to perform well. In terms of what capacity we have for price increases, that all relates to what's the customer demand level, what are the new offerings we can introduce into our data packages, etcetera. So we're pricing to what the market wants in terms of the product. So I would be reluctant to try and guess at what and when the next price increase might be. But I think again you've seen you talked about 65 going to 75, 55 went to 65. So we've consistently looked to make sure that the price is reflective of the customer demand and the quality of the product that we're selling. Okay. Thank you very much. Our next question comes from Michael Carrier with Deutsche Bank. Thanks, guys. Just one on the expenses. Just in terms of the acquisition related costs, is it more meaning in terms of that line item and having the expenses this quarter next quarter, like should it be ongoing, meaning that it's a core piece of the business? Or is it currently you're doing a lot more in that area versus what you did historically and maybe it was in other G and A. And so you're trying to break that out. Just trying to get a sense on I know you're trying to say that it's core, but is it just an elevated level currently versus kind of the long term run rate? No, I think fundamentally what it gets down to is we have consistently said that M and A is a part of the growth strategy that we've got. It's not a strategy. M and A is not a strategy, but it is a part of how we expect to grow. And so for us to exclude what I'll call core M and A type spending, whether it's legal fees or banker fees or things like that, that's just a part of the business. When you're an acquirer, you're going to spend money on lawyers to write deals, you're going to spend money on accounting firms to due diligence. And that's simply a fundamental part of our expense. What we will continue to do is note on a non GAAP basis any large single charges that are made. So for example, as you guys know, a lot of times the banking agreements are single success fees. And so if we've got a $2,000,000 or $5,000,000 or $8,000,000 success fee similar to what we did around Satip last year or a single one off large fee for a banking line similar to what we had around the NYX deal last year. We'll continue to point those out because those are unusual. They're not reflective of the run rate in the core business. But the overall M and A business, it's just it's something we do. And so to continue to pull that out and say, don't look at that, don't pay attention to that, frankly, I think would be a bit disingenuous. So what we're trying to do is give you a fair reflection of what we believe the core expenses are that support our ability to grow the top line. These M and A expenses are a part of that. And I'll note with those expenses included 62% margins and 67% margins if you pull the brokerage business out. So it's a part of the core expenses. It is a bit of a change, but I think it's a change more reflective of the business we manage. Okay. And then just on the U. S. Business on the ag products, the pricing change at the beginning of the year. I guess one is pushback. It seems like you're gaining traction in terms of new products, probably not. But did that go as expected? And anything on the horizon there? Yes, there was almost literally no pushback at all. And I think there really are 3 primary reasons for that. Number 1, with the price increase, we're still very competitive with any other exchange similar exchange traded products out there. So it was really a change that got us more in line, did not take us above where competitors are. I think the second reason there wasn't a lot of pushback is because I do believe that people that trade the ag products on Nabok do look back where they were 5 years ago and where they are today and recognize better clearing technology, better clearing services, better trading technology. The fact that those improvements along with some of the additional those improvements along with some of the additional compliance costs that we're incurring, it's not unreasonable to look at price increases. And then I think the third factor, if you think about why the price increase I think resonates with people is frankly the product offering that we have, the customer relationships we have and the commercial nature of those customers, what they want are deep liquid markets. And when we create product offerings, better technology that makes those the bid offer tighter, that makes the liquidity pools deeper, that adds in options trading on an electronic basis. If those commercial customers are trading in a market that is better for them. And so again, I think they're relatively as Sanguine is any customer is about a price increase, willing to accept that price increase. So no meaningful pushback at all and I think largely because of the reasons I just mentioned. Okay. Thanks a lot. Our next question comes from Jillian Miller with BMO Capital Markets. Hey, guys. Thanks for taking my question. I know I buzzed in a little late here, but the agreement to partner with SITIP to create the OTC fixed income trading venue, just want to get a little more color on what's the targeted customer base there? Is it dealer to client, dealer to dealer, some kind of combination? What kind of void are you filling in the market? And then maybe you could give us an idea for how the partnership's working financially. I think you alluded to this earlier, but I assume the technology licensing you're going to have some kind of profit sharing or some way you can actually benefit from increases in activity levels on the platform? Yes. So we haven't put out any really disclosed any information with regards to the financial terms of the deal, Jillian. So I'd be reluctant to put that out now. Suffice it to say that the deal structure will not be dissimilar than others that you've seen where we've done ventures with other firms to build platform and platforms and provide technology. In terms of the market opportunity, there's not really in Brazil any meaningful platform for the electronic trading of fixed income instrument. But there is a desire by the customers in Brazil for that opportunity. So we've had, as you would expect before we go into any initiative, a number of conversations with customers in Brazil. One of the reasons we made the investment in Sateep and got onto the Board is because we wanted to build the relationship with the banks and other large local customers in Brazil. We've done that and as we've done that in that dialogue, particularly Dave Goon, who's our Chief Strategy Officer and who's the Board member on Satif, he sat with each of those banks on a number of occasions. And one of the consistent themes that we've heard is we would like a more efficient way to trade fixed income instruments. There are other competitors who are trying to move into Brazil and do that, who are focused more on the client side, which is important, but it's not where the real depth in the market is today. The real depth in the market is among similar not dissimilar than most other markets, the large financial institutions, the large banks. And those customers are telling us that they think an electronic platform is important and necessary. They look at the electronic platform we run for Creditex, they look at our bond platform that we've got and we frankly were a natural partner to come down and develop that along with CTIP. So I would characterize the demand as being the large financial institutions and banks where the vast majority of those products trade today looking for a not again dissimilar than a lot of markets we've entered, looking for a more efficient means of trading. Okay, thanks. That's helpful. And then the FXO, I think, is that the Okay, thanks. That's helpful. And then the FX OTC, you said that one of the reasons why you're not kind of jumping into the interest rate swap clearing is because it's very competitive. But just seems to me like kind of the same players are going into FX. You've seen CME and LCH both kind of making moves there. So I guess I'm wondering what's different in the FX market? Why do you think you have a competitive advantage there? Or there's I guess a better opportunity for you there? I think the reason is we have kind of the largest players who made a commitment to use our platform. It was kind of a once that was agreed, it became a bit of a no brainer. And not only did they agree to use the platform, they gave us broad access to technology people and back office people to design an infrastructure that works for the way they trade and makes it easy to get these trades into a clearinghouse. And I think I'll just leave it at that. We tend not to believe in a field of dreams and build it and hope they will come. We tend to try to work with customers and find out what their real needs are and then work with them to build something that we know they'll need. And in the case of FX Clearing, we really feel very good about the offering that we've designed. Okay, makes sense. Thanks guys. Our next question comes from Rob Ruchat with CLSA. Hey, good morning guys. Thanks for taking my question. I guess I had a couple of questions on OTC. First, I think one of your brokers that trades OTC products suggested that you saw better trading in OTC power options quarter. I think and those have been sort of sluggish in previous quarters. So I was wondering if you could confirm that. And then second, the percentage that you're returning to your customers in terms of rebates on the OTC side has increased from around 20% last year in the Q1 to close to 40% this quarter. So is the rebate a function of volume and revenue? So as volume and revenue go up, so does the rebate percentage? Or should we think about that as kind of a one off where you're looking to drive adoption in some new products? Thanks. So let me start with the rebate part of the question and then maybe we can talk a little bit about the new options. From rebate standpoint, you shouldn't expect that the percentage will go up because volumes and revenue go up. Typically what drives the rebate percentage up is really one of 2 things. 1 is you get into a particularly volatile period. In that volatility, you tend to see more market makers move into the markets, which drive the rebate percentage higher. Unfortunately for Power, that hadn't been the case. We haven't seen a lot of volatility in those markets. The other time that you tend to see in the OTC market and really the future markets as well, the market maker percentages increase is when you're really trying to get new products launched, whether it's options or any sort of new product. You need to get market makers in those markets early making markets. To Jeff's point, if 2 months, 3 months, 8 months later, it's only market makers, those markets don't survive. But in early days, if you want to get liquidity growing, you need to go get those market makers in. And so what I think you're seeing a little bit is as we establish more new markets in OTC, particularly around options, We're trying to bring more market makers into the get the liquidity building. As that liquidity build, it attracts commercials who may be trading a different product that somewhat less correlated or slightly different. And then they start to see the depth of liquidity in the new product and decide, okay, that's the bid offer is tight enough, the liquidity is deep enough, I now want to move into those markets. So over time, I think you'll see that normalize. Over longer periods, the rebate percentage ought to stay relatively constant. But again, as we're developing new markets, you do on occasion see it tick up a little bit more. With regards to options, as Jeff alluded to, that's been a key strategy for us over the past really 3 years and we bought Yellowjacket back in 2009. And when we did that deal, we announced that the real driver behind it was we did not believe anyone in our space had come up with a great way of enabling trading for options electronically. As we sit here today, that's no longer the case. We've announced a number of new options products in power, in gas, in oil, on the future side, on the OTC side and on the ag side. And all of that's been enabled by the investments that we've made in technology. So you do see an industry typically in less, although maybe lower liquidity times trade a bit more on the option side. And again, I think that's what you're seeing in power right now. New products, better technology, maybe a little less volatile market and that's helping the overall options volume on the power side. Thank you. And I'm not showing any further questions at this time. I'd like to turn the conference back over to ICE for closing remarks. Thank you, operator. And I guess I hope this call helps clarify the ways in which we've grown last quarter and outlined some of the initiatives we have that are going to allow us to continue to grow in the future. We'll look forward to hearing from you throughout the quarter and we'll update you on our progress as we go. And thank you all for joining us today. Ladies and gentlemen, this does conclude today's presentation. You may