Q2 2025 Earnings Call Transcript

Welcome to the CME Group Second Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Adam Minick. Please go ahead.

Good morning, and I hope you're all doing well today. We released our executive commentary earlier this morning, which provides extensive details on the second quarter 2025, which we will be discussing on this call. I'll start with the safe harbor language, and then I'll turn it over to Terry. Statements made on this call and in the other reference documents on our website that are not historical facts are forward-looking statements.

These statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement. Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website.

Lastly, in the earnings release, you will see a reconciliation between GAAP and non-GAAP measures following the financial statements. With that, I'll turn the call over to Terry.

Thanks, Adam, and thank you all for joining us this morning. I'm going to make a few brief comments about our quarter and the overall environment. Following that, Lynne will provide an overview of our second quarter results. In addition, to Lynne, as usual, we have other members of our management team present to answer questions after the prepared remarks.

Our record-breaking performance in the second quarter demonstrated the growing need for risk management globally. For the first time in CME Group's history, average daily volume exceeded 30 million contracts for this quarter. Second quarter average daily volume of 30.2 million contracts represented an increase of 16% compared to the same period last year and included all-time records in each month of the quarter. In an environment of heightened headline risk and macro uncertainties, clients are increasingly choosing the transparency and capital efficiency of our essentially cleared benchmark products as they look to manage and mitigate risk.

The strong growth this quarter was broad based, with year-over-year volume growth in all 6 asset classes, including all-time quarterly volume records in interest rates, agricultural, commodities and metals. In aggregate, our financial products volume grew by 17%, and our commodity sector volume grew by 15%. This continues to be a risk-on environment as evidenced by the continued growth in open interest or positions open on the books at CME, up by 7% from the end of Q2 2024 and 10% from year-end 2024. We are also seeing strong levels of large open interest holders, with new records in both interest rates and crypto futures set earlier this month.

We had our highest-ever quarterly volume from our international business, which averaged 9.2 million contracts per day, up 18% from the prior year. This was led by a record 6.7 million average daily volume from EMEA, which was up 15%; and a record 2.2 million contracts per day from APAC, or up 30%. This record international volume was driven by growth across all asset classes and customer segments and reflects our deep integration into global markets. In recent quarters, we've talked extensively about our growing focus on retail traders and highlighted some of the large retail broker partners that have joined our multi-asset class marketplace to meet the increasing demand from this particular segment.

In the second quarter, over 90,000 new retail traders participated in our markets for the first time, a 56% increase versus same period last year. These new customers contributed to our Micro's ADV record of 4.1 million contracts in Q2 and demonstrated the appeal of our products to a broader base of users. The Micro E-mini NASDAQ 100 futures contributed 1.7 million of those 4.1 million contracts. Year-to-date, NASDAQ 100 futures and options trading volume at CME Group has climbed to more than 2.5 million contracts per day, or up 22% versus last year.

Also, we're pleased yesterday, we were able to announce a 10-year extension of CME Group's exclusive license to offer futures and options on futures based on the NASDAQ 100 and other NASDAQ indexes. This license will go through 2039. This extension ensures that our customers will continue to have the ability to trade NASDAQ equity index products alongside our S&P Dow Jones and FTSE Russell products and benefit from the related capital and operational efficiencies for years to come. In addition to the impressive volume records, we delivered record financial results for the second consecutive quarter.

I'll now turn the call over to Lynne to review our financial results in more detail and look forward to your questions.

Thanks, Terry, and thank you all for joining us this morning. During the second quarter, CME Group generated revenue of $1.7 billion, up 10% from the second quarter in 2024. The average rate per contract for the quarter was $0.69, resulting in the highest quarterly clearing and transaction fees in our history of $1.4 billion, up 11% year-over-year. Market Data revenue also reached a record level of 13% to $198 million. Continued strong cost discipline led to adjusted expenses of $491 million for the quarter and $395 million, excluding license fees.

Our adjusted operating income came in at a record $1.2 billion, up 14% year-over-year. Our adjusted operating margin for the quarter was 71%, up from 69.1% in the same period last year. CME Group had an adjusted effective tax rate of 23.3%. Driven by the strong demand for our risk management products, we delivered the highest quarterly adjusted net income and adjusted diluted earnings per share in our history at $1.1 billion and $2.96 per share, respectively, both up 16% from the second quarter last year.

This represents an adjusted net income margin for the quarter of 64%. Capital expenditures for the second quarter were approximately $19 million, and cash at the end of the quarter was $2.2 billion. CME Group paid dividends of $455 million in the second quarter and approximately $3 billion over the first half of the year. Turning to guidance.

We now expect total adjusted operating expenses for the year, excluding license fees, to be approximately $1.635 billion. That is $15 million below our prior guidance and represents 3% growth from last year's adjusted expense levels. All other guidance remains unchanged. We're very proud to deliver the highest quarterly volume, revenue, operating income and diluted earnings per share in our history.

These strong results are the continuation of the growth and demand for our products over the last several years. Following 3 consecutive years of record annual earnings and double-digit earnings growth, the need for our products has driven 14% earnings growth in the first half of 2025. We'd now like to open the call for your questions. Thank you.

[Operator Instructions]. Our first question will come from Owen Lau with Oppenheimer.

So trading volume and hedging activities were very strong in the first half. CME had a record quarter again. But could you please talk about the macro backdrop for the second half? What are the key drivers that can sustain these strong hedging activities going into the second half? Is it going to be interest rates, commodities, crypto or something else?

So Owen, it's Terry Duffy. Your question is about the second half of the year, I assume, right, in total, not just quarter?

Correct. Second half, correct.

Yes. And so it's -- obviously, it's really hard to predict volumes. We've always said that since the day we took this company public, it's difficult to predict. But we have seen, without a doubt, many things going around globally that need to be managed and mitigated through risk management.

The markets have been massively resilient through a lot of the policies that have been going through, whether it's on tariffs or other issues in the United States. But it doesn't negate the fact that we're sitting at record levels of debt, not only here in the United States. We're sitting at increasing levels of debt throughout Europe now. I just -- you just saw the other day where the U.K. government had to issue more debt to continue to run its country.

It is at levels that I think they're obviously unprecedented. And I think that people are going to need to manage and mitigate that risk. The question is, well, how does that transition into volume? It's really hard to predict.

But I think that unless I missed something in the news, there's still massive unrest between Russia and Ukraine. There's still massive unrest between Israel and Palestine in the West Bank there. And so there is so many different things going on right now politically that could have impacts on multiple different asset classes. We feel very strongly that we can be here to help mitigate and manage that risk.

Now we're not hoping for any disasters. I'm only pointing out factual things that are in the news and that are fundamentally math problems such as debt and issuance going on right now. So I don't know how that translates into volume, but I don't know how it does [indiscernible].

Our next comes from Brian Bedell with Deutsche Bank.

If I can just put -- bundle 2 into 1, so a 2-parter, and focus mostly on retail and then the crypto ecosystem. So Terry, you've talked a lot about retail emergence and your bullish views on how this is becoming a much bigger client base. Can you just talk about the recent take-up? You said 90,000 customers -- new traders.

How you're measuring that? And are you seeing that from new online brokers -- new retail traders from online brokers coming in? And maybe how you expect them to trade different asset classes within the CME ecosystem? I think mostly equity and crypto.

And then the second question is around the crypto ecosystem broadly, how you see that unfolding over the next several years. What would CME's role be in that? Could that include listing perpetual futures or doing some acquisitions potentially on the tokenized front or establishing a tokenized capability at CME, if that's something you believe in?

Brian, thank you for that 2-part question. Much appreciate it. It seemed like a little more parts than 2, but that's okay. So let me try to address it.

And I'll ask my team to join in where I think they're all vigorously taking some notes on some of your points. So Julie and Tim McCourt will both join in as well and maybe others. But let me say a couple of things. One, in my prepared remarks, I referenced 90,000 new users for the first time, which I think is something that -- I've been here a long time.

It's really not -- it's very unprecedented to see that type of growth. I think it's up 56% is what I referenced. So to me, that is very, very exciting from the retail perspective and the growth. I don't believe that's going away.

And I've said this to you, Brian, and the rest of the analysts and others that cover us, these people want access to markets, and we're going to make certain we give it to them. And I'm very, very optimistic about this segment. I'm never trying to predict the direction of markets, so I will never do that. But I will say that people have access to markets they never had before.

And I don't see that slowing down. I think it only accelerates for many more years to come as people start to participate in different markets. As far as the different asset classes, I think, Brian, was part of your question. Do they go from trading crypto to maybe gold or other asset classes here at CME?

I think as people evolve -- people always seem to evolve into different asset classes. And as you know, Brian, very well, when one asset class seems to be getting a lot of attention, a lot of people follow it. Right now, we're seeing a lot of people follow the crypto. We can talk about some of the legislation that has passed and reasons why they're following crypto.

So we've seen a massive uptick in the crypto markets as has others. So not a surprise. We saw a lot of people attracted to gold when gold hit $3,500 an ounce just a few months back. So that is not a surprise.

When crude oil traded up to $125 a barrel, you see a lot of people -- this was several years ago, going after that trade. So I think that there is not any one particular asset class. That's the beauty of CME. We have multiple different asset classes that people will follow, but they also follow things that are -- that have attention to them at that given moment in time.

And they have the ability to do that now where maybe 10, 20 years ago, they did not. So they can move from asset class to asset class relatively quickly and seamlessly. That was one of your questions. So I think they participate in all of our asset classes, depending on what's going on fundamentally.

Your other question was around crypto, I believe, as it relates to will we continue to accelerate our entry into crypto. From my standpoint, right now, we are hardly a first-mover in crypto. I think that we are a fast follower, to say the least, and we have a lot to offer in our crypto franchise. I think there's a lot of people that like to have the regulated platform on crypto, and it gives them confidence.

I think that's one of the reasons you've seen massive growth in people that are more mainstream in today's financial system trading it because they're using CME's reference prices to do that and are based off of our futures contracts. So we will continue to participate in that venue. As far as perpetuals go, Brian, I think is one of your other questions. I thought I heard you say, perpetuals are something that are illegal in the United States of America.

They do have them in Europe. So the question is we will have to wait and see how the regulations shake out on perpetuals. There are certain products that are not conducive to perpetuals. Mainly deliverable products are not conducive to perpetuals.

So cash settled maybe more so, such as the crypto markets could be more of a perpetual-type contract, but there are many products that just would not be efficient as a perpetual as it relates to risk management that are deliverable. So when you look at energy, you look at rates, you look at all these products that are physically delivered and people are counting on that delivery mechanism in order to manage the risk to take delivery or make delivery, perpetuals do not work. So I think it will go back and forth, and we'll see how the regs shake out. That's about what I heard.

Maybe the team wants to pick up more, Julie or...

Yes. I mean, Brian, thanks for the call-out on the retail business. I think I'll just double-click a little bit with some additional stats to support the points that Terry was making earlier. This was another record for the retail segment.

We certainly did see an extremely robust entry of new traders to that 90,000 that we talked about earlier. And this is now our fifth consecutive quarter of double-digit retail client acquisition growth. And what has been fundamental across this is just that 3-pillar strategy that we've talked about on previous calls, which is partnering with those new-to-futures brokers that you referenced; expanding market access, and that is because of our diverse product speed; and also enhancing our trader education. So a few other things: I mean total participation across our marketplace for retail saw a significant 16% increase this quarter as well.

And what was also great to see was overall growth across all major regions. So we saw North American leading that with a 19% increase in total participants, a very healthy growth coming out of EMEA as well as APAC. So those strategic partnerships with those new-to-future brokers have been driving, I would say, instrumental and instrumental in driving growth as well. Yet if we look across our top 25 partners, we are seeing strong performance throughout all those partners.

They are a key part of how we are able to continue to grow the complex and reach retail traders. And on the product side, we've mentioned the Micro record earlier, certainly, 4.1 million across the whole suite. 3.6 million of that in ADV was from equities. But I will also call out gold, which was up over 37%. Among retail, crypto with Micro Bitcoin, up 94%; Micro Ether, up 212%.

So we're seeing that retail traders are accessing far more than just our Micro equity suite, which is great. And we also saw a nice jump in our rate per contract. We were up 7% from Q1 to $0.349. So we're happy with where things are at and clearly highly focused on the educational aspects, what we're doing with our brokers as well. We held over 100 client events just in Q2 to help educate traders.

So we feel pretty good about the outlook going forward in the second half of the year.

Thanks, Julie. I'm going to ask Tim real quick to comment on crypto or anything else that Brian referenced, and then we'll get on to the next question.

A - Tim McCourt: Great. Thanks, Terry, and thanks, Brain, for the question. I think the one thing just to add to [indiscernible] was about 190,000 contracts traded up over 130% year-over-year. Just want to point out that momentum continues here in July. We're through -- sort of end of last week, we're doing almost 260,000 contracts per day in our crypto complex, which is over $12 billion of notional OI of the complex, continues to grow. It's now over $26 billion of notional, about 232,000 contracts here in July. And just reinforce Terry's earlier comment, with our new record large open interest holder in the complex of almost 800 large traders, the great momentum is continuing here in July, and we look forward to continuing to serve the needs of our clients in the cryptocurrency complex as one of the most trusted exchanges doing so.

Our next question comes from Chris Allen with Citi.

I wanted to ask how you guys are thinking about capital deployment here, just given the level of cash balances sitting on the balance sheet right now and then the closing last year in the back half of the year. How are you thinking about prioritizing buybacks versus dividends, just given where the stock is? Any thoughts on inorganic growth opportunities in the current environment?

Thanks, Chris. I got a little siren in the background here in Chicago. Sorry about that. But I think we caught your question. I'll ask Lynne, if you heard it, to go ahead and respond to it.

Yes, of course. Thanks, Chris. I think the way we're thinking about capital deployment has not changed. Really, since we announced the buyback program, we've discussed that that's going to be an opportunistic program.

So we still have our variable dividend structure and the ability to return cash through that valve, and we have the addition of the share repurchase that we can look to utilize if we see some disconnects in terms of trading versus performance. So I think that's going to be our approach when we think of that mix, and it will be dependent on market activity. On the inorganic side, as you know, we always get approached, just given our capital structure and our size, kind of ability to participate in those type of activities. It is always difficult in the exchange space, particularly in kind of international M&A.

But I would say we look just as much as we always have. We just tend to be a bit more choosy in terms of when we pull that trigger, but we may look at other ways to execute on growth initiatives, things like the joint ventures we've executed or things like our commercial agreement and the extension with NASDAQ yesterday that you saw. So we look at growth opportunities, not just in the M&A lens but all different types of structures.

Our next question comes from Craig Siegenthaler with Bank of America.

This is Eli Abboud on for Craig. Can you discuss the impact of tariffs on your physical commodities business? Specifically, has the growing basis between your products and some of the European alternatives affected trading, particularly in the commercial channel?

Yes. Thank you for the question. I'll ask Derek Sammann, who heads up that part of our business for his take and what he's seeing in over there.

Yes. Thanks, Eli. I appreciate the question. When you look at the uncertainty across the globe right now, whether it's tariff-related specific question or geopolitical uncertainties, ongoing Middle East unrest and Ukraine-Russia tensions that Terry referenced, trade disputes, all of this is leading to a realignment of a number of the global physical supply chains.

With the benchmark markets we run and the fact that U.S. is now exporting record amounts of energy, we're seeing that, that is leading to the record results, not just for the first half of this year across the commodities complex, ags, energy and metals on the volume side, but also record revenues there as well. When you specifically drill down into the tariff impacts themselves, it's leading to 2 effective impacts. On one side, the tariff impacts are creating both short- and long-term dislocations in markets. It creates a cost basis differential that all needs to be risk management.

We're seeing our volume and activity increase across all of our client segments, and we're seeing record activity across both APAC, up almost 40%; and EMEA, up over 22% this year. So we've seen global participation increase. Not only did we see record activity in April when a number of these tariffs were announced, but we actually saw that perpetuate through into records in metals and energy in June. We're seeing that particularly express itself in options.

But specifically to the question of the tariffs themselves, that's leading to a differential in price between our futures markets and the cash market that's known as a basis and that we're seeing that reflected in increased levels of what was called the EFPs, or exchange of physical. And that means that managing the price between spot -- physically delivery contracts and futures moves around. We've seen volatility in that, and that is what is leading to our record activity and particularly on the options side across each of our asset classes. So we're seeing that both on the institutional side with the commercial business at record levels.

We're also seeing that create opportunities for folks that are looking to gain access to that price activity. You heard Julie mention that before, record activity in gold, as Terry mentioned, but record activity in our gold Micros through the retail community. So it's a risk for some, and they come to CME Group to manage that basis risk. And it's an opportunity for others, and we see that in activity from the speculative side as well.

So to Terry's point, we're here to solve customer risk no matter what side of the trade they're on. And our focus is on markets across geographies, across client segments. And in each one of these markets and physical commodities, it's a risk-on environment, and we see that record activity this quarter and first half of this year.

Our next question comes from Dan Fannon with Jefferies.

So given all the records that you guys have had in the first half of the year, curious what drove the expense guide takedown? So in terms of priorities, Lynne, is this just timing in terms of spend? Or are there other changes in terms of expense outlook that you guys are making proactively?

Yes. Thanks, Dan. I would say there's a couple of things that led to the change in guidance. One was the refinement of our views on the spending on the Google migration.

So we have been looking to optimize that spend. And as we're getting kind of more applications into that environment, we're finding ways to minimize the incremental spend. So certainly, just a refinement on kind of the additional expense load from new applications moving and also a refinement of the model in terms of timing and level of increased spend from new things that we expect to come on over the course of the year. The other area I would point out is we are coming in a bit lighter on the professional services thus far this year.

So we're using a bit less of consulting help, not just on the migration project, but overall across the firm. So those 2 items are leading to that $15 million change in guidance.

Our next question comes from Alex Kramm with UBS.

Two of the, I guess, newer buzzwords or topics over the last few months have been stablecoins and tokenization. I think Brian actually mentioned tokenization in his question. I don't think you really responded to that. But not sure if I have a really smart question on the topics, but just wondering from your perspective, where you're spending your time.

Where do you see opportunities on both of those issues? And are there any potential risks as well that you see here? Any efficiencies you could gain as well, sorry?

Yes. Alex, thank you. The risks and benefits, will be cautious not to speculate on those, but I do want to give you an update where we're at. As you know, we put out a press release as it relates to some of the stablecoins that we're looking to implement. So I'll ask Suzanne Sprague, who's been spearheading that on behalf of the company, where we're at and how it's progressing. So Suzanne?

Yes, thanks, Terry. And thanks for the question, Alex. So we are primarily focused on our partnership with Google. We did announce, as Terry mentioned, earlier this year, the Google Cloud Universal Ledger partnership initiative that we're progressing with Google to be able to bring to market tokenization technology to enable 24/7 movement of value.

So for us, we're starting -- we're thinking about tokenizing cash and other noncash assets for our current ecosystem, not really looking at the clearing space to start. And we've now entered the second phase of testing efforts, focusing on our relationship with settlement banks and then eventually extending that to our clearing members and clients. So we are very optimistic about our ability to bring to market a solution in 2026. We haven't necessarily refined the use case that we'll launch with at this point in time, but recognize there is a lot of momentum with tokenization overall and that the movement of value on a 24/7 basis can really bring increased efficiencies into our ecosystem, which we always focus on anyways.

Yes. And Alex, just to add and not that I need to because Suzanne said it, but I don't want to be overlooked. The word efficiency is critical as it relates to our efforts here on stablecoins and tokenization if we go down that path for us to create additional efficiencies. As you know, we've created capital efficiencies, but we also need to create other efficiencies, and we will continue to do so.

And we believe with our multi-asset class exchange with the benefits that we have already, this could increase our value to our clients on a stablecoin, especially as it relates to risk management and tokenizing some of the cash. So we're very excited about this. But we will do it in a way that makes sense and, for the long run, not just to get something pushed out there for the short term.

Our next question comes from Ken Worthington with JPMorgan.

CME introduced new cash collateral requirements in the quarter or that got implemented early in the quarter. To what extent did the new requirements contribute to results this quarter? And I believe there was an extra 10-basis-point charge for noncash collateral if certain minimums weren't maintained. To what extent did the 10 basis points contribute as well?

And then can you just give us average cash and noncash collateral balances for the quarter, please?

Thanks, Ken. Lynne and Suzanne, we'll have you address that.

Yes. So Ken, you're right. The new soft minimum went into effect in April 1. One thing to keep in mind, obviously, at the beginning of April and coming into this quarter, there's also a lot of volatility coming into effect at the same time that this new policy went into place. So we've seen a couple of things.

One, the overall level of collateral that's been posted increased pretty significantly between first quarter and second quarter. So our total collateral posted this quarter averaged $316 billion. That was up from about $290 billion last quarter. Of that, about $133 billion was in cash, and $145 billion was in noncash collateral.

So of the required amount, you had almost 48% posted in cash. I would note that the floor or the soft minimum was placed at 30%, and we obviously saw a lot higher than that this quarter. In times of high volatility, it's not unusual, and Suzanne can comment on this maybe a bit more, for us to see more cash posted at the clearinghouse. So some of the shift that we saw and that increase in cash balance likely was the result of that volatility.

And as we progress through the year, as our customers get more accustomed to that soft minimum, we may see more of a rightsizing closer to that 30% target.

Yes. I think it's hard to anticipate for the remainder of the year, given all the variables we've talked about already that contribute to uncertainty in the environment. But generally, in periods of higher volatility and more uncertainty, people do stay more liquid. So I think that does explain why we continue to see those elevated levels even now that we've backed off some of the earlier volatility in April.

Our next question comes from Patrick Moley with Piper Sandler.

So I had one on the trial that's currently ongoing with your former floor traders. The damages that the claims are seeking at least in the media seem to be rather large, $1 billion to $2 billion-plus. So to the extent that you're able to comment on it, how are you thinking about this trial, your ability to win? And how should investors think about your reserving for any potential damages and whether that's had any impact on your capital return appetite in the near term?

Patrick, thanks for the question. And I don't mean to be short with you, but I'm just going to say, we cannot comment on pending litigation. We are -- as you just noted, we are in the middle of this trial now, so it's way too early to speculate what we would or would not do. We have said from the beginning that we have not accrued anything to date for this, and that's all we can say that we've already said publicly, but I'm not going to say anything further on the trial.

Our next question comes from Michael Cyprys with Morgan Stanley.

Maybe just a question here on 24/7 trading. Just curious to hear your views on what you see as the major hurdles and roadblocks today for bringing that to the marketplace. Maybe talk about some of the steps you might take to overcome that, including even with stablecoins, I think, you were alluding to before. Maybe elaborate on the role, how you see that perhaps helping catalyze 24/7 trading?

And then what ultimately might be the time frame that you think that could bring to the marketplace? And then just remind us with extended trading or global trading hours today, just how meaningful that is as we think about maybe -- thinking about the size and the demand that you might ultimately see over time for that. I'm just curious any views around how you might see that demand and use cases shaping up for 24/7.

Michael, it's Terry Duffy. Let me just, again, make a couple of comments. But again, we're speculating a little bit here on the 24/7 about what the demand may or not be on the hours that are -- the markets are not open today because you don't know. First of all, there is a cost associated with the firms in order to staff up for these 24/7 type of trading that especially on margin products, you have to be staffed up if you don't have a fully funded type of a contract.

So I think it's going to be difficult lift for the firms, and so they're going to have to make a decision. Is it worth paying their staff for -- to your point, is the demand there for it? So I personally believe that 24/7 trading will eventually happen globally. I just don't know what asset classes and when.

It could be 10 years down the road, 20 years down the road or 2 years down the road. I don't know. I think the way that you look at the evolution of markets, you would think that it would have to come there. But certain products may not be conducive to certain governments that they oversee that they would allow a 24/7 trading on.

So you might see more like we do today with the crypto markets being more in that realm, but I don't know about some of the other like interest rate products, how central banks would feel about that. Foreign exchange, how central banks would feel about that. How certain energy companies would feel about that. There's a whole host of constituents that have to have an input into what they believe is in the best interest going forward.

So I think it's a difficult question to answer other than I think certain products will, certain ones won't, and the timing is yet to be determined. And anybody on my team, you're not -- well, if you have a different viewpoint, I'd be interested in myself to hear it. So that's kind of how we see it, Michael. So I don't know.

I think you're right about the demand, but the cost for the demand is going to be something that people are going to have to analyze. And if the demand is there, it will support the cost, and I assume people will do it. If it's not, I assume they will not. But I think it will be asset class by asset class driven more than anything else is the way I see it.

Any particular asset classes you think this could be more conducive for and any other hurdles beyond the demand side?

Yes. I think I said it already. I think crypto will be the asset class that's already basically there today. The question is, do crypto futures, on a regulated platform, do they go there or not? Again, I don't know the answer to that. But right now, the cash market, as we all know, it goes 24/7 today. So again, that would be the asset class that appears headed in that direction.

Our next question comes from Kyle Voigt with KBW.

Just curious if we could get an update on FX Spot+ and how the client uptake has been since it launched in early second quarter. I know early days, but any sizing of how additive it's been to the broader FX franchise thus far and how you'd frame the opportunity from here.

Thanks, Kyle. I'll ask Mr. McCourt to make a comment on FX Spot+. Tim?

Yes. Thanks, Terry. And Kyle, thanks for the question. FX Spot+ is something that we introduced back in April.

That is the combination, from a technology perspective, of the spot and futures FX market, and it's really gone exceedingly well in the rollout. So when we look at some of the notable metrics of the Spot+ offering, we see single-day volume of $2.7 billion, which is great for a contract that's only about 3 months old or an offering only 3 months old. But I think what's more impressively noted is that nearly 50 entities have actively traded on this new marketplace including a few dozen banks that have not previously interacted with our FX futures market. So that remains a central hypothesis of this offering that if we can bring new participants through FX Spot+ to enjoy the benefits of both liquidity pools on the spot and futures side and avail futures-based liquidity where CME Group continues to be a leader alongside our primary market designation in the spot market, that's a powerful combination for the marketplace and our clients.

It's something that we also think, to point out, while still early days, we're very pleased with the market quality this has been able to deliver, where we have been able to improve the competitiveness and the market quality of a few of our spot-based currency peers that historically CME, through our EBS and FX Spot offerings, have not been the leader. So we're very pleased that we're seeing new participants, better market quality and significantly additive volume to our complex, all as a function of rolling out Spot+.

Our next question comes from Benjamin Budish with Barclays.

I was wondering if you could comment on your cash treasury trading business. It looks like your market share of overall treasury trading volume has stepped down a bit in the last couple of months. Curious if this is a function of competitive intensity, if you see more trading moving to voice. Any thoughts there on sort of competitive dynamics and what you're seeing in that market?

Yes. Thanks, Ben, for your question. I'll ask Mike Dennis to respond to that. Mike?

Yes. Ben, appreciate the question. Just to start off, BrokerTec had an exceptional Q2. Our average daily notional volume of $949 billion was up 24%. In April, we saw one of the highest volume months since February '22, up -- of ADV (sic) [ ADNV ] about $151 billion, which was up 39% year-over-year.

And furthermore, on April 7, BrokerTec had one of its highest volume days, reaching $322 billion in U.S. Treasury actives traded on our platform, which proves our theory that BrokerTec is the primary venue for liquidity, price discovery and risk transfer. Now when we compare ourselves to others in the marketplace, we look to compare ourselves to like central limit order books that offer U.S. Treasury on-the-run actives.

There's a lot of different ways to look at cash government security trading. Our platform, again, only has on-the-run U.S. Treasury actives. You don't do off-the-runs.

You don't do bills. And so when we look at competitors in that space, we think our market share is flat from the first half of this year versus last year. So it's also important to just understand that BrokerTec is more than just U.S. treasuries. We have a strong repo offering, and we saw another record quarter of $362.9 billion ADV (sic) [ ADNV ].

And we also have RV curve, which had a second consecutive record quarter at $2.7 billion. So some of the things that we're looking at relating to competition is BrokerTec Chicago. We've obviously announced BrokerTec Chicago, which is a second matching engine that will sit next to our futures in the Aurora data center. Launch is scheduled for September 15. We're very excited about it.

We've had a lot of clients already reach out to connect to the new API and start testing. And we do think that this can help with new client acquisition, where clients are trading in sharper tick increments on other platforms, and we do think it will bring new participants into the cash markets.

Our next question comes from Alex Blostein with Goldman Sachs.

I was wondering if you guys could comment on changes in bank capital requirements following CCAR and potentially other changes related to SLR and a couple of other things that could perhaps allow banks to expand balance sheet size. And just curious how you could see your ecosystem impacted by this, whether it's in the rates business or any other products could potentially benefit from that.

Thanks, Alex. As you know, I'm sure you do know, Alex, we've been very vocal that the SLR requirements and some of the other requirements on banks has been onerous. And we believe that the capital that was originally deployed and continues to be deployed for risk management post Dodd-Frank is adequate. And to be adding to something on top of that seemed like doubling up on something you didn't need to have done.

So actually, I was quite pleased to hear some of the recent announcements coming forward, especially on the supplemental leverage ratio as you commented on. And how does that translate into us? Hopefully, it frees up your balance sheet and others so you can continue to do more risk management in a more prudent way and not have as much capital tied up for reg issues that is probably unnecessary. But again, I think what's important is making sure the system is safe and sound, and that is the overriding opinion.

But I think that from our standpoint, the way we look at it, if there are changes, I see it as a net positive for us. Mike, do you want to comment any further?

Yes. I think just to add to what Terry said, there's been no formalization yet on SLR. It's currently in a public comment period, but we do think that SLR relief could provide some balance sheet flexibility for bank clients, but the actual impact is going to depend on the bank and how the final rule is calibrated.

Our next question comes from Simon Clinch with Rothschild & Co.

I wanted to jump back to the retail investors that you're -- retail traders that you're signing on. And perhaps, Terry, you could just give us a sense of how big the base of retail traders you have on the platform. And as you're bringing on like these 90,000 new traders this quarter, do you typically see those traders come on and trade very, very actively straight away? Or is there some level of graduation before these kind of retail traders reach some level of maturity in activity?

Yes. Thanks, Simon. It's a great question. It's almost unanswerable, though, because when you look at a new participant to say that they have hit their stride or their peak in the first week of trading is kind of -- that's not possible, right?

I mean you do -- there is a curve for everybody that's new into any market. Whether it's your foray into equity, equity options, futures, ETFs, whatever you're participating in, you're not going to go all in to begin with. So when we talk about 90,000 new participants, we want to make certain that we participate with our clients to have a very good educational system so they understand and because we want to preserve their -- and help them grow into whatever they're going to eventually be. But to say that they're mature enough on day 1 to maximize their value, it'd be a bit of a stretch.

And from someone who participated in the market and when I started in 1981, I assure you, I was trading a lot smaller in '81 than I was in 2001 before I became Chairman of CME. So it's just an attrition of a trader and how they go forward and depending on what they are used to trading. So I think that's really important to have longevity in this client base. It's a massive client base, but I want to make sure they're educated and they have a good understanding of what they're getting into.

So I would hope they're not going all in to begin with because I don't think that's a good thing for the future. I think what's good is they continue to participate for a longer period of time, which will be beneficial for them and will be beneficial for CME. So I'll ask Julie Winkler to comment further.

I think Terry said it well. I think traders come to us with different journeys. A critical part for us as well as our retail broker partners is that education point. I think what we've seen in the last 5 years is that the traders that do come to our doorstep are far more sophisticated and educated on products in general than what they were pre-COVID.

And some of that has come from the growth of simulation environments, the use of better technology within those environments, trading simulators like the one that we just launched a new one on July 12. All of these tools are just equipping these retail traders with more data, more analytics so that when they do start and fund their accounts, they are more ready to trade. And as Terry pointed out, we also are highly focused on client retention. And for us, that means making sure they continue to get exposure to new products, they understand the content. We have an extensive client education event process that I talked about earlier as well as we work with like 85 different external traders in -- that speak 13 different languages so that we make sure we're meeting these retail traders where they are and helping to bring them along in that journey.

I think you can also say like with those things, the traders that are the largest that is probably the 80-20 rule, where they are making up a large percentage of that day-to-day activity. And yet again, I think the goal is to help those traders mature along their journey. And for us, a lot of that is about product introduction. And I think you're already seeing that in the Q2 results, where it may come to us first from a Micro equity perspective, but our partners in CME have been highly effective at getting them and cross-selling them into other products like crypto and metals.

Simon, hopefully that gives you a little flavor and color about how we're looking at the retail today and going forward.

Our next question comes from Bill Katz with TD Cowen.

Okay. Just maybe a bit of tough question to answer, but I'm sort of curious, just given the interplay of sort of a rising non-U.S. rising retail opportunity set relative to the base business and sort of the volume growth, how are you thinking about maybe the projection for RPC looking ahead?

Yes. So those are, I would say, kind of 2 competing factors there, Bill. So I think you need to think about as we continue to expand our international presence, that does tend to be nonmember activity, so that does tend to be at a bit higher RPC. On the flip side, when you're talking about the retail activity, they may be participating in more of the smaller contracts, some of the Micro, which does have a dampening effect on the average rate per contract.

So for us, we are not focused on growing RPC. We're focused on growing that revenue base and growing kind of the opportunities that our clients have to trade. So I would focus more on that overall revenue picture than the RPC growth per se.

Our next question comes from Ashish Sabadra with RBC Capital Markets.

This is Will Qi on for Ashish Sabadra. Maybe I just wanted to double-click on the international markets there. Continue to see great momentum. Wondering if you guys can provide a little bit more color on the drivers from geographic segments, maybe also how that sales coverage and efforts are progressing on those major geographies as well.

Thank you for that question. Julie, you want to talk a little bit about the sales in the international business real quick?

Sure. Yes. I mean, I think the record quarter of 9.2 million contracts, 18% increase, as Terry mentioned earlier. What was great was the fact that we saw international records really across nearly every single asset class, rates, up 14%; equity indices, up 38%; energy, 23%; ags, 3%; and metals, 14%.

So I would say solid performance across all of the diverse asset classes and across our key customer segments as well. So we saw EMEA leading the charge there with that ADV up 15%. And what we saw similar to Q1 is significant growth from all of those Tier 1 countries. So those areas where we have our sales resources most focused on sales execution.

So countries such as France, the U.K., Switzerland, UAE and the Netherlands. But also, I think in APAC, a great second quarter of volume, up 30% and significant increases there from Singapore, India and China. In terms of what are the drivers behind some of that, Derek mentioned it a little bit earlier in his answer. Definitely, as commercial participants continuing to diversify their commodity hedging, we're seeing the sell side that are seeking global benchmarks, the ones that we offer and the liquidity that we are able to provide round the clock and also really some strong performance from the buy side, who, I think, are seeking the capital efficiency offering that we have here, particularly after the tariff announcement.

So we see a lot of growth initiatives still on the horizon. Certainly, retail is a key aspect of our international volume, but also just the investments that we're making in other key strategic markets and leveraging things like other incentive programs to acquire new clients and continuing to offer regionally relevant products and expanding our data services. So a continued focus on that going forward. And we believe that, that will help to continue to fuel that international growth.

And just to add to what Julie said. What Julie and her team do is no different than what they do here in the U.S. as far as doing the sales, getting out there, she has a sales team that's global. This is not a U.S.-based sales team. The education is critically important, especially internationally.

And when you look at -- when you go out there with your teams on sales and education and you show them the deep pools of liquidity, that's very attractive for any participant anywhere in the world. And again, what we talk about all the time is people see the market efficiencies that they can achieve by trading CME's products is, again, a very attractive component for our international clients, and you're seeing more and more of it on a daily basis because of Julie and her team. So thank you for your question.

Our next question comes from Craig Siegenthaler with Bank of America.

I was wondering if you could elaborate on the NASDAQ licensing agreement? Do the economics of the agreement change after yesterday's renewal?

There's no changes to the economic structure, Eli, just the extension...

No, it's Craig.

Just out to 2039, but at the same economics.

And our last question comes from Benjamin Budish with Barclays.

I just wanted to circle back on the collateral balances. And curious if you could unpack a little bit how cash versus noncash traded month-over-month. I think you mentioned in the prepared remarks or perhaps earlier in the Q&A that given the higher volatility in April, you saw a bigger influx of cash. What does the exit rate sort of look like into Q3, just as we're trying to calibrate our models for the next quarter?

Yes. So it's still early, Ben, but so far in July, the average cash balance has held relatively steady at about $132 billion versus the $133 billion I mentioned for Q2. We have seen a bit of an increase in the noncash collateral that's up to $153 billion so far in July, and the total collateral average is at $321 billion.

We have no further questions. I would like to hand the call back to management for closing remarks.

Thank you all again for joining us this quarter. We appreciate it very much. We're very excited by the results we were able to produce. Again, record quarter. We will continue to stay focused on creating efficiencies, bringing new clients to our marketplace and all the other initiatives that we discussed today. So thank you again, and have a great day. Be safe.

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