And the one thing I would note is that it’s also important that CME also has the ability to trade cash treasuries on BrokerTec and the futures, which is also both leading price discovery mechanism. So we are the natural home for this trade to take place, and we continue to work with the marketplace. Now we can increase the efficiency of this trade going forward and work even more closely with market participants to make sure we unlock the value that still exists between bringing the BrokerTec and our futures business together at CME.
TerrenceDuffy: Thank you, Brian.
Brian Bedell: Thanks, Tim. Thank you.
Operator: Thank you. Our next question is from the line of Kyle Voigt with KBW. Please go ahead. Your line is open now.
Kyle Voigt: Thanks. Maybe just a question on expenses. Good to see the lower expense guide today, but given the slightly higher kind of inflationary environment and still relatively tight labor market, just wondering if you could remind us how you think about steady-state organic expense growth on a medium-term basis for this business within the current macro backdrop? And then second part of that question, as we’re approaching the end of the year here, can you also just remind us how the Google-related expenses are expected to unfold into 2024 versus 2023 level? So I think there was spend for the first four years, but just maybe give us an update on where you stand with that spend today and when that starts to wind down.
TerrenceDuffy: Thank you, Kyle. Lynne, do you want to address both of those issues?
Lynne Fitzpatrick: Yes, sure. So overall expense guidance, if you look at our estimate for this year, that’s up about 3.6% on our core expenses despite the inflationary environment. So I think what we’ve seen from us over the years is really tight expense discipline and expense control. We’re always looking for ways to minimize the — run the business expense to become more efficient so that we can have more of our expense base going through to growth initiatives and helping to grow the bottom-line. So I think we have a strong track record there. If you look back in history, it averaged between that 3% to 3.5% over the last several years. Certainly, as we look forward, we’ll continue that same type of discipline, and we’ll look to provide guidance as we get closer to year-end.
On the Google front, we did guide that we would have four years of incremental cash costs in the range of $30 million per year on average. So our expense guidance for this year, this is our second year, is $60 million in expense, offset by $20 million in CapEx savings to get to a net $40 million. We had $30 million in net expenses last year. So we have two more years where we think there will be an incremental expense associated with the Google migration before we see — start to see breakeven and ultimately cash flow positive.
Kyle Voigt: Great. Thank you very much.
Lynne Fitzpatrick: Thanks, Kyle.
Operator: Thank you. Our next question is from the line of Benjamin Budish with Barclays. Please go ahead. Your line is open.
Benjamin Budish: Hi. Good morning. Thanks for taking the question. Terry, in your comments, you talked about the kind of uncertain rate environment and ongoing need for participants to manage risk. Earlier in the year, you talked about the opportunity with regional banks. But maybe just at a high level, how do you see that opportunity more broadly? Is it kind of new participants that haven’t been on CME’s platform before? Is it more involved hedging from existing participants? How do you see kind of like the medium term TAM coming from that environmental need that you see? Thanks.
TerrenceDuffy: Yes. I think it’s hard for us to describe if it’s the regional banks or the bigger banks hedging. I mean, Suzanne can help me with more color on that as who the exact participants are because they come in to one of the bigger banks anyway, even the smaller ones do. So we’re not quite sure which one is laying off the risk.
Suzanne Sprague: Yes. I would agree with that. It’s generally appealing, I would say, for both of those groups of folks to engage with us on an ongoing basis, especially now with the uncertainty in the rate environment to think through the offerings that we have from a capital efficiency standpoint as well as a general risk management standpoint for ensuring that there aren’t additional micro or macro events that will, I guess, circulate in the industry SVB is one example of a lot of engagement that we’ve had leading up to and afterwards with clients about the way that we provide services and clearing solutions to allow people to manage risk as well as the product side. So, I think it is hard to specifically identify what portion of those participants might be new and existing, but we have been engaging pretty broadly in the marketplace around those events to make sure that the products and services as well as the way that the clearinghouse offers risk management services are accounted for and available for market participants more broadly to get ahead of any other events that might be circulating in the industry.
TerrenceDuffy: And just to add to that, Ben — thank you, Suzanne, that’s a great answer. But just to add to that, Ben, the duration risk that we saw take down SVB has not gone away. As we talked about earlier in our comments, the issuance that is coming out from the government seems quite large in order to run and pay our bills in this government, and the demand has been a little bit lighter. So in return, whether we like it or not, rates are continuing to be very stubborn regardless of what the Fed does or does not do. So I think that we’re not suggesting there will be more duration risk. But what I am suggesting is that people are going to have to manage that. And so whether it’s the biggest of banks or the mid-tier banks, the risk management associated with duration, not only is it not going away, in my opinion is increasing because of the fundamentals of the overall treasury market in general.
So from our standpoint, we think that will lead to more people mitigating and managing risk through our treasury complex from all different sizes of the banking world. That useful Ben?
Benjamin Budish: No. That was great. Thank you so much.
TerrenceDuffy: Okay. Thanks.
Operator: Thank you. Our next question is from the line of Chris Allen with Citi. Please go ahead. Your line is open now.
Chris Allen: Good morning, everyone. I was wondering if you could provide color on the average collateral balances for cash, non-cash in the quarter and then with respect to the yields and then where they stand at present?
Terrence Duffy: Lynne?
