John Pietrowicz: Just one thing to add to that, when you think about the investments that we make in technology, things like artificial intelligence, big query, machine learning, we’re able to get that through Google without having to make the investment ourselves. So there is a lot of positives associated with the migration to the cloud, including flexibility, ability to launch products faster. When you think about the business cases, certainly going to be able to have better returns on our investment because we don’t have to build out the entire infrastructure, assuming success, we can build towards success. So a lot of real positives we think in the long run strategically with our relationship with Google.
Alex Blostein: Great. Thank you.
Terrence Duffy: Thanks, Alex.
Operator: Our next question is coming from the line of Brian Bedell with Deutsche Bank. Please go ahead.
Brian Bedell: Hi, good morning, folks. Come back to the €“ or actually talk about the interest rate franchise, obviously, record volumes and record revenue. There is a perception that as the Fed ends tightening that would reduce volumes, but we’ve got a number of other factors that could continue that strong volume. So just wanted to get your thoughts on that? Those being, obviously, the price increases and then also the new potential customers that, Julie, you talked about from the term SOFR, the introduction of those new customers. So maybe just if you can comment on that and also the 10-year €“ or the long bond complex in terms of what you’ve been saying historically about more treasuries making it into private hands and being hedgeable and then other things that you’re developing on the long end of the curve, not to mention that higher €“ I think high RPC on the treasury side versus the short side.
Terrence Duffy: Thanks, Brian. Sean, do you want to go ahead and start?
Sean Tully: Yes. Thanks very much for the question. Great question. In terms of the overall rates complex, obviously, a very good year this year, as you said, with record volumes strong open interest, record large open interest holders. In fact, if you look over the last decade, we’ve more than doubled the number of large open interest holders, so working very closely with Julie’s team, expanding our client base significantly. If you look at that growth in the market environment, obviously, the market environment has been a strong positive. In terms of the very long end of the curve to get specifically to your 10-year question, we haven’t actually yet seen a strong uptick that we €“ that I had expected in our treasury futures with the reduction in the Fed’s balance sheet.
In fact, surgery futures are down slightly. This year, they are down 3%. So that marketplace is actually down. So how is it that we are up 7% so far this year relative to last year, which was a strong year. What we’ve seen is something that Lynne has mentioned, I think, on past calls, which is that now with the Federal Reserve having greater uncertainty as to whether they will be increasing rates or decreasing rates and with a much greater dispersion that you see in the economic numbers with some seeing a very strong economy and others seeing a very weak economy, we see greater demand than ever before for our interest rate options. So if you look at our short-term interest rate options this year, they are, in fact, up 40%. That’s obviously driven by the huge success in the investment we made in SOFR options last year.
And if you look, in fact, now at our SOFR futures plus SOFR options, we’re doing 5 million contracts a day so far this year. So I think the outlook relative to the Federal Reserve having the opportunity or the potential for either increasing rates or decreasing rates makes greater need for our products than ever before.
Brian Bedell: Maybe if you could about the organic side. I think you talked about the new €“ the potential new trading customers from the 2,000 firms that you’re onboarding?
Sean Tully: Yes, I’m really excited. Another thing that I’m very excited about is €“ think about what we did over the last couple of years was we migrated our single largest business, the short-term interest rate futures and options business from the LIBOR benchmark over to the SOFR benchmark. And what that’s meant is a significant investment in resources, time and money in order to facilitate that migration with our clients. What we’re going to get back to what we’re going to be able to get back to this year is innovation and new products. So I’m very excited about the new options products that we will be launching this year. We’ve got several of them in the pipeline. We’ve got some new future products in the pipeline. And you may recall that about half of the growth in our listed rates, futures and options business since 2012 has come from new products.
So we will be launching many new products this year that we are very excited about and getting back to that innovation. In terms of the additional clients, where we now have more than 2,100 new clients licensed with CME terms so far. I’ll turn it over to Julie.
Julie Winkler: Yes. So in terms of who those clients are. I think it might just be helpful if I just talk for a minute about some of the segments. Clearly, banks are the largest segments. They are the ones that are lending against this rate for all of the work they are doing across business loan, trade finance, commercial real estate. But some of those other groups that are more to that organic point that you asked about is for the first time, a lot of private lenders, so these could be specialized hedge funds, PE firms, insurance companies, those that definitely are lending and need this rate to be used. We’re also seeing licensees coming from the buy side and other investors running loan syndication, CLO death. And again, those are use cases very specific to buy-side participants, and those are really touching across the globe.
So we’re seeing that in Europe and Asia as well. And also just other fin-tech and service providers, so you can imagine there is a growing number of vendors that are going to need these rates for valuations, risk management, loan administration, accounting. And this is where our sales team is critical to be able to work those through the funnel. And also, you can imagine the education around that, right? So we’re continuing to work with commercial clients, corporate treasurers to help them understand both how that rate works, get them licensed and help them understand what other risk management products and data we have available for them. So we are working through this and as I mentioned, still have a good pipeline of opportunities across those segments that we’re working through right now.
Brian Bedell: Alright. That’s great color. Thank you so much.
Terrence Duffy: Thank you, Brian.
Operator: Our next question is coming from the line of Alex Kramm with UBS. Please go ahead.
Alex Kramm: Hey. Hello, everyone. Just another one on the pricing side maybe for a minute. I know you talked about your impact of the price increase, the similar way every year where you say like, hey, adjusting same mix as we saw last year, it should be this or that and then obviously a higher level this year. But what we’ve also seen in recent years is that mix never really seems to be driving that upside that a lot of us expect. So I know you don’t have a crystal ball, but €“ a, now with the 4% to 5% that you’re talking about, maybe the question is how much do you think or we should expect to stick? And maybe just review what the biggest drivers of that mix are that has maybe worked against you on the pricing side recently? I know there was a lot of question, but hopefully, you got the gist of it.
John Pietrowicz: Yes. Thanks, Alex. It’s very difficult, obviously, as you know, to predict how the mix is going to happen year in and year out. And I think what we’ve seen certainly over time as volumes build, the only real impacts we have are mix shifts to our RPC. So in other words, we generally don’t reduce prices. You saw an example when we wanted to change behavior where we adjusted and gave some fee waivers for the SOFR First Options, which obviously was hugely successful. But to put it into perspective, right, so if you look at what we did last year, we made a 1.5% to 2% price adjustment. At the time, I said that the biggest impact was going to be in the equity part of our business. And if you look at equities, our €“ if you look at the RPC for equities in the fourth quarter of 2001, we were at $0.526.
If you look at the in our equities complex today for the fourth quarter, we’re at $0.535 and this is on a 25.6% year-over-year increase in volume. So when you talk about it’s sticking, I would say that’s pretty sticking, especially when you consider volume incentives and the like that we have in our equity business. So we do take our pricing adjustments extremely seriously. We look at it on a product-by-product basis. We’re very surgical. We have regular discussions around it to make sure that we’re making the investments in market maker programs and incentive plans appropriately. And I would say that overall, when you look at our volume and pricing dynamics, I think we’ve been pretty successful and what we’ve done in terms of adjusting prices at the right time.
Alex Kramm: Okay. Fair enough. Thanks, guys.
Terrence Duffy: Thank you, Alex. Appreciate the question.
Operator: Our next question is coming from the line of Simon Clinch with Atlantic Equities. Please go ahead.
