Benjamin Budish: All right, great. Thank you for all the color.
Terry Duffy: Thank you.
Operator: Our next question is coming from the line of Alex Blostein with Goldman Sachs. Please go ahead.
Alex Blostein: Hey, everybody. Good morning. Thanks for the question. I was hoping we could dig into the equity business a little more and specifically just talk about the competitive dynamics between you guys and Cboe’s contracts. We’ve seen the divergence and kind of volumes in market share for a couple of quarters now. So just curious to hear what you’re seeing with respect to underlying clients and what you have in the works to narrow that gap. Thanks.
Terry Duffy: Yeah, it’s a good question, Alex. I’ll turn it over to Mr. McCourt. He’ll start and I’m going to jump in as well, and maybe Ms. Winkler also. So go ahead, Tim.
Tim McCourt: Thanks, Alex. I think before we get to the market share point, it’s important to note that equity options on futures here at CME had a record 2023 doing over 1.4 million contracts and had consecutive record months in Q4 as we headed into the end of the year. And also important to note here in January on the recent activity up over 1.5 million contracts per day. So our equity option franchise at CME is continuing to grow, but there are certainly dynamics in the marketplace around the same day expiring or zero DTE options that are changing the dynamics. But it’s important to know that it is a growth versus growth story. Here at CME, our same day expiring options on the S&P 500 E-mini future are up 70% in Q4 2023 versus 2022.
But it’s also interesting to note they only make up about 26% of our volume in Q4 of 2023. And our open interest is up between 20% to 24% outside of zero DTE when we look over 2023 and 2024. So it’s a very strong growth story here at CME. It’s not only a zero DTE story. And when we look at the relative participation of our market, it is important to note that we have gained share since the low that we observed over the summer at the peak of some of the zero DTE trading, trading picking up several percentage points of share back. It’s also important to note when we look at our global offering nearly 24 hours a day, we remain the leader across the globe, particularly in non-US trading hours, where that relationship is practically inverted against SPX and E-mini options remain the product of choice for those investors outside the US and outside of the normal US trading day.
So you really have to look at all the facets of our business which continue to grow and continue to serve a vital part of risk management for our clients and the marketplace.
Terry Duffy: And I think just to add to what my colleague said, Alex, I think it’s really important that we, when he references the risk management of these, we’re a risk management institution and we’re looking at massive amounts of open interest that have portfolio margin associated with them that cannot be replicated at other entities, so we — to the degree we can. So we are really excited about our equity franchise. We do recognize, so we’re not saying we don’t recognize the growth that has been in zero DTEs. As you know, our zero DTEs expire into futures and theirs expire into cash. That has been a difference that it seems that the retail participants seem to like a little bit more than the professional participant. So we are obviously looking at different things as this continues to evolve.
Alex Blostein: Very helpful. Thank you.
Terry Duffy: Thank you.
Operator: Our next question is coming from the line of Kyle Voigt with KBW. Please go ahead.
Kyle Voigt: Hi. Good morning. So last week you announced that you’ll be rolling out US Corporate Bond Index futures this summer. I think other venues have attempted to launch credit index futures in the past, and it historically has proven difficult for those products to gain sufficient adoption. Just wondering if you could go into some detail about why you think the time is right for this product, why your effort may be different here, and then also provide some color on customer demand that you’re seeing for the product as well?
Terry Duffy: Thanks, Kyle. Tim?
Tim McCourt: Thanks, Terry. Thanks, Kyle. Great question. We’re pleased to announce earlier this month that we entered into the IPO arrangement with Bloomberg to offer futures on their corporate bond futures for both high yield and investment grade with futures coming online summer of 2024. Still all the details are coming, but it’s important to note, I think when we look at credit, is in this market with the increasing rate environment and the increasing dynamics and relationships diverging between equities and rates market, Introducing credit products to the market makes complete sense to offer another tool to our clients to manage the risk as it manifests in all parts of their portfolio, whether it be equity, rates, or single name credit.
I think it’s also interesting to note is that when we look at this universe in general and partner with Bloomberg, we are also tapping into a well-established ecosystem around these indices around other exchange traded products and structured products that are available. So this is a very welcome tool for clients. We’ve heard overwhelming feedback over the last several months during the validation process that this will be additive. It will help them in other parts of the credit market. And we’re looking forward to bringing these products to market, work with our participants to make sure that they continue to grow. And I would just encourage you to stay tuned for more details as we approach this.
Terry Duffy: And so Kyle, let me make a few more points on this. I think you said it in your question, timing. Timing is everything as it relates to certain products and certain product launches. So I don’t think a lot of people would have believed that the short end of the curve was going to continue to be the attraction point for as long as it has been to date. We listed a T-Bill contract where someone would say, well, geez, we haven’t had that since 1980 or 1981. Why did you bring that back out? Well, the cost for us to do that is very de minimis. And we can get these contracts out there quickly. And if people need to manage risk, even if it’s small at that current period of time, it’s a good thing for CME. So I think when you look at the corporate bond market, timing is everything.
And we’re not trying to nail the timing perfectly, but we want to make sure that these products are available if in fact people need to manage their risk more closely today than they did when others [prior] (ph) listed these contracts. So you never know and again, these are not big lifts for CME. We can continue to do it, but we also have other value-added propositions that some others don’t when we list new contracts.
Kyle Voigt: Great. Thank you.
Terry Duffy: Thank you.
Operator: Our next question is coming from the line of Michael Cyprys with Morgan Stanley. Please go ahead.
Michael Cyprys: Hi, good morning. Thanks for taking the question. I wanted to ask on post-trade services, the JV that you have with S&P, OSTTRA. It’s been nearly three years since the OSTTRA JV was created. I was hoping you could speak to the growth that you’ve seen, how well penetrated is the offering today, and speak to where you see some of the biggest growth opportunities ahead in post-trade services and some of the steps you guys are taking to accelerate growth? And then also, if you could touch on the competitive backdrop, that would just be interesting to hear. Some others are looking to take share in processing and risk management.
Terry Duffy: It’s a great question, Michael. We haven’t talked too much about that. So I appreciate the opportunity to discuss it real quick on the call. I’m going to turn it to Lynne, but I’m going to make a few comments as it relates to it as well because I think it goes into the strategy we originally acquired NEX in the cash markets and also the post-trade services that came with it and what our thought process was. So I’ll save those comments and I’ll let Lynne go first.
Lynne Fitzpatrick: Yeah. So, thanks Mike. I think one of the things that we’ve been excited about is the JV that we were able to establish with originally IHS and now S&P. It was bringing together additional assets in the space to bring scale to that joint venture. So being able to cover multiple asset classes from FX, interest rates, credit, being able to have the services span across that back office of the customer base has been really important and is a good foundation to grow from. So, I think we’ve been excited about the prospects there. There certainly are always competitors in that space and people looking at that space. It’s one that continues to need improvement in terms of where banks are looking for efficiencies.
We’ve talked a lot about capital efficiencies. This is an area where it is important to the customers to have that service and have consistent approach there. So I think it’s one where we continue to look for opportunities to expand the reach of that joint venture now that it’s a trusted provider across a lot of the major asset classes.
Terry Duffy: I have nothing more to add than that because I think Lynne summed it up. That’s where I was going to go with the benefits of once we acquired the business, getting focused on the cash markets to complement our futures markets was something we’re really excited about with NEX. And then when you look at the post-trade services and now having the JV, I think that was nothing but a bonus for us to be able to do that with IHS and then ultimately with our partner at S&P Global. So I think Lynne summed it up quite well.
Michael Cyprys: Great, thank you.
Operator: Our next question is coming from the line of Simon Clinch with Redburn Atlantic. Please go ahead.
Simon Clinch: Hi guys. Thanks for taking my question. There’s quite a bit been written about the hedge fund basis trade recently and I was wondering if you could talk a little bit more about, I guess how you think that that particular trade has scaled, how it’s impacted your business, and what you would expect if or when it starts to unwind as the Fed shifts from QT to QE at some point? Just Some thoughts on that would be really useful. Thank you.
