BGC Group, Inc (BGC) Q2 2008 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the second quarter 2008 BGC Partners Inc. earnings conference call. My name is Noalia and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Jason McGruder, Head of Investor Relations. Please proceed.

Good morning, everyone. We are calling from London today. Before we begin we want to make sure that you know that our second quarter 2008 financial results press release was issued last night. If you do not have a copy of the document you may obtain one by going to the Investor Relations section of our Web site at BGCPartners.com. I also refer you to the disclaimer language titled "Discussion of Forward-looking Statements" contained in our earnings release. I remind you that the information in this release and on this call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. Such forward-looking statements include statements about the outlook and prospects for BGC Partners and (inaudible) industry as well as statements about our future financial operating performance. Such statements are based upon current expectations that involve risks and uncertainties. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied because of the number of risks and uncertainties included, but not limited to risks and uncertainties identified in the earnings release and BGC Partners filings with the U.S. Securities and Exchange Commission. We believe that all forward-looking statements are based upon reasonable assumptions were made. However, we caution you it's impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on the anticipated results or outcomes. Then accordingly, you should not place undue reliance on these statements. Forward-looking statements speak only as of the day they are made. And we undertake no obligation to update the statements in light of subsequent events or developments. Please refer to the complete disclaimer with respect to forward-looking statements set forth in yesterday's earnings release and the risk factors set forth in our public filings (inaudible) by reference. I would now like to turn the call over to our host, Howard Lutnick, Chairman and co-CEO of BCG Partners.

Good morning and thank you for joining us today on our second Quarter 2008 Conference Call. With me today is Lee Amaitis, my co-Chief Executive Officer; Shaun Lynn, our President; and Bob West, our Chief Financial Officer. Lee will begin by discussing recent business trends and Bob will review our second quarter results, and I will conclude with our third quarter outlook, and of course we will then be happy to answer your questions. I am pleased to report that in the second quarter our pretax distributable earnings more than doubled to $42.3 million or $0.22 per fully diluted share while our post-tax distributable earnings increased by 70% to $32.2 million or $0.17 per fully diluted share, all when compared to the second quarter of 2007. Our pre and post-tax distributable earnings margins also expanded by over 3% this morning to 13.8% and 10.5% respectively. We are proud to have delivered such dramatic improvements in profitability, and I am delighted to announce that we will begin paying out dividends to common stockholders quarterly rather than semi-annually. We have declared dividends of $0.13 for the second quarter which is payable on September 30th. Although industry wide volumes briefly declined for the last two weeks of June, we continue to produce double-digit revenue growth in the second quarter, with revenues up by 11.9% to $305.5 million. With that period behind us, our July revenues were up approximately 10% compared to last year. We believe our partnership structure, dividend policy and stock buyback program aligns the interest of management, our employed partners and our public shareholders with our common goal of increasing distributable earnings per share. With that, I would like to turn the call over to Lee.

Thank you, Howard. Good morning, everyone. As most of you know a key factor in our growth is the continuing expansion and integration of electronic trading. In the second quarter of 2008 we saw improvement in fully electronic revenues from credit default swaps and foreign exchange options. Our second quarter 2008 fully electronic revenues from CDS and FX options exceeded the total for all of 2007. The volumes in July suggested this growth will continue. Our customer usage of our technology adds to our confidence that new product volumes and revenue will become significant percentage of our overall revenues and volumes over the next couple of years. We have moved from the first phase, which was the client testing of our new products, and using eSpeed and BGC trader to view prices as the second phase were over 30th of world's largest banks and investment banks are trading in significant number of products other than U.S. Treasury's overall system without broker resistance. In addition to CDS and FX options, we continue to expand our fully electronic trading volumes in Canadian and European government bonds as well as European agencies. With our technology being recently named one of the only three approved platforms of the governments of Belgium, the Netherlands, Greece and Austria for the quotation and trading of their domestic bonds, we are pleased to – we are well-positioned to expand our fully electronic trading across Europe. As we have always said, the conversion to fully electronic trading of certain asset classes is a matter of when not if. Such conversions will lead to considerably higher profit margins and earnings growth with or without corresponding revenue growth. We continue to hire new brokers, adding to both our revenue and profitability growth, our broker productivity continues to grow with our average revenue per broker at $454,000 for the first half of 2008, up 22% from the first half of 2007. We are also pursuing accretive acquisition opportunities, investing in our world-class technology and taking other steps, particularly, in energy, equities and commodities and expanding our geographic footprint that will best position the company for top and bottom line growth in 2000 and beyond. With that I would like to turn the call over to Bob West.

Thank you, Lee. For the second quarter of 2008, BGC Partners generated revenues of $305.5 million, up 11.9% compared to last year's second quarter figures of $273 million. We generated approximately $103 million in revenues in April and $105 million in May. The final 10 days of June were abnormally slow and we generated approximately $98 million for the month. However, July revenues were up 10% year-over-year to approximately $103 million. The company's brokerage revenues were $278.6 million in the second quarter of 2008, up 11.9% compared to $249 million in the prior year period. (inaudible) revenues increased by 1.8% to $143.1 million. Credit revenues increased by 23.7% to $59.1 million. Foreign exchange revenues increased by 5.7% to $34 million and other asset classes increased by 59.4% to $32.3 million, all compared to the second quarter of 2007. The increases in credit and other asset deposits were driven primarily by the strong organic growth across the globe in credit and equity derivatives, and by the acquisition of our energy broker, Radix. For the second quarter of 2008, our (inaudible) business represented 46.8% of our revenues. Credit, 22.6%; foreign exchange 11.1%; and other asset classes, 10.6%. As a reminder, distributable earnings or the earnings which we expect to distribute to the benefit of our partners and our public shareholders. We also use distributable earnings to calculate the dividend and determine the size of our stock buyback program. Distributable earnings and income statement and the reconciliation of these amounts to GAAP earnings are included within the supplemental schedules attached to press release. Turning to expenses, compensation and employee benefits represent 57.2% of the company's revenues in the second quarter of 2008 on a distributable earnings basis which is an improvement over 58.5% in the year earlier period. Our non-compensation expenses were 29% of revenues on a distributable earnings basis in the second quarter of 2008, an improvement of 6 percentage points compared to 35.3% in the second quarter of 2007. Our pre-tax distributable earnings were $42.3 million or $0.22 per fully diluted share, up over 140% compared to $17.1 million or $0.09 per fully diluted share in the second quarter of 2007. Our pre-tax distributable earnings margin was 13.8% in the second quarter of 2008, more than double the 6.3% recorded a year ago quarter. We expect to continue to expand our pre-tax distributable earnings margin by growing our revenues and broker head count over our relatively fixed non compensation expense base. We also expect that we can achieve higher pretax margin as we increase the percentage of revenues we generate from fully electronic trading, market data and software. We generated post-tax distributable earnings of $32.2 million or $0.17 per fully diluted share in the second quarter of 2008, up 70% versus $18.9 million or $0.10 per fully diluted share in the second quarter of 2007. Our effective tax rate for distributable earnings was 22.1% in the June quarter, which compares to a tax benefit of 15.7% in the prior year period. We continue to expect our effective tax rate for distributable earnings to be approximately 22% in 2008 and 27% for 2009 and thereafter. On a fully diluted weighted average share count, our fully diluted weighted average share count was 190.1 million for the second quarter of 2008 compared to 185.3 million in the year earlier period. As of June 2008, our fully diluted share count was 199.9 million shares. As of June 30, 2008, we had 1,281 brokers versus 1,204 as of June 30, 2007. Now, I would like to turn the call back over to Howard.

Thank you, Bob. We expect to generate revenues of between $280 million and $300 million in the third quarter of 2008 compared to $299 million in the year earlier period. Our top line outlook considers that historical levels of seasonality return this August. As many of you know, turmoil from the credit market made August and September of last year unusually busy for both BGC and our clients. Therefore, this third quarter is an unusual comparison to our 2007 third quarter, which grew approximately 40% as compared to the same quarter of 2006. Nonetheless, because of our highly leverageable platform and growth in fully electronic trading of new product, we continue to expect high double-digit distributable earnings growth and expanding margins for the remainder of the year. We expect third quarter 2008 pre-tax distributable earnings of $33 million to $40 million and post-tax distributable earnings of $26 million to $31 million, which is an increase of 50% to 80% when you compare those to the earnings of 2007. The company has strong profitability. The company has world-class technology. We have a terrific management team and a unique partnership structure that is both retentive and tax-efficient for our stockholders and our partners alike. And with that, Operator, I would like to open the call for questions, please.

(Operator instructions) Your first question comes from the line of Rich Repetto with Sandler O'Neill. Please proceed. Rich Repetto – Sandler O’Neill & Partners: Yes. Good morning, Howard.

Good morning. Rich Repetto – Sandler O’Neill & Partners: I just want to get a little bit more understanding or color on the late June I guess slowdown in the rate products. Was it with large customers, large investment banks or was it more spread out across all clients or any, in particular, rate products?

It was broadly across the rate group in general. And it came from – and it is really only the last two weeks of June, the first two weeks of June for us, I think the whole industry, if you look at the industry wide numbers, they kind of went down in the – for the last three weeks, really saw that in the last two weeks. And from my perspective, it looked like it coincided with a change to that brief hawkish opinion about inflation that the Fed and U.S. and the European since (inaudible) might have to raise rates to head off inflation, we saw rates jump which really against the position that most of the rates traders in the world have and that quickly reversed itself. And that's why you see in our July numbers (a), they were back to $103 million and (b), they were up 10% year-over-year. So it was really just a spike or an abnormality to the market and has been rare, and we rarely if ever see that kind of thing, but it did happen. And so it was really contained in that two-week period and you can see from our July numbers that they really bounced back in June historically it's a stronger month than July. You know, July 4th is a holiday. It's generally a bigger month and it really was the last two weeks and just (inaudible) and that's what happened. Rich Repetto – Sandler O’Neill & Partners: Got you. And then I guess the next question would be what do you think is typical seasonality for August or September? And are you looking that on – I guess you can't look at it year-over-year because last year was such an outlier, but say from the July level what do you think is typical seasonality in August?

Generally, we have the benefit of that comparison which we have the 100 brokers we've added plus the new brokers we have in come online. We will generally be able to compare them to last year including what we think is the growth rate. But because it's really not effective for us given the scale of our growth to go all the way back to 2006, and that has led us to this wide range of guidance. So, we think in fact that we know that July is fine, and we are confident that September will be fine. And so, we've given this sort of wide range of guidance because we have lot more brokers, and it is possible that August could be down 20% compared to July, that has happened historically, but it could well be that it's only a couple of points down and that September should be ever better. So I think given that kind of model that's why we gave a big spread is really all about August and the seasonality and how things are impacted given the stress of the world's credit markets or of the world's traders take a holiday because they didn't get one last year, then they will be slower. If there is a hiccup in the world, which is very reasonably likely to happen, you could see the end of August be substantially different, and so we put in that wide range and we think by adding our revenue for July, you really get a sense that from our perspective, our business is in excellent position, it is growing comparatively in almost every model and message that we have and what we see, but August is just going to be different August than last year. So, we tried to give you as much information as we have. And then to look back in 2006 it's just not a reasonable comparison because the company is much bigger, much stronger and much better and one other quick topic would be as Lee mentioned, the rollout of electronic trading comes with it a commission discount. So it comes with it a relatively small constraint on revenue, but a significant increase in profitability. So as we roll out our technology, you might see a relatively smaller increase in revenue that you might otherwise view, but that will come with a corresponding significant increase in profitability. We may in fact do a variety of things to encourage our customers to use that, and of course electronic trading companies will have lower commissions. So you might – the more successful we are at rolling out electronic trading, the less those two natural relationships will stay. But the increase in profitability, I think will be consequential materially and you'll see it. Rich Repetto – Sandler O’Neill & Partners: That's helpful. I just thought it was interesting. If I'm doing my math right and you back that $98 million for June out of the quarter, it looks like all the other months, April, May as well as July, you said was $103 million, they're all averaging that's $103 million, $104 million range.

Right. Right. That's what – I mean that's why we showed it to you so you wouldn't think that somehow, something happened to our business and now it's different, in July, it's $103 million, right, and April and May $103 million and so it was the same and you would think July generally is seasonally weaker than April or May. So that is very optimistic for us as a comparison as a core of our business and against the concept that somehow there's an industry wide downturn or anything like that. It's just we are not seeing it, we did not see it in July, we did not see it in April, we did not see it in May, and we did not see it for the first two weeks in June. Rich Repetto – Sandler O’Neill & Partners: Very last – that's helpful. Very last question I would. The dividend was $0.13. You had talked about a minimum at least of $0.60 for the year ending – for the 12 months ending March 31st '09. And I was just wondering what did the board think about it, what did you think about, if it would have been $4 million or so to do $0.15 and did like what was the balance between $0.13 or doing a couple more pennies to be on that minimum six – or do you see making it up in the fourth quarter calendar quarter in the first of next year to get to $0.60?

I think, generally speaking, the discussion you know, sort of I guess the end results was that the board could easily approve the $0.15 dividend if you wanted to. It's certainly well within the balance that we – of the policy that we set. But the thought that having such variability that if the second quarter, we were not able to have that same dividend, then people might think that even though the dividend has variability to it, we wanted people to be able to rely on it. So the board came to the view that if we can add $0.13 this quarter and $0.13 next quarter even with the seasonality then at least people would understand that we are going to – to the extent our earnings allow us to just stay at $0.13. And therefore, once we get to the first quarter of next year given our expectations that the growth of our business we should be able to make it up. So we were a little lower because of the second two weeks of June, but we thought that people would appreciate a consistent dividend policy knowing that our expectation is giving our guidance that in light of the market allows us to stay within our guidance which is pretty wide and, obviously, that's what we think we can deliver. And we will be able to have it a $0.13 dividend next quarter as well within our expectation. (inaudible) Consistency, we thought it was important to not be higher in the second quarter and then lower in the third quarter because people might think that the dividend is going to keep going down, because it'd be reliable as opposed to saying we are just going to be – try to be steady and (inaudible). Rich Repetto – Sandler O’Neill & Partners: And then sorry for going on so much here, but, then how should we interpret it the last quarter statement about the – at least do you still feel there's a reasonable chance to get the $0.60 dividend? Because I look back and it said at least $0.60 or 75% of distributable earnings.

I think given the last two weeks in June, you may want to take that down a little bit. It doesn't mean that we won't try to make that if the business allows us to, but given exactly where we are now, it would not be unreasonable for you to take that down to $0.55 or $0.56. Rich Repetto – Sandler O’Neill & Partners: Understood. Thanks.

Your next question comes from the line of Daniel Harris with Goldman Sachs. Please proceed. Daniel Harris – Goldman Sachs: Good morning. I was hoping, Howard, you could just go back to what you had talked a little bit about that the lower commissions that you'll pay out to your brokers on electronic trading, you know, how do you incent your brokers if you are indicating that we may see a lower revenue growth that you otherwise would think, but a bigger increase in income to drive volumes through the electronic platform if they are going to get essentially a lower commission rate on those?

So, let's just do the macro for electronic trading. Generally speaking, it has been our history, we have been doing this for a long time that if and when commissions come down by half, volumes grow by double, you just don't do it on the same Tuesday. The fact is it takes a little while for that volume, the loss of friction, if you will, to work its way through the process. So with fully electronic trading, a great incentive to have our clients trading for lower price which many of our clients think they should have, with the stress the credit market they'd like to have a lower price we offer that lower price right now to them by saying if you do it electronically we can cut your price in half. Our model generally is that our brokers get 15% to compensation to take care of those clients who are typing themselves, and that would be an increase then of 45 points to the bottom line. So we can, if you will, incent our customers to trade electronically. And generally, if you cut the commission a little, they will do a little more volume. Now, you are not going to see that on the first day. And as Lee said you saw more electronic volume in credit default swaps and FX options in the second quarter of 2008 than we saw in all of the all four quarters of 2007. And that's superb pickup and superb statistics granted from a small number. So the brokers remember having great incentives and that is their 30-odd percent equity ownership of this company and its value. So our interests are entirely aligned. They do get compensated. And you may remember that for a broker the number one asset is his time. So if he can get paid from a client who's not taking up his time, and he can spend his time doing all the other products that make him money then the net result of the growth is he makes more money. And so the brokers understand that. That's why they came to BGC because BGC was always the company with its proprietary trading technology that's there to allow customers to do it by hybrid which they do now or do it fully electronic and they know they get paid for it. So we would naturally have a slight decline in revenue as there's pickup in electronics. You should not notice it on the bottom line because we have an increase in profitability. And as that bottom grows you see a dramatic increase in profitability. It is absolutely what we want to do. And the brokers are here and they are massive owners of this company because they want that to happen. They are our owners as well. Daniel Harris – Goldman Sachs: So I just – I'd want to go back from this. So you said that you general that BGC Partners generally pays out 15% on electronic transactions relative to these sort of blended rate of 56% or 57%?

I would say, generally, that's right. That's right. That is the long-term, and absolutely the long-term model, that's the model in treasuries as an example, that's exactly how it works. Daniel Harris – Goldman Sachs: That's helpful for me. And then this is a question that I think we've asked every quarter. And it seems like you guys are highlighting it more. The ship to electronic trading, I think Creditex noted – or ICE [ph] noted that Creditex said that their 2Q electronic transactions were up to about 6% or 7% in the U.S. versus I think one previously. And you are talking about how 2Q was more than all of '07. What products are really driving that shift to the electronic platform more than they have been in the past?

We said that the two that we highlighted were FX options and credit default swaps, so those two products were obviously the big drivers. We do have a – we are very successful electronically in Canada. And we are moving as we said European government bonds. European agencies, for example, EBRDs, and those kinds of corporate/sovereign bonds are moving electronic. Within the CDX it remains. We are getting the most pickup on our system. Everybody's different, you know our number, there are a few competitors with Electronics Systems, but we are talking fully electronic systems not using it to capture information when the broker doesn't trade. This is literally to us where we do not have to come and see the broker the same way; because the broker do not – has to do the work. They make money but they didn't have to do the work. Daniel Harris – Goldman Sachs: So it's more the – on the CVS I think you said the single names are moving electronic versus the index?

No. For us. Remember that the interesting thing is each of the brokers say they are in CVS, but it is inaccurate to suggest that we all do the exact same thing. You know some houses are suggesting that we all are doing – we are excellent at autos and telcos. Those – that area of ours where we are excellent. And some of the others are better at imaging and some of the others are better at media and some of the others – you know everybody has different things. There are probably two of us who are good in each product category, but none of us are perfect in all of them. Daniel Harris – Goldman Sachs: That's helpful then. And then can you just sort of give a little bit more color around the growth that you're seeing in another – obviously with Radix in there now, that line is growing very rapidly year-over-year. So two questions. One, if you can break out and give us any color on sort of what's making up that $32 million and then, two, is commodity something that you think could ultimately just be a big home run for you guys? And is that more than just Singapore and its global?

Right now, our energy or commodities is basically just a small acquisition in Singapore. Others growth came from equity derivatives and it was organic, and we expect that to continue to be a very strong growth driver for us. Eventually, we will get big enough to be broken out separately and we absolutely think, as Lee highlighted, that the three areas that we think will be big home runs for us are equities or commodities and energy. Those three areas are big drivers for us because we look across at the comparison of the other IVPs. They all have a significant percentage of their revenues from those products. We do not. And as you know, our platform is more than capable of handling that and adding that to our scale. So those are three opportunities for us that we think would be big places where we can either acquire accretively and plug them into our model or higher profitably at a loss. So those are three areas that we highlight that you should see over next period of time that we will have dramatic revenue growth and profitability. Daniel Harris – Goldman Sachs: Thanks, guys. I will get back in the queue.

Your next question comes from the line of Rob [ph] with Deutsche Bank. Please proceed. Rob – Deutsche Bank: Hi, good morning. I was hoping that you could give us some more color on the expense side. Are there any areas that you are looking to manage down further in the next couple of quarters?

Nothing. Particularly, what we see though is we have a very leverageable expense base, and our percent of our total revenues we see that trailing down over time. But, as you bring lot more people and we expand our business, but there's nothing – there's no particular area where we see the numbers driving down. Just overall the percent of revenue should decline, not only over the next few quarters. Rob – Deutsche Bank: You talked about moving to more electronic trading. Can you give us a little more detail in terms of geographies that where you think you have the most opportunity to expand there?

That's a global initiative. We have CVS in Europe, has had a bigger uptake for electronic trading than it has in the United States, but it's one of the areas where we're focused on heavily. We have seen our FX options business around the world move towards the electronic platform, Asia, Asia-Pacific, the European communities as well as the United States. So both of those products that I've mentioned before have been more global. CVS is a little bit more concentrated in the European horizon, but it doesn't necessarily mean that, that's not going to have an uptake in the U.S. as well, because our platform's growing up in the U.S. as well. Rob – Deutsche Bank: Can you give us an idea of what your European CDS business looks like relative to the whole?

In terms of electronic versus voice or–? Rob – Deutsche Bank: Both that and in terms of the contribution.

They are relatively the same in terms of revenue contributions to the whole. Rob – Deutsche Bank: And you've talked about previously potential mergers. I'm wondering if you can give us an update in terms of what you are looking at for the second half of this year. What sort of opportunities you are seeing and then also what impact there may be to you from mergers among your competitors?

I think we usually wouldn't use the word acquisition. So we think – and part of our reason for our raising money in our secondary was that we thought we could accretively acquire a company and then add brokers to those acquisitions attractively. We have a number of targets of companies that we think that would work well with us, plug in well with us. We like the management and they like our partnership structure and the whole model that we have and we are actively in discussions with a variety of counterparties around the world. This is a big industry with lots of local players, and there are tremendous opportunities across the world. And so we find no limit to the number of opportunities that's really buying them at the right price not only the right structure and the right model. So we are actively pursuing them and they will – when we have the right deal at the right price and the right model, we will sign those deals and then we will talk about them. They could be relatively larger, relatively smaller than (inaudible) now to the word merger. With respect to the second part of your question which is if there were a merger between GFI and Tullett which has been in the press, we think there are three opportunities with respect to that and we wish them well with it. Those three opportunities are if you think about it, number one, they are currently five large IDB. After the transaction there will be four. It is a definite benefit to the company for each of our clients to pop one of those names off of their board and have four big customers in the IDB space, not five. That is just an absolute mathematical benefit. Our market share will improve. Number two, those two companies will move towards integrating not towards acquiring. They will not be really in the space of buying and acquiring other people because they have to integrate themselves. And that's a lot of work. So they will not be out looking for the companies, therefore if there is less companies, two left, as it turns out, the next ex years, maybe two, maybe three years, we are not looking at the small local brokers to acquire. And so they are just not that interested in that because they can make the hay between the combinations of themselves in choosing which CIO to keep, which President to keep, which CFO to keep, which of their energy team to keep, how are they going to integrate? All that kind of staff will keep them occupied and therefore they won't be looking at other acquisitions which will make the opportunity for us to acquire other companies better. And then, by definition, there will be opportunities for us to grow in the energy space, the commodity space, and equity space. We have great technology. We have a great marketplace, we have great management and there are these businesses that are great opportunities for people. And to the extent that brokers want to join us for whatever reason, we have a great opportunity. So I think that kind of thing will bode very well for our company in the short, intermediate and long-term. Rob – Deutsche Bank: That's helpful. And just one housekeeping item, the share count I think at the end – when the deal closes around 200, is there any reason to think that will be dramatically different in the coming quarters?

No. Rob – Deutsche Bank: Thank you very much.

Your next question comes from the line of Jeff Rosenbaum from D.E. Shaw. Please proceed. Jeff Rosenbaum – D.E. Shaw: Hi, just one question, following up on the last set of question about changes in industry dynamics given the GFI and Tullett is. Can you just talk high level qualitatively about the ability to combat commission pressure more if there are fewer competitors and if that's real? Or if that will continue to be as much commission pressure as you've seen in the past?

I don't scale our business drives the bottom line, but scale across local products. Whether you are excellent in 84 products or 102 products does not really change the economics of commission. So we don't see any change in the global landscape because Tullett and GFI merge, I just think it just means they won't be hiring from each other. It probably reduces the broker compensation as brokers move from – there's just less places to go, if you will. But no, I don't see it changing. If I understand your question right, I don't see it having any impact whatsoever on commissions. I think the thing that will have the most impact on commissions is our ability to rollout electronic trading because the clients can start to do their business at half price. Electronically, that has different factors in it. You tend to attack those areas of the market that are benchmarking or part of a product that (inaudible) the whole product out and those brokers then can definitely be actively engaged with all the rest of the products that are not electronic. And that has been the history of it and they have been successful. But we don't see the merger having any impact whatsoever to commission change at all. Jeff Rosenbaum – D.E. Shaw: Thank you.

A follow-up question comes from the line of Rich Repetto with Sandler O'Neill. Please proceed. Rich Repetto – Sandler O’Neill & Partners: Yes. Hi, Howard. Just one quick follow-up. I know the cash – you've sort of laid out the strategy of acquisitions, accretive acquisitions for the use of cash. But would you also consider potentially buying back shares if the stock looked that attract to you beyond that, because the difference between the 13 and – excuse me yes, the $0.13 dividend and the $0.17 distributable for earnings isn't a whole lot as far as shares go. But would you consider that or is it really the opportunity for acquisition is just that much more accretive?

Currently, we think we can do very, very well with acquisitions that are very accretive, but we will not in any way rule out the fact that if the acquisition opportunity is for our own shares that will absolutely factor in and it is highly valuable to us because it does earn substantial amounts of money. But we currently think we can and we didn't expect to be able to put the money that we just raised to excellent use highly accretively, and in that accretive acquisition have a platform on which to add staff to grow as well so that we get sort of a double whammy, if you will, and for those of you who've known us for a while, you saw that with our Euro Brokers acquisition which is we put ourselves in a great platform, we then added our technology to it and then we hired hundreds and hundreds of brokers on top of that platform and made the whole much more valuable. So we can do that in the energy space. I think we started with that with Radix, and it's gone exceedingly well for us so far and that's just a small energy acquisition in Singapore and it's that proving the point to us I think we can do this in many other places. But absolutely nothing off the table. But we do think that there are plenty of opportunities out there for us to acquire accretively and then to add to that thereafter. Rich Repetto – Sandler O’Neill & Partners: Thank you.

I would now like to turn the call over to Mr. Howard Lutnick, Chairman and Co-CEO.

Thanks. I'm glad my title hasn't changed. Anyway, thanks guys, for spending time with us and have a great day. We look forward to talking to you again soon. Thanks very much, everyone.