Intercontinental Exchange, Inc. (ICE) Q3 2011 Earnings Report, Transcript and Summary

Charles A. Vice - President and Chief Operating Officer Jeffrey C. Sprecher - Founder, Chairman and Chief Executive Officer Scott A. Hill - Chief Financial Officer, Principal Accounting Officer and Senior Vice President Kelly Loeffler - Vice President of Investor & Public Relations and Corporate Communications

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division Brian Bedell - ISI Group Inc., Research Division Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division Michael Carrier - Deutsche Bank AG, Research Division Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division Christopher J. Allen - Evercore Partners Inc., Research Division Daniel F. Harris - Goldman Sachs Group Inc., Research Division Kenneth B. Worthington - JP Morgan Chase & Co, Research Division Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division Rob Rutschow - Credit Agricole Securities (USA) Inc., Research Division Howard Chen - Crédit Suisse AG, Research Division Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division Christopher Harris - Wells Fargo Securities, LLC, Research Division Jillian Miller - BMO Capital Markets U.S. Matthew S. Heinz - Stifel, Nicolaus & Co., Inc., Research Division Roger A. Freeman - Barclays Capital, Research Division Alex Kramm - UBS Investment Bank, Research Division

Good day, ladies and gentlemen, and welcome to the IntercontinentalExchange Third Quarter 2011 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference to your host, Kelly Loeffler, Vice President of Investor Relations and Communications.

Good morning. ICE's third quarter 2011 earnings release and presentation are available and archived in the Investors section of our website at theice.com. This call will be available for replay. Today's call may contain forward-looking statements. These statements are subject to risks, assumptions and uncertainties, and we undertake no obligation to update these statements. These represent our current judgment. A description of the risks that could cause our results to differ materially from those described in our forward-looking statements can be found in the company's Form 10-Q, which was filed with the SEC this morning. The results discussed today include adjusted operating number, which we believe are more reflective of our performance. Non-GAAP reconciliations can be found in the earnings release and presentation. We also include an explanation of why this information is meaningful and how we use these measures. With us today are Jeff Sprecher, Chairman and CEO; Scott Hill, Chief Financial Officer; and Chuck Vice, President and Chief Operating Officer. I'll now turn the call over to Scott.

Thank you, Kelly. Good morning, everyone, and thank you for joining us today. I'm pleased to again report that ICE achieved record revenues, record net income and record cash flows during the third quarter and for the first 9 months of 2011. And importantly, we're delivering these results, even as we invest to ensure our continued ability to deliver value to our shareholders. I'll begin this morning on Slide 4, with an overview of our performance in the first 9 months of this year. Total futures volume increased 18%, while OTC Energy volumes rose 23%. Revenues increased 16% to $1 billion, adjusted operating margins expanded to 61%, and we grew adjusted earnings per share 24% in the first 9 months of this year. Cash flow from operations increased 43% to a record $541 million. We leveraged that strong profit and cash generation to make strategic investments in Brazil, to build the tools our customers will need in the evolving global market environment, to roll out over 230 new futures and OTC Energy products, to expand over 300 cleared CDS products, to add to our technology team to deliver industry-leading solutions like our new clearing technology in Europe, and to opportunistically buy back our shares. Let's move to Slide 5 now and get into the detail of our third quarter results. Consolidated revenues rose 19% over the prior third quarter to $341 million. Consolidated operating income grew 35% to $204 million. Adjusted diluted earnings per share in the quarter increased 32% to $1.87. For the first 9 months, CapEx and capitalized software expenditures were $43 million, and adjusted EBITDA grew 20%. Moving to Slide 6, I'll review the components of our revenue and expenses for the third quarter. Transaction and clearing revenues increased 18% to a record $302 million, driven by record volume in both futures and OTC markets. Total contract volume grew 25% to a record $207 million contracts. Futures revenues rose 24% to $155 million. OTC Energy revenues increased 13% to $101 million. Revenues from credit derivatives, execution and clearing grew 8% in the quarter to a record $46 million. Local market data feeds also accelerated, improving 17% to a record $32 million. Shifting to the expense side of Slide 6, we saw a healthy 4-point expansion in adjusted margins to 61%, with adjusted expenses of just 6%, a 19% top line growth. Core operating margins, which exclude our CDS brokerage business, remain stable from 2Q levels at 67%. Turning now to Slide 7. I'll walk through the performance of our Futures business segment. ICE's futures markets produced a record volume quarter with ADV up 23% and open interest up 10% over the year ago period. ADV and ICE Futures Europe grew 28%. And during the quarter, the exchange established its fifth monthly volume record in 2011 and a new $25.8 million contract in the month of August. Both ICE Futures Europe continue to be driven by activity in our benchmark contracts, Brent and Gas Oil, up 41% and 30%, respectively. Throughout the year, we've set individual product records and exchange-wide volume and open interest records. You might have also have seen the recent announcement by commodity indexes that are being reweighted to include ICE Brent Futures for the first time, as well as increasing the weighting of Brent within the indices. While Brent and Gas Oil are our largest revenue contributors, we continue to see healthy growth at our European utility products. These include natural gas and coal, which saw volumes rise 84% and 64%, respectively, compared to the prior third quarter. Emission volumes increased 52%, and revenues grew 44% to $17 million. Moving now to the ICE Futures U.S., volumes grew 12% in the third quarter as a result of strong demand for our Russell and FX contracts. Volume in agriculture contracts was more subdued, due in part to the European credit environment and large price movements in the past year in certain markets. We believe that as the environment improves, futures will again become more active. Increased U.S. equity market volatility produced strong volume and open interest growth in the Russell Index futures and options contracts during the quarter. Russell volume increased 32%, and OI grew 17% from the year-ago period and set volume records in August and September. Notably, the Russell Index contracts have generated $15 million of profit during the first 9 months of 2011. The U.S. Dollar Index also continues to gain traction, with volume up 55% from last year's third quarter and open interest doubling. Customers are responding positively to growing liquidity, and we continue to expand our financial product set based on demand, particularly in FX. I'd also like to point out that this morning we announced our October futures volumes increased 21%, and rate per contract remained steady. So the fourth quarter is off to a very solid start. Turning next to Slide 8, I'll review our over-the-counter segment. Average daily commissions in energy increased 14% over the prior third quarter to $1.55 million. North American natural gas and global oil volume increased 29% and 58%, respectively. Open interest increased at a healthy rate, despite the relative lack of volatility and continued low prices. Global Oil continues to benefit from an ongoing migration to clearing and from new products. And as I noted previously, year-to-date, we have introduced over 230 new contracts for clearing. The vast majority of which are OTC Energy contracts, and total new product revenue reached $29 million. This includes $12 million of incremental revenue in the third quarter alone. Open interest for OTC Energy contracts rose 31% from the prior third quarter, indicating healthy demand for our products. And our OTC Energy business continues to deliver solid results with average daily commissions of $1.6 million per day in October. In our Credit Derivatives business, third quarter revenues were up 8%. The credit results were driven by growth on the clearing side of the business, though execution showed improvement, with execution revenue at its highest levels we've seen in 5 quarters. The CDS execution market remains soft due to low levels of volatility, and its participants await regulatory clarity. However, our Execution business continues to migrate towards the screen, with 61% of Creditex's third quarter revenues conducted electronically, up from 55% in this year's first quarter and up from only 35% in the fourth quarter of 2008. ICE has cleared nearly $25 trillion in gross notional value and remains the clear leader in CDS clearing. Open interest at the end of the quarter grew 43% from the prior third quarter. Last week, we began clearing sovereign CDS on certain Latin America names that ICE cleared credit, making it the first clearing house to clear sovereign CDS. With 330 cleared credit derivatives contracts, we lift hundreds more contracts for clearing than our nearest competitor. Importantly, through 9 months, our profit from CDS clearing is nearly equal to the profit we made throughout the year in 2010. Turning now to Slide 9, you can see the solid metrics that our model has produced. We have quarter-after-quarter consistently grown our operating cash flow, as we maintain a lean operating model and focus on profitable growth. For the 9-month period, cash flow grew to $541 million, an increase of 43% compared to last year. This consistent cash generation allows ICE to reinvest in the business, execute disciplined M&A, and opportunistically buy back shares. As of the end of the third quarter, we had $497 million in cash and a very low debt-to-EBITDA ratio of 0.7x. Our low leverage and healthy level of cash gives us strategic flexibility, as we evaluate many new opportunities. With that, I'll be happy to answer any questions during our Q&A, and I'll now turn the call over to Jeff. Jeff, over to you.

Thank you, Scott, and good morning, everyone. ICE's record results were driven by the continuation of long-term secular trends in the global derivatives markets and our unique positioning. As evidenced by our returns on capital, we've invested prudently in the capabilities needed to capture and build upon these secular trends. Whether it's the demand for clearing, on activity or post-trade solutions, ICE is woven deeply into the infrastructure of our customers. We continue to build on this vital partnership at a time when risk management and capital efficiency are more important than ever. So before I walk through our results, I'd like to update you on the status of the default of MF Global. MF Global affiliates were members at 4 of our clearing houses, with the exception of our CDS clearing houses where they did not meet our membership criteria. Because of the ongoing regulatory issues, we're limited in what we can say. But I want to confirm that ICE is in a very strong position with respect to managing through MF's default. We believe that we have ample collateral to assist in the orderly movement of customers to new member firms for the termination and liquidation of their positions, as this process plays out. The press has reported that there may be, potentially, a shortfall of funds in customer accounts. But in our case, ICE has always been in receipt of the full amount of margin monies that are required for the positions in our clearing houses. We began the default process on Monday by making certain that our lines of credit were fully available to the clearing houses in the unexpected event that short-term capital was required to manage through the situation. We then turned our attention to converting MF's noncash collateral into cash by executing trades in the market. We were granted access to MF's offices, and we seconded experienced traders to oversee the management of hedging the portfolio and liquidating accounts. We were able to offer account holders a window of opportunity to move their positions or have our traders liquidate them to the extent that the MF trustee and administrator and the local regulators allowed. In the U.K., we're operating under the newly implemented special administration regime. This regime was adopted following the Lehman bankruptcy, and within hours it allowed us to access customer account information. We continue to work with regulators, MF Global and its trustees and administrators to transfer and liquidate customer positions where we are permitted. We were well-prepared in advance of the default, and we've taken actions since the default to protect the clearing houses. You should know that MF Global represented a low single-digit number in terms of the percentage of activity in our clearing houses, and we do not anticipate a material impact based on all the information that we have at this time. Again, we feel we're in an extremely solid position with regard to managing their default. Now let me return back to our results, and I'll update you on how we're delivering on the needs of our customers, and why we produced growth in each of the past 27 quarters. If you go turn to Slide 10, we provided a snapshot of a few of the areas of growth for us and how we view changes in technology and regulation to redefine markets and create opportunity. I'll begin with the fundamental strength of our business model. First, we have a unique reach across geographies, customers and products. Nearly half of our revenues come from outside the U.S., and our customer base is skewed towards those that are commercially oriented. Our specialized products are designed for end users and risk managers. While the energy markets were among the last to go electronic, these markets had been an area of unprecedented innovation in product and risk management techniques. ICE's Brent Crude and Gas Oil contracts are in their 14th consecutive year of record volume. And the emergence of China as the leading consumer of energy continues to drive growth, along with the supply-and-demand imbalances in western economies. Brent is relied upon for pricing 2/3 of the world's physical oil, and it continues to rise in importance to the oil community. To ensure our contracts have the broadest market appeal possible, we're working with the industry to evolve the benchmark Brent and Gas Oil's futures contracts as their demand rises. And while these contracts and the majority of our other contracts have set new volume and open interest records this year. Similarly, we're continuing this expansion of our OTC Energy markets, and I think it's important to understand the unique value proposition that these markets have provided to our customers and ultimately to our shareholders. OTC revenues continue to grow, and year-to-date average daily commissions in 2011 are 36% compared to 2009, which was the first full year that we operated our energy clearing house. We're now able to lift 600 cleared OTC Energy contracts, up from 100 cleared contracts when our clearing was outsourced. From a customer perspective, coupling ICE futures and ICE OTC Energy contracts on one platform delivers tremendous value in the form of liquidity, security and efficiency. Thousands of market participants rely on our integrated energy futures and OTC platform for both trading and risk management. Customers seek sound, well-regulated transparent markets, and I believe [ph] market structures have many unintended consequences, such as creating the need for automated trading systems to simply reassemble the markets. Today, competition and execution in clearing keeps our cost of transacting in the regulated markets well below the cost of transacting off exchange. Because the cost of trade in our markets represents a very small percentage of the total cost of trading, access to multiple clearing houses and exchanges is not seen to be the primary concern to our commercial hedgers. And the capital efficiency of our clearing model draws participants who hold nettable transactions. In fractured markets, customers and regulators faced increased operating complexity, and systemic risks rise, just as we saw in the fragmented U.S. equity markets during the flash crash. Today's market structure supports the goal of moving bilateral markets into clearing. It supports moving opaque markets onto exchange, and it allows for the detection of speculative volume that is difficult to detect in a fragmented world. Our model promotes increased transparency and clearing in a way that is already widely accepted and is increasingly relied upon by the industry. Turning to OTC Credit Markets, we created a model for CDS execution and open access clearing that has largely been mirrored under financial reform. Our CDS clearing revenues continue to rise in spite of financial reform delays. We believe our leadership in the electronic application and clearing of swaps will continue to be a competitive advantage, and we've also shown an ability to compete in new markets that we were not involved in a few years ago. Now our financials futures business. We're developing formerly under-leveraged products, such as our foreign-exchange futures. Year-to-date, we've grown our FX futures volume 26% compared to the first 10 months of 2010, which outpaces our peers in both futures and OTC FX markets. As Scott noted, we've already invested and innovated in technology to ensure we're serving customers efficiently and in a way that grows our business. Therefore, as we continue into a more automated world, we believe our investment levels will remain steady. For example, the cost of implementing a new clearing system at ICE Clear Europe this year has been part of our investment, as has increasing the functionality of our platform to more than double our options volume. ICE's team of over 300 technologists continues to develop best-in-class systems that contribute to ICE's ability to innovate and to meet our customer requirements. If you'll move to the right-hand side of Slide 10, you'll see the box labeled Business Optionality. It shows a few opportunities that we believe will enable us to continue to diversify our business in the growth markets. While the primary driver of ICE's earnings is our core business, many of these initiatives capture a significant amount of attention. Our strategic diversification is a driver of our opportunity set, and it enables ICE to deliver consistent results. By diversifying into these new areas, we've become more relevant to a larger and more global customer base, without needing to become a large company. We remain nimble in creating our own opportunities, including our move into Brazil's fixed income and energy markets. The demand for derivatives trading and clearing is rising, and it's coming from a more globally diverse customer base, which ICE has a very solid start in serving. Turning to the topic of financial reform. You've seen a little more progress with Dodd-Frank in the United States since we spoke in August. Dozens of rules remain to be adopted, but we have enough information to move ahead with delivering on the key provisions of the law, and we're bringing needed certainty to markets. With the recent passage of both the position limit and DCO core principle rules, 2 major policy sets are finalized. In regard to the former, ICE has initiated a position limit regime on its energy futures and OTC contracts pursuant to regulatory actions in 2008. With these position limits already in place, ICE established record OTC commissions, as well as record WTI futures volumes. Given this experience, we believe the position limit approach that was adopted by the CFTC is prudent, and it will lead to increased confidence in our markets. We have a number of assets already deployed that are supporting the market evolution towards increased transparency, including ICE's energy platform and Creditex's electronic credit platform, which will likely become swap execution facilities. We're actively developing our swaps data repository solution, and we anticipate going live in 2012. In the CDS market, our clearing houses continue to meet demand for more cleared products, and we've introduced clearing for Latin American sovereign CDS just last week. We cleared nearly $25 trillion in gross notional, representing the vast majority of outstanding clearable CDS. We continue to introduce new products to maintain our leadership, and we produced record revenue during the third quarter in CDS clearing. So while regulatory change will continue well into 2012, the daily need to manage price and counter-party risk continues. Regulatory reform increasingly requires that exchanges and clearing houses are the central venue for markets. Whether these markets are futures or over-the-counter, we've established a leading business model, well in advance of these requirements. Financial reform is creating new avenues to serve the markets, and it offers additional opportunities for organic growth and M&A. I'll close off this slide on the concept of value creation. The focus of our efforts is to deliver for our customers ahead of the curve, and this in turn generates value for shareholders. While pursuing organic growth, we carefully manage expenses and investments. We've been very disciplined in our approach to M&A, spending over $2 billion in acquisitions since 2007, and during that time, generating over $2 billion in operating cash flow, which is generating 18% returns on that invested capital. In the third quarter, when the opportunity arose, we repurchased $103 million of ICE stock at prices that we believe do not reflect the fundamental strength of our business. So we remain opportunistic by striving to ensure that our franchise stays in front of new business, while creating value for shareholders, which includes virtually all of our employees. Let me close out on Slide 11 and show the positive upward trend in open interest and volumes in our markets as it continues. The strong growth engine of our core business is a solid backdrop for layering on new initiatives that create optionality for us in the long term. As entrepreneurs, we look for opportunities that arise within change, and I continue to believe that this defines our company. On behalf of my colleagues, I'd like to sincerely thank our customers for their business in the third quarter. I'd also like to thank the ICE team for delivering the best quarter in our history. So I'll now ask the operator to conduct the question-and-answer session, and I'll ask you if you could limit yourself to one question and one follow-up. Operator?

[Operator Instructions] Our first question comes from Rich Repetto of Sandler O'Neill. Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division: Jeff, from my understanding, on the margin on client assets in the futures market that the exchange requires some margin that the SEM can also require margin on top of that. And I guess in your prepared remarks, you said that you were in full control of the client margin. Does that include all margin that even MF could have required above what the exchange level is for the products traded on ICE products?

We're in control of all the margin money that was sent to us, which would be the money that we demanded, and there could potentially be other monies that were demanded by MF in MF's account, and there could also be money that customers left simply on deposits treating those accounts, as you will, like bank accounts that would be under MF's control. We have what we have requested, and that -- those requests can be out of our -- it's directly out of our risk model or can be increased amounts as we see fit, depending upon the clearer and the customer. Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then my one follow-up would be, I believe that you would be the-- the self-regulating organization that monitors, I believe that's the way the structure is set up for these accounts. Have you found CME acknowledge, I guess, it was potential for co-mingling? And I guess -- and also can you explain if this is the case, as customers move assets from MF to another broker, the potential margin that still sits at MF on top of yours, could there be a doubling for a period of time until these assets get freed up through the bankruptcy, could there be a small portion of double margining? And how does that impact your volumes? Like they claim they were number 3 on ICE Europe.

Yes, so let me break your question down, and I'll answer where I can. First of all, with respect to the SRO, the way the market structure works is that each clearing firm must have an SRO, and because the Chicago Mercantile Exchange require the Chicago Board of Trade and NYMEX, it is principally the SRO for almost all clearing firms in the United States. Our U.S. Exchange, the former New York Board of Trade, would be the SRO for any clearer that was simply a member of our clearing house that was not also a member of these other clearing houses, which I believe is a universe is zero. There may be 1 or 2, but I believe it's 0. So we are not an SRO over MF Global. And so I can't, even if I knew, I would probably wouldn't address your question, but I specifically can't address it, because I genuinely don't know. We were not in that role. With respect to customer monies, we are working with the trustee in the U.S. and the administrator in the U.K., and where they permit us, we will either move accounts or liquidate accounts. As we do that, we, the clearing house, are not releasing any monies. So those monies are being held in aggregate against the entire MF position by the clearing house. So if somebody were to move their position to a new FCM, and that FCM gave us that position back, theoretically, I assume that the new FCM may be requiring additional margin, but that's between the client and the clearer. We will be margining that clearer for the new position as it moves. Richard H. Repetto - Sandler O'Neill + Partners, L.P., Research Division: That helps, Jeff. Unfortunately, I couldn't ask about your record revenues and record earnings, but we'll get that next time.

I hope you'll write about it.

Our next question comes from Howard Chen of Crédit Suisse. Howard Chen - Crédit Suisse AG, Research Division: Jeff, we saw proposals for open access fungibility and transaction taxes in Europe during the quarter. Given so much is happening in that region right now, everyone's trying to find common ground, I'm just wondering, what's your overall level of concern that these proposals potentially being implemented.

Well, I think, first of all, I would point out just as you suggested, that they are proposals. And so these are things that have been floated by various entities and are up for conversation. I guess my own view, because I'm an engineer and, unfortunately, think like an engineer. Sir Isaac Newton said in his third law that for every action there's an equal and opposite reaction. And so we have a proposal right now to create a large vertical monopoly, futures exchange in Europe and the equal reaction has been a proposal to try to dismantle that. And so, it's not necessarily surprising. In terms of where it goes from here, I think it will be subject to a lot of debate and probably heavily influenced by whether or not a large exchange forms up or not, and we won't know that for a bit. We will be active in that debate. I think it's bad policy, both the tax and the method [ph] proposals for clearing. It will lead to a flight from Europe of trading and ultimately more volatility and fracturing -- fractures of markets that really have a lot of unintended consequences. So we will be discussing that with the appropriate legislators and regulators, as those proposals go forward, but I think it's probably premature to prejudge their outcome. I do take some comfort that we're located in the U.K. right now, as our European operation in the U.K. has suggested that they will veto the transaction tax. I guess I would also suggest to you that we enjoy operating our business out of the U.K., because it is a global franchise that people respect U.K. law, and U.K. has a convenient time zone. But other than that, there is no natural reason for our business to be in the U.K. And it could easily move if there were changes to market structure that were disadvantageous to hedgers and ultimate users of the market from other domiciles. So it is there as a privilege, I believe, to the U.K. and not a right, and we will be discussing that with European regulators. Howard Chen - Crédit Suisse AG, Research Division: And separately, if we drill into the Energy OTC side of the franchise, as both you and Scott noted, you continue to see really strong growth in Global Oil and other products. I was just hoping you could give us a bit more flavor for the appetite that you're seeing in the market, and maybe how you grade yourselves on the opportunities that you've seen over the last couple of years.

Look, I think, particularly in Global Oil, that business is up 68% year-over-year. It's basically 2.5x the revenue it was just 2 years ago. And I think that's really driven by a couple of things. Number one, it's clearly an indication of the market wanting to get out of the bilateral world and into a cleared world; and number two, what's facilitated that is our ability to launch new products for clearing. I think we're now at somewhere around 600 products available for clearing in OTC. When I started 4 years ago, that number was around 100, and that's back before we controlled our own clearing. As I mentioned in my prepared remarks, we've launched over 230 products this year. The vast majority of which are OTC, a great number of which are OTC Global Oil. So it's really 2 things. It's the market wants to move into a cleared solution, and now that we've got control of our own clearing house, we've done exactly what we said we would, and we've launched the new products that people want to have available for clearing, which has facilitated that. And then other product innovations, as we've been able to launch options. As an example, our natural gas, that business even in a relatively low-volatility environment, we've seen solid performance there. Natural gas revenues were up 9% in the quarter. So I think it's really all about our ability to innovate and launch new product. That's what's really underpinning the strength of the OTC results.

Our next question comes from Chris Allen of Evercore.

I just wanted to talk a little bit about expenses. You guys have provided a guidance at the beginning of the year running -- the adjusted operating expense will be 4% to 6%. Obviously, with the record level of revenues and what looks like a strong start to the fourth quarter, I was wondering if you're still comfortable with that guidance? Or is there going to any pressure from noncash comp and bonus accrual, anything like that, anything to think about into the fourth quarter?

Well, I think, as opposed to prior years, where we've had a single quarter where the performance outstrip maybe what our expectations were, we came out of the gate really strong this year. We were strong in the first quarter. We had a strong second quarter. We just set a record in the third quarter. So we've been able to manage the accrual with a pretty good view that the year was going to be good, almost from the very beginning. So I'm hopeful that the fourth quarter blows away our expectations. I think the trend, as you saw it from the metrics I gave, $1.6 billion OTC and 21% futures volume growth. We feel good about October, and I think fourth quarter is going to be another good quarter. But I think we're fairly well-positioned in terms of where we've got the accruals on our performance, our performance bonuses, et cetera. And in terms of overall expense, I think the mid-single digits and the 19% revenue growth in the quarter speaks for itself. Our margins were up 4 points on a year-over-year basis. Our core margins, excluding the brokerage business, are 67%. We're investing in future growth, and we're delivering current growth with relatively modest expense growth.

And not to beat a dead horse on MF, I guess just to simplify everything, from your perspective, related to the ICE clearing houses, did MF violate any customer seg rules?

They did not violate any of our rules. And so they were a member in good standing at the point they went into default.

Our next question comes from Alex Kramm of UBS.

Just one more on MF, not so much about the clearing house, but I think you talked about the clearing house percentage here before. So if I go back to some of your older case, you -- I think you certainly highlight them as one of your biggest customers in some of your businesses. So maybe, if you can just give us a little bit of a flavor where they were strong, where they were not so strong? And I think they were big energy and commodities player. I think they also did a lot of energy facilitations. So if you think about the business, what do you think the impact the timeline has, how long do you think, realistically, some of this clearing up of all this going on, account movement is going to be done?

The MF house positions were very, very small. The vast majority of the positions in our clearing house were related to their customers. As you know, our market tends to be made up predominantly by commercial market participants. Look, any disruption is going to cause some amount of impact, but our expectation is, just as you saw in October, our volumes will continue to perform well, based upon the large commercial participation in the market. So again, we'll work through what the details are, but our expectation right now is that it should not have a material impact on the performance of our business.

And then just switching gears for a little bit. Obviously, in this whole OTC to exchange clearing migration, you've shown where you pick your battles, but I think more recently, there's been a lot of discussion about not just the clearing side but also on -- what I want to call like the futurization of business and how business are shifting our futures world. Can you maybe talk about that a little bit more? I think it's not a new trend, but clearly, it's something that people focus on right now. So do you think it's going to be a big impact for you and what business, perhaps, or do you still think like the clearing side and maybe just a shift to clear it on the energy side is really the bigger opportunity, not so much the futures side?

I think as we sit here today, it's hard to know any specificity because the rules about what is an OTC swap versus what is a future are still being discussed in the United States. And I think the details in those rules will matter in the answer to your question. But generally speaking, if you step back, I do think that it will become more complicated than it used to be to trade in the over-the-counter markets. There will likely be the swap data repositories and reporting requirements, and there will be requirements to demonstrate that you're hedged or not hedged and the like. And it may ultimately be easier for contracts that can be highly standardized and with standardized tenures to be traded as futures, if they can serve the need that people were getting in the over-the-counter market. Obviously, there will always be, in my mind, some need for customization. But generally speaking, I think where contracts can be standardized, there will be a trend towards futures. And I think we see from others that in the FX market, our own FX futures market and others' markets, that there does seem to be, in that case, a trend from OTC to futures. In just elaborating on energy, which is where we sit, we're very -- we have a lot of optionality. We have a great OTC platform. We have an open clearing house, in the sense that we accept trades from over 100 different OTC venues now. And then we have an amazing futures franchise that's quite global and quite standardized, and the benchmarks in there continue to be increased in importance. So I think we're sort of set up regardless of how the market goes, and if you were to read our comments in this area, you'll see we're relatively agnostic just trying to help the regulators make informed decisions.

Our next question comes from Matthew Heinz of Stifel, Nicolaus. Matthew S. Heinz - Stifel, Nicolaus & Co., Inc., Research Division: I just like to go back to the OTC Energy business quickly, and I guess trying to think about the -- specifically, with the global oil, trying to think about what's the bilateral, what's the real opportunity out there in terms of the bilateral turnover in similar products and how much and how quickly do you think some of this could move over to your platform?

I have a simplistic view from going back to the starting of ICE, where I came out of the electric power market, and that was the first market that Charles Vice and I attacked and then it moved to the natural gas, and then we've moved into oil. And if you think about that chronology, oil had been the oldest market of those 3 that it traded. Natural gas at the time we started ICE had been trading relatively robustly for maybe almost 10 years, and electric power was just starting in its infancy. Sort of the newer the market, the faster they are willing to adopt fewer trading techniques and technologies. So the oil is the last of those, it seems to just now be starting to think about clearing. For many, many years, you had major oil companies with deep balance sheets and large global banks and asset managers that were trading that, and the balance sheet credit was not an issue. And we saw after the Lehman collapse that people started to think about their counter-party risk. And it is that trend that is moving people--and I would suggest to you, it's all voluntary not regulated--into clearing. And so it's early days. I'm sure there's a lot of people that have long-term -- long-standing bilateral, big balance sheet, big collateralized OTC relationships that have yet to move positions into clearing. But I think the trend is starting, it's accelerating, and we're helping that trend by now controlling our clearing technology and putting domain knowledge in how to manage risks of complicated OTC oil portfolios. Matthew S. Heinz - Stifel, Nicolaus & Co., Inc., Research Division: And as my follow-up, you mentioned that you were clearing some more sovereign CDS in ICE trust or foreign [ph] ICE trust and ICE Europe. How much sovereign are you doing on the brokerage side? It seems like you saw some nice growth there. Really, I guess the first quarter of year-over-year growth in quite a while for the brokerage. How much sovereign are you doing and what are the kind of early -- what's the early feedback you're seeing from the Greek situation?

What we announced is the clearing of Latin American solves out of our ICE Clear Credit clearing house. We've not yet launched the European sovereign clearing yet. We're working through, still, with regulators on the approval to launch those products. We don't have a large sovereign desk in our execution business. Obviously, the volatility that's been generated around those sovereigns have been good for volumes and was one of the contributors, as you look at the third quarter. The other thing that really drove the strong performance is with that volatility and with some of the other economic risks that are out there, what we're seeing is a lot of customers trying to get off risk as much as they can. And one of the products that we've talked a little bit about in the past are DNA or Delta Neutral Auctions, which basically allows customers to mitigate risks. We saw a tremendous performance out of that product in the quarter. It's a highly electronic product, and that was really a big contributor to the growth. So we don't have direct exposure to the sovereigns on the execution side, but the volatility around those sovereigns certainly contribute to the performance of that business, and particularly in the electronic offerings like DNA. Matthew S. Heinz - Stifel, Nicolaus & Co., Inc., Research Division: And then anything you're hearing from just on the sovereign side, in general, from the Greek situation?

It's like the same thing you read in the paper.

Our next question comes from Michael Carrier of Deutsche Bank.

Scott, just the tax rate in the quarter is fairly low relative to what you've said in the guidance side. You didn't change the guidance for the year. So I just wanted to get some sense, obviously, depending on where the business is coming from that's going to have an impact, but any update there?

Yes, look, I hate to go into the accounting weaves, but our tax rate for the first 9 months is 32%, which is spot in the range that we've given at 31% to 34%. However, each quarter, I've got a book a rate in the quarter that gets me book right on the year. So the low rate in the quarter simply is reflective of the math to get me to the right full year or the current year rate of 32%. And so what I'd look at is the year-to-date rate not the quarter rate as indicative. That's in the range of 31% to 34%. I'll note that we definitely are trending lower on the tax rate, and that's reflective of the fact that we continue to grow the business outside the U.S., and in the U.K., in particular, the authorities in the U.K. have made the determination that it's good for business to have relatively lower tax rates. And we're seeing the tax rate in the U.K. come down. We benefit from that. So it's almost a perfect storm of more business coming from the U.K, and tax rates going down in the U.K. that's driving that. So the range was 31% to 34%. We're sitting at 32% on a year-to-date basis and trending lower. We'll give some updated guidance as we move into 2012, but as we see our business continue to grow outside the U.S. and continue to see indications from outside the U.S., that tax rates are likely to stabilize or continue to come down, I think you should expect to continue to see us have a fairly attractive, certainly on a relative basis, tax rate.

And then just a follow-up, on the OTC credit side, the sovereign opportunity. Obviously, that's going to make or break you, meaning, there's a lot of other opportunities, and you guys have been gaining traction in other product areas. But the way this -- the Greek situation plays out, and I guess it will ultimately depend on what ISDA decides, but does it put like a crimp in the whole sovereign CDS opportunity, particularly if the CDS doesn't trigger inner restructuring? I'm just wondering like sovereigns maybe different than corporates in terms of when you go into a bankruptcy or the actual triggers. And obviously, it's still to be determined, and we'll see how this all shakes out over the next months and quarters. But just any thoughts around that and how ISDA will potentially look at that?

I guess I agree with you that it's yet to be determined, and it's obviously, I think, important for a determination to ultimately be made and a collective view of the market as to what it means to own a sovereign CDS, and I think once the market understands its utility and maybe where it lacks utility, then the product can seek its own trading level. But -- and it may be the different countries, that the market has a different view of different countries in the way they manage defaults or potential defaults, and so it may not be just one thing, but it may be country by country, the product may have different utility. We're going to have to wait and see, but right now, this is a voluntary write-down proposal, and if the market really accepts that it is voluntary, then I think CDS will continue somewhat unabated, frankly.

Our next question comes from Ken Worthington of JPMorgan. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: I apologize I missed some of your opening remarks. So if this is repeated, just shut me down. In Brent versus Gas Oil, we're seeing open interest kind of stagnate on the Gas Oil outside when it's accelerating on the Brent side. I would assume the customers are the same. There was the reconstitution. Is that still having an impact here, or is there something else? And when would you kind of think that Gas Oil and Brent fundamentals would start to converge? Or what would it take for them to converge again?

Ken, the fundamental issue is Gas Oil, the pricing curve is in backwardization, which fundamentally means, there's a negative cost to carry. So you're not seeing people put open interest on and hold it because basically the prices are lower out in the future than they are today. That is the fundamental issue. Volumes growth has been in line. I think I said in my prepared remarks, Brent grew 41 and Gas Oil grew 30. So the volume growth has continued unabated. The interest in the product has continued unabated. The OI is simply related to the shape of the curve right now. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: And then, again, I apologize if you mentioned this, but on BRIX, can we get an update on the project there and what kind of progress you're making towards launch?

This is Chuck. We've launched the trading system for over-the-counter, physical trades in Brazil. We launched that several months ago, and that's gone very well. I think there are about 40 or 45 signed participants with -- we're having trades every day there, and we're kind of now beginning to think about Phase 2 and how we go about offering instruction, the right kinds of derivatives for trading there to help in risk management in that market, looking at the clearing assets that we have, speaking with Cetip, where we have a minority investment there, and really just exploring what the options are to continue to build some infrastructure for that market, not only power but some of the other commodities in Brazil.

Our next question comes from Jillian Miller of BMO Capital Markets.

So you guys have said in the past that you're energy markets are gaining some new participants from China and the Middle East, as the governments kind of scale back the subsidies they're providing for gasoline. And so hedging becomes more important. I just want to get an update there on how those policies of the governments are progressing and maybe some commentary on any new firms in the past quarter or 2 that have been looking to start trading on your markets as a result.

Yes. I guess the probably the most exciting or interesting new news that we've gotten recently is, over the past couple of months, China had said that they're going to allow -- I believe it was 31-- of their largest companies to begin to participate in global markets. And I believe the comment was something along the lines of -- we're large consumers of commodities, but we don't really participate in the price formation. I think that's a big opportunity, clearly, as I think we said on the call, maybe 3 or 4 calls ago. When Jeff and I were in China last year, we met with Sinopec and talked to them about their trading activities in our market. And we're seeing more and more interest. We actually have a person in China and an office in Singapore, who are in constant dialogue with the Chinese companies, and instructing them on how to get access to our markets for trading. So that's probably the biggest new news, is that the Chinese government now as they start to try deregulate pricing to some extent, they recognize their companies are going to be faced with price volatility, and they're now offering an opportunity for, at least, a small subset of those companies to go out and manage that risk. And I think when they look to go and manage that risk, they're going to think about what are their exposures: Brent, which is what their oil is priced on; Gas Oil, which is an important diesel hedge or hedge tool. Those are the benchmarks globally. Those are going to be the products that attract the Chinese companies, because it will help them manage the risk they've got, global sugar and global cotton, it's the same thing. So we're basically letting them know that on our exchange, we've got these benchmark contracts. They reflect the risk you're looking to hedge, and we are clearly seeing growing interest from those companies in our markets.

And then there's some regulatory changes I guess going on in Canada that are going to allow you lift additional contracts. I just want to get some insight as to how widely used you expect the new contracts could be in. In general, maybe you could give us an update on your strategy for ICE Canada. I don't know if there's like OTC clearing opportunities or maybe some additional new product launches that you are eyeing.

Well, it's an exciting opportunity for us, and that the Canadian Wheat Board used to be the price setter for wheat, and, with the proposed legislation to eliminate that, there will be a free market. So we have the canola contract in Canada, as you may know, and many of the same agribusiness firms are active in the wheat market. So they have rallied around us to work with us, and the market has designed a new contract and contract terms, specifications, delivery points, et cetera, for a Canadian wheat contract. We have filed with the regulator to begin to launch that, to get the approval to launch that contract. And so we think we are the natural home for that contract. Our customers think we're the natural home for that contract, and it should be a good opportunity for us. As a result of that, ICE has a history of -- as we get customer connectivity, we work with those customers to figure out their other hedging needs and launch new contracts that are similar, that can give economic offsets and other hedging tools for them. So I would expect that it would spawn additional contracts from us.

Our next question comes from Roger Freeman of Barclays Capital.

I just wanted to come back to the -- your OTC business, been a bunch of questions on that, trying to size the opportunity. If you look at all of--the 600 contracts across the energy space, what percentage of the total OTC market would you say is addressed by sort of equivalent contracts in your clearing house.

I don't even know where I'd begin to answer that question, Roger. I don't have a view to the full size of the OTC market. We tried a few times to size it. Look, the thing I keep going back to is the Global Oil 2 years ago was just under $5 million and around 6% of our total OTC revenues. Every one of our OTC revenue products has grown over the past 2 years, and yet Global Oil is now roughly 12% of our total OTC revenues and has doubled in size. So I don't know how large the opportunity is. There is clearly demand for the clearing solution. I mean, we've got one recent example of a fairly large airline, who's making the decision to start hedging their risk directly, as opposed to, or at least, hedging a portion of their risk directly, as opposed to going to a third party to write those hedges for them. So I can't give you a metric. I'd love to give you a metric, but I can't give you a firm metric, other than what we've seen over the last couple of years and the customer movements that we're seeing move directly into the market as opposed to going through third parties for their hedging.

Okay. But I'm assuming, you talk to your customers as you develop these new products. So I was just trying to get a sense for whether, obviously, like the airline issue is one where the airline has decided to take on maybe some basis risks from a standardized clear contract versus an OTC, but are willing to do that. And I'm just wondering, how -- are there any big holes at this point in terms of kind of customization that corporates and other customers look for in these true bilateral arrangements that they can't get pretty close to in a cleared contract?

I think the thing that exchanges are -- can't lift, at least as the market exists right now, are contracts that have lots of optionality in it. I mean, let's just take a hypothetical airline. If you were an airline, you might want an OTC hedge that in the event you have certain routes, you were able to increase its size. In the event that you drop certain routes, you might drop certain delivery points and so on and so forth. You might, in the case of a tenure that you might have some certain contracts, if you get out of your elongated contracts you might want the swap to also terminate. So exchanges that list inner contracts for trading tend to not have all that optionality. I personally think one of the unintended consequences of all this new OTC regulation is that there will be more money to be made by people that can write a lot of optionality in the contracts. And I think those will become hard to value, because options are more difficult to value. So I think that just happens to be one of the unintended consequences is creating harder to value contracts for those that don't come in the clearing houses or on exchanges.

Our next question comes from Daniel Harris of Goldman Sachs.

Jeff, you mentioned earlier that you thought that a transaction tax was bad policy, and yet probably for the third time that I can remember in the last 5 years, it was put forth again, or it will be put forth today, how much global coordination do you think is out there, maybe in front of the G20 meeting, given that we know that France and Germany want this. There are certainly some sects of the U.S government that might want this. I'm not sure, do you feel that there's any global demand for putting a transaction tax out there to raise taxes? Or is it just something that's just more noise, you think?

Well, first of all. I do think that regulators are -- and legislators are being much more coordinated globally than I've seen in my 10-year tenure here in the industry. So I do think, and I do think that's a positive thing, because we operate global markets to the extent that we have consistent regulation. It's helpful for our customers. I don't know, you've got some large countries that have very explicitly said they won't support such a tax, and others that have very explicitly said they are demanding such a tax. And so it's hard to know where it all lands, but I do think there's a general appreciation that unless such a tax is widely applied, that global products will find a different home in a lower tax environment. And so, I do think that in every conversation we've had, there is an acknowledgment that's a real capability. That being said, we have seen that the equities markets tend to be local markets, and there have been local transaction taxes on some equity markets, and those markets haven't left. They have evolved into things like contracts for differences, OTC markets that try to avoid the tax and et cetera. But nonetheless, they haven't actually left. They morphed into something that avoids the tax, but stays.

Well, and the bad policy you point, too, if you look at, I mean, today it costs you less than $1 to trade a Brent contract. You take 1/10 of 1% as a tax on that one contract, which is 1,000 barrels of oil, it's going to cost you $10. Today, it costs you a $1 to trade, tomorrow it costs you $10 on taxes on a commodity that the price of that commodity is going to go up to reflect that additional tax.

I couldn't agree with you more. I just want to turn back to also something you guys said about the CDS market. You're seeing some signs of stabilization. I'm guessing that's both in the execution side, as well as the clearing side, which obviously has continued to grow through more and more people using the clearing. But what are you really seeing, it looks like the execution side is up off the 4Q '10 lows. Are you seeing more traders engaged in that market? You also mentioned electronification was increasing pretty rapidly, certainly over the last 2 years. So where do you think that could go back to in a market that has more certainty around clearing and regulation around CDS?

I think more clarity on what the rules are going to be for SEFs. I think more clarity around the rules for clearing, I think all of those are predicates to that market recovering. What you're seeing in the results today, as I mentioned earlier, really is driven largely by risk mitigation strategies, and that's enabled by the products that we offer like DNA, which allow people to get off of risk. So today, that's what's driving it. As I look, despite the fact that we have been in a relatively subdued environment, we're still a #1 or #2 market share in key index in single-name products that we serve. We're building out capabilities and things like emerging markets. So as we get the clarity around the rules for trading CDS and the rules for clearing CDS, we feel very good about the position we've got, and we feel very confident that over the longer term, the CDS is a viable product. It does facilitate the flow of credit into the market. It is a good indicator, and I would argue a better indicator than the ratings agencies or stock prices with regards to the health of a company. So we think it's a way that people in the future will take a view on a company. So we like our market position. We like the product offering we've got. We like the positions we have as the clearing house. And as that market turns, we believe it's a significant opportunity to help contribute to our ability to continue to grow.

Our next question comes from Chris Harris of Wells Fargo.

Just a quick follow-up on the CDS business. Obviously, CME is focused on capturing share here, and they're obviously looking closely at getting share in the buy side. We know that you guys are obviously cornered the dealer market, but I'm just wondering what kind of strategic advantages or structural advantages do you have over CME that will help you win out the buy side with respect to the CDS?

The first advantage is $25 trillion versus a few million or billion that they've done. The second is $1.6 trillion of open interest. The third is over 330 CDS products that we clear, which is far away more than anybody else in the industry. The fourth is a very open and robust dialogue with the buy side customers, where, for example, we're putting together allocation capabilities, which is key to a number of the buy side firms that will be rolling out shortly, which will facilitate their ability to come in. It's our risk models and our risk management capabilities. The ability to develop technology to look at the portfolio that our clients have. We're in discussions with regulators right now to try and get them to allow us to deploy the technology we've already built that will look at the portfolio of single-name and indexed products. So I think it's the full suite of -- it's our operations, it's our risk management, it's our open interest, it's a number of products we clear. We feel very good about the position that we've got in terms of CDS clearing.

And then just a quick follow-up on the health of the overall business. You guys are definitely not seeing it in volumes yet, but just curious how you think a prolonged slowdown in Europe might affect your growth outlook over the next couple of years?

I think the thing you've seen historically, if you go back and look at the fourth quarter of 2008 and into 2009, we don't -- our business model is very geographically diverse. We're not tied to just the European economy. We're not tied to just the U.S. economy. We're not tied to the deleveraging of financial institutions. We've got a very strong commercial customer base. We have global commodities, the demand for which is being driven out of the emerging economies, the geographic diversity, the product diversity, all of that has enabled us to grow right through the difficult periods over the last 2 years and gives us confidence that we'll continue to grow into the future.

Our next question comes from Niamh Alexander of KBW. Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division: And if I could touch on the Climate Exchange business -- and are we still kind of running this as neutral this year or maybe positive-accretive? And can you give me an update on that market environment? I think we're moving into an important next phase in Europe.

Niamh, I would say we're on track to where we had expected to be. We took the synergy, the cost synergies out, frankly, a little bit ahead of pace. In terms of revenues, we got off to a little bit of soft start this year, but as I mentioned in my remarks, 52% volume in the third quarter, 44% revenues. October was another good month in terms of the emissions. So I would tell you we're kind of right on track with where we expected to be. And then embedded in your question is the key. The next real, if you will, growth wave that we think we're well-positioned for is Phase 3. There are new participants in that marketplace. Airlines is an example, who haven't participated before, who will begin to be able to participate in 2012. The certificates, the emission certificates today, which have been provided for free, will start to be auctioned in the future. We will participate in a part of that. But more importantly, those options will generate additional price volatility, which tends to mean more risk, which tends to mean more hedging, which is what people do with the products on our exchange. So we feel good about where we are now. We had a very strong third quarter and a good October in terms of top line, and with the new participants and the implementation of Phase 3 in the coming 12 to 18 months, we feel like that's a good growth business for us, looking forward. Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division: And if I could, Jeff or Scott, you tend to like to see a lot of outside of the non-organic acquisition opportunities. You've made the big investment into Brazil, but I can tell from your comments there that you're still seeing some acquisitive opportunities. Are the conversations changing? Are the sellers kind of more willing sellers or the price expectations different? Do you think maybe you're getting closer to something?

I won't say whether we're getting closer to something and you know that. But yes, I do think that people are having different price expectations. It is interesting that you picked up on that because the last few months, we went through this period, I think after Dodd-Frank was announced, when everybody said we're a big winner here, and now what we've seen is that the implementation of Dodd-Frank and its counter-party EMIR in Europe is going to take some time. It's going to be implemented over a long period of time. There's a lot of details, the details matter. And so I've seen some people realize, okay, a pot of gold just didn't land in my lap, and I'm going to have to work to evolve businesses and stay ahead of all this, and it's been sobering for some people. So I do think that there will be some opportunities potentially to buy interesting businesses at reasonable prices, accretive prices for us, as time goes on, which means -- you know adjusted, I thought would be the case. And I do see it's going to happen now.

Our next question comes from Jonathan Casteleyn of Susquehanna.

Just one question for me on your legacy OTC Energy business. I guess what impact does a very abundant supply of U.S. natural gas have on the business. So if your adoption rates of new participants in your market start to slow, why won't this be an issue for the gas franchise?

Jon, I would argue that the abundance of natural gas and the fact that, in the U.S., we're looking at natural gas as a particular -- as a potential alternative to oil is something that's going to drive more interest in that product, drive more people towards using that product, consuming, producing and all of that will be good for that business on the longer term. Obviously, in pockets where we see really low prices because of supplies we've seen in the past, that can impact volumes over the short term. But over the longer term, as natural gas is looked to more as a viable alternative to oil, I think that only bodes well for that market.

I would say, Jon, and one of the interesting things that we look at here in trying to figure out forward-looking budgets is growth in our data revenues and the growth in people that are requesting screens for view only, and you can look at that and see that it continues to be robust. So we have a very powerful set of OTC data that comes from all of these contracts and all the data points that we see, and there is increasing demand, it appears, for that data set, which would suggest to me that there's more interest in those natural gas markets.

Our next question comes from Brian Bedell of ISI Group.

Jeff, if you could just comment on Brent and WTI. I mean, you've gained about 10 percentage points of market share. If you look at Brent as a proportion of Brent and WTI combined, from about 30% to about 40% in the beginning of the year. And would the price convergence coming back in to around $16, do you think that has an impact on how people will view Brent versus WTI? Or do you think, more organically, Brent has much more room to go in terms of gaining share of those 2?

What's interesting is both Brent and WTI are -- they're physically delivered products, and they have unique delivery issues, both of them do. And they've evolved over time to continue to stay relevant and grow in relevance and that. And so what's happened, really more obviously for the first time to many markets over the last couple of quarters is that the people see that those are 2 different grades that have 2 different specific issues, and as those issues move around, it's good for hedging, they're both important benchmarks. We like having both, I would say, we probably have cannibalized our WTI contract more than our competitors in pushing people to Brent, but that's a natural consequence of the fact that we have a -- an active sales force and education component that are talking to people about using Brent as a hedge, and showing them against our own contracts how that would work. But I think that all in that is very helpful and positive. I do think that these issues will move around, I think they'll continue to move around and I think that the contracts have disconnected long enough that people will continue to use both now for a specific reasons and not necessarily as substitute for one another, which used to be the case. We see that we've been able to develop an active Brent options market around our Brent. It used to be that the only option to trade in oil were options on WTI Because Brent and TI were so highly correlated, when you've got to be an illiquid option market, people didn't want to split the liquidity. So you were able to hedge Brent with the WTI option. Today, there's a new option market that creates new arbitrage opportunities for options market makers to deal in both, and I think that will just continue to grow.

We feel good about both contracts.

And then just for my follow-up, can you elaborate a little bit on cross-sell progress between your energy products and your financial and other commodity products between customer sets. What type of resources are you allocating to that from a, I guess, a sales force perspective? And do you see that improving over the next, say, 12 months or so?

Yes, we've got quite a sales force here now, and it doesn't just span product, but it also then expands geography, and then if you think about -- we really now have a sales force that's selling clearing and we have a sales force that's selling post-trade services. So we go from front to the middle to the back-office. So we've done a pretty good job. It's a great team, and they're real energetic and people that are on our sales team, if you like working here, you'll really like working here, and they work together as a giant team. We standardized information inside that sales force for tremendous amount of information sharing on customers, what we learned. And so the cross-selling opportunity, I think has really been helpful. I would suggest to you, for example, that people like to ask me a lot in shareholder meetings about moving the Russell Index to ICE and what we paid, and how it's doing, and what its return on investment is, and so on and so forth. But one of the side benefits is that it got us. That became our first truly retail product, which that sales channel opened up our ability to sell the dollar index, get on some of the independent system vendors' screens that deal with retail. And now we've been pushing other FX products, and we wouldn't have had that sales channel, unless we had a flagship product like Russell. So it's been a really great consequence of that and we see that all over the organization.

And then momentum is improving?

Definitely, we maybe to your question started to recognize our ability to organize our own sales force better and to cross-pollinate those opportunities through our own management efforts.

Our next question comes from Patrick O'Shaughnessy of Raymond James. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division: One interesting slide that one of your competitors in Chicago put together is to talk about how much in their trading activity takes place during U.S. trading hours versus Asian versus U.K. hours. Have you guys looked at data similar to that? I'm guessing that given ICE Futures Europe, obviously based in London, it would probably skew a little bit more towards Europe, but can you give us a sense of how globally your customer order flow is from that perspective?

Well, first of all, we don't have to guess by guessing hours. We actually have data, and we're -- we have the unique ability because of the way the ICE trade platform was built as an OTC platform, where we see, we're required by law to know the identity of every customer in the early days of ICE. We have tremendous tracking capabilities inside our trading engine, and we also have our own screen, and as I mentioned earlier. And so we don't rely solely on third-party screen. So we have a very good sampling across the market of people are using our screen. So that we can see and we track people's IP addresses, frankly. So we can see not just to the country, but exactly to their address where people are acting from. So we have about half of our revenues that come from outside the United States. And frankly, we just don't look at hours. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division: And then for my follow-up question, it's kind of a more long-term philosophical question. With North Sea production dwindling, the way that they calculate Brent, as it obviously it keeps changing a little bit. At some point, do you run the risk where Brent isn't the relevant global benchmark, just because there is no Brent left? Or how do you see that developing over, I think, probably the next 10 to 20 years? It's probably not a next 5 to 10 years issue but further out?

Yes. It's interesting because we call the contract Brent, but actually there's little or maybe no Brent in Brent. It's a -- over time, this trend is not a new trend, this has been a trend for the 25 years or so that the contract has been in existence. And so what's happened is that the industry has worked with us, and we moved the location, when we went from Brent to Oseberg to Forties, which are different grades of oil and we will likely, at some point, add Ekofisk. And frankly, what people are delivering would be the cheapest to deliver, which is another way of saying the lowest grade of that complex. And so, Brent is becoming less sweet as the sweetest oils go away. But -- and then also as we announced Platts, which is one of the -- there's 3 or 4 price assessors-- is changing their assessment criteria to the length and the number of cargo, put more cargoes in the assessment that they do, we've announced that we're going to follow them, follow behind them and change the way we create our own Brent Index that uses data that we get from Platts and other assessors. So it will continue to evolve. I don't -- it doesn't go to 0. It's not a peak oil theory kind of contract. The reality is the market launched a grade of crude that is sort of the utopian grade, against which all other grades can be benchmarked through Delta pricing. And so it will continue, that contract will continue to evolve to the best that's available. Also, by the way, when we first bought the International Petroleum Exchange of London, there was a lot of discussion whether the North Sea was going to go away, and technology keeps finding new ways of extracting more and more oil, and it's just $80 and $100 oil prices. The market forces continue to find new oil. So the demise of the actual Brent oil field has been greatly exaggerated over decades. I think but frankly, just stepping back, it provides intellectual property and domain knowledge and content that we uniquely have to keep that market organized and keep the customers around us, and so in that regard, it's a good thing. It would be very hard for a competitor to replicate what we do in continuing to evolve that contract.

Our next question comes from Rob Rutschow of CLSA. Rob Rutschow - Credit Agricole Securities (USA) Inc., Research Division: I guess my first question, open interest in Europe in the Energy business has been largely a result of growth and options open interest. And you spoke to that a bit, but can you kind of talk about what's driving the growth in those options open interest, and also whether or not there's any reason to think that turnover in those would be higher than it is for some of your other options contracts?

Yes, I think as Jeff mentioned, a few minutes ago on the options question, there really wasn't a viable Brent option until we launched that product this year. So in the past, where people were potentially wanting to hedge a Brent futures position with an option, their really, their only option for any liquid pool was to go to the WTI option. And so the reason you've seen the big build up in Brent options is because we've launched the product, it's built up the liquidity pool, and it's obviously the most natural hedge to a Brent future is the Brent option. I'll note though that not only are Brent options OI up dramatically, I think over the last year, a year ago, it was 10% of what it is today. But Brent futures OI is also up very significantly. Gas Oils, as I mentioned earlier in one of my responses, that OI is flat, but that's largely related to the nature of the price curve, which is currently in backwardation.

And you do have -- there is a substitution effect that there are people that will hold options positions as synthetic futures and buys move back and forth since the options expires into the underlying. But all of that ultimately becomes additive as market makers are moving back and forth between options and underlying and the interplay between the 2. Rob Rutschow - Credit Agricole Securities (USA) Inc., Research Division: My follow-up is a little bit longer term question. You talked about this a little bit, but it sounds like you're sort of questioning whether or not OTC market participants will be able to recreate idiosyncratic risk management tools with futures. And so I wanted to see if that's an accurate assessment and if it's not, is there a strategic benefit to having a broader product set if you are trying to recreate or address idiosyncratic risk with futures contracts?

That's a good word, by the way, I'm going to cannibalize that from you, but the interesting thing is that, at least, in the U.S., there are very strict with accounting rules that companies use to determine whether or not their risk is hedged. And it is helpful for companies to have very perfect hedges, which means if you have loans that have prepayment capabilities and the ability to switch from fixed to floating and so on and so forth, you might want to write an interest rate swap that has all that optionality in it, and then it would be very clear that that was a hedge and not held for trading. So I think there's -- there will continue to be a real demand for a lot of optionality that will be uniquely tailored to underlying risk, and that will not make its way on to exchanges. The people writing those, the dealers and market makers that will be on one side of providing the liquidity, the end user on those trades, will want to hedge out of that risk and they will break that optionality into small building blocks, I suspect, and put it into liquid markets that we lift. And so if you look at our Energy business now, the hundreds of OTC contracts that we lift, those are all the building blocks that a sophisticated market maker can use to assemble an energy trade for an end user that has a lot of optionality and hedge it out in our markets. So the 2 are complimentary, and the reason I make that distinction is I don't think that one substitutes for the other. I think that they will both grow together. But over time, where we can standardize components of that risk and list them, trading and clearing, there will be a natural growth in that. And where the end user is willing to sacrifice some optionality, they will enter the markets, the listed markets directly.

Our last question comes from Dan Fannon of Jefferies. Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division: Just one question for me. Jeff, you mentioned the kind of global coordination on the regulatory front. I guess, if you think about the differences in the 2 dynamics that are coming about, are there key issues that you are focused on or concerned about, given how things are progressing at this point?

Yes. It's mostly that the trend, the overall trend ignoring the detailed differences between various regulators is for more clearing of OTC contracts and more transparency in the way the over-the-counter markets trade. And there will be timing differences, I suspect, on when those get implemented. And while regulators are trying to coordinate all that, the realities of legislators and lobbyists and people like us that want to have a say in the details will affect the timing of implementation. So we're pretty focused on making sure that during that period of instability, we can provide a stable environment for our customers, so that there is not some arbitrage that goes on because we've been in the wrong place at the wrong time. That kind of means we really have to be everything to everybody at the same time, and there's tremendous efforts going on here to try to figure out exactly where our customers needs are going to be and what time and make sure that we're there ahead of it, and make sure we're educating our customers how they can get to us. So for example, I mentioned that we're building a swaps data repository that we'll have available shortly and well in advance, we believe, of the implementation of the U.S. version of SDRs, and it's that kind of thing that is really the focus of the industry right now.

I would now like turn the conference over to management.

Thank you, operator. I'd like to again thank all our customers. The third quarter for many of our customers was full of volatility, and we very much appreciate that you turned to us for help in managing your risks. Again, I'd like to thank our employees. There was a lot of work that went on here, including the delivery of our new clearing systems in Europe that really positioned us well for handling that customer business. And with that, we'll see you all next quarter.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.