Good day, and welcome to the Intercontinental Exchange First Quarter 2019 Earnings Conference Call and Webcast. All participants will be on listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Warren Gardiner, Vice President of Investor Relations. Please go ahead, sir.

Good morning. ICE's first quarter 2019 earnings release and presentation can be found in the Investors section of theice.com. These items will be archived, and our call will be available for replay. Today's call may contain forward-looking statements. These statements which we undertake no obligation to update represent our current judgment and are subject to risks, assumptions and uncertainties. For a description of the risks that could cause our results to differ materially from those described in forward-looking statements, please refer to our 2018 Form 10-K. In our earnings supplement, we refer to certain non-GAAP measures including adjusted income, EPS, operating income, operating margin, expenses, effective tax rate, free cash flow and EBITDA. We believe our non-GAAP measures are more reflective of our cash operations and core business performance. You'll find a reconciliation to the equivalent GAAP terms in the earnings materials and explanation of why we deem this information to be meaningful; as well as how management uses these measures in our Form 10-Q. When used on this call, net revenue refers to revenue net of transaction based expenses, and adjusted earnings refers to adjusted diluted earnings per share. Please see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain terms. Also, with us on the call are Jeff Sprecher, Chairman and CEO; Scott Hill, Chief Financial Officer; and Ben Jackson, our President. I'll now turn the call over to Scott.

Thanks, Warren. Good morning, everyone and thank you for joining us today. I'll begin on Slide 4, with some of the key highlights from our first quarter performance. ICE's consolidated first quarter net revenues totaled $1.3 billion, up 5% year-over-year on a constant currency basis. Trading and clearing net revenues grew 5% and data revenues increased 6%, each on a constant currency basis. This strong revenue performance help deliver the second best quarter of earnings per share and free cash flow in our company's history. First quarter adjusted operating expenses totaled $528 million including, roughly $7 million non-recurring benefit and comp expense. Adjusted for that, we would have been at the low end of our guidance range at around $535 million. Second Quarter adjusted expenses are expected to increase to be between $537 million and $547 million largely driven by the full quarter impact of annual merit increases in equity grants. We then expect each subsequent quarter to increase sequentially by about $3 million to $5 million, reflecting increased technology investments and spend related to Bakkt. Incorporating all of those dynamics, we are now lowering our full year adjusted expense guidance to a range of $2.15 billion to $2.18 billion. I'll pause here to note that in the first quarter, we recognized $19 million of non-operating income related to a true up for OCC's 2018 results. Additionally, unlike last year, we did not receive a dividend from Euroclear in the first quarter. We do however expect a dividend of around $20 million in the fourth quarter, a 40% increase from the dividend received in the first quarter of 2018. Shifting to capital return, we deployed over 95% of our free cash flow to dividends that once again are increasing by double digits and share repurchases. Of note, the $440 million…

Thank you, Scott and good morning to everyone on the call. I'll begin on Slide 7. Our first quarter performance highlights the value of the organic and inorganic initiatives that have undertaken over the last year. We've been engaged in a deliberate evolution to add growing subscription-based revenues and to increase our addressable market by expanding our asset class coverage. Despite softer trading volumes across our industry in the first quarter, and as a result of this evolution, we grew revenue, earnings per share and free cash flow and we returned nearly $600 million in capital to our shareholders, the second most in any quarter in our history. 10 years ago, we were largely commodities trading venue. At the time, roughly 85% of our revenue was transaction-based. Today, half of our business is recurring revenue in nature and spans a diverse set of asset classes. Asset classes that we think are well positioned to continue to grow. At roughly 30% of our business, commodities markets still remain an important component of our growth profile. We offer a full spectrum of risk management tools that are critical to the daily hedging and trading needs of global energy and agricultural commodity market participants. Global benchmark contracts such as Brent crude oil, Gasoil, sugar and European natural gas, the name of few, Anchor what is the industry's most diverse commodity in complex. Our financial markets businesses home to futures on global interest rates and equity indices, such as the MSCI index complex, where we recently launched a suite of new indices as we partner to expand the range of risk management tools offered to our customer base. In our cash equities business, the New York Stock Exchange stands as the leading provider of listing and trading services. We are the listing venue of…

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Mr. Michael Carrier of Bank of America. Please go ahead.

All right, thanks and good morning. Thanks for taking the question. Just the first question, some of that fixed-income business, you guys have done well on the data side. I think on the trading, the team is a bit more competitive with some of the encumbered platforms out there. So how are you thinking or strategically how are you differentiating between the other platforms that are already in the market in order to win over the next few years?

Thanks, Michael. This is Ben Jackson. And I think Jeff captured it in the comments that he was making in his opening script there. In that the key differentiator that we have is the scale and size of our fixed-income business when you look at it as a vertical and it represents now 1/4 of our revenues across our entire revenue base. So think about a $1.3 billion business. And if you look at the cornerstone of that $1.3 billion business – in that is really our data businesses. The data businesses that we've established with pricing, reference data, index and analytics capabilities that we provided to customers for more than three decades, data businesses and data services are very hard to establish with customers. You have to have a long track record of a trust for them to trust that you as a benchmark price that they're going to references it takes a long time to establish the credibility in our relationship. And it’s both institutional relationships that we have solidified over multiple decades that really is our differentiator that we're going to leverage as it comes into execution. For execution platforms themselves, we've seen similar performance to what you've seen from the other platforms that have recently announced. We had strong performance in corporates, in U.S. corporates, we've seen trade sizes increased. We have seen a little bit of relative weakness in municipals as the spread between municipals and treasuries has narrowed. And treasuries have coming to favor but we have seen treasuries perform very strong on our platform. So net-net our platforms what we've done in Q1 is we have fully integrated our ICE bonds business to now execute as one business. We restructure the organization rationalize and take some cost out and now have a single vision to leverage the institutional relationships that we've established over multiple decades. So that's really what you see as our differentiator.

Okay. Thanks a lot.

The next question is from Rich Repetto of Sandler O'Neill. Please go ahead.

Yes. Good morning, Jeff. Good morning, Scott. And first thanks for Slide 7, Jeff has guided. It's been we have an experience watching the company expanded over the years. So anyway my question is on what you've schooled us on Scott, the annual subscriber value for market data and went up nicely. But again, you talk about this what we're working on right now is 2020 revenue for market data. And I guess the questions – I know you've accelerated the growth from the low single digits to the 4% to 6% now. But as you go forward is there any – as you add this annual subscriber value is there any momentum – anything to point that you can grow it faster than the upgrade you have right now? And is it still coming from the same sort of buckets that you talked about when you – a couple of years ago when you first gave some guidance on good growth there?

Yes. Thanks for the question, Rich. And I do think the ASV is a good metric to focus on because it is forward-looking. As I proved last year, it doesn't give perfect forecast but it's directionally very indicative. I think the key thing you see not just in ASV but in the growth trends we've established. Our compound growth rate since 2015 through the end of 2018 was just under 6% every year on average. This quarter we grew 6%. That's the third quarter in a row that we put up 6%. And if you look at our guidance for the second quarter, we're again going to be kind of in that 5% to 6% range at the midpoint being around – right around 5.5%. So it's a growth trend that's been consistently delivered in ASV indicated it can continue. And it can continue because some other things that we've talked about in the script, there are a lot of tailwinds in the fixed-income space. There's a move from active to passive management. There's a move that Ben spent a lot of time talking about towards bond ETFs, which if you look at relative to equity ETF is a much smaller space, but one where everybody is pointing to a strong future. And so I think in the fixed-income area and that's largely our pricing and analytics business which you've grown 6%, 7% ever quarter for the last four or five quarters, it's really those trends that have driven it and continue to drive it. I think if you then look at the exchange data and the connectivity piece, again, I go back to the remarks I made, we continue to see more customers wanting our data and connecting to our platform. And so our connectivity services related to futures exchanges was up solidly again this quarter. Our futures exchange data was up again this quarter. And that goes back to the nature of the commodities business the futures business that we offer. We offer a global set of interest rates that are subject to European economic and European Central Bank dynamics and Federal Reserve dynamic. We offer commodities and energy space that most comprehensive global oil market, the most competitive global natural gas market, the most comprehensive global ag market and we continue to see commercial customers, who are managing their price risk exposures in our market and that drives a demand for connectivity and for exchange data. And so again, I would suggest to you, you've been seeing that in the growth results we put up, I think it's definitely reflected in our first quarter and second quarter guidance and I see – I think you see it in the ASV which indicates that those trends continue.

Okay. Thanks, Scott.

The next question is from Mr. Patrick O'Shaughnessy of Raymond James. Please go ahead, sir.

Hey, good morning. To follow up on the first question on your fixed-income business, is there any quantification you can provide regarding customer growth or average trade size? And kind of metrics that you can provide what's that – what indicate that you're progressing along your goals?

Thanks, Patrick. I think – as I mentioned we've seen relative performance to what you've seen from the other platforms this past quarter with corporates being strong and municipals in particular seeing some relative weakness. If you look at our platforms, we do have a bit of a tilt in our mix towards municipals. So we did see that impact the businesses to some degree. But all that said, trends that we've seen and as we're leveraging the rest of our businesses to really move into the institutional space some of the metrics that I've said in prior calls that we continue to see is trending very positive is the development of our RFQ capabilities to move into the institutional space and RFQ represents close to 20% of our trading volumes on a day-in and day-out basis. We continue to see – and continue to develop that and continue to see customers utilizing that. We have on our platform on any given day over 10,000 securities that have prices of $250 up on either side. So that it’s real indicator that central limit order book trading in fixed income is starting to develop. And we look forward to continuing to provide customers choice on central order book trading options through our click-to-trade protocol in addition to our RFQ capabilities that we have built out on the back of a long standing capability that you've had in all of our futures markets and being able to provide that protocol as well. So it's – those two pieces and leveraging the institutional relationships that we have across our business that we believe well positions us to continue to change the mix of assets that are trading on our platforms and also increasing trade sizes.

Great. That’s helpful. Thank you.

The next question is from Dan Fannon of Jefferies. Please go ahead.

Thanks. I guess one more on fixed-income. Just to make sure that we're thinking about what your goals are. I guess what is the kind of right way to gauge success? Is it because we don't really have market share we're not getting clean data yet? Is it aggregate revenues? Or I guess what just kind of holds you accountable in terms of that success? What should we think about as a goal post as we think about the remainder of this year or even further?

It's a good question. This is Jeff. It’s complicated press because we don't run our businesses the way we recorded them on the chart. In other words, we have an integrated management team and we are running all those businesses together and honing the common technology platforms where we can do it in common sales and marketing efforts. But if you step back the goal post that we set internally as senior management, I referenced in my prepared remarks, that 10 years ago we are a very different company. We were sitting here around 10 years ago thinking, wow, there's going to be an analog-to-digital conversion in fixed-income. How do we participate? And we were pretty knowledgeable. We are very knowledgeable about markets, because this management team has been together a long time and our team had a lot of international cross border experience. And we decided to go right for the high value part of the business. The high value part of the business is in mature markets is not the execution. And I can tell you a very mature New York Stock Exchange has 12 other exchange competitors and five more that are rumored to be signing up and some estimate as many as 50 different venues, where you can execute trades on U.S. equities. The high value part of the business is getting those institutional relationships getting your data, your connectivity, your higher value products on the people's systems, it's very hard when you're running a fund to change your benchmarks, to change your underlying data as people consume information that it perpetuate through organizations and becomes institutionalized. So in looking at fixed-income market and the difficulty that we all had in our industry are how to digitize that. We decided to start with where we thought…

Great. Thank you.

The next question is from Mr. Jeremy Campbell of Barclays. Please go ahead.

Hey, Thanks. Jeff, just piggybacking on that mortgage commentary there, I mean, now with MERS and Simplifile can you just provide some color how ICE mortgage services fits within the existing kind of mortgage technology infrastructure? So for instance, I think of like Black Knight that has something like 80% of mortgage services on their technology platform, with also a large origination technology platform. Is something like that a partner for ICE mortgage services a competitor or just an entirely different stereo of influence?

It's very good question. So when we bought MERS. MERS was really – is a company that registers if you will paper-based mortgages. It gives every U.S. mortgage, Mortgage Identification Number, all the MIN number Mortgage Identification Number and that's for paper-based e-comm system. What we did is over two years we built the digital ecosystem and we worked with Fannie and Freddie to hook that digital ecosystem to them as an endpoint. And we started with these eNotes that we mentioned, which is essentially stock mortgage, it's all loan document. Can we get the industry to digitize the essential loan document and send that to Fannie and Freddie? Now – and to each other to the extent they want to. Now we're going to have Simplifile, which says, okay I can send that same mortgage to be recorded as a closing. So we're starting to build the backend of endpoints if you will. There are a lot of companies out there that have digitized at the frontend, there's a very competitive market when you arrive go get a mortgage today we may be on a digital platform or we talking to somebody in an office that’s actually typing into the digital platform. It's highly competitive space and those and well worn in the industry itself to sort of start the time to figure out how to automate the frontend. We would hope that we're going to have an open API on this network that we're building. We're hoping that those people will plug-in what they're doing and onto our network, so that those essential digital documents can be codified and recorded. There are literally hundreds of documents that exist in the world that go into a mortgage. Your mortgage provider last year tax return they want to see 1099, they want you to go various forms are somewhat unique to them, they want past employment history, they may do a credit search. All of that stuff, if there is an industry that’s trying to organize that as you mentioned and it's in various states of way. But largely in today's world, that’s all gets printed out into paper documents and put in boxes and store it somewhere. And there's so many different fields that are entered into on those forms because that they're not that standardized. There are acronyms and conventions and things that are hard for people to translate to bring that whole file together. And so what we've done and said, let's start with the nugget, the essential core, which is the actual note itself and then allow we'll build some of it and we’ll have this network build with others can plug-in to it. And let's try to get the entire industry standardizing around our network if you will which will be the essential way to close the transaction.

Great. Thank you.

The next question is from Mr. Kyle Voigt of KBW. Please go ahead, sir.

Hi, good morning. Maybe a switch gears to the trading business. I know, you're seeing some really good growth in global oil and other energy products. But Brent is still the large futures product by revenue and we've seen some soft open interest threat throughout the past two years there. Just wondering if you can talk about why you think we haven't been seeing some of the same type growth more historical growth rates in Brent at least we have the past two years? And if there's anything in the horizon that could we reaccelerate those growth rates?

Hi, Kyle. It's Ben. Thanks for the question. And yes, we have seen what we view as a temporary pullback in open interest volumes in Brent. And I think which you can point to is a lot of this happened in particular in the last two-three weeks. You can point to a lot of very unforeseen events that have recently happened. Things such as removal of waivers against the Brent oil sanctions, new bands being implemented on Venezuelan oil and now the potential for contagion in Russian oil, all of this has led to a pretty uncertain environment for traders. And while you'll hear us as an exchange operator and others, point to times of volatility be great for volumes was not great for volumes is complete uncertainty. And an area where there is a complete unforeseen event that happens which tend to see and what we've seen over time is the traders will go into a risk off mode and they’ll take a step back, assess the situation and tried to form a view on directionally where the market is going. And we think that's what we're seeing in Brent itself. But you touched on an area that we're seeing that we are seeing growth and it's made up of significant amount of the pull of that recent temporary pullback and that's in that global oil complex. And when you think about what is that global oil complex, you've got a whole suite of products that basically hang off of Brent, Gasoil and our WTI business. So these are products that are very precise basis locations for people to hedge risk at a point of consumption or a point of production in North America, in the Middle East, in Europe and across Asia. You see complementary spread in differential contracts between Brent and Gasoil and these contracts. You also see refined products spreads. So a barrel of oil versus refined products that come off of it oftentimes called crack spreads. We've seen significant growth in this part of the complex with open interest up 6% year-over-year and volumes up 18% year-over-year. So when you combine this whole complex as one global oil business with over 500 contracts that have been developed with our commercial traders at the core you see a complex that's priced two-thirds of the world's oil. It has led and continues to lead in open interest market share and has gained market share over the past year and that's a global complex that includes both futures, options, and all of our oil products together. So we're going to begin to work with our commercial customer base to build that out.

Got it. Thank you.

The next question is from Alex Blostein of Goldman Sachs. Please go ahead.

Hey, guys. Good morning. Just another follow-up around the mortgage business, can you guys update us on the – I guess the revenues and expense contribution from the Simplifile business that you bought? I think the press release just mentioned strong track record of revenues, revenue growth and profitability just trying to pencil out what that is? And then Jeff definitely helpful summary of kind of what MERS is and kind of what it does? But again maybe update us on what the revenue there stands today? And I guess bigger picture how does this business ultimately going to leverage ICE's data and trading segments? Or is that meant to be really almost kind of like a standalone part of what you guys do?

Thanks for the question. I'm going to take the numbers part and then I'll hand it over to Jeff for the important stuff. So just quickly just in terms of the numbers Simplifile, we literally just signed it yesterday. And as we mentioned on the press release, we don't anticipate it closing until the third quarter. What we will do as we typically have is once we've closed it we'll update our guidance and give you the expense and the revenue associated with it. What I can tell you is that, when I give the expense update particularly if it's only in the fourth quarter and I'm hoping we could contain it in our current guidance and it'll be more than offset by revenue because it is a profitable business. So more to come on that, once we get the deal closed. And as we said in the press release that that will be sometime in the third quarter we anticipate. In terms of the MERS revenue, we actually had a strong first quarter. The business tends to correlate a little bit or I guess it's a negative correlation with interest rates. And so with them having moved a little bit higher as we move through last year. There's a little bit of concern it might impact that business. But as it stabilize the first quarter was actually relatively strong on a pro forma basis little above $20 million of revenue, we're up double digits year-over-year. And so you'll recall that we gave you guidance. I think of revenues $17 million to $19 million in the fourth quarter and we actually did a little better than $20 million in the first quarter. And as I think I mentioned on that call, as is gets to relatively low expense base. So high incremental margins like a lot of the other businesses that we operate. With that I'll hand it to Jeff to talk about how it fits.

You're somewhat foreshadowing the ideas that we have here on data and analytics. Once a mortgage has been digitized and the information around it has been standardized so that it's searchable and can be run through analytics platforms. Fannie and Freddie theoretically ought to be able to more quickly get on an underwrite decision that would speed up that process, speed up funds flow and closing. And as Fannie and Freddie layoff risk in the market as they do today, they will allow the third-party that are going to undertake that risk to be able to do more research on the portfolio of mortgages that would be in there. So we do view that the data component of mortgage will become more interesting and valuable and will help drive down cost and speed up closing times. MERS when we acquired it was essentially a consortium and a membership organization with 5000 members. It has data policies within that the industry agreed to essentially. We've in taking control of the business, we've asked many of the companies that have been involved on the Board of Directors to stay on the Board. So we have representatives from the GSES from large banks and what-have-you. And really the reason that we ask them to stay on is to continue to contribute exactly to the dialogue that I just mentioned, which is what is the information that the industry wants and needs. How do we deal with PII information as we digitize things and make information more accessible? What are the levels of information that the market needs versus the need to be kept proprietary? Thinking about the expansion of this business globally and into other asset classes of lending. How does it meet the European standards and what-have-you? So those are all PPD future conversations that we started honestly when we first got involved in the business. And there'll be a natural by-product that I think of digitization and standardization's industry.

Great. Thanks very much.

The next question is from Mr. Brian Bedell of Deutsche Bank. Please go ahead, sir.

Great. Thanks very much. I stay on the MERS topic. I think Jeff or Scott you mentioned about 1% of outstanding mortgages right now are electronically documented through the eNotes system. Can you help us think about the run rate half or the revenue growth half over the long term. Is it most – is it entirely dependent on new originations? Or is there a path to convert existing mortgage documents that don't have any activity to them electronically in terms of bringing up that mortgage? And then maybe just how many eNotes actually did you register in 1Q? I know it was more of 2018 altogether.

I'll start with second part of your question, 19,000 eNotes in Q1 still a very small when you think of it in the context of the U.S. mortgage industry is still nascent. But you've seen what's going on underneath that is the early adopters people that are anxious to become more digital have embraces this idea and are moving quickly to try to build it into their workflow. There's a broad cross-section people in mortgage industry that are talking to us and looking at the ATI or figuring out how to build it into their current workflow and it's not unlike any analog-to-digital transition that you witnessed in other asset classes. So what you see, our early adaptors are getting there quickly as they get in there and start to experience cost savings and ability to serve their customers better it's driving competition. So we are very encouraged by the early results even though it's a low number. The revenue model is simply we charge essentially in eNote on our platform and Simplifile charges the register in eNote and the more that that can all be put into one workflow to make it easy for the lender and mortgage underwriters. You can imagine that the pace of increase. As for existing documents there are a number of companies out there that are exploring how to go back and digitize existing mortgages. There's a lot of error rate in dealing with boxes of paper mortgages that exists in warehouses when there is a change of servicing rights when there is a foreclosure. And one of the things that Simplifile and MERS has been working on over the last decade is changing local law and what-have-you so that the golden record if you will can be digital that the original mortgage you may recall during the last financial crisis people showed up with global sign mortgages in courts and many judges rejected them. And as a result MERS the entity that was hoping to find and produce those mortgages on behalf of the original lenders. And so moving to an electronic system with a golden record, which is much like what's done in many other asset classes that can be respected by the courts will potentially be a reason that all these legacy mortgages will be scanned and put into that system. And like I had of the meeting on – I actually had a meeting on this topic yesterday with a third-party, who wanted to talk about how they can plug into MERS and they would offer this kind of services.

So do anticipate being able to get say, bulk transfers of existing mortgages without any activities or no refi or no foreclosure or no new mortgage. Just go into some record keepers and be able to do a giant bulk transfer of those existing paperback to eNotes?

Potentially the problem is that those records are not standardized. And you need essentially not just the ability to scan but you need essentially artificial intelligence or rules-based engine. That on a document that says, somebody is named Robert and another document has him down as Bobby but that's the same person. And where people have made errors in writing social security numbers down and all this other stuff you can get it pretty quickly into chaos. So the people that are – there are people looking at this are trying to figure out is their ability to scan those create an indelible record that will be respected by the courts and in foreclosure and store that record pointed at MERS and the eNote and allow the marketplace itself to better transfer potentially those mortgages between one another particularly in sourcing rights, which happens quite often.

Okay, great. Thank you so much for the color.

There's a follow-up question from Mr. Rich Repetto of Sandler O'Neill. Please, go ahead sir.

Yes. Hi, Just a question for Ben on the fixed-income side. When you're back in to the revenue it looks like for TMC and BondPoint it looks like revenue went down quarter-to-quarter. And I know you mentioned Ben some softness in the muting market but it did look like from a trace volumes that there was a record volume in 1Q. So just trying to understand the actual revenue from the fixed-income on the trading side?

Yes, Rich. I tried to hit that on the comments I made earlier where a lot of it has to do with a mix so the municipal space. And our platforms compared to the others that you see out there tend to be more tilted towards the municipal space. And the muni space has had a rough go at it lately. Again given that spread between treasuries and munis has narrowed and treasuries have come into favor. So what we have seen is that treasuries have picked up, but treasuries tend to be at a lower price per transaction. So what we do see is that with the efforts that we have underway and that I've talked about on prior calls with the ETF hub initiative and the build-out of our RFQ, we are continuing to advance those efforts. And with ETF hub on schedule to be released later this year. We see that initiatives like that as well as the connection that we're building across the institutional businesses that we have. We'll continue to change that mix as well as increase the average trade size that we'll see on the platform.

Got it. Thank you.

It's a follow-up question from Mr. Patrick O'Shaughnessy of Raymond James. Please go ahead sir.

Hey, great. Thank you. So Bakkt has obviously some pretty well-publicized delays since you announced the initiative. How do you think about the market opportunity for Bakkt and how that's changed since you really launched the effort?

Well, to be completely transparent with you it's really been helpful that the cryptocurrency industry sort of went into what they call a winter that took some of the heat off of the timetable to launch. There's been a – and secondly we've actually been looked at a number of different companies and acquired a company earlier this week that wouldn't have been available to us had the market really been hot because valuations were really hot. So I see this kind of maturation that's going on where for example the people the blockchain engineers that we acquired through our recent acquisition became really interested if you will in affiliating with a larger more corporate if you will effort to move the industry forward. There's a lot of interest still in this market. It's not when we talk about institutions, the institutions are regulated, the banks are regulated, the regulators are trying to get their arms around this asset class and how to regulate it. And we want to be a regulated venue, which is why it's taken a while. But that said, you can't really get into the true institutional markets that we serve without being highly regulated and highly trusted. And so the juices worth the squeeze in terms of the way and it's going well now. There were a lot of things that had to get shorted out over jurisdiction and custody and how these – what will happen in a bankruptcy. And those kinds of issues that in my mind need to be resolved before there's going to be wide adoption of the asset class. And we been at the forefront solving those and building the solutions for those and we're very, very close now to finalizing all of that. So once we're sure this sort of downturn in the value of these assets allowed us to attract some really great people and gave legislators and regulators the time to think about particularly in the United States how to deal with this asset class.

Thank you.

The next question is from Mr. Chris Allen of Compass Point. Please go ahead.

Good morning, guys. I wanted to ask a follow-up on the muni market in general. Where does that market stand in terms of electronification particularly in the institutional side? What are the impediments if there are any right now? And how do you see that kind of evolving moving forward?

Thanks, Chris. Yes. So the municipal space it is far behind or even U.S. corporates are. So if you look at estimates of the U.S. corporate market in terms of how much is electronic being 20% to 25% but clearly moving more and more electronic. The municipal space is further behind where our estimates are call it 10% to 12% of it are electronic. We are seeing that continue to move more electronic or beneficiary of that obviously. But the municipal space structurally has been tough for the point that I brought up before with spreads between municipals and treasuries coming down. But also if you just look at muni issuance, if you look back two years ago it's significantly higher than where it is now. Now it's starting to just rebound at this point and as new issuance starts to come around, we should see some benefit in the secondary trading on that. And it takes a while to get behaviors to change from the analog type of transaction. But it's early days but we are starting to see that move as well.

Has the banks taking any steps towards launch tranche any munis?

Similar to corporates the dialogues that we're having with banks is that they started certain trade sizes and started small trade sizes and looking to electronify that. And then over time as they get more and more comfortable with it they'll move up that threshold in terms of what's the minimum size that they no longer want a phone involved in that transaction. They want to build more algorithms into pricing those trades, more electronic execution in pricing those trades and municipals are just a few years behind where corporates are.

Thanks, guys.

The next question is a follow-up from Michael Carrier of Bank of America. Please go ahead.

Hey guys. This is actually Sameer Murukutla, Mike had to jump off. A quick question related to your thought process around acquisition especially in the fixed-income space. Maybe can you give an update on how you think about the return in increasing goals? Meaning, historically it's been a focus but given some of the structural growth in certain areas would you sacrifice those goals if you think the structural growth make up for it over a longer period?

I guess, the operative part of your question for me is longer period. We try to be very disciplined about our return on invested capital. We feel like we can pay a premium for a business if we can put it on our platform and quickly grow it or digitize it. And also integrate the business so that if we look generally out three years, we want to start to see very high returns on invested capital. We give ourselves – we tend to give ourselves three years to integrate a business and honestly internally we try to drive ourselves to two. And so we want to see very positive results mathematically coming out of that. I'm smiling, because we built $1 billion revenue business in fixed- income. I think without a lot of people realizing what we were doing because we really didn't talk about it in that way. And we were able to acquire key parts of that business at valuations that were incredibly low relative to where people are valuing fixed-income assets today. I'm not sure that the market has recognized that it's partly why we decided to pull the curtain back a little on this call and give you more color on what we look like today. And so I don't know now that that sort of the curtains now that the wizard is visible, I'm not sure that we're going to be able to continue to find interesting assets that deliver on the metrics that I just tried to describe but we're always looking.

Yes. I think the only thing I would add to that, as you've heard us talk about our acquisition how does it fit our strategy, how does it enable our growth, how quickly can we integrate it, how many synergies can regenerate, what's the return on investment. You've seldom heard us say the word accretion. Because at the end of the day you can financially engineer accretion you can't financially engineer returns. And if the deal done strategically, you are not likely to be able to get those returns. And so that we showed you the model a couple of summers ago and it was in the case before we showed it to you, it is the case now that it's about strategic fit, it's about growth and its about returns. Those are the things that matter and it's one of the reasons you see our return on invested capital now back at 9% when our weighted average cost of capital is only 6% because we do focus on creating economic value.

Thanks for the color.

Thank you.

Well it's 9:30. So with I think we'll wrap up. I'm sorry, Sherry, are you going to wrap it up for me?

Sorry, I was just going to say, back over to you, excuse me.

Thank you. Currently I was more anxious to get off the call. But thank you all. It was a great quarter and we'll look forward to reporting our next quarter results soon.

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