Cme Group Inc. · NASDAQ:CME
Cme — Q2 2016 Earnings Presentation
74 slides from Cme's earnings presentation, April 2016
Slide 1: CME Group Customer Forum Spring 2016
CME Group Customer Forum Spring 2016 Singapore April 12 Hong Kong April 14 London April 28 U.S. Webinar May 9 © 2016 CME Group. All rights reserved.
Slide 2: Disclaimer
Disclaimer Futures and swaps trading is not suitable for all investors, and involves the risk of loss. Futures and swaps are leveraged investments, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money initially deposited for a
Slide 3: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates • Global Repository Service © 2016 CME Group. All rights reserved. 3
Slide 4: EU Regulatory Update – Current Legislative Status
EU Regulatory Update – Current Legislative Status REMIT Wholesale energy EMIR OTC, CCPs, TRs CRD IV Basel III MAR Market Abuse MiFID II / MiFIR Markets and participants FTT Financial Transaction Tax BENCH Benchmarks CCP R&R Resolution & Recovery 2012 2013 2014 2015 2016 2017 2018 Legislative Regulat
Slide 5: EU Regulatory Update – MiFID II / MiFIR
EU Regulatory Update – MiFID II / MiFIR MiFID II / MiFIR is a broad regulatory reform package, the key provisions being: Algo/HFT: Regulatory controls on algorithmic trading/HFT and Market making Commodities regulation: Position limits and scope of regulation Transparency: Pre- and post- trade
Slide 6: EU Regulatory Update – Algorithmic trading/HFT
EU Regulatory Update – Algorithmic trading/HFT 2016 EU Legislative and Policy Priorities – MiFID II / MiFIR Algorithmic trading/HFT regulation Legislative outcome → MiFID II is the first EU initiative to introduce regulatory controls for HFT / algorithmic trading. It includes a series of measures
Slide 7: EU Regulatory Update – EMIR / Clearing Obligation
EU Regulatory Update – EMIR / Clearing Obligation 2016 EU Legislative and Policy Priorities Scope IRS - 14 products: - Basis swaps (EUR, GBP, JPY, USD) - Fixed-to-float / plain vanilla (EUR, GBP, JPY, USD) - Forward rate agreements (EUR, GBP, USD) - Overnight index (EUR, GBP, USD) Note: Exemption
Slide 8: EU Regulatory Update – EMIR / Clearing Obligation
EU Regulatory Update – EMIR / Clearing Obligation Q1 Q2 Q3 Q4 18 March – first IRS-clearing CCP 01 October – Final draft IRS RTS 2014 authorised, start of clearing submitted by ESMA to the EC obligation procedure 19 December – Commission proposed amendments 06 August – Formal endorsement 01 October
Slide 9: Agenda
Agenda • Regulatory Updates • E-Trading Update New iLink Architecture – MSGW & Drop Copy 4.0 Implied Volatility-Quoted Options Streamlined Fix Binary New! Market by Order Cyber-Security Plans Consolidated Fills New! CME Group Referential Services • CME DataMine & Customer Center • CME
Slide 10: New iLink Architecture Updates
New iLink Architecture Updates New Market Segment Gateways (MSGW) • 1:1 with match engines; moves point of message prioritization from engine to MSGW • Provides a consistent and predictable performance profile across sessions for all products on a Market Segment • Reduces variability associated with
Slide 11: Final Rollout Schedule for Direct Access to MSGW
Final Rollout Schedule for Direct Access to MSGW • FX & Commodities Available Now • Equities April 24, • Mock trading session: Saturday, April 23 2016 • Interest Rates May 1, • Mock trading session: Saturday, April 30 2016 • ALL Remaining Markets May 15, • Mock trading session: Saturday, May 14 2016
Slide 12: New iLink Architecture
New iLink Architecture Post Launch: • New FIX tag 5979-RequestTime: - will be added to iLink outbound messages following the completion of all Phase 2 launches - The timestamp of a FIX message is taken when the MSGW received the last byte of the TCP packet containing the last byte of a FIX message.
Slide 13: Drop Copy 4.0
Drop Copy 4.0 In August 2015, CME Group introduced Drop Copy 4.0 • Key Features: - Enhanced solution to support MSGW architecture - Harmonized session model and functionality to iLink and MSGW norms - More robust fault tolerance following the MSGW iLink model - XML encapsulated message to preserve a
Slide 14: Messaging Efficiency Program (MEP)
Messaging Efficiency Program (MEP) Options Product Group Additions Effective July 5, 2016 the following options products will be added to the Globex MEP: Product Product Group Tier #3 Ratio Tier #2 Ratio Tier #1 Ratio Group Code Description >20k Messages >40k Messages >60k Messages E-Mini S&P 500 Ou
Slide 15: Volatility-Quoted Options with Implieds
Volatility-Quoted Options with Implieds New CME U.S. volatility-quoted options product with implied functionality • Volatility-Quoted options are a new option product type on Globex that allows the submission of orders in terms of volatility percentages instead of premium - A volatility-quoted optio
Slide 16: Implied Volatility-Quoted Options Example
Implied Volatility-Quoted Options Example 6EU6 6EU6 P13500 Bid Ask Bid Ask (i) 15 @ 1.3500 100 @ 1.3502 (i) 30 @ 0.0138 40 @ 0.0140 GEU6 VP13500 Bid Ask 30 @ 10.02% 50 @ 10.45% • Volatility-quoted orders allowed to be submitted to a maximum of two decimal places • Globex will utilize the Bjerksund-S
Slide 17: Implied Volatility-Quoted Options
Implied Volatility-Quoted Options • Model inputs: - Interest Rate is daily rate and is based on the settlement price of the previous day's Eurodollar future front month quarterly - Time decay is in daily terms or "calendar days to expiration". The calendar days to expiration will only be an integer
Slide 18: Implied Volatility-Quoted Options
Implied Volatility-Quoted Options • Customer impacts - Options and Futures will move onto the same Market Segment; as a result, Market Segment ID and MDP 3.0 channel configurations will change. - New FIX tags on Premium Option iLink Execution Report used to determine the conversion from volatility v
Slide 19: Implied Volatility-Quoted Options
Implied Volatility-Quoted Options Client Systems Wiki Type “Triangulation” for more info © 2016 CME Group. All rights reserved.
Slide 20: Streamlined FIX/FAST Migration to Streamlined SBE
Streamlined FIX/FAST Migration to Streamlined SBE Simple Binary Encoding (SBE) - Market Data • Streamlined FIX/FAST market data is a dedicated data feed for products not found on Globex which include: - Block Trades - Equity Indices (e.g., S&P, Dow Jones, Bloomberg) - Eris Exchange products - OTC Da
Slide 21: Streamlined FIX/FAST Migration to Streamlined SBE
Streamlined FIX/FAST Migration to Streamlined SBE Simple Binary Encoding (SBE) – Market Data • Customer impacts - New schema and new SBE messaging - Mandatory certification per feed to consume streamlined SBE in production - Rolling migration, starting with Block Trade data feeds - Streamlined FIX/F
Slide 22: Market By Price vs. Market By Order
Market By Price vs. Market By Order CME Globex’s current Market by Price (MBP) solution offers price, quantity at the price, and the number of orders in the quantity best 10 price levels quantity Market By Price bids asks price Market By Order (MBO) shows individual order sizes that make up the tota
Slide 23: New! Market By Order Market Data Coming Q4
New! Market By Order Market Data Coming Q4 CME Globex Market By Order (MBO) will provide: • Individual queue position • Full depth of book • Size of individual orders at a price • Increased confidence in execution by improved transparency into detailed book composition • Maintained anonymity MBO and
Slide 24: Market By Order Market Data
Market By Order Market Data • No book management instructions in the market data feed - Book is built on receipt by sorting by price and then order priority - Sequencing by order priority - No change in market data based on matching algorithm, FIFO vs. Pro-rata Action Time priority Quantity Security
Slide 25: CME Direct Will Reflect New MBO Information
CME Direct Will Reflect New MBO Information In CME Direct, in addition to the usual Bid and Quantity columns, there would be Order Priority (number of orders ahead of you) and Quantity Priority (number of contracts ahead of you). © 2016 CME Group. All rights reserved. 25
Slide 26: Market By Order Market Data
Market By Order Market Data • New Release: Q3 • Phased Production Rollout in Q4 2016 – Q2 2017 • Starting with NYMEX, COMEX, CME Europe and DME products in Q4 • Targeting CBOT, MGEX in Q1 and CME, BMD, KRX in Q2 2017 • Rollout on a channel by channel basis; Asset classes and DCM rollouts will be bun
Slide 27: Security Ecosystem
Security Ecosystem • As part of ongoing improvements, CME has significantly enhanced its security profile through external-facing enhancements and internal hardening. - New CME application portal has harmonized on SMART Click credentials and two-factor authentication. - Clearing applications have mi
Slide 28: Security Ecosystem
Security Ecosystem • Mandatory requirements for systems connecting to CME - 2 Factor authentication (human to machine) - Encryption of confidential or sensitive data over untrusted networks • iLink and Drop Copy will transition to a self-service model using SMART Click - A secure login server will e
Slide 29: iLink 3.0 Update
iLink 3.0 Update • iLink 3.0 is planned for 3 phases starting in 2017 - Phase 1 adds the ability to cancel mass quotes by quote set ID - Phase 2 introduces the new logon procedure, presentation layer, and session layer - Phase 3 includes remaining application layer changes including Mass Order and C
Slide 30: Consolidated Fills Approach
Consolidated Fills Approach • Consolidation of Fill notices on all customer interfaces: - MDP 3.0 – completed already with Trade Summary message - iLink Order Entry - Clearing • Consolidate to single fill: - Per aggressor order - Within an instrument - At a single price • Benefits: - Reduce iLink, i
Slide 31: Example: Fill Consolidation
Example: Fill Consolidation Scenario: An aggressive order (A) of two contracts matches against two passive orders (B and C) of one contract each. Current fill messages: Future consolidated fill messages: • Fill A for 1 contract • Fill A for 2 contracts • Fill B for 1 contract • Fill B for 1 contract
Slide 32: Consolidated Fills
Consolidated Fills • 2017: Fill Consolidation - Fewer fill messages with quantity aggregated by price - Common ID will be used across iLink, MDP, and STP/Drop Copy to correlate all trade information together. More details forthcoming - Messages reflect match events at engine; order granularity still
Slide 33: CME Group Referential Data Services
CME Group Referential Data Services First Offering: Product Referential API • Request product and instrument information by exchange, MDP channel, or venue - Restful Services with query support and response formats including XML, CSV, and JSON • Data can be used for a wide variety of use cases inclu
Slide 34: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates • Global Repository Service © 2016 CME Group. All rights reserved. 34
Slide 35: CME DataMine: Historical Data Service
CME DataMine: Historical Data Service CME DataMine is the official source of the most comprehensive historical price information available for CME Group markets. • Provides a broad array of data types including: ‐ Market Depth ‐ End of Day ‐ Block Trades • Continuously growing product suite • Provid
Slide 36: Common Use Cases of Historical Datasets
Common Use Cases of Historical Datasets Strategy Data Quality Investment New Strategy Backtesting Validation Consulting Generation Internal New Asset Class Academic Regulatory Performance Research Research Monitoring Surveillance Market Margin Risk Analytics Charting Surveillance Calculations © 2016
Slide 37: DataMine - 2016 New Developments
DataMine - 2016 New Developments REST Migration Web- API for of based data New Improved historical self access & financial pricing data to service AWS datasets structure Amazon user Cloud Cloud interface delivery © 2016 CME Group. All rights reserved. 37
Slide 38: Contact Us
Contact Us We welcome client feedback and suggestions – please contact us! Business Team: [email protected] Product Management: [email protected] General Website http://www.cmegroup.com/market-data/datamine-historical-data.html © 2016 CME Group. All rights reserved. 38
Slide 39: New! CME Customer Center
New! CME Customer Center • Centralized access to all your tools and applications • Access is single-sign on enabled using your SMART Click ID © 2016 CME Group. All rights reserved. 39
Slide 40: New! CME Customer Center
New! CME Customer Center • New self-service functionality is available via the Request Center - Drop Copy Management - Globex Firm IDs Requests © 2016 CME Group. All rights reserved. 40
Slide 41: New! CME Customer Center
New! CME Customer Center • View and manage your Drop Copy Groups. Add and remove sessions at your convenience. • Eliminates the need for Schedule 12 paperwork for Drop Copy group management © 2016 CME Group. All rights reserved. 41
Slide 42: New! CME Customer Center
New! CME Customer Center • Request new Globex Firm IDs or update existing ones • Clearing Firm authorized users can approve clearing relationship mapping • Eliminates the need for Schedule 6, Exhibit B paperwork © 2016 CME Group. All rights reserved. 42
Slide 43: New! CME Customer Center
New! CME Customer Center • Track the progress of open requests you’ve submitted • Get alerts via Notification Center to items pending in your To Do’s © 2016 CME Group. All rights reserved. 43
Slide 44: New! CME Customer Center
New! CME Customer Center • New capabilities coming soon: - Request new iLink session IDs (Q2) - Manage access and entitlements for CME Group applications: • Firm Admin Dashboard (Q2) • FirmSoft (TBA) • Available to Clearing Firms and authorized customers - contact your Global Account Manager for fur
Slide 45: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates • Global Repository Service © 2016 CME Group. All rights reserved. 45
Slide 46: CME Europe Overview
CME Europe Overview Status Since Launch 3 Asset Classes 1,300,000+ >12,000 147 Products Contracts traded Record Daily Volume FX, Energy & Agriculture Award winning $125Billion >20,000 Cocoa futures Record Nat Gas O.I. FX notional value traded (in TTF & NBP contract monthly equivalents) 75K+ contract
Slide 47: CME Europe Progress to Date
CME Europe Progress to Date © 2016 CME Group. All rights reserved.
Slide 48: CME Europe − 2016 YTD Highlights
CME Europe − 2016 YTD Highlights Record Exchange volumes; multiple milestones in FX, Gas & Cocoa Foreign Exchange: March Volume: 70,455 contracts. Open Interest (as of March 31st): 4,317 contracts • Record CMEEL FX ADV of 3,203 lots in March (↑8% Y-o-Y), in correlation with a six-month rising volume
Slide 49: CME Europe − 2016 YTD Highlights
CME Europe − 2016 YTD Highlights Record Exchange volumes; multiple milestones in FX, Gas & Cocoa Agricultural Volume for March 2016: 8,408 contracts. Open Interest (as of March 31st): 2,150 contracts • CME Europe’s award winning Cocoa Futures contract marked its 1st year anniversary with over 50,255
Slide 50: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates Metals Energy FX & Rates Swaptions Clearing • Global Repository Service © 2016 CME Group. All rights reserved. 50
Slide 51: Precious Metals Products
Precious Metals Products Leading Contracts with Deep Liquidity Product Code 2015 ADV 2016 ADV (Jan-Feb) Open Interest * Gold Futures (100oz) GC 165,000 lots 217,000 lots 457,000 lots Gold Options (100oz) OG 30,000 lots 49,000 lots 1.1 million lots Silver Futures (5000oz) SI 53,000 lots 68,000 lots 1
Slide 52: Precious Metals Products
Precious Metals Products Product Update – Gold Kilo Futures (GCK) Increase in Liquidity since GCK Launch CME Group launched Gold Kilo Futures (GCK) in January 2015. GCK is listed on COMEX and physically delivered in Hong Kong, offering access to trade the Far East gold market. • Continuously quoted
Slide 53: Base/Ferrous Metals Products
Base/Ferrous Metals Products Leading Contracts with Deep Liquidity Product Code 2015 ADV 2016 ADV (Jan-Feb) Open Interest * Copper Futures (25,000lbs) HG 74,335 lots 79,081 lots 205,143 lots Iron Ore Futures (500MT) TIO 87 lots 1159 lots 25,574 lots Hot Rolled Steel (20ST) HR 139 lots 361 lots 24,59
Slide 54: Base Metals Product Update
Base Metals Product Update Aluminum Premiums AUP, AEP, MJP, EDP Increase in Liquidity since AUP Launch CME’s cash settled futures contracts offer the aluminium industry the ability to effectively mitigate premium exposure • All are Cash Settled. • AUP & MJP vs Platts published indices. AEP & EDP vs
Slide 55: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates Metals Energy FX & Rates Swaptions Clearing • Global Repository Service © 2016 CME Group. All rights reserved. 55
Slide 56: New Crude Contracts: Brent Options and WTI Houston Futures
New Crude Contracts: Brent Futures-Style Options and WTI Houston Futures NYMEX Brent Financial Futures (BZ) 200 Brent Futures-Style Margin Options Open Interest / ADV (Thousands) (BZO) 150 • CME’s first option with Futures-Style Margining 100 • Look-a-like to ICE’s Monthly Brent Option (B) • Leverag
Slide 57: NYMEX: The Emerging WTI-Brent Exchange
NYMEX: The Emerging WTI-Brent Exchange NYMEX Brent Globex Exchange-Listed Spreads 40 • NYMEX front month exchange listed 35 WTI-Brent (code CLBZ) spread now Average Daily Volume (Thousands) 30 consistently 50% market share or 25 greater 20 15 • Bid/Ask spread on front two months 10 CLBZ now consiste
Slide 58: NYMEX: Natural Gas Enhancements
NYMEX: Natural Gas Enhancements • Reduced ticks in our most common Natural Gas Spreads. • Implieds for Natural Gas options are live and trading on Globex. Crude Options Implieds will be available to trade in April. • Physical NG Butterfly spread products to be listed in April 2016. • Average Priced
Slide 59: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates Metals Energy FX & Rates Swaptions Clearing • Global Repository Service © 2016 CME Group. All rights reserved. 59
Slide 60: FX tick size reduction
FX tick size reduction Effect on market quality • Minimum tick increment in the standard size EUR/USD contract changed from $12.50 per tick to $6.25 per tick on January 11, 2016 - Cost reduction of 36% for orders executed at the Top-of-Book Save $89.45 on average execution size of 18 contracts (~$2.
Slide 61: FX Highlights
FX Highlights • CNH New liquidity program launched March 15 • Improved market making program with new market makers • Block price makers added • Aggressive customer outreach will commence early April • New Bloomberg USD Index futures to commence trading on April 4 • Cash settled futures referencing
Slide 62: Interest Rates Highlights
Interest Rates Highlights • Ultra 10 Contract the most successful “new-launch” in CME’s history • 1 million contracts traded in just seven weeks; a record for CME • Successful first roll from March to June expiry • Open interest on a strong uptrend • Broad client participation across trade types • F
Slide 63: Agenda
Agenda • Regulatory Updates • E-Trading Update • CME DataMine & Customer Center • CME Europe Updates • CME Product Updates Metals Energy FX & Rates Swaptions Clearing • Global Repository Service © 2016 CME Group. All rights reserved. 63
Slide 64: CME Group Swaptions Clearing
CME Group Swaptions Clearing Launching April 11, 2016 Based on Strong Client Demand Clearing Swaptions Amplifies our Unparalleled Capital Efficiencies Voluntary clearing allows market participants the flexibility to reduce the risk of their cleared IRS portfolios Margin offsets of up to 91% poss
Slide 65: Cleared OTC IRS Swaptions Product Scope
Cleared OTC IRS Swaptions Product Scope Initial Product Offering: Swaptions Max Expiry Final Settlement Underlying Tenor Index Currency Type Years Method Years (up to) Months <2 <5 > 10 Physical 30 50 1 3 6 USD European LIBOR • USD vanilla swaptions • Includes Straddles, cleared as a single trade or
Slide 66: USD Swaptions Product Characteristics
USD Swaptions Product Characteristics • Straddles, the simultaneous right to pay and receive at the same strike & maturity, are supported & can be cleared as a single trade • Both upfront and forward premiums are supported • Premiums may be settled on spot (T+1) through the expiration date +1 of the
Slide 67: Swaptions Exercise Process
Swaptions Exercise Process With CME as the swaptions counterparty to every trade, both the long and short benefit from a streamlined exercise and assignment process Bilateral Process CME Cleared Process Post 11am ET and prior to Option 1 Option 2 EOD, long effects swaption Prior to 11am ET, Long Pri
Slide 68: Agenda
Agenda • Regulatory Updates • CME Europe Updates • CME Product Updates • E-Trading Update • CME DataMine • New! CME Customer Center • Global Repository Service © 2016 CME Group. All rights reserved. 68
Slide 69: CME Global Repository Service
CME Global Repository Service World class trade repository solutions combining global breadth with highly efficient real-time technology and aggressive pricing. www.cmegroup.com/GRS Unique Accept: 1500+ Trades OTC-Bilateral reported OTC-Cleared Customers ETD 250+MM US, EU, 24hr Simple. Canada, ACCES
Slide 70: CME GRS Value Proposition
CME GRS Value Proposition COVERAGE TECHNOLOGY COST OPERATIONS In all major reporting Best in class Simple and cost World class client jurisdictions; set up technology to ensure effective fee plans. service team. to be a true global your compliance and Expense certainty. Intensive compliance offering
Slide 71: GRS New Developments
GRS New Developments • Pursuing a Singaporean trade reporting license from MAS; targeting end of 2016. • Australian Trade Repository (ATR) is live and accepting trades in all asset classes, CME/non-CME, bilateral and cleared. • CME Clearing now supporting delegated reporting of CME Cleared trades to
Slide 72: Reporting 2.0
“Reporting 2.0” • CME is a true Global TR. . . an alternative exists! • Expense savings on trade reporting are real. Moves to CME often result in 50%+ per annum. • Compliance risk is real. Regulatory reporting fines have begun. • Your TR operator should offer more than just trade reporting. © 2016 C
Slide 73: Contact Us
Contact Us Business Team: [email protected] Client Services: [email protected] Chicago +1 (312) 580 5352 | London +44 (0) 203 379 3180 General Website http://www.cmegroup.com/GRS © 2016 CME Group. All rights reserved. 73
Slide 74: Q&A Quiz
CME Group Customer Forum Q&A Quiz © 2016 CME Group. All rights reserved. 74