Cme Group Inc. Q4 FY2021 Earnings Call

Good day, and welcome to the CME Group Fourth Quarter and Year End 2021 Earnings Call. At this time, I would like to turn the conference over to John Peschier. Please go ahead, sir.

Thank you. Good morning, everyone. I hope you're all doing well today. I'm going to start with a Safe Harbor language. Statements made on this call and in the other reference documents on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement. Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website. Lastly, on the final page of the earnings release, you will see a reconciliation between GAAP and non-GAAP measures. With that, I'd like to turn the call over to Terry.

Thanks, John. Let me echo John's comments and hope that you and your family are all safe and healthy. Thank you for joining us this morning. We released our executive commentary earlier today, which provided extensive details on the fourth quarter of 2021. I have John, Sean, Derek, Sunil, and Julie Winkler on the call this morning, and we all look forward to addressing any questions you have. Before I begin, in addition to John who will discuss the financial results, I'm going to have Sean and Derek make some comments as we did last quarter. Trading activity was strong during the fourth quarter with average daily volume of 20.5 million contracts per day, up 26% versus the fourth quarter last year, and up 15% sequentially. We also added 26% ADV growth during the month of December versus the prior year. We saw tremendous year-over-year strength in our interest rate business, which was up 56%, including record quarterly SOFR futures ADV. As we continue to assist clients with the transition from LIBOR, equity index ADV increased 15% and energy ADV rose 16% compared to the fourth quarter last year. Additionally, options ADV grew 58% to 3.7 million contracts. The strong finish to the year supported record annual ADV in total of 19.6 million contracts, up 3% from last year, as well as record annual non-U.S. ADV of 5.5 million contracts, up 4% compared with 2020. In the fourth quarter, non-U.S. average daily volume was up 24% to 5.7 million contracts per day. We saw 26% growth in Europe, 15% growth in Asia, and 45% growth in Latin America. As always, we continued to launch new innovative products, tools, and services to support customer needs. We executed on targeted sales campaigns for recent launches during Q4. Micro Ether futures were launched in early December and surpassed 100,000 contracts within the first two weeks. We also began trading E-minis Russell 2000 Monday and Wednesday weekly options contracts, as demand for the more short-dated options continues to grow. Additionally, we recently announced our plans to launch a new 20-year U.S. Treasury bond future in early March 2022, which is pending regulatory review. Over the full year 2021, new products launched since 2010 generated approximately $500 million in revenue, up 30% from 2020. Finally, in line with our longstanding history of innovation, we are extremely excited about having signed our 10-year strategic partnership deal with Google Cloud. This will allow us to transform derivative markets to cloud adoption and co-innovation to deliver expanded access, new products, and more efficiencies for all market participants. As far as activity to date in 2022, we averaged 24.6 million contracts per day in January, up 28% compared with January of 2021. Equity index and interest rates continue to lead the way with year-over-year growth of 56% and 33%, respectively. Options ADV growth was also strong, which was up 39%. With that, let me turn the call over to Sean and then Derek to give you a little more color on each of these areas. Sean?

Thank you, Terry. And thanks again, everyone for joining. While volatility across financial asset classes remained well below normal historical levels in 2021, interest rate and equity index volatility are around the historical mean in the fourth quarter, and FX market volatility generally remained below the 28th percentile. In that somewhat more normal environment in the fourth quarter, as Terry mentioned, we saw strong rates in equity volumes. We saw rates options up 94% year-over-year, equity index options up 68% year-over-year, and FX options up 18%. In terms of our customer penetration, every financial asset class saw an all-time record average annual number of large open interest holders in 2021, as more customers used more of our financial products than ever before. In addition, we are pleased with our continued progress in the financial product launches, new product adoption, and strong commercial results from these new products. From January 24th, new financial products achieved a volume of more than 10.5 million contracts making up over 30% of the entire exchange volume that day. Among our new products, we achieved an ADV record in our Micro equity E-minis in January, up 3.7 million contracts, up 64% compared with January of last year. Our newly launched Micro Ether futures achieved an ADV of 21,500 contracts in January. And our Crypto futures in total reached a record 57,900 contracts in January, up 229% year-over-year, equating to 2.87 billion average daily notional traded. With strong growth in our equity index and crypto futures, we initiated a fee adjustment beginning on February 1st. We increased our E-mini and micro E-mini member fees by one penny per contract. And we increased our non-member E-mini and Micro E-mini fees by five cents per contract. Likewise, we increased our Bitcoin and Ether futures member fees by $0.50 per contract and our non-member fees by $1 per contract. We are also pleased with new product growth in our rates business. Putting our new 20-year U.S. Treasury note features announcement into perspective, our ultra 10-year futures achieved a new all-time high annual ADV of 372,000 contracts in 2021. As we progress through the LIBOR transition, our SOFR futures now represent 95% of the average daily volume of all exchange-traded SOFR futures and 98% of the open interest. In January, our SOFR products overall grew exponentially. SOFR futures achieved 731,000 contracts ADV, up 645% year-over-year. On February 3rd, our SOFR futures and options achieved an open interest of 3.4 million contracts, up 406% versus a year ago. Adding the open interest from our SOFR-linked contracts, which is how we refer to our Eurodollar futures and options that reference LIBOR, which will be finally set after June 30th, 2023, to our SOFR futures and options open interest, the combined open interest is currently running at 17.45 million contracts. Regarding our term SOFR index, we have already licensed 600 firms across the globe, including in the financial, banking, manufacturing, and other industries. And with that, I'll hand it over to Derek.

Thanks, Sean. Looking at our commodities portfolio, we drove strong 2021 results across our global benchmarks with particular strength in the fourth quarter energy, which grew 16% year-on-year. In addition to hitting record agricultural products volumes in Europe and Asia in 2021, we also hit a new record monthly average daily volume in our Micro WTI contract in November and set multiple records in our industrial metals portfolio, made up of copper, aluminum, and steel. On the client side, we continue to focus on expanding commercial customer participation, and in 2021, these end-user open interest orders were our best performing client segment overall. Additionally, to better serve our clients accelerating focus on environmental and sustainability concerns and the emerging risk management needs of these customers, I'm pleased to announce that we have created a new environmental products portfolio. This portfolio aggregates the full range of our existing and planned environmental and sustainability-linked products such as our market-leading global emissions offset contracts, biofuels such as ethanol and other renewables, and battery metals like cobalt and lithium, and will serve as a catalyst for our continued expansion across asset classes in this rapidly evolving space. Customer demand is increasing for carbon and environmental products that facilitate broad participation and risk management needs across diverse industries and geographic limits. Our focus is on building tools to effectively manage their environmental risks and achieve their goals through the energy transition. Turning to our global options business, we delivered strong results again in 2021, up 6% versus 2020, finishing the year with a robust fourth quarter, up 58% as Terry mentioned. Our outstanding fourth quarter results were led by strength in our interest rates, equity index, and FX business lines as macroeconomic uncertainties and rate rise expectations filtered across global financial markets. Our options growth was again driven by outsize growth outside the U.S., led by APAC, up 23% and EMEA, up 4%. Most importantly, our fastest growing options client segments are commercials and buy-side customers, which reflects our consistent focus on attracting end-user customers to our markets. Our overall options growth was accelerated by the continued global adoption of our electronic frontend CME Direct, which hit a new record number of active users in 2021, and drove a record for Globex revenues on this platform. CME Direct continues to be a key driver of our non-U.S. growth, with the average daily monthly users trading booking via the platform in the fourth quarter, increasing 50% in Latin America, 18% in Europe, and 10% in Asia versus the fourth quarter of 2020. Finally, turning to our international business, having just taken over responsibility for this business in November, I'm excited to optimize this team's structure and mandate to ensure that we can continue to deliver outsized growth outside the U.S. As Terry shared, we reached record annual non-U.S. ADV in 2021, which was bolstered by our strongest fourth quarter ever of 5.7 million contracts. Given our success in finding and onboarding new global clients, we've specifically invested in new client-facing headcounts in Asia to further strengthen the on-ground commercial resources, which will further accelerate this growth. Overall, we are very pleased with the continued success of our non-U.S. business and with 2021 revenues in excess of $1.1 billion, I look forward to generating continued outsized growth in both futures and options as we continue to add resources for this critical part of our global growth story. With that, I'll turn to John to discuss the financial results.

Thanks, Derek. During the fourth quarter, CME generated more than $1.1 billion in revenue with average daily volume up 26% compared to the same period last year. If you adjust for the impact of the creation of OSTTRA, our joint venture with IHS Markit, our revenue would have been up approximately 11% for the quarter. Market Data revenue was up 2% from last year to $142 million and up 6% for the full year of 2021. Expenses were very carefully managed and on an adjusted basis, were $429 million for the quarter and $369 million excluding license fees. For the year, CME had adjusted operating expenses, excluding license fees of $1.468 million, which is $32 million below our revised guidance of $1.5 billion. CME had an adjusted effective tax rate at 22.1%, which resulted in an adjusted net income attributable to CME Group of $607.5 million, up 22% from the fourth quarter last year, and an adjusted EPS attributable to common shareholders of $1.66. The issuance of the Class G non-voting shares in November in conjunction with our partnership with Google impacted the calculation of EPS attributable to common shares. These Class G non-voting shares have similar rights to common stock with the exception of voting rights and are convertible to common shares on a one-to-one basis. Had the Class G shares been converted to common shares at the date of the issuance, the adjusted EPS attributable to common shareholders would have been $1.68. We expect the EPS for the Class G and common shareholders to be the same going forward. Please refer to the financial results page of the executive commentary for further information. Capital expenditures for the fourth quarter were approximately $29 million. CME declared $2.5 billion of dividends during 2021, including the annual variable dividend of $1.2 billion, and cash at the end of the quarter was approximately $2.9 billion. Turning to guidance for 2022, we expect total adjusted operating expenses excluding license fees to be approximately $1.45 billion. We are expecting an improving business environment and our guidance reflects that expectation. In addition to our expense guidance, we expect the investment related to the Google partnership and the move to their cloud platform to be in the range of $25 million to $30 million. A portion of these costs may be capitalized, and we will update the guidance as the engineering and migration plans finalize. Capital expenditures, net of leasehold improvement allowances, are expected to be approximately $150 million, and the adjusted effective tax rate should come in between 22.5% and 23.5%. With that summary, we'd like to open up the call for your questions. Based on the number of analysts covering us, please limit yourself to one question, and then feel free to jump back into the queue. Thank you.

We will take our first question from Dan Fannon from Jeffries. Please go ahead.

Thanks, and good morning. John, could you discuss what factors influenced the difference between your guidance and the actual expenses, considering the more conservative start compared to where you concluded the fourth quarter? Additionally, as we look ahead to 2022 and the Google partnership, can you provide insights on the size and scope of the investment in the long term, and how we should anticipate it evolving from the figures you provided for 2022?

Thanks, Dan. I appreciate the question. In terms of the delta from the guidance, as you know, we were, as I said in my prepared remarks, down about $32 million from our revised guidance of $1.5 billion, which is $60 million below the guidance that we gave at the start of the year. The difference is attributed to three things. One is that we achieved our run rate synergies earlier than expected. So our realized synergies were higher, and that's about a third of the delta. If you recall last quarter, we announced that we hit our $200 million run rate synergy target that we had set at the start of the acquisition. We still had limited travel and in-person events, and our marketing spend was lower, which accounts for another third of the difference. The balance is really good expense management across the entire organization, including careful use of contingent labor. Also, we did experience some delays in the delivery of technology equipment that led to lower technology expense. That's the balance. So that's the difference between the $1.5 billion revised guidance and the $1.468 million that we came in at. Regarding your question around the Google multi-year investment, based on current trading activity, I would expect to invest on average a net of $30 million per year for the next four years as we look to move to the Google cloud platform, after which we would expect to be in a net positive cash spending position. We're going to update annually as the costs could fluctuate based on the order that applications are moved to the cloud and the speed of the migration. So if we are moving to the cloud faster, you would see our expenses tick up to move quicker to the cloud, which would be a good outcome as we want to move there as quickly as possible to enjoy the benefits that we see of getting onto the cloud platform. So like I said, that's an annual average cost of $30 million that will fluctuate. It's also important to note that, that's a cash outflow, and a portion of that could potentially be capitalized. I would expect some of it to be capitalized, and we'll update that as we get closer each year.

We will now take our next question from Alex Kramm from UBS, please go ahead.

Yeah. Hey, good morning, everyone. Since you are just talking about the Google Cloud partnership on the cost side, maybe you can also talk about it around the revenue side and the opportunity set there, and maybe the excitement there. Like, what new sources of revenue could you theoretically generate or how might your clients be able to engage with you easier? And then specifically any change for colocation revenues? I mean, that's a nice income stream. So just wondering if anything could change over time, given that you're moving to the cloud?

Alex, I think you asked a couple of different questions around the revenue opportunities associated with Google. So I'm going to ask Sunil and Julie to comment on the colocation with your final question, and I believe John and I can tackle the first one. Why don’t you start, Sunil?

Thank you, Terry. For the first phase, we are actively focused on migrating our clearing and enterprise business applications to the cloud. Regarding clearing applications, our focus is on moving foundational services to the cloud. A key client-facing service we plan to deliver this year is CME's margin calculator. This will complement an online risk engine we already provide, but this new calculator will operate in the cloud as an app, enabling our clients, service providers, and clearing firms to launch these calculation engines on demand throughout the day for real-time risk assessment. That’s what we aim to offer in terms of services. I will pass it to Julie to discuss the data aspect, specifically on the Market Data side.

Yeah. So as Sunil points out, we have been engaging with customers since the announcement in November, and one of the things that they definitely highlighted is the need to manage risk more in real-time. We are really allowing our customers to help us prioritize this work. The second area is really in Market Data, and we see significant opportunities to deliver value to our customers in new ways. We have an existing service that is live with GCC today with our smart screen product. We have 25 global customers that are in production, and we have about 70 more in the pipeline. What's really planned next is an acceleration of the data and products we've put within that offering. We'll be looking to add real-time options data onto that platform, which we know there are a number of customers in the pipeline that have an interest in that. We are also looking at other ways that we can use Google tools such as BigQuery to make some of our large and certainly interesting data sets available to our customers through that offering. It's really a blend of both our data and our intellectual property being used with Google tools, and we are building that solid data foundation to make it easier, adding analytics to that as well. A lot of that planning is underway now, and we're quite excited to be working with them.

So Alex, on your last question regarding the colocation revenue, which is a very nice revenue source for CME, I think it's a bit premature to judge what that revenue's going to look like one way or another. We have a lot of work ahead of us over the next couple of years, as we've already outlined on moving markets to the cloud. There's a lot to be done between now and then with that revenue potentially impacted. But I will say, as we did this transaction and I work closely with John on this, we understand that the colocation revenue could be impacted down the road. That said, I also believe the savings and efficiencies of moving us into the cloud will well offset any expected revenue from colocation. I do believe the future is much brighter regarding the efficiencies and costs associated with the colocation business. So John, do you want to add that?

To your question, Alex, also what differentiates this relationship with Google versus a client-vendor relationship is the innovation framework that we have set up with Google. We are moving to the cloud, but also we have a framework set up so that we co-innovate with Google on new products and services to deliver to our clients. It's too early to say what that is going to be, but we have a framework so that we will develop business plans and products and services together. We're starting to see some of it now. Julie talked about utilizing some of their technology, like BigQuery. Google has invested significantly in their technology footprint, and we benefit by leveraging that in ways that others cannot because it's a partnership versus a client-vendor relationship.

We will now take our next question from Rich Repetto from Piper Sandler.

Good morning, Terry. Good morning, John. And congrats on the strong start in January with your volumes. My question is more about here and now, or not the Google Cloud but more regarding 2022. Your stock is the only U.S. exchange stock up year-to-date, and I think everybody's looking at anticipating a bigger tailwind than you've had in regards to the volumes. Can you provide any incremental insights for your investors about this year and the macro environment that gives us more confidence that say the 24 million, 25 million contracts in January is more sustainable this year?

It's really hard to predict future volumes, as we've said since day one of taking the company public. I know you're aware of that. I will say the following: I don't think any of us have ever seen the way the markets are setting up right now in relation to pandemics, supply chain controls, and inflation. None of us have seen this over the last 20-plus years, especially on the inflationary front. The way our markets are situated, we've been able to continue to invest in different products, as I mentioned in my earlier comments, to generate revenues outside of our core product lines, which have grown this company. Looking at what's in front of us, I suspect our core product should continue to be very active, like you saw in January. Why? Because of all the fundamental factors that are not just in the U.S., but globally. This setup is something I have not seen in my career, and while I might not be happy about this, it reflects how volatile things can become from one day to the next. Sean, do you want to comment?

Thanks, Terry. This is something we've been discussing throughout the entire pandemic, which is that we saw this cycle was completely different from the previous one. The amount of stimulus from both fiscal authorities and monetary authorities was unprecedented relative to the size of the problem. We now have an unemployment rate of 4%, with a record number of open positions in the United States. Inflation is running at 7%. Wage growth is at 5.7%, while the Federal Reserve is still buying securities at near-zero overnight rates. This is unprecedented. We've got five tightenings priced into the curve for the coming year, which is the first time I've seen that in a long time. This reminds me of late 1993, and what happened then was significant tightening in 1994, resulting in large bankruptcies in U.S. history. Henceforward, I think the setup is strong, with risk management becoming increasingly critical over the horizon.

I do not want to belabor the point, there's a lot in front of us. Allow me to provide an example that showcases the rapid changes we can see across markets. Consider that just 20 months ago, on April 20, 2020, the price of West Texas Intermediate was negative $37.50; they were paying you to take the product. Today, it has stabilized to around $92, $93 a barrel. This showcases the volatility that can occur within cycles. That’s why I've stated that I've never seen this kind of setup before, underscoring how quickly things can change.

We will now take our next question from Brian Bedell from Deutsche Bank. Please go ahead.

I have a few questions. I'll just ask one right now to get back in the queue. Maybe starting with the environmental products portfolio that you talked about. Can you discuss the ADV that you're currently generating? And then touch on the potential for product innovation in this range of products, given there's a lot of obviously new adoption and the profile of U.S. users versus international users?

Thanks, Brian. Let me turn it over to Derek Sammann, who will address those questions.

Thanks, Brian. Good question. When looking specifically at the carbon products, this is a brand new market for us. The leading cash market out there, CBL-Xpansiv, is trading in the low couple of hundred million dollars a day equivalent in the spot market as the largest market we have. Currently, environmental products’ volumes are in the low single hundreds right now; open interest is around 10,000, depending on where the market closes. This is a slow build which reflects that we are investing to ensure we have the best partners in this emerging market. The energy transition could be a years-long journey, but we are committed to building a solid foundation in this evolving market space.

Thanks, Derek. Sean, would you want to add comments about the potential for an increase in supply of hedgeable treasuries into the market after quantitative tightening over the long term?

Absolutely. We were very pleased last year with all-time record volumes in our treasury futures, specifically our ultra-10 year treasury futures. When it comes to quantitative tightening, the Treasury announced a slight reduction in long-term issuance in the recent releases. That being said, this is likely to be offset by the Federal Reserve's actions regarding their quantitative easing. So in the short term, any reduction in issuance may be balanced by the ongoing quantitative easing. In the long term, as we've seen in previous cycles, when the Federal Reserve stops expanding their balance sheet and begins tightening, that leads to increases in demand for our treasuries, as buying clients will require our hedges and risk management products.

Thank you, Sean. Operator, we will now take our next question from Michael Cyprys from Morgan Stanley.

I wanted to ask about crypto. You guys have Bitcoin and Ether futures and have been successful there. Broadly, how do you think about potentially extending into the underlying physical token market? To what extent could it make sense for CME on that front, potentially opening your platform to bring retail investors in more directly with your exchange, or wrapping it even with crypto wallets on the physical side? In a broader sense, how do you see the market structure developing in crypto versus other asset classes, and what do you think it will take to be successful to be a dominant player within the trading of digital assets?

Well, Michael, that was a lot of questions and comments in one go, but I will say that, the crypto space appears to be here to stay, and we are here to facilitate the risk management of these products. As Sean referenced, we are looking to roll out new products and we have not announced what those will be yet, but we've seen success with those we have to date. As far as the cash side of the business, that's a very crowded field right now. We are a dominant listed player in the crypto market and will maintain that presence. We want to ensure a thoughtful approach here, as it relates to how cash markets ultimately evolve and may create efficiencies. For retail opportunities, our micro contracts are already attracting retail interest. So more information is to come on new product launches and opportunities in this space.

We will now take a follow-up question from Alex Kramm from UBS.

Sorry, I realized we're way into overtime here. But a couple of follow-ups to squeeze in here. You mentioned the SOFR term license and how many people you've licensed this out to. I would assume this is kind of like a utility kind of benchmark, like LIBOR was. But maybe elaborate if you're actually generating revenues on that and if there's an opportunity for maybe some analytics products, etc. And if you're looking at this as a revenue opportunity?

Let me answer the last one first. I don't think anybody has announced that we're writing a check for the increase in our stake with S&P Global just yet, until that deal closes. We've been hearing that it will close shortly, but we'll wait until that is done before any assumptions. I agree on the indices business, and we've had success with it. In terms of licensing for the term SOFR, we've licensed over 600 entities generating seven-digit annualized revenue. Opportunities will emerge for cross-sell initiatives, and we're seeing strong traction with both global investment and regional banks. This is key for transitioning from LIBOR. The revenue opportunity for SOFR is great, and we are actively generating revenue through both real-time and historical data licensing.

We will now take our next question from Brian Bedell from Deutsche Bank.

Just a quick 2-parter hopefully. I wanted to circle back, Derek, on your comments on the environmental products. I don't know if you have the ADV from just that environmental products portfolio that you cited, maybe just for January. I realize it's very early. So, and then the second part is just around the future of hedgeable treasuries in the market after quantitative tightening.

Yes, sure, Brian. Good question. Regarding carbon products alone, this is a brand-new market. The leading cash market, CBL-Xpansiv, is trading at low couple of hundred million dollars a day equivalent. Currently, volumes are in the low single digits, while open interest is around 10,000. This will gradually build, as we're focused on locking in strong partnerships now to secure our position for years to come. The environmental products are projected to have a slow build-up, but we have set the foundation for growth in risk management, so we will monitor and present the environmental products portfolio view regularly.

In terms of the Treasury supply after quantitative tightening, we did see some reductions in long-term issuance announced recently. In the next few months, the quantitative easing may offset those reductions. However, when the Fed engages in tightening, it sparks demand for our products as market participants hedge their treasuries. This creates greater liquidity in our markets, benefiting our offerings significantly.

Thank you, Sean. Operator, we will now take our next question from Chris Allen from Compass Point.

I was wondering if you could provide some color just on plans for deployment around the $1 billion from the Google investment. CapEx this year is $150 million. Obviously, you have a healthy amount of cash generation. Just wondering how you plan on deploying that, whether there's a shift in capital priorities, given the cash balances where they stand right now?

John?

Yes. Thanks, Chris. As we indicated at the time we did the transaction with Google, the $1 billion was meant to invest in business growth. Part of that investment includes the migration onto the cloud platform. There are various initiatives we are keen to explore to drive value over the next few years. We anticipate that the investment will be pivotal for accelerating growth, allowing for innovative product offerings as well as expanding client engagement. We are continuously assessing opportunities to leverage our cash balance for maximum impact.

We will now take our next question from Eli Molin, filling in for Craig Siegenthaler from Bank of America.

I was wondering, given that Fed funds haven't moved yet, even though they will, and energy prices are already up a lot. I just wanted your perspective on the potential lead time between energy volumes and the rates volume curve? Or stated differently, do you think energy volumes are going to peak well before rates volumes just based on timing?

Thanks, Eli. Derek, do you want to address the energy volume part?

Yes, great question. The current cycle significantly differs from previous ones due to structural changes in energy markets. As we come out of the pandemic, demand for crude oil has recovered to pre-pandemic levels, while production has not. This imbalance has driven up prices. We're also seeing more focus on sustainable initiatives that have led to reduced capital expenditure in oil infrastructure projects. The dynamics of our markets mean that energy products will likely see continued demand. There's a different trend emerging where clients are starting to hedge both crude and natural gas as we adapt to new supply chain dynamics.

Thank you, Derek. Operator, we will now take our next question from Michael Cyprys from Morgan Stanley.

I wanted to ask about crypto. You have Bitcoin and Ether futures and have been successful there. How do you think about expanding into the underlying physical token market? What are your thoughts on opening up your platform to bring retail investors in more directly with your exchange? What do you think it will take to be a dominant player within the trading of digital assets?

Michael, that's a great set of questions. The crypto market seems to be here to stay, and we want to provide risk management in this area. We're analyzing new products now and will consider how cash markets evolve. Retail interest is growing, and our micro contracts are solidifying this engagement. However, the cash side remains competitive and will require careful execution to see if we can create efficiencies in our futures market.

We will now take a follow-up question from Alex Kramm from UBS.

I just want to clarify, you mentioned licensing for SOFR. Are you generating revenues from that, and can that lead into cross-selling analytics products?

We’ve successfully licensed over 600 entities and are generating significant revenues in terms of seven-digit figures annually. This offers us tangible opportunities for cross-selling as we cater to sectors transitioning to SOFR.

We will now take our next question from Brian Bedell from Deutsche Bank.

Just a quick 2-parter hopefully. I wanted to circle back, Derek, on your comments on the environmental products portfolio. Do you have the ADV from the environmental products for January? And the second part is just around potential increases in hedgeable treasury supply post-quantitative tightening.

The ADV for our environmental products is low single digits currently, as we are in the early growth phase. The market is anticipated to build gradually as we have a long journey ahead of us. Our initiatives in carbon products are slowly progressing, and this will take time to see significant adoption.

From a macro standpoint, regarding treasury supplies following quantitative tightening, we might see shifts in issuance levels. However, past experiences indicate that market demand for hedging products typically increases in response to significant policy changes by the Fed.

Well, I would like to thank all of you for joining us on today's call. We appreciate it very much. Obviously, we're excited about the quarter. We're thrilled about the beginning of 2022. The landscape is setting up, and we are poised to continue assisting participants in managing their risks during these challenging times.

This concludes today’s call. Thank you for your participation. You may now disconnect.