Welcome to the ICE Third Quarter 2023 Earnings Conference Call and Webcast. My name is Lauren, and I will be coordinating your call today. There will be an opportunity for questions at the end of the presentation. I will now hand you over to your host, Katia Gonzalez, Manager of Investor Relations to begin. Please go ahead.

Good morning. ICE's third quarter 2023 earnings release and presentation can be found in the Investors section of the ice.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 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 2022 Form 10-K, third quarter Form 10-Q, and other filings with the SEC. In our earnings supplement, we refer to certain non-GAAP measures. 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 our earnings materials. 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. Throughout this presentation, unless otherwise indicated, references to revenue growth are on a constant currency basis. Please see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain items. With us on the call today are Jeff Sprecher, Chair and CEO; Warren Gardiner, Chief Financial Officer; Ben Jackson, President; and Lynn Martin, President of NYSE. I'll now turn the call over to Warren.

Thanks, Katia. Good morning, everyone, and thank you for joining us today. I'll begin on Slide 4 with some of the key highlights from our third quarter results. Third quarter adjusted earnings per share was a record, totaling $1.46, up 11% year-over-year. Net revenues totaled $2 billion and on a pro forma basis, increased 4% versus last year, driven by double-digit growth in our Exchange segment which was led by 22% growth in our futures platform. Third quarter adjusted operating expenses totaled $812 million, including $56 million related to Black Knight and $756 million related to legacy ICE, which was $4 million below our original guidance range, largely driven by lower technology spend, including reduced cloud exposure as we continue to optimize and drive efficiency through our data center footprint. As we move into the fourth quarter, we expected adjusted operating expenses to be in the range of $955 million to $965 million, with the increase relative to the third quarter driven by additional rent, depreciation and amortization, seasonality, and capitalized labor as well as a full quarter of expense related to Black Knight. Moving below the line, adjusted non-operating expense totaled $114 million, including $41 million of incremental interest expense related to our acquisition of Black Knight. We expect adjusted non-operating expense in the fourth quarter to be between $225 million and $230 million, largely driven by the full core impact of acquisition-related interest expense. It is also worth noting that we have reduced our term loan and CP outstanding by around $700 million since the transaction closed in early September. Now let's turn to Slide 5, where I'll provide an overview of the performance of our Exchange segment. Third quarter net revenues totaled $1.1 billion, up 10% year-over-year. Transaction revenues of $754 million were up 13%, driven by 42% growth in our energy revenues. This strong performance included 48% growth in global natural gas driven by a record quarter of TTF volumes. In addition, we continue to see robust trends across our global oil business with average daily volume up 40% year-over-year in the third quarter and open interest at the end of October up 26% year-over-year. As we look to the fourth quarter, it's worth noting that we expect OTC and other revenues to be in the range of $70 million to $75 million, with the third quarter benefiting from a few items that we don't anticipate will repeat. In addition, and in light of the strong performance in our equity options business, where revenues are up 15% year-to-date, we've elected to do a regulatory fee holiday, which will temporarily reduce OTC and other revenues by $10 million to $15 million in the fourth quarter. Shifting away from transaction revenues, recurring revenues increased by 4% year-over-year, including 8% growth in Exchange data services, which is once again driven by double-digit growth in the number of customers consuming our global energy and environmental data, as well as the benefit of a few million dollars related to audit recoveries, which we don't expect will repeat in the fourth quarter. This was partially offset by our listings business where growth in annual listing fees was offset by the rolling off of initial listing fees related to the strong IPO market in 2021. Turning now to Slide 6, I'll discuss our Fixed Income and Data Services segment. Third quarter revenues totaled $559 million, up 4% versus a year ago. Transaction revenues increased by 6%, including 9% growth in ICE bonds and 5% growth in our CDS clearing business. Excluding the impact of the Euronext migration, both recurring revenues and annual subscription value grew by 4%, driven by strong growth across our desktop, feeds, and derivative analytics offerings. Within our desktop business, revenues once again grew double digits as we continue to see strong demand from energy and environmental-focused customers, as well as the continued robust growth in our ICE chat offering partly driven by growing adoption of large language models. In our consolidated feeds business, we once again grew high single digits and expect to exceed $100 million of revenue for the full year as we continue to realize the benefits of past investments to enhance our platform. In our fixed income, data, and analytics business, we generated a record $279 million in the third quarter with sequential growth in revenue driven by our North American pricing and reference data business. While PRD growth may continue to be below trend in the near term, we're seeing signs of an improved sales cycle alongside strong retention. Let's go next to Slide 7, where I will discuss our Mortgage Technology segment. Third quarter Mortgage Technology revenues totaled $330 million, including $87 million related to Black Knight. Recurring revenues totaled $235 million and on a pro forma basis $396 million, representing nearly 80% of total pro forma segment revenues. Despite the headwinds facing the mortgage industry and the related near-term pressure on our recurring revenues, sales continued to be robust as customers look to reshape and modernize how they do business. Through October, we have already surpassed our prior full-year record for new Encompass sales, which was set in 2020. In our servicing solutions business, the closing of the Black Knight transaction has unlocked the pipeline with four new MSP customers signed in October alone, including a top 25 servicer, Fifth Bank. This compares to a total of five signings through the first nine months of the year and has quickly put 2023 on track to be the second-best year for MSP sales since 2017. In addition, as we look to 2024 and continue the momentum, we have seen post-close, the current pipeline for MSP is at its highest level in five years. While we expect the secular trend of customers seeking greater efficiency across their workflows to continue, it's important to note that these strong sales results will take time to implement. And looking to the fourth quarter, we anticipate near-term cyclical headwinds will persist, coupled with typical seasonal pressures on origination volumes in the first and fourth quarters of each year. We expect the total fourth quarter IMT revenues will be in the range of $490 million to $500 million, bringing full-year pro forma revenues to approximately $2.06 billion and in the middle of the guidance range we provided on our Black Knight closing call in late September. In summary, at a consolidated ICE level, we once again grew revenues, adjusted operating income, and adjusted earnings per share. As we look to the end of the year and into 2024, we remain focused on meeting the needs of our customers, continuing to drive growth and create value for our shareholders. I'll be happy to take your questions during Q&A. For now, I'll hand it over to Ben.

Thank you, Warren, and thank you all for joining us this morning. Please turn to Slide 8. I would like to first welcome the Black Knight team to their first ICE earnings call. While it has been less than two months since we closed on the acquisition in early September, we've been very impressed by the collaboration between our teams during this short time, a testament to the talent of our respective employee populations and our shared entrepreneurial cultures. Similar to our exchanges and fixed income businesses, Black Knight integrated into our ICE Mortgage Technology network, a network that thrives by offering a value proposition that aligns growth with efficiency gains that we bring to our customers. As we have seen across our network in futures and fixed income, these efficiency gains are best achieved through harnessing unstructured data to create mission-critical information, seamlessly linking participants to that information and ensuring that the network technology underpinning are of the highest quality and security. It is the execution of this value proposition that often propels an analog to digital conversion of an industry, and it is a blueprint we've applied across all our businesses. A number of years ago, we saw the importance of investing in an energy platform that is truly global, one that better serves the needs of an evolving and growing commercial customer base. Today, as trade dynamics evolve and become increasingly complex, customers are not only seeking liquidity in the major gold benchmarks, but also in products that provide for greater hedging opportunities. Our global oil complex spans over 700 products, including locational spreads, product spreads, and refining spreads. These products are built off of our benchmark contracts, such as Brent crude oil and gas oil. Driven by the breadth of our commercial customer base, we have become the natural home for liquidity in these products with open interest in our oil complex up 26% year-over-year through the end of October, including a 28% increase in our other crude and refined products. In our natural gas markets, we began investing in the globalization of these markets over a decade ago. Today, our European TTF and Asian JKM gas complexes continue to grow and reach important milestones as they evolve into global gas benchmarks. In the third quarter, the number of participants in each market grew double digits year-over-year, and TTF reached another quarter of record volumes. This strong performance helped drive record revenues across our natural gas complex through the first nine months of 2023, up 37% year-over-year. In addition, interest trends for TTF and JKM remained strong through October, up 58% and 19% year-over-year, respectively. This strength continues to underscore the significance of our contracts to the price formation of global natural gas. We are well positioned to both benefit from the near-term volatility and the long-term secular growth trends occurring across these markets because we operate a global gas market with benchmarks across North America, Europe, and Asia. In our environmental markets, we recognize the importance of carbon price transparency over 10 years ago by acquiring the Climate Exchange in 2010 and building around those leading markets to develop a global environmental business. As we look out over the longer term, corporates and market participants remain committed to environmental policy to reduce carbon emissions. This is illustrated by continued growth in active market participants, up 9% year-over-year. Importantly, because we offer one of the broadest suites of environmental products across the carbon cycle, we remain excited about our position to serve customers as they navigate the journey to clean energy and as the demand for transparent pricing in carbon grows. In summary, these cleaner energy sources combined, including global natural gas and environmental products, make up over 40% of our energy revenues today and have grown 17% on average over the past five years, including a 30% growth year-to-date. As the clean energy transition continues to introduce new complexities, uncertainties, and volatility to energy markets, our global environmentals, alongside our gas and oil complexes, will provide the price transparency across the energy spectrum needed to manage these evolving risks. Moving to our Fixed Income and Data Services business. As fixed income markets electronify and passive investing grows, our comprehensive all-weather platform continues to generate compounding revenue growth, up 7% year-to-date. Investments we've made to enhance content and functionality across our other data and network services business continue to pay dividends. Year-to-date, this part of our business is up 7%, driven by strength across our desktop, derivatives analytics, and feed offerings as customers continue to modernize workflows. Within our desktops business, the investments we have made to reduce friction across the workflow have contributed to double-digit revenue growth year-to-date, along with double-digit growth in the number of users that connect to our ICE Chat platform. Similarly, within our consolidated feeds business, investments we've made to elevate and enhance our offering have led to accelerating adoption by large financial institutions. This has directly contributed to high single-digit growth in this area year-to-date. In addition, we continue to see strength in our index business driven by double-digit growth in ETF assets under management as of the end of the third quarter, with now over $0.5 trillion in assets selecting ICE indices as the passive benchmark. As we move forward, we will continue to build on our track record of adding efficiencies and bringing transparency to opaque asset classes, leveraging our mission-critical data assets and market-leading technology. Turning now to our mortgage business. Like what we saw in the commodity markets 20 years ago, there's an analog to digital conversion occurring in the U.S. residential mortgage industry. Critical to our ability to execute on this opportunity is our network, which in combination with Black Knight, spans from consumer acquisition all the way through to the secondary market. In the third quarter, our mortgage business once again outperformed the broader industry that experienced nearly a 20% decline in origination volumes. This continued outperformance is a result of executing against our strategy of leveraging our mission-critical technology and data expertise to accelerate the analog to digital conversion happening in the industry. Part of that strategy is intentionally shifting more business to recurring revenue, particularly within our origination technology and data and analytics business. During the third quarter, of the Encompass customers that came up for renewal, roughly 60% increased their base subscriptions. Importantly, where customers decline in subscriptions, the trade-off is a higher per closed loan fee, which will provide an uplift in transaction revenues when the market returns. Part of our thesis has been that clients that have origination businesses, combined with servicing businesses, we want to bring together a complete front-to-back experience for their clients through one trusted platform provider. As mentioned last quarter, JPMorgan Chase has selected Encompass for their loan origination system across all channels and has implemented or is implementing our data and document automation platform. These wins are on top of a long-standing, great relationship with MSP for servicing, which now positions us to provide a platform to help facilitate their front-to-back experience for their clients. Since we closed on Black Knight, I am pleased to share two new wins along the same lines. First, M&T Bank has now selected Encompass to replace their existing loan origination platform and has added our data and document automation platform on top of the existing MSP relationship for servicing, again, positioning us to provide our platform to support the front-to-back experience for their clients. The second new win is with Fifth Third Bank. We have cross-sold MSP and several data and analytics products to Fifth Third Bank, an existing IMT customer, including our consumer engagement solutions and all regs product. In summary, these are major wins for us and serve as a validation of our vision with large clients bringing together a complete front-to-back experience for their clients through one trusted platform provider. The relationships with these great customers are models we plan to replicate with many more. Increased workflow efficiency through continued electronification is a secular trend we believe will continue through a variety of mortgage origination environments. This trend gives us confidence that we can grow the business that today is only a fraction of the $14 billion addressable market that is in the early days of an analog to digital conversion. With that, I'll now turn the call over to Jeff.

Thank you, Ben, and good morning, everyone. Thank you for joining us. Please now turn to Slide 9. The idea to start ICE came in the late 1990s, an idea to take advantage of the move of commerce to the Internet and an idea to capitalize on changing government regulations regarding energy procurement. The subsequent dot-com crash and the collapse of Enron created a very difficult business environment, particularly the trading of energy. But it was in this challenging environment where ICE was able to gain a foothold into the market and build the foundation for a growing business in commodity trading, a business that, as you've just heard, continues to flourish more than 20 years later. Sometime around 2006, we came across a newspaper article about credit default swaps and the difficulty that this market was having settling such contracts. We became convinced that ICE could build a clearinghouse infrastructure that could solve these delivery problems. Our colleagues took up the challenge and we acquired targeted platforms and talent. Two years later, when the financial crisis of 2008 froze the CDS markets, we were in a position to offer a sustainable solution. And when the Dodd-Frank Act of 2010 and the European Market Infrastructure Act of 2012 required the use of clearinghouses in the over-the-counter swaps markets, ICE was able to expand what has now become another significant business for us. I tell you these stories not as some kind of victory lap, but to remind you of our repeated experience that the best time to lay the groundwork for a strong future is when your target customers are experiencing stress and are open to new vendors and new platforms to alleviate their problems. I also remind you that evolutions in regulation in the financial services industry typically follow periods of economic change and that standardized, open, and transparent platforms, such as those that ICE operates, can benefit. Ultimately, I call your attention to our history to answer a question that we've been asked: why is ICE investing in a consumer finance technology platform via the mortgage market? And why do it now? We spoke on our recent call following the closing of our acquisition of Black Knight about our aim to build financial market infrastructure across the company that can offer earnings and dividend growth in variable market conditions, all-weather growth that will allow our shareholders to have confidence that they won't have to time their investments into and out of an episodic earnings stream. There are currently many stress points across large portions of the U.S. mortgage industry, and ICE is experiencing an openness from market participants and its regulators to consider new solutions delivered by our comprehensive technology platform. This is why Warren and Ben were able to tell you in specifics about the encouraging reception that we're receiving for our vision to rewire the mortgage market. And why Ben shared our success with platform clients like JPMorgan Chase, M&T Bank, and Fifth Third Bank, all of whom are significant sophisticated drivers of the market. The same economic stress that exists in the current U.S. mortgage market is, conversely, fueling growth on our commodity hedging and credit protection platforms, which benefited ICE's record third quarter earnings. We're positioning ourselves to transform the U.S. mortgage market while it is under stress with a goal to create opportunities to springload our future growth and contribute to our all-weather earnings and dividend growth roadmap. Another topic that we're being asked about a lot is our adoption of large language models and learning algorithms. ICE has long been investing in adaptive learning tools beginning more than a decade ago when we incorporated learning tools into our growing ICE Chat system as a way of automating workflows based on unstructured trader and back-office conversations. We're also deploying learning models in our compliance efforts to recognize trading and usage patterns that deviate from norms. Ben mentioned our ICE Mortgage Technology product, now called Data and Document Automation, which is an extension of the learning model that we acquired within Ellie Mae. This product recognizes a wide variety of documents that end up in a consumer file when underwriting a loan, documents such as pay stubs, tax returns, bank statements, and alike, which the algorithm automatically identifies and places in appropriate digital folders. The model extracts key structured and unstructured data elements from these folders for further validation by a credit team via a workflow that detects exception cases for the compliance team. Our model is based on a transparent rules engine, which we believe will assist our customers and their regulators to comply with the President's recent private letter ruling on model fairness and integrity. Our model is being further extended by us across our expanding mortgage platform. Our experience in building and deploying these learning models also facilitates our research into the cost of computation that is associated with model queries, and it permits us to have a thoughtful understanding of the cost-benefit analysis of their deployment and the extension of models. When we acquired the New York Stock Exchange, it was built on a technology stack that was overly complicated, hard to manage, and unreliable. So we set off to completely rebuild the underlying architecture with modern technology. Given the importance of the New York Stock Exchange to the global economy, we had to rebuild the exchange while it was in daily use. Its extensive connectivity to the global financial services industry demanded that we not ask our customers to invest in making changes on their side of the firewall. So, we wrapped the old technology with a modern front end and methodically rebuilt and replaced all of the back-end hardware and software. This process took us years to execute with our successful final software rollout just a few days ago, deprecating the last of its seven unique legacy matching engines. Our upgrade blueprint worked. Today, the New York Stock Exchange sits atop one of the most powerful, deterministic performance, and resilient tech stacks in the world. This same plan to build a new bridge while the cars continue to drive across it was deployed by us when we acquired Interactive Data Corporation. There, we inherited over 100 legacy servers, many of which literally could not be shut down for fear of not being able to properly restart them. We again replaced this mess with a modern data superstore over a period of six years and without sacrifice from our customer base. When we made our initial investment in MERS, its technology was outsourced and could not keep up with the demands placed on it during the financial crisis. Our business deal with MERS ownership consortium was to rebuild the platform within two years. If successful, we had an option to buy and run the company. We did just that. MERS is now a cornerstone of our broad U.S. mortgage industry platform. With our acquisition of Black Knight, we've again undertaken a blueprint to wrap its legacy technologies, tie it to our mortgage platform for near seamless integration with our customer base and rebuild its tech stack with modern architecture over the coming years. As I've mentioned on past calls, ICE is agnostic to cloud providers, but we also operate our own proprietary cloud with ICE data centers having connectivity to a vast portion of the global financial services industry. This allows us to oversee our costs and stand behind our performance, a cloud strategy that Warren mentioned was a contributor to our record earnings in the quarter. In summary, my comments today highlight three backdrops that ICE follows to evolve our all-weather business model. We invest in environments that may have fallen out of favor and at times when customers need us the most. We embrace regulatory shifts and the workflow alterations that inevitably follow periods of economic change. And we embrace experimentation with new technologies, while enhancing technology assets that we may acquire to drive platform efficiencies and better serve our customers. Shifting now to ICE's strong results. Please turn to Slide 10. In the third quarter, we delivered the best quarter in our company's history with record revenues, record adjusted operating income, and record adjusted earnings per share. We have intentionally positioned our company to provide customer solutions in numerous geographies and economic conditions to facilitate all-weather results. These record-setting third quarter results against our extraordinary third quarter results of last year are another example of strong execution across our platform. I would like to end our prepared remarks by thanking our customers for their continued business and their trust. I would also like to thank my colleagues at ICE for their contributions to our best-ever quarterly results following up on our unsurpassed results of the first half. And with that, I will now turn our call back to our moderator, Lauren, and we will conduct a question-and-answer session until 9:30 Eastern Time.

Our first question comes from Ken Worthington from JPMorgan. Ken, please go ahead.

Hi. Good morning. Thanks for taking the question. I wanted to ask about ICE oil. So you mentioned last quarter that Midland was added to Brent, and we've seen trading at Midland take off. I'm curious how you think Midland is impacting the trading of Brent? And to what extent Midland is a contributor to ICE's increased share in WTI? And then I guess, most importantly, how much of the benefit to ICE is left as we look forward? Or has the positive impact already played out?

Hi, Ken. It's Ben. Thank you for the question. We see all the investments that we've been doing in our oil platform as a truly global platform that's all complementary to one another. As the clear trend around the world has been underinvestment in energy infrastructure, so you have a lot of volatility in energy when there's any kind of supply shocks. You've got electronification continuing to take hold. You have energy markets that are truly global. You've got supply chains that are evolving and changing, and people are looking for more precision and risk management. So with all the investments that we've been making in our global oil platform, we take all that into account, we're engaging with customers now more than ever, and we're getting feedback that there's a need for more precise instruments, pricing Middle East oil that's destined for China. That's what created that Murban contract and ICE futures Abu Dhabi, and it's grown nicely. In parallel to that, Brent, which is the centerpiece of that entire complex is up both in open interest and volume year-over-year. So we see them as complementary trading assets that run side by side. We also continue to see investments like our HOU contract in the U.S., which is pricing Midland barrels coming out of Midland, going into Houston, and then eventually making its way into our dated Brent contract. We're seeing that contract also continue to grow. So we see these all as very complementary assets to one another. And even within the Middle East itself, you look at our Dubai contract. That contract is up in volumes 80% year-over-year, with open interest up close to 50% year-over-year. So we again see them all as very complementary assets that traders look at both for the precision that that particular instrument provides, but then also trading them in parallel to the other benchmark contracts.

Okay. Great. Thank you.

Thank you. Our next question comes from Ben Budish from Barclays. Ben, please go ahead.

Hi. Good morning. Thanks for taking my question. I wanted to follow-up on some of the commentary around the wins in the mortgage business. Just to what degree do you think that some of the MSP wins and some of the cross-selling are a result of things ICE is doing differently since acquiring the asset? To what degree is it perhaps pent-up demand, things were maybe stalling while the merger was pending? And if that's the case, what do you think about the pipeline? How sustainable is that growth versus perhaps a compression of some built-up or some pent-up demand over the last many months? Thank you.

Yes. Thank you for the question. As we've said in a number of calls, our hypothesis has been that the combination of these businesses will create, for the first time, an opportunity for our clients to have one trusted platform provider for that complete front-to-back experience for their clients. You heard a lot in our prepared remarks about the sales success across our platform. We believe that based on that success as well as the funnel we see ahead of us, we have a platform that's really spring-loaded as the market normalizes and loans are growing. Just unpacking some more detail on what's going on under the cover. We mentioned we had a solid Q3 in Encompass sales in the third quarter and then also in October. As Warren pointed out in his prepared remarks, we've had a record sales year, and we still have a couple of months to go in the year. So that's playing out very well for us. We mentioned we won M&T Bank, an existing MSP customer. They're adding both Encompass and our DDA platform. We've won TriPoint that's moving to Encompass. We also had an expansion with The Federal Savings Bank, adding our data and document automation platform on top of the existing Encompass relationship. Switching to MSP. There's no doubt that there was some pent-up demand on MSP as there was an overhang on the deal with clients waiting to see how it was going to come through. Now we're seeing a number of deals come through. We mentioned Fifth Third Bank replacing their existing platform provider. They are also adding a number of data products as part of that deal as well. We've also added Black Hills Federal Credit Union, which is an existing Encompass client. This is incredibly strong. But as Warren also commented in his prepared remarks, this is core infrastructure that's going into these clients, and it does take time for them to implement across both MSP as well as on the loan origination side. You've got a six to 18-month window to implement these clients. But then once implemented, we're getting new loans under our platform and on our network. We are also not losing significant customers on the platform. That's why I used the comment that we're spring-loaded. As we see the market environment normalize at some point in time, the loan growth that we've had on our platform positions us very well to achieve the long-term objectives of the growth criteria that we've outlined.

Great. Thanks for all the incremental color.

Thank you. Our next question comes from Dan Fannon from Jefferies. Dan, please go ahead.

Thanks. Good morning. Questions on the fixed income data. I think, Warren, you mentioned improved sales cycles. I was hoping you could expand upon that. And then also, as you think about next year, and pricing, how we might think about - or what has been the typical price that you've raised or the percentage increase and maybe how that might be different in this type of inflationary environment?

Hi, It's Warren. So I'll talk a little bit about the pricing, and I'm going to hand it over to Lynn to talk about some of the color on what we're seeing on the fixed income data analytics side. On the pricing side, it would have been a couple of years now that we've talked about a third or so of the growth we felt like would come from pricing. I'd say that, look, it will move around each year, so it's not necessarily perfectly consistent in that way. But certainly, as you look over the last number of years that we've had the IDC asset, it's been pretty much in that range. As we're thinking towards next year, I think it's fair to be thinking that will continue. It's underpinned by the philosophy you've heard us articulate a number of times on these calls and that we look to capture value when we bring it to our customers. That's really what we're doing when we think about price within the fixed income and data analytics business and really across the platform. So we're going to continue to do that in that business, similar to what we have over the last couple of years.

Yes. And it's Lynn. I'll just chime in with some color on what we're seeing. As we said on previous calls, this segment, in particular, really shows the all-weather nature of ICE. If you look at the execution side of the business, ICE bonds, in particular, had really strong growth over the last quarter, particularly given the muted volatility in the muni markets where we've been able to continue to increase our adoption by the retail and wealth side of the businesses as well as benefit from the increased adoption by institutional users contributing to share gains in all of our different products. Now bringing that through to the fixed income data and analytics side, as we’ve interacted with the front office customers, we've seen continued increasing demand for our front office tools. While small contributors to the overall bottom line, products like CEP and best execution that we've talked about in the past, there continues to be strong demand for those products as fixed income markets continue to electronify. You've seen that manifest itself in a shortening sales cycle, which has been really beneficial for us in terms of the pipeline contribution and conversion rates in the short term. Additionally, as we've continued to see money flow into fixed income ETFs, as evidenced by 30% growth year-on-year at the end of Q3 into our index AUM, we've continued to see that manifest itself in terms of demand for data, indices, and services around our indices. We remain optimistic that we're uniquely positioned to capitalize on the trend of fixed income electronification and the optimization of workflows.

Great. Thank you.

Thank you. Our next question comes from Kyle Voigt from KBW. Kyle, please go ahead.

Hi. Good morning. There have been some headlines over the past couple of days around the NAR lawsuit being decided in favor of the plaintiffs. There's some pressure around what that means down the road for the number of buy-side real estate agents needed to serve that U.S. mortgage market and the percentage of home sales that will even have a buy-side agent involved in a transaction. I believe buy-side agents are the largest referral pipeline of deal flow for loan officers, which are core Encompass clients. If we see less buy-side agents being used in the market, and loan officers lose their largest referral pipeline, do you foresee any material share shifts for who is originating loans within the mortgage ecosystem? And if so, how do you believe that could impact Encompass, if at all?

Hi, Kyle. This is Ben. Those types of trends play into our overall thesis and hypothesis in this space is that there is opportunity to create more efficiency around the transactions. For us, we're neutral in that space. We don't have a business of selling leads to real estate brokers and the like. For us, our core businesses are all in and around the origination transaction itself, making sure that we're matching the client to the ideal product that meets their needs at the lowest cost to improve access to homeownership. We are also identifying based on data and analytics the best product to cross-sell to clients. So when we talk about that whole front-to-back offering, that's really our sweet spot. We don't see a negative impact to us. If anything, all of the data and analytics offerings we have that underpin this overall platform, front to back, both between ICE Mortgage Technology assets and the data assets that have come with the Black Knight business, position us very well going forward.

Thank you.

Thank you. Our next question comes from Alex Blostein from Goldman Sachs. Alex, please go ahead.

Hi. Good morning. Thank you for the question. I was hoping we can maybe build a little bit more specificity around the fixed income data and analytics business. If we look at the revenue trends that have obviously been sort of challenged here, we know the reasons why around the sales cycle and pricing pressure on fixed income assets. But if you look at the annual subscription value, it's been kind of flat for the last couple of quarters. So maybe just help contextualize what does the improved sales pipeline and shortening cycles mean for revenue growth over the near term, maybe early thoughts into '24?

Yes, Alex. This is Lynn. Thanks so much for the question. If you look at the Fixed Income and Data Services segment as a whole, I talked about some of the all-weather nature that attributed really to the fixed income data and analytics line and the executions line. One area that we've continued to see as a strong contributor to both the bottom line and top line is the other data services business and the acceleration of that business throughout the year. That's really been fueled by a couple of different areas. Number one is our multiyear investment in the modernization of the tech stack associated with our distribution platforms. On the macro side, continued strong demand for our products and services fueled by the broader adoption of automation across the industry. We're seeing the confluence of these items benefit the top line growth and optimism for continued growth in this area for the medium term. We've been very deliberate to be cloud agnostic and invest in our own data centers, in response to customer demand, as increased automation tends to be a data-heavy area fueling demand for data center space. More recently, our connectivity sales in Q3 were the second highest in our history. Now those will take some time to implement before we see the revenue benefits. Our desktop sales last quarter matched our historical high. We continue to be optimistic that the trends will be positive for this area based on our current pipeline and recent sales. On our feeds business, we've benefited from the automation trend as workflows become more automated and customers value our modernization efforts. We've attained a variety of new customers recently and also benefited from historical Tier 1 logos increasing adoption of our services. Lastly, the area that continues to drive growth is the adoption of our large language model within our chat platform. Our chat user growth is up 13% year-to-date, and increased usage of models has driven revenue benefits here and activity in our energy markets, which generated through large language models in our energy markets was up 90% quarter-on-quarter compared to last year and 70% year-to-date. There are a variety of trends that we see as tailwinds for this line specifically to drive compound growth in the medium to long-term.

All right. Thank you.

Thank you. Our next question comes from Brian Bedell from Deutsche Bank. Brian, please go ahead.

Great. Thanks so much. Good morning folks. Maybe just to talk about the synergy - the revenue synergy targets for the Black Knight, the $125 million over five years. You mentioned, Ben, on the Black Knight update call at the end of September, the $300 million opportunity you see now. Could you reconcile the difference between those two numbers? And I realize there's still six to 18-month types of implementation time frames, so they take a while to get into the revenue stream. But it would seem like you're certainly on track to easily beat that $125 million ahead of time. So maybe just talk about your outlook on revenue synergies over the next couple of years?

Hi Brian, it's Warren. So, yes, you throw out a couple of numbers there, all correct, of course. When we think about those revenue synergies, it's important to know that it takes a little bit long for these to implement. The best way to think about it is that you probably won't see immediate, significant benefits early on, but as we move through the next couple of years and towards year five, you're going to start to see those build. Part of that is on integrating the companies and getting going on some of the areas we've talked about, not only on core products, but also on some of the data products that we want to cross-sell across the platform. That takes a bit of time in addition to the implementation timelines we discussed. Certainly, we're off to a very strong start and are encouraged in terms of reaching those targets.

Okay, fair enough. Thank you.

Thank you. Our next question comes from Simon Clinch from Redburn Atlantic. Simon, please go ahead.

Hi everyone. Thanks for taking my call. I was wondering if we could just drill down to your comments about the mortgage market and the performance of the transaction side. I'm just curious to know how you're getting your market information on mortgage originations being down nearly 20%. We’re hearing different figures beyond that. So, I'm curious how you build that number. And then ultimately, how are you thinking about what's going into that fourth quarter guide for the IMT pro forma revenues as well?

Hi Simon. We generally look at the composite, the forecasters as you're aware of the MBA, Sandy and Freddie, while also pulling together some other data around our loan volumes and, of course, MERS registrations. Your question is fair because the forecasters can work with imperfect information. But that's generally what we saw. We did see in the quarter some Encompass closed loans down in the high teens. I think we did well versus the market, and that's encouraging. There is, within those transaction revenues, some elements such as professional services fees, default management revenues from Black Knight, and MERS registrations. These create some noise in the results that we are evaluating. However, we're performing well within the closed loan component, and I think that will continue to drive outcomes into next year.

Thanks. Thanks a lot.

Thank you. Our final question comes from Craig Siegenthaler from Bank of America. Craig, please go ahead.

Thanks. Good morning everyone. After the pricing adjustments in the energy complex earlier this year, we wanted to see if you had an update on the ability to adjust pricing in the future, both outside of the energy complex over the near-term and then longer-term in the energy business. We know this has not been a big focus for ICE in the past, but inflation is higher and a key competitor of yours has been more aggressive with pricing hikes.

Thanks for the question, Craig. It's Warren. That's something we're thinking about. As I said on prior calls, the headline price changes are not something we had traditionally done. We have always injected market maker tiers and incentive programs. But traditionally, we hadn't done it at the headline level. We did do it this year, and I think it's been relatively successful. As we move into our budget season here, we're thinking about potential adjustments as it relates to pricing. It's something that we will pick our spots on. I don't expect us to do it on the same products every year, but we will be thoughtful about that.

Thank you. Our final question comes from Michael Cyprys from Morgan Stanley. Michael, please go ahead.

Good morning. Thanks for taking the question. We've seen banking regulators propose new capital rules for the banks, which could make some of their bespoke off-exchange-driven products a bit more capital intensive. So, just curious if you're taking that into account. Where do you see the biggest opportunity to bring derivatives from OTC to the exchange-traded market, and how you might quantify that? Additionally, given the capital proposals that could make certain products and businesses more capital intensive for the banks, where do you see the biggest opportunities from that?

This is Jeff. Thanks for the question. I think it's a complicated environment because while the Basel rules are being discussed, every country that we do business in seems to be considering implementing them slightly differently. It begs the question of whether the market will coalesce around a single standard. We don't know yet. However, some of the proposals, at their most draconian, could have significant impacts on banks. If you step back and look at our business macro level, ICE believes in standardized, transparent, widely distributed, regulated businesses. Any regulatory or government action that pushes the market towards more transparency and more standardization is good for us. It's been our experience that economic changes, whether downturns or upturns, seem to trigger transitions that regulators take a look at, and we have tended to benefit from these changes historically. This is why we are not anti-regulation and are willing to adapt because the way we do business aligns with what regulators are looking for.

Thank you.

Thank you. Our final question comes from Patrick Moley from Piper Sandler. Patrick, please go ahead.

Good morning. I just had one last one on fixed income. I think last quarter, Lynn had mentioned that as issuance normalizes, you could see AUM reallocation and higher capture indices. I was just hoping to get an update on, from your perspective, what you're seeing there and your expectations going forward? Also, how we should think about the yield profile differences between treasuries and munis and the impact that could have on the business more broadly?

Yes, Lynn. Thanks for the question. In terms of the allocation of assets under management (AUM), we have definitely seen an improvement across a variety of equity indices, although they're relatively small compared to our core fixed income indices where you've seen an uptick in AUM that has moved into them, particularly in areas such as high-yield where we're well-known. Governments have continued to grow in terms of AUM, along with higher capture classes such as investment grade. All this has resulted in our index revenues growing nicely, particularly as compared with last year. Regarding yield profiles, our core products such as munis exhibited muted volatility during the summer months, which was not overly unexpected. However, you've seen volatility in those products start to spike in the fall. Treasuries have also been a significant grower for us in terms of transactions, alongside growth in CDs and our money market products. Our transactions on the platform in Q3 compared with Q3 last year are up 53%. Our achievements stem from the hard work put into expanding our retail and institutional footprints.

Thanks.

Thank you. That is now the end of the Q&A session. So I'll now hand back over to Jeff Sprecher for closing remarks.

Thank you, Lauren, for managing the call, and thank you all for joining us this morning. Let me again thank my colleagues for delivering a record third quarter and definitely want to thank our customers for their continued business and their trust. We'll be updating you again soon as we continue to innovate around our all-weather business model and build solutions for our customers and generate growth on top of growth. So with that, I hope you all have a great day.

This concludes today's call. Thank you for joining. You may now disconnect your lines.