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CME Group Inc (NASDAQ:CME)
Q2 2019 Earnings Call
Jul 31, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the CME Group Second Quarter 2019 Earnings Call. At this time, I would like to turn the conference over to John Peschier. Please go ahead, sir.

John Peschier -- Director, Investor Relations

Thank you and good morning to everyone and thank you for joining us. I'm going to start with the Safe Harbor language. Then I'll turn it over to Terry and John for brief remarks, followed by questions. Other members of our management team will also participate.

Statements made on this call and in 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 statements. More detailed information about factors that may affect our performance can be found in our filings with the SEC, which are on our website. Lastly, on the final page of our earnings release, you will find a reconciliation between GAAP and non-GAAP measures.

With that, I will turn the call over to Terry.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thank you, John, and thank you all for joining us today. My comments today will be brief so we can get right into your questions. We released our executive commentary this morning, which provided extensive details on the second quarter. In Q2, average daily volume grew to 21 million contracts per day, up 14% compared to last year. We had record quarterly average daily volume in agricultural products as well as interest rate agriculture and metals options. Open interest reached an all time high above 150 million contracts on June 13th. We continue to drive significant growth globally. During the second quarter, volume from outside US totaled a record 5.4 million contracts, that included 28% growth from Asia and 22% growth in Europe.

We continue to see success on the innovation front with the launch of our new Micro E-mini contracts, which began on May 6th. During June, we averaged more than 400,000 contracts per day, making this the most successful new product launch in the history of CME. We are also pleased with how the NEX integration process is going so far. We have made great progress combining our sales forces as they begin to jointly engage with clients. We remain laser-focused on this very strategic transaction and look forward to keeping you updated with our progress.

With that, I'm going to turn the call over to John to provide some additional comments and then we'll take your questions.

John W. Pietrowicz -- Chief Financial Officer

Thanks, Terry. We've reached a number of milestones this quarter as we continue the integration process. We've completed the first phase of staffing the combined business. We moved the majority of the legacy NEX businesses to our administrative systems, which will enable the streamlining of internal support functions. We moved the legacy NEX employees to our new facility in London. We consolidated our Hong Kong offices and are on track to consolidate our offices in London and New York by year-end.

We are actively working on data center consolidations, systems consolidations, and the customer migration of BrokerTec, which was announced -- will be in Q4 2020 and EBS in 2021 to Globex. Based on our progress with the integration and our overall strong expense discipline, we are reducing our full year operating expense guidance by $10 million to a range of $1.64 billion to $1.65 billion.

With that short 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.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] We will now take our first question from Richard Repetto from Sandler O'Neill. Please go ahead. Your line is open.

Richard Repetto -- Sandler O'Neill -- Analyst

Yeah. Good morning, Terry. Good morning, John, and team. I guess the first question will be more general, but I'm sure we've all heard about the LSE -- potential LSE and Refinitiv transaction. And I guess, Terry, just trying to get your thoughts. It seems like these players are going after. They don't have the dominant position that the CME has in derivative products, and it looks like they're expanding with data, but I'm just trying to see what your thoughts are, does it have an impact on the CME and how does it affect the exchange industry overall if there was a combination of LSE and Refinitiv?

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Rich. I'll make a few comments, and maybe John, Brian, or anybody else, Sean, they want to join in as well. I think that, listen, these are not new ideas, new products, I mean, they've been out there for a while. They've been out there competing with different participants. We don't compete a lot with them, a little bit on the fringes. So, we're not overly concerned about the announced transaction. I think that when we talk about M&A activity, we always said cross-border transactions are very difficult to accommodate and to get done. I think there's a long way to go on this process. We'll have to wait and see. As I said in my opening comments, we're laser-focused on integrating the NEX business, and that's where our focus is going to remain.

As far as other things that compete with CME, again, Rich, I just don't see it any different than it was prior to the announcement, but my colleagues may see it a little differently. John?

John W. Pietrowicz -- Chief Financial Officer

No, I agree. This really doesn't change the competitive landscape for us. And there is a long time between when this potential transaction gets announced gets done. So, obviously we'll be watching. But I think from our perspective, it doesn't change the competitive landscape.

John Peschier -- Director, Investor Relations

Does that help at all, Rich?

Richard Repetto -- Sandler O'Neill -- Analyst

Yes, it does. Got it. Thank you very much.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thank you, Rich.

Operator

Thank you. We will now move to our next question from Dan Fannon from Jefferies. Please go ahead.

Dan Fannon -- Jefferies -- Analyst

Thanks. Good morning. John, I guess, my question is on kind of expenses and/or also the integration. You talked about all the things you've got done, you reduced expense guidance, but it looks like the revenue -- I'm sorry, the expense synergy number for this year is unchanged. Maybe if you could talk about that more broadly or what's driving the reduction in actual expenses versus the synergies. Then also kind of update us on the kind of potential revenue synergy opportunity with NEX, and you talked about the sales force integration but maybe how that's going or any tangible kind of comments around some successes.

John W. Pietrowicz -- Chief Financial Officer

Yeah, thanks. Thanks, Dan. Yeah, we are very pleased with how the integration is going. We have done a lot combining the businesses in the short time we've owned it. So, very pleased with that. In terms of the synergy number, we've achieved about 60 percent of the $50 million in synergies, most of that occurred right at the end of Q2. So we're continuing to work through it.

To give you an idea, when we acquired NEX, it was not a very integrated business. So, the integration process is complex and we continue to work through it. But we'll update you as we go, but we're very confident in terms of hitting the $50 million, and the entire management team is focused on running the business -- our core business as efficiently as we can and running the integration process as efficiently as we can. To the extent we can accelerate the synergies, we certainly will. And I think we've got a high degree of confidence going into the $50 million and we continue to look at ways to accelerate that.

Bryan, do you want to comment?

Bryan T. Durkin -- President

I would just note that we're reaching out to the client base in the context of sticking to the timelines that we initially announced with the overall migration. Particularly with BrokerTec, we've held client sessions now across the regions. We've received some great feedback in terms of the overall integration plan. We did a major BrokerTec [Indecipherable] internally that allows our systems to interface with each other. That's a good indication of our ability to deliver on the timeline that we've committed to our client base and to all of you. So, the initial feedback, the initial read in terms of the migration onto Globex has been very positively received.

Terrance A. Duffy -- Chairman and Chief Executive Officer

John, anything else to add to that?

John W. Pietrowicz -- Chief Financial Officer

I think just of the line of what Bryan said, right. We're doing an enormous amount of education of the two sales forces to ensure that there's -- the cross-selling is happening. The EBS and BrokerTec sales forces have great contacts that are new in many cases for CME Group. We're educating them on our core products, and we're getting that cross-selling process, ad likewise in the other direction. In addition to that, as Bryan mentioned, we have had customer forums in regards to the migration of BrokerTec to Globex. We had one in New York, Chicago, London, Singapore and Hong Kong, and each of them were extremely well received. Clients are in general very happy with our outreach, very happy with the progress, very happy with the plan.

Bryan T. Durkin -- President

So to just circle back, pardon me, Dan, you had asked about the expense reduction and how much of that was relative to synergies versus the rest of the business. It's actually both that's allowed us to drive our expense guidance downward. If you recall, when we made the initial expense guidance at the beginning of this year, it already had a very low embedded expense growth rate and it was in a very tight range. So it really shows excellent expense management across the entire business that allows us to lower the expense guidance.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Did that help, Dan?

Dan Fannon -- Jefferies -- Analyst

Yes, thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thank you.

John W. Pietrowicz -- Chief Financial Officer

Thanks, Dan.

Operator

We will now move to our next question from Ben Herbert from Citi. Please go ahead.

Ben Herbert -- Citigroup -- Analyst

Hey, good morning. Thanks for taking the question. My question is just on -- good morning -- the NEX Group revenue declined sequentially and it looks like it was maybe optimization and mostly trade portfolio management driven. Just wondering if you could give some underlying detail there around the drivers in that sequential decline. Thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

John?

John W. Pietrowicz -- Chief Financial Officer

Sure. Yeah, we're happy to do that. So, if you take a look at the transaction -- the transaction fee line, the NEX was down about $2 million. It was primarily due to the reset business. So it's the transaction revenue associated with the optimization business, and part of that is reset. Reset has seasonality in its business, and the first quarter is traditionally the highest quarter of the year in terms of revenue for reset. So that's what drove the sequential decline in the transaction revenue line.

The other line, you see additional couple of million dollar decline there. That's primarily driven by the sub-leasing of space at the NEX headquarters building. We've since moved the NEX employees to our new facility in London. So we're no longer subleasing that space. So that's what drove the decline in the revenue, and there was a corresponding decline in expenses associated with that. So that's about $2 million as well. So that accounts for the reduction sequentially in the NEX revenue.

If you look at the other revenue line, there's an additional $2 million sequential decline, and that was what we discussed last quarter, which was related to our inflation adjustment. It's done annually with B3, or formerly BM&FBOVESPA. So if you look at that, the entire sequential decline in the other revenue was down $4 million, $2 million was related to the subleasing revenue and $2 million was related to the annual inflation adjustment that we talked about last quarter.

Ben Herbert -- Citigroup -- Analyst

Great. Thank you

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thank you, Ben.

Operator

Thank you. Our next question is from Jeremy Campbell from Barclays. Please go ahead.

Jeremy Campbell -- Barclays -- Analyst

Given the wild success here of Micro E-minis and the equity complex. I mean, have you given any thought to micro-sizing other asset classes? And if so, any color you can provide around what types of asset classes might fit that bill and the typical length of product development and go-to-market timeline would be helpful.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Yeah, I'll let Sean comment and maybe Derek as well, obviously the two guys that run two business lines. So, Sean, you start.

Sean Tully -- Senior Managing Director, Global Head of Financial

We're very excited obviously about Micro E-mini launch, the greatest launch in CME history. So, as you probably aware, May 6th was the launch date, 461,000 contracts ADV. Over 40,000 Tag 50s, so over 40,000 individual registered traders, more than 130 countries. We had trades from more than 27 million contracts. So we're very excited about it.

In addition to that, more than 90% of the Tag 50s trade less than 10 lots a day, which really means this is an incremental revenue and incremental volume, incremental risk management on our platform. So we're very excited about it. So there is no question, it was a great success and we're very excited about it. There's also no question therefore that we're looking at it very closely in regards to other asset classes. However, I think that equities is the unique asset class, and that the opportunity there are probably unique, one that we worked on for a long time, but we are looking very closely at our other asset classes and with the other opportunities might be. And I would stay tuned, but I don't have any current announcements

Terrance A. Duffy -- Chairman and Chief Executive Officer

Derek, anything on the ag side you want to comment on or energy?

Derek Sammann -- Senior Managing Director, Global Head of Commodities & Options Products

Yeah. I would say, picking up on Sean's point, I think when we were talking to clients about the desire and the need for a product that was more appropriately sized, given the increase in the overall equity market, that's a unique attribute of that equities contract that gets bigger as the market goes up. None of our other asset classes have a contract that scales that way. We actually have a micro-gold contract already. We did see a small lift in volumes up to, I think, 23,000 or 25,000 contracts there. But the unique drivers behind the need for customers to resize a contract for retail participants uniquely exist in equities. We have continued to engage with our retail partners and the intermediary customers. And at this point, we're continuing to make sure that we're focused on our core product and solving client need where there is any inhibitors to access in our market. So at this point, no, but we'll continue to talk to them.

Terrance A. Duffy -- Chairman and Chief Executive Officer

And let me just add one more thing, Jeremy. I think that these guys summed it up quite well, but we're very careful about how we ascribe the valuations to all of our contracts and their sizes and what the needs are for risk management purposes. And we just don't want to start to create new contracts that we think are micro small. So we think there are a subset of people that would be attractive to them. We're driven by commercials. We do have retail participants, but they are professional in nature. We're not trying to attract somebody who has never traded futures before, and it has a day job. So, I think it's a little bit different. When we talk about retail and these micro products versus what others might consider retail. So, I think both Sean and Derek summed it up well. The equity markets makes complete sense because of the valuation. We don't see that in the other asset classes that would make that demand pending [Indecipherable] right now.

Jeremy Campbell -- Barclays -- Analyst

Great, thank you

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Jeremy.

Operator

Thank you. Our next question now comes from Chris Allen from Compass Point. Please go ahead. Your line is open.

Christopher Allen -- Compass Point -- Analyst

Good morning. So, I wanted to ask on market data. We've kind of seen the slide from 4Q and it was about 136 to 130 last quarter, 128 this quarter. You noted a decline in subscriber sequentially. Just wondering if you can give us any color on the magnitude there, and also whether there was any audit fees included in this quarter.

Terrance A. Duffy -- Chairman and Chief Executive Officer

So, first of all, when you referenced the first higher quarter, there was a higher audit fees associated with that quarter. And I believe that we spoke to that during that call. Audits is going to continue to be a very sporadic and chunky indicator for us as we've said from the get-go. We had lower audits this year -- this quarter. I have to say, but we have a number in the pipeline, and I can't speak further to that until those matters are resolved.

With regards to the subscriber count, as you know, there is a strong focus on expense management across Wall Street, and we've seen a reduction in the number of our larger banks in some of our hedge funds. So we're monitoring that area very closely. I also though think you have to keep in mind the great growth that we've seen from a transactional perspective on the international side where we utilize our market data very heavily, particularly for our growth throughout Asia as well as our retail base.

So, in summary, we're very pleased with the performance of some of the other portions of the market data business, particularly in our derived space, which we're continuing to see growth. And as I stated we'll monitor the subscriber base very closely.

Christopher Allen -- Compass Point -- Analyst

Thanks, guys.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Chris.

Operator

Our next question is from Christian Bolu from Autonomous Research. Please go ahead. The line is now open.

Christian Bolu -- Autonomous Research -- Analyst

Good morning, all. Maybe this one is for Sean. So, Sean, despite I guess the Fed looking to cut rates, open interest growth in your kind of rates business has been pretty strong. So maybe some color on what you think is driving growth there. Also we have seen pretty high levels of record amounts of treasury inventory being held by the dealers. I'm curious if that has been an incremental driver of demand for your products as well.

Sean Tully -- Senior Managing Director, Global Head of Financial

Sure. Thank you for the question. The interest rates business has done very well this year, and our innovation has continued to help to drive that growth. After10 years, for example, now doing well over 200,000 contracts a day, recently had a record all-time volume day and a record all-time open interest with significantly faster growth in the overall complex.

In terms of the environment, the Federal Reserve, as I'm sure you're aware, has gone from -- or the market expectations, I should say, of the Federal Reserve have gone from expecting tightening to expecting easing. So, as you know, there is a Federal Reserve meeting happening today. And according to our FedWatch Tool, which you can find on our website, there is a 78% chance of 25 basis point tightening -- sorry, easing today.

And then, in addition to that, later in December or by the end of the year, it's expected that you could have a total of 75 basis points for the easing by the Federal Reserve. That change in market expectation from expected tightening to expected easing creates a lot of volatility. It creates a lot of risk, and it creates a lot of need for risk management and CME Group is where people go to manage the US interest rate risk.

So, our Fed Funds Futures have seen enormous growth on the back of the changes in expectations about Fed policy and so have our have our have our treasury futures. Treasury futures continue to grow. One of the things that we talked about is continuously making our futures complex the foremost -- excuse me, attractive place to manage risk. The change we made very early this year, for example, was in our two-year note futures. In our two-year note futures, we changed the minimum price increment. So we reduced by half the minimum price increment in those two-year futures. We reduced therefore the cost to trade or the cost to cross that bet offer spread by 50%. That was an extremely compelling move by market participants decreasing their costs as they had this increasing need to manage risk relative to the change in rate environment I just talked about.

In terms of that the -- our two-year notes went from about 12.7% of our entire treasury futures complex to almost 16% of our entire treasury futures complex . So, the huge increase in the two-year note relative to the rest of the complex relative to improving our products on a continuous basis and making them more attractive. On that front, we've been very excited over the last several years. We spoke to you many times over the last several years about our increasing penetration in our treasury futures. So if you go back several years ago, our treasury futures are running about 55% of the average daily volume of the treasury bond market, according to shipments [Phonetic] data. We're currently at an all-time record of 117%, so it continues to increase as we continue to launch new products like the Ultra 10-Year future, which have been extremely successful, as well as adjust the existing products like our two-year notes.

Last thing I'll mention on that front, we've excited about our silver futures launch. We're currently doing this month about 38,000 contracts a day, 220,000 contracts open interest, over $770 billion from a notional standpoint, 184 participants in that marketplace. So we're very excited about our innovation. We're very excited about the market uptake and continuously improving our products. And yes, the environment has been positive with the expected rate changes by the Federal Reserve.

Christian Bolu -- Autonomous Research -- Analyst

Okay. Thank you very much.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Christian.

Sean Tully -- Senior Managing Director, Global Head of Financial

Thanks, Christian.

Operator

Thank you. We will move to our next question from Kyle Voigt from KBW. Please go ahead.

Kyle Voigt -- KBW -- Analyst

Hi, good morning. Just going to try one follow-up on the Refinitiv's transaction. Could you comment whether this was a transaction that you looked at, and if so, any reasoning regarding why you passed on the deal?

Terrance A. Duffy -- Chairman and Chief Executive Officer

Go ahead, John.

John W. Pietrowicz -- Chief Financial Officer

Yes. Hi, Kyle. We don't comment on M&A transactions. I think, as you probably are aware, we as a company we obviously are a leader in the space and we monitor the space, but we are not going to comment on any specific transaction. I think, Terry hit it on the head in his prepared remarks. We are very focused like a laser on the NEX integration and we're very excited about the transaction that we consummated and closed in November.

Kyle Voigt -- KBW -- Analyst

Thank you.

John W. Pietrowicz -- Chief Financial Officer

All right. Thanks, Kyle.

Operator

Our next question comes from Alex Kramm from UBS. Please go ahead.

Alex Kramm -- UBS -- Analyst

Hey. Good morning, everyone. Just wanted to quickly come back to the micro success in particular around pricing. I don't know if you commented on this call, but obviously a month ago you disclosed kind of the RPC that business is running at. It's obviously pretty low as we expected, but I think on a risk-adjusted basis, it's still lower than your core products. So, I think the expectations was its retail, it's small, it's going to be a premium product on the risk-adjusted basis. So maybe talk about the customer mix kind of like how you are supporting that business with market maker incentives and how quickly maybe that RPC can ramp as that product gains more traction?

John W. Pietrowicz -- Chief Financial Officer

Thank you for that. Yes. So it might be helpful just to give you the rack sheet or the pricing sheet that's also available on our website. So, our E-mini futures for members, we charge $0.35, for Micro we charge $0.04. The micro contract is 10 times the size. So on a risk-adjusted basis, the micro was $0.40 relative to $0.35 that we charge on the E-minis. Likewise, for non-members, if you again look at our website, you can see that our Micro E-minis, we charge $0.20 a contract or the equivalent of $2 in terms of an E-mini, whereas the E-minis themselves are charged at $1.18. So you see that they are certainly charged at a significant premium.

Nonetheless, with the launch that we had and wanting to make sure that our clients have the best possible customer experience on day one, we do spend money on incentives for the first several months of a new contract. As you can imagine, we did incent market makers for the first several months, and we felt that that was a positive and necessary investment. And I think it's shown that it's been a very good investment. However, clearly once the marketplace is up and running and it has its own momentum and critical mass, those market making incentive programs will no longer be necessary. So you should see an improvement in the RPC in that product as we move forward.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Does that help, Alex?

Alex Kramm -- UBS -- Analyst

Yeah, I mean, I guess if there is any expectations on timing, I mean, you never know when a marketplace is self-sustainable. But I mean, is this a few more quarters or do you think it can ramp pretty quickly, I guess, is what I was really getting at?

John W. Pietrowicz -- Chief Financial Officer

Yeah. I think I said months, right, so several months. So, I would -- it's not an extended marketing program likely.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Yeah. And I think, we always reserve the rights to decide how the fundamentals of any markets are going and how we're going to consider programs which we do on a daily basis around here, whether continuing adding to them, subtracting to them, so that's just part of what we do on an everyday basis, Alex.

Alex Kramm -- UBS -- Analyst

Very good. Thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Alex.

Operator

Thank you. We'll move to our next question from Chris Harris from Wells Fargo. Please go ahead.

Chris Harris -- Wells Fargo Securities -- Analyst

Hey, guys. If the Fed cuts interest rates 2 times to 3 times before the end of the year, how should we be thinking about the impact on your non-operating income?

John W. Pietrowicz -- Chief Financial Officer

Thanks. , Chris. We haven't announced how we are going to handle the change in pricing relative to a Fed rate cut in terms of the capture that we have on the average balances. But as you've seen recently, we've passed through any of the changes to the customers. So, we haven't been increasing our share of the Fed of the rates. So, a couple of points. Number one, we have seen the Fed average balances that we have here at the cash balances that we have here at the, at the exchange come down. So, in the first quarter, we had about $28 billion in terms of average cash balances held at the clearinghouses, down to about $25.6 billion. So we did see a reduction in terms of the average cash balances.

So, one of the things that when we look at it, we think about how do we incent the average cash balances to increase here. Also I wanted to point out that beginning in the month of July, we did have a price change in terms of the non-cash collateral. We increased the charge from 1 basis points to 5 basis points, and that began at the start of July. Just to give you an update in terms of the non-cash collateral that's held at the clearinghouse, its attributable to that, right now it's about $90 billion in terms of non-cash collateral that will be impacted by the 4 basis point increase.

Chris Harris -- Wells Fargo Securities -- Analyst

Okay. Thanks for the update.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Great, thank you.

Operator

And we'll take our next question from Ken Hill from Rosenblatt Securities. Please go ahead.

Kenneth Hill -- Rosenblatt Securities -- Analyst

Great, thanks. Good morning. I wanted to go back to market data for a second. I think, during last quarter you announced the new global head of market data services. I was just hoping you could kind of elaborate a little bit more on that role, what kind of products might be coming in kind of any potential timing on that kind of improvement for that business?

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Ken. Bryan?

Bryan T. Durkin -- President

Yeah. We installed Trey Berre, who oversees our market data and tech services, and he hit the ground running in the context of the engagement that he has been having with the broader client base. The focus has been really on continuing to build and grow on our subscriber business, but in addition to that very much cultivating, developing our other services, particularly data mine and derive data services.

Trey actually built up the derived data business, which has performed quite well for us over the last couple of years. We're very enthusiastic about his engagement in his reach globally as we work to continue to grow this business. He has very well integrated with our Global Head of Sales as well as our Chief Commercial Officer and taking a holistic view at the various data services, the development of new products and the integration of the NEX market data business into our overall data offering. Is that OK?

Kenneth Hill -- Rosenblatt Securities -- Analyst

Thanks for the detail there.

Bryan T. Durkin -- President

Thank you.

Operator

Thank you. The next question now comes from Deutsche Bank, and its Brian Bedell. Please go ahead. Your line is open.

Brian Bedell -- Deutsche Bank -- Analyst

Great, thanks very much. If you guys can talk about the FX futures and options business a little bit broadly both from the perspective of any revised expectations on the uncleared margin rule? And the volumes have been kind of light recently. So maybe just if you can talk about whether there simply hasn't been any traction yet even though there is good demonstration from, say, for example, the Greenwich Associates report about the much improved efficiency of using FX versus other -- the futures rather versus other methods. But should we be expecting more of a step function in improvement in volumes after the uncleared margin rule come through or do you think that will take a lot more time?

Terrance A. Duffy -- Chairman and Chief Executive Officer

Sean?

Sean Tully -- Senior Managing Director, Global Head of Financial

Yeah, thank you. Brian. A very good question. So, no question that the foreign exchange environment has been a very challenging one. If you look at volatility, for example, realized volatility in the euro versus US dollar in the second quarter, that's at the second percentile going back to 2007. So it is near record low volatility going back more than a decade. Likewise, if you look at dollar-yen, you're at the sixth percentile in the second quarter going back to 2007. In fact with the G7 realized volatility index that goes back to 1992, and you're near the lowest volatility for G7 foreign exchange, according to Fed index going back to 1992.

So, with that extremely low volatility relative to the history of that marketplace, that obviously makes it much more challenging and lesser needs for risk management. Nonetheless, we've continued to improve our products on the foreign exchange side continuously as we do with all of our products. So, some of the things I might mention, we changed the strikes for our FX options on April 1st, making them much more appropriate and to adjusting them across the entire expiry [Phonetic] spectrum and so making them much more attractive.

In addition to that, back earlier this year, we changed the minimum price increment in our quarterly roll in our dollar sterling. I mentioned earlier, the great success that we had in reducing the minimum price increment in our two-year notes. We've also had very good success in reducing our minimum price increment in our dollar sterling contract in terms of the quarterly roll. And so that was a significant success where we saw a very large increase during the roll period in volume. We also saw a very large increase in non-member activity.

In addition to that then, we've just recently announced that we're changing the minimum price increments in the quarterly roles in our dollar-yen as well as our dollar-euro contracts, that's happening in early August. And that should make those products much more attractive lowering the total cost. We're constantly focused on making that look the most attractive possible from a total cost perspective.

And as you mentioned on June 15th, Greenwich published a study showing that CME's FX options are as much as 70% lower cost than OTC FX options and will be especially attractive during the -- sorry, under the uncleared margin rules. So again, very attractive products, continuously improving them and getting external studies done that shows that they're are much more attractive. In fact, while the volumes have been hampered due, as I said, to the historically low volatility. Our FX futures complex reached an all-time large open interest holder record on May 28th of this year in that environment. So we're very excited about that and the continuous improvement.

In terms of the uncleared margin rules, the uncleared margin rules, essentially the regulators have made a small adjustment to them. There is originally expected to be four tranches of requirements, we are the last tranche in September of 2021 or September of 2020 -- excuse me -- was expected to be the last set of participants. The threshold there was moved to $50 billion outstanding as opposed to, I think, it was $7 billion outstanding. So, now, they're giving essentially more time for that last set of participants to get ready for the uncleared margin rules. So there is just one additional year. So we expect the same impact that we would have had. It is giving participants a greater amount of time to adopt to the uncleared margin rules.

In terms of the uncleared margin rules themselves, CME Group has the most holistic solution available for every aspect of the uncleared margin rules. I think I may have mentioned, we did a very successful webinar on our uncleared margin rules just a couple of months ago that showed our value proposition across all of our optimization businesses that we acquired through the NEX transaction as well as our OTC clearing in our listed products. So we are very excited about the holistic solution that we can present to our clients for the uncleared margin rules. We do expect that to be a positive tailwind for our business. We expect that tailwind to be gradual and we expect it to happen over a longer period of time.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Okay,

Brian Bedell -- Deutsche Bank -- Analyst

Thank you, Sean. So over the next year or so, I guess given the extension, is that fair rather than more of a step function in say in the fourth quarter?

Sean Tully -- Senior Managing Director, Global Head of Financial

Yeah. Again, the uncleared margin rules, as I said, the last set of participants are in September of 2021. So you've got from now until then. In order for participants to adhere, let me just -- let me say one other thing. So, what we saw with the Dodd-Frank rules, OK, was a two stage process. When we saw the Dodd-Frank and you saw the huge increase we had in interest rate futures usage during the Dodd-Frank rules. And what we did was we offer to participants OTC clearing and we've built now actually -- sorry, as long as I brought it up, we had an all-time record in June of 178 billion a day in our OTC clearing business, so we are very excited about that. But what we saw with Dodd-Frank was, we first offer participants the opportunity to do OTC clearing so that they could adhere to the rules. We expect that participants their first port of call will be to adhere to the rules. The second port of call will be to optimize once they adhere to the rules. So you will see some optimization right at some move into our clear products and our futures products between now and when it's implemented, but we also expect that tailwind to continue afterwards.

Brian Bedell -- Deutsche Bank -- Analyst

That's very helpful. Thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. We now take our next question from Michael Carrier from Bank of America. Please go ahead. Your line is open.

Sameer Murukutla -- Bank of America Merrill Lynch -- Analyst

Hey, good morning. This is actually Sameer Murukutla on for Micheal. Thanks for taking the question. Terry, John, just a quick one on capital management. Sorry. Given the lower rate outlook, how does this effect have any effect on your capital management philosophy? Are you willing to take on higher levels of debt and what this could mean incrementally, I guess, in terms of your aggressiveness with the variable dividend this year?

Terrance A. Duffy -- Chairman and Chief Executive Officer

Sameer, thanks. In terms of our capital management, I think we've been very clear in terms of how we're approaching it. So, why don't I give you kind of a highlight in terms of what our capital structure looks like right now. So, CME has $1 billion in cash on hand, so that's $300 million above our $700 million minimum. We have about $4 billion in debt with about $635 million in commercial paper, and our debt to EBITDA is around 1.28 times. We paid down about $300 million in debt since the first of the year and we are on track to achieve our 1 times debt to EBITDA by the end of 2020. So, we are very focused on meeting our commitments that we have made to our investors and to the rating agencies to be at the 1 times debt to EBITDA by 2020 and we're on that path. In terms of the impacts to the variable dividend, we don't give out guidance in terms of what our annual variable dividend is, but I think you can take a look at how we approached it last year. And we're very balanced in terms of how we approached at the annual variable dividend, the pay down of the debt and the investment in the business.

Sameer Murukutla -- Bank of America Merrill Lynch -- Analyst

Perfect, thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks, Sameer.

Operator

We'll now take a follow-on -- actually a question from Alex Blostein from Goldman Sachs. Please go ahead. Your line is open.

Eric -- Goldman Sachs -- Analyst

Hi, this is Eric filling in for Alex. Energy open interest have been tracking down versus the end of 2018. Can you help us understand why it is that and any color on the client participation outside the US and specifically how sticky are these volumes from the client base outside of US?

Terrance A. Duffy -- Chairman and Chief Executive Officer

Derek?

Derek Sammann -- Senior Managing Director, Global Head of Commodities & Options Products

Yeah, this is Derek. Thanks for the question. A couple of things. We talked last quarter about us stepping away from our power business. Our power contracts are extremely small sized contracts and they are a large portion or a large absolute number of open interest contract. So we tried to do in our investor materials separate those products out and show you the open interest in our core products. So, if you just look at the headline overall energy complex, we try to provide you that the numbers for OI specifically just on the power side. So we're talking about contracts of tiny, tiny value in sizes, a business that we've run at probably flat for the last couple of years. We're down probably 10-ish million contracts but these are tiny, tiny little contracts not core to our business.

As it relates to the globalization of the business right now, we're actually seeing in our energy, if you look at what the energy trading range has been, let's talk specifically, crude oil was effectively in a $5 trading range for the last month. it's been in the $10 trading range for the last six months. What we're excited about is being that in and of sideways and kind of flat markets low volume environment, we're actually seeing that we are continuing to outperform the broader crude market. We are doing 1.25 million contracts a day in WTI, you've seen about 900,000 contracts that are taking place in the Brent contract. So we're seeing both the global narrative of expanding participation globally of WTI as the global marker expand. The marker of that in the materials we gave you, you can see that 27% of our energy business now takes place with customers outside the US.

That's it from just 15% back in 2014. That's up from just I think 24% even just a year ago. So we're continuing to see outsized performance of primarily commercial participants for the comment Terry made earlier in the call, which is our focus point for non-US customers for a commercial participation. So I think the globalization of the crude oil market and now the be Nat gas market are indicative of the client base, we are building focusing on our sales force and we're seeing that continued growth in participation from outside the US has been the primary drivers for growth in the overall complex. So we're happy with where we are continuing to be in a challenging macro environment, invest in the business on board and global customers, and we're seeing that flow through in the metrics in this participation from outside the US.

Eric -- Goldman Sachs -- Analyst

Thanks, Derek.

Derek Sammann -- Senior Managing Director, Global Head of Commodities & Options Products

Thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thanks.

Operator

We have a follow-on question from Richard Repetto from Sandler O'Neill next. Thank you.

Richard Repetto -- Sandler O'Neill -- Analyst

Yeah. Hi, Terry and John and team. I guess my question is on the international or the volume that's coming from outside the US, it's just to me is pretty amazing that it's as resilient as it is and it's across product lines as well the percentage. It doesn't -- it seems like they're trading in line with the US but more all the time. So, I guess, one question is, could you just give us a little bit more color behind what's driving that and is there anything from a regulatory standpoint, I know open access is starting to come back into the conversation in Europe in 2020, anything that you have on your foresight -- in your vision going forward outside the US?

John W. Pietrowicz -- Chief Financial Officer

Thank you, Rich, for that question. You've heard me comment in past calls what's been going on with our international focus over the last five years. In the last 4.5 years, we've seen tremendous growth, 81% growth in average daily volume internationally. Breaking that down, EMEA is representing about 72% growth, APAC 110%, and LATAM, which you've seen in the last couple of years, about 150%. Now what's driven that? We've strategically placed our people in these various regions. As we've noted, we've invested in the sales force. You've heard me speak about country planning, which has been very, very important for us, covering over 70% of our top 10 countries throughout the world has allowed us to drive and better focus our resources and attention across these asset classes. Deeply appreciate your recognition about the diversity of the asset classes and how those are performing very well across our various regions.

We've been saying that double-digit growth continuing to occur across the various asset classes that we represent. When we talk about EMEA, for example, we've seen 22% growth there, largely driven by the financials, equities and agricultural, but also what we haven't mentioned is the tremendous growth in options that are occurring international, double-digit growth across those asset classes.

As we look at Asia in particular, traditionally we would focus on China and Hong Kong and, more recently, South Korea. Through these plans that we've instituted, we've gotten much broader coverage. We've made the investments as we alluded to throughout Hong Kong and Australia. And again, we're seeing wonderful double-digit growth in those quadrants. We're focusing more on Southeast Asia in terms of the development of those plans, and we have, although it's a lower base, seen some very nice double-digit growth across the Southeast Asia quadrant.

When we look at Latin America, again, we're seeing some nice growth coming out of the Brazilian hedge fund community in particular. I think them having a very stable and modest interest rates in Brazil has helped us quite a bit in terms of our ability to further penetrate and grow those markets. With respect to EMEA, we're really pleased with the country planning impact that has allowed us to see, again, growth across Israel, the Netherlands, Germany and Scandinavia. And so, it's their targeted focus, it's the diversity of the asset classes. It's our belief that we have as deeply penetrated the opportunities that exist across the globe. And we're going to continue that focus.

Terrance A. Duffy -- Chairman and Chief Executive Officer

And Rich, let me just touch a little bit and John can jump in as well. I think what I have not heard much about the open access language coming out of Europe, but I wouldn't be surprised if it's being bantered around. What I'm hearing more of is less about that in more about efficiencies for the client. And that's really what we're hearing, not only coming out of Europe order in that globally, because that is the theme is more efficiencies. And when you look at just what we've been able to accomplish on that front. Taking the margin efficiencies with our interest rate portfolio going from, Sean, you can give me the numbers is about 2 billion to 5 billion roughly over the last year or so.

So I think those are the efficiencies that clients are really looking for. And then when you look at some of the other regulatory rhetoric that you may or may not be hearing, I think you had an unprecedented comments coming out of the United States Congress when you had the chairman of the Oversight Committee for our industry hold a hearing and then subsequently publicly say to the Europeans that you will not regulate US Financial Services. And it was very, very powerful statement coming out of that hearing. I was fortunate to testify that. And I don't -- in all the years, I've been doing as I've seen something like that. So, I do believe you're hearing rhetoric coming out of Europe and I think most of it's related toward Brexit and what's going to happen there. But in the meantime, they are trying to make it a global rhetoric. But I think our government has made perfectly clear that we are redeemed and equivalents society with our rule base, the way we are operating today, and this is a global industry and that will not be disrupted. So I'm very confident net aspect of it. And again, on the open access provision, I'm not hearing much of that any more on the efficiencies on the earning different.

John, do you have any different?

John W. Pietrowicz -- Chief Financial Officer

Yeah. Exactly that's right. As I said, we were delivering to participants approximately $2 billion, $2.5 billion portfolio margin efficiencies last year in the second quarter. We peaked at a bit over $5 billion efficiencies or portfolio margining efficiencies as we see a large number of participants continue to uptake that service. As I mentioned earlier, in regards to the uncleared margin rules and in regards to Dodd-Frank sometimes takes participants time to adopt to the efficiencies that we offer the marketplace and we see continued increased adoption of portfolio margining, On that front. I think that is related to our all-time record US dollar swaps OTC clearing volume in June of $129 billion. Our all-time record overall OTC swaps clearing $178 billion in June. Second quarter was up 46% at over $150 billion.

And finally, our invoice spreads -- so invoice spreads specifically take advantage of that portfolio margining. This is US Treasury future traded as a spread to an interest rate swap, and when they're both clear to me, you get up to 85% margin savings. And in terms of that, we're doing about 120,000 contracts a day this year relative to 89,000 contracts a day last year. So, a very big increase in uptake of these efficiencies that we're delivering to the marketplace.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Does that help, Rich?

Richard Repetto -- Sandler O'Neill -- Analyst

Very much. Thank you.

John W. Pietrowicz -- Chief Financial Officer

Thank you .

Operator

We have a follow-on question from Kyle Voigt from KBW next. Please go ahead.

Kyle Voigt -- KBW -- Analyst

Hi. Thanks for taking my follow-up question. So if we look at your total open interest, I think a large majority of increase year-on-year is due to the extremely strong growth we're seeing in the euro-dollar options franchise. But if we look on the euro-dollar futures side, we're seeing a lot down year-on-year. Just wondering if you can comment on of what's driving such strong uptake in that euro-dollar options business? And then, I guess, any explanation for why we aren't seeing that growth in the euro-dollar futures side of the complex as of yet?

Terrance A. Duffy -- Chairman and Chief Executive Officer

John?

John W. Pietrowicz -- Chief Financial Officer

Yes, So we've seen -- we're very excited about the huge growth that we've had in the euro-dollar options. And as we said earlier, the interest rate environment changed dramatically from last year to this year, where you went from an expectations of Federal Reserve tightening to the expectations of Federal Reserve easing with the Federal Reserve meeting happening today. As you can see, the expectations live on our FedWatch Tool. So, in that environment, yeah, we've seen people reduce their open interest in the futures contracts relative to the reduced expectations of tightening.

But the huge increase in options is relative to the increase in risk in the environment. So we're very excited about it. I would expect the interest rate complex to continue to grow, right. And it continues to be the place where the marketplace goes to manage risk. We're very excited. We had an all-time record open interest in interest rates, as you're mentioning in June of over 110 million contracts. And I think it's based on the continuous improvement that we make in those products relative to alternatives in order to manage risk.

Terrance A. Duffy -- Chairman and Chief Executive Officer

I guess, just from my past, I will tell you that when you're -- from a trading perspective, people will look when the fundamentals of our any marketplace especially something that has an impact on so many different products such as interest rates, when you have a policy of tightening that has been broadcast for several years and then all of a sudden flipped into an easing process,people will migrate to the options on the futures to manage that risk only because they want to mitigate some of the exposures associated with it. So it's just a way. I think it's more a little bit of a fundamental confusion in the overall marketplace because of policy has appeared to be changing. Is that fair, Sean?

Sean Tully -- Senior Managing Director, Global Head of Financial

Yes.

Kyle Voigt -- KBW -- Analyst

It's helpful. Thank you.

Terrance A. Duffy -- Chairman and Chief Executive Officer

And that's not a bad thing from our perspective either. I just want to make sure we're clear on that. We're very bullish on our options franchises as throughout all of our asset classes. And I think that's one of the reasons why you're seeing our business grow to where it is. A lot more people are managing their risk in our options across the asset classes, and that's a healthy sign for this industry, not a negative one.

Kyle Voigt -- KBW -- Analyst

Thank you.

John W. Pietrowicz -- Chief Financial Officer

Thanks.

Operator

And we'll take our last follow-on question from Alex Kramm from UBS. Please go ahead. Your line is open.

Alex Kramm -- UBS -- Analyst

Yeah. Hey, hello again. Just as we were talking about regulation early, I know you were more focused on Europe. But maybe Terry, this is your domain, maybe talking a little bit more about the US obviously new CFTC Chairman. I'm sure you met plenty of times. We haven't heard publicly a lot from him, other than that OpEd the other day. There wasn't much detail, but one of the things that I thought was interesting was the whole risk it created in CCP since the financial crisis. So, any thought in terms of agenda, any change in direction, I know it's early days, but what are you focused on I guess with the change of the leadership there?

Terrance A. Duffy -- Chairman and Chief Executive Officer

So I have met with the Chairman since he has assumed the role of Chairman just recently. And I had the opportunity to work with him when he was overhead treasury as well. I think he is a terrific young man and I think he's going to be very good for the industry. As I told them, this is one of the most dynamic industries in the United States and financial services, and he is the guy that is sitting in the right place at the right time. I think his focus right now is going to be to make certain what I've said earlier is to make sure that the United States is not disenfranchised by anybody around the world from a regulatory arbitrage or an overreach of regulatory on the US participants or what the CFTC should be doing.

Secondly, on his OpEd that he penned, I think I do believe they put out a comment afterwards. As it relates to CCP risk, I don't think the Chairman was trying to draw attention to CCP risk. He was just making some points in his OpEd and he had a clarification statement sent up with the commission right thereafter. So all in all, I'm very pleased with the new Chairman. I think that he will be good for the industry globally and I think that's a healthy thing as I said earlier, this is a global business . And there's a lot of people counting on that ecosystem to continue to mitigate and manage the risk. And disruptions are not good and clarity is even worse -- or no clarity is even worse. So I think the Chairman understands that and he is working with its counterparts to make sure that we can have a well functioning futures and options world globally. So I'm very excited by Chairman Tarbert and his leadership

Alex Kramm -- UBS -- Analyst

All right, very good. Thank you, again.

Terrance A. Duffy -- Chairman and Chief Executive Officer

Thank you.

John W. Pietrowicz -- Chief Financial Officer

Thanks, Alex.

Operator

Ladies and gentlemen, that now concludes our question-and-answer session. At this time, I'd like to turn the conference back to Mr. Peschier for any additional or closing remarks.

John Peschier -- Director, Investor Relations

I'd just like to thank all of you for participating and have a great day. Thank you

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

John Peschier -- Director, Investor Relations

Terrance A. Duffy -- Chairman and Chief Executive Officer

John W. Pietrowicz -- Chief Financial Officer

Bryan T. Durkin -- President

Sean Tully -- Senior Managing Director, Global Head of Financial

Derek Sammann -- Senior Managing Director, Global Head of Commodities & Options Products

Richard Repetto -- Sandler O'Neill -- Analyst

Dan Fannon -- Jefferies -- Analyst

Ben Herbert -- Citigroup -- Analyst

Jeremy Campbell -- Barclays -- Analyst

Christopher Allen -- Compass Point -- Analyst

Christian Bolu -- Autonomous Research -- Analyst

Kyle Voigt -- KBW -- Analyst

Alex Kramm -- UBS -- Analyst

Chris Harris -- Wells Fargo Securities -- Analyst

Kenneth Hill -- Rosenblatt Securities -- Analyst

Brian Bedell -- Deutsche Bank -- Analyst

Sameer Murukutla -- Bank of America Merrill Lynch -- Analyst

Eric -- Goldman Sachs -- Analyst

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