CME Group Inc  (NASDAQ: CME) Q1 2020 Earnings Call Transcript

CME Group Inc  (CME) Q1 2020 earnings call dated Apr. 29, 2020

Corporate Participants:

John Peschier — Managing Director, Investor Relations

Terrence A. Duffy — Chairman & Chief Executive Officer

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

John W. Pietrowicz — Chief Financial Officer

Kendal Vroman — Senior Managing Director, International & Optimization Services

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

Julie Winkler — Chief Commercial Officer

Analysts:

Daniel Fannon — Jefferies — Analyst

Ben Herbert — Citi — Analyst

Alex Kramm — UBS — Analyst

Brian Bedell — Deutsche Bank — Analyst

Christopher Allen — Compass Point Research — Analyst

Michael Carrier — Bank of America Merrill Lynch — Analyst

Rich Repetto — Piper Sandler — Analyst

Jeremy Campbell — Barclays — Analyst

Christian Bolu — Autonomous Research — Analyst

Owen Lau — Oppenheimer — Analyst

Alex Blostein — Goldman Sachs — Analyst

Christopher Harris — Wells Fargo Securities — Analyst

Kyle Voigt — KBW — Analyst

Kenneth Hill — Rosenblatt Securities — Analyst

Kenneth Worthington — JPMorgan — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the CME Group First Quarter 2020 Earnings Call. At this time, I would like to turn the conference over to our first presenter, Mr. John Peschier. Please go ahead, sir.

John Peschier — Managing Director, Investor Relations

Good morning and thank you all for joining us today. I’m going to start with the Safe Harbor language. Then I will turn it over to Terry, Derek and John for brief remarks, followed by your questions. Other members of our management team will also participate in the Q&A.

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, the final page of our earnings release, you will find a reconciliation between GAAP and non-GAAP measures. With that, I would like to turn the call over to Terry.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thank you, John, and thank you all for joining us this morning. We hope you and your families are healthy and staying safe. Today, we have Julie Winkler joining us along with Ken Vroman. And Julie heads up our global sales and research areas and she has taken over our data business. Ken is now running our optimization area and our international business. Julie and Ken are taking on several of Bryan Durkin’s responsibilities as he transitions to his role as an advisor. Also, I am going to have Derek Sammann to make a few comments regarding the energy market at the end of my remarks. These are obviously extraordinarily difficult and challenging times for all of us. The COVID-19 pandemic has taken a devastating toll and human life and created unprecedented uncertainty around the world. It has also changed our daily lives in the ways that seemed unimaginable only a few weeks ago. The heroes in this crisis are clear, our sincere thanks go out to the entire medical community fighting this disease on the front-lines and aggressively working towards a vaccine. We also want to thank the many first responders who continue to risk their lives to keep us safe.

At CME Group, we remain focused on the health and safety of our entire community. We took early actions and we’re the first in the industry to close our trading floor to protect our employees and market participants who access that facility on a daily basis. We also implemented work from home mandates and travel restrictions to protect employees across our global offices. We are proud of the resilience of our team and how they have risen to this new challenge. Our employees continue to work incredibly hard to help our customers and partners navigate through this challenge and its increased uncertainty and volatility.

With that in mind, I’d like to highlight a number of metrics that we think reflect our performance this quarter and are important to consider as we look forward. Our systems and processes performed extremely well with peak order traffic during the quarter and we saw very consistent response times. Our highest volume day on record took place in the first quarter when we traded 58 million contracts on February 28. Aside from the peaks, Q1 volumes set records across many different product areas as our global clients managed risk.

Average daily volume for the quarter was 27 million, up 45% from 2019. In addition, our volume in the first quarter from clients outside the United States was particularly strong, averaging 7.3 million contracts per day, or up 56%. As a result clients continued to be able to manage their risk across all products in all time zones. We also maintained our industry-leading clearing function to provide safeguards for every trade. In response to increased volatility, we raised margins on many products across most asset classes. These prudent risk management policies were reviewed with both our Clearing House, risk committees and our regulators. We’re in daily contact with our regulators to ensure the health of our markets during these unprecedented peaks of volatility.

Let me turn to the trading floor for a moment, our options volumes in key products, especially interest rates and equities that have traditionally relied on the floor have held up well since we closed it. We successfully assisted many clients who trade on the floor to the screen, leveraging our own front-end platform in order to quickly register in onboard a significant number of new users over a short period. And in the five weeks since then, interest rate options as a percentage of interest rate futures have remained at roughly the same levels. So far, these volumes are actually ahead of where they were in the last few days that the pits were open. As many of you know, we have made a significant effort to increase our global sales presence. We began to make an investment several years ago and to deepen our client coverage around the globe and that has served us extremely well with our regionally focused sales model.

Today, more than half our sales staff is based outside the United States, we have sales professionals in 19 cities located in 15 countries around the world. Our sales, product management, clearing and operation teams have worked closely together to handle client engagement during this pandemic, with client interactions at record high. Client feedback consistently mentions that our proactive outreach stands out compared to others in our industry. We believe these efforts will continue to pay off. We saw broad-based strength across all customer groups, including asset managers, hedge funds, banks, prop trading firms, commercials and retail.

Our retail business was up more than 70% growth with considerable strength in the US, Europe and Asia. Last but certainly not least, we made considerable progress during Q1 to integrate the NEX business. We divested NEX Exchange and we integrated our London offices where more than 600 of our employees work. We completed over 290 cross-selling meetings to clients from both our traditional futures business and those of the cash and optimization business we acquired. For reference, that compares to 400 of these cross-selling meetings during the full year of 2019. The largest percentage of these meetings continue to be focused on new clients in our interest rate and FX and options businesses and we also are seeing success with optimization, EBS, BrokerTec and data services.

To summarize the first quarter, the market environment was challenging for all of us on a professional and personal level. I am proud of the dedication of our employee base as they stepped up to the challenge. We also appreciate the trust that our market participants have in our ability to deliver results.

Looking ahead, we do not know yet what the long-term impact of COVID-19 will be, but we do know that financial markets are an important part of maintaining our economy and ultimately recovering from this tragedy. As we move forward through 2020, our strategy remains the same, to build strong global benchmark offerings with deep liquidity around the clock; to continue our commitment to offer all of these asset classes on common platforms; to deliver world-class risk management and capital efficiencies; to promote broad participation; offer robust distribution and continue developing strong channel partnerships. We look forward to answering your questions you have but before that, I want to turn the call over to Derek Sammann. Derek.

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

Thank you, Terry. As Terry mentioned, the COVID-19 pandemic has caused increased uncertainty and elevated volatility across all of our asset class, including our global crude oil market. I’d like to take a moment to provide our perspective on what happened in the crude oil market last week to further context to use most of these events. Overall, the WTI futures market performed as they were designed in a challenging market environment. And I’ll share a few comments on what we saw in the market to illustrate that further. Continued downward price pressure and a significantly steepening contango have created unique challenges with the global oil market over the last few months. Along with a significant oversupply of oil, there has also been a drastic reduction in global demand. With the global daily oil consumption decreasing from 100 million barrels a day to 70 million barrels a day, heightened concerns about storage capacity in the US and abroad have intensified the downward pressure on oil prices as well. In early April, anticipating that these market dynamics may create the potential for negative pricing, CME Group proactively informed our regulator, our clearing firms and the marketplace that our trading and risk management systems were capable of handling negative prices in the WTI contract should market dynamics require it. Prepared for such an eventuality, we saw WTI trade negative on April 20 driven by the same fundamentals I mentioned a moment ago, oversupply, reduced demand and increasingly full US storage.

Our WTI contract reflected these challenging underlying dynamics on Monday as the cash and futures markets were converging going into Tuesday’s final settlement of our WTI physically delivered contract. I should also note that while negative prices are rare they are not entirely new in energy and power markets. We’ve seen multiple examples of negative price in the energy and power in the US, Germany and the UK.

I’d also like to briefly comment on the strength of WTI as a global benchmark. Today, WTI represents 56% of the global trade in crude oil futures, including more than 60% in April. WTI is the market’s choice for managing crude oil exposure and we believe that is because optimal commodity benchmarks are based on physically delivered products. Physical delivery is the gold standard of these contracts because it ensures convergence of the underlying cash market. Commercial and end-user customers who participate in physical oil markets need the certainty that convergence provides so that they can optimally manage their underlying risk. WTI futures settle with actual transactions that result in physical delivery as opposed to other products, which are disconnected from the physical and settled via assessments. We’re pleased that WTI markets continue to reflect broad participation from all client segments around the world and in every time zone. Year-to-date, our overall crude and refined products volume during Asian trading hours is up 148% and Europe has increased by 48%. Importantly, we also continue to provide our clients with the leading crude oil options tools, which have grown 49% in the first quarter of this year and are particularly important to our clients in times of heightened volatility.

In summary, against this backdrop of extremely challenging market dynamics, our benchmark of physically delivered WTI crude oil futures contract continues to perform to help our clients hedge and transfer their risk in global oil markets.

With that, I’ll turn the call over to John.

John W. Pietrowicz — Chief Financial Officer

Thanks, Derek. As Terry mentioned, the investment in our technology and the dedication of our employees served our clients well during this unprecedented time. During the first quarter, CME generated more than $1.5 billion in revenue, up approximately 29% from last year. Expenses were very carefully managed and on an adjusted basis were $459 million for the quarter and CME had an adjusted effective tax rate of 23.6%, which resulted in an adjusted diluted EPS of $2.33. Capital expenditures for the quarter were approximately $38 million. During the quarter, CME paid out $1.2 billion to our shareholders in the form of our annual variable dividend of $2.50 per share and our regular dividend of $0.85 per share, which is up 13% from a year ago. CME’s cash at the end of the quarter was approximately $1 billion. We continue to pay down our debt, we have approximately $100 million of outstanding commercial paper, which will pay down by the end of the year. This quarter, we achieved our one times debt-to-EBITDA target.

We continue to progress on the integration of our legacy BrokerTec and EBS trading systems. Our technology and operations teams continue to work towards a migration of the BrokerTec platform to Globex in the fourth quarter with EBS following in 2021. Our testing environment is up and BrokerTec clients are testing the system. We will be working closely with our customers during the next several months while we navigate the added complexity of remote working environments, but at this time we continue to target the fourth quarter. At this point, we continue to expect our operating expense for the year excluding license fees to be in the $1.64 billion to $1.65 billion range. In addition, our tax and CapEx guidance remains unchanged. Please refer to the last page of our executive commentary for additional financial highlights and details.

In summary, we are very pleased with the performance of the Company. Our employees adapted to the challenges of this environment and worked relentlessly on behalf of market participants. Our global employees along with the investments we made in our technology systems and processes ensured the markets operated well and risk was effectively managed. In closing, I hope you and your families are healthy and safe during this difficult time. We would like to now open up the call for your questions. Please limit yourself to one question. John Peschier and I will be available today for any follow-ups you might have after the call. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Dan Fannon with Jefferies.

Daniel Fannon — Jefferies — Analyst

Thanks. Good morning. I guess, Derek, just to follow up on your comments in WTI and the relevance of that. I guess could you talk about, obviously, the health of your customers and then really the utility of the product for both commercial and non-commercial users as we think about what’s happened here in the last couple of weeks with regard to negative pricing. And, obviously, the headlines haven’t been good. You’ve seen ETFs change kind of rolling forward some of the contracts. I guess just behaviorally. can you talk about how your customers are acting? And ultimately the utility of the products going forward if you could kind of walk through that again as to why you still view WTI as the most relevant benchmark within that asset class?

Terrence A. Duffy — Chairman & Chief Executive Officer

Dan, it’s Terry Duffy. Before Derek goes into answering that question, I want to touch on one thing that you referenced, because I think it’s a little bit incorrect. The headlines haven’t been good as I think the way you said. The headlines were not good on day one. I think that was a lot because a lot of people didn’t understand exactly what happened. That narrative has changed dramatically. I’m sure you’ve seen. So I think that the narrative and the headline associated with what went on in negative pricing is completely different than it was a week ago, Monday. So I just to make sure that we’re clear on that.

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

Hey, Dennis there. Yeah. Thanks, Terry. Thanks for the question. It’s certainly a topic, Dan. So let me start by talking about the utility of WTI. I mean, there is — let’s talk about what WTI is. We firmly believe that kind of the optimal benchmarks are based on physically delivered contracts. As I mentioned in my comments, physical deliveries that we widely believe to be — at least firmly believe the gold standard for these commodity contracts because it ensures convergence with the cash market. So when you think about WTI, what it represents, it actually represents at expirations on April 21 of the physically settled WTI out at $10.01 [Phonetic], that is the price at which over 2.4 million barrels were delivered at that price.

So when customers are looking for a product that represents the actual underlying physical value of that asset, physically delivered contracts that converts to cash is that standard. So I think it’s worth talking about what is the difference between WTI with physically settled product that delivers you the actual price of the asset itself versus say Brent, for example. And it’s worth noting that the Financial Times just ran an article this morning, came out about an hour ago, that references the disconnect that Brent futures is seeing right now from the underlying convergence with the futures — with the underlying futures that are traded or actually the underlying physical cargoes that have been assessed in the North Sea right now. So that difference between ICE Brent futures as a financially solid contract, it does not settle the physical delivery. What physical barrels are priced on is dated Brent, which is trading between $5 and $7 below ICE Brent right now.

So when we focus on the utility, the contract, to come back to your question, Dan, contracts that connect the unlined physical market and deliver that actual asset at that price is what our physical end user customers are looking to use our contract for. When you look at our business year-to-date on the client side, our fastest growing participants in the revenue side were our corporates and our buy side and bank participants. So you see broad-based participation from the end user customers whether it’s the buy-and-hold guys or whether it’s the commercial customers, those have been our fastest growing participants year-to-date in this contract. And I would say that the last piece of your question relative to kind of what does this look at in a going forward basis, listen, the market has seen some unprecedented impacts to the global oil market right now.

This is not just the US story. This is a global story. If you actually look at the floating storage that is being utilized, it’s estimated that about 10% of all freights in global right now is being used for floating storage for oil coming out of the North Sea. So the oversupply store is not just the US story, the steepness of the curve in the front-end of WTI is simply reflective of the underlying fundamentals of supply demand storage globally not just in the US, and that’s what customers use our products for. They need to know that the underlying physical risk is linked with the contract and they can deliver at that price. So that’s how we think about it. That’s why our customers are using our products. And that’s — I just want to put some context there relative to how WTI represents the actual underlying physical barrel and how WTI — the Brent futures contract doesn’t converge to spot. That’s actually priced at about a $6 or $7 premium, I believe, right now, the dated Brent, which is the physical cargoes.

Daniel Fannon — Jefferies — Analyst

Thanks, Derek, and thanks for the color.

Operator

Thank you. Our next question comes from Ben Herbert with Citi.

Ben Herbert — Citi — Analyst

Hi, good morning. Thanks for taking my question. Just want to — hope you could give us some color on the APAC volume strength in the quarter just the progression given some of the rolling economic shutdowns and then re-openings? And then also any detail you can provide similar on April to-date? Thank you.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Ben. I’ll ask Ken Vroman and Julie Winkler to make comments. So either Ken or Julie can go ahead and start.

Kendal Vroman — Senior Managing Director, International & Optimization Services

Sure. Thanks, Terry. Yeah, to your point, we have seen very, very strong volumes in Asia through Q1, we saw that up 73% year-over-year, which was really good. And as we noted in China and other places, this is despite economic shut downs across various countries in Asia. We do see that they are probably leading the world in terms of coming back now. So while we’ve been able to — as they come back online, we think that growth will continue. China is an example, we saw that up just 7% year-over-year, last year was a tough year given some of the trade wars that were going on that dampened volume, but we do see ADV growth there for the first time since Q4 of 2018. And when you take the China story in combination with Greater China, including Hong Kong and Taiwan, it becomes an even stronger growth story. So we think temporarily these dislocations based on the pandemic have been worked through and we think that’s a testament to the investments we’ve made in terms of education in the area, marketing, technology and infrastructure and importantly, our sales team and the work they’ve done there and seamlessly transitioned into a more digital outreach. And so we think while we’ve seen volumes, to answer the second part of your question, move back into a more normal range or a more consistent range with the run rate of 2019 in April, we feel good about the platform that that positions us for growth.

Ben Herbert — Citi — Analyst

Thanks, Ken.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thank you, Ben.

Ben Herbert — Citi — Analyst

Thank you.

Operator

Thank you. Our next question comes from Alex Kramm with UBS.

Alex Kramm — UBS — Analyst

Yeah. Hey, good morning, everyone. I was hoping to switch gears to interest rates for a second, obviously, lot of debate about a zero interest rate environment and what that means for you guys. So just curious if you could provide any color on what you’ve been seeing from a client perspective already as a result of that? And I guess the things I would highlight, obviously, volumes in April have been very soft. Open interest is down in particular on Eurodollar futures and I think the large open interest holders that you often cite as a, I guess, indicator of growth I think is also down 13% from the peak. So just any more in-depth color for things that we may not be seeing happening underneath the surface?

Terrence A. Duffy — Chairman & Chief Executive Officer

Great question, Alex, and I’m going to ask Sean to comment. But as you know the volumes in April have been down pretty much across the global marketplaces, including our interest rate complex with Eurodollars. But there’s a lot of things that we’ve been discussing and talking about and watching fundamentally that I think Sean can give you a little bit of color around that, we find very interesting. Sean? Sean Tully, are you there? Did we lose him? Sean? Did Sean Tully drop off?

Operator

No, sir, his line is still connected.

Terrence A. Duffy — Chairman & Chief Executive Officer

All right. So why don’t we come back to that, Alex, your question in a second and go to the next one. I don’t know why Sean can’t get through?

Alex Kramm — UBS — Analyst

Oh good. Thank you.

Terrence A. Duffy — Chairman & Chief Executive Officer

We’ll be right back to you Alex on that question. I have in line John Pietrowicz, you heard Alex’s question, correct?

John W. Pietrowicz — Chief Financial Officer

Yeah, we heard it, Sean is working to get back on the line.

Terrence A. Duffy — Chairman & Chief Executive Officer

Okay, so, I can give you — I mean, John if you want to — we’ve all been discussing this. Sean, is that you?

John Peschier — Managing Director, Investor Relations

Apparently Sean is on the line, but we can’t hear him. So, I think, Alex, we can come back when Sean gets on. And so we’ll go to the next question and then we’ll circle back to this one once Sean is able to speak.

Terrence A. Duffy — Chairman & Chief Executive Officer

Yeah, but just on that point, Alex we’ve been talking a little bit about what is going on with the issuance of debt. Sean referenced on a call with us just the other day, we’re looking at $3.7 trillion of additional debt, of which we think we’ll see a lot of coupon issuance associated with that against our treasury complex. So we do believe that that is very optimistic for that business. So even though we are in a zero rate environment to your point on the short term of Eurodollars, we are still seeing a lot of activity in the back end of the Eurodollars, along with the options on Euros and across the treasury complex. And, again, the more debt we’re assuming or issuing with coupons, we do feel that people will be needing to manage that debt. So there’s a lot of positives there. I’m not sure Sean is going to get back on but he’ll give you — elaborate more in a second. So why don’t we go to the next question and we’ll come back to Alex.

Operator

Thank you our next question comes from Brian Bedell with Deutsche Bank.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hi, Brian.

Brian Bedell — Deutsche Bank — Analyst

Well, Sean might actually be part of this question too but it is okay to defer as well. And he can answer it when he gets back on. Or if you guys maybe you want to take a shot at it, it’s just really — it’s along the rates line but it’s from a different perspective. It is — the question is, to what extent has the user base changed substantially in April versus March, obviously, a lot of participation by proprietary trading firms and hedge funds and the risk parity strategies with basis trades. And the question is, that seems — I would surmise that’s dropped off a lot in April, so maybe if you can confirm that as part of the decline in April versus March in the rates franchise and what you think it will take for those firms to re-engage and begin trading again?

Terrence A. Duffy — Chairman & Chief Executive Officer

So thank you, Brian. I’m not sure if Sean joined back yet. So if he didn’t, Sean are you there?

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

Yeah, Terry, I am back in, can you hear me this time?

John Peschier — Managing Director, Investor Relations

Yes, we can hear you Sean.

Terrence A. Duffy — Chairman & Chief Executive Officer

Yes. Did you hear the question?

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

I apologize, I don’t know what happened there. Now can you repeat the question, I apologize.

Terrence A. Duffy — Chairman & Chief Executive Officer

Yeah, sure. I am sorry, go ahead, Brian.

Brian Bedell — Deutsche Bank — Analyst

Oh yeah, sure. I got it. Actually to Sean, yeah, thanks for joining back. So, it’s about the user base in the interest rate franchise in April versus March. Obviously, after we get through a volatility period, we typically do see a lot of the proprietary trading firms and hedge funds pair down their risk books. Maybe if you can come on to what extent that has been the major driver of the volume decline in March to April and what do you think it will take for those firms to re-engage in the strategies again, how long do you think that might be?

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

Yeah, hi, thank you for the question. And apologies that I was cut off somehow earlier. In terms of our volumes, the short end of the yield curve, in particular, the very fund contracts, let’s say the Fed funds contracts, for example, do become less interesting during a time of zero interest rate policy. And when we do not expect the Federal Reserve to change rates at the upcoming meeting. However, our deferred Eurodollar futures become extremely interesting relative to the shape of the curve and the timing of when the Fed might begin to become active again. Most importantly, you would have seen at the end of last week, the Congressional Budget Office did announce their estimated $3.7 trillion deficit for the federal government this year. This is obviously completely unprecedented in terms of its size. And if you think about $3.7 trillion deficit, that’s $3.7 trillion worth of additional treasury bills, notes, and bonds that will need to be issued this year, that will need to be risk managed. If you look at 2019 for example, the net issuance was $984 billion. So this is obviously multiples of that. So we do expect to see increased activity in hedging across the treasury curve with respect to the increased issuance. You also saw our business grow dramatically between 2012 and 2018. Much of that time during zero interest rate policy with the additional products that we added that allow people to much more accurately manage their risk across the entire curve. We’ve also seen huge innovation. We’ve obviously invested in innovation. We’ve invested in electronic markets. We’ve invested in client acquisition. Our SOFR future is doing 50,000 a day, our Ultra bond futures is doing 233,000 contracts a day, our Ultra10 is doing 293,000 contracts a day. Invoice spread is doing 148,000 contacts a day. So I do expect as you go further out the curve, there will be increased uncertainty. I do expect with the increased treasury issuance that that will also create a much greater demand for risk management and I think our innovative products serve our clients well in this environment.

Brian Bedell — Deutsche Bank — Analyst

And just on the user base, the mix change between March, obviously, there’s a lot of proprietary strategies engaged in March, how are you seeing those players in April? It looks like they probably dropped off to a substantial extent, do you think those players come back soon or I guess confirm that or if you can confirm that, is that the large part of the drop off from March to April?

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

There’s no question that you tend to see some reduction by leverage funds in particular and CPAs, when you have a very large increase in marginal requirements. We have invested as well in addition to the things I mentioned earlier in great margin and capital efficiencies over the years that helped clients out. The thing I would mention is in March, we reached a new all-time portfolio margining efficiency delivered to clients when margins increased. So $7 billion in margin savings in the month of March with portfolio margin. We do expect the customers to come back in and to have to manage the increasing issuance by the US Treasury as the year progresses. It may, as you know, the treasury will be issuing for the first time in many years a 20-year bond issue. That will be traded on the BrokerTec platform and it will be deliverable into our bond futures. So we do expect to see the same activity we’ve always seen with the increased treasury issuance.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hey, Brian, let me just add to that story that I think we’ve heard for years now with the rates going down to where they’re at, where are the participants going to come from. We saw them all show back up in March to your earlier point, and then they dissipate a little bit in April. We, like any other business, cannot measure the full year by a couple of weeks of trading. So the good news is everybody is actively watching our markets. That doesn’t mean they can actually participate every single day. But I would not get too hung up on a few weeks of trading. I think we have to measure this over the longer period, just like we’ve seen over the last several years. And then we saw the record business that we saw that we put in the first quarter.

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

To that point, I mean, I think when you take a look at the last 10 years, April tends to be in the bottom couple of months in our — in terms of monthly volume. In fact, when you look at last year, we did about 15.7 million contracts a day in rates accounted for more than 50% of that activity. In April rates are accounted for about 38% of the activity. So, the fact that we’ve seen some decline is not unusual. In April, there’s no rule. Easter tends to be in the month of April so there’s Good Friday and Easter Monday. And also, this tends to be a period of time when there’s spring breaks and the like. So, a bit different environment this year but, a slower April is not uncommon.

Terrence A. Duffy — Chairman & Chief Executive Officer

Again, I don’t want to belabor this, Brian, but at the same time and we’re all not in the same room, so I don’t want to start contradicting everybody and I won’t because everything we said is true. But we do have to measure this over a long period. And there is a different fundamentals in today’s market than there was a year ago, as we all know. There’s different fundamentals in today’s market than it was six weeks ago and I think Sean clearly pointed out what is happening from a fundamental side. And now we will have to see how that transitions into how people want to manage that risk and the value of it needs to be managed. And we definitely saw that happen in March.

Brian Bedell — Deutsche Bank — Analyst

Thanks for all the great color. Appreciate it.

Terrence A. Duffy — Chairman & Chief Executive Officer

Appreciate it, Brian. Thank you for your comments, appreciate it.

Operator

Thank you. Our next question comes from Chris Allen with Compass Point. Good morning, guys. Just want to circle back on crude, understand the differences between WTI and Brent, the physical sentiment dynamics. So maybe you can give us some color on the WTI customer base, maybe roughly size, how it breaks down between commercial speculators, market makers? What I’m trying to think through is if we do hit full capacity from a storage perspective, while starting to shut in, how does it impact the commercial base moving forward and how does that filter through down to the speculative base as well, any color there would be helpful?

Terrence A. Duffy — Chairman & Chief Executive Officer

Okay, thank you very much, Chris. And to what we can deliver, Derek why don’t you go ahead and respond to Chris’s question.

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

Yes. So thanks, Chris. Good question. Yeah, it is good question. I think that Chris you had asked us before kind of what that spread is, I can’t give you a percent, I can’t give you names, but what I can tell you is when you look at the growth in the participation of our energy market overall and certainly crude is a strong reflection of that, it is a big part of our overall franchise. As I mentioned before, the fastest growing participants in our energy franchise this year is buy-side corporates and banks. Those are the two fastest growing participants. So if you asked about who’s participating more broadly, who’s extending the utilization, it’s exactly those customers that we focus on for that end user connection to our core product. We haven’t seen that change in the last couple of weeks and we don’t anticipate that changing. As I mentioned, the reason and utility of a WTI contract being physically delivered is that it converges directly to those underlying barrels. I think the question that you’re posing is, if this contango continues, this stays steep the way it is, what is the impact on the global oil market? Well, as I mentioned before, this is not an issue that’s only impacting WTI right now. You’re seeing the dated Brent traded at a significant discount to Ice Brent futures right now for exactly the same reasons. So I think it’s about — between a $5 and $7 disconnect right now. So global oversupply and a lack of demand and the storage issues globally is impacting the overall oil market.

So it’s not a function of customers saying, hey, WTI is no longer my physical risk because the reason people use WTI is once the export ban was lifted in 2015, it became the underlying physical assets they were exposed to if they were up in Asia actually importing those products. The reason I mentioned at the top of the call my comments on the broadening and accelerated use of participation in our markets in energy, crude and refined from Europe and Asia is explicitly because it’s reflective of the globalization that Terry alluded to and Ken spoke to at the top of the call is significant growth we’ve seen and end user participants in our energy market. So triple digit growth out of Asia, 50% to 48% growth in Europe is indicative of the way in which WTI has become a global benchmark and that is the physical risk that people are facing.

To your point about storage, I can’t control for that. The market can’t control for that. Nobody loves the fact that oil is priced as low as it is right now. Dated Brent is trading this morning at I think I said about $5 to $7 discount to Ice Brent, and it’s reflecting exactly what our physical market is reflecting. So dated Brent and WTI reflect the physical, Ice Brent futures don’t have the physical component to it. So it’s actually pricing. It doesn’t reflect the underlying price of the barrel of oil in the North Sea right now. So you want to be a little bit careful when you look at the Ice Brent rate right now because it does not reflect where you can sell a barrel.

Christopher Allen — Compass Point Research — Analyst

Thanks, Derek.

Operator

Thank you. Our next question comes from Mike Carrier with Bank of America.

Michael Carrier — Bank of America Merrill Lynch — Analyst

Good morning. Thanks for taking the question. Just given the high level of volatility during the quarter in energy and elsewhere, how has the Clearing House operated, how FCMs held up, and any significant changes made during the quarter given some of the big moves that we are seeing?

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks. Mike, it’s Terry Duffy. The Clearing House has done as usual an exceptional job managing this risk. I spent most of my time, especially over the last six to eight weeks tethered to Sunil Cutinho, the President of our Clearing House and his team as we continue to go through these unprecedented times. And it’s not just me, it’s many members of our management team that are working with Sunil and others to make sure that we’re doing everything to be able to manage this risk. I think in my opening remarks you heard me reference about margins. This is a very big component of how we operate CME to make sure that we have products margin properly so we’re not putting this system at risk.

Today, we’re holding record amounts of margin on deposits because of the way we’re concerned with the volatility and with the unprecedented times that we live in. So I have nothing but kudos for the entire Clearing House, its staff. They’ve done a remarkable job. The systems and the operations that my COO Julie Holzrichter has put into place along with Sunil and Kevin Kometer is second to none. So we’re very proud of this. We’re still working towards our SPAN 2 margin methodology, which we’re still excited about, which will be more advanced on margining going forward. But we’ll keep our original system as well. So on all I will tell you, and I don’t know if it’s Sunil’s call or not but the Clearing House is operated at the highest level. And in the 40 years that I’ve been in the business and the 18.5 years that I’ve been CEO and now Chairman — Chairman and now CEO.

Michael Carrier — Bank of America Merrill Lynch — Analyst

Okay. Thanks a lot.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Rich Repetto with Piper Sandler.

Rich Repetto — Piper Sandler — Analyst

Hey, good morning. And first, I hope all the CME team and their families are all healthy and safe. And, excuse me, congrats on a phenomenal quarter. I got to turn back to the WTI question and to Derek again. It sounds like you’ve made the case for physical delivery. So it sounds like there’s no option to go, an option to cash in physical deliver to move the contract like that. So then it comes back to the storage issue. And I know you said the spread was around $7 or $8 but if you look back over the last year, the spreads really been around $5 to $6. And that day that it did price negatively, the spread was negative $50 to $60. So I guess the question is, and if you talk to industry participants they are also well aware of the storage issues in Cushing. And it sounds you improved the storage in the past five years, but what can you do to improve the storage going forward? It is the for capacity to improve the storage so that it doesn’t get that wide again?

Terrence A. Duffy — Chairman & Chief Executive Officer

Hey, Richard, thanks. Go ahead, Derek.

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

Okay. So, listen, it’s a good question. There’s three overall drivers of change, I think you guys have written about this, and people understand this. You’ve got this massive oversupply with Saudi and Russia piloting, you get this massive destruction on the demand side. And I reference 100 million barrels a day, consumption reduced down to 70. The stat that was on the news last night, widely reported air traffic was down 95%. You know, miles driven in states that are shut in either Europe or US or is down 75%. So there’s no demand although there is some storage issues. So I want to be careful how far I opine on this physical infrastructure on stores but what I can tell you this, that there has been a significant expansion of use of floating storage both in Europe and in the US and in Asia. I think I might have mentioned earlier in our conversation that, alternative forms of storage is plenty of storage, VLCCs or ULCCs which are the carriers that carry oil, are being increasingly filled up in just sort of this floating storage and docked out in various places in Europe and US right now.

The other piece that’s going on right now is that as refiners have reduced their runs, the crude can’t stop as quickly as refiners can run their run. So we have been speaking to multiple folks in our world asking us those questions, how can I get involved in the physical delivery process? And they’re seeking to find alternative forms of opportunity. With the steepness of the curve right now, Rich, and I said this is true in dated Brent as well as WTI. This is a global phenomenon. So this isn’t a function of switching from one product to another product. This is underlying fundamental supply and demand overlaid with the storage issues. So I think we’re starting to see floating stores take up some of that excess. We are seeing folks determining where and how they can convert some of those utilities to address the storage. But, again, that’s not what we can control for. What we can control for is how effectively our promise converge on the day of expiration and how our markets reflect the underlying fundamentals and the use of our markets by those end user customers who in our engagement, particularly the commercial customers, recognize the contract did what it needed to do, which was converge on the day of expiration. As I said, a little over 2.4 million barrels of crude got delivered in on the basis of that delivery settlement price on April 21 of $10.01.

And the last thing I’d say is, with the unprecedented impact of COVID-19 across a range of physical markets, we are seeing historically high levels of basis differential between cash and futures. We’ve seen it in the gold market with EFP prices moving out as there are concerns about moving gold globally. We’re seeing it in some of the cattle market products about where and how delivery can get done and how those markets are converging. I will tell you, every one of our physical delivered products have converged because they operate effectively to serve the end user needs of those participants.

Rich Repetto — Piper Sandler — Analyst

Thanks, Derek. Do you expect Brent that Seabourne delivered, do you expect that to trade negatively as well?

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

I can’t tell you — it depends on how steep that curve goes right now. As I said, there’s an FTE piece that came up literally just before we all jumped on this call, explicitly calling out the very steepest on the front end of the dated Brent or right now the disconnect. I think it was as high as $8 last week. So if we continue to see demand as low as it is, not return but here’s the beauty of the market, Rich if you look at the forward curve and if you look at the forward curve right now, it’s all about the steepness of the contango, the very front month contract is trading significantly below the second month. That’s trading a little bit below third month. The market is telling us with the price of the forward curve, that probably six, nine months out that forward curve roughly flattens out. We’re just seeing the steepness of the front end.

So I think the FTE has made some really good points this morning and points that we’ve been looking at more as the physical Brent whereas dated Brent, not where Ice future is. You can’t sell a molecule based on the ICE futures price. The molecules get sold on dated Brent that’s the physical of delivered products. And that’s what FTE is pointing out, is that is a growing disconnect and it’s following the same fundamental drivers that WTI is right now. It is a storage issue, it is a spend issue, and it is a demand issue and supply issue. So the good news is that there’s lots of different opinions, how quickly demand is going to return. And that’s where the volatility in our market, that’s why we’re still doing 3.5 million contracts even in April in this environment to help customers navigate this.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Derek. And just to reconfirm, Rich, we don’t need the FTE to validate the fundamentals that we’ve been seeing in the marketplace for numerous years and everything that Derek and his team are working on a daily basis. So, Derek thank you for your answer. Rich, thanks for your question.

Operator

Thank you. Our next question comes from Jeremy Campbell from Barclays.

Jeremy Campbell — Barclays — Analyst

Hey, thanks and thanks for all the great color on the market so far. Some of that’s been pretty well traveled. I just want to ask a little bit about your cross-selling efforts that might help blunt some of the natural volume headwinds you might see in some products. I think you mentioned doing 290 cross-sell meetings in the first quarter versus 400 for the full year last year. Can you just help us think about one, what the length of this cross-selling cycle might look like and then two, what the client engagement and feedback looks like, either from optimization clients maybe looking to use futures to lower capital charges or typical futures cash OTC traders looking to dip their toes in the waters of other product structures?

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Jeremy. I’m going to turn to Julie Winkler and let her respond to that question, and if Ken wants to add a little something to optimization, but I really think this is more towards Julie’s area. Julie.

Julie Winkler — Chief Commercial Officer

Sure. Thank you for the question. So, this has definitely been a challenging environment, but the client engagements that we’ve been able to drive and the cross-sell statistics that you mentioned are definitely accurate. So year-to-date through the end of April, we’ve seen our sales activity up about 150% versus the same period in 2019. So the outreach has continued, even though we’ve been in this virtual environment. So contacting clients via calls, e-mails, and videoconferences you would expect. And what we saw with the 290 cross introductions, the biggest month we had was in February where we had 135. More specifically, that was driven by an uptick within the buyside in our commercial client segment in the US. And this number, compared to all of 2019, we did 400 cross introduction meetings.

The largest percentage as we previously reported as well of those cross introductions continued to be focused on really new clients in our futures and options, both interest rate and FX franchises. But we are seeing successes, as you’ve mentioned, across new introductions into our optimization services. So if you can think about the environment that we’re in, where clients do have increased need to manage their risk, they are looking at new things like try resolve to manage their margin exposure to one another as well as data. You know, we haven’t talked about data yet today, but in a period of unprecedented volatility, clients need data to be able to put this data within their trading models to forecast that for future trading events. And so those cross introductions, I would say, have uptick more within the last quarter than even what we saw last year. But it’s something that we’re continuing to monitor. And client engagement and feedback’s been really strong. We invested a lot in our global sales team over the last few years. And having that regionally based with sales leader and personnel on the ground means that we have that trust with our customers and the need for face to face meetings is less important when we build those relationships. So that part has been great. And we’re also taking advantage of this work from home environment to continue to do a lot of education with our sales team and make sure that they’re really prepared for those cross introductions. So with that, I will turn it over to Ken to add anything from an optimization perspective.

Terrence A. Duffy — Chairman & Chief Executive Officer

Ken, real briefly on optimization.

Kendal Vroman — Senior Managing Director, International & Optimization Services

Yeah, very briefly, I think, Julie’s team’s efforts are really kind of the lifeblood that’s driving the optimization business. The one observation I would say is that we learned a lot in the first quarter about the importance of these businesses, and they performed well. Because CME was so quickly able to move to a work from home environment we were we were very well prepared to help our customers during this time, and our services performed very well. And having acquired NEX 18 months ago and working through the integration, I think we can sit here and say, coming out of the Q1 that these services are in high demand from our customers and they’re even better positioned based on their performance during this difficult time coming out of the first quarter.

Jeremy Campbell — Barclays — Analyst

Thanks again.

Terrence A. Duffy — Chairman & Chief Executive Officer

Jeremy, thank you very much.

Operator

Thank you. Our next question comes from Alex Kramm with UBS.

Terrence A. Duffy — Chairman & Chief Executive Officer

Oh hey, hello again.

Alex Kramm — UBS — Analyst

Yeah, thank you. I think Sean actually answered my original question, so I don’t think there’s much more to add, but since I am back here just a quick follow up on, I guess, Terry’s comments — on your comments on the Eurodollar franchise, on the floor trading rather. You made it almost seem like closing the floor hasn’t had an impact because the percentage between futures and options has remained stable. And I guess I would challenge it to some degree and say well, just because the percentage is unchanged doesn’t mean the pie hasn’t shrunk, right. So maybe Sean or somebody else can flesh out a little bit what you’ve seen actually in terms of trading strategies, how people have behaved, etc? And then related to that, considering that I think the trading on the floor is much lower economics than trading electronically. Wondering to what degree you’re already exploring, like hey, it says has markets shifted enough where maybe we don’t really need the floor as much anymore as we needed and it could be a substantial cost savings, maybe in the future if we never reopen again. So maybe any sort of color on the cost of the floor would be helpful as well? Thank you.

Terrence A. Duffy — Chairman & Chief Executive Officer

Okay. So thanks, Alex. And I’m going to let Sean take the first part as it relates to potential different strategies associated with floor versus screen if there is any doing — if there are any difference that he’s saying, I gave you percentages of apples to apples. Your point about the pie could be valid. I’m not saying it’s not. And then I will comment more about where we’re at as far as our objectives as it relates to the trading floor. So let me go first to Sean to talk about that.

Sean Tully — Senior Managing Director, Global Head of Financial & OTC Products

Terry, thank you very much. Terry mentioned in his prepared remarks, if you look at and as Alex you referred to, so thank you, Alex for the question. Our options as a percentage of our interest rate futures since the closure of the floor are running at 39%. If you look at 2019 as the base case, our interest rate options traded at an average daily volume of 36% of the relevant future. So from that perspective, it looks like it’s been a very healthy transition to the floor.

In addition to that, you’ll know well, for many years now we have made very significant investments in electronification of our markets and in particular we have instruments called user defined spreads. So there are many predefined spreads that users can ask on a request for, quote, for prices. And then in addition to that, they are almost an unlimited number of user defined spreads that users can request quotes on from our market makers up to 30 lacs. So we have seen very robust activity on the box since the closure of the four and we’ve seen — I’d say all of the different types of strategy that we ever saw on the floor continue to trade on the box. We’ve seen as I said, actually a growth in the percentage of options versus futures. I’d also mention some of the innovations that we had launched and we’re continuing to work on have gotten greater traction. I’ll give you an example. We have a function called a committed cross where a broker is able to put in both sides of the trade. And if they better the market, they get a portion of the trade guaranteed to them.

Why is that important? We were trying to electronically replicate the experience on the floor for both the end customers, the market makers, as well as the brokers. And I’m very pleased to say that while committed cross was trading just 10,000 or so a day in January, we’re trading 74,000 a day since the closure of the floor. So our innovations are working, our investments in electronic markets are working, participants can trade any strategy today as easily as they could prior to the closure of floor, and in fact, our options volumes relative to futures have increased relative to last year since the closure of the floor. I hope that helps.

Terrence A. Duffy — Chairman & Chief Executive Officer

Let me just add a few things, Alex and Sean, thank you for that response. The trading floor, the costs associated with it are roughly around 20 million annually, I believe is what the number is. But John Pietrowicz or John Peschier you can correct me, as it relates to the floor products, as you know back in 2000 we had thresholds associated with them about the viability of their existence. And, the futures did not meet those thresholds. Subsequently, we closed them several years after they did not meet the thresholds. We didn’t do it right away. It was actually many years. The options on futures, none of the products meet the threshold today except for one, to my knowledge and that is Eurodollar options.

So, we are going to continue making sure we maintain our thresholds and our guidelines that we have agreed to many, many years ago. But most importantly, Alex, as it relates to the trading floor, we will not do anything irrational either way until we know exactly where the health officials and government officials are going to come down as it relates to multiple people getting together in a single location. As you know, trading floors or trading environments are very closed environments and very difficult to — with this virus to continue and to keep everybody safe. I have 54 employees that have to be down there to staff those and then we have hundreds of traders and clerks that are down there and we have an obligation to do the right thing and not overreact either way. So we’ll make those decisions with government officials and health officials as time goes on. But I just want to point out that the cost is not extraordinary and the threshold levels have not been met in futures, subsequent close the threshold amount in futures has not been met but still open except for one product Eurodollars. Does that help you?

Alex Kramm — UBS — Analyst

Awesome, thank you very much.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks. Bye. Appreciate it.

Operator

Thank you. Our next question comes from Christian Bolu with Autonomous.

Christian Bolu — Autonomous Research — Analyst

Thank you, guys. Good morning. Maybe a follow-up for Sean. I’m sorry if I already missed this, but why exactly do you think treasury issuance will have any impact on volumes at a zero rate QE world, I guess treasury debts tripled from 2007 to 2014 but CME volumes did not grow over that period, so curious what’s different this time? And then just a second part of the question or just the second question basically only for John, really more of a clean-up question, on the balance sheet I see performance bonds tripled to $100 billion. Just remind us of the dynamics here on that line item, kind of what drove the spike, is that sustainable, and more importantly, how do we think about any P&L impacts? Thanks.

Terrence A. Duffy — Chairman & Chief Executive Officer

Yeah, go ahead.

John W. Pietrowicz — Chief Financial Officer

Thanks. So I would say that our marketplace today is completely different than it was probably 2010. As I said earlier, we spent an enormous amount of money, effort on product innovation that has, for example made our tertiary complex much more attractive. We added our ultra bond futures in 2010 that this year have done 233,000 contracts today. We added our ultra 10 year futures just couple of years ago, which are doing 293,000 contracts today. These allowed participants to much more accurately hedge their cash treasuries with the underlying futures products. In addition to that, we also have made significant adjustments to our product. So as you know, over a year ago we adjusted our two-year notes, futures, minimum pricing increments, reducing them by half. I’m very glad to say that we believe that around 200,000 contracts a day of our two-year note futures today are attributable to the decline in that pricing. When you reduce that minimum pricing current, you reduce the cost to trade by reducing the bid offer spread. In addition to significantly reducing the execution costs to trade by things like changing minimum price increments we’ve massively improved the capital margin and total cost efficiencies through things like portfolio margining against the freight swaps. Again, didn’t exist during that time period that you were talking about.

In terms of interest rate swaps, I mentioned earlier actually we had an all time revenue record in Q1 in interest rate swaps and in March in particular, as I did mention earlier, we saw an all time record portfolio margining benefit to our customers of $7 billion. So we see very significant differences in terms of our products, in terms of our offerings. In addition to that, we could talk for a long time about our investment in sales force. So if you look — going back to the period of time you’re referring to the bulk of our sales force sat in United States and the bulk of that sales force sat in Chicago. Today, most of our sales force is outside of the United States and so we have much more deeply penetrated the global market.

Last, if you go back to 2012, another key difference and something you’ve heard me talk about on earnings calls before is because of these efficiencies, because of our improvements in sales, because we have invested so much in electronic markets our penetration of the cash treasury bond market has gone up dramatically. So if you look back in 2012, our treasury futures traded 55% of the average daily volume of the cash treasury bond market. Today, we are trading more than 121% of that underlying cash treasury bond market, so the Treasury futures. So I think for all of those reasons, we’re in a completely different place today than we were. I hope that helps.

Christian Bolu — Autonomous Research — Analyst

Thanks, John.

Terrence A. Duffy — Chairman & Chief Executive Officer

I’m sorry, Christian, go ahead.

Christian Bolu — Autonomous Research — Analyst

I was going to say John, please, on the balance sheet.

John W. Pietrowicz — Chief Financial Officer

So, thanks Christian. So in terms of the balance sheet, what you see in terms of the performance bonds that’s the positions that the customers put up in support of their trading activity. And we did see an increase on our balance sheet in terms of performance bonds, which primarily represents cash put up at the Clearing House, increase from about $37 billion in the fourth quarter of 2019 to $100 billion in the first quarter of this year. So pretty market increase and that’s really due to the activity at the Clearing House and the volatility. So higher the volatility and more activity, you’ll see an increase in the amount of performance bonds put out. Now how that flows through into the income statement is we earn money on cash put up at the Clearing House by our customers. And generally speaking, we have a spread between what the IOER is, the interest on excess reserves and we share that with our customers. Generally, it’s about 80% gets rebated back to the customers about 20% we keep in support of managing the collateral. We also earn based upon the non-cash collateral as well and that flows through our revenue line.

But to give you an idea, in last quarter average balances in terms of cash that we earn on increase from about $28.1 billion to $40 billion dollars so a $12 billion increase on the average balance. And we earned 29 basis points in the fourth quarter and 19 basis points in the first quarter. Now, just to point out, the average cash balances through the month of April is about $89 billion in the month of April. So about more than double what we had on average for the first quarter. Now, the IOER did come down to 10 basis points and again, we will keep a spread of approximately 80:20, 80% to our customers, about 20% to us. And so the customers earning eight basis points and we’re earning two basis points.

Christian Bolu — Autonomous Research — Analyst

Great. Thank you very much.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Sean. Thanks, Christian. Okay.

Operator

Our next question comes from Owen Lau with Oppenheimer.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hey, Owen.

Owen Lau — Oppenheimer — Analyst

Yeah, good morning. Thank you for taking my question. Continuing on the balance sheet and capital management, so you had $1 billion in cash and you reached your one times leverage target at the end of the first quarter. But given the COVID uncertainty, would you raise more debt in order to have more cash or you’re confident about your cash position and can pay down some debt? And I think, more importantly, how should investors think about your variable dividend policy this year? Thank you.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Owen. John, you can go ahead and address that and I might chime in as well.

John W. Pietrowicz — Chief Financial Officer

Yes, sure, thanks. Thanks Owen. In terms of our capital structure, we’re very comfortable with our capital structure. We like I mentioned in the prepared remarks, we’ve achieved our one times debt to EBITDA target. We have about $100 million in commercial paper that we will be paying down in relatively short order. So with that, that’s the remaining amount of debt that’s pre-payable. So we feel very comfortable with our capital structure. We had as you saw this quarter, we’ve got very strong leverage in our business model and we have a very high investment grade rating, which we think is important for the firm, so very comfortable in terms of our capital structure.

In terms of our ability to pay down debt like I mentioned, we got $100 million in pre-payable debt, which will pay down in short order. And I think in terms of our annual variable dividend, the dividend is obviously a function of our Board and that’s a Board decision. We have been very focused on ensuring that we’ve got an appropriate capital return policy and we’ve been utilizing our annual variable dividend and our regular dividend as a means to return cash back to our shareholders. Our regular dividend we increased 13% to $0.85 a share. And we have a what we think is a really good and prudent dividend policy.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, John.

Operator

Thank you. Our next question comes from Alex Blostein with Goldman Sachs.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hey, Alex.

Alex Blostein — Goldman Sachs — Analyst

Hey, guys, good morning. Thanks for taking the question. So another one for Derek around the energy market dynamics. And the question is really not so much about the merits of physical delivery versus cash hellmen [Phonetic] or Brent versus WTI. I’m more curious about the outlook of US oil production. And given the fact that that’s likely to decline over the coming year to bring the markets back into balance, obviously the demand side of the equation is kind of difficult to predict right now. How do you see this decline in oil production impacting utilization of WTI? And in terms of exposure, Doc I think you talked about in terms of growth by different customer categories. But any way you can give us a sense of just kind of run rate exposures in terms of total revenues or total volumes of WTI by kind of the buckets that you’ve described and not one of the prior questions? Thanks.

Terrence A. Duffy — Chairman & Chief Executive Officer

Alex, thank you, and Derek obviously, we can’t predict future volumes but Derek, why don’t you go out and address Alex’s question?

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

Yeah, so it’s tough because the predicate is where the market’s going to go. What I can do Alex is point you, as we all look at, as I mentioned earlier, look at the forward curve. And if you look at the forward curve and look at where the market is expecting some amount of demand to return, I think that the real risk here, frankly is and this is why the refiners have been quicker to reduce rather than take a less crude into refining because they can respond more quickly to shifts in demand. The concern is it takes longer to shut an oil well down. The concern now is not that there won’t be terminal demand for the next year, the question now is, as states are beginning to open and they just start to see air miles start to fly and miles driven start to increase as they go back to work, the issue now is wells are reluctant to close because it takes them a while to restart. There is a very real chance that if and this is the math which — that producers are doing right now should we shut down and how long does that take me out to reduce my excess stocks and then by the time you see demand starting to slowly ramp and then accelerate as markets open up again and demand returns they don’t want to be behind.

There’s a real risk right now that actually if too many folks shut down their production now, you’ve got the uncertainty of, well, when demand returns, I will be behind the curve and are we going to see some rubberbanding back effect of oversupply now, people overly shutdown then demand returns but then the producers can’t return that quickly enough. So the interesting dynamic is the people express different opinions as to how quickly demand is going to return. I can’t control for that. What we are watching is the forward curve and we are watching, there’s a reluctance for producers to shut down because it takes them offline for too long so if you do see a rapid return of demand they’re going to be behind. And so we need to just look at the COVID uncertainty on top of the election uncertainty that’s keeping people in the market. We are not seeing people shutter positions close down and sit and wait for demand to return because everybody knows by the time you see it it’s too late.

So I can’t give you a precise answer but look at the forward curve, look at the continued participation in our market. Our WTI futures open interest has been between 2.2 million and 2.4 million contracts in the last six months, that has continued to be more of us in play. We have seen as I mentioned before that outsized participation from the commercials. We’re not seeing them step away. So I think everyone’s looking at the return of demand, I can’t control for that but the market’s telling you it’s probably three months out, four months out. And in the meantime, the storage issue is kind of a red herring because I don’t want to leave people with the impression that the structural constraints there there’s only so much tank space in Cushing and oil can’t go anywhere.

There’s over 3 million barrels a day that transition through Cushing as a distribution hub. It goes on a rail cars, it goes to the trucks and moves elsewhere. So quite frankly the contango in the market right now is an opportunity for folks and we think the market’s going to be responding to that and finding smart ways to take that oil, transport it, and that’s one of the differences that you’re seeing. That’s not just physical storage at Cushing, it’s a transit hub and so folks are figuring out where can I take that and move that and there is a cost to doing that turning to the locations. So it’s a healthier RPC business. We’re still at about $1.12 or $1.13 on and there about and we’re continuing to see the commercials participate. We don’t see them coming back because the uncertainty of the near term demand return.

Alex Blostein — Goldman Sachs — Analyst

Thanks, Derek.

Operator

Thank you. Our next question comes from Chris Harris with Wells Fargo.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hey, Chris.

Christopher Harris — Wells Fargo Securities — Analyst

Hey, guys. How should we be thinking about the potential risks to market data and connectivity revenues as a result of the recession, it really doesn’t seem like there has been any impact so far but not sure how to be really thinking about the outlook for the duration of 2020 and beyond?

Terrence A. Duffy — Chairman & Chief Executive Officer

So I’m going to let Julie Winkler comment about the market data business a little bit and John Pietrowicz, if you want to comment on the revenue side as well. I will give you this observation from where I’m sitting right now everything you’ve heard and everything you’ve heard over the last six weeks from multiple companies is we’re in uncharted waters, difficult times, different times, no one seen it before. And I believe and I think the team believes that the opportunity for market data is going to be critically important in order for risk management whether it’s derived or historical. So we can’t predict what it’s going to be but I think more and more people after seeing what’s going on here over the last several weeks are going to be looking for more and more data in order to help run their businesses. So if that gives you any indication and what Julie Winkler and her team are doing right now is pretty exceptional. So Julie I will let you comment and then if anybody else wants to make a remark, John. Go ahead. Julie.

Julie Winkler — Chief Commercial Officer

Sure. Thanks, Terry, thanks for the question. Yeah, the data business certainly performed well in Q1 with our consolidated revenue of $132 million. So we were up slightly over the first quarter of 2019. We really have not seen much decline in our professional subscriber displays device count so far. So certainly from the impact of COVID-19 going forward what the team’s been doing is certainly close consultation with our key data vendors and also our clients to gather input. I’d say many of our customers were very well prepared for this work from home and the scenario that we’re in. They transitioned their traders and their support teams with minimal disruption and they wanted to recreate as much as possible the experience those people have in active data and that work from home and DR environment.

So for some customers, the transition was more disruptive. The good news there, as Terry pointed out earlier, there really was no disruption right in terms of the market data technology or distribution. And so we’ve seen some of our vendors tell us there might be some decreased demand for data screens in this going forward while others are actually seeing an increased need from their customers for our data. So we are going to definitely remain close to them. I think the two things that we’re looking at in particular are the historical data that I talked about earlier where the last two months we saw 50% increase in sales as customers are shopping for data. As Terry pointed out the web traffic on those pages are up over 300%. Clients need to have access to that data to be able to continue to refine their trading strategies and manage risk going forward.

And additionally in our non display device business customers are increasingly seeking flexibility of how to use CME data in algorithms and machine learning capabilities and other automated solutions. So that’s a trend seen across the industry that we think will certainly continue through this. And we’re continuing to get as close to our customers as possible and also I believe bringing that team within our client development and research organization that we’ve talked about today is definitely going to be more client focused and continue to understand what their needs are so we can deliver new products, acquire new clients, and continue to work very closely with our channel distribution partners. So John, anything you want to add?

John W. Pietrowicz — Chief Financial Officer

No, I mean, I think we saw solid first quarter compared to the fourth quarter and Julie get to alter all the points.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, guys. So I believe we have about three or four more questions and I’d like to get through all of them. So I don’t want to cut anybody out, so why don’t we continue?

Operator

Thank you. Our next question comes from Kyle Voigt with KBW.

Kyle Voigt — KBW — Analyst

Hi, good morning. John [Technical Issues].

Terrence A. Duffy — Chairman & Chief Executive Officer

Kyle, I didn’t hear your question but — John did you get the question?

John W. Pietrowicz — Chief Financial Officer

No, no. I am not sure.

Operator

I do apologize. Our next question comes from Ken Hill with Rosenblatt.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hey, Ken.

Kenneth Hill — Rosenblatt Securities — Analyst

Hi, good morning. Thanks for the extended questions here. I just wanted to ask on expenses, you had some nice control here in the first quarter. So I just wanted to — how to think about that for 2Q, maybe any potential COVID-19 impacts that might flow through into 2Q, whether there will be kind of travel lockdowns, or are you thinking about the expense base here over the near term and then as the year progresses would be helpful? Thanks.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Ken. I will hand it over to John and he can address that. John.

John W. Pietrowicz — Chief Financial Officer

Yeah. Thanks, Terry. I think the entire organization really has done a fantastic job in term of managing our expenses in this really unprecedented time and unprecedented amount of activity at the exchange. In terms of expense impacts related to the pandemic certainly we’re seeing less employee attrition and less hiring going on during this period of time. And when you look at the level of travel it’s down substantially as you would expect. In fact in the first quarter it was half of what we spent in the fourth quarter of 2019 and I would imagine in this quarter it will be near zero. Also our marketing and advertising spend is pushed out into — later on into the year and also we really moved to as Julie had and Ken had pointed out previously, we really moved to more video conferencing and webinars versus event. So we have seen some impacts related to the crisis. I am very proud of the entire organization and how they’ve been able to manage through it and also manage expenses.

In terms of our guidance we certainly are very comfortable that we’re not going to exceed our guidance range and it’s a little too early really to predict how we’re going to come out. It really relates to a lot of how the stay at home orders get taken away, how businesses respond to and as Terry has mentioned previously these are really unprecedented times. So we felt that it’s a little too early to make any adjustments to our guidance. But we are — as we have — as the entire organization has obliged several years we’ve been managing our expenses well.

Terrence A. Duffy — Chairman & Chief Executive Officer

And just to add to what John said, Ken, I think it’s a pretty safe bet that we will be very conservative with our people as they get back into their normal routines whenever that may or may not be to limit that to some degree. I’m not just going to turn the valve and say everybody go back to what you were doing before because as we clearly highlighted on this call and then have been over the last several weeks we’ve been able to function at a very high level and I’m very proud of my team for doing this all throughout the world from home. So we will be very cautious to continue on with business as usual from a travel perspective and if there are things that would incur cost.

Kenneth Hill — Rosenblatt Securities — Analyst

Great. Thanks very much for the detail.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Ken, appreciate it.

Operator

Thank you. Our next question comes from Ken Worthington with JPMorgan.

Terrence A. Duffy — Chairman & Chief Executive Officer

Hi, Ken.

Kenneth Worthington — JPMorgan — Analyst

Hi, thank you for squeezing me in. In terms of your response to Christian’s question earlier on the record or near record margin levels, where are those levels now that we are sort of closing in on the end of April and volatility is diminished? And given the decline in interest rates, what are the net yields that you’re earning on the customer cash side versus the yield you might have earned earlier in the year?

Terrence A. Duffy — Chairman & Chief Executive Officer

I think John Pietrowicz answered your latter question a moment ago but maybe I’m mistaken. John I think you already answered that one but you can say it again. As far as the amounts that we on deposit, I will yield to John Pietrowicz on that exact number if you want to give it a minute because it does fluctuate depending on what the margin models are calling for up or down. As I said earlier we have raised margins across the Board on most asset classes to be prudent on risk management. So that is obviously a big part of it. And let me turn it over to John for any other comment on that.

John W. Pietrowicz — Chief Financial Officer

Sure. Thanks, Terry. As I mentioned previously we are averaging in terms of cash that’s put up the Clearing House in terms of what’s available for investments on behalf of our clients, it was $88.7 billion through the month of April. In terms of noncash collateral on average and this is the amount that is subject to — that we can — that’s managed on behalf — non-cash collateral that’s managed on behalf of or that’s put up at the Clearing House, about $136 billion. Both are up substantially from the first quarter. First quarter average cash was about $40 billion and about $114.5 billion that is related to — that we earn some collateral management fees for. At the end of March, our total collateral was $255.4 billion being relatively stable through the end of April and approximately $240 billion to $250 billion range. So as Terry indicated, this is really related to prudent risk management. In terms, I’ve already mentioned, in terms of the amount of sharing that we do with our customers because we invest on their behalf, they get about 80% — the customers get about 80% of what we earn and we keep about 20% of what we earn and right now the IOER is at 10 basis points.

Kenneth Worthington — JPMorgan — Analyst

Okay. Thank you.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, John. Thanks, Ken.

Operator

Thank you. Our next question comes from Kyle Voigt with KBW.

Terrence A. Duffy — Chairman & Chief Executive Officer

Welcome back, Kyle.

Kyle Voigt — KBW — Analyst

I am sorry about that and I’m just asking the last couple but it was just on expenses. I know there’s a — I think there’s a $1.54 billion annual expense run rate. If you just look at the first quarter, you kind of annualize that and guidance was $1.64 billion to $1.65 billion, just wondering if John, if you could help us bridge the gap there in terms of what’s going to drive the incremental spend year-over-year and if the expense lacks the roll out guidance range if the options for Demian and your CRO expenses and other expenses remain low due to COVID-19?

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Kyle. John?

John W. Pietrowicz — Chief Financial Officer

Yeah, thanks Kyle. Yeah, we certainly — like I mentioned very proud of the entire organization in terms of how they have been managing expenses especially in light of the crisis and the incredible amount of activity that has to be managed. And it’s across the entire organization that’s really stepped up to manage the incredible amount of volume and the customer outreach has been tremendous, really I think differentiates us from our peers in terms of our engagement with our customers. So a trend as a result across the board from the employees. We’ve definitely been managing our expenses very carefully. We intend to continue to manage our expenses very carefully. This is something that you’ve seen us do over the last several years. Every employee really looks at and makes sure that we are spending our money as efficiently as we can. Going forward, it’s too early to tell in terms of how the crisis plays out. And so we felt that it wasn’t appropriate yet to change our guidance. We’re very comfortable that we’re not going to be above our guidance and in fact I think there’s opportunity based on different scenarios for us to come in under our guidance. But it’s a little too early to tell. And in terms of the back half of the year, depending on how the crisis plays out there could be some timing related to some of our spending. And as you are aware, our fourth quarter tends to be heavier spend for us in terms of seasonality in our expenses.

Terrence A. Duffy — Chairman & Chief Executive Officer

Thanks, Kyle. Thanks, John.

Kyle Voigt — KBW — Analyst

Okay. Thank you.

Operator

Thank you. At this time, we have no further questions in the queue, so I’ll turn it back to Mr. Duffy for closing comments.

Terrence A. Duffy — Chairman & Chief Executive Officer

Dave, thank you. Thank you all very, very much. We appreciate the opportunity to address your questions during this quarter. And I will say it once again most importantly, we wish you and all your families and friends nothing but the best of safety and health. God bless, be safe, and we’ll look forward to talking to you all soon. Bye-bye.

Operator

[Operator Closing Remarks]