WEBVTT - The CME's Terry Duffy on the Big Risks He's Seeing Now 0:00:12.800 --> 0:00:16.079 Hello, and welcome to another episode of the All Thoughts Podcast. 0:00:16.160 --> 0:00:17.520 I'm Tracy Alloway. 0:00:17.239 --> 0:00:18.320 And I'm Joe Wisenthal. 0:00:18.600 --> 0:00:21.200 Joe, I can't remember did you live in Chicago At 0:00:21.200 --> 0:00:21.600 one point? 0:00:21.640 --> 0:00:24.759 I lived in Juliet, Illinois. Oh, jud two to twelve. 0:00:24.880 --> 0:00:25.360 Oh my gosh. 0:00:25.920 --> 0:00:28.159 Yeah, that's so funny. So I've lived in Chicago for 0:00:28.360 --> 0:00:32.840 middle school, so I think, like, yeah, we probably overlapped. 0:00:32.840 --> 0:00:33.640 It's a great city. 0:00:33.720 --> 0:00:34.839 I love coming here. 0:00:34.960 --> 0:00:38.240 And from a finance perspective, it is also an important city. 0:00:38.720 --> 0:00:43.160 It's an interesting and important city, absolutely, and so obviously, yes, 0:00:43.280 --> 0:00:46.279 when I think of Chicago, I think of trading and 0:00:46.560 --> 0:00:47.760 commodities of particular. 0:00:48.040 --> 0:00:50.120 Yeah, and I feel like there's a lot of trading 0:00:50.159 --> 0:00:54.160 and financial infrastructure located in Chicago that has a great 0:00:54.360 --> 0:00:57.600 line of sight over what's happening in the rest of 0:00:57.640 --> 0:01:00.760 the system and the rest of the country. And so 0:01:00.800 --> 0:01:04.200 since we are here in Chicago at the ISDA AGM, 0:01:04.280 --> 0:01:07.240 we would be remiss if we didn't try to understand 0:01:07.600 --> 0:01:11.880 the perspective of the Chicago sort of trading market and 0:01:12.000 --> 0:01:14.080 what's going on in finance right now, let's do it 0:01:14.120 --> 0:01:15.880 all right, So I am very pleased to say that 0:01:15.920 --> 0:01:18.760 we have the perfect guest for this episode. We are 0:01:18.800 --> 0:01:21.400 going to be speaking with Terry Duffy, chairman and CEO 0:01:21.760 --> 0:01:24.040 of CME Group. Terry, thank you so much for coming 0:01:24.040 --> 0:01:24.679 on all thoughts. 0:01:24.760 --> 0:01:26.760 I'm Tracy, Joe. Thank you very much for having me. 0:01:26.800 --> 0:01:27.640 Welcome to Chicago. 0:01:27.760 --> 0:01:28.680 Thank you appreciate. 0:01:28.720 --> 0:01:29.479 Welcome back, Joe. 0:01:29.720 --> 0:01:32.640 Yeah, it's been about twenty years since since I've actually 0:01:32.680 --> 0:01:35.080 been here. So it's weird because I'm walking around. I 0:01:35.080 --> 0:01:37.760 see some buildings that I recognize, and other things, like 0:01:37.800 --> 0:01:40.080 this area where we are right now, are completely new. 0:01:41.080 --> 0:01:43.120 Why don't we start with some of the things that 0:01:43.200 --> 0:01:46.880 happen happening in markets recently because there is no shortage 0:01:47.240 --> 0:01:50.160 of headlines. You have the debt ceiling ongoing, you have 0:01:50.200 --> 0:01:53.360 the banking crisis, you have the FED raising rates, although 0:01:53.520 --> 0:01:56.160 maybe it's on pause for a while. Now, let's start 0:01:56.160 --> 0:01:59.600 with a banking crisis. What's going on there? What do 0:01:59.600 --> 0:02:02.360 you see from the CME perspective, because of course you 0:02:02.480 --> 0:02:05.720 deal with interest rate derivatives and hedges, so this is 0:02:05.760 --> 0:02:08.840 sort of ground zero for some of the asset liability 0:02:08.880 --> 0:02:10.359 mismatches that we've seen in banking. 0:02:10.760 --> 0:02:12.640 Yeah, so the I don't know if I want to 0:02:12.639 --> 0:02:15.440 call it a banking crisis, because a banking crisis is 0:02:15.560 --> 0:02:19.399 traditionally systemic throughout the whole organization. This is something that's 0:02:19.440 --> 0:02:23.520 affecting mostly these second and third tier banks. So the 0:02:23.600 --> 0:02:27.440 other only one that has gone away in recent times 0:02:27.480 --> 0:02:29.840 is Credit Swiss, which was a major bank, but they, again, 0:02:30.000 --> 0:02:33.440 Credit Swiss has been, you know, advertisers having issues for 0:02:33.480 --> 0:02:35.160 many years, so I don't think that was a giant 0:02:35.200 --> 0:02:38.639 surprise to a lot of participants in the banking world. 0:02:40.160 --> 0:02:43.480 As far as the third tier banks, especially, well, it's 0:02:43.560 --> 0:02:46.040 zooming in a couple I guess. You know. One of 0:02:46.040 --> 0:02:50.520 the couple things that I've said about, especially Silicon Valley SVB, 0:02:51.040 --> 0:02:53.800 is is it's really amazing to me that the banks 0:02:54.320 --> 0:02:57.520 who are in the interest rate business in lending business. 0:02:58.200 --> 0:03:02.120 I'm in the interst rate trading business, hedge risk management 0:03:02.120 --> 0:03:04.840 business of interest rates, and they're in the business of 0:03:04.880 --> 0:03:09.440 making loans to participants and deposits for their clients, that 0:03:09.800 --> 0:03:12.959 they should have a better understanding of the rate market 0:03:13.120 --> 0:03:15.640 just in general. I mean, the FED has telegraphed here 0:03:15.680 --> 0:03:18.440 in the United States that we're going to have a 0:03:18.480 --> 0:03:23.440 prolonged tightening series of events, and we did so we 0:03:23.520 --> 0:03:26.320 went from essentially zero to just over five percent in 0:03:26.360 --> 0:03:30.360 the last year or so, and still they hedged long 0:03:30.440 --> 0:03:35.600 duration on their books with their client money to get 0:03:35.640 --> 0:03:38.480 a yield, and in return the rates continue to go up. 0:03:38.520 --> 0:03:40.880 And we know what happened that was an unhedged position. 0:03:41.000 --> 0:03:43.320 So you would have to ask yourself, you know, where 0:03:43.440 --> 0:03:46.080 is the risk management associated with some of these banks 0:03:46.080 --> 0:03:50.720 that are taking money from participants on deposit their fiduciaries. 0:03:50.760 --> 0:03:53.720 They should have a better understanding of the business that 0:03:53.760 --> 0:03:57.640 they're in. So I was quite surprised by that. I 0:03:57.680 --> 0:04:00.280 don't like to see the banks continue to dwindle. We 0:04:00.320 --> 0:04:04.480 went from roughly thirty thousand banks back in nineteen fifty 0:04:04.520 --> 0:04:08.200 to less than forty three hundred today, so that's not 0:04:08.280 --> 0:04:11.760 a good trend for the financial sector. So I don't 0:04:11.800 --> 0:04:13.920 like to see that activity. So I would hope that 0:04:13.960 --> 0:04:16.800 they people would continue to manage their risk in a 0:04:16.839 --> 0:04:19.320 smart way. And I'm not saying that from a self 0:04:19.400 --> 0:04:23.480 interest proposal. Most second and third tier banks, because of 0:04:24.440 --> 0:04:27.560 some accounting rules, can't even use futures they but they 0:04:27.560 --> 0:04:30.680 can use swaps, and I'd like to see them just 0:04:30.760 --> 0:04:33.920 use the swaps, I said in a meeting earlier today. That. 0:04:34.000 --> 0:04:36.120 I'm a big believer in the ecosystem, because if the 0:04:36.120 --> 0:04:38.840 ecosystem continues to grow, then see them will do just 0:04:38.880 --> 0:04:42.200 finding that ecosystem. So, you know, I'm a little surprised 0:04:42.240 --> 0:04:45.080 by some of this activity with the banks, and it's 0:04:45.120 --> 0:04:50.640 frightening the regular participants listen, they're looking just to keep 0:04:50.680 --> 0:04:53.040 their money in a safe place. And when you lose 0:04:53.080 --> 0:04:56.159 the faith of the banks, it's a very troubling event. 0:04:56.240 --> 0:04:58.440 So the bigger ones get bigger, the smaller ones go 0:04:58.480 --> 0:05:02.560 away and return. You could say that the consumers pay 0:05:02.600 --> 0:05:02.800 for that. 0:05:03.120 --> 0:05:06.159 Do you see anything changing in terms of trading volume 0:05:06.240 --> 0:05:07.679 of some of these interest rate products? 0:05:07.760 --> 0:05:08.000 Now? 0:05:08.000 --> 0:05:10.800 Can you see banks starting to react more to this 0:05:10.960 --> 0:05:11.960 risk here? 0:05:12.120 --> 0:05:16.039 I think what could happen is back in the seventies, 0:05:16.560 --> 0:05:19.560 before even before I was in the marketplace, a lot 0:05:19.600 --> 0:05:25.719 of the agricultural communities, when farmland was really sufferings. Actually 0:05:25.880 --> 0:05:28.520 just south and west of where you spent some of 0:05:28.560 --> 0:05:32.640 your early years, Joe, south of Joliette, some great farmland, 0:05:32.720 --> 0:05:35.400 and you know, mid to southern Illinois was in trouble. 0:05:36.040 --> 0:05:39.880 And you know, eventually when farmers wanted to borrow money 0:05:40.000 --> 0:05:42.000 from the banks, the banks said to them that they 0:05:42.040 --> 0:05:44.640 need to have a hedging program in place in order 0:05:44.680 --> 0:05:47.560 to get loans from the banks. No, not all, but some. 0:05:47.839 --> 0:05:50.599 So I think that was something that you know, helped 0:05:51.279 --> 0:05:56.000 bolster their industry and in return, you know, risk management 0:05:56.000 --> 0:05:59.680 became more of a popular tool for the agricultural community, 0:05:59.680 --> 0:06:02.839 like it with financial services. So what does that mean 0:06:02.920 --> 0:06:06.520 for the banks and the second and third tier banks? 0:06:06.800 --> 0:06:09.000 You know, I think that they can continue to do 0:06:09.040 --> 0:06:11.520 the swaps, as I said, and in return, companies like 0:06:11.600 --> 0:06:13.640 mine can benefit because most of the banks who do 0:06:13.680 --> 0:06:17.080 the swaps with the second and third tier banks historically 0:06:17.160 --> 0:06:20.600 do the layoff in derivatives on CMA groups. So for us, 0:06:20.680 --> 0:06:23.400 it's again, it works for us either way. 0:06:23.600 --> 0:06:25.480 But did you see And I get that your point 0:06:25.600 --> 0:06:28.880 is not to advertise or promote seeing me specifically or 0:06:28.920 --> 0:06:32.400 necessarily out of self interest. But when we had and 0:06:32.440 --> 0:06:36.039 I guess it started with SVB and people, why did 0:06:36.040 --> 0:06:38.719 they not take better care of their duration risk? Can 0:06:38.760 --> 0:06:40.560 you like, if we looked at a chart, could we 0:06:40.640 --> 0:06:44.200 see or something in the data that other entities woke 0:06:44.279 --> 0:06:46.560 up to this? I mean, I'm also thinking of some 0:06:46.640 --> 0:06:48.560 of the deposit moves where it does seem like there 0:06:48.600 --> 0:06:50.960 was the sort of nonlinear steps, Suddenly people want to 0:06:50.960 --> 0:06:53.560 be in money market, mutual funds, et cetera. Was there 0:06:53.640 --> 0:06:58.080 some notable reaction among banks and after the SVB collapse 0:06:58.160 --> 0:06:59.400 in terms of their hedging activity. 0:07:00.120 --> 0:07:01.920 I wouldn't be able to see it, as I said, 0:07:01.960 --> 0:07:04.320 because most of those banks would do swaps, and I 0:07:04.320 --> 0:07:07.080 don't see the swap activity. I would only see the 0:07:07.160 --> 0:07:09.880 layoff from the larger dealers, so their activity is always 0:07:09.920 --> 0:07:14.200 pretty active. Joe so, and I wouldn't see that coming. 0:07:13.960 --> 0:07:18.520 In since we're just throwing out risks in the market. 0:07:19.040 --> 0:07:22.240 Let's do the debt ceiling and treasury market and we 0:07:22.280 --> 0:07:25.480 can get into debt ceiling specifics. But even before this 0:07:25.720 --> 0:07:30.800 latest showdown, I heard complaints from dealers about liquidity in 0:07:30.840 --> 0:07:35.440 treasuries and often in treasury futures, which you wouldn't necessarily expect. 0:07:35.760 --> 0:07:37.880 What's going on there? And is there anything that the 0:07:37.880 --> 0:07:41.600 CME can do to improve liquidity in that market? 0:07:41.880 --> 0:07:46.600 Well, here, I think we continually run the largest futures 0:07:46.600 --> 0:07:48.840 exchange in the world, especially when it comes the raids 0:07:48.880 --> 0:07:52.120 and the treasury complex. The liquidity in our markets has 0:07:52.160 --> 0:07:57.240 been outstanding, especially through this entire tightening process. When people 0:07:57.320 --> 0:08:02.520 talk about liquidity. There's always going to be pockets of illiquidity, Tracy. 0:08:02.560 --> 0:08:04.720 It's just the nature of any market in the world, 0:08:04.720 --> 0:08:08.000 including some of the largest. There becomes a situation where 0:08:08.000 --> 0:08:12.280 the market has a precipitous move because of an unknown 0:08:12.320 --> 0:08:17.000 event or that happened to pop up that caught everybody 0:08:17.160 --> 0:08:20.000 off base, where you're going to have pockets of illiquidity. 0:08:20.040 --> 0:08:25.080 That's called volatility. So I think sometimes people mistake illiquidity 0:08:25.120 --> 0:08:28.720 with volatility, and that's just what makes markets move at times. 0:08:28.760 --> 0:08:32.520 So I don't believe that, you know, everything we've done 0:08:32.679 --> 0:08:35.600 has been proper for the marketplace. We continue to keep 0:08:36.720 --> 0:08:39.400 our engagement with our clients to see if there's something 0:08:39.400 --> 0:08:42.760 that they would like us to do differently. And again, 0:08:43.360 --> 0:08:46.080 I just think it's just a combination of you know, 0:08:46.240 --> 0:08:48.920 ill liquid times because of events that are happening in 0:08:48.920 --> 0:08:49.280 the world. 0:08:49.520 --> 0:08:52.240 This is like illiquidity is another word for a price 0:08:52.320 --> 0:08:54.240 move that I didn't like pretty much. 0:08:55.320 --> 0:08:57.880 You said that, not me, But that's sometimes what happens, Tracy. 0:08:57.960 --> 0:09:02.840 Yes, you know, we the last year we've seen extraordinary 0:09:02.920 --> 0:09:07.280 high rate volatility in general, and maybe it's come down 0:09:07.320 --> 0:09:10.040 a little bit. But of course I'm just curious, like 0:09:10.320 --> 0:09:14.520 obviously seems like volatility across any market is probably going 0:09:14.559 --> 0:09:16.839 to increase demand from any of the products that are 0:09:17.160 --> 0:09:21.679 traded on your exchange. You know, how much, like are 0:09:21.720 --> 0:09:24.280 you able to quantify how much this sort of like 0:09:24.520 --> 0:09:28.360 high rate vall regime has helped CME's business. And if 0:09:28.400 --> 0:09:29.600 we were to go to some just sort of like 0:09:29.960 --> 0:09:33.360 normal I don't know, twenty seventeen some year that we 0:09:33.400 --> 0:09:35.880 all kind of forget for some reason, like what does 0:09:35.920 --> 0:09:38.079 that mean for a business like the CMA. 0:09:38.600 --> 0:09:42.360 Well, I guess what you're trying to ask the question, 0:09:42.440 --> 0:09:45.199 not trying. What you are asking a question is how 0:09:45.280 --> 0:09:48.960 much does volatility play into the CME's average daily volume? 0:09:49.000 --> 0:09:50.480 Is that a fair way to Is that's it? Yeah? 0:09:50.920 --> 0:09:55.320 I on ironically, I always appreciate what the guests like, and. 0:09:55.400 --> 0:09:57.160 The guest rephrases the question. 0:09:56.960 --> 0:09:59.600 In a better way, understand what I'm trying to ask better. 0:09:59.400 --> 0:10:02.400 S So Joe, No, I mean, it's a great question, 0:10:02.520 --> 0:10:05.600 and I get it a lot, especially from new investor community. 0:10:05.600 --> 0:10:09.280 But I tell people, and this has been the historical fact. 0:10:09.400 --> 0:10:12.440 Volatility is a component of what we do, it's not 0:10:12.720 --> 0:10:18.679 what we do. So risk management is critically important. Margins 0:10:19.360 --> 0:10:22.800 are very thin across the board. You need to manage 0:10:22.840 --> 0:10:25.960 your risk in order to survive in today's world. It's 0:10:26.000 --> 0:10:29.040 a very competitive world. So people that have interest rate 0:10:29.160 --> 0:10:32.400 risk are people who have energy risks. Whatever the risk 0:10:32.480 --> 0:10:35.040 may be associated with the asset classes that I trade. 0:10:35.120 --> 0:10:38.000 Volatility is only a component of it because volatility never 0:10:38.040 --> 0:10:41.080 announces itself. You have to remember that this is because 0:10:41.120 --> 0:10:43.480 the VICS goes up or down, doesn't mean volatility is 0:10:43.480 --> 0:10:48.160 announcing itself. Volatility shows up when the FED makes a 0:10:48.480 --> 0:10:52.680 decision that no one saw coming. That's unannounced volatility, right, 0:10:52.800 --> 0:10:55.679 So you have to be prepared because if you're trying 0:10:55.679 --> 0:10:58.760 to manage your risk after the event has been announced 0:10:58.840 --> 0:11:01.440 or disclosed, whatever it may be, you're not going to 0:11:01.440 --> 0:11:03.240 be able to do so. Joe, So I think that's 0:11:03.240 --> 0:11:06.480 when people say volatility, you know, seeing me is based 0:11:06.480 --> 0:11:09.280 on volatility, it's not. It's a component. Risk management is 0:11:09.320 --> 0:11:12.640 critically important through all times of the cycle, no matter. 0:11:12.440 --> 0:11:17.439 What what does volatility actually mean for your own risk management? 0:11:17.480 --> 0:11:19.440 Because I imagine you know there are times you wake 0:11:19.520 --> 0:11:21.840 up and suddenly you have to start collecting more margin 0:11:22.000 --> 0:11:24.760 on something and as an exchange, that must be a 0:11:24.800 --> 0:11:26.080 challenge in the current environment. 0:11:26.640 --> 0:11:30.079 It is a challenge and it is a critical component 0:11:30.160 --> 0:11:34.080 to what we do. Since we don't participate in markets, tracy, 0:11:34.240 --> 0:11:37.280 we manage the risk for others, which makes it a 0:11:37.280 --> 0:11:39.880 lot easier to do so on margins and other things 0:11:39.880 --> 0:11:44.199 since we're not involved economically as far as that, so 0:11:44.360 --> 0:11:46.960 we're agnostic to the market where it goes up or down. 0:11:47.240 --> 0:11:50.640 Our focus is strictly on managing that, and we have 0:11:51.160 --> 0:11:55.680 parameters on our margin capabilities of what we will move them, 0:11:55.920 --> 0:11:58.719 and we go with what we have SPAN and now 0:11:58.760 --> 0:12:01.640 we have a new system called SPAN two, which is 0:12:02.480 --> 0:12:06.400 systems that first of all, SPAN was licensed to multiple 0:12:06.400 --> 0:12:09.040 exchanges around the world for their risk management protocols in 0:12:09.120 --> 0:12:11.160 order to set margins, and we continue to run that 0:12:11.280 --> 0:12:15.040 and now are just introducing a more advanced system coming 0:12:15.160 --> 0:12:17.959 up at the end of this year. So listen, we 0:12:18.360 --> 0:12:21.480 look at it and we don't deviate from the formula. 0:12:21.559 --> 0:12:25.280 We don't speculate on the margins. It's thinking, well, this 0:12:25.440 --> 0:12:27.760 is a good customer, so maybe we'll let that margin 0:12:27.840 --> 0:12:30.600 go a little bit. So we don't do that. We 0:12:30.640 --> 0:12:32.079 go right by the letter of the law when it 0:12:32.160 --> 0:12:35.319 comes to margins. I think sometimes people say that an 0:12:35.320 --> 0:12:39.559 example being during the Ukraine War. I talked about earlier 0:12:39.600 --> 0:12:42.920 today on a panel with Scott o'melio, when you looked 0:12:42.920 --> 0:12:45.560 at what's going on with the price of energy and 0:12:45.600 --> 0:12:48.920 then ultimately the price of wheat was really affected because 0:12:48.920 --> 0:12:52.000 of the bread basket and the Baltic there. We raise 0:12:52.080 --> 0:12:55.120 margins significantly because the price you know you're talking about. 0:12:55.400 --> 0:12:58.240 You know, roughly a third of the European nations are 0:12:58.320 --> 0:13:01.240 counting on that wheat for the survival. Most of the 0:13:01.240 --> 0:13:03.760 African nations are counting on that wheat for this as 0:13:03.800 --> 0:13:06.120 a staple for their survival, and all of a sudden 0:13:06.160 --> 0:13:09.160 it's getting trapped or not being allowed to come out 0:13:09.160 --> 0:13:12.240 of that region. You know, the market really took off 0:13:12.240 --> 0:13:14.720 on that, and we trade both soft and hard wheat, 0:13:14.760 --> 0:13:19.240 so we trade the baker's wheat and we also trade 0:13:19.240 --> 0:13:21.320 to feed wheat. So those are things that we have 0:13:21.400 --> 0:13:23.480 to be very very careful of because we don't want 0:13:23.520 --> 0:13:26.319 to get into a situation where we don't have enough 0:13:27.360 --> 0:13:31.440 margin on deposit or breaches of margin where Tracy, I'm 0:13:31.480 --> 0:13:33.480 not able to pay you because Joe didn't have the 0:13:33.520 --> 0:13:36.040 money to pay me to pay you. So we're very 0:13:36.040 --> 0:13:36.679 careful of that. 0:13:53.240 --> 0:13:57.360 Since we're talking about your market structure. We talked about 0:13:57.400 --> 0:14:01.800 this earlier at the is the meeting a CFTC chair Venom. 0:14:01.840 --> 0:14:05.120 But you know, last year around this time, there was 0:14:05.160 --> 0:14:09.560 a considerable fight debate over this idea put forward by 0:14:09.920 --> 0:14:14.040 FTX about changing how futures are regulated and traded in 0:14:14.080 --> 0:14:17.319 the United States to allow direct access to the exchange. 0:14:17.600 --> 0:14:23.560 Setting aside what happened with FTX, do you see eventually 0:14:23.720 --> 0:14:27.200 any merit or possibility that the US will go in 0:14:27.480 --> 0:14:31.000 something that direction where there is more direct access to 0:14:31.040 --> 0:14:33.680 the futures exchanges as opposed to having to go through 0:14:33.680 --> 0:14:34.120 a broker. 0:14:35.840 --> 0:14:38.400 Well, I don't know the ultimate answer to that, but 0:14:38.520 --> 0:14:41.240 I do know that if there is going to be 0:14:41.360 --> 0:14:44.160 a path forward like that, then everybody needs to be 0:14:44.240 --> 0:14:46.720 involved to make sure that we all understand the process, 0:14:46.800 --> 0:14:49.960 because the last thing we want to have happen is 0:14:50.040 --> 0:14:54.800 people who are hedging risks associated with the food in 0:14:54.840 --> 0:14:57.880 this country don't understand the risk management of it. So 0:14:57.920 --> 0:14:59.840 it all sounds great when we talk about crypto bec 0:15:00.040 --> 0:15:02.880 who cares, right, But when you're talking about if you're 0:15:02.880 --> 0:15:04.680 going to eat or not, or what the price of 0:15:04.720 --> 0:15:06.880 that product is, all of a sudden we care when 0:15:06.920 --> 0:15:10.560 we talk about not allowing energy companies to manage their risk, 0:15:10.640 --> 0:15:13.680 are not understanding how their risk is managed. Then all 0:15:13.680 --> 0:15:17.240 of a sudden we care because ultimately, when the markets 0:15:17.280 --> 0:15:22.240 become inefficient, that the cost does not born by the 0:15:22.320 --> 0:15:26.120 trader or the exchange that is born by the or 0:15:26.200 --> 0:15:31.480 by the consumer. The consumer absorbs those costs associated with 0:15:31.560 --> 0:15:35.000 inefficiencies in the marketplace. So I think whatever the whatever 0:15:35.360 --> 0:15:37.600 is going to be going forward, whether it's a direct 0:15:37.680 --> 0:15:40.600 model or something else, needs to make sure everybody understands. 0:15:40.640 --> 0:15:44.000 We bring all sectors along and we write rules associated 0:15:44.000 --> 0:15:46.080 with to make sure that people understand the rules of 0:15:46.120 --> 0:15:46.440 the road. 0:15:47.160 --> 0:15:49.520 I mean that definitely makes sense. But just to push 0:15:49.560 --> 0:15:52.840 on this a little bit further, like if we were 0:15:52.840 --> 0:15:54.680 to go in that direction in this country, like it's 0:15:55.600 --> 0:15:58.240 how would the CME adapt to such a model or 0:15:58.280 --> 0:16:01.040 what does that mean? What would that mean potentially. 0:16:00.600 --> 0:16:03.760 For ye you're asking me to speculate, Joe, on what 0:16:03.800 --> 0:16:06.840 the CME would do, and I won't do that. We're 0:16:06.880 --> 0:16:09.480 just not going to speculate on a what if scenario. 0:16:10.520 --> 0:16:15.120 I'm prepared for any outcomes that may or may not arise, 0:16:15.960 --> 0:16:18.560 and that's just good prudent risk management. In our part 0:16:18.640 --> 0:16:20.960 to make sure we were ready for those. But again, 0:16:21.040 --> 0:16:23.280 we're not going to comment on what our strategy would 0:16:23.320 --> 0:16:23.800 or would that be. 0:16:24.240 --> 0:16:25.880 I have a bunch of crypto questions that I. 0:16:25.800 --> 0:16:29.800 Want to What about the dee you guys you talked 0:16:29.800 --> 0:16:30.160 about it. 0:16:30.920 --> 0:16:32.800 Wait, wait, wait, I want to ask one other thing, 0:16:32.920 --> 0:16:36.080 just on commodities, because I had dinner with a bunch 0:16:36.120 --> 0:16:38.320 of commodities traders last week and I said, I was 0:16:38.360 --> 0:16:41.720 going to interview you. What should I ask? And yeah, 0:16:41.800 --> 0:16:44.360 they had a bunch of unprintable stuff to ask. 0:16:44.680 --> 0:16:47.240 But but the one those are good friends. 0:16:47.880 --> 0:16:50.320 One question that I thought was really good is one 0:16:50.400 --> 0:16:54.360 of them asked, why aren't you more active in LEM 0:16:54.600 --> 0:16:57.840 style commodities management? You know, the LEMY has had a 0:16:57.920 --> 0:17:00.920 series of scandals at this point, a lot of traders 0:17:00.920 --> 0:17:03.680 have lost trust in that business. Isn't this a giant 0:17:03.720 --> 0:17:05.840 market opportunity for the CME. 0:17:06.560 --> 0:17:09.760 Again, I think we look at markets, and I said 0:17:09.760 --> 0:17:14.800 this earlier, I'm not rooting for anybody to have problems 0:17:14.840 --> 0:17:17.399 like Lam has had. I don't believe in growing my 0:17:17.480 --> 0:17:22.119 business as someone else's despair, because that despair costs participants 0:17:22.320 --> 0:17:26.600 money and that's not healthy for markets in general. So 0:17:26.680 --> 0:17:29.800 I don't like that we are competing with l ME. 0:17:29.920 --> 0:17:33.000 I don't mind good old fashioned competition. We are competing 0:17:33.040 --> 0:17:35.000 with them in aluminum and some other products. But the 0:17:35.200 --> 0:17:39.080 product you're referring to is nichol is a much smaller market. 0:17:39.440 --> 0:17:42.680 It's also has a host of warehouses that are associated 0:17:42.720 --> 0:17:45.040 with that market that you would have to replicate it. 0:17:45.040 --> 0:17:50.000 It's not just let's list nickel and not have the 0:17:50.040 --> 0:17:53.480 facilities to make certain that the deliveries on a nickel 0:17:53.560 --> 0:17:57.159 are facilitated properly so someone doesn't get delivery of a 0:17:57.240 --> 0:18:02.439 box of rocks, which actually happened versus nickel. So again, 0:18:02.680 --> 0:18:06.080 I think from our standpoint, I don't like seeing what's 0:18:06.119 --> 0:18:08.160 going on with l and ME. But at the same time, 0:18:09.359 --> 0:18:12.159 we're going to continue to be competitive in areas that 0:18:12.200 --> 0:18:15.040 we think we can do well at and I've already 0:18:15.119 --> 0:18:18.040 said that right now we're in a strong position on 0:18:18.080 --> 0:18:20.879 some of these metals products that we're competing in. Nichola 0:18:20.920 --> 0:18:23.439 is something that I have said that I am not 0:18:23.800 --> 0:18:26.640 looking to list at this moment. You never say never, 0:18:26.720 --> 0:18:28.840 but at this moment, I'm not looking to list it. 0:18:29.280 --> 0:18:31.000 I think it's got a lot of issues in and 0:18:31.040 --> 0:18:33.440 of itself. So we'll have to see how that market progresses. 0:18:33.480 --> 0:18:35.520 But again, it's a much smaller market than some of 0:18:35.560 --> 0:18:36.359 the other ones they have. 0:18:37.119 --> 0:18:38.680 Actually, I was going to go into the dead shot, 0:18:38.800 --> 0:18:40.879 but now I'm curious, like, what is it about Nickel 0:18:41.000 --> 0:18:44.800 specifically when you say, oh, it definitely has issues. 0:18:44.520 --> 0:18:47.320 But got it? Well, it has issues because I don't 0:18:47.320 --> 0:18:49.040 know if it's the warehouse system. I don't know if 0:18:49.040 --> 0:18:51.800 it's the cash market associated with it. There's a whole 0:18:51.800 --> 0:18:54.520 host of things that maybe we need to modernize in 0:18:54.560 --> 0:18:57.480 cash markets to make the derivative much more efficient as well. 0:18:57.480 --> 0:19:00.359 Sometimes we're trying to have the derivative make the cash 0:19:00.400 --> 0:19:02.800 more efficient. You need to have a strong cash market 0:19:03.040 --> 0:19:05.520 if in fact you're going to have a strong derivative market. 0:19:05.840 --> 0:19:08.240 We're going to have to do an episode on commodities 0:19:08.320 --> 0:19:10.480 collateral management soon, and I think I have the perfect 0:19:10.480 --> 0:19:10.960 guest for that. 0:19:11.160 --> 0:19:14.360 I'm looking forward to that one. Right to the dead ceiling. 0:19:16.960 --> 0:19:18.639 How big of a deal would it be if the 0:19:18.760 --> 0:19:22.000 US were to miss a coupon payment in your opinion, Well. 0:19:21.840 --> 0:19:24.800 Here I don't again speculation. 0:19:25.000 --> 0:19:26.760 You're you're the one who said bring it back to 0:19:26.800 --> 0:19:27.200 the death. 0:19:27.240 --> 0:19:29.639 Well, the only reason I said that is because you 0:19:29.680 --> 0:19:33.000 said I wrote down markets dead selling fed FTX, and 0:19:33.040 --> 0:19:34.720 you hopscotched over two of them. 0:19:34.720 --> 0:19:36.560 So we're getting to them. We're not going in a 0:19:36.560 --> 0:19:37.560 linear rom I'm sorry. 0:19:37.600 --> 0:19:39.640 I'm sorry. Most people go in order, they say they're 0:19:39.640 --> 0:19:43.639 going to go in but that's what jo and Tracy Bloomberg. Sorry, 0:19:43.680 --> 0:19:46.320 so I got it. So I'm teasing you. So anyway, 0:19:46.400 --> 0:19:49.000 So I the dead ceiling here, I think talking about 0:19:49.040 --> 0:19:51.440 a potential default and what it would mean, I think 0:19:51.480 --> 0:19:54.520 you'd have to be hard pressed because I think that 0:19:54.520 --> 0:19:58.360 that could be catastrophic, to say the least, because it's 0:19:58.400 --> 0:20:02.960 not just the US, which is a huge obviously participants 0:20:03.000 --> 0:20:04.920 in the United States that could if we had a default, 0:20:04.920 --> 0:20:07.320 Because it's not just the treasuries. It could be a 0:20:07.400 --> 0:20:11.360 default or slowing a payment on Social Security, it could 0:20:11.400 --> 0:20:16.560 be slowing a payment on veterans affairs, which they need 0:20:16.600 --> 0:20:18.600 that money to survive. These are veterans that fought for 0:20:18.600 --> 0:20:21.640 our country. There's a whole host of things that payments 0:20:21.680 --> 0:20:23.720 need to go out to do so, not just the 0:20:23.760 --> 0:20:28.240 treasury market. So you also look at probably sixty other 0:20:28.240 --> 0:20:31.000 countries that are holding US debt. And I'm not referring 0:20:31.040 --> 0:20:33.800 to just China, because the easiest thing to say is China. 0:20:34.280 --> 0:20:37.600 Sometimes I think China wouldn't even care of the US defaulted, 0:20:37.680 --> 0:20:40.240 because that would only maybe bolster their long term view 0:20:40.640 --> 0:20:44.919 about where they put themselves in the financial system. And again, 0:20:45.119 --> 0:20:48.600 their view is in hundreds of years. Ours is in nanoseconds. 0:20:48.680 --> 0:20:50.919 So you've got to remember the difference between how they 0:20:50.920 --> 0:20:53.439 think about it. What I am very concerned about, and 0:20:53.440 --> 0:20:56.080 I hope our government unsands there's a lot of smaller nations, 0:20:56.160 --> 0:20:59.520 especially European nations, who own US debt that if it 0:20:59.560 --> 0:21:02.000