Lynne Fitzpatrick: Sure. So, we saw in Q3, it was at $94.9 billion, it was at $89.7 billion for Q4. And quarter-to-date, we are at $90.1 billion.
Terrence Duffy: And just to go back to the clearinghouse question for a second, I think it’s really important to note, we strategically did not increase our keep because we knew there was alternatives that people could park their money in versus keeping it in our clearinghouse. That actually fared a tremendous amount of fruit by us making that decision because we were able to keep the numbers that Lynne referenced and continue to bring in the additional revenue that we may not have if we tried to increase our take and people would have gone to alternative investments.
Gautam Sawant: Got it. Thank you.
Operator: Our next question is coming from the line of Chris Allen with Citigroup. Please go ahead.
Chris Allen: Yes, good morning everyone. I was wondering if you could provide a little bit more granularity around market data, maybe just some of the products rolling out with the addition of Google. And when this year you saw the year-over-year increase driven by some price increases in new demand in terms of SOFR. So maybe you could give us a little bit of color there just in terms of how that kind of breaks down? And just on the Google migration, I thought that was $30 million in annual costs. I know you are talking about incremental $60 million. I am just wondering what’s this incremental cost related to just in terms of is it more migration or is it new product developments, any color there would be helpful? Thank you.
Terrence Duffy: Yes. Thanks, Chris. We are going to let Lynne talk about the cost on the Google migration, because I think I will make sure we all stay in the same numbers and then we will turn it over to Julie to talk about the data.
Lynne Fitzpatrick: Sure. So on the cost side, in 2022, we did see $30 million in expense in line with our guidance. The guidance for 2023 is $60 million in expense. Now we will see an offset to that as we are seeing a decline in the capital expenditures related to capital refreshes that are no longer required. So we have about a $20 million offset that we are seeing step back. But the $60 million in expense guidance will be approximately evenly split between professional fees and technology fees for this year.
Terrence Duffy: Julie?
Julie Winkler: Yes. So, market data certainly was €“ had a very strong quarter again in the fourth quarter, we were up another 8% year-on-year and the increases is due primarily to both the value of our data, the new products that we are introducing and also the fee adjustments that we made back in January of 2022. And we also are seeing throughout the year favorable performance both in our drive data area in terms SOFR licensing, as you mentioned and also just organic across our professional subscriber devices and also non-display. And I’d say the one thing as it relates back to our new products and also our work with Google is we know that we have very valuable data and we know being able to produce more of that data in analytics and putting that in the cloud is going to be really what our clients are asking for.
And so we are highly focused on looking at new ways to develop that with our partners at Google. We have got a number of deep dives underway with them on the innovation front, including things on data analytics, AI, ML, new APIs and also new ways to help our clients understand the data and analytics around their risk management. So we have already begun to launch a number of those products, those begin to be rolled out in forward. And some of it is also just our new product operating model that we are using. And so we are seeing an increased velocity in which we can put these products out, so things like in our data mined area. Some of our new benchmarks and indices are also being created through that. And so you’ll continue to see a rollout of €“ specifically as it relates back to the term SOFR revenue.
This is revenue that was part of the licensing effort that the team is underway. At the end of Q4, we had over 2,000 firms that we have licensed for term SOFR products. And really, we’re continuing to see increased demand for that. That was up over 300 firms just since the end of Q3, just to kind of show the acceleration of that. These are €“ the revenue there is around people being licensed for OTC derivative product usage. And also, we’re finding in a lot of these cases, these are new customers to CME Group. So we’re also working heavily within our sales organization to convert those users and expose them into our trading business. And so with everything within market data, it’s what can we do to provide insights to our clients that will also create support and synergies and transaction based.
I hope that helps us.
Chris Allen: Thank you.
Terrence Duffy: Thanks, Chris.
Operator: Our next question is coming from the line of Alex Blostein with Goldman Sachs. Please go ahead.
Alex Blostein: Hey, good morning. Thanks for the question. I was hoping just a follow-up on the last discussion around cloud migration and expenses related to that. As you guys think about the future beyond 2023, and any incremental costs associated with migration. I was hoping you could flesh that out. But also bigger picture, as you think about CME’s expense flexibility on a go-forward basis. To what extent do you think this sort of limits your ability to be more flexible like we’ve seen in the past? Thanks.
Terrence Duffy: Lynne?
Lynne Fitzpatrick: Sure. So if we think about the Google migration, I think what John guided to last year, was that we would see about 4 years of incremental cash costs averaging $30 million cash cost per year. So we did see that $30 million in 2022. The cash cost for this year are estimated at $40 million. So we do expect over the next 2 years to have some incremental costs related to the migration. After that point, we see ourselves getting to breakeven and ultimately a cash flow positive for the investment. One of the reasons that we are pursuing this initiative is to increase our flexibility. And we will continue to see a move from infrastructure-intensive spend and moving into this environment where we have CapEx coming down, the coming down, ultimately, we will see more of the expense in the technology line as we are renting the capacity as we need it as opposed to building through infrastructure.
So that is the migration that we expect to see over the next several years on the cost base.
