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Intercontinental Exchange (ICE) Q2 2018 Earnings Conference Call Transcript

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Intercontinental Exchange (NYSE: ICE)

Q2 2018 Earnings Conference Call

Aug. 2, 2018 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning, and welcome to the Intercontinental Exchange second-quarter 2018 earnings conference call. [Operator instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Warren Gardiner, vice president of investor relations. Please go ahead.

Warren Gardiner -- Vice President Investor Relations

Good morning. ICE's second-quarter 2018 earnings release and presentation can be found in the Investors section of These items will be archived, and our call will be available for replay. Today's call may contain forward-looking statements.

These statements, which we undertake no obligation to update, represent our current judgment and are subject to risks, assumptions, and uncertainties. For a description of the risks that could cause our results to differ materially from those described in forward-looking statements, please refer to our 2017 Form 10-K. In our earnings supplement, we refer to certain non-GAAP measures, including adjusted income, operating margin, expenses, EPS, EBITDA, organic revenue, free cash flow, and tax rate. We believe our non-GAAP measures are more reflective of our cash operations and core business performance.

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You'll find a reconciliation to the equivalent GAAP term in the earnings materials and an explanation of why we deem this information to be meaningful, as well as how management uses these measures in our Form 10-Q. When used on this call, net revenue refers to revenue net of transaction-based expenses, and adjusted earnings refers to adjusted diluted earnings per share. Please see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain terms. Also with us on today -- call today are Jeff Sprecher, chairman and CEO; Scott Hill, chief financial officer; and Ben Jackson, our president.

I'll now turn the call over to Scott.

Scott Hill -- Chief Financial Officer

Thanks, Warren. Good morning, everyone, and thank you for joining us today. I'll start on Slide 4 with some of the key highlights from our second quarter. ICE's consolidated second-quarter net revenues increased 6% year over year to a record $1.25 billion.

Data and listings revenues were $637 million, while trading and clearing net revenues were a record $609 million. Adjusted operating expenses totaled $503 million for the quarter, slightly below the midpoint of our guidance range and up modestly versus the second quarter of last year. Adjusted operating margins expanded 2 points to 60%, and adjusted operating income rose 8% to $743 million. These strong operating results, coupled with a lower adjusted tax rate of 24%, generated adjusted earnings per share of $0.90, up 18% from the second quarter of 2017.

And importantly, through the first half of 2018, operating cash flows increased 13% to $1.2 billion. We've returned nearly 85% of that cash through nearly $760 million of share repurchases and $280 million in dividend payments. You'll note that we accelerated roughly $160 million of repurchases into the second quarter following the short-term decline in our share price after our last earnings call. We continue to expect to fully utilize the approximately $440 million remaining on our original $1.2 billion share authorization during the second half of the year.

Now let's move to Slide 5, where I'll discuss the data and listing segment. Data services revenues were up 4% year over year on an organic constant-currency basis. Adjusting for the impact of the audit true-up we noted during last year's second quarter and some delayed implementations in our connectivity business during this year's second quarter, 2Q growth would have accelerated to above 5%. This solid revenue growth combined with synergy achievement helped improve adjusted operating margins in our data and listing segment to 52%.

Within data services, pricing and analytics revenues were up 7% on an organic constant-currency basis in the second quarter. That's an acceleration from 5% in the first quarter. And with further acceleration expected in the second half, we remain confident that this business will grow 7% for the full year. That's two to three times faster than prior to our acquisition of IDC.

Importantly, that strong organic growth doesn't yet include the benefit of the Bank of America Merrill Lynch Indices, where revenues were also up meaningfully from where they were a year ago, driven by leveraging ICE's global sales force. Moving to exchange data. Revenues were flat year over year on an organic constant-currency basis. Revenue derived from the consolidated tape plan was down year over year, somewhat offset by modest growth in the NYSE prop data.

In our futures business, data revenues were down 3%. However, adjusted for the 2Q '17 audit fee, our futures data grew 4% on an organic constant-currency basis. Finally, desktop and connectivity revenue was up 2% on an organic constant-currency basis. Connectivity and feeds grew 4% despite the impact from the previously mentioned connectivity implementation delays.

We expect connectivity and feeds growth to reaccelerate in the third and fourth quarter. And we continue to expect full-year revenue growth of 7%. Our desktop revenues, which represent less than 4% of our overall data revenues, declined 8% on an organic constant-currency basis. The market trend away from standardized desktop terminals to customizable feed and alert-driven solutions continues.

In addition, we're seeing erosion in our retail platform, eSignal, where there is typically higher customer churn and competitive offerings with a wider range of services attached to the platform. Looking to the second half, organic ASV entering the third quarter is up 6.3%, including pricing and analytics ASV up over 7% and connectivity and feeds up over 7%. We expect continued sequential improvement in revenues and revenue growth in the third and fourth quarters. Assuming current spot rates hold, we anticipate third-quarter data revenues between $530 million and $532 million and fourth-quarter revenues between $538 million and $542 million.

Turning to listings. Revenue increased 5% organically year over year. The NYSE raised nearly $9 billion through 20 IPOs in the second quarter. Through the first half of the year, the NYSE remained the global leader in capital raised through IPOs with over $19 billion.

We are now home to 21 of the last 22 IPOs that have raised over $1 billion. Please turn to Slide 6, where I'll provide an overview of our trading and clearing business. Trading and clearing revenue increased 11% year over year in the second quarter. In our futures business, revenues grew 10% versus the prior year despite only a 1% increase in volumes.

A positive mix shift toward higher RPC product, such as Gasoil, ags, and emissions, yielded a 9% year-over-year improvement in our blended futures RPC. While July volumes have been lower, open interest in our oil franchise is tracking up 11%, led by double-digit growth in our benchmark Brent contract. On the agricultural side, open interest is up 17% year over year. And in our interest rates -- in our rates business, open interest is up 11%, led by Euribor and Gilt, which are up 32% and 25%, respectively.

As we've said before and as we saw during the first half, elevated levels of open interest generate strong trading volumes when mixed with volatility. Our over-the-counter markets benefited from strength in CDS clearing, as well as ICE BondPoint. During the second quarter, demand for credit protection and continued strong buy-side clearing activity drove a 45% year-over-year increase in CDS notional cleared. Volume at BondPoint grew nearly 20% versus last year on a pro forma basis.

The strong revenue performance combined with disciplined expense management enabled expanded adjusted operating margins of 68% and generated a 12% increase in adjusted operating income compared to the prior year. I'll conclude my remarks on Slide 7. We're pleased with the strong start to 2018. First-half revenues increased 5%.

Adjusted operating profit increased 8%. Cash flows increased 13%. And adjusted EPS grew 21%. Our trading and clearing segment generated 11% revenue growth.

Margins expanded to 68%. And open interest in July is up double digits in our oil, ags and rate products. During the first half, on an organic constant-currency basis, our pricing and analytics business grew 6%, and our connectivity and feeds business grew 7%, while the NYSE remained the leader in IPO proceeds raised. We remain on track to achieve our 2018 synergies, and our data and listings margins expanded to 52%.

And we returned more cash to shareholders during the first six months of 2018 than we have in any full year prior to 2017 even as we continue to invest opportunistically in strategic assets that will further enhance our future growth profile. The right-hand side of Slide 7 reflects updated guidance. Though our full-year organic constant-currency data revenue growth will be between 5% and 6%, our second half guidance reflects continued sequential improvement and overall growth in our data revenues of at least 6% on an organic constant-currency basis. That accelerated growth will be supported by continued strength in pricing and analytics and connectivity and feeds, which, as mentioned previously, we continue to expect to grow at or above 7% for the year.

Our core second half expenses will land as near the low end of our original guidance entering 2018. And our adjusted tax rate for 3Q and 4Q is expected to remain around 24%. $23 million to $25 million in TMC and CHX expenses, along with $10 million of nonrecurring severance charges related to our recent deals, will be offset by incremental revenues of $33 million to $35 million. Our interest expense will be around $67 million in the third quarter and $73 million in the fourth, reflecting our use of debt to fund important strategic initiatives while still returning a record $1.7 billion to shareholders in 2018.

We began 2018 confidently. And having now met our first half objectives and established a foundation for a number of strategic growth initiatives that Ben and Jeff will discuss, we're even more confident entering the second half of the year and looking toward 2019. With that, I'll hand the call to Ben.

Ben Jackson -- President

Thanks, Scott and good morning to everyone on the call. I'll begin on Slide 8. When we acquired Interactive Data nearly three years ago, it brought a core foundation of fixed-income comprising and analytics. The gold standard for price evaluations and pre- and post-trade analytics spanning nearly 3 million instruments around the world.

We then bolted on additional content that is complementary to that foundation, such as the S&P securities evaluation business and the Bank of America Merrill Lynch indices. With these assets now fully integrated, we bring to market a comprehensive solution of new and innovative services, such as helping our customers better understand the quality of their execution and the liquidity risks associated with their positions. We have also engaged with that community of fixed-income traders and asset managers about their workflow challenges, and the resounding issue is with trade execution. Whether it is a cash trader at a mutual fund, an insurance company looking to hedge risk or a market participant that wants to create or redeem a share of a fixed-income ETF, all of these participants are dealing with very manual and archaic processes and are looking for different and more efficient ways to source liquidity.

As many of you know, fixed income today is still largely a voice market, but it is also one seeking greater automation. We expect this evolution will continue, as it has in many asset classes, going from voice to RFQ to a central order book over time. And it is why BondPoint and TMC are such exciting assets. Specifically, by marrying click-to-trade technology, which is essentially a central order book streaming thousands of CUSIPs throughout the day, with critical pre- and post-trade data and analytics, we have a recipe to facilitate greater efficiency, efficiency that is very much in demand as both banks and asset managers search for greater productivity across their businesses.

The phone is no longer an option for the high-volume, smaller trade size, a result of fixed-income market structure changes that have fragmented inventory. And thus, the efficiency and executions that our platforms provide is being embraced by the buy-side, the sell-side, corporations and wealth advisors. BondPoint and TMC are also very complementary. First, BondPoint is largely a corporate venue, while TMC leads in munis.

Each began by catering to wealth managers, market-makers and the buy-side. And over time, this audience has expanded to include sell-side and corporates. And by leveraging our connectivity to the broader trading community, we expect to further expand this customer base. Since acquiring BondPoint and TMC, we have seen increased demand to engage with both platforms.

It's one of the reasons BondPoint volume was up over 30% in the first half. In addition, it's important to point out that, prior to our acquisition, TMC was owned by some of the largest wealth management platforms in the world. This ownership created a conflict of interest prohibiting their wealth management arms from trading on the platform. That restriction has now been lifted at all three banks and their affiliates.

And as a result, we expect new flow will be shown on the platform. In sum, we are uniquely positioned to leverage our technology, our content and our distribution. And we look forward to updating you as we grow the business, expand margins and drive shareholder value. With that I'll turn the call over to Jeff.

Jeff Sprecher -- Chairman and Chief Executive Officer

Thank you, Ben. Good morning to everybody on the call. I'll start on Slide 9. I'll begin by expanding on what you just heard from Ben.

This morning, we announced an innovative solution, addressing some of the workflow inefficiencies in the fixed-income exchange-traded funds market. Fixed-income ETFs have grown rapidly over the past decade, growth that we believe is still in its early innings and growth that this newly announced infrastructure is designed to support. Working closely with BlackRock, the world's largest ETF sponsor, and leveraging ICE technology, data and trading infrastructure, we plan to establish a central trading hub that enables seamless connectivity for market participants to more effectively communicate and transact. While the system will be wholly owned and operated by ICE and connect to our BondPoint and TMC markets, it will be an open-source platform made available to all market participants.

With BlackRock serving as a development partner, we seek to create new standards and new protocols to streamline the front-to-back office workflows and to bring together transparency and efficiency to the ETF marketplace. Another example of product innovation directly sourced from our customer dialogue is our recently announced partnership with Magellan Midstream Partners, one of the leading providers of pipeline infrastructure, storage and distribution of crude oil. This September following regulatory review, we expect to launch a physically delivered Permian WTI contract with offtake in Houston. The legacy WTI benchmark at Cushing, Oklahoma, is an important marker for U.S.

crude oil in the Midcontinent, but it is a landlocked benchmark with growing quality concerns. This is evidenced by the price divergence between Brent crude and WTI Cushing crude, which has recently widened to as much as $11. Conversely, crude that makes its way to Houston usually trades at only a $2 to $3 locational discount to Brent crude. Our Permian WTI contract offers a solution, serving the increasing demand for an exportable North American crude benchmark of predictable quality and delivery in a location that commercial customers tell us that they desire.

Permian WTI will also complement our Brent crude franchise as, once it hits the water, crude from Houston joins an array of other global crude oils that price against the seaborne Brent global benchmark. In our interest rate markets, we're working with customers and regulators to launch alternatives to LIBOR. Consistent with our mission to provide an array of options and solutions, we now offer one-month and three-month SONIA futures. While still in their early days, we've seen signs of success with traded gross notional value reaching GBP 128 billion this week as investors and traders gravitate to the largest marketplace for U.K.

and European interest rate futures. In addition, this October, we plan to launch one-month and three-month sulfur contracts to round out our global interest rate offering. In our equities markets, we launched NYSE National during the quarter, which we have repurposed into a taker-maker pricing model. National runs on Pillar, a proprietary technology that we've been rolling out across our equity venues.

Consistent with our broader vision, both NYSE national and Pillar bring greater efficiency, execution quality and choice to our customers. This commitment to our customers and the market quality to which they list and trade is why we also have opposed some elements of the SEC's recently proposed transaction fee pilot. We appreciate and we encourage the SEC to consider holistic U.S. equity market reforms, including the reform of the rebate model.

However, while this proposal is called the pilot study by the SEC, in reality, we're troubled by what appears to be an experiment that involves all public companies listed on U.S. exchanges. And it's an experiment that doesn't consider the 40% of volume that trades off-exchange, where much of the important broker data that the SEC is looking to collect is actually located. It's beyond ironic that an agency of the U.S.

government is proposing to establish price controls on market-making in what is the most admired free market. This is why we continue to encourage the SEC to make modifications to its recent proposals. Let me conclude my remarks on Slide 10. We have built a platform that cultivates and scales innovation, a platform that embeds our solutions into our customer workflows and drives long-term growth for our shareholders.

For many of our customers, data drives trading, which in turn, creates the information used in post-trade functions, which feeds into the future pre-trade decision making. It's a virtuous cycle, and our global ecosystem of exchanges, clearing houses, information, and connectivity is difficult to replicate. So I'd like to end by thanking our customers for their business and for their trust in the quarter. And I want to thank my colleagues for the efforts that contributed to another strong quarter for ICE.

I'll now turn the call back to our moderator, Andrea, to conduct the question-and-answer session, which will run until 9:30 Eastern Time. Andrea?

Questions and Answers:


[Operator instructions] Our first question will come from Ken Worthington of JPMorgan. Please, go ahead.

Ken Worthington -- J.P.Morgan -- Analyst

Hi, good morning, and thank you for taking my question. Jeff, I think the topic du jour among investors happens to be volumes, and volumes have been particularly tepid across asset classes more recently. Clearly their seasonality and volatility has declined across multiple asset classes, so there's definitely elements of seasonality and cyclicality here. I guess my question is, what are your thoughts on secular shifts in global trading? Are you seeing any sort of underlying shifts in trading behavior that's changing the longer-term rate of volume growth for your futures, equities and now fixed-income businesses?

Jeff Sprecher -- Chairman and Chief Executive Officer

And that's a really good question. The short answer is no, we're not seeing that. But every asset class is slightly different. Obviously -- I think you've covered us for years, and one of the interesting things that we find about our physical commodities business, which, in other words, our oil and agriculture and metals business, is that those tend to be tied to supply chain issues, the volatility that affects supply chains.

And there are a lot of volatility issues that are acts of God, and so they tend to be long-term structural issues just in the ecosystem of moving goods and services around the world. And so those markets have performed well. That's why I think we've had 21 consecutive record years in oil trading. And there's no end to that.

Other markets that you mentioned -- equities, fixed income, in other words, bonds and certain financial commodities, interest rates and the like -- are very much driven by central bank policy and acts of humans. And they're global as well. And there seems to be no end to the act of humans right now in coming out of the end of the financial crisis and trying to return to some sense of normalcy in central banks and various countries, including the United States, refining their trading policies around the world as the economy recovers. And so we go through fits and starts in those due to acts of man, but my own -- I'm bullish long term because there's a lot of change going on in the world, and essentially, these products are used to help manage the risk of that change.

Scott Hill -- Chief Financial Officer

And Ken, I know you're a numbers guy, I think the other thing that supports what Jeff's saying, is if we were seeing secular shifts away, you wouldn't see open interest in oil up 11% and open interest in ags up 17% and open interest in rate up 11%. And the other thing that I'm encouraged by, because again it's always to me been a leading indicator of ongoing interest in our market, I mentioned in my prepared remarks, if you set aside the audit from the prior year, our futures exchange data in the quarter was up 4% year over year. And that's not price. That's customers.

That's more people interested in oil market. That's more people starting to think about Houston as the place for physical oil in the U.S. So I definitely -- not only do we not see it qualitatively; quantitatively, we're not seeing any shift either.


Our next question comes from Rich Repetto of Sandler O'Neill. Please, go ahead.

Rich Repetto -- Sandler O'Neill -- Analyst

Yes. Good morning, guys. I guess my question is, first, about the crude oil announcement you made, Jeff. I'm just trying to understand as a nonenergy guy but trying to understand that if it should only be a $2 price difference and it's wider, where's the problem and how do you solve that? I guess, you went through that, but I just want to understand a little bit more clearly.

And then to tie it into a little bit something more tied to current revenues and earnings, is the -- you've talked before about natural gas being a negative byproduct of crude. The natural gas volumes are really hitting lows, and I guess, could you give a better explanation of that if it isn't -- if you can give a better explanation of the natural gas bonds you're experiencing right now.

Jeff Sprecher -- Chairman and Chief Executive Officer

Sure. I think, first of all, I should say, I was not an exchange guy until I started this company, so I guess you could argue whether or not I've become one. But the fact you're not an energy guy is not something that's going to deter you from coming to the right answer. And I mean that as a compliment.

So historically, the United States -- price of oil in the United States has been benchmarked to West Texas Intermediate crude at Cushing, Oklahoma, which is landlocked, as I mentioned. It's a very good tradable contract because there are lots of idiosyncrasies around moving oil in and out of this landlocked area. You need pipes and storage and the like to actually feed refineries and work with the commerce of the United States. So that contract particularly lends itself to speculative traders that really enjoy studying these permutations and benefiting from the knowledge of flows around Cushing, Oklahoma.

But as you alluded to, there's been a fundamental change in where we discover oil in the United States and -- with the advent of fracking. And much of that oil is not connected to the systems that lead to Cushing, Oklahoma. And increasingly, because we're creating a surplus of oil in many areas, some of that oil is being exported. And it's being exported by getting it down to the Gulf of Mexico and putting it on ships and sending it overseas.

And we -- ICE has really built our energy business by catering to commercial customers, and commercial customers tell us that they've been frustrated by the ability to hedge their new fracking oil businesses with the legacy WTI Cushing, Oklahoma, benchmark. And there is some basis trading that goes on -- financial basis trading that does exist in the OTC markets. But what our customers tell us, the commercial customers, is they would really like a physically delivered contract, which is how they're used to dealing with oil in the United States with the benchmarks. And they really like it in the Houston area, and that will then create a more representative price of U.S.

oil, if you will, and will also allow them to either use that oil price benchmark for internal hedging or if they choose to export. And as I've mentioned on other calls, the price in Houston more accurately reflects the price of oil around the world because the price of oil around the world is really oil that is moving from the Middle East or from Russia and elsewhere to areas of population growth, and so it tends to be seaborne. And therefore, there'll be a very nice trading hedge, if you will, between Brent oil, which is seaborne oil, and Permian oil at Houston, which can be seaborne oil. And the price difference, generally speaking, will be the price of transportation.

It will allow people to hedge shipping cost by the delta price. And of course, there will be times when there will be hurricanes and other acts of God that will affect shipping, and people will be able to hedge out that risk on those -- on that kind of basis trade. So we -- long story short, that contract really is being desired by a lot of our customers who helped us stand it up, helped us arrange the relationship with Magellan and create the infrastructure for delivery. So we have high hopes for it.

And we know that a lot of our commercial customers are anxious for it to begin to trade. You're right in that one of the byproducts of discovering oil in shale is natural gas, and many of the -- these new shale areas don't have particularly good infrastructure for selling that natural gas, for putting it into the natural gas systems in the United States. And as such, many people literally are almost giving that gas away. So the marginal price of natural gas in the United States has fallen as the increase in oil production has risen, and -- which is an interesting phenomena.

The benchmark for natural gas in the United States, Henry Hub, is in Louisiana now. And similarly, it is not necessarily a great benchmark for the new infrastructure of natural gas that's being discovered. That being said, the market has been working on basis trades around the gas business. And because the price of gas is so low, they don't really necessarily need to hedge in the way that they did before.

So overall, Henry Hub volumes and natural gas volumes have fallen, and we expect, honestly, that as long as the U.S. remains an active oil producer that that will be the case. We do think there will be more infrastructure built over time because we think this is a permanent change in the way the United States gets energy. And so we think some of these basis hubs may become primary trading hubs as opposed to the Henry Hub, but the market has yet to determine that.

Scott Hill -- Chief Financial Officer

And just to -- again to put a couple of numbers around that, kind of hard coming back a little bit to is it secular or not. Jeff talked about the commercials are a lie for natural gas. Over the last three years, it's growing 13% a year on average. That's twice what you're seeing at one of our peers.

And in addition to that, if you look at the basis market, our volumes are actually up 20% year over year in the first half. And so again, if you step back and think about where the commercials are and how they're hedging their risk, which is where the sustainable growth is going to come from and where you see an open interest growth, we're very confident in the natural gas platform we've built. And that's a U.S. statement that you add on top of that that our European natural gas footprint is doing really well, particularly our index business that we bought a number of years ago.

Volumes and revenues in that business are trending positively in the year. So we've long talked about the global nature of the natural gas franchise that we have, the commercial orientation. And I think what you see in our ability to grow energy revenues despite the volume decline you see in the U.S. natural gas business all relates to the global commercial nature of the franchise we've established.


Our next question comes from Michael Carrier of Bank of America. Please, go ahead.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Hi. Thanks, guys. Scott, maybe just one on the -- on your guidance. And this is more on the expenses.

So I can see on the core a bit lower. Just on the acquisition, both when I look at the revenues, the expenses and any interest expense, it seems like they're probably coming in roughly breakeven. Just wanted to get some sense on what's the maybe outlook on like the growth profile of the kind of the acquisition revenues. And probably just bigger picture, when I think about going into '19/'20, giving a lot of the focus on fixed income, what are maybe some of the key like drivers that you think can maybe extend the growth rate over the coming years?

Ben Jackson -- President

Thanks, Michael, for the question. This is Ben Jackson. I'll try to unpack several of the questions you had there. So on the acquisitions, I'll start with that.

I think the way to think of it is, is really of two different transactions. So first, you have the Chicago Stock Exchange. That business is going to be fully integrated into our New York Stock Exchange platform. The way to think about that business in terms of size back half of this year is it's approximately $8 million in revenue with $8 million in expense.

So if you roughly double that, plus a little bit, that gives you an idea of what that business is on a full-year basis. As I said, that business is going to be fully integrated into the New York Stock Exchange. Scott also mentioned that there's some severance expense [Inaudible]


[Operator instructions] Pardon me, everybody. And I will allow the speakers to continue where they left off.

Ben Jackson -- President

Thank you. Thank you for rejoining us to the call. Apologies to those of you out there on the call being dropped there. So I'll pick up on the question that was asked that had multiple parts to it, and I'll just start over with where -- to where I was going with the answer.

So first, on the acquisition, so the way to think about them is they're two different acquisitions. So the first being the Chicago Stock Exchange, and the Chicago Stock Exchange business is a business that's going to be fully integrated into the New York Stock Exchange on New York Stock Exchange technology over time. That business is roughly $8 million in revenue the back half of this year with $8 million in expense. If you double that plus a little bit more, it gives you an idea of what that business is on a full-year basis.

Scott also mentioned in his comments about severance back half of this year. We have already enacted our integration plan so some subset of that severance is related to some of the immediate restructuring we did of the Chicago Stock Exchange business. And that will end up leading to about a 30% reduction in expenses on the Chicago Stock Exchange business, excluding severance when you roll forward into calendar-year 2019. So that's that business.

Separately, when you think of the TMC business, the TMC business is business we're really excited about. It'll be alongside our BondPoint business, and there's a number of reasons that we're excited about these types of execution businesses. So both BondPoint and TMC, they're more central order book trading businesses, whereas, the vast majority of fixed-income execution platform -- electronic execution platforms that are out there are more RFQ oriented. And RFQ, as a protocol, is much easier to support.

It's basically, think of it as almost email facilitation compared to building a true central order book, where you have millions of quotes being streamed into your markets on both the buy and the sell-side being able to support that. In terms of the TMC business, we are going to be integrating that with BondPoint. The way to think of those two businesses as a combined entity, that it's approximately $100 million business with $40 million in operating profit, and there's significant growth opportunity for both. We've already seen the growth in the BondPoint business with the BondPoint business up in terms of volumes 33% this year.

Also on BondPoint, we've seen new connections, more than double-digit connections from new entities connecting into it with more than half of those connections being with buy-sides. Other things to point out that we look at that's very interesting on platforms like BondPoint, and the trend is very similar with TMC, is that we're seeing a significant amount of growth in odd-lot trading. To define what odd-lot trading is, odd-lot trading is trades that have an average of more than 100 bonds per trade that are associated to it. A lot of people think about these platforms as though they're micro lot trades, which is less than 100 bonds per trade.

One of the fastest areas of growth we've seen on the BondPoint platform, and TMC is also seeing that, is in this odd lot trading is the trades that have more than 100 bonds per trade, and that in BondPoint grew by more than 50% in the first half. The other thing we've seen is the streaming prices. The depth of the market continues to grow, more streaming prices are coming into the markets, and that streaming is happening with both buyers and sellers. We're seeing an equal amount of quoting on both buyers and sellers in the platform, and TMC is seeing similar trends.

The other thing I'd point out on TMC on the revenue side -- that's an interesting growth opportunity that I mentioned in the prepared remarks, that you have to remember that that platform was owned by three major banks: Bank of America Merrill Lynch, Morgan Stanley, and Citi. These are some of the largest private banks and wealth advisors in the space. As a result of the significant ownership that those three banks had with TMC, that created a conflict of interest where they could not send -- they literally used a stop sign that they could not send or could their affiliates send their flow to the TMC platform. Well, I'm happy to say that we're just over a week from being closed, and that restriction has been lifted at all three banks and their affiliates, so it's an obvious sign that there's pent-up demand to get access to the robust liquidity pool that TMC provides.

And we look forward to that revenue flowing to this business soon. As part of the integration plan, so we are going to bring -- because they're two central order book trading platforms, we are going to be bringing those platforms together, but we also acknowledge that the protocol associated to how bonds are executed in each is different. So what we would like to and where we're heading toward is creating a single connection for our clients to connect into our platforms but get access to the two different liquidity pools respecting the fact that TMC has come up primarily in the municipal space as an anonymous platform, and BondPoint has come up primarily in the corporate space with post-trade name give up. The last piece I'll hit -- and there was another question around just our strategy and the trends here.

And one of the things we're really excited about that came from the announcement this morning is our strategy, which Jeff has termed in the prepared comments as a virtuous circle, around how pre- and post-trade analytics, data and execution all comes together. The announcement this morning on the BlackRock opportunity, we see a clear sign of that strategy coming to life because this is an opportunity for us to partner with a leading ETF market participant in BlackRock to create a new innovative solution, a platform that'll be open to ETF market participants, that will help reduce the inefficiency and frictions that exist in the fixed income create, redeem process. This is a rapidly growing area of the industry. And when you look into that, the details of how execution happens in that primary market trading, you'll find that it's very manual.

You have disconnected systems -- disconnected instant-messaging systems from order management and execution systems. Those are disconnected to execution venues. There's no standards on the protocols with which how these industry tools connect. And ICE is in a unique position, we found from working with BlackRock, with our combination of reference data, ETF constituent data, pricing data, instant messaging and our recently acquired execution platforms in BondPoint and TMC to help solve this challenge.

So we're excited that BlackRock is a committed development partner for this. We look forward to reaching out to more industry participants to advance this effort. I think that's just one sign of things to come.


Our next question comes from Alex Blostein of Goldman Sachs. Please, go ahead.

Alex Blostein -- Goldman Sachs -- Analyst

Hey, thanks for taking the question. So just building the idea on the credit buildout topic, can you guys give us a sense of whether you -- given the acquisitions you've made recently, are you sort of at the size and scale in terms of capabilities, or should we expect you guys to do more bolt-ons? And I guess as larger deals become available, to sort of really accelerate growth here, should we expect you guys to kind of follow your historical M&A targets, which I think you're trying to get things on EPS accretion by the end of the first year? Or there might be change for something larger in terms of near-term dilution versus kind of like longer-term strategic vision?

Jeff Sprecher -- Chairman and Chief Executive Officer

Alex, this is Jeff. It's a good question. Nothing has changed in terms of our outlook. I think if you think back about how we've been talking about the fixed-income marketplace, we've been pretty diligent about the things that we've acquired and the things that we're building to bring those pieces together.

We've talked pretty openly about the fact that we think the opportunity is in the fact that the workflow and fixed income is very clumsy, and these spaces evolving quickly and that there are gaps that we can fill. And by buying a pricing business then building out ourselves a reference data business then buying an index business, then building ourselves a self-indexing capability, then buying a muni platform, then buying a corporate platform and now tying all that together with our instant messenger and network, we think we have a powerful set of infrastructure tools that are -- that equip us well to tap into the growth that's happening in that space and help drive the next leg of how trading and pricing and infrastructure will develop. So we don't necessarily need anything. And the next leg, as Ben has talked about, is us tying all that together and making it accessible -- easily accessible to the marketplace.

We always look for unique bolt-on opportunities that will give us a buy versus build advantage so that we can get to market faster. And certainly, some of the things I just mentioned really helped us to get to where we are today much faster. And we always look for unique opportunities that can be transformative. But as you have indicated, they have to fit within our M&A discipline.

And the people that I'm sitting with here, none of us enjoy running large companies. We hate bureaucracy, and -- but what we love is growth -- EPS growth. And so if we can find something that won't change the culture of our firm in the long run but will help our EPS growth, we'll always look at it. Those are difficult, particularly as people like you have really spent a lot of time in our space and written on various companies, and very good companies tend to be priced as very good companies and are hard for us to acquire and meet that discipline.


Our next question comes from Chris Harris of Wells Fargo. Please, go ahead.

Chris Harris -- Wells Fargo Securities -- Analyst

Thanks. Scott, just a quick one on the guide. A nice step up in data revs for 4Q. I'm just wanting to know, is that a good jumping off point as we think about 2019.

Or is there some perhaps seasonality in that number which might lead to a tick down in the first quarter of next year?

Scott Hill -- Chief Financial Officer

No. It's a good question, and I appreciate the compliment on the guide. It's a business that we feel really good about. We've seen sequential improvement from first quarter to second quarter.

We'll see it to the third quarter. We'll see it to the fourth quarter. And there's not a seasonal boost that we're getting in the fourth quarter. What you're seeing is the build in ASV.

You look at the first-quarter growth of around 5%, adjusted for the audit fee from the prior year, we'd have been around 5% in the second quarter. But ASV sits at 6%. And what we've said is, in the back half of the year, we think we will grow data revenues at least 6%, and so that's really pointing you toward what the overall, I guess, path -- glide path is in terms of revenue. So not seasonal, reflective of the building ASV.

By the time we get to the end of the year, the nice thing will be the Bank of America Merrill Lynch indices, which are up 50% from where they were a year ago but aren't counting it all toward our organic growth right now, will start to count. And so that's a tailwind. As we move into '19, growth in that business will start to fully count toward organic growth. And so we're pleased with how the business has trended.

We're pleased with where it's headed now, and I think '19 sets up to be another really good year.


Our next question comes from Kyle Voigt of KBW. Please, go ahead.

Kyle Voigt -- Keefe, Bruyette & Woods -- Analyst

Hi, good morning. I just -- I guess one on LIBOR. I guess, during the quarter, some of the global regulators reiterated their prior stands that LIBOR must be migrated to alternative more transaction-based benchmarks. Just curious if we could get some updated thoughts on LIBOR as a viable benchmark longer term.

Because a couple quarters ago, it sounded like you and maybe some other market participants were optimistic on the future of LIBOR and potentially making some changes to the calculation methodology that could prolong the life and viability of the benchmark. But now we have regulators pushing back. So any thoughts there would be great.

Jeff Sprecher -- Chairman and Chief Executive Officer

Sure. There's no question that regulators continue to urge the market to look for alternatives for new business and to try to figure out if historical business, there are contractual ways of migrating the historical business that has benchmarked to LIBOR to other rates. And the market is responding, and we've been responding. We see it as an opportunity, and that's why we've launched SONIA and about to launch SOFR futures, and those have actually been doing well.

And you can imagine people that are supporting those are many of the people that are regulated and have been urged to get on with developing new alternatives. On the LIBOR side, LIBOR has increasingly becoming -- become more rooted in transaction business and less rooted in estimates. And there was a white paper published by a large group that ICE is administrating that is overseeing LIBOR on how it will migrate, and that migration is going well. And the migration is basically away from estimates and to transactions.

And so we think LIBOR will be a very good safety net that that contract for the legacy business that won't be able to transition and for new business that will have difficulty adopting some of these new benchmarks in the early days, there will be a safety net there. And we're confident that we can make that contract, that index more robust and give it more confidence than it had in the past. So it's kind of a double-edged strategy that we have and going well on both sides, honestly. And a lot more serious activity and discussion about these alternatives in the last quarter than there had been leading up to it.


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

Alex Kramm -- UBS -- Analyst

Yes. Hey, good morning, everyone. Wanted to come back to the data guidance and outlook, Scott. But I just wanted to compare the previous guidance with the new guidance.

So I think for the full year previously, you said 6% or 7% organic, and I know this included currency beforehand. But even the -- even then, I think you said even without currency, it should be at least 6%. So now you're saying 5% to 6%. You mentioned a couple of items like the audit fees and also the implementation.

But just wondering, if any -- if you could highlight any other things that maybe have been running a little bit slower. I know you've been very excited throughout the year. And in particular, I think some people thought Europe and MiFID II could draw some upside. So just wondering if you think you fell short in some areas and identify those.

And then just related to that real quick, can you just remind us, TMC and the national exchange, are there market data feeds that are coming in now as well from the acquisition? Could you give us a million-dollar number on that, too, as well?

Scott Hill -- Chief Financial Officer

I can't give you a million-dollar number because it won't add up to that. Those aren't really data plays. But let me step back out. It's a good question.

It's a fair question. We did say coming into the year 6% to 7%. I did adjust that not to say 5% to 6%. Let's put that in perspective.

we're about 0.8 points off what we thought coming into the year on a $2.1 billion business, which means we're off around $16 million to $18 million, give or take a little bit. I noted earlier that the Bank of Merrill Lynch indices, that business has grown 50%. I'm not taking any credit for that $6 million or $7 million mitigating it, but it's why in the quarter and in the guidance you see that from an absolute-dollar standpoint, we're right where people expect us to be. And so if you kind of add it all up, I talked about it in my prepared remarks, there are a couple of places where we're a little bit short versus what we thought coming into the year.

The first place I mentioned is the second quarter. We saw some delays in some connectivity implementations. The good news is what that means is contracts that would have run 2Q this year to 1Q of next year will now run 3Q of this year to 2Q of next year, so no revenue lost in total, just a little bit of a slip out here that's a few million bucks. More importantly, and this won't surprise you, our overall desktop revenue are coming down a little faster than we expected.

That's consistent with what you're seeing in the industry. People really don't want the desktops anymore. They prefer the direct feed. And we've got a retail platform eSignal that really is not an optimal platform and not particularly strategic, and we're off a few million dollars there.

And then the last thing, again, won't come as a surprise to you, is our NYSE tape data is a little bit softer than what we thought coming into the year. So again, in a $2.1 billion business, we've got a few areas -- three areas, to be specific, for a few million dollars mitigated by a really strong index performance that isn't reflected in the organic growth. And then you take a step back and say, OK, now you've talked to me about 10% of the business. Tell me about the 90%.

The 90% of the business is pricing and analytics, which is going to grow 7% for the year. It's connectivity and feed that's going to grow 7% for the year. It's an exchange data business on a futures side that you can go back and run the growth rates over the past few years. It's a good grower.

It doesn't grow every single year. But over the course of two to three years, it's a good grower as well. So that's 70%, 85% of our revenues right there, and we're putting up good numbers in the year. And by the way, talk about guidance, we said seven coming into the year on pricing and analytics and connectivity and feeds, and I'm telling you it's still seven.

So we feel good about the overall performance of the data business. Yet in total, we're probably $8 million to $10 million light of where we thought we'd be versus the $2.1 billion forecast coming in, but overall, we have very strong confidence in where this business is positioned, the ASV being up 6%, pricing and analytics and connectivity and feeds ASV being up 7%, so we feel good about the guidance we gave in the back half of the year, the acceleration in the growth in the back half of the year. And as I indicated earlier in response to the question, a continued acceleration as we move into 2019.

Ben Jackson -- President

And Alex, just to put a point one of the things that Scott said, we've been -- being more transparent about the data that comes out of the New York Stock Exchange. The large exchange groups I think created the false perception that somehow equity data was becoming more valuable. And the reality, is if you look at the long-term trends, it's becoming cheaper and less valuable. And you can still read people that write articles that somehow equity exchange data is going up or that somehow there's pricing power in that area and not robust competition.

The reality is that that's been in long-term decline. We expect that that's going to be the case long term. We expect that the market's going to continue to get cheaper for that data. As we all know, you can go on your smartphone, and you can look up a real-time stock price for free now, and that is the long-term trend.

So we've just been more open about pulling that out so that we can change the narrative that exists in the industry that this is not what people believe it is. This is not an area of pricing power and growth.


Our next question comes from Brian Bedell of Deutsche Bank. Please, go ahead.

Brian Bedell -- Deutsche Bank -- Analyst

Great. Thanks very much. Good morning, folks. Also thanks for the additional transparency.

It's really helpful. Maybe just for Ben. And also, thanks for your description of the fixed income efforts. I just want to make sure I have it right and then get your view on some near-term growth there.

So we're looking at fixed-income trading in its entirety being, in the third quarter -- starting in the third quarter, roughly at $100 million annualized run rate. And it looks like about, in rough numbers, $50 million from TMC, maybe about $25 million from BondPoint, about $25 million then from the -- the CDS trading business. So first, if you can sort of confirm if that's right. And then as you think about the organic things that you mentioned of how you're improving that fixed-income trading unit, including getting that new flow from the wealth management clients that weren't able to do that before, how should we think about that revenue from just those things and not the market and broadly growing into 2019, or is that already in your run rate? And then also if you could just comment on the BlackRock initiative, when that starts and when that will start contributing from a revenue perspective?

Ben Jackson -- President

Thank you, Brian, for the question. So as I've mentioned, the combined business, and we're just talking about BondPoint and TMC when I say that, and today, as it stands on an annualized basis, those businesses are $100 million in revenues with $40 million in operating profit. As I had mentioned, there's some growth opportunities, in particular, on the TMC side that we believe are quite interesting from just the affiliate revenue, subcustody revenue with the restrictions being lifted on those significant major banks in the wealth advisory space and in the private banking space that I had mentioned. The fact that that restriction has been lifted already, and again, we've just closed a little over a week ago, is I think a great sign that there's pent-up demand that wants to interact with that liquidity and with that flow.

So if you look at that that revenue flowing into the business, you look at the integration -- the view toward integration that I had given some color on a little bit earlier of creating a single connection point where customers can get access to both liquidity pools, I see that, over near term, that margins of this combined businesses would get in line with our other exchange businesses. In addition to that -- so you asked a question about the BlackRock opportunity, so where -- they're the ETF create/redeem platform with BlackRock as a development partner, and that opportunity has a number of areas for revenue generation for that new company that'll be a wholly owned subsidiary of ICE. As you think about it, there's areas of opportunity for that to generate revenue in the creation and redemption of process and just order-taking. You have instant messaging in there.

You have data. You have pre- and post-trade analytics. You have services for authorized participants. You have connectivity to execution platforms like ours and execution that would flow from that, as well as third-party execution platforms, connectivity to third-party order management systems and execution management systems and analytics systems, such as Aladdin, as well as other third parties, so there is great opportunity there in a number of different areas to not only for this new company to generate revenue but also to solve a real need for the industry as the growth trajectory that I had mentioned before is expected to continue into the future.

And these investments are needed for the ETF market participants to continue to help enable that growth to continue. The platforms we're expecting to come live and start in 2019.

Brian Bedell -- Deutsche Bank -- Analyst

And so just to clarify then, the CDS trading is over and above that $100 million, and the initiatives on the wealth management side are also -- will be incremental to that $100 million of BondPoint plus TMC?

Scott Hill -- Chief Financial Officer

It's Scott. You've got a bit of an overinflated view of what we're doing in terms of credit x revenue. So I think Ben is right in discussing TMC and BondPoint as around $100 million. You add in all the pieces together, it's only a little above that.

So I think you think about our bond business as a starting point at around $100 million business that, as Ben said, lots of growth opportunity now on the top line, and more importantly, in the near term, lots of opportunity to expand margins.


Our next question comes from Ben Herbert of Citi. Please, go ahead.

Ben Herbert -- Citi -- Analyst

Hi, good morning. Thanks for taking the question. Jeff, just wanted to get your take on cross-border regulatory coordination and just if you get a sense that it has improved at all over the course of the year or might improve going forward.

Jeff Sprecher -- Chairman and Chief Executive Officer

I guess I'm a glass-half-full guy, so I'll take the, I think it might improve going forward. But we're at a very difficult inflection point right now globally in the middle of the Brexit negotiations and in the middle of renegotiation of trade policies around the world. And so there's friction that filters down through government systems to the various regulators on trying to figure out how to work in a global marketplace. We spend a fair amount of time on a day-to-day basis going through these various changes.

It's dynamic and happening in real time. It -- honestly, we feel good about the decisions we made to distribute our network around the globe. We have a trading -- regulated trading venue and clearing house in London. We have a separate regulated trading and clearing venue on Continental Europe, separate regulated trading and clearing venues in the United States and also same thing in Asia.

And a lot of the work we do is talking to our customers, trying to figure out what their thinking is and where various businesses may move if some of the worst-case scenarios come to pass. And fortunately, there really hasn't been a change in business. We're still growing, and business remains relatively interrupted, but there are a lot of contingency plans inside my company and inside all of our customers on where things might have to land going forward. And we feel really comfortable with the position we're in because all of those platforms are on the same technology.

And for us, moving really means moving files and moving interconnections and not so much moving people in the way you would think about some of our customers being threatened. So I'm optimistic, but we really are kind of at a pinch point. I expect that that may go on for the next few quarters right now. I also expect personally that it will impact foreign exchange rates as the market tries to figure out where economic flow will go.

And so Scott continues to try to guide you as best we can on a constant-currency basis.


Your next question comes from Jeremy Campbell of Barclays. Please, go ahead.

Jeremy Campbell -- Barclays -- Analyst

Great. Thanks, guys. I know we're in injury time here, so I appreciate it, but -- so a quick one. Ben, I think you highlighted in your color a lot of the different touch points that you guys are going to have of BlackRock here.

So when we think about the revenue opportunity, it sounds like the partnership is going to be kind of additive on the transaction side, but when we think about the data side of the coin, can we think about BlackRock really kind of accelerating the data growth at all over the next kind of two to three years? Or is this one of those extra contributing bidding factors that keep growing at your long-term guidance of like mid- to high single digits?

Jeff Sprecher -- Chairman and Chief Executive Officer

Jeremy, thanks for the question. And as I have mentioned just of the past comments, there's a number of different areas that this new company, which will be a wholly owned subsidiary, again, of ICE, would earn revenues. So you have transaction revenues in -- as it relates to the order-taking of creation and redemption. You've got execution that can happen on our trading platforms.

But you also have recurring revenue that would take the form of connectivity into this standardized messaging system that's interconnecting all these participants in the ETF marketplace. You've got also data that's associated to this connectivity to third-party EMS, OMS systems, including Aladdin and others, and also other third-party execution platforms that will be on there. So it'll be a mix of both recurring revenue that will be associated to this, as well as execution revenue opportunity. And the other thing to point out is that BlackRock is a committed development partner into this.

We are reaching out to. And since the press release came out this morning, our team has been inundated with very positive phone calls and feedback from other market participants that we are welcoming to participate in this important effort to help create these standards that will hopefully lubricate the type of growth that this business has seen historically and lubricate to that -- that that growth can continue into the future. The other thing I'd point out is that, in June, BlackRock filed to switch to our benchmarks as part of ICE Data Services for four of their largest corporate ETFs, so we see a trend there as well where we can provide services toward major index providers to utilize our data in support of their fixed-income self-indexing efforts.


This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Sprecher for any closing remarks.

Jeff Sprecher -- Chairman and Chief Executive Officer

Thank you, Andrea. Thank you, all, for your participation this morning. Thanks for dialing back in after the call was cut. I apologize for that inconvenience.

And we look forward to speaking with you in October when we're going to report our results for the third quarter. Have a good morning.


[Operator signoff]

Duration: 74 minutes

Call Participants:

Warren Gardiner -- Vice President Investor Relations

Scott Hill -- Chief Financial Officer

Ben Jackson -- President

Jeff Sprecher -- Chairman and Chief Executive Officer

Ken Worthington -- J.P.Morgan -- Analyst

Rich Repetto -- Sandler O'Neill -- Analyst

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Alex Blostein -- Goldman Sachs -- Analyst

Chris Harris -- Wells Fargo Securities -- Analyst

Kyle Voigt -- Keefe, Bruyette & Woods -- Analyst

Alex Kramm -- UBS -- Analyst

Brian Bedell -- Deutsche Bank -- Analyst

Ben Herbert -- Citi -- Analyst

Jeremy Campbell -- Barclays -- Analyst

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