Dan Fannon

Dan Fannon from Jefferies asked for more details on the short-term dynamics impacting the Mortgage segment's Q4 performance, including the Flagstar roll-off, and the expected contribution and timeline of PennyMac's departure from the platform.

Answer

Warren Gardiner, CFO of Intercontinental Exchange, clarified that Q3 mortgage revenue was slightly lower due to inactive loan roll-off on MSP, some customer renewals at lower minimums, and Q1 2026 implementations. He noted Flagstar's Q4 roll-off and estimated PennyMac's impact at about half a point of recurring revenue growth, not affecting results until 2028.

Dan Fannon inquired about the shorter-term dynamics for ICE's Mortgage segment in Q4, including the impact of Flagstar, and the contribution and timeline of PennyMac's announced departure from the platform.

Answer

Warren Gardiner, CFO of Intercontinental Exchange, clarified that Q3 mortgage revenue was slightly lower due to inactive MSP loans, some renewals at lower minimums, and Q1 2026 implementations. He confirmed Flagstar's roll-off in Q4 and estimated PennyMac's impact as approximately a half-point on recurring revenue, not affecting ICE until 2028.

Dan Fannon of Jefferies & Company Inc. asked for an expanded view on ICE's appetite for large-scale M&A, considering its current business mix, stock valuation, and deleveraged balance sheet.

Answer

Founder, Chairman & CEO Jeffrey Sprecher stated that the company's core DNA and disciplined approach to capital deployment have not changed. He emphasized the goal of being an 'all-weather' company and that reaching leverage targets provides maximum flexibility to execute their long-term strategy, which always weighs M&A against organic investment and capital returns.

Dan Fannon from Jefferies & Company Inc. asked CEO Jeff Sprecher to elaborate on the company's appetite for large-scale M&A, considering its current business mix, stock valuation, and recently achieved leverage target.

Answer

CEO Jeffrey Sprecher stated that the company's core strategy to be an 'all-weather' business has not changed. He emphasized a disciplined approach to capital deployment, constantly evaluating whether to build organically or acquire assets to accelerate strategy, always weighing these options against shareholder returns like buybacks. He noted that achieving their leverage target early provides 'maximum flexibility' but does not change their fundamental discipline.

Dan Fannon sought clarification on whether Virtu Financial's new capital deployment strategy would lead to more variability in quarter-to-quarter revenue/ANTI or drive more consistent results, and what the ultimate goal is. He also asked about the timing of new investments (people, strategies) relative to revenue opportunities.

Answer

Co-President and Co-COO Joseph Molluso stated the goal is to trend towards the higher end of their previously published adjusted net trading income range as a base case. He acknowledged potential variability but emphasized that Virtu Financial remains a volatile business. He also noted that new investments and revenue opportunities should largely be in line, without a significant long-term lag, though environmental noise will still impact performance.

Dan Fannon of Jefferies & Company Inc. asked for context on the overnight trading opportunity, including its current contribution and future potential. As a follow-up, he asked which of Virtu's organic growth initiatives is expected to be the biggest contributor in three years.

Answer

CEO Douglas Cifu described overnight trading as being in "very early days" and currently 99% retail-driven, but sees it as an inevitable growth area and a strong tailwind for the firm. For the biggest long-term growth driver, Co-President Joseph Molluso identified crypto and options as having enormous potential, while also highlighting the record performance of the ETF block franchise.

Dan Fannon inquired about the expected pace of Alpha platform implementation costs for next year, following the $10M-$15M range for Q4, and the long-term impact of this integration on expense growth.

Answer

CFO Allison Dukes expects implementation costs to remain high through 2026, potentially modestly increasing, with streamlining benefits realized in 2027. President and CEO Andrew Schlossberg noted significant progress on the equity business transition.

Dan Fannon asked about the expected pace of Alpha platform implementation costs for next year, following the $10-15 million range for Q4, and the ultimate long-term impact of this integration on expense growth.

Answer

CFO Allison Dukes stated that implementation costs are expected to remain high through 2026, potentially modestly increasing, as the company aims for completion by year-end 2026. She explained that significant decommissioning and streamlining opportunities, leading to reduced fixed expenses, are anticipated in 2027. President and CEO Andrew Schlossberg expressed satisfaction with the implementation progress.

Dan Fannon asked for elaboration on the ongoing bond reallocation theme, questioning if AllianceBernstein is well-positioned to materially benefit from it, considering its performance and product offerings. He also asked about the biggest variance between the initial non-compensation expense guidance for the year and the current year-to-date performance.

Answer

Seth Bernstein, President and CEO, noted recovering taxable fixed income appetite in Asia and strong performance in the tax-exempt SMA space in the U.S., where AB is the largest player. Onur Erzan, Global Head of Private Wealth, Alternatives and Distribution, added that their annualized organic growth rate for municipal SMAs was 26% in Q3, and they secured a $500 million global credit win, with their ETF platform exceeding $10 billion. Seth emphasized strong long-term performance for these services. Tom Simeone, CFO, attributed the variance in non-compensation expenses to cost containment initiatives implemented in Q2 following April events.

Dan Fannon questioned the biggest variance in non-compensation expenses between the initial guidance for the year and the current tracking.

Answer

Tom Simeone (CFO) attributed the variance primarily to cost containment initiatives implemented in Q2, which have delivered savings since.

Dan Fannon of Jefferies asked about gross sales trends, questioning whether the Q2 slowdown was temporary and what the forward-looking momentum appeared to be.

Answer

Onur Erzan, Head of Global Client Group, stated he was not overly concerned, noting that year-to-date sales were up slightly and that redemption rates had improved. He characterized the Q2 slowdown as a 'six to eight week air pocket' and reported seeing momentum return in June and July. He expressed optimism, citing opportunities in insurance, the scaling ETF platform, and new geographic expansions.

Dan Fannon asked about the credit quality and strategic adjustments in Blackstone's private credit portfolio amidst recent market headlines and bankruptcies.

Answer

President and COO Jon Gray clarified that recent defaults were bank-led, not private credit, and involved fraud, not reflecting broader credit issues. He emphasized Blackstone's deep due diligence and long-term hold strategy, noting minimal realized losses and strong aggregate performance, with no significant changes to their model.

Dan Fannon asked about the private credit market, inquiring about any changes in credit quality across Blackstone's portfolio and adjustments made in response to recent headlines and bankruptcies.

Answer

Jon Gray, President and Chief Operating Officer, clarified that recent defaults were bank-led and idiosyncratic, not reflective of traditional private credit. He emphasized Blackstone's consistent underwriting model, deep due diligence, and long-term hold strategy, noting minimal defaults and realized losses, and no significant changes to their approach.

Dan Fannon sought more color on management's confidence that the 'deal-making pause is behind us,' given previous expectations for a recovery.

Answer

President & COO Jonathan Gray acknowledged past slowdowns but explained that this time, multiple 'tumblers are falling into place.' He cited record-high equity markets, debt spreads returning to pre-hike levels, improved business confidence, and a more favorable regulatory environment. Gray also pointed to significant pent-up demand, with M&A and IPO volumes running far below historic norms. Proprietary data, like the busiest IPO pipeline since 2021 and a 50% increase in credit deal screenings, reinforces this confidence.

Dan Fannon questioned whether the recent acceleration in net new asset growth represents a 'new normal' for fiscal 2026, considering timing and competitive factors. He also asked about spending priorities for fiscal 2026 compared to 2025, focusing on areas of increased or decreased investment, non-compensation expenses, and targeted pre-tax margins.

Answer

CEO Paul Shoukry confirmed that net new asset numbers have increased, reflecting record recruiting results and a lag in asset onboarding. He acknowledged the competitive environment and M&A activity but emphasized strong retention and robust recruiting momentum. CFO Butch Oorlog stated that spending will continue to prioritize growth, with incremental costs in recruiting and investment sub-advisory fees, alongside ongoing significant investment in technology, including AI. Paul Shoukry reiterated the target of generating over 20% adjusted pre-tax margins, noting that specific non-comp expense guidance for 2026 would be provided on the next call.

Dan Fannon from Jefferies & Company Inc. asked about the apparent disconnect between bullish commentary on organic growth and the actual Net New Asset (NNA) results, and also questioned the outlook for the fixed income brokerage business.

Answer

CEO Paul Shoukry clarified that the optimistic commentary reflects an accelerating pipeline, noting there is a 3-to-9-month lag before new advisors' assets are reflected in NNA. He also explained that the fixed income business, which primarily serves depositories, performs best in an environment of high deposits and low loan demand, which is not the current state.

Dan Fannon from Jefferies & Company Inc. asked about the apparent disconnect between bullish commentary on recruiting and the recent net new asset (NNA) results, and also questioned the outlook for the fixed income brokerage business.

Answer

CEO Paul Shoukry explained there is a lag of three to nine months before recruited advisors' assets are reflected in NNA figures. He also noted ongoing competitive pressure from private equity-backed roll-ups. Regarding fixed income, he stated the business primarily serves depositories, and a favorable environment involves deposit-rich banks seeking to invest in securities.

Dan Fannon inquired about CME Group's long-term retail strategy, including the FanDuel partnership and micro complex, and whether future growth would be organic or involve potential M&A.

Answer

Terry Duffy, Chairman and CEO of CME Group, explained that the retail strategy is evolving, focusing on distribution and efficiencies, citing the FanDuel partnership's potential to access 13 million accounts. He emphasized the company's strong position to grow organically, leveraging its credibility in new asset classes like crypto, and suggested M&A is not currently the preferred path.

Dan Fannon asked about CME Group's long-term retail strategy, including the FanDuel partnership and micro complex, and whether future growth would be organic or involve potential M&A.

Answer

Terry Duffy, Chairman and CEO, CME Group, explained that the retail strategy is evolving, highlighting the FanDuel partnership's potential to reach 13 million accounts and the overall growth in the retail business. He emphasized CME Group's credibility in new asset classes like Bitcoin and stated that the company is in a strong position to grow its retail business organically, currently preferring this approach over M&A.

Dan Fannon of Jefferies & Company Inc. asked for the rationale behind lowering the full-year expense guidance, especially given the record-breaking performance in the first half of the year.

Answer

Lynne Fitzpatrick, President & CFO, attributed the $15 million reduction in expense guidance to two main factors: first, the successful optimization and refinement of spending related to the Google Cloud migration, and second, lower-than-anticipated use of professional services and consulting across the firm.

Dan Fannon from Jefferies & Company Inc. asked for the rationale behind lowering the full-year expense guidance, especially in light of the record performance in the first half of the year.

Answer

President & CFO Lynne Fitzpatrick attributed the $15 million reduction in adjusted operating expense guidance to two main factors. First, the company has refined and optimized its spending on the Google Cloud migration. Second, the use of professional services and consulting across the firm has been lower than initially anticipated.

Dan Fannon inquired about the momentum in Capital Markets Technology, specifically regarding trade management services and data center growth, and the outlook for Q4 and next year.

Answer

Adena Friedman, Chair and CEO, detailed that Capital Markets Technology comprises Market Tech, Calypso, and Trade Management Services (connectivity). She noted strong demand for connectivity services driven by robust market volumes and increased data center capacity. Friedman highlighted robust demand for Calypso across collateral, treasury, trading, and risk management, with significant growth in Latin America. Market Tech also showed expansion in Latin America, good upsells, and strong new sales, indicating a healthy environment for the remainder of the year and into next year.

Dan Fannon asked for more details on the momentum in Capital Markets Technology, specifically regarding trade management services and data center growth, looking ahead to Q4 and next year.

Answer

Adena Friedman, Chair and CEO of Nasdaq, highlighted strong demand for connectivity services in their markets, supported by robust market volumes and increased data center capacity. She noted robust demand for Calypso across collateral, treasury, trading, and risk management, with strong growth in Latin America. The Market Tech business also saw expansion in Latin America and good upsells, indicating a healthy environment.

Dan Fannon from Jefferies & Company Inc. inquired about ancillary revenues tied to listings, such as Corporate Solutions, asking about the current environment and the lag effect on these revenues as the IPO market recovers.

Answer

Chair & CEO Adena Friedman characterized the Corporate Solutions environment as one of 'modest growth.' She explained there is a lag effect for new listings, as they receive a three-year 'starter kit' of IR services, which delays subscription revenue. However, an improving IPO market increases the overall pipeline and opens up opportunities for upsells.

Dan Fannon inquired about any changes in the mix of strong account growth, specifically regarding customer profiles or geographic sourcing, and asked for preliminary thoughts on 2026 expense growth and areas of investment.

Answer

Milan Galik, President and CEO, stated that the account growth mix remains consistent with previous quarters, with equal representation across geographies and client types, including direct clients, introducing brokers, prop trading firms, financial advisors, and hedge funds. Paul Brody, CFO, declined to provide forward-looking statements on expenses but noted the current quarter's run rate is typical. Milan Galik added that the company operates without fixed budgets, adjusting staffing based on opportunities and needs while maintaining expense discipline.

Dan Fannon asked for more detail on the improved securities lending results, including the diversity of hard-to-borrow names, and sought an update on the introducing broker pipeline.

Answer

CFO Paul Brody noted that securities lending strength came from both general account growth and a few 'high-flyer' special names, and that a pickup in IPOs would likely boost this segment. CEO Milan Galik described the introducing broker pipeline as 'very strong,' highlighting that firms who previously chose competitors are now returning to IBKR due to its superior offering and cost.

Dan Fannon from Jefferies & Company Inc. asked for more details on the improved securities lending revenue, including the diversity of hard-to-borrow names and the potential for an upward trend with more IPOs. He also requested an update on the introducing broker business, specifically the size of new partners and the strength of the pipeline.

Answer

CFO Paul Brody stated that securities lending strength came from both a general rise in activity and a few 'high flyer' hard-to-borrow names, noting that a pickup in corporate activity like IPOs would likely boost results further. CEO Milan Galik described the introducing broker pipeline as very strong, with a notable trend of firms returning to IBKR after initially choosing competitors.

On behalf of Dan Fannon, an analyst asked for an update on the company's excess capital available for M&A as of March 31 and inquired about any changes or progress in inorganic growth priorities and deal sourcing.

Answer

CFO Paul Brody stated that excess capital remains in the $6 billion to $7 billion range. CEO Milan Galik added that the company continues to evaluate opportunities but has not found a suitable deal, noting a recent potential acquisition failed because the seller was unwilling to part with 100% ownership, which was a deal-breaker for Interactive Brokers.

Dan Fannon inquired about the net new asset (NNA) growth within the wealth channel, specifically the contribution from workplace and the IPO market, and momentum in other channels.

Answer

CFO Sharon Yeshaya highlighted strong performance across self-directed and advisory channels, with new and existing clients attracting assets. She emphasized the workplace channel's exciting momentum, exceeding the historical $60 billion annual migration, contributing significantly to NNA, fee-based flows, and channel migration.

Dan Fannon of Jefferies & Company Inc. inquired about the specific financial or strategic factors that would prompt Morgan Stanley to complete an inorganic acquisition. He also asked for more detail on the drivers of Net New Assets (NNA) and the current advisor recruiting environment.

Answer

Chairman & CEO Ted Pick responded that the bar for acquisitions is very high, as the firm's organic opportunities are 'extraordinary' and any deal must directly enhance the core strategy. EVP & CFO Sharon Yeshaya added that NNA strength is broad-based across all three channels, with the workplace channel being a significant source of new assets for the advisor-led business.

Dan Fannon asked about Bullish's customer concentration, how pricing adjustments have evolved, the progress in Q3, and whether further pricing tweaks are anticipated.

Answer

Tom Farley, CEO and Chairman, noted that customer concentration is common in markets and that the team has worked to bring it down to a reasonable level. David Bonanno, CFO, expressed satisfaction with the current pricing framework, which has diversified the customer base and spread fees across activity levels and customer types, despite some customers still having higher volume concentration. He indicated that while they are comfortable with the current framework, tweaking never ends.

Dan Fannon inquired about Bullish's customer concentration, how pricing adjustments have evolved to address it, and whether the company anticipates further tweaking of its pricing strategy going forward.

Answer

Tom Farley, CEO and Chairman, acknowledged that customer concentration is common in markets and that the company continuously optimizes pricing. David Bonanno, CFO, added that recent pricing changes have diversified the customer base and spread fees across activity levels, making them comfortable with the current framework, even if some customers remain high-volume. He noted that while tweaking never ends, they are pleased with the current outcome.

Dan Fannon from Jefferies & Company Inc. inquired about Marex's free cash flow for the quarter and the last twelve months, and also asked about the status of expense synergies from recent acquisitions.

Answer

Group CEO Ian Lowitt provided a detailed breakdown of cash flow for H1 2025, noting a net cash increase of $779 million and explaining the adjustments from reported PBT to cash PBT. He also stated that most cost synergies from past deals are realized, with future benefits from acquisitions like Winterflood expected to be a mix of revenue and cost improvements. Group CFO Rob Irvin added that Deloitte had reviewed the interim financial statements.

On behalf of Dan Fannon, an analyst asked for an update on Marex's M&A strategy, including any focus on specific product capabilities or geographic regions.

Answer

CEO Ian Lowitt described the M&A environment as favorable, with many sellers and few buyers, leading to an 'extremely active pipeline' for Marex. He confirmed the company is evaluating opportunities across all business segments (Clearing, Agency and Execution, Market Making) and in multiple geographies, without highlighting any specific area of focus. Management added that while the timing of deals is unpredictable, there has been no slowdown in M&A activity.

Dan Fannon of Jefferies & Company Inc. asked for more detail on the trading cadence during the second quarter, specifically contrasting the highly active month of April with the rest of the quarter and the trends seen in early Q3.

Answer

CFO Meron Shani explained that April saw elevated capital markets activity due to tariff announcements, with invested amount per trade increasing 54%. This activity normalized through the remainder of Q2. Conversely, crypto activity was lower in Q2 as traders focused on equities but saw a rebound in July driven by an altcoin rally.

Dan Fannon of Jefferies & Company Inc. asked for more detail on the trading cadence during the second quarter, specifically contrasting the highly active April with the rest of the period and the subsequent trends observed in July.

Answer

CFO Meron Shani explained that elevated trading activity in April, driven by tariff announcements, saw a 54% increase in invested amount per trade. This activity normalized through the end of Q2. Conversely, crypto activity was lower in Q2 but saw a rebound in July, driven by the altcoin rally, surpassing Q2 levels.

Dan Fannon asked for more details on the private wealth opportunity, including plans to broaden distribution for the TPOP product and the future product roadmap for the retail channel.

Answer

CFO Jack Weingart detailed plans to expand beyond the two initial wirehouse partners to include international banks and the RIA channel via a partnership with iCapital. He also mentioned that new products are being designed for broader credit (a multi-asset interval fund) and real assets.

Dan Fannon of Jefferies & Company Inc. asked for details on the integration priorities and timeline for the R.J. O'Brien acquisition, the current client behavior in the Commercial segment amid tariff uncertainty, potential changes in the competitive FCM landscape from banks, and modeling guidance for the Benchmark acquisition.

Answer

Executive Vice Chairman Sean O'Connor outlined a phased integration for R.J. O'Brien, targeting international synergies in 3-6 months and the larger US integration over 9-12 months. He and Group President Charles Lyon noted that while market uncertainty persists, they have not seen any change in competitive behavior from banks in the FCM space. CFO William Dunaway clarified that the Benchmark acquisition will be reported within the Institutional segment and, while smaller, is expected to be accretive and a key growth driver.

Dan Fannon from Jefferies & Company Inc. followed up on the topic of management changes, asking if the hiring process was now complete and whether the current leadership team is the one management believes can execute on its strategic goals.

Answer

CEO Christopher Concannon expressed strong confidence in the current team, especially with the upcoming arrival of Dean Barry. He emphasized that the new hires bring critical product and practical knowledge, such as Spencer Lee's EMS and buy-side experience, which are vital for tackling the large dealer-to-client block trade market and executing the company's next phase of growth.

Dan Fannon sought clarification on the fiscal 2026 expense guidance and questioned why the effective fee rate has remained flat year-over-year despite a positive AUM mix shift towards higher-fee equities.

Answer

CFO & COO Matthew Nicholls clarified the fiscal 2026 expense outlook is based on fiscal 2025 guidance less $200 million in savings, excluding performance fees. On the fee rate, he explained that its stability is a net result of offsetting factors: positive mix from alternatives is counteracted by fee pressure on large institutional mandates and growth in lower-fee vehicles like ETFs and Canvas. He noted a stable rate is a decent outcome in the current environment.

Dan Fannon of Jefferies & Company Inc. asked about the long-term impact on the firm's effective fee rate, considering the growth in lower-fee products like ETFs and model delivery accounts versus the traditional mutual fund back book.

Answer

President, CEO & Chair Robert Sharps stated the firm assumes fees will trend down, driven by mix shift. He noted the biggest impact is the shift from mutual funds to lower-cost trusts in the DC channel as plans scale. While alternatives are fee-enhancing, growth in fixed income and ETFs pressures the overall rate. CFO Jennifer Dardis added that the cost-to-serve for institutional and model delivery clients is lower, partially offsetting the lower revenue rate.

Dan Fannon of Jefferies & Company Inc. inquired about the current recruiting backdrop, the outlook for net new assets (NNA) for the rest of the year, and the broader trend of advisor movement across the industry.

Answer

CEO Rich Steinmeier noted that overall industry advisor movement has been truncated, dropping from a historical 5.5-6% to around 5% due to macroeconomic uncertainty. Despite this, he stated that LPL is maintaining its industry-leading win rates. He acknowledged a more competitive transition assistance (TA) environment but reiterated that LPL's capabilities, technology, and economics are the primary drivers for advisors choosing the firm, not just the TA package.

Dan Fannon inquired about the expected double-digit EBITDA contributions from AQR and Pantheon, seeking historical context on their contribution levels and the breakdown between management and performance fees.

Answer

CEO Jay Horgen confirmed that both Pantheon and AQR are expected to be double-digit contributors to earnings in the current year, driven by strong organic growth and secular tailwinds. He noted Pantheon's consistent growth and AQR's resurgence, particularly in tax-aware solutions. CFO Dava Ritchea added that AQR's growth is fueled by over $20 billion in year-to-date liquid alt inflows, shifting its profile to be more absolute return-oriented. Both executives highlighted that these firms offer opportunities for higher management fees, performance fees, and operating leverage.

Dan Fannon questioned the disconnect between strong multi-asset performance and its inconsistent net flows, and also asked for clarity on the full-year compensation ratio guidance given the unpredictability of performance fees.

Answer

CEO Ali Dibadj stated that 'the time for balanced has come,' citing strong performance and a favorable market environment, and noted growing interest in Europe and Asia, alongside growth in the broader solutions business. CFO Roger Thompson added that while it is too early to predict second-half performance fees, the firm's guidance for a 43% to 44% compensation ratio for the full year remains unchanged and already assumes some level of performance fees.

Dan Fannon of Jefferies & Company, Inc. inquired about the potential impact of regulatory reforms, such as capital relief from the Supplementary Leverage Ratio (SLR), on the largest dealers and trading velocity in the rates market.

Answer

CFO Sara Furber and CEO Billy Hult view potential SLR relief as a significant positive for the rates market. They explained it would increase the resilience and liquidity of the Treasury market by allowing banks to hold more Treasuries, which in turn facilitates more trading and could boost swaps activity. They concluded that the current constructive environment, with strong banks and advancing technology, creates a great recipe for the next leg of electronification.

Dan Fannon asked whether the robust trading business could be sustained if investment banking activity accelerates and inquired about the firm's strategy for alternative fundraising in the retail wealth channel.

Answer

Chairman & CEO David Solomon stated that a strong investment banking environment is 'quite constructive' for their large and diverse markets business. Regarding alternatives, he confirmed that Goldman Sachs is 'very strategically focused' on the opportunity, actively building third-party wealth distribution partnerships, and is positioned to benefit from potential rule changes allowing alternatives in retirement accounts.

Dan Fannon of Jefferies asked for an expansion on trends in interest-earning assets, specifically margin balances, segregated cash, and other buckets. He also inquired about the share buyback activity during the quarter and the outlook for the remainder of the year.

Answer

EVP and CFO Steve Boyle noted a nice bump in margin balances as markets recovered and expects that to continue if the environment holds. He explained the segregated cash movement was a year-end anomaly and current levels are more indicative of the future. Regarding the buyback, Boyle stated they are trending toward the high end of the annual guidance range and expect to be consistent buyers over time, despite potential quarter-to-quarter fluctuations.

Dan Fannon questioned the slow start to advertising spend and its implications for full-year guidance, and asked for the rationale behind co-founding the Members Exchange.

Answer

CFO Steve Boyle explained the lower ad spend was a flexible response to the market environment and that it would increase in Q2, cautioning against cutting marketing too deeply. President and CEO Tim Hockey justified the Members Exchange as a pro-competitive move, noting that despite many venues, ownership is concentrated, and this new, retail-focused exchange will enhance competition.