Morgan Stanley (MS) Management Presents at Barclays Global Financial Services Conference (Transcript)

Morgan Stanley (NYSE:MS.PK) Barclays Global Financial Services Conference September 16, 2020 9:45 AM ET

Company Participants

Jon Pruzan – Chief Financial Officer

Conference Call Participants

Jason Goldberg – Barclays

Jason Goldberg

Great. I think we’re back. Jon, thanks for joining us.

Jon Pruzan

Pleasure to be here.

Question-and-Answer Session

Q – Jason Goldberg

Let’s just jump right in. Obviously COVID-19 has impacted a lot of things in the current landscape. Maybe you could talk to which business lines you feel been the most impact least impacted by COVID-19. How did Morgan Stanley responded to these changes and challenges? And are you seeing, any behavioral changes in your customers since the start of the pandemic?


So a big question a lot of components to that. But before we start, I just want to recognize today actually is the 85th anniversary of Morgan Stanley, Henry Morgan and Harold Stanley today in 1935 started our business down on Wall Street. Obviously, it’s been quite a journey for the last 85 years, and we’re in the midst as you just said of a very unique situation in the pandemic and the health crisis and I would say Jason literally everything we’ve done has been affected obviously. Every component of our business, every aspect of our employees. But over the last decade what we’ve tried to do is to transform our business to eliminate the tail risk.

So, we’d be in a position with more durable sources of revenues, capital-light, investment management, wealth management components and so that we would do well in a good market and we’d be okay during periods of stress. And we’ve clearly done better than okay in the first half. But clearly all parts of our business have been affected.

The most I would say is clearly the employee base. We’re very focused on the health and safety of our employees, the health and safety comes first. We’ve been operating at sort of below 10% of the folks in the office through most of the period. We’re up a little bit now to about 10% or 12% as people start to feather back into the offices.

But the areas that have really been impacted the most if you think about financial services and this is a general comment really credit net interest income with rates being at zero and clearly just technology and the plan at all. And I’ll just spend a second on each credit.

Clearly, we’ve got a different portfolio mix in terms of both the wealth management portfolio and the ISG, the shape and the size of that portfolio different than many. So, not as impacted as some others. On the rate side, clearly, rates being zero has hurt the NII but our NII is only about 10%. It’s clearly impacted the wealth margin, but really not a primary driver of our results.

And then you have the extraordinary actions of the Fed and central banks and governments around the world that have really created an extraordinarily active and elevated activity levels around both just Sales & Trading but also underwriting calendar and that sort of played into our traditional strength when I think about not even traditional I guess 85 years ago we didn’t have the Sales & Trading business.

But clearly our core strength and our original strength of being a world-class integrated investment bank and all those activity levels have led to very strong results in the capital markets and ISG side of the business.

So, everything been impacted. Some more than not some positive some negative, but I think we’ve navigated quite well so far and still a lot of uncertainty out there but we feel good about our position right now.

Jason Goldberg

You touched on ISG. So, maybe we could delve more into that. On the second quarter earnings call, you talked about anticipated normalization of activity in the capital markets business while rebound M&A activity may take some time. Still volatilities remain elevated. Maybe just talk to kind of the current backdrop and how things have evolved since?

Jon Pruzan

Sure. So, listen I mean from an ISG perspective, we’re not going to have as good a quarter as we did in the second quarter, but I would say it’s sort of better than a typical summer quarter, August activity levels were good. There was no real slowdown in August and we’ve seen very, very constructive markets across all of the different components of the Sales & Trading and Investment Banking business.

So, strong new issue calendar underwriting both equity and fixed income. Clearly, equity is stronger now I would say the investment-grade fixed income new issue calendar has been strong throughout but it slowed down a little bit but still active.

Underwriting and new issue calendar lead to good sales and trading activities. So, there’s just been elevated volumes. We started to see a pickup in volatility, particularly equities with the tech sell-off. But again engagement levels are very, very high. And there’s just a lot of I would say thematics that people are worried about or focused on and are engaged with us and we’ve seen significant client engagement whether that’s the path of the virus, the second wave whether we’re in an inflationary environment or deflationary environment, Brexit the new coalition in the EU. So thematically there’s enough going on to keep people engaged and active.

I think in the second quarter I said, leverage finance was slow and M&A was slow. We’ve started to see signs of life in both of those. First of all in the M&A you just look at the pace of announcements. That will set us up well for next year will not help us in the existing quarter as we had this air pocket where we had very few announcements over the last six months from an M&A perspective.

And then we started to see some more activity in the leveraged finance market very constructive markets. Velocity is very good. Ability to distribute is very good and we’ve seen that, sort of, LBO pipeline starting to build that again barring sort of a shutdown in markets. We see a good and healthy pipeline across that platform.

Jason Goldberg

Helpful. Maybe shift gears to the wealth management side of the house. And I fully appreciate your comments earlier that net interest income is not a huge component of Morgan Stanley. But I do get asked a lot about wealth management’s NII trajectory. One of the things going out the conference so far is kind of elevated premium amortization. Maybe just talk to NII in that business whether it’s the margin or thoughts on the loan deposit outlook? And just maybe how has the pandemic reshape what has traditionally been a relationship model?

Jon Pruzan

Sure. Listen I’ll tackle the first — the last question first, which is I think the relationship model is — it’s sort of improved positive through the crisis. I mean clearly people want advice during this period. They want relationships. They want to be able to talk to someone the FA population is as busy as they’ve ever been with client engagement. I think a lot of the investments that we’ve made in technology has significantly helped us as we sent everyone home in March. The digital work we’ve done and particularly on the platform and the ability for the FA teams to talk to each other and stay current with clients has been extraordinarily — extraordinary. And then the adoption rate has accelerated in a lot of the technology.

So I think the relationship model has performed extraordinarily well and client engagement is at all-time highs and our FAs are working as hard as they ever have. So that component we’ve been very pleased with and we’ve been able to do it from home and we’ve done it I think very well.

In terms of NII specifically, in the second quarter, I think we said we had about $1 billion of NII ex-prepayment. We would expect that number to drift down a little bit because the second quarter benefited from increased LIBOR levels as well as spreads. And I think we’re still comfortable with that guidance that we had expected to come down a little bit from the second quarter levels.

Prepayment amortization we took a lot of that pain over the last 12 months. There is some out there for us still, but I wouldn’t expect it to be a main driver this quarter. But, obviously, rates and volatility might change that picture a little bit. And then again client engagement has been extraordinary. And our deposits have held up. We, obviously, had the delayed tax payments in July, but we continue to see deposit balances increase this quarter.

Loan receptivity in the wealth channel has been very strong particularly around the securities-based lending product with rates as low as they are. So we’ve seen good health in both deposits and loans. But again, rates at zero, it’s hard to make up. And so we would expect to see a little bit of a drift down here in NII as we turn into the back half of the year.

Jason Goldberg

Maybe kind of talk to shift gears and you hit pause on your targets kind of given the environment that obviously was far from normal from target set up at the start of the year. Just maybe talk to how you’re thinking about those targets today against the current backdrop?

Jon Pruzan

Listen I mean as you know and you’ve covered us for a long time, we like to come out every January with a set of targets as you said. We’ve sort of positioned those as in normal environment. Clearly we’re not in a normal environment. I like the way you put it — phrase it. We did pause that.

The other thing to remember is when we came out in January we hadn’t announced E*TRADE transaction. So we have put a pause on that. And you would — as you would expect in January, I think we’ll have a little bit more clarity hopefully on the environment and the path of the recovery. We will have closed the E*TRADE transaction and we will set out a new set of targets.

That being said, I think we put up very strong returns. I mean some of the targets are still — were still performing against a 10% ROTCE in the first quarter in 2018 and the second quarter. So year-to-date about a 14% is still a very strong return. But on the flip side the margin, right? We lost — pick a number $500 million $600 million of NII. You can’t make that up in wealth.

We put up a 24.5% margin, I think in the second quarter. We told you we thought that margin was probably stable for the third quarter. That’s sort of what we’re experiencing right now. We still have some incremental or just starting to see some incremental costs related to the integration of E*TRADE. And so that’s — the margin has been stable in that period. But we’ll come back in January when we have a little bit more information. We’ve got the deal closed and we’ll set out a new time frame and a new set of targets.

Jason Goldberg

Helpful. I want to talk a bit about E*TRADE in a second. But maybe first get a question on capital. Obviously, we got the results of CCAR and the SCB rollout and Morgan Stanley, while having a high SAP certainly looks very good in terms of its capital position. Maybe just talk about your thoughts on this next round of stress test and just maybe the priorities of capital as we think about next year?

Jon Pruzan

Sure. Listen I think we finally started to get some recognition for the business model with a 13.2% SCB relative to 16.5% capital at the end of June. We’ve talked about E*TRADE adding to that capital position. We’re clearly in a positive excess capital position which gives us a lot of flexibility to pursue and I’ll talk about sort of the options of that capital in a minute, but we’ve got significant flexibility to pursue opportunities.

In terms of the next stress test, I mean, our expectation is the first day letter any day now which will lay out the sort of the guidelines and the path and the rules of the new submission. Our expectation is, it’s going to be more rigorous around wholesale and retail credit.

And as I mentioned to you before, we would expect to perform well in that type of test. It will clearly be more challenging. Our expectation is more challenging, the test itself this time around than last time even though, I think the economy has improved a little bit.

But again, if it’s going to be focused on wholesale and retail credit on the wealth side with our $85 billion-plus portfolio at the end of June, we’ve had virtually no charge-offs in the last 18 months. We’re lending into our high net worth and wealthy clients and that portfolio has performed quite well.

And on the ISG side, again our shape and size of that portfolio is different. We’ve talked about in the two vulnerable sectors only being about 10% of that $165 billion portfolio. That segment has been pretty stable. The vast majority of our portfolio is either investment-grade or secured.

So again, we would expect to perform well. I don’t know what they’re going to do with the information. I wouldn’t expect the CR SCB change, they might selectively change SCBs, but I don’t think you’ll see a wholesale change in the SCB.

Our SCB is 13.2%. And in terms of what we’re planning on doing that again, I think we have significant flexibility. We – capital return is an important part of our story. When we have more clarity on the path of the recovery and the economy, as well as some more guidance from the regulators, right? We’re shut down this quarter but we would expect to hear from them presumably around the new stress test what they’re thinking about. We’ll come back with you on sort of our capital return but we would like to increase our dividend and we would like to restart our buyback.

We also have plenty of capital to continue to invest with our clients and support our clients like we’ve done through the first six – excuse me, first nine months of the year. And then I think, opportunistically we still like to fill in some spots. As we’ve said before, we want to focus on sort of fee based revenues, more durable revenues, areas which are more capital light Investment Management is an area. We like the growth trajectory of that business. We like the returns of that business. If there are opportunities in that space we’d like to continue to try to build out that business.

Jason Goldberg

I guess on the topic of acquisitions just maybe expand upon what kind of your acquisition criteria kind of what you’re looking for you meant Investment Management with E*TRADE closing around the corner, there’s more to do in wealth management. And would kind of a prolonged limitation on share repurchase make acquisitions more attractive?

Jon Pruzan

Listen, I think we want to deploy our capital in the most best return risk-adjusted profile we can. And if acquisitions is that over buybacks we’ll do that. And again, at 16.5% versus 13.2%. We’ve had over 300 basis points of capital, excess capital. We would expect that to grow with the closing of E*TRADE. So we have real flexibility and plenty of options.

In terms of the criteria, listen, we told you we’ve been focused on IM and wealth management. I think wealth management is clear. We have E*TRADE. That’s on track. We need to close it and we need to get the integration right. We’re very excited about again the wealth management and that transaction but I think that will keep us busy in that space for a while.

And then on the IM side, just like every opportunity or acquisition that we look at, it’s got to make strategic sense, it’s got to have – financially be sound and then culturally sort of fit together. And within the IM space, we’ve talked about scale in certain businesses maybe fixed income we’d like to be bigger. Select products, things that will add to the portfolio in our Investment Management business.

We’ve had really nice success in the small transaction that we did 1.5 years, I guess two years ago. We’ve done a lot of organic growth initiatives. You’ve seen our AUM grow quite well. We’ve sort of had leading net flows into our long-term strategy. So we feel very good about that business. We like the trajectory. We like the return. And if we can add selectively to that business we will try to do that.

Jason Goldberg

You mentioned E*TRADE. So maybe we could delve a bit more into that. And maybe discuss kind of the final preparations for the closing of the acquisition. And any insights from the integration process to provide you maybe more or less comfort around the deal. Obviously, you announced in a pre-COVID environment.

Jon Pruzan

Listen, I think I’ll go through each of those pieces, because I think it’s important. So I mean, we’re on track to close in the fourth quarter. The integration and work streams are progressing well. We’ve got the org structure all set up and ready to go and we’re excited to keep moving get the deal closed and starting to integrate. I think through the process of spending more time with our new partners and with the company, I would say we’re just — we’re more excited than we were when we first announced it. I mean, one of the things that we’re excited about is just the performance that they’ve had through this period, right? They’ve got more clients. They’ve got record net new assets, record clients, record levels of cash, record activity levels.

And so we were excited about all of those engines helping Morgan Stanley grow our wealth business and more broadly the workplace in other parts of the area. And now we’re buying a company that has more clients, more assets, more cash and so all of that is a positive. Obviously, the NII story is slightly different. But the fundamental reasons why we bought the company are still intact. And I would say, they’re even more intact than they were when we did it in February. Synergies, we still feel very comfortable with both the cost savings as well as the funding synergies. And as we spend more time with our partners, I do think that there’ll be real revenue opportunities as we get the companies integrated. And as we start bringing a lot of their capabilities to our existing clients and vice versa some of our capabilities to there. So we feel very good about it. And as I said it’s on track for the fourth quarter.

Jason Goldberg

Helpful. And just a reminder for those in the audience, if you click the top left-hand corner of your screen, you can submit a question. Alternatively, email me [email protected] Just include MS in the subject. Jon, maybe sticking with the wealth management theme and talk to about your workplace offering. On the most recent earnings call mentioned the selenium integration and the execution of MS at work strategy are on track and our important precursor trade integration. Maybe talk a little bit more about the overall strategy there, the kind of successes you’ve had the year-to-date have seen some announcements in terms of geographic expansions? And do you maybe just provide an update?

Jon Pruzan

Sure. Well listen, I think the Solium deal was a very important transaction. As I said before, it’s sort of a precursor which will actually help us with the E*TRADE transaction. And actually, the E*TRADE transaction I think accelerates and strengthen some of what we wanted to do with Solium. But when we think about Solium, there were really three components. We wanted to generate more corporate clients, then we wanted to build credibility and trust with the participants of those employers, then ultimately convert those participants to clients. So just briefly on each of those 3. As I said in the earnings call, we’ve seen really good receptivity. And we’ve seen an acceleration of the wins on the corporate client side. So that’s gone better than actually expected. We also talked about we had to convert all of our existing programs and plans on to the Solium platform. We talked about that getting done by the end of 2021. We’re actually going to be largely done by the end of this year. So that’s ahead of schedule and we feel very good about that.

In terms of building trust with our new participants in the programs. We’re doing that through content and education. Usually that would be done in person, but just like this conference, mostly webinars now and really sort of the financial wellness component and just getting people familiar with who Morgan Stanley is and what our capabilities are. And then lastly, converting participants to clients, there were two components to that. And one was as we talked about before our old system we basically called our clients and said, you’ve had a vesting event where do you want us to send the money or where do you want us to send the shares? So we had to get to a place where we had a Morgan Stanley account for clients. We’re in the process of converting and making sure that every participant has a Morgan Stanley account and that will take some time. But we have had some real nice early successes in converting participants to clients.

And I think the E*TRADE transaction is going to actually help with that because clearly their self-aware and reactive functionality is better than ours, the quicker we can bring that functionality to our — to the participants in our workplace work plan. Offering is going to be important. And we also as you know think it’s going to be a very important channel for us, the overall workplace channel because most wealth gets created in the workplace. This gives us a nice feeder with new clients, cash capture and all the things that we discussed.

So we’re very excited about the progress that we’ve made with Solium and we’re going to get even more growth I think out of that again out of that channel both in the channel itself, but also a feeder into some of our other channels and whether that be a self-directed channel or a virtual adviser or a full-service financial adviser we’re very excited about it.

Jason Goldberg

Helpful. Maybe sticking with that, you mentioned before kind of your FA population. Maybe just talk about in terms of what you’re seeing in the recruiting process?

Jon Pruzan

Sure. Listen, I think Morgan Stanley is sort of becoming a destination of choice for FAs. We’ve talked a little bit about the technology that we have. The brand is resonating very well. I think we’ve got good strong momentum. What we’ve also seen and this is sort of anecdotal. But the FAs that we’re bringing in today are bigger — have bigger books of business. They’re bringing more of their assets with them. And when they get on our platform, we’re seeing them grow their assets probably faster than they could have at other places and that is getting out and we’re seeing a very strong pipeline of people who want to join the firm.

And net recruiting is a real important metric from just an overall sort of starting point. Historically, we’ve sort of been losing net a couple of hundred FAs a year, so losing more than we’re recruiting. But with that we’ve been losing any assets and revenues. And generally, those things sort of start us in the year at a detriment. I think what we’re seeing this year and now I think what we’re seeing this year is net recruiting is sort of much closer to zero.

We’re not recruiting — we’re recruiting a little bit more, but we’re clearly not losing as many FAs as we have historically. And what that does is it sets us up real well for future years because the revenues and the assets that we lose in the net recruiting situation has historically been negative, we would expect to be positive this year. And we expect again and Morgan Stanley is going to become a destination of choice for the FA population and we’re really excited about that.

Jason Goldberg

And then maybe shift gears to just technology. Obviously, one of the big themes coming out of this conference. I think digitization has come up in every presentation. Maybe just talk to which areas do you think require the most investment in technology given what’s going on? And just how do you see Morgan Stanley positions relative to competitors? And I guess are there any capabilities that others have that you feel like you need?

Jon Pruzan

Sure. I mean again digitization, technology, automation all of those are very current topics. And I think we’ve seen an acceleration really through the pandemic is as we’ve seen a large part of the population start working from home for those who can. And so technology is always critically important to us. We think we’re really good at it. MSET is a perfect example of state of the art, trading platform and equities. We continue to invest in that area. We need to continue to stay current. The initiatives and investments that we made in wealth, the digital capabilities we have there. Particularly for the FA has been very strong in terms of capabilities that we want. We’re clearly picking up more capabilities with E*TRADE filling some gaps where we thought we needed to fill.

But broadly speaking, I think we’ve been very, very pleased with our technology and places not only from an offense perspective but from a defensive perspective, I think the plant has held up extraordinarily well, right? We sent everyone home like everyone else. We are able to processed [ph] all of the volumes. We had no major issues and we continue to be engaged and supporting our clients as the vast majority of our employees work-from-home.

When we sent everyone home we made sure they had the right technology whether that was screens or laptops or turrets or phones. And we’ve been able to obligate this really well and we continue to invest in our remote capabilities and I think our clients are seeing that.

Jason Goldberg

We have about 10 minutes on the clock. So certainly time if the audience has any Q&A to submit may hit the button or e-mail me. Jon when we ran through the businesses, we kind of or talked about ISG. We talked about wealth management. I didn’t ask about Investment Management. Obviously, Morgan Stanley has a differentiated product offering in that space. Maybe just talk to — update us in terms of what’s going on there, just given kind of what is going on in the world?

Jon Pruzan

Sure. And again, I mean in the second quarter, what we started — what we’ve been seeing is just real nice growth in that business. Our net flows, I think are industry-leading. We had 18% net flows into long-term strategies in the second quarter. We continue to see our clients interested in our products. And we see — continue to see real nice positive net flows. And this is really a flow story.

So when you start to look at the composition of the revenues in our Investment Management business today or this quarter, my expectation is you’ll see a larger percentage of that coming from the fee-based flows, and the fees that we make off of our AUM, given the growth that we’ve seen in AUM. We also really sets us up nicely for the go-forward periods. Carry, obviously, is volatile, in any given quarter. We’ll have to go through the process of seeing that, but the values are good.

So our expectation is for Investment Management to have another strong quarter. But we’ve been really excited about, again, a lot of the organic initiatives that we’ve put into place, your comments around the differentiated product has really led to leading industry flows.

And that again sets us up well, more durable revenues, fee-based flows, fee-based revenues. And we feel good about it. The one area that is under pressure is, as we talked about earlier with rates at zero, our liquidity business and money market business gets impacted by the low rates, but again, broadly speaking, very healthy flows and very healthy quarter for IM.

Jason Goldberg

Helpful. We do have a question from the audience. Does better FA retention recruiting mean anything for your fee-based flows outlook?

Jon Pruzan

Again, net recruiting positive is just a good for everything, whether that be, fee-based flows, assets under management, our ability to generate deposits, and/or loan growth it’s just a net positive across the board. Stability less, ins and outs, better also just organizationally in time, from a time perspective.

So it’s clearly a net positive. We continue to see strong flows into our fee-based accounts. And I think we’ll see a nice quarter this quarter. Again, also we’re not losing as many FAs, so we’re not seeing as many assets and clients leave. So all-in-all, very underlying fundamentals of that business, very strong. So client engagement, new assets fee-based flows, deposits loans and then obviously net recruiting positive.

Jason Goldberg

Got you. Maybe we’ll go to some of the audience polling questions. The first one that we’ve been asking every company is, what’s your position in the stock? For Morgan Stanley 50% of the people say overweight which is certainly in an above-average answer that we’ve seen so far at this conference, but I guess not surprising given it doesn’t have the same kind of credit risk characteristics at some of the other names.

The second question we asked is which of the following would be needed to become more bullish on the shares of Morgan Stanley. And I won’t read all the answers because you could see them on your screen. But interesting Jon, number one was additional comfort around the benefits of the E*TRADE acquisition.

So I know you talked about comfort on the funding side the expense cut side. Maybe you could extract a little bit more on just what are some of the revenue synergy opportunities there.

Jon Pruzan

Sure. And again I think we’re on track to close in the fourth quarter. I think we want to get the transaction closed in January we’ll have a little better sense of sort of where all the pieces are and we’ll spend some more time on the topic. But just broadly, there’s real revenue opportunities.

I mean the easiest is that, we now know that about — our existing client base has about $300 billion to $400 billion in assets in sales-directed accounts. With obviously E*TRADE self-directed functionality being able to bring those assets to us and those self-directed assets to us is clearly one area.

The workplace, again, I think their digital capability in their self-directed account what you can do online; some of their banking products online will clearly help us with this conversion of workplace participants to clients. So there are just lots of areas the loans.

I think the SBL product, maybe some of the mortgage product could be very receptive into the E*TRADE client base. We’ve got products and research that we think will be well received in the E*TRADE client base.

But our job is to integrate these businesses in a way that is not disruptive to each of the different channels and each of the different client bases. And then over time add more capabilities and more functionality to improve the overall experience. So again we’re going to take it slow. We’re very excited about it. We think there are real opportunities and we’re picking up a company that now has more clients more assets and more cash. So we’re really excited about it.

Jason Goldberg

Makes sense. The next question we had asked was when do you think Morgan Stanley will be able to achieve its longer-term ROTC aspiration of 15% to 17% on a sustained basis with 2022 or by 2023 as the most used responses for what that’s worth? I won’t ask you to comment when you think that will be?

Jon Pruzan

I would say that’s okay. Those are — I will not comment. The one thing I will say is, we are now at this point we’ve got a 14% year-to-date ROTCE and we’re clearly carrying more capital than we thought we would when we sort of set out those targets in the beginning of the year. So we’re very happy with the returns and the profitability that we’ve generated. And as I said we’ll revisit in January, when we have a little bit more time to think about the economy, as well as the Fed, as well as the E*TRADE deal.

Jason Goldberg

And then the last audience question was, what is the best incremental use of capital for Morgan Stanley. And two-thirds of the audience maybe not surprisingly picked share repurchase, which I know we’ve talked about.

Jon Pruzan

What was the other a-third though, I want to just – this is interesting.

Jason Goldberg

So 65% share repurchase, roughly 20% wealth management acquisition – wealth management acquisitions, 8% Investment Management acquisitions and then 4% dividend increase, 4% Investment Banking higher end. So definitely a big preference. I know you mentioned dividends earlier but a big preference to share repurchase over dividends for what that’s worth.

Jon Pruzan

Well I appreciate that.

Jason Goldberg

And then we got two minutes remaining. But we do have a couple of audience questions coming in now. Maybe just talk to a bit more – maybe just talk about overall just how you’re managing expenses and kind of view on expenses in this environment. You talked a little bit about digitization and the like.

Jon Pruzan

Listen I mean as you know we’ve tried to continue to be very disciplined around expenses and sort of control what we can control. What we’re seeing is clearly things like market and business development, professional services, some of the focus areas that we’ve had, before continue to do well and we do well in those areas.

Obviously, marketing and business development being significantly aided by the fact that no one’s traveling. We’re not doing in-person conferences things of that nature. So we’re saving money there. Where we have seen an increase in expenses as you would expect given elevated volumes and sales and trading businesses. Those businesses carry sort of the BC&E, the clearing and brokerage and clearing expenses transaction taxes.

So those variable costs have been elevated with the increase in revenue. So I think overall, we’ve done well managing the expanded space. I think we showed in the second quarter the real operating leverage that we had when we really turbocharged the revenue side of the equation. And so we’re very pleased with how that’s being managed but we are super focused on it.

We will continue to make the tech investments to help automate and streamline processes, so we can continue to maintain not only that expense discipline but reinvest some of those savings continually into the business.

Jason Goldberg

I think that’s a perfect place to leave it. Jon, thanks so much for meeting with us virtually today. And I hope our next meeting is in person.

Jon Pruzan

That would be great. Stay safe and thank you for the opportunity.

Jason Goldberg

Thank you.

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