Executives: Jan Strecker - IR Gregor Pottmeyer -

CFO
Analysts: Owen Jones - Citigroup Peter Lenardos - RBC Arnaud Giblat - Exane Johannes Thormann - HSBC Daniel Garrod - Barclays Martin Price - Credit Suisse Anil Sharma - Morgan Stanley Gurjit Kambo - JP Morgan Kyle Voigt - KBW Richard Repetto - Sandler O'Neill Benjamin Goy - Deutsche Bank Michael Werner -

UBS
Operator: Good afternoon ladies and gentlemen and welcome to the Deutsche Boerse AG Conference Call regarding the Q2 2017 Results. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions following the presentation. Let me now turn the floor over to Mr. Jan Strecker.

Jan Strecker: Welcome ladies and gentlemen and thank you for joining us today to go through our second quarter 2017 results.

With me is Gregor Pottmeyer, Chief Financial Officer. Gregor will take you through the presentation and after the presentation, we will be happy to answer your questions. The presentation materials for this call has been sent out via e-mail and can also be downloaded from the Investor Relations section of our website. As usual, this conference call is recorded and is available for replay. With that, let me now hand over to Gregor.

Gregor Pottmeyer: Welcome ladies and gentlemen. Let me start today's presentation with an overview of the development in the second quarter. The first quarter have been characterized by low equity market volatility on the one hand and interest rate related improvement as well as good secular growth on the other hand. This trend continued in the second quarter and this is by year-over-year net revenue growth doubled to 4% in Q2 from 2% in Q1. Adjusted operating costs were flat, because higher share based compensation and inflation was offset by our efficiency measures.

Depreciation increased as expected due to investments in future growth. Still, earnings growth reached 7%, which was nearly twice as much as revenue growth. In May, the acquisition of the U.S. commodity exchange, Nodal, was completed. In the first half of 2017, volumes increased by 24%, and Nodal generated around €8 million net revenue with an EBITDA margin of around 40%.

EEX financed the Nodal acquisition through a capital increase of €155 million. Given the Deutsche Boerse was the only participating shareholder, our economic stake in EEX increased from 63% to 75%. This is resulting in an increase of our annual net income by around €7 million. In the first half of 2017, we achieved around 5% secular net revenue growth, which is in line with our plan. However, secular growth was offset by a cyclical net decline and negative consolidation effect of 2% in total, resulting in 3% net revenue growth.

We think it's still possible to meet the lower end of our net income guidance range of 10% to 15% for the full year. But cyclicality, including equity market volatility, would have to turn net positive in the second half of 2017. Net revenue in the first half of 2017 amounted to €1,247 million. Adjusted operating costs without depreciation were down slightly and the 2% total increase was mainly driven by €9 million higher provisions for share based compensation because of the higher share price. The EBITDA and net income increased both by 6% against the same period last year.

Adjusted earnings per share amounted to €2.49. This brings me to the details of the result of the second quarter on page three. Net revenue increased by 4% to €624 million. As part of net revenue, the net interest income rose to €34 million, because of significant growth of the net interest income at Clearstream. Operating costs adjusted for exceptional items were flat, despite higher share-based compensation inflation.

Depreciation increased as planned due to higher investment spending. Exceptional items totaled €26 million, which among others, included a provision for potential fine relating to the current investigation of the public prosecutor in the amount of €10.5 million. The adjusted EBITDA increased by 7% and the EBITDA margin stood at 61%. The decline of minorities due to the increased stake in EEX and lower financial expenses due to the complete redemption of the U.S. dollar private placement last year had a positive impact on the net income.

The net income is also adjusted for a €33 million tax liability relating to the settlement that was offered in 2013. As described in our interim report for the first quarter, the Luxembourg tax authority is denying the tax deductibility of the payment. We believe their opinion is unfounded and we'll continue to take all appropriate measures to defend ourselves. But from an accounting point of view, it became necessary to book a provision. The adjusted net income amounted to €233 million, and adjusted earnings per share to €1.25.

I'm now turning to the quarterly result of the individual segments, starting with Eurex on page four. The Eurex development was mainly driven by cyclically weaker activity in index derivatives, in line with lower equity market volatility. This was partly offset by the continued double-digit growth in interest rate derivatives. In commodities, we continue to see a weaker development despite the Nodal consolidation. This was mainly driven by the regulatory uncertainty around the pricing debate and the possible split of the German and Austrian splitting zone, which had a negative impact on the German power derivatives volumes.

Furthermore, in the French power derivatives market, volumes were negatively impacted by a fixed power tariff in conjunction with unexpected shutdown of nuclear power plants in France. We think those two developments are temporary in nature. In total, net revenue in the Eurex segment stood at €263 million, the adjusted EBITDA at €156 million, and the EBITDA margin at 59%. In the cash market, we saw an increase of the order book turnover by 5%. Therefore, net revenue in the Xetra segment increased to €43 million, EBITDA on an adjusted basis stood at €26 million and the EBITDA margin at 61%.

At Clearstream, total asset under custody increased by 3% to €13.4 trillion. This was driven by a slight decline in the ICSD business, 3% growth at the CSD and double-digit growth of the investment fund business. The increase of the CSD net revenue despite the discontinued charge for settlement services in the context of T2S was a result of a new fee schedule that was introduced in March. The main driver for the increase were reporting services, which previously were included in our settlement fee. Over time, we expect further positive effect from T2S by growth in custody and the value-added services.

Outstandings in the collateral management business of GSF continued to be negatively affected from Central Bank monetary policies, which reduced the need for secured money transactions. Due to a more favorable business mix, its growth in the higher margin securities lending business, GSF net revenue increased by 9%. The cash balances at Clearstream adjusted for blocked accounts increased by 4% to €12.5 billion. In addition, the higher rates in the U.S. dollar resulted in a substantial increase of Clearstream's net interest income.

The decline of cash balances against the second quarter did not really affect the NII as the decline mainly occurred in Euro balances. In total, net revenue in the Clearstream segment amounted to €216 million, the adjusted EBITDA to €127 million, and the adjusted EBITDA margin to 59%. Net revenue in the Market Data and Services segment declined by 1% year-over-year. This was mainly driven by a decline in the data business due to the deconsolidation of Infobolsa and MNI in 2016. This was partly compensated by 16% net revenue growth in the index business.

Major drivers were the strong increase of assets under management in ETS and a few smaller changes to overall pricing. Total net revenue in the MD&S segment amounted to €101 million, the adjusted EBITDA to €70 million, and the EBITDA margin to 70%. This brings me to page eight and the net revenue drivers in the first half 2017. With our secular initiatives, we generated around 5% net revenue growth in the first half this year, which is in line with our plan. The main contributors were custody, investments and services, new Eurex products, collateral management services, and Eurex OTC clearing.

This was partly offset by a net decline in the cyclical part of our business, which was mainly driven by the weaker development in index derivatives and negative consolidation effects. In total, this resulted in a 2% decline of net revenue. In addition, we saw some pressure on the cost base in the first half arising from staff cost inflation of around €10 million, depreciation and amortization due to higher investments of around €13 million, and higher share based compensation due to the share price increase of around €9 million. We were able to offset more of those pressures by further improving efficiencies, but especially, the higher share based compensation troughed the increase of overall growth by 2%. Even though, the business development during the first half of 2017 was slightly below our expectations, we regard it's still possible to achieve the lower end of our net income growth guidance range of 10% to 15% for the full year.

This is subject to a positive development in the cyclical environment, especially in terms of higher volatility on the equity markets compared to the first half of 2017. This concludes our presentation. We are now looking forward to your questions.

Operator: [Operator Instructions] And the first question comes from Owen Jones from Citigroup.

Owen Jones: Hello, good afternoon.

I have a question on the topic of your secular growth trends that you have outlined in -- that we've seen in the first half. Would you be able to set out your thought process as to how you see these same trends progressing in the second half? Do you have any visibility as to new projects coming on stream, for example, it might have a positive revenue contribution in the second half? And related to that, in terms of any new projects coming on stream, do you see any cost pressure associated with your secular activities in the second half as well?

Gregor Pottmeyer: Yes, in principle, all the trends you're seeing in the first half year should also take place in the second half year because that's exactly the differentiation because we say it's a secular trend. And therefore, we expect the same growth rate in the second half year as we have seen in the first half year. There are some specific elements what comes in addition through the first half year. So, obviously, as we consolidate now the Nodal Exchange and we have just integrated two months in the first half year.

So, there will be another increase and we've consolidated now for six months. In addition, I would also expect for the OTC clearing path as that process just started to kick in. So, it's roughly €5 million in the first half year. It should be a double-digit million euro in the second half year. So, these are some examples.

And with regard to cost pressures out of that, so we have done basically our investment in majority of these products what we show here as secular trends and the additional operational costs are very low.

Owen Jones: Okay. Thank you. As a very quick follow-up, could you just give us the update as to how is 360T is going with regards to the electronic trading and clearing, please?

Gregor Pottmeyer: 360T is also -- let's cover, that question. So, the revenue increase overall is plus 2% in the first half year, that doesn't look very bright.

But if you compare the development with our competitors, then you see that we win market shares. So, our trading volume at 360T increased by 4%, at Thomson Reuters, I think it's almost minus 3% at EPS, The Next Group, minus 7%. So in this multi-dealer platforms area, we increased our market share and was the only exchange or platform who were able to grow that business. With regards to the structural element, so we implemented an ECN distribution channel in the first half year and we will introduce central limit order book functionality, including clearing and risk management capabilities in the second half year. And -- so we are in good consultation with our customers here.

And therefore, our core belief is unchanged that the FX market is also a market that we expect in the mid to long-term a change from off-exchange to on-exchange and we are one of the first who will benefit from that development.

Owen Jones: Okay. Thank you very much.

Operator: Next up is Peter Lenardos from RBC.

Peter Lenardos: Hi, good afternoon gentlemen.

It's Peter from RBC in London. A question on pricing, I was curious if you made any material changes to the pricing of any of your derivative contracts or indices throughout the most recent quarter? Or if you have any plans to do so?

Gregor Pottmeyer: Yes, so in the Investor Day, I think we discussed that topic a lot and very intensively. Now, with regard to Eurex, we formed agreement with the customers and we had some changes at the beginning of July this month. So that should be slightly positive effect for us in the second half year. In addition, you're seeing some very positive development also in our index business.

So, that is also one reason that there are some positive price impacts here. And as we discussed on the Investor Day, so -- and there are other elements that we currently evaluate and later it's just interaction or a message through. We see also some opportunities to increase our pricing in these kind of areas. So, slightly positive impact out of that pricing measure.

Peter Lenardos: And Gregor, do you think any of that's having an impact on volumes because the Q3 volumes so far are a bit weak?

Gregor Pottmeyer: No, we don't expect volume pressure out of that measure.

Peter Lenardos: Great. Thanks gentlemen.

Operator: The next question comes from Arnaud Giblat from Exane.

Arnaud Giblat: Yes, good afternoon. I was just wanting a bit more clarity on your guidance.

You said you can achieve the lower end of your earnings guidance in 2017, subject to a positive development in the cyclical environment in H2. Can I just, first of all, check what your reference point is? Is it the €881 million of adjusted net income you're referring to? So, you're confident you can achieve €0.10 of growth of that if the cycle helps? And secondly, does that include Nodal? So, obviously, it isn't in the reference points, so should we be stripping out the impact of Nodal and any other acquisitions in terms of determining what your guidance is? And finally, should the volumes remain at a low level, what action can you take on the cost base to achieve better operating leverage?

Gregor Pottmeyer: Yes, so when we refer to additional cyclicality in the second half year, then we mainly refer to the -- our equity product and specifically, our equity index product that is the core product of Eurex. So, you have seen in the first quarter or in the first half year very low volatility in the range of 14% or 15%. So that level has to go up when for the case we would be able to achieve our lower end of our guidance range. So, that is specifically relating to that one.

With regard to our fixed income product and our net interest income, so we are confident that we can see within close rate in the second half year what we have seen in the first half year. Our reference point as with regard to the net income, so that is the adjusted net income, what is €811 million at H1 2016 and with regard to additional cost measures. So, first of all, I want to remind all of us, so we see some cost increases in 2017 out of -- and the sum is roughly €17 million, it's €30 million for depreciation, it's roughly €20 million for inflation, it's now roughly €10 million for our share based payments, and €10 million for Nodal. So that would add up to roughly €70 million, so a 6% increase of our cost. Obviously, in the first half year, we have shown a cost increase of 2%.

So, we were able to mitigate 4% in the first half year and we did it via internalization of external contracting and the number is roughly more than 500 people what we internalized here. Secondly, we have a different, more direct and proactive steering process. So, non-performing projects or businesses are stopped. We have an initiative in all the areas that we want to standardize and automate our process and we would also benefit from higher degree of digitization in our organization. So, all these measures are sustainable and help us to mitigate our costs and to come as close as possible to flattish cost.

Arnaud Giblat: Okay. Thank you.

Operator: And the next question comes from Johannes Thormann from HSBC.

Johannes Thormann: Good afternoon everybody. Johannes Thormann, HSBC.

Just some follow-up questions. First of all, on Nodal. So, the €8 million for two months translating into three months would be a good run rate for the next quarter, is what you expect? Secondly, looking at remarks from competitors and then also the business figures in 360T, do you have a simplified -- if you will take a simplified margin, is there any margin pressure at 360T? And last, but not least, how likely do you consider that the OFAC tax bill has to paid to Luxembourg? Thank you.

Gregor Pottmeyer: Okay. With regard to Nodal, so the revenue in the first half year was €7 million.

So that should be the minimum run rate also for the second half year, because as guided, we are convinced that that is a growing asset. And we have seen over the last 18 months, even if the volume development was volatile here, but the average market share has steadily increased here. And we expect from that asset in the next time to be double-digit on growth and in addition, we said its EBITDA margin of roughly 40%. So, that is what we expect with regard to Nodal. With regard to 360T, so from a margin perspective, we have always discussions with the customers to change pricing here.

Our focus is to really get additional volume. We do it specifically organically with some regional expansion in the Asian market and also in the U.S. market, where we made some good progress. But the main focus for 360T is to realize the structural growth by using our standard limit order book functionality and our clearing functionality over the next years. OFAC tax, so, the tax authority has now informed us that they have denied such tax deductibility for the payment we did.

We have a different view here and we will take all necessary and appropriate measures in order to defend ourselves against these tax demands. But the first step is that we pay for that and the second step is whether we will get something back from that and that decision will be made at court.

Johannes Thormann: Okay, understood. Thank you.

Operator: And the next question comes from Daniel Garrod from Barclays.

Daniel Garrod: Hi there Gregor, Daniel Garrod, Barclays here. I just wanted to approach some of the detail on the cost basis a bit further. In the past, you've given details around size of project spend overall. I wonder as if you could clarify that. So, for 2017 and what scope you do have to scale back investment in projects in Q3 and Q4 to meet your guidance? Second, I just wanted to clarify the detail you'd given on the share based compensation.

I think you were saying that you expected about €10 million increment in 2017, are you saying that you have €9 million already in the first half? So, could it be higher than that €10 million expectation? And if that's just the interim, what is the absolute size of the staff compensation that's based on the share remuneration? Thank you.

Gregor Pottmeyer: Yes. With regard to the project spend, so -- and we gave some guidance with regard to our CapEx and we say it's roughly €150 million what we spent as CapEx. And in the first half year, we spent €67 million. Normally, the spend is a little bit higher in the second half year.

So therefore, the €150 million is still a good level. With regard to the share based compensation, obviously, as I do not know how our share price will develop in the second half year, it's just that the -- that I mentioned the €9 million in the first half year and that is basically with €10 million and I do not know how our share price will develop. The base is, therefore, is roughly €550,000 shares we have.

Daniel Garrod: Sorry. And the ability -- the other sort of €90 million of CapEx if you needed the ability to scale that back in Q3 and Q4?

Gregor Pottmeyer: Yes, obviously.

Daniel Garrod: €83 million, sorry.

Gregor Pottmeyer: Yes, yes. So, we look what kind of projects develop, how they develop. And we don't cut strategic projects. So, like OTC clearing, like euro clearing, et cetera, all these kinds of very important are centered in the order book functionality at 360T.

So, all our structured cost initiatives, we won't cut these projects. But at smaller initiatives, we are able to make some position to postpone if they do not perform.

Daniel Garrod: Okay. Thank you. Understood.

Operator: And next up is Martin Price from Credit Suisse.

Martin Price: Good afternoon. I think Clearstream was required to apply for the licenses needed to operate under CSDR by the end of September. So, I was just interested to know what changes, if any, you plan to make the business as part of that application process. There just seems to be quite a bit of focus at the moment on the risks of contagion in the event of a CSD default.

So, I'd be interested to know if you're planning to make any adjustments to existing capital buffers, in particular. Thank you.

Gregor Pottmeyer: Yes, when you're point is directly frank to the capital and capital buffer discussions, so from today's perspective and our knowledge on a short-term basis we do not expect big changes here? And yes, you are right. And we will make our application in the end of -- until end of September. And that's the need what every CSD hates to do.

And you are also right in mentioning that there's some discussions around recovery or resolution processes and the default processes. With regards to that, I think we are good prepared to have that kind of discussion with the regulators.

Martin Price: Understood. Thanks Gregor.

Operator: The next question comes from Anil Sharma from Morgan Stanley.

Anil Sharma: So, just two questions, please. If I look at the index business, you've obviously had a pretty big increase in revenues Q-on-Q. But also, it's been pretty volatile, especially relative to some of your peers in the Europe and U.S. So just wonder if you could explain what's going on there and how we should be thinking about the sustainable revenue number for quarter. And then second one, just coming back to cost.

Could you -- sorry, it's not quite clear to me what your start point is, what's your reference start point of costs that we should be using? And if you could just -- yes, sorry, maybe, I think [Indiscernible] thing, if you could explain again, that would be helpful.

Jan Strecker: Yes, Anil, maybe on the index question first. So, Deutsche Boerse index business is different to that of our peers and that derivative contracts are a key revenue drivers, roughly one-third of overall index revenues. And this doesn't occur so much at our peers. So, with this swing and index derivatives trading activity in the second quarter, we saw a decline of the number of contracts, also our revenues swing.

And then in the quarter, the assets under management and ETFs increased quite dramatically both year-over-year, but also sequentially and this has provided for another very positive development. On top of that and this is something we've explained on the first quarter call, there was some effect of revenue accruals, where we changed the methodology in the first quarter. So, the first quarter certainly is not basis. The second quarter is a better basis if we continue to see such high AUM levels, especially in ETF space and then Eurex could, for instance, provide for another tailwind in the second half.

Gregor Pottmeyer: Yes, and with regard to the reference point for our share based compensation, maybe to say it differently.

So, share price increase of €10 translates into €5 million additional cost.

Operator: The next question comes from Gurjit Kambo from JP Morgan.

Gurjit Kambo: Hi good afternoon. In terms of the sort of guidance on revenues. Obviously, if you look at your sort of low end of the guidance on net revenues, let's say, 5%, 10% increase.

That's kind of implying a 7% growth rate in H2 year-on-year. Except on cyclical, it's very difficult. But on the structural side, you had a 5% increase in H1 year-on-year. Are you sort of comfortable given what you know about the structural businesses that you could achieve the 5% growth in the second half?

Gregor Pottmeyer: Yes, first of all, as I mentioned earlier, we expect that growth we have seen in the first half year that is to be in a competitive amount in the second half year. So, -- and then I mentioned, some additional elements out of the consolidation of Nodal and I mentioned, OTC clearing as Nodal element.

And the third element what could help us to come to the 7%. You mentioned, for the second half year is also that comp, so the comparison in the second half year is lower compared to the first half year.

Gurjit Kambo: Thank you.

Operator: The next question comes from Kyle Voigt from KBW.

Kyle Voigt: Hi good afternoon.

Just a follow-up on the earlier derivatives pricing question. I was looking for a little more color here. Were there pricing change is made to both interest rates and index derivatives? And secondly, is there a way to frame the overall change in pricing? Should we think about maybe low single-digits increase to revenue per contract in both of these lines or something more substantial than that?

Jan Strecker: Actually, it was a pretty structural change of the C schedule. And the first and foremost goal was to make the market-making incentives more intelligent. So, for instance, we've introduced different liquidity classes for the different products will need to differentiate and reflect the liquidity situation and to make sure that we're only incentivizing liquidity provision and product where it is really necessary.

So, this was sort of the big structural change. But we've also changed a few other components. So, for instance -- and this is something, which is an increase, at least a small one. We've started to differentiate between the different accounts. So, for some products, for instance, the agent accounts or the customer is paying something like 5% more than the prop trading accounts or the own account of one of our clients.

And this differentiation is pretty much industry standard, so you find that with our peers as well and net-over-net. So, small increases on the one hand, maybe also a few points where we relief clients is producing mildly positive implications for the revenues at Eurex -- and this is without EEX and 360T, obviously, so Eurex core. And while you don't know exactly how clients are reacting to such changes, our modeling suggests that this is something like a 1% to 2% revenue accretion overall.

Kyle Voigt: Sorry, that's 1% to 2% on the total Eurex revenue or is that just on the index and interest rate derivatives or? Sorry.

Gregor Pottmeyer: No, no, total Eurex, but only Eurex exchange.

So, without EEX and without 360T.

Kyle Voigt: Okay. All right. Thank you. That's helpful.

And then just one follow-up for me on the commodities business. As you noted earlier, the revenues were down in the first half of the year, I think, about 6%, but likely more than that on an organic basis. And you gave some commentary in your prepared remarks as to why this is happening in terms of some short-term factors. But even when you go back to the Investor Day slides, it appears that the momentum from the OTC to on-exchange trend that we've been seeing in the power derivatives market has also faded a bit over the past 12 months. So, just I'm wondering why you think that will reaccelerate going forward? And then, just one more follow-up on the commodities business is, could you help us frame the total EBIT margin profile of that business? Is it similar to Eurex as a whole or a bit lower? Thanks.

Gregor Pottmeyer: Okay. So, I mentioned the two specific developments. The one is the pricing zone and the split here between Germany and Austria. And that triggered some more OTC activity in that kind of market. But we expect, when we are through that situation that it will come back again on the exchange basis.

With regard to the cash market, we are able to increase our market share here. So, here you have a continuing trend to our platform and we are also on the cash market now close to 30% market share. So, both elements, of the French power derivatives market and then the German and Austrian market; we really see that as temporary in nature. With regard to the EBIT margin at EEX, it's currently, I guess, there's some guidance, 40% on the Nodal Exchange and the EEX margin is definitely above that level, but it's below the level of Eurex in total.

Kyle Voigt: Okay.

Surely helpful. Thank you.

Operator: The next question comes from Rich Repetto from Sandler O'Neill.

Richard Repetto: Hello Gregor. I guess my question -- and if you've -- you might have already covered this either today or at your Analyst Day.

But I'm just trying to see with MiFID II coming next year, has there been any incremental cost? Or is -- I'm sure you're prepared for it now. But what is the incremental cost and what are the impacts you're seeing -- you expect to see on your business, revenue and expenses, say, next year from the big change in regulation?

Gregor Pottmeyer: Yes. Thanks Rich for that question. I think, overall, MiFID is for Deutsche Boerse a positive and principled as a trading obligation for derivatives. So, that's possible -- that's positive.

We are now end of our abilities or competition on the derivatives clearly is not in the scope of that, so that's obviously positive for us. The open access we will -- we think we can manage that and maybe, there are also additional opportunities for us out of that. So, in principle, MiFID will add Deutsche Boerse as in general, it trends towards more trends-oriented and integrity for European financial market and that's what Deutsche Boerse stands for. With regard to cost, yes, obviously, we have to prepare for that and the investment we need here is under low double-digit million euro number.

Richard Repetto: Okay.

Thanks very much Gregor.

Operator: And next up is Benjamin Goy from Deutsche Bank.

Benjamin Goy: Yes hi good afternoon. One question please on your secular growth business in the -- with Investment Funds Services. [Indiscernible] on the custody are nicely up, but revenues are basically flat-lining.

So, wondering whether there is any margin pressure in this business? Or it just takes time to cross sell more product to clients? Thank you.

Jan Strecker: Yes, thanks for the question. So, Investment Funds Services is a pretty diversified range of products and services we are offering. So, one service is organizing custody and settlement of fund shares and in the Investor Day -- in the June Investor Day presentation, you basically find a breakdown. So, settlement and custody of fund shares, but we also have a range of other services, including helping our clients throughout fund orders from the issuer through to the distribution network.

So therefore, by just looking at the revenues and the custody assets, you get to a pretty reasonable yield in terms of modeling revenues, but it can fluctuate a little bit from quarter-to-quarter because of the other drivers. So, at Eurex, for instance, it works pretty well, but in such a diversified business, this simplified modeling works less well. And therefore, the yield can also fluctuate a little quarter-to-quarter. But there is nothing, no structural change in terms of pricing and so on. So, it's really a function of the product mix.

Benjamin Goy: Gregor thank you.

Operator: The next question comes from Peter Lenardos from RBC.

Peter Lenardos: It's Peter, again, from RBC. Just two follow-up questions. The first one would be why you don't plan to start your share buyback program until the end of September? And the second one is more presentational in nature.

I thought that typically on the interim and full year results, the CEO and CFO presents it and I was just curious as to why the change? Thanks.

Gregor Pottmeyer: With regard to the second question, obviously, the CEO is also -- other important meetings and therefore, we agreed that I do that call here. With regard to the share buyback, yes, we announced in April that we'll do a share buyback program of €200 million in the second half year of 2017 and so far we have not begun to do. But preparation measures are already underway. And we take also into consideration all relevant legal and compliance requirements.

And at present, we intend to start the program before end of September.

Peter Lenardos: Thanks for that Gregor. Thank you.

Operator: The next question comes from Arnaud Giblat from Exane.

Arnaud Giblat: Yes, good afternoon.

Thanks for taking the follow-up. Just a quick one on Nodal. I calculate that you paid a 40x earnings on a normalized basis. So, I'm wondering what synergies have you factored in? What sort of growth you factored in? I think you mentioned double-digit. What I'm trying to understand is what sort of return on invested capital you're aiming for, say, three years out? Thank you.

Gregor Pottmeyer: Yes. Thanks Arnaud for that question. You have to take into consideration two legs of that transaction. So, the one leg is that we obviously acquired the Nodal Exchange and that's now, what you referred is a 40 times or whatever. But in parallel, we increased the economic stakes in EEX from 62% to 75% as a funding of that initiative.

And so we get out of that an additional net income of roughly €7 million. And so you have to add both legs up when you do such kind of calculation. And our return on investment target is unchanged what we want to achieve. We want to achieve a level of up to 10%.

Arnaud Giblat: Okay.

Thank you.

Operator: The next question comes from Mike Werner from UBS.

Michael Werner: Hello. Thank you for letting me ask the question. Two questions.

One, in the Eurex business. We did see, at least according to my calculations, a bit of a decline in the rate per contract, the average rate per contract in the equity index side in Q2 versus Q1. And I was that wondering what was driving that? Was that a mix shift in the underlying products or potentially a change in terms of the market participation from market maker to the traditional investor? And then secondly, in the past you have talked about the potential opportunity coming from Brexit. And we've seen a number of firms announcing that Frankfurt would ultimately be their Continental European hub. So, I was just wondering have you been talking with those potential clients with regards to opportunities as to what services Deutsche Boerse can provide them.

Thanks.

Jan Strecker: Yes. Thanks Mike. Let's get the Eurex RPC question out of the way first. So, in the quarter, we saw an increase of the share of auctions in index derivatives.

And that increased from 47% in the first quarter to 51% in the second quarter. That seems like a very small change. But given that generally there's a lot more market making required in options and you've mentioned that, so you're on the right track here. The revenues per contract are suffering slightly. Things can fluctuate.

So it could be very well that it's the opposite way in the next quarter we shall see. Another comment is that the product mix is obviously changing in index derivatives, so we've added quite a lot of new products. And some of them are higher margin, so dividend derivatives, for instance, but those products have been more flattish in the second quarter and others are slightly lower margin. So, for instance, the volatility derivatives that have performed very well in the second quarter, they have a slightly lower margin. And therefore, we think the year can also continue to fluctuate slightly going forward.

But as we have discussed earlier with the new fee schedule across the Board, they should be mildly coming up.

Gregor Pottmeyer: Yes. And with regard to your Frankfurt question, so in principle, the discontinuity caused by the Brexit and in addition, the political build to strengthen the Eurozone led both of us opportunities for Deutsche Boerse as the power shifts towards the continent. So far, we cannot and obviously, also, we do not want to preempt potential future decisions here by politicians, central banks or our regulators. However, what we see here is that there is a lot of uncertainty currently with regard to our clients.

And the clients have to make decisions already today or they are starting the process, we cannot wait, let's say, another two years before the direction is final and clear. And we as a leading exchange organization in the euro area, I think we are very well-positioned to address potential new regulatory requirements and client needs. And we are in a very intensive and good dialogue with the clients.

Michael Werner: Thank you.

Jan Strecker: All right.

There are no further questions in the pipeline. So, we would like to conclude today's call. Thank you very much for your participation and have a good day.