00:00So there's so much I want to get to, and I want to start actually with, you know, how you
00:04approach
00:04partnerships, because State Street is really interesting that, you know, especially when you
00:08think about your ETF business, you've been very active in partnerships. You have joint products
00:13with the likes of Bridgewater, Apollo, Galaxy, the list goes on. And I wonder how you approach,
00:19you know, partnering with others versus outright M&A. Well, we start with what we have, which is
00:27we've got a leading ETF platform. State Street invented the ETF. We had the first ETF out there.
00:34And as ETFs have become the vehicle of choice, we've recognized that that platform is available
00:42not to us, but to others, and that we can pretty rapidly bring products to market almost faster
00:48than we could through M&A or organic development by working with some of the best managers in the
00:53world. So the partner model has worked well with us, and we'll continue to do that. I mean,
00:58in terms of M&A, I mean, M&A is episodic. There has to be a meeting of the mind
01:04between the buyer
01:04and the seller, and it has to make sense for shareholders. This is a way that we can bring
01:09things highly tailored to market pretty quickly. Right. Well, let's talk a little bit more about
01:13your ETF business. You mentioned SPY. It's one of the largest and oldest ETFs out there. But
01:19I think about the State Street ETF business overall, and your share of that industry has
01:25been slipping for about a decade now. You have the likes of BlackRock and Vanguard really ascendant
01:30when it comes to the industry there. So how do you reverse that? I mean, you've gotten more
01:34aggressive with the partnerships. You've gotten more aggressive with the launches when it comes to
01:39the last two years or so. But how are you thinking about, again, how you reverse that decline and just
01:44where ETFs sit in the overall business of State Street? Part of what you have to look at over the
01:50last decade is what's happened to ETFs, right? ETFs have exploded. Like I said, it's the vehicle of
01:57choice. So when we started out, there were institutional buyers. And today, we still are
02:03the largest provider to institutions. What happened over the last decade was the entrance of the retail
02:09investor into it. And Vanguard and BlackRock went into that sooner than us and really did get ahead
02:16in us. But for us, our core market segment is the institutional investor. At times like April of last
02:24year, when there's all sorts of turmoil in the market, our ETFs will by far be the largest vehicle
02:30that's traded in the marketplace. So that's the core franchise that we want to protect.
02:35And in the meantime, we've aggressively grown what we call the low cost segment, right? This is the
02:42buy and hold segment where something like SPY, where it's got these very narrow spreads, it's not
02:48that important to a retail investor. They're looking at fee. And so we've got a low cost lineup in there.
02:54And last quarter, our low cost, the low cost version of SPY.
02:57SPY M. Yes, SPY M was the largest ETF asset gatherer in the world. So for us, it's retaining and
03:06growing that institutional segment and then making the kind of investments that we are in the retail
03:12segment. With some of the other businesses, though, I mean, you've been integrating liquidity and FX
03:16and securities lending under kind of that state street markets. Is this kind of a play to kind of
03:20actually compete with the bank trading desk? Or are you still going to kind of hold on to that
03:26customer role? Everything that we do in markets is related to what we do in custody and asset
03:31servicing, right? So we're not out there independently taking kind of principal positions.
03:38It's all to facilitate that business. And what we've recognized is it's easier for the investors if we
03:44can provide all that for them with not just the traditional channels, but with the electronic
03:50channels to be able to provide on a low cost basis. And today, in terms of real money, real money,
03:55foreign exchange, for example. So as opposed to principal foreign exchange, we are the leader
04:00in that.
04:01And I do want to talk a little bit about geopolitics, particularly in light of your most recent results.
04:05FX trading business obviously on fire. So I think it was up 29, 30 percent or so. Was that
04:10all a function of basically what was transpiring in the Middle East?
04:14It's a function of two things. More volatility. You'll see higher volumes. But back when there was no
04:21volatility over the last five, seven years, we worked hard on product and technology distribution to
04:29basically create a new relationship. So we've basically grown volume. And that's the piece that
04:35nobody really focused on in our earnings over the last two quarters is we've hit record volumes each
04:40time. Yeah. So it's not just about the it's not just about the dollars and cents, but it's actually
04:45the number of trades that we've done. So and that's really important to us is building share in that
04:50business. You know, it's funny. I actually started at Bloomberg as an FX reporter in 2016. And there truly was
04:57no
04:57volatility in the FX markets. You had to really beg people to read your story. It's a totally different
05:03world now. I want to talk a little bit about AI, because you've mentioned that, you know, when it comes
05:08to the
05:09second half, that's when you really should see I start scaling for State Street. And I was reading
05:14through your earnings call. And, you know, a lot of analysts want to know what's going to happen in July.
05:19What are you going to say on the July earnings call? So I'm going to try here, too. I mean,
05:23what benefits
05:24should we be on the lookout for when it comes to how State Street is sort of looking at AI?
05:30So maybe a little
05:32bit of quick background. So what we've done over the last several years is be able to invest in the
05:39business at a very high rate, basically by improving productivity and using some of the old productivity
05:46tools, machine learning and things like that. And we've reinvested that into the business, which in turn
05:51has grown revenues. So you've seen our revenue growth over the past. It's been nine quarters now of
05:58expanding margin. And it's all about this. Be productive, reinvest back in the business, grow
06:05revenues. AI, not just for us, but for everybody. You've got these incredibly powerful tools for a
06:11business like us. It will all be about how effectively we can implement AI. As I've said earlier in my
06:18panel
06:18this morning, if the technology never got any better, still be a really powerful tool. It is getting
06:23better. And it's all about how you implement it and how you are willing to change your operating
06:28model. And that's what we'll talk about in July. Absolutely. Well, looking forward to July. And
06:33before we let you go, I do want to ask another really wonky ETF question. And you think about
06:38SPY, as I said, one of the oldest and largest ETFs. It's actually a unit investment trust. It's not an
06:44open-ended ETF. It's a similar situation when it comes to the Qs, which is held by Invesco. But
06:50Invesco was actually able to convert the Qs from a unit investment trust into an ETF,
06:56unlocking a whole ton of revenue in the process. Is that something that's under consideration at
07:02State Street? No, no. I mean, we're happy with the way it is now. And we're much more focused on
07:07the product diversification that we're doing and recognizing that SPY is a tool for institutions.
07:12And we'll have companion tools and companion products around that.
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