Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2018 | Feb. 15, 2019 | Jun. 30, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | Cboe Global Markets, Inc. | ||
Entity Central Index Key | 1,374,310 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY | ||
Entity Current Reporting Status | Yes | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Amendment Flag | false | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 111,596,097 | ||
Entity Public Float | $ 11.7 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 275.1 | $ 143.5 |
Financial investments | 35.7 | 47.3 |
Accounts receivables, net | 287.3 | 217.3 |
Income taxes receivable | 70.4 | 17.2 |
Other current assets | 15.2 | 9.4 |
Total Current Assets | 683.7 | 434.7 |
Investments | 86.2 | 82.7 |
Land | 4.9 | 4.9 |
Property and equipment, net | 71.7 | 73.9 |
Goodwill | 2,691.4 | 2,707.4 |
Intangible assets, net | 1,720.2 | 1,902.6 |
Other assets, net | 62.9 | 59.5 |
Total Assets | 5,321 | 5,265.7 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 198.5 | 153.8 |
Section 31 fees payable | 81.1 | 105.6 |
Deferred revenue | 8.5 | 15.4 |
Income taxes payable | 4.1 | 2.6 |
Current portion of long-term debt | 299.8 | |
Contingent consideration liability | 3.9 | 56.6 |
Total Current Liabilities | 595.9 | 334 |
Long-term debt | 915.6 | 1,237.9 |
Income tax liability | 114.9 | 78.8 |
Deferred income taxes | 436.8 | 488.2 |
Other non-current liabilities | 7.4 | 6.8 |
Commitments and Contingencies | ||
Redeemable Noncontrolling Interest | 9.4 | 9.4 |
Stockholders’ Equity: | ||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at December 31, 2018 and December 31, 2017 | ||
Common stock, $0.01 par value: 325,000,000 shares authorized, 125,639,637 and 112,161,355 shares issued and outstanding, respectively at December 31, 2018 and 124,705,786 and 112,741,217 shares issued and outstanding, respectively at December 31, 2017 | 1.2 | 1.2 |
Common stock in treasury, at cost, 13,478,520 shares at December 31, 2018 and 11,964,569 shares at December 31, 2017 | (720.1) | (558.3) |
Additional paid-in capital | 2,660.2 | 2,623.7 |
Retained earnings | 1,288.2 | 993.3 |
Accumulated other comprehensive income, net | 11.5 | 50.7 |
Total stockholders’ equity | 3,241 | 3,110.6 |
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity | $ 5,321 | $ 5,265.7 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 325,000,000 | 325,000,000 |
Common stock, shares issued (in shares) | 125,080,496 | 124,705,786 |
Common stock, shares outstanding (in shares) | 111,601,976 | 112,741,217 |
Treasury stock (in shares) | 13,478,520 | 11,964,569 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues: | |||
Total revenues | $ 2,768.8 | $ 2,229.1 | $ 703.1 |
Cost of revenues: | |||
Total cost of revenues | 1,551.9 | 1,233.5 | 136.7 |
Revenues less cost of revenues | 1,216.9 | 995.6 | 566.4 |
Operating expenses: | |||
Compensation and benefits | 228.8 | 201.4 | 113.2 |
Depreciation and amortization | 204 | 192.2 | 44.4 |
Technology support services | 47.9 | 42.1 | 22.5 |
Professional fees and outside services | 68.3 | 66 | 53.1 |
Travel and promotional expenses | 13 | 17.2 | 11 |
Facilities costs | 11.5 | 10.3 | 5.7 |
Acquisition-related costs | 30 | 84.4 | 13.6 |
Other expenses | 14 | 10.1 | 4.7 |
Total operating expenses | 617.5 | 623.7 | 268.2 |
Operating income | 599.4 | 371.9 | 298.2 |
Non-operating (expenses) income: | |||
Interest expense, net | (38.2) | (41.3) | (5.7) |
Other income | 10 | 3.8 | 14.1 |
Income before income tax provision (benefit) | 571.2 | 334.4 | 306.6 |
Income tax provision (benefit) | 146 | (66.2) | 120.9 |
Net income | 425.2 | 400.6 | 185.7 |
Net loss attributable to redeemable noncontrolling interest | 1.3 | 1.1 | 1.1 |
Net income excluding redeemable noncontrolling interest | 426.5 | 401.7 | 186.8 |
Change in redemption value of redeemable noncontrolling interest | (1.3) | (1.1) | (1.1) |
Net income allocated to participating securities | (3.1) | (3.9) | (0.8) |
Net income allocated to common stockholders | $ 422.1 | $ 396.7 | $ 184.9 |
Basic earnings per share (in dollars per share) | $ 3.78 | $ 3.70 | $ 2.27 |
Diluted earnings per share (in dollars per share) | $ 3.76 | $ 3.69 | $ 2.27 |
Basic weighted average shares outstanding (in shares) | 111.8 | 107.2 | 81.4 |
Diluted weighted average shares outstanding (in shares) | 112.2 | 107.5 | 81.4 |
Transaction fees | |||
Revenues: | |||
Total revenues | $ 1,986.9 | $ 1,564.9 | $ 509.3 |
Access fees | |||
Revenues: | |||
Total revenues | 127.9 | 106.8 | 52.4 |
Exchange services and other fees | |||
Revenues: | |||
Total revenues | 83.1 | 74.8 | 46.3 |
Market data fees | |||
Revenues: | |||
Total revenues | 204 | 164.5 | 33.2 |
Regulatory fees | |||
Revenues: | |||
Total revenues | 333.9 | 291.5 | 48.3 |
Other revenue | |||
Revenues: | |||
Total revenues | 33 | 26.6 | 13.6 |
Liquidity payments | |||
Cost of revenues: | |||
Total cost of revenues | 1,113 | 849.7 | 35.8 |
Routing and clearing | |||
Cost of revenues: | |||
Total cost of revenues | 39.1 | 37.6 | 11.1 |
Section 31 fees | |||
Cost of revenues: | |||
Total cost of revenues | 302.4 | 260 | 11.8 |
Royalty fees | |||
Cost of revenues: | |||
Total cost of revenues | $ 97.4 | $ 86.2 | $ 78 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Comprehensive Income | |||
Net income | $ 425.2 | $ 400.6 | $ 185.7 |
Other comprehensive (loss) income, net of tax: | |||
Foreign currency translation adjustments | (39.2) | 51.3 | |
Unrealized holding gains on financial investments | 0.2 | ||
Comprehensive income | 386 | 452.1 | 185.7 |
Comprehensive loss attributable to redeemable noncontrolling interest | 1.3 | 1.1 | 1.1 |
Comprehensive income excluding redeemable noncontrolling interest | 387.3 | 453.2 | 186.8 |
Change in redemption value of redeemable noncontrolling interest | (1.3) | (1.1) | (1.1) |
Comprehensive income allocated to participating securities | (3.1) | (3.9) | (0.8) |
Comprehensive income allocated to common stockholders, net of tax | $ 382.9 | $ 448.2 | $ 184.9 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholder's Equity - USD ($) $ in Millions | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income, net | Redeemable Noncontrolling Interests | Total |
Beginning balance at Dec. 31, 2015 | $ 0.9 | $ (467.6) | $ 123.6 | $ 603.6 | $ (0.8) | $ 259.7 | |
Increase (Decrease) in Stockholders' Equity | |||||||
Cash dividends on common stock | (78.5) | (78.5) | |||||
Stock-based compensation | 14.5 | 14.5 | |||||
Excess tax benefit from stock-based compensation | 1.1 | 1.1 | |||||
Purchase of common stock | (64.6) | (64.6) | |||||
Net income excluding noncontrolling interest | 186.8 | 186.8 | |||||
Increase due to acquiring majority of outstanding equity of Vest | $ 12.6 | ||||||
Net loss attributable to redeemable noncontrolling interest | (1.1) | ||||||
Redemption value adjustment | (1.1) | 1.1 | (1.1) | ||||
Ending balance at Dec. 31, 2016 | 0.9 | (532.2) | 139.2 | 710.8 | (0.8) | 12.6 | 317.9 |
Increase (Decrease) in Stockholders' Equity | |||||||
Cash dividends on common stock | (118.1) | (118.1) | |||||
Stock-based compensation | 52.6 | 52.6 | |||||
Exercise of common stock options | 4 | 4 | |||||
Issuance of vested restricted stock granted to employees | 0.3 | 0.3 | |||||
Issuance of stock for acquisition of Bats Global Markets, Inc. | 0.3 | 2,424.4 | 2,424.7 | ||||
Common stock issued from employee stock plans | (26.1) | (26.1) | |||||
Net income excluding noncontrolling interest | 401.7 | 401.7 | |||||
Purchase of additional equity interest from noncontrolling interest | 3.2 | (3.2) | 3.2 | ||||
Other comprehensive income (loss) | 51.5 | 51.5 | |||||
Net loss attributable to redeemable noncontrolling interest | (1.1) | ||||||
Redemption value adjustment | (1.1) | 1.1 | (1.1) | ||||
Ending balance at Dec. 31, 2017 | 1.2 | (558.3) | 2,623.7 | 993.3 | 50.7 | 9.4 | 3,110.6 |
Increase (Decrease) in Stockholders' Equity | |||||||
Cash dividends on common stock | (130.3) | (130.3) | |||||
Stock-based compensation | 35.1 | 35.1 | |||||
Common stock repurchased from employee stock plans | (20.9) | 1.4 | (19.5) | ||||
Purchase of common stock | (140.9) | (140.9) | |||||
Net income excluding noncontrolling interest | 426.5 | 426.5 | |||||
Other comprehensive income (loss) | (39.2) | (39.2) | |||||
Net loss attributable to redeemable noncontrolling interest | (1.3) | ||||||
Redemption value adjustment | (1.3) | 1.3 | (1.3) | ||||
Ending balance at Dec. 31, 2018 | $ 1.2 | $ (720.1) | $ 2,660.2 | $ 1,288.2 | $ 11.5 | $ 9.4 | $ 3,241 |
Consolidated Statement of Cha_2
Consolidated Statement of Changes in Stockholder's Equity (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Changes in Stockholders’ Equity | |||
Dividends (in dollars per share) | $ 1.16 | $ 1.04 | $ 0.96 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows from Operating Activities: | |||
Net income | $ 425.2 | $ 400.6 | $ 185.7 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 204 | 192.2 | 44.4 |
Amortization of debt issuance cost | 2.5 | 3.6 | |
Change in fair value of contingent consideration | 3.9 | 1 | |
Gain on settlement of contingent consideration | (1.4) | ||
Realized gain on available-for-sale securities | (1.4) | (0.4) | |
Provision for uncollectible convertible notes receivable | 3.8 | ||
Provision for deferred income taxes | (47.7) | (238.4) | (8.8) |
Stock-based compensation expense | 35.1 | 52.6 | 14.5 |
Loss on disposition of property | 1 | ||
Impairment of data processing software | 14.9 | ||
Equity in investments | (1.1) | (1.4) | (1.2) |
Changes in assets and liabilities: | |||
Accounts receivable | (70.3) | (20.6) | (8.4) |
Income taxes receivable | (53.2) | 42 | (25.8) |
Other prepaid expenses | (15.8) | (7.3) | (0.2) |
Other current assets | 0.5 | ||
Accounts payable and accrued liabilities | 46.8 | 10.3 | 21 |
Section 31 fees payable | (24.5) | (42.4) | |
Deferred revenue | (7) | 7.8 | (1.5) |
Income taxes payable | 0.4 | (50.5) | (1.6) |
Income tax liability | 36.1 | 6.3 | 12.4 |
Other liabilities | 0.7 | 0.3 | |
Net Cash Flows provided by Operating Activities | 534.7 | 374.4 | 229.6 |
Cash Flows from Investing Activities: | |||
Acquisitions, net of cash acquired | (1,414.1) | (14.3) | |
Purchases of available-for-sale financial investments | (166.2) | (136) | |
Proceeds from maturities of available-for-sale financial investments | 178.7 | 155.1 | |
Purchases of investments | (1.8) | (4) | (23.7) |
Payment of contingent consideration from acquisition | (2) | ||
Purchases of property and equipment | (36.3) | (37.5) | (44.4) |
Net Cash Flows used in Investing Activities | (25.6) | (1,436.5) | (84.4) |
Cash Flows from Financing Activities: | |||
Proceeds from long-term debt | 300 | 1,943.9 | |
Principal payments of long term debt | (325) | (700) | |
Proceeds from credit facility | 39 | ||
Payments of credit facility | (39) | ||
Debt issuance costs | (2) | (8.2) | |
Dividends paid | (130.3) | (118.1) | (78.5) |
Purchase of unrestricted stock from employees | (20.9) | (26.1) | (4.1) |
Proceeds from exercise of stock-based compensation | 2.1 | 2 | |
Excess tax benefit from stock-based compensation | 1.1 | ||
Payment of contingent consideration with acquisition of a business | (56.6) | ||
Purchase of common stock under announced program | (140.9) | (60.5) | |
Net Cash Flows provided by (used in) Financing Activities | (371.6) | 1,099.7 | (150.2) |
Effect of Foreign Currency Exchange Rate Changes on Cash and Cash equivalents | (5.9) | 8.6 | |
Increase (Decrease) in Cash and Cash Equivalents | 131.6 | 46.2 | (5) |
Beginning of Period | 143.5 | 97.3 | 102.3 |
End of Period | 275.1 | 143.5 | 97.3 |
Supplemental disclosure of cash transactions: | |||
Cash paid for income taxes | 213.4 | 177.4 | 142.1 |
Interest paid | $ 38.7 | 27 | |
Supplemental disclosure of noncash transactions: | |||
Forfeiture of common stock for payment of exercise of stock options | 3.7 | ||
Supplemental disclosure of noncash investing activities: | |||
Change in post-retirement benefit obligation | $ (0.1) | ||
Accounts receivable acquired | 117.8 | ||
Financial investments acquired | 66 | ||
Property and equipment acquired | 21.8 | ||
Goodwill acquired | 2,653.3 | ||
Intangible assets acquired | 2,000 | ||
Other assets acquired | 32.8 | ||
Accounts payable and accrued expenses assumed | (59.9) | ||
Section 31 fees payable acquired | (143.6) | ||
Deferred tax liability acquired | (722.6) | ||
Other liabilities assumed | (135.5) | ||
Issuance of common stock related to acquisition | $ (2,424.7) |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Operations | |
Nature of Operations | (1) Nature of Operations Cboe Global Markets, Inc.(“Cboe” or “the Company”) is one of the world’s largest exchange holding companies, offering cutting-edge trading and investment solutions to investors around the world. The Company is committed to relentless innovation, connecting global markets with world-class technology, and providing seamless solutions that enhance the customer experience. Cboe offers trading across a diverse range of products in multiple asset classes and geographies, including options, futures, U.S. and European equities, exchange-traded products, global foreign exchange and multi-asset volatility products based on the VIX, the world’s barometer for equity market volatility. Cboe’s trading venues include the largest options exchange in the U.S. by volume and the largest stock exchange by value traded in Europe. In addition, the Company is one of the largest stock exchange operators by volume in the U.S. and a leading market globally for ETP trading. The Company is headquartered in Chicago with offices in Kansas City, New York, London, San Francisco, Singapore, Hong Kong, and Ecuador. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | (2) Summary of Significant Accounting Policies (a) These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) as established by FASB. (b) The accompanying financial statements are presented on a consolidated basis to include the accounts and transactions of Cboe Global Markets, Inc. and its majority owned subsidiaries and all significant intercompany accounts and transactions have been eliminated. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, valuation of redeemable noncontrolling interests and reported amounts of revenues and expenses. On an ongoing basis, management evaluates its estimates based upon historical experience, observance of trends, information available from outside sources and various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions. For those consolidated subsidiaries in which the Company's ownership is less than 100% and for which the Company has control over the assets and liabilities and the management of the entity, the outside stockholders' interest are shown as non-controlling interests. Segment information The Company has five business segments: Options, U.S. Equities, Futures, European Equities, and Global FX, which is reflective of how the Company's chief operating decision-maker reviews and operates the business (Note 17). This change has been reflected in all periods presented. (c) The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as disclosure of the amounts of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the valuation of goodwill, indefinite-lived intangible assets, and unrecognized tax benefits. (d) The Company’s cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains cash at various financial institutions and brokerage firms which, at times, may be in excess of the federal depository insurance limit. The Company’s management regularly monitors these institutions and believes that the potential for future loss is remote. The Company considers all liquid investments with original or acquired maturities of three months or less to be cash equivalents. (e) Financial investments are classified as trading or available-for-sale. Trading financial investments represent financial investments held by the Company’s broker‑dealer subsidiary that retain the industry‑specific accounting classification required for broker‑dealers. These investments are recorded at fair value with changes in unrealized gains and losses reflected within interest expense, net in the consolidated statements of income. Available-for-sale financial investments are comprised of the financial investments not held by the broker-dealer subsidiary. Unrealized gains and losses, net of income taxes, are included as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets. Interest on financial investments, including amortization of premiums and accretion of discounts, is recognized as income when earned. Realized gains and losses on financial investments are calculated using the specific identification method and are included in interest expense, net in the accompanying consolidated statements of income. A decline in the fair value of any available-for-sale investment below carrying amount that is deemed to be other‑than‑temporary results in an impairment to reduce the carrying amount to realizable value. To determine whether an impairment is other‑than‑temporary, the Company considers all available information relevant to the collectability of the investment, including past events, current conditions, and reasonable and supportable forecasts when developing estimate of cash flows expected to be collected. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year‑end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates. (f) Accounts receivable are concentrated with the Company’s member firms and market data distributors and are carried at cost. The Company nets transaction fees and liquidity payments for each member firm on a monthly basis and recognizes the total owed from a member firm as an asset and the total owed to a member firm as a liability. On a periodic basis, management evaluates the Company’s receivables and determines an appropriate allowance for uncollectible accounts receivable based on anticipated collections. In circumstances where a specific customer’s inability to meet its financial obligations is probable, the Company records a specific provision for uncollectible accounts against amounts due to reduce the receivable to the amount the Company estimates will be collected. Once the Company determines an allowance for an uncollectible account is necessary, interest on the receivable ceases to be accrued. (g) Property and equipment, net is stated at cost less accumulated depreciation. Depreciation is computed using the straight‑line method over the estimated lives of the assets, generally ranging from three to seven years. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation of leasehold improvements is calculated using the straight‑line method over the shorter of the related lease term or the estimated useful life of the assets. Long‑lived assets to be held and used are reviewed to determine whether any events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. The Company bases this evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present that would indicate that the carrying amount of any asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. In the event of impairment, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset as measured using quoted market prices or, in the absence of quoted market prices, a discounted cash flow analysis. The Company expenses software development costs as incurred during the preliminary project stage, while capitalizing costs incurred during the application development stage, which includes design, coding, installation and testing activities. (h) Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of a business acquired. Goodwill is allocated to the Company’s reporting units based on the assignment of the fair values of each reporting unit of the acquired company. The Company tests goodwill for impairment at the reporting unit level annually, or in interim periods if certain events occur indicating that the carrying value may be impaired. The impairment test is performed during the fourth quarter using October 1 st carrying values, and if the fair value of the reporting unit is found to be less than the carrying value, an impairment loss is recorded. The Company performed its 2018 annual goodwill impairment test and determined that no impairment existed. Intangible assets, net, primarily include acquired trademarks and trade names, customer relationships, strategic alliance agreements, licenses and registrations and non‑compete agreements. Intangible assets with finite lives are amortized based on the discounted cash flow method applied over the estimated useful lives of the intangible assets. Intangible assets deemed to have indefinite useful lives are not amortized, but instead are tested for impairment at least annually, usually concurrently with goodwill. Impairment exists if the fair value of the asset is less than the carrying amount, and in that case, an impairment loss is recorded. The Company performed its 2018 annual intangible assets impairment test using October 1, 2018 carrying values and determined that no impairment existed. (i) The financial statements of foreign subsidiaries where the functional currency is not the U.S. dollar are translated into U.S. dollars using the exchange rate in effect as of each balance sheet date. Statements of income and cash flow amounts are translated using the average exchange rate during the period. The cumulative effects of translating the balance sheet accounts from the functional currency into the U.S. dollar at the applicable exchange rates are included in accumulated other comprehensive income (loss), net in the balance sheet. Foreign currency gains and losses are recorded as other income, net in the consolidated statements of income. The Company’s operations in the United Kingdom, Singapore, and Hong Kong are recorded in Pounds sterling, Singapore dollars, and Hong Kong dollars, respectively. (j) Deferred taxes are recorded on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the consolidated financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties expense is recognized on the full amount of deferred benefits for uncertain tax positions. The Company’s policy is to include interest and penalties related to unrecognized tax benefits in the income tax provision within the consolidated statements of income. We have elected to account for global intangible low-taxed income (“GILTI”) in the period in which it is incurred, and therefore, have not provided any deferred tax impacts of GILTI in our consolidated financial statements. (k) For further discussion related to revenue recognition of fees, such as transaction fees and liquidity payments, access fees, exchange services and other fees, market data fees, and regulation transaction and Section 31 fees, see Note 4. Concentrations of Revenue and Liquidity Payments For the years ended December 31, 2018, 2017, and 2016, two members accounted for 23%, 17% and 42%, respectively, of the Company’s transaction fees. No member accounted for more than 10% of the Company’s total revenue during the years ended December 31, 2018, 2017, and 2016. For the years ended December 31, 2018, 2017, and 2016, no member accounted for more than 10% of the Company’s liquidity payments. No member is contractually or otherwise obligated to continue to use the Company’s services. The loss of, or a significant reduction of, participation by these members may have a material adverse effect on the Company’s business, financial position, results of operations and cash flows. The two largest clearing members mentioned above clear the majority of the market-maker sides of transactions at all of the Company’s U.S. options exchanges. If either of these clearing members were to withdraw from the business of market-maker clearing and market-makers were unable to transfer to another clearing member, this could create significant disruption to the U.S. options markets, including ours. (l) Basic earnings per share is calculated using the two-class method and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of common shares and dilutive common share equivalents outstanding. The dilutive effect is calculated using the more dilutive of the two-class or treasury stock method. (m) The Company grants stock‑based compensation to its employees through awards of restricted stock units. In connection with the acquisition of Bats, Bats previously awarded stock options and restricted stock awards. The Company records stock‑based compensation expense for all stock‑based compensation granted based on the grant‑date fair value. The Company recognizes compensation expense related to stock‑based compensation awards with graded vesting that have a service condition on a straight‑line basis over the requisite service period of the entire award. In connection with the acquisition of Bats, as discussed in Note 20 in further detail, each outstanding Bats stock option (defined below) granted under any of the Bats Plans (defined below) that was outstanding immediately prior to the effective time of the acquisition of Bats was converted into an option to purchase our common stock, on the same terms and conditions (including vesting schedule) as were applicable to such Bats stock option. In addition, each award of Bats restricted shares (defined below) granted under any of the Bats Plans that was unvested immediately prior to the effective time of the acquisition of Bats was assumed by the Company and converted into an award of restricted shares of our common stock, subject to the same terms and conditions (including vesting schedule) that applied to the applicable Bats restricted shares. The amount of stock‑based compensation expense related to awards of restricted stock and restricted stock units is based on the fair value of Cboe Global Markets, Inc. common stock at the date of grant. The fair value is based on a current market‑based transaction of the Company’s common stock. If a market‑based transaction of the Company’s common stock is not available, then the fair value is based on an independent third‑party valuation using equal weighting of two valuation analysis techniques, discounted cash flows and valuation multiples observed from publicly traded companies in a similar industry. The amount of future stock‑based compensation expense related to awards of stock options is based on the Black‑Scholes valuation model. Assumptions used to estimate the grant‑date fair value of stock options are determined as follows: · Expected term is determined using the simplified method, using the average between the contractual term and vesting period of the award. The simplified method was used due to the lack of historical information; · Expected volatility of award grants made under the Company’s plan is measured using the weighted average of historical daily changes in the market price of the common stock of comparable public companies over the period equal to the expected term of the award; · Expected dividend rate is determined based on expected dividends to be declared; and · Risk‑free interest rate is equivalent to the implied yield on zero‑coupon U.S. Treasury bonds with a maturity equal to the expected term of the awards. (n) The Company records identifiable assets, liabilities and goodwill acquired in a business combination at fair value at the acquisition date. Additionally, transaction‑related costs are expensed in the period incurred. (o) All costs incurred to issue debt are capitalized as a contra-liability and amortized over the life of the loan using the interest method. (p) The Company uses the cost method to account for a non-marketable equity investment in an entity that it does not control and for which it does not have the ability to exercise significant influence over an entity’s operating and financial policies. When it does not have a controlling financial interest in an entity but can exercise significant influence over the entity's operating and financial policies, such investment is accounted for using the equity method. The Company recognizes dividend income when declared. In general, the equity method of accounting is used when the Company owns 20% to 50% of the outstanding voting stock of a company and when it is able to exercise significant influence over the operating and financial policies of a company. The Company has an investment where it has significant influence and as such accounts for the investments under the equity method of accounting. For equity method investments, the Company records the pro‑rata share of earnings or losses each period and records any dividends received as a reduction in the investment balance. The equity method investment is evaluated for other‑than‑temporary declines in value by considering a variety of factors such as the earnings capacity of the investment and the fair value of the investment compared to its carrying amount. If the estimated fair value of the investment is less than the carrying amount and the decline in value is considered to be other than temporary, the excess of the carrying amount over the estimated fair value is recognized in the financial statements as an impairment. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 12 Months Ended |
Dec. 31, 2018 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | (3) Recent Accounting Pronouncements Recent Accounting Pronouncements – Adopted In the first quarter of 2018, the Company adopted ASU 2017‑09, Compensation - Stock Compensation (Topic 718). This ASU provides additional guidance as to which changes to a share-based payment award require an entity to apply modification accounting. The Company’s application of the pronouncement, on a prospective basis, did not result in a material impact to the consolidated financial statements. In the first quarter of 2018, the Company adopted ASU 2017‑07, Compensation - Retirement Benefits (Topic 715). This ASU requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The Company applied the full retrospective application of the pronouncement, which did not result in a material impact to the consolidated financial statements. In the first quarter of 2018, the Company adopted ASU 2016‑15, Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force). ASU 2016‑15 addresses eight specific cash flow issues in an effort to reduce diversity in practice: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon bonds; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The Company’s application of the pronouncement did not result in a material impact to the consolidated financial statements. In the first quarter of 2018, the Company adopted ASU 2017‑01, Business Combinations (Topic 805) - Clarifying the Definition of a Business. ASU 2017‑01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. There are three elements of a business: inputs, processes, and outputs. While an integrated set of assets and activities (collectively, a “set”) that is a business usually has outputs, outputs are not required to be present. Additionally, all of the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs. ASU 2017‑01 provides a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If, however, the screen is not met, then the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. Finally, the amendments in this ASU narrow the definition of the term “output” so that it is consistent with the manner in which outputs are described in Topic 606 - Revenue from Contracts with Customers. The Company will apply the pronouncement, on a prospective basis, for any business combination. In the first quarter of 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The changes primarily relate to equity investments, financial liabilities measured using the fair value option, and updated disclosure requirements. The Company applied the full retrospective application of the pronouncement, which did not result in a material impact to the consolidated financial statements. In the first quarter of 2018, the Company adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This update addresses the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (“Jobs Act”). The guidance eliminates the stranded tax effects resulting from the Jobs Act as well as improves the usefulness of information reported to financial statement users by requiring certain disclosures about stranded tax effects. As the amendment only relates to reclassification of the income tax effects of the Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The Company’s application of the pronouncement did not result in a material impact to the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. In computing the implied fair value of goodwill under Step 2, an entity, prior to the amendments in ASU 2017-04, had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities, including unrecognized assets and liabilities, in accordance with the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. However, under this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, ASU 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. For public entities, the update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 Recent Accounting Pronouncements - Issued, not yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases. This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset (“ROU”). The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases to clarify the implementation guidance and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements. This updated guidance provides an optional transition method, which allows for the initial application of the new accounting standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period of adoption. These updates are effective for annual and interim periods beginning after December 15, 2018. The Company adopted the new ASUs on January 1, 2019 using the alternative transition approach and will not restate comparative periods. We will elect the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carryforward the historical lease classification. Based on our portfolio of leases as of January 1, 2019, approximately $45M of both ROU assets and liabilities are expected to be recognized on our balance sheet upon adoption, primarily relating to operating leases of real estate. We do not expect the new standard to have a material impact on our consolidated income statements and statements of cash flows. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For public entities, the update is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. The Company is in the process of evaluating this guidance and assessing the impact the ASU could have on the consolidated financial statements. |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2018 | |
Revenue Recognition | |
Revenue Recognition | (4) Revenue Recognition The main types of revenue contracts are: · Transaction fees - Transaction fees represent fees charged by the Company for the performance obligation of executing a trade on its markets. These fees can be variable based on trade volume tiered discounts, however, as all tiered discounts are calculated monthly, the actual discount is recorded on a monthly basis. Transaction fees, as well as any tiered volume discounts, are calculated and billed monthly in accordance with the Company’s published fee schedules. Transaction fees are recognized across all segments. The Company also pays liquidity payments to customers based on its published fee schedules. The Company uses these payments to improve the liquidity on its markets and therefore recognizes those payments as a cost of revenue. · Access fees - Access fees represent fees assessed for the opportunity to trade, including fees for trading-related functionality and connectivity across all segments. These fees are billed monthly in accordance with the Company’s published fee schedules and recognized on a monthly basis when the performance obligation is met. There is no remaining performance obligation after revenue is recognized. · Exchange services and other fees - To facilitate trading, the Company offers technology services, terminal and other equipment rights, maintenance services, trading floor space, trading floor connectivity, and telecommunications services. Trading floor and equipment rights are generally on a month-to-month basis. Facilities, systems services and other fees are generally monthly fee-based, although certain services are influenced by trading volume or other defined metrics, while others are based solely on demand. All fees associated with the trading floor are recognized in the Options segment. · Market data fees - Market data fees represent the fees received by the Company from the U.S. tape plans and fees charged to customers for proprietary market data. Fees from the U.S. tape plans are collected monthly based on published fee schedules and distributed quarterly to the U.S. exchanges based on a known formula. A contract for proprietary market data is entered into and charged on a monthly basis in accordance with the Company’s published fee schedules as the service is provided. Both types of market data are satisfied over time, and revenue is recognized on a monthly basis as the customer receives and consumes the benefit as the Company provides the data. U.S. tape plan market data is recognized in the U.S. Equities and Options segments. Proprietary market data fees are recognized across all segments. · Regulatory fees - There are two types of regulatory fees that the Company recognizes. The first type represents fees collected by the Company to cover the Section 31 fees charged to the Exchanges by the SEC. The fees charged to customers are based on the fee set by the SEC per notional value of the transaction executed on the Company’s U.S. securities markets. These fees are calculated and billed monthly and are recognized in the U.S. Equities and Options segments. As the Exchanges are responsible for the ultimate payment to the SEC, the exchanges are considered the principal in these transactions. Regulatory fees also includes the options regulatory fee (ORF) which supports the Company’s regulatory oversight function in the Options segment and other miscellaneous regulatory fees and cannot be used for non-regulatory purposes. · Other revenue - Other revenue primarily includes revenue from various licensing agreements, all fees related to the trade reporting facility operated in the European Equities segment, and revenue associated with advertisements through the Company’s website. All revenue recognized in the income statement is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to product line and segment (in millions): Corporate European items and Options U.S. Equities Futures Equities Global FX eliminations Total Year Ended December 31, 2018 Transaction fees $ 835.5 $ 876.4 $ 128.0 $ 97.4 $ 49.6 $ — $ Access fees 61.8 46.6 6.8 8.8 3.9 — 127.9 Exchange services and other fees 37.6 29.0 8.3 5.9 2.3 — 83.1 Market data fees 42.9 140.9 6.6 13.1 0.5 — 204.0 Regulatory fees 60.0 273.8 0.1 — — — 333.9 Other revenue 19.7 6.4 — 6.4 0.1 0.4 33.0 1,057.5 1,373.1 149.8 131.6 56.4 0.4 Timing of revenue recognition Services transferred at a point in time $ 915.2 $ 1,156.6 $ 128.1 $ 103.8 $ 49.7 $ 0.4 $ 2,353.8 Services transferred over time 142.3 216.5 21.7 27.8 6.7 — 415.0 1,057.5 1,373.1 149.8 131.6 56.4 0.4 Year Ended December 31, 2017 Transaction fees $ 673.8 $ 659.4 $ 131.7 $ 66.2 $ 33.8 $ — $ Access fees 54.7 41.3 1.9 6.4 2.5 — 106.8 Exchange services and other fees 42.6 19.2 7.2 4.2 1.6 — 74.8 Market data fees 41.1 111.0 2.5 9.6 0.3 — 164.5 Regulatory fees 55.4 236.1 — — — — 291.5 Other revenue 15.9 5.5 1.3 3.2 — 0.7 26.6 883.5 1,072.5 144.6 89.6 38.2 0.7 Timing of revenue recognition Services transferred at a point in time $ 745.1 $ 901.0 $ 133.0 $ 69.4 $ 33.8 $ 0.7 $ 1,883.0 Services transferred over time 138.4 171.5 11.6 20.2 4.4 — 346.1 883.5 1,072.5 144.6 89.6 38.2 0.7 Year Ended December 31, 2016 Transaction fees $ 408.2 $ — $ 101.1 $ — $ — $ — $ 509.3 Access fees 51.6 — 0.8 — — — 52.4 Exchange services and other fees 38.4 — 7.9 — — — 46.3 Market data fees 30.1 — 3.1 — — — 33.2 Regulatory fees 48.3 — — — — — 48.3 Other revenue 12.9 — 0.7 — — — 13.6 589.5 — 113.6 — — — 703.1 Timing of revenue recognition Services transferred at a point in time $ 469.4 $ — $ 101.8 $ — $ — $ — $ 571.2 Services transferred over time 120.1 — 11.8 — — — 131.9 589.5 — 113.6 — — — 703.1 Contract liabilities for the year ended December 31, 2018 primarily represent prepayments of transaction fees and certain access and market data fees to the Exchanges. The revenue recognized from contract liabilities and the remaining balance is shown below (in millions): Balance at January 1, 2018 Cash Additions Revenue Recognition Balance at December 31, 2018 Liquidity provider sliding scale (1) $ 4.8 $ 4.8 $ (9.6) $ - Other, net 10.6 11.0 (13.1) 8.5 Total deferred revenue $ 15.4 $ 15.8 $ (22.7) $ 8.5 (1) Liquidity providers are eligible to participate in the sliding scale program, which involves prepayment of transaction fees, and to receive reduced fees based on the achievement of certain volume thresholds within a calendar month. These transaction fees received are amortized and recorded as revenue ratably as the transactions occur over the period. |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions | |
Acquisitions | (5) Acquisitions Bats Global Markets, Inc. On February 28, 2017, pursuant to the Agreement and Plan of Merger, dated as of September 25, 2016 (the “Merger Agreement”), by and among Cboe, Bats, CBOE Corporation, a Delaware corporation and a wholly-owned subsidiary of Cboe (“Merger Sub”), and Cboe Bats, LLC (formerly CBOE V, LLC), a Delaware limited liability company and a wholly-owned subsidiary of Cboe (“Merger LLC”), Cboe completed the merger of Merger Sub with and into Bats and the subsequent merger of Bats with and into Merger LLC. As a result of the Merger, Bats became a wholly-owned subsidiary of Cboe. The acquisition-date fair value of the consideration transferred totaled $4.0 billion, which consisted of the following (in millions): Cash consideration for Bats outstanding common stock $ 955.5 Common stock issued Equity awards issued 37.4 Debt extinguished 580.0 Total consideration $ 3,960.2 As a result of the Merger, each share of voting common stock of Bats, par value of $0.01 per share (“Bats Voting Common Stock”), and each share of non-voting common stock of Bats, par value of $0.01 per share (“Bats Non-Voting Common Stock” and, together with the Bats Voting Common Stock, “Bats Common Stock”), issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than shares held by Cboe, Bats or any of their respective subsidiaries, shares held by any holder of Bats Common Stock who was entitled to demand and properly demanded appraisal of such shares under Delaware law and unvested restricted shares of Bats Common Stock granted under any Bats equity incentive plan (all such shares described in this parenthetical, “Excluded Shares”)) was converted into, at the election of the holder of such share, either (i) 0.3201 of a share of common stock, par value of $0.01 per share, of Cboe (“Cboe Common Stock”) and $10.00 in cash (the “Mixed Consideration”), (ii) $14.99 in cash and 0.2577 of a share of Cboe Common Stock (the “Cash Election Consideration”) or (iii) 0.4452 of a share of Cboe Common Stock (the “Stock Election Consideration”). Pursuant to the terms of the Merger Agreement, the Cash Election Consideration and Stock Election Consideration payable in the Merger were calculated based on the volume-weighted average price (rounded to four decimal places) of shares of Cboe Common Stock on The Nasdaq Stock Market LLC for the period of ten consecutive trading days ended on February 24, 2017, which was $79.9289. The Cash Election Consideration and the Stock Election Consideration were subject to automatic adjustment, as described in the Merger Agreement and in the definitive joint proxy statement/prospectus dated December 9, 2016, filed by Cboe with the SEC on December 12, 2016, as amended and supplemented from time to time (the “Prospectus”), to ensure that the total amount of cash paid and the total number of shares of Cboe Common Stock issued in the Merger were the same as what would have been paid and issued if all holders of Bats Common Stock received the Mixed Consideration at the Effective Time. The amounts in the table below represent the allocation of the purchase price. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Cash and cash equivalents $ 130.1 Accounts receivable 117.8 Financial investments 66.0 Property and equipment 21.8 Other assets 32.8 Goodwill Intangibles Accounts payable (33.7) Accrued expenses (26.2) Section 31 fees (143.6) Income tax payable (52.9) Deferred tax liability (722.6) Other liabilities (82.6) $ For tax purposes, no tax deductible goodwill was generated as a result of this acquisition. Goodwill was assigned to the Options, U.S. Equities, European Equities, and Global FX segments as further described in Note 17 and is attributable to the expansion of asset classes, broadening of geographic reach, and expected synergies of the combined workforce, products and technologies of the Company and Bats. The intangible assets were assigned to the Options, U.S. Equities, European Equities, and Global FX segments in the following manner and will be amortized over the following useful lives: U.S. European Options Equities Equities Global FX Useful life Trading registrations and licenses $ 95.5 $ 572.7 $ 171.8 $ — indefinite Customer relationships 37.1 222.9 160.0 140.0 20 years Market data customer relationships 53.6 322.0 60.0 64.4 15 years Technology 22.5 22.5 22.5 22.5 7 years Trademarks and tradenames 1.0 6.0 1.8 1.2 2 years Goodwill 226.4 1,738.1 419.3 267.2 $ 436.1 $ 2,884.2 $ 835.4 $ 495.3 There were no goodwill or intangible assets assigned to the Futures segment as a result of this transaction as Bats did not operate a Futures business and no synergies are attributable to this segment. The fair value of accounts receivable acquired was $117.8 million. The gross amount of accounts receivable was $118.0 million of which $0.2 million was deemed uncollectable. The Company expensed $30.0 million of acquisition-related costs during the year ended December 31, 2018 that included $23.6 million of compensation-related costs, $2.7 million of stock based compensation, $3.0 million of professional fees, and $0.6 million of general and administrative expenses. These expenses are included in acquisition-related costs in the consolidated statements of income. The amounts of revenue, operating income and net income of Bats are included in the Company’s consolidated statements of income from after acquisition date for the year ended December 31, 2017 are as follows (in millions): Revenue $ Revenue less cost of revenues 378.2 Operating income 73.4 Net income 88.4 The unaudited financial information in the table below summarizes the combined results of operations of the Company and Bats, on a pro forma basis, as though the companies had been combined as of January 1, 2017. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented. Such pro forma financial information is based on the historical financial statements of the Company and Bats. This pro forma financial information is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information, including, without limitation, preliminary purchase accounting adjustments. The pro forma financial information does not reflect any synergies or operating cost reductions that may be achieved from the combined operations. The unaudited pro forma financial information combines the historical results for the Company and Bats for the year ended December 31, 2017 in the following table (in millions, except per share amounts): Revenue $ Revenue less cost of revenues Operating income 471.9 Net income 271.1 Earnings per share: Basic $ 2.41 Diluted 2.41 The supplemental 2017 pro forma amounts have been calculated after applying the Company's accounting policies and adjusting the results to reflect the additional amortization that would have been charged assuming the adjusted fair values of acquired intangible assets had been applied on January 1, 2017. The supplemental 2017 pro forma financial information includes pro forma adjustments of $107.8 million for acquisition-related costs, such as fees to investment bankers, attorneys, accountants and other professional advisors, as well as severance to employees. Silexx Financial Systems In November 2017, the Company completed the acquisition of assets of Silexx Financial Systems, LLC (Silexx) for $9.0 million in cash. Silexx is a developer and operator of a multi-asset order and execution management system. Of the purchase price, $6.7 million was allocated to goodwill, $2.1 million was allocated to intangible assets, and $0.2 million was allocated to working capital. Silexx is included in the Options segment. |
Severance
Severance | 12 Months Ended |
Dec. 31, 2018 | |
Severance | |
Severance | (6) Severance Subsequent to the Bats acquisition, the Company determined that certain employees' positions were redundant. As such, the Company communicated employee termination benefits to these employees. In July 2018, the Company established a voluntary separation plan (“VSP”) for select associates. Associates who elected to participate in the VSP received financial benefits commensurate with their tenure and position, along with vacation payout and medical benefits. The irrevocable acceptance period for most VSP associates has ended. The following is a summary of the employee termination benefits recognized within compensation and benefits in the consolidated statements of income (in millions): Employee Termination Benefits Balance at December 31, 2017 $ 4.8 Termination benefits accrued 15.3 Termination payments made (14.0) Balance at December 31, 2018 $ 6.1 |
Investments
Investments | 12 Months Ended |
Dec. 31, 2018 | |
Investments | |
Investments | (7) Investments As of December 31, 2018 and 2017, the Company's investments were comprised of the following (in millions): Year Ended December 31, 2018 2017 Equity Method Investments: Investment in Signal Trading Systems, LLC $ 12.4 $ 12.5 Investment in EuroCCP 9.3 9.6 Total equity method investments 21.7 22.1 Cost Method Investments: Investment in OCC 30.3 30.3 Investment in Eris Exchange Holdings, LLC 20.0 20.0 Investment in American Financial Exchange, LLC 5.9 5.9 Other cost method investments 8.3 4.4 Total cost method investments 64.5 60.6 Total investments $ 86.2 $ 82.7 Equity Method Investments Equity method investments include investments in Signal Trading Systems, LLC ("Signal"), a joint entity with FlexTrade System, Inc. to develop and market a multi-asset front-end order entry system, and EuroCCP, a Dutch domiciled clearing house. EuroCCP is one of three interoperable central counterparties, or CCPs, used to clear trades conducted on Cboe Europe Equities' markets. Cboe Europe Equities owns 20% of EuroCCP and can exercise significant influence over the entity as an equal shareholder with four other investors. Cost Method Investments The carrying amount of cost method investments totaled $64.5 million and $60.6 million as of December 31, 2018 and 2017, respectively, and is included in investments in the consolidated balance sheets. The Company accounts for these investments using the measurement alternative primarily as a result of the Company's inability to exercise significant influence as the Company is a smaller shareholder of these investments. As of December 31, 2018, cost method investments primarily reflect a 20% investment in OCC and minority investments in American Financial Exchange, CurveGlobal and Eris Exchange Holdings, LLC. In December 2014, OCC announced a newly-formed capital plan. The OCC capital plan was designed to strengthen OCC's capital base and facilitate its compliance with proposed SEC regulations for Systemically Important Financial Market Utilities ("SIFMUs") as well as international standards applicable to financial market infrastructures. On February 26, 2015, the SEC issued a notice of no objection to OCC's advance notice filing regarding the capital plan, and OCC and OCC's existing exchange stockholders, which include Cboe Options, subsequently executed agreements effecting the capital plan. Under the plan, each of OCC's existing exchange stockholders agreed to contribute its pro-rata share, based on ownership percentage, of $150 million in equity capital, which would increase OCC's shareholders' equity, and to provide its pro rata share in replenishment capital, up to a maximum of $40 million per exchange stockholder, if certain capital thresholds are breached. OCC also adopted policies under the plan with respect to fees, customer refunds, and stockholder dividends, which envision an annual dividend payment to the exchange stockholders equal to the portion of OCC's after-tax income that exceeds OCC's capital requirements after payment of refunds to OCC's clearing members (with such customer refunds generally to constitute 50% of the portion of OCC's pre-tax income that exceeds OCC's capital requirements). On March 3, 2015, in accordance with the plan, Cboe Options contributed $30 million to OCC. That contribution has been recorded under investments in the consolidated balance sheets as of December 31, 2018 and December 31, 2017, respectively. On March 6, 2015, OCC informed Cboe Options that the SEC, acting through delegated authority, had approved OCC's proposed rule filing for the capital plan. Following petitions to review the approval based on delegated authority, the SEC conducted its own review and then approved the proposed rule change implementing OCC's capital plan. Certain petitioners subsequently appealed the SEC approval order for the OCC capital plan to the U.S. Court of Appeals for the D.C. Circuit (the “Court”) and moved to stay the SEC approval order. On February 23, 2016, the Court denied the petitioners' motion to stay. On August 8, 2017, the Court held that the SEC’s approval order lacked reasoned decision-making sufficient to support the SEC’s conclusion that the OCC capital plan complied with applicable statutory requirements. The Court declined to vacate the SEC’s approval order or to require the unwinding of actions taken under the OCC capital plan, but instead remanded the matter to the SEC for further proceedings concerning whether that capital plan complies with those statutory requirements. Petitioners requested a stay of dividend payments to the exchange stockholders until the SEC made a final decision about the OCC capital plan, but the SEC denied that request on September 14, 2017. The SEC allowed for and received information from interested parties for the SEC’s consideration in connection with its review of the OCC capital plan on remand from the Court. On February 13, 2019, the SEC issued an order disapproving the proposed rule change implementing OCC’s capital plan following the SEC’s review of the OCC capital plan on remand from the Court. The SEC concluded, upon further review, that the information before the SEC was insufficient to support a finding that the OCC capital plan was consistent with the Exchange Act and Exchange Act rules and regulations. Among other items, the SEC noted in its order that while OCC represented to the Court that it is possible to unwind the OCC capital plan, the petitioners argued and the Court recognized that unwinding and replacing the OCC capital plan may pose considerable logistical challenges for OCC. The SEC also stated in its order, among other items, that the SEC would consider any requests for exemptive relief that OCC might seek while OCC establishes a new capital plan and seeks to come into compliance with the SEC requirement that OCC maintain a capital plan to cover potential general business losses. As a result of the recency, there is uncertainty regarding next steps and potential consequences. |
Financial Investments
Financial Investments | 12 Months Ended |
Dec. 31, 2018 | |
Investments | |
Financial Investments | (8) Financial Investments The Company’s financial investments with original or acquired maturities longer than three months, but that mature in less than one year from the balance sheet date and any money market funds that are considered cash and cash equivalents are classified as current assets and are summarized as follows (in millions): December 31, 2018 Cost basis Unrealized gains Unrealized losses Fair Value U.S. Treasury securities $ 35.7 $ — $ — $ 35.7 Total financial investments $ 35.7 $ — $ — $ 35.7 December 31, 2017 Cost basis Unrealized gains Unrealized losses Fair Value U.S. Treasury securities $ 47.3 $ — $ — $ 47.3 Money market funds 2.5 — — 2.5 Total financial investments $ 49.8 $ — $ — $ 49.8 |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment, Net | |
Property and Equipment, Net | (9) Property and Equipment, Net Property and equipment consisted of the following as of December 31, 2018 and 2017 (in millions): December 31, December 31, 2018 2017 Construction in progress $ 0.1 $ 5.9 Building 81.7 77.4 Furniture and Equipment 161.6 139.7 Total property and equipment 243.4 223.0 Less accumulated depreciation (171.7) (149.1) Property and equipment, net $ 71.7 $ 73.9 Depreciation expense using the straight-line method was $25.1 million, $31.3 million and $24.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. |
Other Assets, Net
Other Assets, Net | 12 Months Ended |
Dec. 31, 2018 | |
Other Assets, Net | |
Other Assets, Net | (10) Other Assets, Other assets, net consisted of the following as of December 31, 2018 and 2017 (in millions): December 31, December 31, 2018 2017 Software development work in progress $ 8.7 $ 10.2 Data processing software 219.0 220.0 Less accumulated depreciation and amortization (193.2) (189.6) Data processing software, net 34.5 40.6 Other assets (1) 28.4 18.9 Data processing software and other assets, net $ 62.9 $ 59.5 (1) At December 31, 2018 and December 31, 2017, the majority of the balance included long-term prepaid assets and notes receivable. Amortization expense related to data processing software was $18.9 million, $17.9 million, and $18.7 million for the years ended December 31, 2018, 2017, and 2016. |
Goodwill and Intangible Assets,
Goodwill and Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets, Net | |
Goodwill and Intangible Assets, Net | (11) Goodwill and Intangible Assets, Net The following table presents the details of goodwill by segment (in millions): U.S. European Corporate Options Equities Equities Global FX and Other Total Balance as of December 31, 2016 $ 7.7 $ — $ — $ — $ 18.8 $ 26.5 Additions 233.1 1,740.4 419.3 267.2 — 2,660.0 Dispositions (1.4) — — — — (1.4) Changes in foreign currency exchange rates — — 22.3 — — 22.3 Balance as of December 31, 2017 $ 239.4 $ 1,740.4 $ 441.6 $ 267.2 $ 18.8 $ 2,707.4 Additions — — — — — — Dispositions — — — — — — Changes in foreign currency exchange rates — — (16.0) — — (16.0) Balance as of December 31, 2018 $ 239.4 $ 1,740.4 $ 425.6 $ 267.2 $ 18.8 $ 2,691.4 Goodwill has been allocated to specific reporting units for purposes of impairment testing - Options, U.S. Equities, European Equities and Global FX. No goodwill has been allocated to Futures. Goodwill and intangible asset annual impairment testing was performed as of October 1, 2018 and did not result in any impairment of goodwill or intangible assets. The allocation of the new goodwill did not impact the existing goodwill assignment to reporting units and there are no aggregate impairments of goodwill. The following table presents the details of the intangible assets (in millions): U.S. European Corporate Options Equities Equities Global FX and Other Total Balance as of December 31, 2016 $ 2.0 $ — $ — $ — $ 6.7 $ 8.7 Additions 212.0 1,146.1 416.1 228.1 — 2,002.3 Dispositions (0.2) — — — — (0.2) Amortization (15.1) (74.3) (23.8) (28.5) (1.2) (142.9) Changes in foreign currency exchange rates — — 34.7 — — 34.7 Balance as of December 31, 2017 $ 198.7 $ 1,071.8 $ 427.0 $ 199.6 $ 5.5 $ 1,902.6 Additions — — — — — — Dispositions — — — — — — Amortization (16.8) (81.5) (27.7) (32.7) (1.3) (160.0) Changes in foreign currency exchange rates — — (22.4) — — (22.4) Balance as of December 31, 2018 $ 181.9 $ 990.3 $ 376.9 $ 166.9 $ 4.2 $ 1,720.2 For the years ended December 31, 2018, 2017 and 2016, amortization expense was $160.0 million, $142.9 million and $1.7 million, respectively. The estimated future amortization expense is $138.4 million for 2019, $122.0 million for 2020, $106.6 million for 2021, $94.1 million for 2022 and $83.2 million for 2023. The following table presents the categories of intangible assets at December 31, 2018 and 2017 (in millions): Weighted December 31, 2018 Average U.S. European Corporate Amortization Options Equities Equities Global FX and Other Period (in years) Trading registrations and licenses $ 95.5 $ 572.7 $ 176.0 $ $ Indefinite Customer relationships 38.8 222.9 163.9 140.0 3.0 18 Market data customer relationships 53.6 322.0 61.5 64.4 13 Technology 24.8 22.5 23.1 22.5 4.0 5 Trademarks and tradenames 1.7 6.0 1.8 1.2 1.0 2 Accumulated amortization (32.5) (155.8) (49.4) (61.2) (3.8) $ 181.9 $ 990.3 $ 376.9 $ 166.9 $ 4.2 Weighted December 31, 2017 Average U.S. European Corporate Amortization Options Equities Equities Global FX and Other Period (in years) Trading registrations and licenses $ 95.5 $ 572.7 $ 186.5 $ — $ — Indefinite Customer relationships 38.8 222.9 173.7 140.0 3.0 19 Market data customer relationships 53.6 322.0 65.1 64.4 — 14 Technology 24.6 22.5 24.4 22.5 4.0 6 Trademarks and tradenames 1.7 6.0 2.0 1.2 1.0 2 Other 0.2 — — — — 2 Accumulated amortization (15.7) (74.3) (24.7) (28.5) (2.5) $ 198.7 $ 1,071.8 $ 427.0 $ 199.6 $ 5.5 |
Accounts Payable and Accrued Li
Accounts Payable and Accrued Liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Payable and Accrued Liabilities | |
Accounts Payable and Accrued Liabilities | (12) Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following as of December 31, 2018 and 2017 (in millions): December 31, 2018 December 31, 2017 Compensation and benefit related liabilities $ 52.4 $ 18.0 Termination benefits 6.1 4.8 Royalties 25.0 20.3 Accrued liabilities 91.8 59.1 Marketing fee payable 10.4 8.4 Accounts payable 12.8 43.2 Total accounts payable and accrued liabilities $ 198.5 $ 153.8 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt | |
Debt | (13) Debt The Company's debt consisted of the following as of December 31, 2018 and 2017 (in millions): Debt: December 31, 2018 December 31, 2017 Term Loan Agreement $ 271.1 $ — Prior Term Loan Agreement — 294.9 3.650% Senior Notes 644.5 643.8 1.950% Senior Notes 299.8 299.2 Revolving Credit Agreement — — Total Debt $ 1,215.4 $ 1,237.9 In connection with the Merger, on December 15, 2016, the Company entered into the Prior Term Loan Agreement (as defined below) providing for a $1.0 billion senior unsecured delayed draw term loan facility and on January 12, 2017, the Company issued $650 million aggregate principal amount of 3.650% Senior Notes due 2027 ("3.650% Senior Notes"). The proceeds from this delayed draw term loan facility and issuance of our senior notes, in addition to using cash on hand at Cboe and Bats, were used to finance a portion of the cash component of the Merger consideration, to refinance existing indebtedness of Bats and its subsidiaries and to pay related fees and expenses. In addition, on December 15, 2016, the Company entered into a $150 million revolving credit facility to be used for working capital and other general corporate purposes. On June 29, 2017, Cboe refinanced approximately $300 million of the amounts outstanding under the Term Loan Agreement through the issuance of $300 million in aggregate principal amount of 1.950% Senior Notes due 2019 ("1.950% Senior Notes" and, together with the 3.650% Senior Notes, the "Notes"). On March 22, 2018, the Company repaid $300 million of outstanding indebtedness under the Prior Term Loan Agreement by using proceeds from a new Term Loan Agreement (as defined below) providing for a $300 million senior unsecured term loan facility. Term Loan Agreement On March 22, 2018, the Company, as borrower, entered into a new Term Loan Credit Agreement (the “Term Loan Agreement”) with Bank of America, N.A. (“Bank of America”), as administrative agent and initial lender, and several banks and other financial institutions from time to time party thereto as lenders. Bank of America also acted as sole lead arranger and sole bookrunner, with respect to the Term Loan Agreement. The Term Loan Agreement provides for a senior unsecured term loan facility in an aggregate principal amount of $300 million. The proceeds of the loan under the Term Loan Agreement were used to repay the $300 million of outstanding indebtedness under the Prior Term Loan Agreement. Loans under the Term Loan Agreement bear interest, at our option, at either (i) the London Interbank Offered Rate (“LIBOR”) periodically fixed for an interest period (as selected by us) of one, two, three or six months plus a margin (based on our public debt ratings) ranging from 1.00 percent per annum to 1.50 percent per annum or (ii) a daily floating rate based on the agent’s prime rate (subject to certain minimums based upon the federal funds effective rate or LIBOR) plus a margin (based on our public debt ratings) ranging from zero percent per annum to 0.50 percent per annum. The Company was required to pay an up-front fee of 0.05 percent to the agent for the entry into the Term Loan Agreement. The Term Loan Agreement, which matures on December 15, 2021, contains customary representations, warranties and affirmative and negative covenants for facilities of its type, including financial covenants, events of default and indemnification provisions in favor of the lenders thereunder. The negative covenants include restrictions regarding the incurrence of liens, the incurrence of indebtedness by our subsidiaries and fundamental changes, subject to certain exceptions in each case. The financial covenants require us to meet a quarterly financial test with respect to a minimum consolidated interest coverage ratio of not less than 4.00 to 1.00 and a maximum consolidated leverage ratio of not greater than 3.50 to 1.00. At December 31, 2018, the Company was in compliance with these covenants. Prior Term Loan Agreement On December 15, 2016, the Company, as borrower, entered into a Term Loan Credit Agreement (the “Prior Term Loan Agreement”) with Bank of America, as administrative agent, certain lenders named therein (the “Prior Term Lenders”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner, Morgan Stanley MUFG Loan Partners, LLC, as syndication agent, and Citibank, N.A., PNC Bank, National Association and JPMorgan Chase Bank, N.A., as co-documentation agents. The Prior Term Loan Agreement provided for a senior unsecured delayed draw term loan facility (the “Prior Term Loan Facility”) in an aggregate principal amount of $1.0 billion. The commercial terms of the Prior Term Loan Agreement are substantially similar to the Term Loan Agreement, other than interest rates and the maturity date. Loans under the Prior Term Loan Agreement, which was to mature on February 28, 2022, bore interest, at our option, at either (i) LIBOR periodically fixed for an interest period (as selected by us) of one, two, three or six months plus a margin (based on our public debt ratings) ranging from 1.00 percent per annum to 1.75 percent per annum or (ii) a daily floating rate based on the agent’s prime rate (subject to certain minimums based upon the federal funds effective rate or LIBOR) plus a margin (based on our public debt ratings) ranging from zero percent per annum to 0.75 percent per annum. The Company was required to pay a ticking fee to the agent for the account of the Prior Term Lenders which initially accrued at a rate (based on our public debt ratings) ranging from 0.10 percent per annum to 0.30 percent per annum multiplied by the undrawn aggregate commitments of the Prior Term Lenders in respect of the Prior Term Loan Facility, accruing during the period commencing on December 15, 2016 and ending on the earliest of the dates on which the loans are drawn. On February 28, 2017, Cboe made a draw under the Prior Term Loan Agreement in the amount of $1.0 billion. Cboe used the proceeds to finance a portion of the cash component of the aggregate consideration for the Merger, repaid certain existing indebtedness of Bats, paid fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement, funded working capital needs, and for other general corporate purposes. 1.950% Senior Notes due 2019 On June 29, 2017, the Company issued $300 million aggregate principal amount of 1.950% Senior Notes. The form and terms of the 1.950% Senior Notes were established pursuant to an Officer’s Certificate, dated as of June 29, 2017, supplementing the Indenture (as defined below). Underwriter fees of $0.8 million were also capitalized and netted against long-term debt in the consolidated balance sheet, while other issuance fees of $0.9 million were expensed and are included in debt issuance costs within interest expense on the consolidated statement of income for the year ended December 31, 2017. The Company used the net proceeds from the 1.950% Senior Notes to repay amounts under the Prior Term Loan Agreement. The 1.950% Senior Notes mature on June 28, 2019 and bear interest at the rate of 1.950% per annum, payable semi-annually in arrears on June 28 and December 28 of each year, commencing December 28, 2017. The 1.950% Senior Notes are unsecured obligations of the Company and rank equally with all of the Company’s other existing and future unsecured, senior indebtedness, but are effectively junior to the Company’s secured indebtedness, to the extent of the value of the assets securing such indebtedness, and will be structurally subordinated to the secured and unsecured indebtedness of the Company’s subsidiaries. The Company has the option to redeem some or all of the 1.950% Senior Notes, at any time in whole or from time to time in part, at the redemption prices set forth in the Officer’s Certificate. The Company may also be required to offer to repurchase the 1.950% Senior Notes upon the occurrence of a Change of Control Triggering Event (as such term is defined in the Officer’s Certificate) at a repurchase price equal to 101% of the aggregate principal amount of 1.950% Senior Notes to be repurchased. 3.650% Senior Notes due 2027 On January 12, 2017, the Company entered into an indenture (the “Indenture”), by and between the Company and Wells Fargo Bank, National Association, as trustee, in connection with the issuance of $650 million aggregate principal amount of the Company’s 3.650% Senior Notes. The form and terms of the 3.650% Senior Notes were established pursuant to an Officer’s Certificate, dated as of January 12, 2017, supplementing the Indenture. The Company used a portion of the net proceeds from the 3.650% Senior Notes to fund, in part, the Merger, including the payment of related fees and expenses and the repayment of Bats’ existing indebtedness, and the remainder for general corporate purposes. The 3.650% Senior Notes mature on January 12, 2027 and bear interest at the rate of 3.650% per annum, payable semi-annually in arrears on January 12 and July 12 of each year, commencing July 12, 2017. The 3.650% Senior Notes are unsecured obligations of the Company and rank equally with all of the Company’s other existing and future unsecured, senior indebtedness, but are effectively junior to the Company’s secured indebtedness, to the extent of the value of the assets securing such indebtedness, and will be structurally subordinated to the secured and unsecured indebtedness of the Company’s subsidiaries. The Company has the option to redeem some or all of the 3.650% Senior Notes, at any time in whole or from time to time in part, at the redemption prices set forth in the Officer’s Certificate. The Company may also be required to offer to repurchase the 3.650% Senior Notes upon the occurrence of a Change of Control Triggering Event (as such term is defined in the Officer’s Certificate) at a repurchase price equal to 101% of the aggregate principal amount of 3.650% Senior Notes to be repurchased. Indenture Under the Indenture, the Company may issue debt securities, which includes the Notes, at any time and from time to time, in one or more series without limitation on the aggregate principal amount. The Indenture governing the Notes contains customary restrictions, including a limitation that restricts our ability and the ability of certain of our subsidiaries to create or incur secured debt. Such Indenture also limits certain sale and leaseback transactions and contains customary events of default. At December 31, 2018, the Company was in compliance with these covenants. Revolving Credit Agreement On December 15, 2016, the Company, as borrower, entered into a Credit Agreement (the “Revolving Credit Agreement”) with Bank of America, N.A., as administrative agent and as swing line lender, certain lenders named therein (the “Revolving Lenders”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner, Morgan Stanley MUFG Loan Partners, LLC, as syndication agent, and Citibank, N.A., PNC Bank, National Association and JPMorgan Chase Bank, N.A., as co-documentation agents. The Revolving Credit Agreement provides for a senior unsecured $150 million five-year revolving credit facility (the “Revolving Credit Facility”) that includes a $25 million swing line sub-facility. The Company may also, subject to the agreement of the applicable lenders, increase the commitments under the Revolving Credit Facility by up to $100 million, for a total of $250 million. Subject to specified conditions, the Company may designate one or more of its subsidiaries as additional borrowers under the Revolving Credit Agreement provided that it guarantees all borrowings and other obligations of any such subsidiaries. As of December 31, 2018, no subsidiaries were designated as additional borrowers. Funds borrowed under the Revolving Credit Agreement may be used to fund working capital and for other general corporate purposes. As of December 31, 2018, no borrowings were outstanding under the Revolving Credit Agreement. Accordingly, at December 31, 2018, $150 million of borrowing capacity was available for the purposes permitted by the Revolving Credit Agreement. Loans under the Revolving Credit Agreement will bear interest, at our option, at either (i) LIBOR periodically fixed for an interest period (as selected by us) of one, two, three or six months plus a margin (based on our public debt ratings) ranging from 1.00 percent per annum to 1.75 percent per annum or (ii) a daily floating rate based on our prime rate (subject to certain minimums based upon the federal funds effective rate or LIBOR) plus a margin (based on our public debt ratings) ranging from zero percent per annum to 0.75 percent per annum. Subject to certain conditions stated in the Revolving Credit Agreement, the Company may borrow, prepay and reborrow amounts under the Revolving Credit Facility at any time during the term of the Revolving Credit Agreement. The Revolving Credit Agreement will terminate and all amounts owing thereunder will be due and payable on December 15, 2021, unless the commitments are terminated earlier, either at our request or, if an event of default occurs, by the Revolving Lenders (or automatically in the case of certain bankruptcy-related events). The Revolving Credit Agreement contains customary representations, warranties and affirmative and negative covenants for facilities of its type, including financial covenants, events of default and indemnification provisions in favor of the Revolving Lenders. The negative covenants include restrictions regarding the incurrence of liens, the incurrence of indebtedness by our subsidiaries and fundamental changes, subject to certain exceptions in each case. The financial covenants require us to meet a quarterly financial test with respect to a minimum consolidated interest coverage ratio of not less than 4.00 to 1.00 and a maximum consolidated leverage ratio of not greater than 3.50 to 1.00. At December 31, 2018, the Company was in compliance with these covenants. Loan and Notes Payments and Contractual Interest The future expected loan repayments related to the Term Loan Agreement and the Notes as of December 31, 2018 is as follows (in millions): 2019 $ 2020 — 2021 275.0 2022 — Thereafter 650.0 Principal amounts repayable 1,225.0 Debt issuance costs (4.9) Unamortized discounts on notes (4.7) Total debt outstanding $ 1,215.4 Interest expense recognized on the Term Loan Agreement and the Notes is included in interest expense, net in the consolidated statements of income, for the years ended December 31, 2018, 2017 and 2016 are as follows (in millions): Year Ended Year Ended Year Ended December 31, December 31, December 31, 2018 2017 2016 Components of interest expense: Contractual interest $ 38.0 $ 39.0 $ 5.7 Amortization of debt discount 0.7 0.6 — Amortization of debt issuance costs 1.8 3.0 — Interest expense $ 40.5 $ 42.6 $ 5.7 Interest income (2.3) (1.3) — Interest expense, net $ 38.2 $ 41.3 $ 5.7 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 12 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss) | |
Accumulated Other Comprehensive Income (Loss) | (14) Accumulated Other Comprehensive Income (Loss) The following represents the changes in accumulated other comprehensive income (loss) by component, before tax (in millions): Foreign currency Unrealized Total Other translation Investment Post-Retirement Comprehensive adjustment Gain Benefits Income Balance at December 31, 2016 $ — $ — $ (0.8) $ (0.8) Other comprehensive income 51.3 0.2 — 51.5 Tax effect on other comprehensive income — — — — Balance at December 31, 2017 $ 51.3 $ 0.2 $ (0.8) $ 50.7 Other comprehensive loss (39.2) — — (39.2) Tax effect on other comprehensive loss — — — — Balance at December 31, 2018 $ 12.1 $ 0.2 $ (0.8) $ 11.5 |
Fair Value Measurement
Fair Value Measurement | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurement | |
Fair Value Measurement | (15) Fair Value Measurement Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk. The Company applied FASB ASC 820, Fair Value Measurement and Disclosure , which provides guidance for using fair value to measure assets and liabilities by defining fair value and establishing the framework for measuring fair value. ASC 820 applies to financial and nonfinancial instruments that are measured and reported on a fair value basis. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels: · Level 1—Unadjusted inputs based on quoted markets for identical assets or liabilities. · Level 2—Observable inputs, either direct or indirect, not including Level 1, corroborated by market data or based upon quoted prices in non-active markets. · Level 3—Unobservable inputs that reflect management’s best assumptions of what market participants would use in valuing the asset or liability. The Company has included a tabular disclosure for financial assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheet as of December 31, 2018 and 2017, respectively. Instruments Measured at Fair Value on a Recurring Basis The following tables presents the Company’s fair value hierarchy for those assets measured at fair value on a recurring basis as of December 31, 2018 and 2017 (in millions): December 31, 2018 Total Level 1 Level 2 Level 3 Assets: U.S. Treasury securities $ 35.7 $ 35.7 $ — $ — Total assets $ 35.7 $ 35.7 $ — $ — Liabilities: Contingent consideration liability to related party $ 3.9 $ — $ — $ 3.9 Total Liabilities $ 3.9 $ — $ — $ 3.9 December 31, 2017 Total Level 1 Level 2 Level 3 Assets: U.S. Treasury securities $ 47.3 $ 47.3 $ — $ — Money market funds 2.5 2.5 — — Total assets $ 49.8 $ 49.8 $ — $ — Liabilities: Contingent consideration liability to related party $ 56.6 $ — $ — $ 56.6 Total Liabilities $ 56.6 $ — $ — $ 56.6 The following is a description of the Company’s valuation methodologies used for instruments measured at fair value on a recurring basis: Assets Measured at a Fair Value on a Recurring Basis Assets measured at a fair value on a recurring basis consist of U.S. Treasury securities and money market funds. These securities are valued by obtaining feeds from a number of live data sources, including active market makers and inter‑dealer brokers and therefore categorized as Level 1. Contingent Consideration Liabilities In connection with the acquisition of Silexx Financial Systems, LLC (“Silexx”), the Company acquired a contingent consideration arrangement with the former owners of Silexx. The fair value of this liability at December 31, 2018 was $3.9 million. That value is based on estimates of discounted future cash payments, a significant unobservable input, and is considered a Level 3 measurement. In connection with the acquisition of Bats, the Company acquired a contingent consideration arrangement with the former owners of Cboe FX. The fair value of this liability at December 31, 2017 was $56.6 million. That value is based on estimates of discounted future cash payments, a significant unobservable input, and is considered a Level 3 measurement. Instruments Measured at Fair Value on a Nonrecurring Basis Certain assets, such as goodwill and intangible assets, are measured at fair value on a non‑recurring basis. For goodwill, the process involves using a market approach and income approach (using discounted estimated cash flows) to determine the fair value of each reporting unit on a stand‑alone basis. That fair value is compared to the carrying amount of the reporting unit, including its recorded goodwill. Impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying amount of the reporting unit. For the intangible assets, the process also involves using a discounted cash flow method to determine the fair value of each intangible asset. Impairment is considered to have occurred if the fair value of the intangible asset is lower than the carrying amount. These measurements are considered Level 3 and these assets are recognized at fair value if they are deemed to be impaired. As of December 31, 2018 and 2017, none of these assets were required to be recorded at fair value since no impairment indicators were present. Fair Value of Financial Instruments The following table presents the Company’s fair value hierarchy for those financial instruments held by the Company as of December 31, 2018 and 2017 (in millions): December 31, 2018 Total Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 275.1 $ 275.1 $ — $ — Financial investments 35.7 35.7 — — Accounts receivable 287.3 287.3 — — Income tax receivable 70.4 70.4 — — Total assets $ 668.5 $ 668.5 $ — $ — Liabilities: Accounts payable $ 12.8 $ — $ 12.8 $ — Section 31 fees payable 81.1 — 81.1 — Contingent consideration liability to related party 3.9 — — 3.9 Debt 1,215.4 — 1,215.4 — Total liabilities $ 1,313.2 $ — $ 1,309.3 $ 3.9 December 31, 2017 Total Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 143.5 $ 143.5 $ — $ — Financial investments 47.3 47.3 — — Accounts receivable 217.3 217.3 — — Income tax receivable 17.2 17.2 — — Total assets $ 425.3 $ 425.3 $ — $ — Liabilities: Accounts payable $ 43.2 $ — $ 43.2 $ — Section 31 fees payable 105.6 — 105.6 — Contingent consideration liability to related party 56.6 — — 56.6 Debt 1,237.9 — 1,237.9 — Total liabilities $ 1,443.3 $ — $ 1,386.7 $ 56.6 The carrying amounts of cash and cash equivalents, accounts receivable, income tax receivable, accounts payable, and Section 31 fees payable approximate fair value due to their liquid or short‑term nature. Long‑term debt The carrying amount of long‑term debt approximates its fair value based on quoted LIBOR or using a fixed rate at December 31, 2018 and 2017 and is considered a Level 2 measurement. Information on Level 3 Financial Liabilities The following table sets forth a summary of changes in the fair value of the Company’s level 3 financial liabilities during the year ended December 31, 2018 and 2017: Level 3 Financial Liabilities for the Year Ended December 31, 2018 Balance at Realized (gains) Beginning of losses during Balance at Period period Additions Settlements End of Period Liabilities Contingent consideration liabilities to related parties $ 56.6 $ 3.9 $ — $ (56.6) $ 3.9 Total Liabilities $ 56.6 $ 3.9 $ — $ (56.6) $ 3.9 Level 3 Financial Liabilities for the Year Ended December 31, 2017 Balance at Realized (gains) Beginning of losses during Balances at Period period Additions Settlements End of Period Liabilities Contingent consideration liability to related party $ — $ — $ 56.6 $ — $ 56.6 Total Liabilities $ — $ — $ 56.6 $ — $ 56.6 |
Redeemable Noncontrolling Inter
Redeemable Noncontrolling Interest | 12 Months Ended |
Dec. 31, 2018 | |
Redeemable Noncontrolling Interest | |
Redeemable Noncontrolling Interest | (16) Redeemable Noncontrolling Interest Redeemable noncontrolling interest is reported on the consolidated balance sheets in mezzanine equity in Redeemable Noncontrolling Interest. The Company recognizes changes to the redemption value of redeemable noncontrolling interest as they occur and adjusts the carrying value to equal the redemption value at the end of each reporting period. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges or credits against retained earnings, or in the absence of retained earnings, additional paid in capital. The redemption amounts have been estimated based on the fair value of the majority-owned subsidiary, determined based on a weighting of the discounted cash flow and other economic factors. For the year ended December 31, 2018, the following reflects changes in our redeemable noncontrolling interest (in millions): Redeemable Balance as of December 31, 2017 $ 9.4 Net loss attributable to redeemable noncontrolling interest (1.3) Redemption value adjustment of redeemable noncontrolling interest 1.3 Balance as of December 31, 2018 $ 9.4 |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting | |
Segment Reporting | (17) Segment Reporting The Company reports five business segments: Options, U.S. Equities, Futures, European Equities, and Global FX, which is reflective of how the Company's chief operating decision-maker reviews and operates the business (Note 2). Segment performance review is primarily based on operating income (loss). Our chief operating decision-maker does not review total assets or statements of income below operating income by segments; therefore, such information is not presented below. The Company has aggregated all of its corporate costs, as well as other business ventures, within the Corporate Items and Eliminations unit based on the decision that those activities should not be used to evaluate the segment's operating performance; however, operating expenses that relate to activities of a specific segment have been allocated to that segment. The Options segment includes our options exchange business, which lists for trading options on market indexes (index options), mostly on an exclusive basis, as well as on non-exclusive "multiply-listed" options, such as options on the stocks of individual corporations (equity options) and options on other exchange-traded products (ETP options), such as exchange-traded funds (ETF options) and exchange-traded notes (ETN options) that occur on Cboe Options, C2, BZX and EDGX. It also includes the listed equity options routed transaction services that occur on Cboe Trading. The U.S. Equities segment includes listed cash equities and ETP transaction services that occur on BZX, BYX, EDGX and EDGA. It also includes market data revenue generated from the U.S. tape plans as well as revenue generated from the sale of proprietary market data ETP listing, listed cash equities and ETPs routed transaction services, connectivity fees, and advertising activity from ETF.com. The Futures segment includes the business of our futures exchange, CFE, which includes offering for trading futures on the VIX Index, bitcoin, and other futures products. The European Equities segment includes the pan‑European listed cash equities transaction services, ETPs, exchange‑traded commodities, and international depository receipts that occur on the RIE, operated by Cboe Europe Equities. It also includes the listed cash equities and ETPs routed transaction services that occurred on Cboe Chi-X Europe, as well as the listings business where ETPs can be listed on Cboe Europe Equities. The Global FX segment includes institutional FX trading services that occur on the Cboe FX platform, as well as non-deliverable forward FX transactions executed on Cboe SEF. Summarized financial data of reportable segments was as follows (in millions): Corporate European items and Options U.S. Equities Futures Equities Global FX eliminations Total Year ended December 31, 2018 Revenues $ $ 1,373.1 $ 149.8 $ $ 56.4 $ 0.4 $ 2,768.8 Operating income (loss) 390.9 140.5 85.7 24.1 (11.7) (30.1) 599.4 Year ended December 31, 2017 Revenues $ 883.5 $ 1,072.5 $ 144.6 $ 89.6 $ 38.2 $ 0.7 $ 2,229.1 Operating income (loss) 252.2 103.2 126.8 8.9 (12.8) (106.4) 371.9 Year ended December 31, 2016 Revenues $ 589.5 $ — $ 113.6 $ — $ — $ — $ 703.1 Operating income (loss) 218.4 — 96.4 — — (16.6) 298.2 |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2018 | |
Employee Benefit Plan | |
Employee Benefit Plan | (18) Employee Benefit Plan Cboe employees are eligible to participate in the Cboe Options SMART Plan (“SMART Plan”). The SMART Plan is a defined contribution plan, which is qualified under Internal Revenue Code Section 401(k). The 401(k) retirement plan eligible to legacy Bats U.S. employees merged into the SMART Plan as of January 1, 2018. In addition, eligible employees may participate in the Supplemental Employee Retirement Plan, Executive Retirement Plan and Deferred Compensation Plan. Effective January 1, 2017, the Executive Retirement Plan is closed to new executive officers and employees. Each plan is a defined contribution plan that is non-qualified under Internal Revenue Code. This expense is included in compensation and benefits in the consolidated statement of income. The Company contributed $12.4 million, $7.7 million, and $5.5 million to the defined contribution plans for the years ended December 31, 2018, 2017 and 2016, respectively. The Company also assumed the Cboe Europe Equities employee‑selected stakeholder contribution plan upon completion of the Merger. The Company’s contribution amounted to $0.4 million and $0.5 million for the years ended December 31, 2018, and 2017, respectively. This expense is included in compensation and benefits in the consolidated statements of income. |
Regulatory Capital
Regulatory Capital | 12 Months Ended |
Dec. 31, 2018 | |
Regulatory Capital | |
Regulatory Capital | (19) Regulatory Capital As a broker‑dealer registered with the SEC, Cboe Trading is subject to the SEC’s Uniform Net Capital Rule (Rule 15c3‑1), which requires the maintenance of minimum net capital, as defined therein. The SEC’s requirement also provides that equity capital may not be withdrawn or a cash dividend paid if certain minimum net capital requirements are not met. Cboe Trading computes the net capital requirements under the basic method provided for in Rule 15c3‑1. As of December 31, 2018, Cboe Trading is required to maintain net capital equal to the greater of 6.67% of aggregate indebtedness items, as defined, or $0.1 million. At December 31, 2018, Cboe Trading had net capital of $10.7 million, which was $10.2 million in excess of its required net capital of $0.5 million. As entities regulated by the FCA, Cboe Europe Equities is subject to the Financial Resource Requirement ("FRR") and Cboe Chi-X Europe is subject to the Capital Resources Requirement ("CRR"). As a RIE, Cboe Europe Equities computes its FRR in accordance with its Financial Risk Assessment, as agreed by the FCA. This FRR was $21.6 million at December 31, 2018. At December 31, 2018, Cboe Europe Equities had capital in excess of its required FRR of $40.3 million. As a Banks, Investment firms, PRUdential (BIPRU) 50k firm, as defined by the Markets in Financial Instruments Directive of the FCA, Cboe Chi‑X Europe computes its CRR as the greater of the base requirement of $0.1 million at December 31, 2018, or the summation of the credit risk, market risk and fixed overheads requirements, as defined. At December 31, 2018, Cboe Chi‑X Europe had capital in excess of its required CRR of $0.5 million. As a designated contract market regulated by the CFTC, CFE is required to meet two capital adequacy tests: (i) its financial resources must be equal to at least twelve months of its projected operating costs and (ii) its unencumbered, liquid financial assets or line of credit must be equal to at least six months of its projected operating costs. As of December 31, 2018, CFE had annual projected operating expenses of $56.6 million and had financial resources that exceeded this amount. Additionally, as of December 31, 2018, CFE had projected operating expenses for six months of $24.0 million and had unencumbered, liquid financial assets and line of credit that exceeded this amount. As a swap execution facility regulated by the CFTC, Cboe SEF is required to meet two capital adequacy tests: (i) its financial resources must be equal to at least twelve months of its projected operating costs and (ii) its unencumbered, liquid financial assets must be equal to at least six months of its projected operating costs. As of December 31, 2018, Cboe SEF had annual operating expenses of $1.3 million and had financial resources that exceeded this amount. Additionally, as of December 31, 2018, Cboe SEF had projected operating expenses for the upcoming six months of $0.5 million and had unencumbered, liquid financial assets that exceeded this amount. |
Stock-based Compensation
Stock-based Compensation | 12 Months Ended |
Dec. 31, 2018 | |
Stock-based Compensation | |
Stock-based Compensation | (20) Stock-based Compensation Stock-based compensation is based on the fair value of the award on the date of grant, which is recognized over the related service period, net of actual forfeitures. The service period is the period over which the related service is performed, which is generally the same as the vesting period. Vesting may be accelerated for certain officers and employees as a result of attaining certain age and service based requirements in our long-term incentive plan and award agreements. On February 19, 2018, the Company granted 147,017 restricted stock units ("RSUs"), each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $111.45 per share. The RSUs vest ratably over three years, with one-third vesting on each anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. In addition, on February 19, 2018, the Company granted 41,868 RSUs, contingent on the achievement of performance conditions including 20,934 RSUs, at a fair value of $115.90 per RSU, related to earnings per share during the performance period and 20,934 RSUs, at a fair value of $122.00 per RSU, related to total shareholder return during the performance period. The Company used the Monte Carlo valuation model method to estimate the fair value of the total shareholder return RSUs which incorporated the following assumptions: risk-free interest rate (2.36)%, three-year volatility (19.2)% and three year correlation with S&P 500 Index (0.30). Each of these performance shares has a performance condition under which the number of units ultimately awarded will vary from 0% to 200% of the original grant, with each unit representing the contingent right to receive one share of our common stock. The vesting period for the RSUs contingent on the achievement of performance is three years. For each of the performance awards, the RSUs will be settled in shares of our common stock following vesting of the RSU assuming that the participant has been continuously employed during the vesting period, subject to acceleration in the event of a change in control of the Company or in the event of a participant’s earlier death or disability. Participants have no voting rights with respect to the RSUs until the issuance of the shares of stock. Dividends are accrued by the Company and will be paid once the RSUs contingent on the achievement of performance conditions vest. On May 15, 2018, the Company granted 92 RSUs, each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $108.11 per share. The RSUs vest ratably over three-years, with one-third vesting on each anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. On May 17, 2018, the Company granted 13,296 shares of restricted stock, at a fair value of $108.38 per share, to non-employee members of the board of directors. The shares have a one-year vesting period and vesting accelerates upon the occurrence of a change in control of the Company. Unvested portions of the stock will be forfeited if the director leaves the Company prior to the applicable vesting date. On May 17, 2018, the Company granted 1,107 RSUs, each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $108.38 per share. The RSUs vest ratably over three-years, with one-third vesting on each anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. On May 17, 2018, the Company granted 6,459 RSUs, each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $108.38 per share. The RSUs vest on either February 19, 2021 or the third anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. On August 15, 2018, the Company granted 990 RSUs, each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $94.65 per share. The RSUs vest ratably over three-years, with one-third vesting on each anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. On November 15, 2018, the Company granted 182 RSUs, each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $109.71 per share. The RSUs vest ratably over three-years, with one-third vesting on each anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. On November 15, 2018, the Company granted 684 RSUs, each of which entitles the holder to one share of common stock upon vesting, to certain officers and employees at a fair value of $109.71 per share. The RSUs vest on the third anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. The Company recognized stock-based compensation expense of $35.1 million, $52.6 million, and $14.5 million for the years ended December 31, 2018, 2017, and 2016 respectively. Stock-based compensation expense is included in compensation and benefits and acquisition-related costs in the consolidated statements of income. The activity in the Company's stock options, restricted stock and restricted stock units for the years ended December 31, 2018, 2017 and 2016 was as follows: Stock Options Pursuant to the Merger Agreement, each outstanding option to purchase Bats common stock (each, a “Bats stock option”) granted under any of the Bats Global Markets, Inc. 2009 Stock Option Plan, the Bats Global Markets, Inc. Third Amended and Restated 2012 Equity Incentive Plan and the Bats Global Markets, Inc. 2016 Omnibus Incentive Plan (collectively, the “Bats Plans”) that was outstanding immediately prior to the Effective Time was converted into an option to purchase Common Stock, on the same terms and conditions (including vesting schedule) as were applicable to such Bats stock option (but taking into account any changes, including any acceleration of vesting of such Bats stock option occurring by reason of the transactions contemplated by the Merger Agreement). Summary stock option activity is presented below: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Value Shares Price Term (years) (in millions) Outstanding, December 31, 2016 — $ — — $ — Granted 683,390 22.45 — — Exercised 17.13 Outstanding, December 31, 2017 442,042 $ 25.36 1.0 $ 17.5 Granted — — — — Exercised (72,559) 20.08 Outstanding and expected to vest at December 31, 2018 369,483 $ 26.40 — $ — Exercisable at December 31, 2018 369,483 $ 26.40 — $ 6.4 The Company estimated the grant date fair value of options awarded during 2017 using the Black‑Scholes valuation model with the following assumptions: 2017 Expected term (in years) 4.2 Expected volatility 19.8 % Expected dividend yield 1.3 % Risk-free rate 1.78 % Forfeiture rate — % Summary of the status of nonvested options is presented below: Weighted Average Grant- Nonvested options Options Date Fair Value December 31, 2016—Nonvested — $ — Granted 81,068 49.17 Vested — — Forfeited — — December 31, 2017—Nonvested 81,068 $ 49.17 Granted — — Vested 49.17 Forfeited — — December 31, 2018—Nonvested — $ — In the year ended December 31, 2018, to satisfy employee's tax obligations and cash exercise payment due upon the election to exercise 72,559 stock options, the Company purchased 8,772 shares at a cost of $1.0 million. Restricted Stock and Restricted Stock Units Pursuant to the Merger Agreement, each award of restricted Bats common stock (“Bats restricted shares”) granted under any of the Bats Plans that was unvested immediately prior to the Effective Time was assumed by the Company and converted into an award of restricted shares of Common Stock, subject to the same terms and conditions (including vesting schedule) that applied to the applicable Bats restricted shares immediately prior to the Effective Time (but taking into account any changes, including any acceleration of vesting of such Bats restricted shares, occurring by reason provided for in the Merger Agreement). Summary restricted stock activity is presented below: Weighted Number of average grant shares date fair value Nonvested stock at December 31, 2016 480,595 $ 63.64 Granted 1,091,843 78.94 Vested (498,540) 67.83 Forfeited (5,506) 71.68 Nonvested stock at December 31, 2017 1,068,392 $ 77.19 Granted 211,696 112.55 Vested (478,692) 75.57 Forfeited (16,220) 93.38 Nonvested stock at December 31, 2018 785,176 $ 87.38 In the year ended December 31, 2018, to satisfy employees' tax obligations upon the vesting of restricted stock, the Company purchased 193,988 shares totaling $22.5 million as the result of the vesting of 478,692 shares of restricted stock. As of December 31, 2018, there were $31.3 million in total unrecognized compensation costs related to restricted stock and restricted stock units. These costs are expected to be recognized over a weighted average period of 1.4 years. Employee Stock Purchase Plan In May 2018, our stockholders approved our Employee Stock Purchase Plan, (“ESPP”), under which a total of 750,000 shares of our common stock will be made available for purchase to employees. The ESPP is a broad-based plan that permits our employees to contribute up to 10% of wages and base salary to purchase shares of our common stock at a discount, subject to applicable annual Internal Revenue Service limitations. Under our ESPP, a participant may not purchase more than a maximum of 312 shares of our common stock during any single offering period. No participant may accrue options to purchase shares of our common stock at a rate that exceeds $25,000 in fair market value of our stock (determined at the time such options are granted) for each calendar year in which such rights are outstanding at any time. The exercise price per share of common stock shall be 90% (for eligible U.S. employees) or 85% (for eligible international employees) of the lesser of the fair market value of the stock on the first day of the applicable offering period or the applicable exercise date. We record compensation expense over the offering period related to the discount that is given to our employees, which totaled $0.1 million for the year ended December 31, 2018. As of December 31, 2018, 750,000 shares were reserved for future issuance under the ESPP. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | (21) Income Taxes Net deferred tax assets and liabilities consist of the following as of December 31, 2018 and 2017 (in millions): 2018 2017 Deferred tax assets: Accrued compensation and benefits $ 17.1 $ 14.1 Property, equipment and technology, net 2.6 2.4 Other 20.7 20.2 Subtotal 40.4 36.7 Valuation allowance (2.0) (1.6) Total deferred tax assets 38.4 35.1 Deferred tax liabilities: Intangibles (380.2) (429.6) Property, equipment and technology, net (17.4) (17.1) Investments (75.3) (75.0) Prepaid expenses or assets (2.3) (1.6) Total deferred tax liabilities (475.2) (523.3) Net deferred tax assets/(liabilities) $ (436.8) $ (488.2) The Company provides a valuation allowance against deferred tax assets if, based on management’s assessment of historical and projected future operating results and other available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. A valuation allowance of $2.0 million was recorded against gross deferred tax assets for net operating losses as of December 31, 2018. As of December 31, 2018 and 2017, we have state net operating loss carryforwards of $18.8 million and $24.9 million, respectively, which, if unused, will expire beginning in 2029. The provision for income taxes for the years ended December 31, 2018, 2017 and 2016 consists of the following (in millions): Year Ended December 31 2018 2017 2016 Current tax expense: Federal $ 125.1 $ 141.0 $ 107.1 State 58.7 25.8 22.6 Foreign 9.9 5.4 — Total current tax expense 193.7 172.2 129.7 Deferred income tax expense: Federal (18.4) (227.5) (7.6) State (23.7) (6.5) (1.2) Foreign (5.6) (4.4) — Total deferred income tax expense (47.7) (238.4) (8.8) Total $ 146.0 $ (66.2) $ 120.9 The Company considers a portion of its non-U.S. earnings to be indefinitely reinvested outside of the U.S. to the extent these earnings are not subject to U.S. income tax under an anti-deferral tax regime. For the years ended December 31, 2018, 2017, and 2016, income from continuing operations before taxes consists of the following (in millions): 2018 2017 2016 U.S. operations $ 548.3 $ 326.7 $ 306.6 Foreign operations 22.9 7.7 — $ 571.2 $ 334.4 $ 306.6 A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended December 31, 2018, 2017, and 2016 is as follows: 2018 2017 2016 Statutory U.S. federal income tax rate 21.0 % 35.0 % 35.0 % Impact of federal, state and local tax law & rate changes, net (3.5) % (55.1) % - % State taxes, net of federal benefit 5.0 % 4.3 % 4.5 % Uncertain tax positions 6.1 % - % - % Section 199 deduction - % (2.6) % (2.6) % Other, net (3.0) % (1.4) % 2.5 % Effective income tax rate 25.6 % (19.8) % 39.4 % The effective tax rate decreased from 2016 to 2017 primarily due to the tax benefit associated with re-measuring net deferred tax liabilities as a result of the Jobs Act and increased from 2017 to 2018 primarily due to the tax benefit associated with re-measuring net deferred tax liabilities as a result of the Jobs Act in 2017. A reconciliation of the beginning and ending uncertain tax positions, excluding interest and penalties, is as follows (in thousands): 2018 2017 2016 Balance as of January 1 $ 67.8 $ 41.9 $ 31.9 Acquired unrecognized tax benefits 23.2 — Gross increases on tax positions in prior period 35.0 6.2 8.8 Gross decreases on tax positions in prior period (19.0) (14.7) (0.6) Gross increases on tax positions in current period 19.0 12.7 3.6 Lapse of statute of limitations (0.5) (1.5) (1.8) Balance as of December 31 $ 102.3 $ 67.8 $ 41.9 As of December 31, 2018, 2017 and 2016, the Company had $99.5 million, $68.2 million, and $40.5 million, respectively, of uncertain tax positions, net of federal benefit, which, if recognized in the future, would affect the effective income tax rate. Reductions to uncertain tax positions from the lapse of the applicable statutes of limitations and potential audit settlements during the next twelve months are estimated to be approximately $0.9 million. Estimated interest costs and penalties are classified as part of the provision for income taxes in the Company's consolidated statements of income and were $1.1 million, $(1.5) million, and $2.5 million for the periods ended December 31, 2018, 2017 and 2016, respectively. Accrued interest and penalties were $12.6 million, $11.1 million and $10.2 million as of December 31, 2018, 2017 and 2016, respectively. The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which Cboe operates: U.S. Federal 2008-2018 Illinois 2015-2018 New York 2011-2018 New York City 2011-2018 United Kingdom 2016-2018 The Company petitioned the Tax Court on January 13, 2017, May 7, 2018 and November 29, 2018 for a redetermination of IRS notices of deficiency for Cboe and certain of its subsidiaries for tax years 2011 through 2015 related to its Section 199 claims. The Company also filed a complaint on October 5, 2018 with the Court of Federal Claims for a refund of Section 199 claims related to tax years 2008 through 2010. The Company believes the aggregate amount of any additional liabilities that may result from these examinations, if any, will not have a material adverse effect on the financial position, results of operations, or cash flows of the Company. As of December 31, 2018, we have not resolved these matters, and proceedings continue in Tax Court and the Court of Federal Claims. On December 22, 2017 the U.S. enacted the Tax Cuts and Jobs Act (the “Jobs Act”). The Jobs Act significantly changed U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. We were able to reasonably estimate the impact of the Jobs Act and recorded a $191.3 million net tax benefit for the year ended December 31, 2017, primarily due to the tax benefit associated with re-measuring net deferred tax liabilities. Upon completing our tax reporting obligations in the fourth quarter of 2018, the impact of the Jobs Act has been determined to be complete. The Company recognized a favorable adjustment of $3.2 million in 2018, resulting in a total net tax benefit of $194.5 million from the enactment of the Jobs Act. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share | |
Earnings Per Share | (22) Net Income Per Common Share The computation of basic net income allocated to common stockholders is calculated by reducing net income for the period by dividends paid or declared and undistributed net income for the period that are allocated to participating securities to arrive at net income allocated to common stockholders. Net income allocated to common stockholders is divided by the weighted average number of common shares outstanding during the period to determine net income per share allocated to common stockholders. The computation of diluted earnings per share is calculated by dividing net income allocated to common stockholders by the sum of the weighted average number of common shares outstanding plus all additional common shares that would have been outstanding if the potentially dilutive common shares had been issued. The dilutive effect is calculated using the more dilutive of the two-class or treasury stock method. Additionally, the change in the redemption value for the noncontrolling interest reduces net income allocated to common stockholders. Net income and diluted earnings per share for the year ended December 31, 2017 include a substantial benefit associated with the enactment of the Jobs Act. The enactment of the Jobs Act resulted in an estimated net income increase of $191.3 million primarily due to a one-time revaluation of our net deferred tax liability based on a U.S. federal tax rate of 21 percent. The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data): Year Ended December 31, (in millions, except per share amounts) 2018 2017 2016 Basic EPS Numerator: Net Income $ 425.2 $ 400.6 $ 185.7 Loss attributable to noncontrolling interests 1.3 1.1 1.1 Net Income excluding noncontrolling interests 426.5 401.7 186.8 Change in redemption value of noncontrolling interests (1.3) (1.1) (1.1) Earnings allocated to participating securities (3.1) (3.9) (0.8) Net Income allocated to common stockholders $ 422.1 $ 396.7 $ 184.9 Basic EPS Denominator: Weighted average shares outstanding 111.8 107.2 81.4 Basic Net Income Per Common Share $ 3.78 $ 3.70 $ 2.27 Diluted EPS Numerator: Net Income $ 425.2 $ 400.6 $ 185.7 Loss attributable to noncontrolling interests 1.3 1.1 1.1 Net Income excluding noncontrolling interests 426.5 401.7 186.8 Change in redemption value of noncontrolling interests (1.3) (1.1) (1.1) Earnings allocated to participating securities (3.1) (3.9) (0.8) Net Income allocated to common stockholders $ 422.1 $ 396.7 $ 184.9 Diluted EPS Denominator: Weighted average shares outstanding 111.8 107.2 81.4 Dilutive common shares issued under stock program 0.4 0.3 — Total dilutive weighted average shares 112.2 107.5 81.4 Diluted Net Income Per Common Share $ 3.76 $ 3.69 $ 2.27 For the periods presented, the Company did not have shares of stock-based compensation that would have an antidilutive effect on the computation of diluted net income per common share. |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 12 Months Ended |
Dec. 31, 2018 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | (23) Commitments, Contingencies and Guarantees Legal Proceedings As of December 31, 2018, the Company was subject to the various legal proceedings and claims discussed below, as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company reviews its legal proceedings and claims, regulatory reviews and inspections and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. The Company's assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. As of December 31, 2018, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these reviews, inspections or other legal proceedings, if any, has been incurred. While the consequences of certain unresolved proceedings are not presently determinable, the outcome of any litigation is inherently uncertain and an adverse outcome from certain matters could have a material effect on our earnings in any given reporting period. However, in the opinion of management, the ultimate liability is not expected to have a material effect on our financial position, liquidity or capital resources. City of Providence On April 18, 2014, the City of Providence, Rhode Island filed a securities class action lawsuit in the Southern District of New York against Bats and Direct Edge Holdings LLC, as well as 14 other securities exchanges. The action purports to be brought on behalf of all public investors who purchased and/or sold shares of stock in the United States since April 18, 2009 on a registered public stock exchange (“Exchange Defendants”) or a U.S.-based alternate trading venue and were injured as a result of the alleged misconduct detailed in the complaint, which includes allegations that the Exchange Defendants committed fraud through a variety of business practices associated with, among other things, what is commonly referred to as high frequency trading. On May 2, 2014 and May 20, 2014, American European Insurance Company and Harel Insurance Co., Ltd. each filed substantially similar class action lawsuits against the Exchange Defendants which were ultimately consolidated with the City of Providence, Rhode Island securities class action lawsuit. On June 18, 2015, the Southern District of New York (the “Lower Court”) held oral argument on the pending Motion to Dismiss and thereafter, on August 26, 2015, the Lower Court issued an Opinion and Order granting Exchange Defendants’ Motion to Dismiss, dismissing the complaint in full. Plaintiff filed a Notice of Appeal of the dismissal on September 24, 2015 and its appeal brief on January 7, 2016. Respondent's brief was filed on April 7, 2016 and oral argument was held on August 24, 2016. Following oral argument, the Court of Appeals issued an order requesting that the SEC submit an amicus brief on whether the Lower Court had jurisdiction and whether the Exchange Defendants have immunity in the claims alleged. The SEC filed its amicus brief with the Court of Appeals on November 28, 2016 and Plaintiff and the Exchange Defendants filed their respective supplemental response briefs on December 12, 2016. On December 19, 2017, the Court of Appeals reversed the Lower Court’s dismissal and remanded the case back to the Lower Court. On March 13, 2018, the Court of Appeals denied the Exchange Defendants’ motion for re-hearing. The Exchange Defendants filed their opening brief for their motion to dismiss May 18, 2018, Plaintiffs’ response was filed June 15, 2018 and the Exchange Defendants’ reply was filed June 29, 2018. Given the preliminary nature of the proceedings, the Company is unable to estimate what, if any, liability may result from this litigation. However, the Company believes that the claims are without merit and intends to litigate the matter vigorously. SIFMA Securities Industry Financial Markets Association (“SIFMA”) has filed a number of denial of access applications with the SEC to set aside proposed rule changes to establish or modify fees for Cboe Options, C2, BZX, BYX, EDGX and EDGA (the “Exchanges”) market data products and related services (the “Challenged Fees”). The Challenged Fees were held in abeyance pending a decision, which was issued on October 16, 2018, on a separate SIFMA denial of access application held before an SEC's administrative law judge regarding fees proposed by Nasdaq and the NYSE for their respective market data products. The Order also applied to NYSE, Nasdaq, MIAX and CTA. On October 16, 2018, the SEC issued an order (the “Order”) that remanded the stayed Challenged Fees and ordered the Exchanges to: (i) within six months of the Order, provide notice to the SEC of developed or identified fair procedures for assessing the Challenged Fees (the “Procedures”) and (ii) within one year of the Order, apply the Procedures to the Challenged Fees and submit to the SEC a record explaining the Exchanges’ conclusions. On October 26, 2018, the Exchanges filed a motion to reconsider the Order with the SEC. On November 21, 2018, the Exchanges filed with the SEC a joinder motion to NYSE’s motion for stay of the Order, which was filed on November 20, 2018. On December 3, 2018, SIFMA filed a response to NYSE’s motion for stay, which the Exchanges joined. Nasdaq withdrew its motion to reconsider the Order with the SEC on December 4, 2018, and on December 5, 2018, filed a Petition for Review with the Washington D.C. Court of Appeals (the “D.C. Circuit”). On December 14, 2018, the SEC denied the motion for stay but tolled the compliance date set forth in the remand order until ruling is made on the motion to reconsider. The Exchanges and NYSE filed on January 4, 2018 to intervene in the Nasdaq Petition for Review to ensure the ability to participate in the case; the motion to intervene was granted on January 25, 2019. On the same day, SIFMA filed a motion with the D.C. Circuit moving to dismiss or hold in abeyance the Petition for Review. The Exchanges and NYSE submitted on February 6, 2019 a statement of issues for consideration in connection with the Petition for Review before the D.C. Circuit. An adverse ruling in that matter or a subsequent appeal could adversely affect exchange market data fees. However, the Company believes that the claims are without merit and intends to litigate the matter vigorously. VIX Litigation On March 20, 2018, a putative class action complaint captioned Tomasulo v. Cboe Exchange, Inc., et al., No. 18-cv-02025 was filed in federal district court for the Northern District of Illinois alleging that the Company intentionally designed its products, operated its platforms, and formulated the method for calculating VIX and the Special Opening Quotation, (i.e., the special VIX value designed by the Company and calculated on the settlement date of VIX derivatives prior to the opening of trading), in a manner that could be collusively manipulated by a group of entities named as John Doe defendants. A number of similar putative class actions, some of which do not name the Company as a party, were filed in federal court in Illinois and New York on behalf of investors in certain volatility-related products. On June 14, 2018, the Judicial Panel on Multidistrict Litigation centralized the putative class actions in the federal district court for the Northern District of Illinois. On September 28, 2018, plaintiffs filed a master, consolidated complaint that is a putative class action alleging various claims against the Company and John Doe defendants in the federal district court for the Northern District of Illinois. The claims asserted against the Company consist of a Securities Exchange Act fraud claim, three Commodity Exchange Act claims and a state law negligence claim. Plaintiffs request a judgment awarding class damages in an unspecified amount, as well as punitive or exemplary damages in an unspecified amount, prejudgment interest, costs including attorneys’ and experts’ fees and expenses and such other relief as the court may deem just and proper. On November 19, 2018, the Company filed a motion to dismiss the master consolidated complaint and the plaintiffs filed their response on January 7, 2019. The Company filed its reply on January 28, 2019. Given the preliminary nature of the proceedings, the Company is still evaluating the facts underlying the complaints, however, the Company currently believes that the claims are without merit and intends to litigate the matter vigorously. The Company is unable to estimate what, if any, liability may result from this litigation. Transaction Fee Pilot In December 2018, the SEC approved a transaction fee pilot in national market system (“NMS”) stocks (the “transaction fee pilot”). The pilot will subject stock exchange transaction fee pricing, including maker-taker fee-and-rebate pricing models, to new temporary pricing restrictions across two test groups, and require the exchanges to prepare data to be submitted to the SEC. The pilot includes a test group that will prohibit rebates and linked pricing, as well as a test group that will impose a cap of $0.0010 for removing or providing displayed liquidity. Once commenced, the pilot will last for up to two years with an automatic sunset at one year unless extended by the SEC. On February 15, 2019, the Company filed a Petition for Review in the Washington, D.C. Court of Appeals on the transaction fee pilot. The transaction fee pilot may cause the Company’s equities exchanges, BZX, BYX, EDGX and EDGA, to require additional resources to comply with or challenge the pilot and it may have a material impact on our business, financial condition and operating results if, for example, shifts in order flow away from exchanges were to occur. The Company intends to litigate the matter vigorously. Other As self-regulatory organizations under the jurisdiction of the SEC, Cboe Options, C2, BZX, BYX, EDGX and EDGA are subject to routine reviews and inspections by the SEC. As a designated contract market under the jurisdiction of the CFTC, CFE is subject to routine reviews and inspections by the CFTC. Cboe SEF, LLC is a swap execution facility registered with the CFTC and subject to routine reviews and inspections by the CFTC. Cboe Trading is subject to reviews and inspections by FINRA. The Company has from time to time received inquiries and investigative requests from the SEC's Office of Compliance Inspections and Examinations as well as the Division of Enforcement seeking information about our compliance with our obligations as a self-regulatory organization, the federal securities laws as well as our members’ compliance with the federal securities laws. In addition, while Cboe Europe Limited and Cboe Chi-X Europe have not been the subject of any material litigation or regulatory investigation in the past, there is always the possibility of such action in the future. As both companies are domiciled in the U.K., it is likely that any action would be taken in the U.K. courts in relation to litigation or by the FCA in relation to any regulatory enforcement action. The Company is also currently a party to various other legal proceedings in addition to those already mentioned. Management does not believe that the outcome of any of these other reviews, inspections, investigations or other legal proceedings will have a material impact on our consolidated financial position, results of operations or cash flows. See also Note 21 (“Income Taxes”). Contractual Obligations The Company currently leases office space, data centers and remote network operations centers, with lease terms remaining ranging from three months to one hundred months as of December 31, 2018. Total rent expense related to these lease obligations, reflected in technology support services and facilities costs line items on the consolidated statements of income, for the years ended December 31, 2018, 2017, and 2016 were $10.1 million, $7.6 million and $4.4 million, respectively. |
Quarterly Data (unaudited)
Quarterly Data (unaudited) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Data (unaudited) | |
Quarterly Data (unaudited) | (24) Quarterly Data (unaudited) First Second Third Fourth Year ended December 31, 2018 (in millions, except per share data) Quarter Quarter Quarter Quarter Revenue less cost of revenues $ 328.5 $ 283.5 $ 270.5 $ 334.4 Operating income 167.7 129.1 126.1 176.5 Net income 118.1 83.0 85.7 138.4 Net income allocated to common stockholders 117.3 82.4 85.0 137.4 Basic earnings per share $ 1.04 $ 0.74 $ 0.76 $ 1.23 Diluted earnings per share $ 1.04 $ 0.73 $ 0.76 $ 1.23 First Second Third Fourth Year ended December 31, 2017 (in millions, except per share data) Quarter Quarter Quarter Quarter Revenue less cost of revenues $ 193.4 $ 266.9 $ 269.7 $ 265.6 Operating income 26.1 117.8 119.3 108.7 Net income 15.2 68.0 60.3 257.1 Net income allocated to common stockholders 15.1 67.3 59.7 254.6 Basic earnings per share $ 0.16 $ 0.60 $ 0.53 $ 2.41 Diluted earnings per share $ 0.16 $ 0.60 $ 0.53 $ 2.40 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events | |
Subsequent Events | (25) Subsequent Events On February 13, 2019, the Company's board of directors declared a quarterly cash dividend of $0.31 per share. The dividend is payable on March 15, 2019 to stockholders of record at the close of business on March 1, 2019. On February 13, 2019, the SEC issued an order disapproving the proposed rule change implementing OCC’s capital plan following the SEC’s review of the OCC capital plan on remand from the Court. The SEC concluded, upon further review, that the information before the SEC was insufficient to support a finding that the OCC capital plan was consistent with the Exchange Act and Exchange Act rules and regulations. As a result of the recency, there is uncertainty regarding next steps and potential consequences. Based on the information known as of February 22, 2019, an estimate of the impact on the financial statements cannot be reasonably estimated. See Note 7 (“Investments”) for additional information. On February 19, 2019, the Company granted 192,733 RSUs and 51,448 PSUs to certain officers and employees at a fair value of $94.16 per share, the closing price of the Company's stock on the grant date. The shares have a three year vesting period based on achievement of certain service, performance and/or market conditions and vesting accelerates upon the occurrence of a change in control of the Company or in the event of earlier death, disability or qualified retirement. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | (b) The accompanying financial statements are presented on a consolidated basis to include the accounts and transactions of Cboe Global Markets, Inc. and its majority owned subsidiaries and all significant intercompany accounts and transactions have been eliminated. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, valuation of redeemable noncontrolling interests and reported amounts of revenues and expenses. On an ongoing basis, management evaluates its estimates based upon historical experience, observance of trends, information available from outside sources and various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions. For those consolidated subsidiaries in which the Company's ownership is less than 100% and for which the Company has control over the assets and liabilities and the management of the entity, the outside stockholders' interest are shown as non-controlling interests. |
Segment information | Segment information The Company has five business segments: Options, U.S. Equities, Futures, European Equities, and Global FX, which is reflective of how the Company's chief operating decision-maker reviews and operates the business (Note 17). This change has been reflected in all periods presented. |
Use of Estimates | (c) The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as disclosure of the amounts of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the valuation of goodwill, indefinite-lived intangible assets, and unrecognized tax benefits. |
Cash and Cash Equivalents | (d) The Company’s cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains cash at various financial institutions and brokerage firms which, at times, may be in excess of the federal depository insurance limit. The Company’s management regularly monitors these institutions and believes that the potential for future loss is remote. The Company considers all liquid investments with original or acquired maturities of three months or less to be cash equivalents. |
Financial Investments | (e) Financial investments are classified as trading or available-for-sale. Trading financial investments represent financial investments held by the Company’s broker‑dealer subsidiary that retain the industry‑specific accounting classification required for broker‑dealers. These investments are recorded at fair value with changes in unrealized gains and losses reflected within interest expense, net in the consolidated statements of income. Available-for-sale financial investments are comprised of the financial investments not held by the broker-dealer subsidiary. Unrealized gains and losses, net of income taxes, are included as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets. Interest on financial investments, including amortization of premiums and accretion of discounts, is recognized as income when earned. Realized gains and losses on financial investments are calculated using the specific identification method and are included in interest expense, net in the accompanying consolidated statements of income. A decline in the fair value of any available-for-sale investment below carrying amount that is deemed to be other‑than‑temporary results in an impairment to reduce the carrying amount to realizable value. To determine whether an impairment is other‑than‑temporary, the Company considers all available information relevant to the collectability of the investment, including past events, current conditions, and reasonable and supportable forecasts when developing estimate of cash flows expected to be collected. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year‑end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates. |
Accounts Receivable, Net | (f) Accounts receivable are concentrated with the Company’s member firms and market data distributors and are carried at cost. The Company nets transaction fees and liquidity payments for each member firm on a monthly basis and recognizes the total owed from a member firm as an asset and the total owed to a member firm as a liability. On a periodic basis, management evaluates the Company’s receivables and determines an appropriate allowance for uncollectible accounts receivable based on anticipated collections. In circumstances where a specific customer’s inability to meet its financial obligations is probable, the Company records a specific provision for uncollectible accounts against amounts due to reduce the receivable to the amount the Company estimates will be collected. Once the Company determines an allowance for an uncollectible account is necessary, interest on the receivable ceases to be accrued. |
Property and Equipment, Net | (g) Property and equipment, net is stated at cost less accumulated depreciation. Depreciation is computed using the straight‑line method over the estimated lives of the assets, generally ranging from three to seven years. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation of leasehold improvements is calculated using the straight‑line method over the shorter of the related lease term or the estimated useful life of the assets. Long‑lived assets to be held and used are reviewed to determine whether any events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. The Company bases this evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present that would indicate that the carrying amount of any asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. In the event of impairment, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset as measured using quoted market prices or, in the absence of quoted market prices, a discounted cash flow analysis. The Company expenses software development costs as incurred during the preliminary project stage, while capitalizing costs incurred during the application development stage, which includes design, coding, installation and testing activities. |
Goodwill and Intangible Assets, Net | (h) Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of a business acquired. Goodwill is allocated to the Company’s reporting units based on the assignment of the fair values of each reporting unit of the acquired company. The Company tests goodwill for impairment at the reporting unit level annually, or in interim periods if certain events occur indicating that the carrying value may be impaired. The impairment test is performed during the fourth quarter using October 1 st carrying values, and if the fair value of the reporting unit is found to be less than the carrying value, an impairment loss is recorded. The Company performed its 2018 annual goodwill impairment test and determined that no impairment existed. Intangible assets, net, primarily include acquired trademarks and trade names, customer relationships, strategic alliance agreements, licenses and registrations and non‑compete agreements. Intangible assets with finite lives are amortized based on the discounted cash flow method applied over the estimated useful lives of the intangible assets. Intangible assets deemed to have indefinite useful lives are not amortized, but instead are tested for impairment at least annually, usually concurrently with goodwill. Impairment exists if the fair value of the asset is less than the carrying amount, and in that case, an impairment loss is recorded. The Company performed its 2018 annual intangible assets impairment test using October 1, 2018 carrying values and determined that no impairment existed. |
Foreign Currency | (i) The financial statements of foreign subsidiaries where the functional currency is not the U.S. dollar are translated into U.S. dollars using the exchange rate in effect as of each balance sheet date. Statements of income and cash flow amounts are translated using the average exchange rate during the period. The cumulative effects of translating the balance sheet accounts from the functional currency into the U.S. dollar at the applicable exchange rates are included in accumulated other comprehensive income (loss), net in the balance sheet. Foreign currency gains and losses are recorded as other income, net in the consolidated statements of income. The Company’s operations in the United Kingdom, Singapore, and Hong Kong are recorded in Pounds sterling, Singapore dollars, and Hong Kong dollars, respectively. |
Income Taxes | (j) Deferred taxes are recorded on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the consolidated financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties expense is recognized on the full amount of deferred benefits for uncertain tax positions. The Company’s policy is to include interest and penalties related to unrecognized tax benefits in the income tax provision within the consolidated statements of income. We have elected to account for global intangible low-taxed income (“GILTI”) in the period in which it is incurred, and therefore, have not provided any deferred tax impacts of GILTI in our consolidated financial statements. |
Revenue Recognition | (k) For further discussion related to revenue recognition of fees, such as transaction fees and liquidity payments, access fees, exchange services and other fees, market data fees, and regulation transaction and Section 31 fees, see Note 4. |
Concentrations of Revenue and Liquidity Payments | Concentrations of Revenue and Liquidity Payments For the years ended December 31, 2018, 2017, and 2016, two members accounted for 23%, 17% and 42%, respectively, of the Company’s transaction fees. No member accounted for more than 10% of the Company’s total revenue during the years ended December 31, 2018, 2017, and 2016. For the years ended December 31, 2018, 2017, and 2016, no member accounted for more than 10% of the Company’s liquidity payments. No member is contractually or otherwise obligated to continue to use the Company’s services. The loss of, or a significant reduction of, participation by these members may have a material adverse effect on the Company’s business, financial position, results of operations and cash flows. The two largest clearing members mentioned above clear the majority of the market-maker sides of transactions at all of the Company’s U.S. options exchanges. If either of these clearing members were to withdraw from the business of market-maker clearing and market-makers were unable to transfer to another clearing member, this could create significant disruption to the U.S. options markets, including ours. |
Earnings Per Share | (l) Basic earnings per share is calculated using the two-class method and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of common shares and dilutive common share equivalents outstanding. |
Stock Based Compensation | (m) The Company grants stock‑based compensation to its employees through awards of restricted stock units. In connection with the acquisition of Bats, Bats previously awarded stock options and restricted stock awards. The Company records stock‑based compensation expense for all stock‑based compensation granted based on the grant‑date fair value. The Company recognizes compensation expense related to stock‑based compensation awards with graded vesting that have a service condition on a straight‑line basis over the requisite service period of the entire award. In connection with the acquisition of Bats, as discussed in Note 20 in further detail, each outstanding Bats stock option (defined below) granted under any of the Bats Plans (defined below) that was outstanding immediately prior to the effective time of the acquisition of Bats was converted into an option to purchase our common stock, on the same terms and conditions (including vesting schedule) as were applicable to such Bats stock option. In addition, each award of Bats restricted shares (defined below) granted under any of the Bats Plans that was unvested immediately prior to the effective time of the acquisition of Bats was assumed by the Company and converted into an award of restricted shares of our common stock, subject to the same terms and conditions (including vesting schedule) that applied to the applicable Bats restricted shares. The amount of stock‑based compensation expense related to awards of restricted stock and restricted stock units is based on the fair value of Cboe Global Markets, Inc. common stock at the date of grant. The fair value is based on a current market‑based transaction of the Company’s common stock. If a market‑based transaction of the Company’s common stock is not available, then the fair value is based on an independent third‑party valuation using equal weighting of two valuation analysis techniques, discounted cash flows and valuation multiples observed from publicly traded companies in a similar industry. The amount of future stock‑based compensation expense related to awards of stock options is based on the Black‑Scholes valuation model. Assumptions used to estimate the grant‑date fair value of stock options are determined as follows: · Expected term is determined using the simplified method, using the average between the contractual term and vesting period of the award. The simplified method was used due to the lack of historical information; · Expected volatility of award grants made under the Company’s plan is measured using the weighted average of historical daily changes in the market price of the common stock of comparable public companies over the period equal to the expected term of the award; · Expected dividend rate is determined based on expected dividends to be declared; and · Risk‑free interest rate is equivalent to the implied yield on zero‑coupon U.S. Treasury bonds with a maturity equal to the expected term of the awards. |
Business Combinations | (n) The Company records identifiable assets, liabilities and goodwill acquired in a business combination at fair value at the acquisition date. Additionally, transaction‑related costs are expensed in the period incurred. |
Debt Issuance Costs | (o) All costs incurred to issue debt are capitalized as a contra-liability and amortized over the life of the loan using the interest method. |
Cost and Equity Method Investments | (p) The Company uses the cost method to account for a non-marketable equity investment in an entity that it does not control and for which it does not have the ability to exercise significant influence over an entity’s operating and financial policies. When it does not have a controlling financial interest in an entity but can exercise significant influence over the entity's operating and financial policies, such investment is accounted for using the equity method. The Company recognizes dividend income when declared. In general, the equity method of accounting is used when the Company owns 20% to 50% of the outstanding voting stock of a company and when it is able to exercise significant influence over the operating and financial policies of a company. The Company has an investment where it has significant influence and as such accounts for the investments under the equity method of accounting. For equity method investments, the Company records the pro‑rata share of earnings or losses each period and records any dividends received as a reduction in the investment balance. The equity method investment is evaluated for other‑than‑temporary declines in value by considering a variety of factors such as the earnings capacity of the investment and the fair value of the investment compared to its carrying amount. If the estimated fair value of the investment is less than the carrying amount and the decline in value is considered to be other than temporary, the excess of the carrying amount over the estimated fair value is recognized in the financial statements as an impairment. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Revenue Recognition | |
Schedule of disaggregation of revenue | The following table depicts the disaggregation of revenue according to product line and segment (in millions): Corporate European items and Options U.S. Equities Futures Equities Global FX eliminations Total Year Ended December 31, 2018 Transaction fees $ 835.5 $ 876.4 $ 128.0 $ 97.4 $ 49.6 $ — $ Access fees 61.8 46.6 6.8 8.8 3.9 — 127.9 Exchange services and other fees 37.6 29.0 8.3 5.9 2.3 — 83.1 Market data fees 42.9 140.9 6.6 13.1 0.5 — 204.0 Regulatory fees 60.0 273.8 0.1 — — — 333.9 Other revenue 19.7 6.4 — 6.4 0.1 0.4 33.0 1,057.5 1,373.1 149.8 131.6 56.4 0.4 Timing of revenue recognition Services transferred at a point in time $ 915.2 $ 1,156.6 $ 128.1 $ 103.8 $ 49.7 $ 0.4 $ 2,353.8 Services transferred over time 142.3 216.5 21.7 27.8 6.7 — 415.0 1,057.5 1,373.1 149.8 131.6 56.4 0.4 Year Ended December 31, 2017 Transaction fees $ 673.8 $ 659.4 $ 131.7 $ 66.2 $ 33.8 $ — $ Access fees 54.7 41.3 1.9 6.4 2.5 — 106.8 Exchange services and other fees 42.6 19.2 7.2 4.2 1.6 — 74.8 Market data fees 41.1 111.0 2.5 9.6 0.3 — 164.5 Regulatory fees 55.4 236.1 — — — — 291.5 Other revenue 15.9 5.5 1.3 3.2 — 0.7 26.6 883.5 1,072.5 144.6 89.6 38.2 0.7 Timing of revenue recognition Services transferred at a point in time $ 745.1 $ 901.0 $ 133.0 $ 69.4 $ 33.8 $ 0.7 $ 1,883.0 Services transferred over time 138.4 171.5 11.6 20.2 4.4 — 346.1 883.5 1,072.5 144.6 89.6 38.2 0.7 Year Ended December 31, 2016 Transaction fees $ 408.2 $ — $ 101.1 $ — $ — $ — $ 509.3 Access fees 51.6 — 0.8 — — — 52.4 Exchange services and other fees 38.4 — 7.9 — — — 46.3 Market data fees 30.1 — 3.1 — — — 33.2 Regulatory fees 48.3 — — — — — 48.3 Other revenue 12.9 — 0.7 — — — 13.6 589.5 — 113.6 — — — 703.1 Timing of revenue recognition Services transferred at a point in time $ 469.4 $ — $ 101.8 $ — $ — $ — $ 571.2 Services transferred over time 120.1 — 11.8 — — — 131.9 589.5 — 113.6 — — — 703.1 |
Schedule of revenue recognized from contract liabilities and the remaining balance | The revenue recognized from contract liabilities and the remaining balance is shown below (in millions): Balance at January 1, 2018 Cash Additions Revenue Recognition Balance at December 31, 2018 Liquidity provider sliding scale (1) $ 4.8 $ 4.8 $ (9.6) $ - Other, net 10.6 11.0 (13.1) 8.5 Total deferred revenue $ 15.4 $ 15.8 $ (22.7) $ 8.5 Liquidity providers are eligible to participate in the sliding scale program, which involves prepayment of transaction fees, and to receive reduced fees based on the achievement of certain volume thresholds within a calendar month. These transaction fees received are amortized and recorded as revenue ratably as the transactions occur over the period. |
Acquisitions (Tables)
Acquisitions (Tables) - Bats Global Markets, Inc. | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions | |
Schedule of acquisition-date fair value of consideration transferred | The acquisition-date fair value of the consideration transferred totaled $4.0 billion, which consisted of the following (in millions): Cash consideration for Bats outstanding common stock $ 955.5 Common stock issued Equity awards issued 37.4 Debt extinguished 580.0 Total consideration $ 3,960.2 |
Schedule of estimated fair values of the assets acquired and liabilities assumed | The amounts in the table below represent the allocation of the purchase price. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Cash and cash equivalents $ 130.1 Accounts receivable 117.8 Financial investments 66.0 Property and equipment 21.8 Other assets 32.8 Goodwill Intangibles Accounts payable (33.7) Accrued expenses (26.2) Section 31 fees (143.6) Income tax payable (52.9) Deferred tax liability (722.6) Other liabilities (82.6) $ |
Schedule of finite-lived and indefinite-lived intangible assets acquired | U.S. European Options Equities Equities Global FX Useful life Trading registrations and licenses $ 95.5 $ 572.7 $ 171.8 $ — indefinite Customer relationships 37.1 222.9 160.0 140.0 20 years Market data customer relationships 53.6 322.0 60.0 64.4 15 years Technology 22.5 22.5 22.5 22.5 7 years Trademarks and tradenames 1.0 6.0 1.8 1.2 2 years Goodwill 226.4 1,738.1 419.3 267.2 $ 436.1 $ 2,884.2 $ 835.4 $ 495.3 |
Schedule of amounts of revenue, operating income and net income | The amounts of revenue, operating income and net income of Bats are included in the Company’s consolidated statements of income from after acquisition date for the year ended December 31, 2017 are as follows (in millions): Revenue $ Revenue less cost of revenues 378.2 Operating income 73.4 Net income 88.4 |
Schedule of pro forma information | The unaudited pro forma financial information combines the historical results for the Company and Bats for the year ended December 31, 2017 in the following table (in millions, except per share amounts): Revenue $ Revenue less cost of revenues Operating income 471.9 Net income 271.1 Earnings per share: Basic $ 2.41 Diluted 2.41 |
Severance (Tables)
Severance (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Severance | |
Summary of employee termination benefits recognized | The following is a summary of the employee termination benefits recognized within compensation and benefits in the consolidated statements of income (in millions): Employee Termination Benefits Balance at December 31, 2017 $ 4.8 Termination benefits accrued 15.3 Termination payments made (14.0) Balance at December 31, 2018 $ 6.1 |
Investments (Tables)
Investments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Investments | |
Schedule of equity and cost method investments | As of December 31, 2018 and 2017, the Company's investments were comprised of the following (in millions): Year Ended December 31, 2018 2017 Equity Method Investments: Investment in Signal Trading Systems, LLC $ 12.4 $ 12.5 Investment in EuroCCP 9.3 9.6 Total equity method investments 21.7 22.1 Cost Method Investments: Investment in OCC 30.3 30.3 Investment in Eris Exchange Holdings, LLC 20.0 20.0 Investment in American Financial Exchange, LLC 5.9 5.9 Other cost method investments 8.3 4.4 Total cost method investments 64.5 60.6 Total investments $ 86.2 $ 82.7 |
Financial Investments (Tables)
Financial Investments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Investments | |
Schedule of Financial Investments | The Company’s financial investments with original or acquired maturities longer than three months, but that mature in less than one year from the balance sheet date and any money market funds that are considered cash and cash equivalents are classified as current assets and are summarized as follows (in millions): December 31, 2018 Cost basis Unrealized gains Unrealized losses Fair Value U.S. Treasury securities $ 35.7 $ — $ — $ 35.7 Total financial investments $ 35.7 $ — $ — $ 35.7 December 31, 2017 Cost basis Unrealized gains Unrealized losses Fair Value U.S. Treasury securities $ 47.3 $ — $ — $ 47.3 Money market funds 2.5 — — 2.5 Total financial investments $ 49.8 $ — $ — $ 49.8 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment, Net | |
Schedule of Property and Equipment, Net | Property and equipment consisted of the following as of December 31, 2018 and 2017 (in millions): December 31, December 31, 2018 2017 Construction in progress $ 0.1 $ 5.9 Building 81.7 77.4 Furniture and Equipment 161.6 139.7 Total property and equipment 243.4 223.0 Less accumulated depreciation (171.7) (149.1) Property and equipment, net $ 71.7 $ 73.9 |
Other Assets, Net (Tables)
Other Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other Assets, Net | |
Schedule of Other Assets, Net | Other assets, net consisted of the following as of December 31, 2018 and 2017 (in millions): December 31, December 31, 2018 2017 Software development work in progress $ 8.7 $ 10.2 Data processing software 219.0 220.0 Less accumulated depreciation and amortization (193.2) (189.6) Data processing software, net 34.5 40.6 Other assets (1) 28.4 18.9 Data processing software and other assets, net $ 62.9 $ 59.5 (1) At December 31, 2018 and December 31, 2017, the majority of the balance included long-term prepaid assets and notes receivable. |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets, Net | |
Schedule of goodwill details by segment | The following table presents the details of goodwill by segment (in millions): U.S. European Corporate Options Equities Equities Global FX and Other Total Balance as of December 31, 2016 $ 7.7 $ — $ — $ — $ 18.8 $ 26.5 Additions 233.1 1,740.4 419.3 267.2 — 2,660.0 Dispositions (1.4) — — — — (1.4) Changes in foreign currency exchange rates — — 22.3 — — 22.3 Balance as of December 31, 2017 $ 239.4 $ 1,740.4 $ 441.6 $ 267.2 $ 18.8 $ 2,707.4 Additions — — — — — — Dispositions — — — — — — Changes in foreign currency exchange rates — — (16.0) — — (16.0) Balance as of December 31, 2018 $ 239.4 $ 1,740.4 $ 425.6 $ 267.2 $ 18.8 $ 2,691.4 |
Schedule of details of intangible assets | The following table presents the details of the intangible assets (in millions): U.S. European Corporate Options Equities Equities Global FX and Other Total Balance as of December 31, 2016 $ 2.0 $ — $ — $ — $ 6.7 $ 8.7 Additions 212.0 1,146.1 416.1 228.1 — 2,002.3 Dispositions (0.2) — — — — (0.2) Amortization (15.1) (74.3) (23.8) (28.5) (1.2) (142.9) Changes in foreign currency exchange rates — — 34.7 — — 34.7 Balance as of December 31, 2017 $ 198.7 $ 1,071.8 $ 427.0 $ 199.6 $ 5.5 $ 1,902.6 Additions — — — — — — Dispositions — — — — — — Amortization (16.8) (81.5) (27.7) (32.7) (1.3) (160.0) Changes in foreign currency exchange rates — — (22.4) — — (22.4) Balance as of December 31, 2018 $ 181.9 $ 990.3 $ 376.9 $ 166.9 $ 4.2 $ 1,720.2 |
Schedule of categories of intangible assets | The following table presents the categories of intangible assets at December 31, 2018 and 2017 (in millions): Weighted December 31, 2018 Average U.S. European Corporate Amortization Options Equities Equities Global FX and Other Period (in years) Trading registrations and licenses $ 95.5 $ 572.7 $ 176.0 $ $ Indefinite Customer relationships 38.8 222.9 163.9 140.0 3.0 18 Market data customer relationships 53.6 322.0 61.5 64.4 13 Technology 24.8 22.5 23.1 22.5 4.0 5 Trademarks and tradenames 1.7 6.0 1.8 1.2 1.0 2 Accumulated amortization (32.5) (155.8) (49.4) (61.2) (3.8) $ 181.9 $ 990.3 $ 376.9 $ 166.9 $ 4.2 Weighted December 31, 2017 Average U.S. European Corporate Amortization Options Equities Equities Global FX and Other Period (in years) Trading registrations and licenses $ 95.5 $ 572.7 $ 186.5 $ — $ — Indefinite Customer relationships 38.8 222.9 173.7 140.0 3.0 19 Market data customer relationships 53.6 322.0 65.1 64.4 — 14 Technology 24.6 22.5 24.4 22.5 4.0 6 Trademarks and tradenames 1.7 6.0 2.0 1.2 1.0 2 Other 0.2 — — — — 2 Accumulated amortization (15.7) (74.3) (24.7) (28.5) (2.5) $ 198.7 $ 1,071.8 $ 427.0 $ 199.6 $ 5.5 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Payable and Accrued Liabilities | |
Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and accrued liabilities consisted of the following as of December 31, 2018 and 2017 (in millions): December 31, 2018 December 31, 2017 Compensation and benefit related liabilities $ 52.4 $ 18.0 Termination benefits 6.1 4.8 Royalties 25.0 20.3 Accrued liabilities 91.8 59.1 Marketing fee payable 10.4 8.4 Accounts payable 12.8 43.2 Total accounts payable and accrued liabilities $ 198.5 $ 153.8 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt | |
Schedule of debt | The Company's debt consisted of the following as of December 31, 2018 and 2017 (in millions): Debt: December 31, 2018 December 31, 2017 Term Loan Agreement $ 271.1 $ — Prior Term Loan Agreement — 294.9 3.650% Senior Notes 644.5 643.8 1.950% Senior Notes 299.8 299.2 Revolving Credit Agreement — — Total Debt $ 1,215.4 $ 1,237.9 |
Schedule of maturities of long-term debt | The future expected loan repayments related to the Term Loan Agreement and the Notes as of December 31, 2018 is as follows (in millions): 2019 $ 2020 — 2021 275.0 2022 — Thereafter 650.0 Principal amounts repayable 1,225.0 Debt issuance costs (4.9) Unamortized discounts on notes (4.7) Total debt outstanding $ 1,215.4 |
Schedule of interest expense | Interest expense recognized on the Term Loan Agreement and the Notes is included in interest expense, net in the consolidated statements of income, for the years ended December 31, 2018, 2017 and 2016 are as follows (in millions): Year Ended Year Ended Year Ended December 31, December 31, December 31, 2018 2017 2016 Components of interest expense: Contractual interest $ 38.0 $ 39.0 $ 5.7 Amortization of debt discount 0.7 0.6 — Amortization of debt issuance costs 1.8 3.0 — Interest expense $ 40.5 $ 42.6 $ 5.7 Interest income (2.3) (1.3) — Interest expense, net $ 38.2 $ 41.3 $ 5.7 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss) | |
Schedule of Accumulated Other Comprehensive Income, Net | The following represents the changes in accumulated other comprehensive income (loss) by component, before tax (in millions): Foreign currency Unrealized Total Other translation Investment Post-Retirement Comprehensive adjustment Gain Benefits Income Balance at December 31, 2016 $ — $ — $ (0.8) $ (0.8) Other comprehensive income 51.3 0.2 — 51.5 Tax effect on other comprehensive income — — — — Balance at December 31, 2017 $ 51.3 $ 0.2 $ (0.8) $ 50.7 Other comprehensive loss (39.2) — — (39.2) Tax effect on other comprehensive loss — — — — Balance at December 31, 2018 $ 12.1 $ 0.2 $ (0.8) $ 11.5 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurement | |
Schedule of fair value hierarchy for assets measured at fair value on a recurring basis | The following tables presents the Company’s fair value hierarchy for those assets measured at fair value on a recurring basis as of December 31, 2018 and 2017 (in millions): December 31, 2018 Total Level 1 Level 2 Level 3 Assets: U.S. Treasury securities $ 35.7 $ 35.7 $ — $ — Total assets $ 35.7 $ 35.7 $ — $ — Liabilities: Contingent consideration liability to related party $ 3.9 $ — $ — $ 3.9 Total Liabilities $ 3.9 $ — $ — $ 3.9 December 31, 2017 Total Level 1 Level 2 Level 3 Assets: U.S. Treasury securities $ 47.3 $ 47.3 $ — $ — Money market funds 2.5 2.5 — — Total assets $ 49.8 $ 49.8 $ — $ — Liabilities: Contingent consideration liability to related party $ 56.6 $ — $ — $ 56.6 Total Liabilities $ 56.6 $ — $ — $ 56.6 |
Schedule of fair value hierarchy of financial instruments held | The following table presents the Company’s fair value hierarchy for those financial instruments held by the Company as of December 31, 2018 and 2017 (in millions): December 31, 2018 Total Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 275.1 $ 275.1 $ — $ — Financial investments 35.7 35.7 — — Accounts receivable 287.3 287.3 — — Income tax receivable 70.4 70.4 — — Total assets $ 668.5 $ 668.5 $ — $ — Liabilities: Accounts payable $ 12.8 $ — $ 12.8 $ — Section 31 fees payable 81.1 — 81.1 — Contingent consideration liability to related party 3.9 — — 3.9 Debt 1,215.4 — 1,215.4 — Total liabilities $ 1,313.2 $ — $ 1,309.3 $ 3.9 December 31, 2017 Total Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 143.5 $ 143.5 $ — $ — Financial investments 47.3 47.3 — — Accounts receivable 217.3 217.3 — — Income tax receivable 17.2 17.2 — — Total assets $ 425.3 $ 425.3 $ — $ — Liabilities: Accounts payable $ 43.2 $ — $ 43.2 $ — Section 31 fees payable 105.6 — 105.6 — Contingent consideration liability to related party 56.6 — — 56.6 Debt 1,237.9 — 1,237.9 — Total liabilities $ 1,443.3 $ — $ 1,386.7 $ 56.6 |
Summary of changes in the fair value of level 3 financial liabilities | Level 3 Financial Liabilities for the Year Ended December 31, 2018 Balance at Realized (gains) Beginning of losses during Balance at Period period Additions Settlements End of Period Liabilities Contingent consideration liabilities to related parties $ 56.6 $ 3.9 $ — $ (56.6) $ 3.9 Total Liabilities $ 56.6 $ 3.9 $ — $ (56.6) $ 3.9 Level 3 Financial Liabilities for the Year Ended December 31, 2017 Balance at Realized (gains) Beginning of losses during Balances at Period period Additions Settlements End of Period Liabilities Contingent consideration liability to related party $ — $ — $ 56.6 $ — $ 56.6 Total Liabilities $ — $ — $ 56.6 $ — $ 56.6 |
Redeemable Noncontrolling Int_2
Redeemable Noncontrolling Interest (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Redeemable Noncontrolling Interest | |
Schedule of Redeemable Noncontrolling Interest | For the year ended December 31, 2018, the following reflects changes in our redeemable noncontrolling interest (in millions): Redeemable Balance as of December 31, 2017 $ 9.4 Net loss attributable to redeemable noncontrolling interest (1.3) Redemption value adjustment of redeemable noncontrolling interest 1.3 Balance as of December 31, 2018 $ 9.4 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting | |
Summarized Financial Information by Reportable Segment | Summarized financial data of reportable segments was as follows (in millions): Corporate European items and Options U.S. Equities Futures Equities Global FX eliminations Total Year ended December 31, 2018 Revenues $ $ 1,373.1 $ 149.8 $ $ 56.4 $ 0.4 $ 2,768.8 Operating income (loss) 390.9 140.5 85.7 24.1 (11.7) (30.1) 599.4 Year ended December 31, 2017 Revenues $ 883.5 $ 1,072.5 $ 144.6 $ 89.6 $ 38.2 $ 0.7 $ 2,229.1 Operating income (loss) 252.2 103.2 126.8 8.9 (12.8) (106.4) 371.9 Year ended December 31, 2016 Revenues $ 589.5 $ — $ 113.6 $ — $ — $ — $ 703.1 Operating income (loss) 218.4 — 96.4 — — (16.6) 298.2 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stock-based Compensation | |
Summary of stock option activity | Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Value Shares Price Term (years) (in millions) Outstanding, December 31, 2016 — $ — — $ — Granted 683,390 22.45 — — Exercised 17.13 Outstanding, December 31, 2017 442,042 $ 25.36 1.0 $ 17.5 Granted — — — — Exercised (72,559) 20.08 Outstanding and expected to vest at December 31, 2018 369,483 $ 26.40 — $ — Exercisable at December 31, 2018 369,483 $ 26.40 — $ 6.4 |
Summary of fair value assumptions | 2017 Expected term (in years) 4.2 Expected volatility 19.8 % Expected dividend yield 1.3 % Risk-free rate 1.78 % Forfeiture rate — % |
Summary of nonvested options | Weighted Average Grant- Nonvested options Options Date Fair Value December 31, 2016—Nonvested — $ — Granted 81,068 49.17 Vested — — Forfeited — — December 31, 2017—Nonvested 81,068 $ 49.17 Granted — — Vested 49.17 Forfeited — — December 31, 2018—Nonvested — $ — |
Summary of restricted stock activity | Weighted Number of average grant shares date fair value Nonvested stock at December 31, 2016 480,595 $ 63.64 Granted 1,091,843 78.94 Vested (498,540) 67.83 Forfeited (5,506) 71.68 Nonvested stock at December 31, 2017 1,068,392 $ 77.19 Granted 211,696 112.55 Vested (478,692) 75.57 Forfeited (16,220) 93.38 Nonvested stock at December 31, 2018 785,176 $ 87.38 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Schedule of net deferred tax liabilities | Net deferred tax assets and liabilities consist of the following as of December 31, 2018 and 2017 (in millions): 2018 2017 Deferred tax assets: Accrued compensation and benefits $ 17.1 $ 14.1 Property, equipment and technology, net 2.6 2.4 Other 20.7 20.2 Subtotal 40.4 36.7 Valuation allowance (2.0) (1.6) Total deferred tax assets 38.4 35.1 Deferred tax liabilities: Intangibles (380.2) (429.6) Property, equipment and technology, net (17.4) (17.1) Investments (75.3) (75.0) Prepaid expenses or assets (2.3) (1.6) Total deferred tax liabilities (475.2) (523.3) Net deferred tax assets/(liabilities) $ (436.8) $ (488.2) |
Schedule of provision for income taxes | The provision for income taxes for the years ended December 31, 2018, 2017 and 2016 consists of the following (in millions): Year Ended December 31 2018 2017 2016 Current tax expense: Federal $ 125.1 $ 141.0 $ 107.1 State 58.7 25.8 22.6 Foreign 9.9 5.4 — Total current tax expense 193.7 172.2 129.7 Deferred income tax expense: Federal (18.4) (227.5) (7.6) State (23.7) (6.5) (1.2) Foreign (5.6) (4.4) — Total deferred income tax expense (47.7) (238.4) (8.8) Total $ 146.0 $ (66.2) $ 120.9 |
Schedule of income from continuing operations before taxes | For the years ended December 31, 2018, 2017, and 2016, income from continuing operations before taxes consists of the following (in millions): 2018 2017 2016 U.S. operations $ 548.3 $ 326.7 $ 306.6 Foreign operations 22.9 7.7 — $ 571.2 $ 334.4 $ 306.6 |
Schedule of reconciliation of the statutory federal income tax rate to the effective income tax rate | A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended December 31, 2018, 2017, and 2016 is as follows: 2018 2017 2016 Statutory U.S. federal income tax rate 21.0 % 35.0 % 35.0 % Impact of federal, state and local tax law & rate changes, net (3.5) % (55.1) % - % State taxes, net of federal benefit 5.0 % 4.3 % 4.5 % Uncertain tax positions 6.1 % - % - % Section 199 deduction - % (2.6) % (2.6) % Other, net (3.0) % (1.4) % 2.5 % Effective income tax rate 25.6 % (19.8) % 39.4 % |
Schedule of reconciliation of beginning and ending uncertain tax positions | A reconciliation of the beginning and ending uncertain tax positions, excluding interest and penalties, is as follows (in thousands): 2018 2017 2016 Balance as of January 1 $ 67.8 $ 41.9 $ 31.9 Acquired unrecognized tax benefits 23.2 — Gross increases on tax positions in prior period 35.0 6.2 8.8 Gross decreases on tax positions in prior period (19.0) (14.7) (0.6) Gross increases on tax positions in current period 19.0 12.7 3.6 Lapse of statute of limitations (0.5) (1.5) (1.8) Balance as of December 31 $ 102.3 $ 67.8 $ 41.9 |
Schedule of tax years currently under audit or remain open and subject to examination by the tax authorities | U.S. Federal 2008-2018 Illinois 2015-2018 New York 2011-2018 New York City 2011-2018 United Kingdom 2016-2018 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share | |
Reconciliation of basic and diluted net income per common share | The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data): Year Ended December 31, (in millions, except per share amounts) 2018 2017 2016 Basic EPS Numerator: Net Income $ 425.2 $ 400.6 $ 185.7 Loss attributable to noncontrolling interests 1.3 1.1 1.1 Net Income excluding noncontrolling interests 426.5 401.7 186.8 Change in redemption value of noncontrolling interests (1.3) (1.1) (1.1) Earnings allocated to participating securities (3.1) (3.9) (0.8) Net Income allocated to common stockholders $ 422.1 $ 396.7 $ 184.9 Basic EPS Denominator: Weighted average shares outstanding 111.8 107.2 81.4 Basic Net Income Per Common Share $ 3.78 $ 3.70 $ 2.27 Diluted EPS Numerator: Net Income $ 425.2 $ 400.6 $ 185.7 Loss attributable to noncontrolling interests 1.3 1.1 1.1 Net Income excluding noncontrolling interests 426.5 401.7 186.8 Change in redemption value of noncontrolling interests (1.3) (1.1) (1.1) Earnings allocated to participating securities (3.1) (3.9) (0.8) Net Income allocated to common stockholders $ 422.1 $ 396.7 $ 184.9 Diluted EPS Denominator: Weighted average shares outstanding 111.8 107.2 81.4 Dilutive common shares issued under stock program 0.4 0.3 — Total dilutive weighted average shares 112.2 107.5 81.4 Diluted Net Income Per Common Share $ 3.76 $ 3.69 $ 2.27 |
Quarterly Data (unaudited) (Tab
Quarterly Data (unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Data (unaudited) | |
Summary of quarterly data | First Second Third Fourth Year ended December 31, 2018 (in millions, except per share data) Quarter Quarter Quarter Quarter Revenue less cost of revenues $ 328.5 $ 283.5 $ 270.5 $ 334.4 Operating income 167.7 129.1 126.1 176.5 Net income 118.1 83.0 85.7 138.4 Net income allocated to common stockholders 117.3 82.4 85.0 137.4 Basic earnings per share $ 1.04 $ 0.74 $ 0.76 $ 1.23 Diluted earnings per share $ 1.04 $ 0.73 $ 0.76 $ 1.23 First Second Third Fourth Year ended December 31, 2017 (in millions, except per share data) Quarter Quarter Quarter Quarter Revenue less cost of revenues $ 193.4 $ 266.9 $ 269.7 $ 265.6 Operating income 26.1 117.8 119.3 108.7 Net income 15.2 68.0 60.3 257.1 Net income allocated to common stockholders 15.1 67.3 59.7 254.6 Basic earnings per share $ 0.16 $ 0.60 $ 0.53 $ 2.41 Diluted earnings per share $ 0.16 $ 0.60 $ 0.53 $ 2.40 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($)segmentitem | Dec. 31, 2017item | Dec. 31, 2016item | |
Property and Equipment, Net | |||
Number of reportable segments | segment | 5 | ||
Goodwill impairment loss | $ | $ 0 | ||
Minimum | |||
Property and Equipment, Net | |||
Useful life (in years) | 3 years | ||
Maximum | |||
Property and Equipment, Net | |||
Useful life (in years) | 7 years | ||
Transaction fees | Customer Risk | |||
Property and Equipment, Net | |||
Number of members | 2 | 2 | 2 |
Concentration risk (as a percent) | 23.00% | 17.00% | 42.00% |
Revenue | Customer Risk | |||
Property and Equipment, Net | |||
Number of members | 0 | 0 | 0 |
Concentration risk (as a percent) | 10.00% | 10.00% | 10.00% |
Liquidity payments | Customer Risk | |||
Property and Equipment, Net | |||
Number of members | 0 | 0 | 0 |
Concentration risk (as a percent) | 10.00% | 10.00% | 10.00% |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Jan. 01, 2019 | |
Recent Accounting Pronouncements | ||
Goodwill impairment loss | $ 0 | |
ASU 2016-02 | Forecast | ||
Recent Accounting Pronouncements | ||
Expected impact of adoption on assets | $ 45 | |
Expected impact of adoption on liabilities | $ 45 |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of revenue by product line and Segment (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Reporting Information | |||
Revenues | $ 2,768.8 | $ 2,229.1 | $ 703.1 |
Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 2,353.8 | 1,883 | 571.2 |
Services transferred over time | |||
Segment Reporting Information | |||
Revenues | 415 | 346.1 | 131.9 |
Corporate Items and Eliminations | |||
Segment Reporting Information | |||
Revenues | 0.4 | 0.7 | |
Corporate Items and Eliminations | Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 0.4 | 0.7 | |
Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 1,057.5 | 883.5 | 589.5 |
Options | Operating Segments | Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 915.2 | 745.1 | 469.4 |
Options | Operating Segments | Services transferred over time | |||
Segment Reporting Information | |||
Revenues | 142.3 | 138.4 | 120.1 |
U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 1,373.1 | 1,072.5 | |
U.S. Equities | Operating Segments | Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 1,156.6 | 901 | |
U.S. Equities | Operating Segments | Services transferred over time | |||
Segment Reporting Information | |||
Revenues | 216.5 | 171.5 | |
Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 149.8 | 144.6 | 113.6 |
Futures | Operating Segments | Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 128.1 | 133 | 101.8 |
Futures | Operating Segments | Services transferred over time | |||
Segment Reporting Information | |||
Revenues | 21.7 | 11.6 | 11.8 |
European Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 131.6 | 89.6 | |
European Equities | Operating Segments | Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 103.8 | 69.4 | |
European Equities | Operating Segments | Services transferred over time | |||
Segment Reporting Information | |||
Revenues | 27.8 | 20.2 | |
Global FX | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 56.4 | 38.2 | |
Global FX | Operating Segments | Services transferred at a point in time | |||
Segment Reporting Information | |||
Revenues | 49.7 | 33.8 | |
Global FX | Operating Segments | Services transferred over time | |||
Segment Reporting Information | |||
Revenues | 6.7 | 4.4 | |
Transaction fees | |||
Segment Reporting Information | |||
Revenues | 1,986.9 | 1,564.9 | 509.3 |
Transaction fees | Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 835.5 | 673.8 | 408.2 |
Transaction fees | U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 876.4 | 659.4 | |
Transaction fees | Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 128 | 131.7 | 101.1 |
Transaction fees | European Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 97.4 | 66.2 | |
Transaction fees | Global FX | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 49.6 | 33.8 | |
Access fees | |||
Segment Reporting Information | |||
Revenues | 127.9 | 106.8 | 52.4 |
Access fees | Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 61.8 | 54.7 | 51.6 |
Access fees | U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 46.6 | 41.3 | |
Access fees | Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 6.8 | 1.9 | 0.8 |
Access fees | European Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 8.8 | 6.4 | |
Access fees | Global FX | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 3.9 | 2.5 | |
Exchange services and other fees | |||
Segment Reporting Information | |||
Revenues | 83.1 | 74.8 | 46.3 |
Exchange services and other fees | Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 37.6 | 42.6 | 38.4 |
Exchange services and other fees | U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 29 | 19.2 | |
Exchange services and other fees | Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 8.3 | 7.2 | 7.9 |
Exchange services and other fees | European Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 5.9 | 4.2 | |
Exchange services and other fees | Global FX | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 2.3 | 1.6 | |
Market data fees | |||
Segment Reporting Information | |||
Revenues | 204 | 164.5 | 33.2 |
Market data fees | Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 42.9 | 41.1 | 30.1 |
Market data fees | U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 140.9 | 111 | |
Market data fees | Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 6.6 | 2.5 | 3.1 |
Market data fees | European Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 13.1 | 9.6 | |
Market data fees | Global FX | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 0.5 | 0.3 | |
Regulatory fees | |||
Segment Reporting Information | |||
Revenues | 333.9 | 291.5 | 48.3 |
Regulatory fees | Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 60 | 55.4 | 48.3 |
Regulatory fees | U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 273.8 | 236.1 | |
Regulatory fees | Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 0.1 | ||
Other revenue | |||
Segment Reporting Information | |||
Revenues | 33 | 26.6 | 13.6 |
Other revenue | Corporate Items and Eliminations | |||
Segment Reporting Information | |||
Revenues | 0.4 | 0.7 | |
Other revenue | Options | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 19.7 | 15.9 | 12.9 |
Other revenue | U.S. Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 6.4 | 5.5 | |
Other revenue | Futures | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 1.3 | $ 0.7 | |
Other revenue | European Equities | Operating Segments | |||
Segment Reporting Information | |||
Revenues | 6.4 | $ 3.2 | |
Other revenue | Global FX | Operating Segments | |||
Segment Reporting Information | |||
Revenues | $ 0.1 |
Revenue Recognition - Rollforwa
Revenue Recognition - Rollforward of contract liabilities (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Revenue recognized from contract liabilities and remaining balance | |
Beginning balance | $ 15.4 |
Cash Additions | 15.8 |
Revenue Recognition | (22.7) |
Ending balance | 8.5 |
Liquidity provider sliding scale | |
Revenue recognized from contract liabilities and remaining balance | |
Beginning balance | 4.8 |
Cash Additions | 4.8 |
Revenue Recognition | (9.6) |
Other, net | |
Revenue recognized from contract liabilities and remaining balance | |
Beginning balance | 10.6 |
Cash Additions | 11 |
Revenue Recognition | (13.1) |
Ending balance | $ 8.5 |
Acquisitions (Details)
Acquisitions (Details) $ / shares in Units, $ in Millions | Feb. 28, 2017USD ($)item$ / sharesshares | Nov. 30, 2017USD ($) | Dec. 31, 2018USD ($)$ / shares | Dec. 31, 2017USD ($)$ / shares | Dec. 31, 2016USD ($) | Feb. 24, 2017$ / shares |
Acquisitions | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||
Goodwill | $ 2,660 | |||||
Acquisition-related costs | $ 30 | 84.4 | $ 13.6 | |||
Compensation and benefits | 228.8 | 201.4 | 113.2 | |||
Stock-based compensation expense | 35.1 | 52.6 | 14.5 | |||
Professional fees | 68.3 | 66 | 53.1 | |||
Facilities costs | 11.5 | 10.3 | $ 5.7 | |||
Futures | ||||||
Acquisitions | ||||||
Intangibles | $ 0 | |||||
Operating Segments | Futures | ||||||
Acquisitions | ||||||
Goodwill | $ 0 | |||||
Bats Global Markets, Inc. | ||||||
Acquisitions | ||||||
Stock-based compensation expense | 2.7 | |||||
Bats Global Markets, Inc. | Voting Common Stock | ||||||
Acquisitions | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | |||||
Bats Global Markets, Inc. | Non-voting Common Stock | ||||||
Acquisitions | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | |||||
Bats Global Markets, Inc. | ||||||
Acquisitions | ||||||
Consideration transferred | $ 3,960.2 | |||||
Number of decimal places that the volume-weighted average price of shares of Cboe Common Stock was rounded to | item | 4 | |||||
Share price, measurement period | 10 days | |||||
Share price (in dollars per share) | $ / shares | $ 79.9289 | |||||
Intangibles | $ 2,000 | |||||
Fair value of accounts receivable acquired | 117.8 | |||||
Gross value of accounts receivable acquired | 118 | |||||
Allowance for doubtful accounts | $ 0.2 | |||||
Acquisition-related costs | 30 | $ (107.8) | ||||
Compensation and benefits | 23.6 | |||||
Professional fees | 3 | |||||
Facilities costs | $ 0.6 | |||||
Bats Global Markets, Inc. | Consideration Option One | ||||||
Acquisitions | ||||||
Equity interests issuable per share owned by acquiree (in shares) | shares | 0.3201 | |||||
Cash consideration (in dollars per share) | $ / shares | $ 10 | |||||
Bats Global Markets, Inc. | Consideration Option Two | ||||||
Acquisitions | ||||||
Equity interests issuable per share owned by acquiree (in shares) | shares | 0.2577 | |||||
Cash consideration (in dollars per share) | $ / shares | $ 14.99 | |||||
Bats Global Markets, Inc. | Consideration Option Three | ||||||
Acquisitions | ||||||
Equity interests issuable per share owned by acquiree (in shares) | shares | 0.4452 | |||||
Silexx Financial Systems | ||||||
Acquisitions | ||||||
Consideration transferred | $ 9 | |||||
Goodwill | 6.7 | |||||
Intangibles | 2.1 | |||||
Working capital | $ 0.2 |
Acquisitions - Acquisition date
Acquisitions - Acquisition date fair value of consideration transferred (Details) - USD ($) $ in Millions | Feb. 28, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Acquisitions | |||
Cash consideration | $ 1,414.1 | $ 14.3 | |
Bats Global Markets, Inc. | |||
Acquisitions | |||
Cash consideration | $ 955.5 | ||
Common stock issued | 2,387.3 | ||
Equity awards issued | 37.4 | ||
Total consideration paid, excluding debt extinguished | 3,380.2 | ||
Debt extinguished | 580 | ||
Total consideration | $ 3,960.2 |
Acquisitions - Fair values of a
Acquisitions - Fair values of assets acquired and liabilities assumed (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Feb. 28, 2017 | Dec. 31, 2016 |
Acquisitions | ||||
Goodwill | $ 2,691.4 | $ 2,707.4 | $ 26.5 | |
Goodwill expected to be deductible for tax purposes | $ 0 | |||
Bats Global Markets, Inc. | ||||
Acquisitions | ||||
Cash and cash equivalents | 130.1 | |||
Accounts receivable | 117.8 | |||
Financial investments | 66 | |||
Property and equipment | 21.8 | |||
Other assets | 32.8 | |||
Goodwill | 2,653.3 | |||
Intangibles | 2,000 | |||
Accounts payable | (33.7) | |||
Accrued expenses | (26.2) | |||
Section 31 fees payable | (143.6) | |||
Income tax payable | (52.9) | |||
Deferred tax liability | (722.6) | |||
Other liabilities | (82.6) | |||
Fair value of assets acquired and liabilities assumed | $ 3,960.2 |
Acquisitions - Intangible asset
Acquisitions - Intangible assets acquired (Details) - USD ($) $ in Millions | Feb. 28, 2017 | Dec. 31, 2017 |
Acquisitions | ||
Goodwill | $ 2,660 | |
Options | ||
Acquisitions | ||
Goodwill | $ 226.4 | 233.1 |
Finite-lived and indefinite-lived intangible assets acquired | 436.1 | |
U.S. Equities | ||
Acquisitions | ||
Goodwill | 1,738.1 | 1,740.4 |
Finite-lived and indefinite-lived intangible assets acquired | 2,884.2 | |
European Equities | ||
Acquisitions | ||
Goodwill | 419.3 | 419.3 |
Finite-lived and indefinite-lived intangible assets acquired | 835.4 | |
Global FX | ||
Acquisitions | ||
Goodwill | 267.2 | $ 267.2 |
Finite-lived and indefinite-lived intangible assets acquired | $ 495.3 | |
Customer relationships | ||
Acquisitions | ||
Useful life | 20 years | |
Customer relationships | Options | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 37.1 | |
Customer relationships | U.S. Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 222.9 | |
Customer relationships | European Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 160 | |
Customer relationships | Global FX | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 140 | |
Market data customer relationships | ||
Acquisitions | ||
Useful life | 15 years | |
Market data customer relationships | Options | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 53.6 | |
Market data customer relationships | U.S. Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 322 | |
Market data customer relationships | European Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 60 | |
Market data customer relationships | Global FX | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 64.4 | |
Technology | ||
Acquisitions | ||
Useful life | 7 years | |
Technology | Options | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 22.5 | |
Technology | U.S. Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 22.5 | |
Technology | European Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 22.5 | |
Technology | Global FX | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 22.5 | |
Trademarks and tradenames | ||
Acquisitions | ||
Useful life | 2 years | |
Trademarks and tradenames | Options | ||
Acquisitions | ||
Finite-lived intangible assets acquired | $ 1 | |
Trademarks and tradenames | U.S. Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 6 | |
Trademarks and tradenames | European Equities | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 1.8 | |
Trademarks and tradenames | Global FX | ||
Acquisitions | ||
Finite-lived intangible assets acquired | 1.2 | |
Trading registrations and licenses | Options | ||
Acquisitions | ||
Indefinite-lived intangible assets acquired | 95.5 | |
Trading registrations and licenses | U.S. Equities | ||
Acquisitions | ||
Indefinite-lived intangible assets acquired | 572.7 | |
Trading registrations and licenses | European Equities | ||
Acquisitions | ||
Indefinite-lived intangible assets acquired | $ 171.8 |
Acquisitions - Revenue and inco
Acquisitions - Revenue and income since acquisition date (Details) - Bats Global Markets, Inc. $ in Millions | 22 Months Ended |
Dec. 31, 2018USD ($) | |
Acquisitions | |
Revenue | $ 1,439.8 |
Revenue less cost of revenues | 378.2 |
Operating income (loss) | 73.4 |
Net income (loss) | $ 88.4 |
Acquisitions - Pro forma financ
Acquisitions - Pro forma financial information (Details) - Bats Global Markets, Inc. $ / shares in Units, $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($)$ / shares | |
Acquisitions | |
Revenue | $ 2,502 |
Revenue less cost of revenues | 1,434.5 |
Operating income | 471.9 |
Net income | $ 271.1 |
Earnings per share: | |
Basic (in dollars per share) | $ / shares | $ 2.41 |
Diluted (in dollars per share) | $ / shares | $ 2.41 |
Severance (Details)
Severance (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Restructuring Reserve | |
Beginning balance | $ 4.8 |
Termination benefits accrued | 15.3 |
Termination payments made | (14) |
Ending balance | $ 6.1 |
Investments - Schedule of inves
Investments - Schedule of investments (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Schedule of Cost and Equity Method Investments | ||
Equity Method | $ 21.7 | $ 22.1 |
Other Equity Investments | 64.5 | 60.6 |
Total Investments | 86.2 | 82.7 |
Investment in Signal Trading Systems, LLC | ||
Schedule of Cost and Equity Method Investments | ||
Equity Method | 12.4 | 12.5 |
Investment in EuroCCP | ||
Schedule of Cost and Equity Method Investments | ||
Equity Method | 9.3 | 9.6 |
Investment in OCC | ||
Schedule of Cost and Equity Method Investments | ||
Other Equity Investments | 30.3 | 30.3 |
Investment in Eris Exchange Holdings, LLC | ||
Schedule of Cost and Equity Method Investments | ||
Other Equity Investments | 20 | 20 |
Investment in American Financial Exchange, LLC | ||
Schedule of Cost and Equity Method Investments | ||
Other Equity Investments | 5.9 | 5.9 |
Other cost method investments | ||
Schedule of Cost and Equity Method Investments | ||
Other Equity Investments | $ 8.3 | $ 4.4 |
Investments - Equity method inv
Investments - Equity method investments (Details) | Dec. 31, 2018item |
Schedule of Equity Method Investments | |
Number of central counterparties | 3 |
Investment in EuroCCP | Cboe Europe Equities | |
Schedule of Equity Method Investments | |
Ownership percentage | 20.00% |
Number of other investors | 4 |
Investments - Other Equity Inve
Investments - Other Equity Investments (Details) - USD ($) $ in Millions | Mar. 03, 2015 | Feb. 26, 2015 | Dec. 31, 2018 | Dec. 31, 2017 |
Other Equity Investments | ||||
Other Equity Investments | $ 64.5 | $ 60.6 | ||
Investment in OCC | ||||
Other Equity Investments | ||||
Other Equity Investments | $ 30.3 | $ 30.3 | ||
Ownership percentage | 20.00% | |||
Contribution requirement | $ 150 | |||
Contribution requirement, shareholder cap | $ 40 | |||
Customer refunds, percent of pre-tax income exceeding capital requirements | 50.00% | |||
Contributions | $ 30 |
Financial Investments (Details)
Financial Investments (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Money market funds | ||
Cost basis | $ 275.1 | $ 143.5 |
Cash and cash equivalents | 275.1 | 143.5 |
Financial Investments | ||
Cost basis | 35.7 | 49.8 |
Total Fair Value | 35.7 | 49.8 |
Money market funds | ||
Money market funds | ||
Cost basis | 2.5 | |
Cash and cash equivalents | 2.5 | |
U.S. Treasury securities | ||
Available-for-sale: | ||
Cost basis | 35.7 | 47.3 |
Fair value | $ 35.7 | $ 47.3 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and Equipment, Net | |||
Total property and equipment | $ 243.4 | $ 223 | |
Less accumulated depreciation | (171.7) | (149.1) | |
Property and equipment, net | 71.7 | 73.9 | |
Depreciation expense | 25.1 | 31.3 | $ 24 |
Construction in progress | |||
Property and Equipment, Net | |||
Total property and equipment | 0.1 | 5.9 | |
Building | |||
Property and Equipment, Net | |||
Total property and equipment | 81.7 | 77.4 | |
Furniture and equipment | |||
Property and Equipment, Net | |||
Total property and equipment | $ 161.6 | $ 139.7 |
Other Assets, Net - Schedule of
Other Assets, Net - Schedule of other assets, net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets | |||
Less accumulated depreciation and amortization | $ (193.2) | $ (189.6) | |
Data processing software, net | 34.5 | 40.6 | |
Other assets | 28.4 | 18.9 | |
Data processing software and other assets, net | 62.9 | 59.5 | |
Amortization | 160 | 142.9 | $ 1.7 |
Software development work in progress | |||
Finite-Lived Intangible Assets | |||
Software | 8.7 | 10.2 | |
Data processing software | |||
Finite-Lived Intangible Assets | |||
Software | 219 | 220 | |
Amortization | $ 18.9 | $ 17.9 | $ 18.7 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets, Net - Goodwill by segment (Details) - USD ($) $ in Millions | Feb. 28, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill | |||
Balance at beginning of the year | $ 2,707.4 | $ 26.5 | |
Additions | 2,660 | ||
Dispositions | (1.4) | ||
Changes in foreign currency exchange rates | (16) | 22.3 | |
Balance at end of the year | 2,691.4 | 2,707.4 | |
Goodwill impairment loss | 0 | ||
Options | |||
Goodwill | |||
Balance at beginning of the year | 239.4 | 7.7 | |
Additions | $ 226.4 | 233.1 | |
Dispositions | (1.4) | ||
Balance at end of the year | 239.4 | 239.4 | |
U.S. Equities | |||
Goodwill | |||
Balance at beginning of the year | 1,740.4 | ||
Additions | 1,738.1 | 1,740.4 | |
Balance at end of the year | 1,740.4 | 1,740.4 | |
European Equities | |||
Goodwill | |||
Balance at beginning of the year | 441.6 | ||
Additions | 419.3 | 419.3 | |
Changes in foreign currency exchange rates | (16) | 22.3 | |
Balance at end of the year | 425.6 | 441.6 | |
Global FX | |||
Goodwill | |||
Balance at beginning of the year | 267.2 | ||
Additions | $ 267.2 | 267.2 | |
Balance at end of the year | 267.2 | 267.2 | |
Corporate and Other | |||
Goodwill | |||
Balance at beginning of the year | 18.8 | 18.8 | |
Balance at end of the year | $ 18.8 | $ 18.8 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets, Net - Schedule of intangible assets by segment (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Finite-lived Intangible Assets | |||
Balance at beginning of the year | $ 1,902.6 | $ 8.7 | |
Additions | 2,002.3 | ||
Dispositions | (0.2) | ||
Amortization | (160) | (142.9) | $ (1.7) |
Changes in foreign currency exchange rates | (22.4) | 34.7 | |
Balance at end of the year | 1,720.2 | 1,902.6 | 8.7 |
Options | |||
Finite-lived Intangible Assets | |||
Balance at beginning of the year | 198.7 | 2 | |
Additions | 212 | ||
Dispositions | (0.2) | ||
Amortization | (16.8) | (15.1) | |
Balance at end of the year | 181.9 | 198.7 | 2 |
U.S. Equities | |||
Finite-lived Intangible Assets | |||
Balance at beginning of the year | 1,071.8 | 0 | |
Additions | 1,146.1 | ||
Amortization | (81.5) | (74.3) | |
Balance at end of the year | 990.3 | 1,071.8 | 0 |
European Equities | |||
Finite-lived Intangible Assets | |||
Balance at beginning of the year | 427 | 0 | |
Additions | 416.1 | ||
Amortization | (27.7) | (23.8) | |
Changes in foreign currency exchange rates | (22.4) | 34.7 | |
Balance at end of the year | 376.9 | 427 | 0 |
Global FX | |||
Finite-lived Intangible Assets | |||
Balance at beginning of the year | 199.6 | 0 | |
Additions | 228.1 | ||
Amortization | (32.7) | (28.5) | |
Balance at end of the year | 166.9 | 199.6 | 0 |
Corporate and Other | |||
Finite-lived Intangible Assets | |||
Balance at beginning of the year | 5.5 | 6.7 | |
Amortization | (1.3) | (1.2) | |
Balance at end of the year | 4.2 | $ 5.5 | $ 6.7 |
Futures | |||
Finite-lived Intangible Assets | |||
Balance at end of the year | $ 0 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets, Net - Estimated Future Amortization (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill and Intangible Assets, Net | |||
Amortization | $ 160 | $ 142.9 | $ 1.7 |
Amortization expense | |||
2,019 | 138.4 | ||
2,020 | 122 | ||
2,021 | 106.6 | ||
2,022 | 94.1 | ||
2,023 | $ 83.2 |
Goodwill and Intangible Asset_6
Goodwill and Intangible Assets, Net - Schedule of intangible assets by category (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets | |||
Intangible assets, net | $ 1,720.2 | $ 1,902.6 | $ 8.7 |
Customer relationships | Weighted Average | |||
Finite-Lived Intangible Assets | |||
Amortization period (in years) | 18 years | 19 years | |
Market data customer relationships | Weighted Average | |||
Finite-Lived Intangible Assets | |||
Amortization period (in years) | 13 years | 14 years | |
Technology | Weighted Average | |||
Finite-Lived Intangible Assets | |||
Amortization period (in years) | 5 years | 6 years | |
Trademarks and tradenames | Weighted Average | |||
Finite-Lived Intangible Assets | |||
Amortization period (in years) | 2 years | 2 years | |
Other | Weighted Average | |||
Finite-Lived Intangible Assets | |||
Amortization period (in years) | 2 years | ||
Options | |||
Finite-Lived Intangible Assets | |||
Accumulated amortization | $ (32.5) | $ (15.7) | |
Intangible assets, net | 181.9 | 198.7 | 2 |
Options | Customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 38.8 | 38.8 | |
Options | Market data customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 53.6 | 53.6 | |
Options | Technology | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 24.8 | 24.6 | |
Options | Trademarks and tradenames | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 1.7 | 1.7 | |
Options | Other | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 0.2 | ||
Options | Trading registrations and licenses | |||
Finite-Lived Intangible Assets | |||
Indefinite-lived intangible assets, gross | 95.5 | 95.5 | |
U.S. Equities | |||
Finite-Lived Intangible Assets | |||
Accumulated amortization | (155.8) | (74.3) | |
Intangible assets, net | 990.3 | 1,071.8 | 0 |
U.S. Equities | Customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 222.9 | 222.9 | |
U.S. Equities | Market data customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 322 | 322 | |
U.S. Equities | Technology | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 22.5 | 22.5 | |
U.S. Equities | Trademarks and tradenames | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 6 | 6 | |
U.S. Equities | Trading registrations and licenses | |||
Finite-Lived Intangible Assets | |||
Indefinite-lived intangible assets, gross | 572.7 | 572.7 | |
European Equities | |||
Finite-Lived Intangible Assets | |||
Accumulated amortization | (49.4) | (24.7) | |
Intangible assets, net | 376.9 | 427 | 0 |
European Equities | Customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 163.9 | 173.7 | |
European Equities | Market data customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 61.5 | 65.1 | |
European Equities | Technology | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 23.1 | 24.4 | |
European Equities | Trademarks and tradenames | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 1.8 | 2 | |
European Equities | Trading registrations and licenses | |||
Finite-Lived Intangible Assets | |||
Indefinite-lived intangible assets, gross | 176 | 186.5 | |
Global FX | |||
Finite-Lived Intangible Assets | |||
Accumulated amortization | (61.2) | (28.5) | |
Intangible assets, net | 166.9 | 199.6 | 0 |
Global FX | Customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 140 | 140 | |
Global FX | Market data customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 64.4 | 64.4 | |
Global FX | Technology | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 22.5 | 22.5 | |
Global FX | Trademarks and tradenames | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 1.2 | 1.2 | |
Corporate and Other | |||
Finite-Lived Intangible Assets | |||
Accumulated amortization | (3.8) | (2.5) | |
Intangible assets, net | 4.2 | 5.5 | $ 6.7 |
Corporate and Other | Customer relationships | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 3 | 3 | |
Corporate and Other | Technology | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | 4 | 4 | |
Corporate and Other | Trademarks and tradenames | |||
Finite-Lived Intangible Assets | |||
Finite-lived intangible assets, gross | $ 1 | $ 1 |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Liabilities - Schedule of accounts payable and accrued liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Accounts Payable and Accrued Liabilities | ||
Compensation and benefit-related liabilities | $ 52.4 | $ 18 |
Termination benefits | 6.1 | 4.8 |
Royalties | 25 | 20.3 |
Accrued liabilities | 91.8 | 59.1 |
Marketing fee payable | 10.4 | 8.4 |
Accounts payable | 12.8 | 43.2 |
Total accounts payable and accrued liabilities | $ 198.5 | $ 153.8 |
Debt - Schedule of long-term de
Debt - Schedule of long-term debt (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 29, 2017 | Jan. 12, 2017 |
Debt Instrument | ||||
Total debt | $ 1,215.4 | $ 1,237.9 | ||
Term Loan Agreement | ||||
Debt Instrument | ||||
Total debt | 271.1 | |||
Prior Term Loan Agreement | ||||
Debt Instrument | ||||
Total debt | 294.9 | |||
3.650% Senior Notes | ||||
Debt Instrument | ||||
Total debt | $ 644.5 | 643.8 | ||
Interest rate (as a percent) | 3.65% | 3.65% | ||
1.950% Senior Notes | ||||
Debt Instrument | ||||
Total debt | $ 299.8 | $ 299.2 | ||
Interest rate (as a percent) | 1.95% | 1.95% | ||
Revolving Credit Agreement | ||||
Debt Instrument | ||||
Total debt | $ 0 |
Debt (Details)
Debt (Details) $ in Millions | Mar. 22, 2018USD ($) | Feb. 28, 2017USD ($) | Dec. 15, 2016USD ($)subsidiary | Dec. 31, 2018USD ($)subsidiary | Dec. 31, 2017USD ($) | Jun. 29, 2017USD ($) | Jan. 12, 2017USD ($) |
Debt Instrument | |||||||
Repayments of outstanding indebtedness | $ 325 | $ 700 | |||||
Proceeds from long-term debt | 300 | 1,943.9 | |||||
Deferred financing costs | 4.9 | ||||||
Borrowings outstanding | $ 1,215.4 | 1,237.9 | |||||
Line of Credit | |||||||
Debt Instrument | |||||||
Credit facility, maximum borrowing capacity | $ 25 | ||||||
Term Loan Agreement | |||||||
Debt Instrument | |||||||
Debt instrument face amount | $ 300 | 1,000 | |||||
Up-front fee (as percent) | 0.05 | ||||||
Minimum consolidated interest ratio | 4 | ||||||
Maximum consolidated leverage ratio | 3.50 | ||||||
Borrowings outstanding | $ 271.1 | ||||||
Term Loan Agreement | LIBOR | Minimum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 1.00% | ||||||
Term Loan Agreement | LIBOR | Maximum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 1.50% | ||||||
Term Loan Agreement | Prime Rate | Minimum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 0.00% | ||||||
Term Loan Agreement | Prime Rate | Maximum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 0.50% | ||||||
3.650% Senior Notes | |||||||
Debt Instrument | |||||||
Debt instrument face amount | $ 300 | $ 650 | |||||
Interest rate (as a percent) | 3.65% | 3.65% | |||||
Redemption price | 101.00% | ||||||
Borrowings outstanding | $ 644.5 | 643.8 | |||||
Revolving Credit Agreement | |||||||
Debt Instrument | |||||||
Credit facility, maximum borrowing capacity | $ 150 | ||||||
Minimum consolidated interest ratio | 4 | ||||||
Maximum consolidated leverage ratio | 3.50 | ||||||
Term of facility | 5 years | ||||||
Maximum borrowing capacity, increase limit | $ 100 | ||||||
Maximum borrowing capacity, total with increase | $ 250 | ||||||
Number of subsidiaries designated as additional borrowers | subsidiary | 0 | ||||||
Borrowings outstanding | $ 0 | ||||||
Borrowing capacity available | $ 150 | ||||||
Revolving Credit Agreement | Minimum | |||||||
Debt Instrument | |||||||
Number of subsidiaries that may be designated as additional borrowers | subsidiary | 1 | ||||||
Revolving Credit Agreement | LIBOR | Minimum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 1.00% | ||||||
Revolving Credit Agreement | LIBOR | Maximum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 1.75% | ||||||
Revolving Credit Agreement | Prime Rate | Minimum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 0.00% | ||||||
Revolving Credit Agreement | Prime Rate | Maximum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 0.75% | ||||||
1.950% Senior Notes | |||||||
Debt Instrument | |||||||
Debt instrument face amount | $ 300 | ||||||
Interest rate (as a percent) | 1.95% | 1.95% | |||||
Deferred financing costs | $ 0.8 | ||||||
Debt issuance costs | $ 0.9 | ||||||
Redemption price | 101.00% | ||||||
Borrowings outstanding | $ 299.8 | 299.2 | |||||
Prior Term Loan Agreement | |||||||
Debt Instrument | |||||||
Repayments of outstanding indebtedness | $ 300 | ||||||
Debt instrument face amount | $ 1,000 | ||||||
Proceeds from long-term debt | $ 1,000 | ||||||
Borrowings outstanding | $ 294.9 | ||||||
Prior Term Loan Agreement | Minimum | |||||||
Debt Instrument | |||||||
Ticking fee | 0.10% | ||||||
Prior Term Loan Agreement | Maximum | |||||||
Debt Instrument | |||||||
Ticking fee | 0.30% | ||||||
Prior Term Loan Agreement | LIBOR | Minimum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 1.00% | ||||||
Prior Term Loan Agreement | LIBOR | Maximum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 1.75% | ||||||
Prior Term Loan Agreement | Prime Rate | Minimum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 0.00% | ||||||
Prior Term Loan Agreement | Prime Rate | Maximum | |||||||
Debt Instrument | |||||||
Interest rate margin (as a percent) | 0.75% |
Debt - Schedule of debt repayme
Debt - Schedule of debt repayments (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Long-term Debt | ||
2,019 | $ 300 | |
2,021 | 275 | |
Thereafter | 650 | |
Principal amounts repayable | 1,225 | |
Debt issuance cost | (4.9) | |
Unamortized discount on notes | (4.7) | |
Total debt outstanding | $ 1,215.4 | $ 1,237.9 |
Debt - Schedule of Interest Exp
Debt - Schedule of Interest Expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Debt | |||
Contractual interest | $ 38 | $ 39 | $ 5.7 |
Amortization of debt discount | 0.7 | 0.6 | |
Amortization of debt issuance cost. | 1.8 | 3 | |
Interest expense | 40.5 | 42.6 | 5.7 |
Interest income | (2.3) | (1.3) | |
Interest expense, net | $ 38.2 | $ 41.3 | $ 5.7 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
AOCI Attributable to Parent, Net of Tax | ||
Beginning balance | $ 3,110.6 | $ 317.9 |
Other comprehensive income (loss) | (39.2) | 51.5 |
Ending balance | 3,241 | 3,110.6 |
Accumulated Other Comprehensive Income, net | ||
AOCI Attributable to Parent, Net of Tax | ||
Beginning balance | 50.7 | (0.8) |
Other comprehensive income (loss) | (39.2) | 51.5 |
Ending balance | 11.5 | 50.7 |
Foreign Currency Translation | ||
AOCI Attributable to Parent, Net of Tax | ||
Beginning balance | 51.3 | |
Other comprehensive income (loss) | (39.2) | 51.3 |
Ending balance | 12.1 | 51.3 |
Unrealized Investment Gain/Loss | ||
AOCI Attributable to Parent, Net of Tax | ||
Beginning balance | 0.2 | |
Other comprehensive income (loss) | 0.2 | |
Ending balance | 0.2 | 0.2 |
Post-Retirement Benefits | ||
AOCI Attributable to Parent, Net of Tax | ||
Beginning balance | (0.8) | (0.8) |
Ending balance | $ (0.8) | $ (0.8) |
Fair Value Measurement - Schedu
Fair Value Measurement - Schedule of fair value hierarchy for assets measured at fair value on a recurring basis (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Assets: | ||
Assets | $ 275.1 | $ 143.5 |
Total assets | 668.5 | 425.3 |
Liabilities: | ||
Contingent consideration liability to related party | 3.9 | 56.6 |
Total liabilities | 1,313.2 | 1,443.3 |
Money market funds | ||
Assets: | ||
Assets | 2.5 | |
Level 1 | ||
Assets: | ||
Assets | 275.1 | 143.5 |
Total assets | 668.5 | 425.3 |
Level 2 | ||
Liabilities: | ||
Total liabilities | 1,309.3 | 1,386.7 |
Level 3 | ||
Liabilities: | ||
Contingent consideration liability to related party | 3.9 | 56.6 |
Total liabilities | 3.9 | 56.6 |
Recurring | ||
Assets: | ||
Total assets | 35.7 | 49.8 |
Liabilities: | ||
Contingent consideration liability to related party | 3.9 | |
Total liabilities | 3.9 | 56.6 |
Recurring | Money market funds | ||
Assets: | ||
Assets | 2.5 | |
Liabilities: | ||
Contingent consideration liability to related party | 56.6 | |
Recurring | U.S. Treasury securities | ||
Assets: | ||
Assets | 47.3 | |
Total assets | 35.7 | |
Recurring | Level 1 | ||
Assets: | ||
Total assets | 35.7 | 49.8 |
Recurring | Level 1 | Money market funds | ||
Assets: | ||
Assets | 2.5 | |
Recurring | Level 1 | U.S. Treasury securities | ||
Assets: | ||
Assets | 47.3 | |
Total assets | 35.7 | |
Recurring | Level 3 | ||
Liabilities: | ||
Contingent consideration liability to related party | 3.9 | |
Total liabilities | $ 3.9 | 56.6 |
Recurring | Level 3 | Money market funds | ||
Liabilities: | ||
Contingent consideration liability to related party | $ 56.6 |
Fair Value Measurement - Sche_2
Fair Value Measurement - Schedule of fair value hierarchy of financial instruments held (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Assets: | ||
Cash and cash equivalents | $ 275.1 | $ 143.5 |
Financial investments | 35.7 | 47.3 |
Accounts receivable | 287.3 | 217.3 |
Income tax receivable | 70.4 | 17.2 |
Total assets | 668.5 | 425.3 |
Liabilities: | ||
Accounts payable | 12.8 | 43.2 |
Section 31 fees payable | 81.1 | 105.6 |
Contingent consideration liability to related party | 3.9 | 56.6 |
Debt | 1,215.4 | 1,237.9 |
Total liabilities | 1,313.2 | 1,443.3 |
Level 1 | ||
Assets: | ||
Cash and cash equivalents | 275.1 | 143.5 |
Financial investments | 35.7 | 47.3 |
Accounts receivable | 287.3 | 217.3 |
Income tax receivable | 70.4 | 17.2 |
Total assets | 668.5 | 425.3 |
Level 2 | ||
Liabilities: | ||
Accounts payable | 12.8 | 43.2 |
Section 31 fees payable | 81.1 | 105.6 |
Debt | 1,215.4 | 1,237.9 |
Total liabilities | 1,309.3 | 1,386.7 |
Level 3 | ||
Liabilities: | ||
Contingent consideration liability to related party | 3.9 | 56.6 |
Total liabilities | $ 3.9 | $ 56.6 |
Fair Value Measurement (Details
Fair Value Measurement (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Contingent consideration liability to related party | $ 3.9 | $ 56.6 |
Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Contingent consideration liability to related party | 3.9 | |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Contingent consideration liability to related party | 3.9 | $ 56.6 |
Level 3 | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Contingent consideration liability to related party | $ 3.9 |
Fair Value Measurement - Summar
Fair Value Measurement - Summary of changes in the fair value of the company's Level 3 financial liabilities (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in fair value of level 3 financial liabilities | ||
Balance at the beginning of the period | $ 56.6 | |
Realized (gains) losses during period | 3.9 | |
Additions | $ 56.6 | |
Settlements | (56.6) | |
Balance at the end of the period | 3.9 | 56.6 |
Contingent consideration liability to related party | ||
Changes in fair value of level 3 financial liabilities | ||
Balance at the beginning of the period | 56.6 | |
Realized (gains) losses during period | 3.9 | |
Additions | 56.6 | |
Settlements | (56.6) | |
Balance at the end of the period | $ 3.9 | $ 56.6 |
Redeemable Noncontrolling Int_3
Redeemable Noncontrolling Interest (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Increase (Decrease) in Redeemable Noncontrolling Interest | |||
Beginning balance | $ 9.4 | ||
Ending balance | 9.4 | $ 9.4 | |
Redeemable Noncontrolling Interests | |||
Increase (Decrease) in Redeemable Noncontrolling Interest | |||
Beginning balance | 9.4 | ||
Net loss attributable to redeemable noncontrolling interest | (1.3) | (1.1) | $ (1.1) |
Redemption value adjustment | 1.3 | ||
Ending balance | $ 9.4 | $ 9.4 |
Segment Reporting - Summarized
Segment Reporting - Summarized financial information by reportable segment (Details) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Segment Reporting Information | |||||||||||
Number of reportable segments | segment | 5 | ||||||||||
Revenues | $ 2,768.8 | $ 2,229.1 | $ 703.1 | ||||||||
Operating income (loss) | $ 176.5 | $ 126.1 | $ 129.1 | $ 167.7 | $ 108.7 | $ 119.3 | $ 117.8 | $ 26.1 | 599.4 | 371.9 | 298.2 |
Operating Segments | Options | |||||||||||
Segment Reporting Information | |||||||||||
Revenues | 1,057.5 | 883.5 | 589.5 | ||||||||
Operating income (loss) | 390.9 | 252.2 | 218.4 | ||||||||
Operating Segments | U.S. Equities | |||||||||||
Segment Reporting Information | |||||||||||
Revenues | 1,373.1 | 1,072.5 | |||||||||
Operating income (loss) | 140.5 | 103.2 | |||||||||
Operating Segments | Futures | |||||||||||
Segment Reporting Information | |||||||||||
Revenues | 149.8 | 144.6 | 113.6 | ||||||||
Operating income (loss) | 85.7 | 126.8 | 96.4 | ||||||||
Operating Segments | European Equities | |||||||||||
Segment Reporting Information | |||||||||||
Revenues | 131.6 | 89.6 | |||||||||
Operating income (loss) | 24.1 | 8.9 | |||||||||
Operating Segments | Global FX | |||||||||||
Segment Reporting Information | |||||||||||
Revenues | 56.4 | 38.2 | |||||||||
Operating income (loss) | (11.7) | (12.8) | |||||||||
Corporate Items and Eliminations | |||||||||||
Segment Reporting Information | |||||||||||
Revenues | 0.4 | 0.7 | |||||||||
Operating income (loss) | $ (30.1) | $ (106.4) | $ (16.6) |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
SMART Plan | |||
Defined Contribution Plan | |||
Company contribution amount | $ 12.4 | $ 7.7 | $ 5.5 |
Cboe Europe Equities Employee Selected Stakeholder Contribution Plan | |||
Defined Contribution Plan | |||
Company contribution amount | $ 0.4 | $ 0.5 |
Regulatory Capital (Details)
Regulatory Capital (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Cboe Trading | |
Regulatory Requirement | |
Minimum net capital required to be maintained, option 1 - percentage of aggregate indebtedness items | 6.67% |
Minimum net capital required to be maintained, option 2 - amount | $ 0.1 |
Net capital | 10.7 |
Excess net capital | 10.2 |
Required net capital | 0.5 |
Cboe Europe Equities | |
Regulatory Requirement | |
Financial resources requirement | 21.6 |
Capital in excess of financial resources requirement | 40.3 |
Cboe Chi-X Europe | |
Regulatory Requirement | |
Capital resources requirement | 0.1 |
Capital in excess of capital resources requirement | 0.5 |
Cboe SEF | |
Regulatory Requirement | |
Annual operating expenses for swap execution facility capital adequacy tests | 1.3 |
XX month operating expenses for swap execution facility capital adequacy tests | 0.5 |
CFE | |
Regulatory Requirement | |
Annual operating expenses for registered futures exchange capital adequacy tests | 56.6 |
XX month operating expenses for registered futures exchange capital adequacy tests | $ 24 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) $ / shares in Units, $ in Millions | Nov. 15, 2018$ / sharesshares | Aug. 15, 2018$ / sharesshares | May 17, 2018$ / sharesshares | May 15, 2018$ / sharesshares | Feb. 19, 2018$ / sharesshares | Feb. 28, 2017item | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Stock-based compensation expense | $ | $ 35.1 | $ 52.6 | $ 14.5 | ||||||
Options exercised (in shares) | 72,559 | 241,348 | |||||||
Payments for the purchase of shares to satisfy the employee income tax withholdings (in shares) | $ | $ 20.9 | $ 26.1 | $ 4.1 | ||||||
Bats Global Markets, Inc. | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Number of decimal places that the volume-weighted average price of shares of Cboe Common Stock was rounded to | item | 4 | ||||||||
Share price, measurement period | 10 days | ||||||||
Performance Based Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 41,868 | ||||||||
Stock options | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Risk-free rate | 1.78% | ||||||||
Expected volatility | 19.80% | ||||||||
Options exercised (in shares) | 72,559 | ||||||||
Shares purchased to satisfy the employee income tax withholdings (in shares) | 8,772 | ||||||||
Payments for the purchase of shares to satisfy the employee income tax withholdings (in shares) | $ | $ 1 | ||||||||
Restricted Stock and Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 211,696 | 1,091,843 | |||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 112.55 | $ 78.94 | |||||||
Shares purchased to satisfy the employee income tax withholdings (in shares) | 193,988 | ||||||||
Payments for the purchase of shares to satisfy the employee income tax withholdings (in shares) | $ | $ 22.5 | ||||||||
Unrecognized compensation expense | $ | $ 31.3 | ||||||||
Unrecognized compensation expense, period for recognition | 1 year 4 months 24 days | ||||||||
Vested (in shares) | 478,692 | 498,540 | |||||||
Awards Granted February 28, Grant Two | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Number of shares of common stock of which unit is convertible (in shares) | 20,934 | ||||||||
Awards Granted February 19, Grant One | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 147,017 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 111.45 | ||||||||
Vesting period | 3 years | ||||||||
Vesting percentage | 33.33% | ||||||||
Awards Granted February 19, Grant Two | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 122 | ||||||||
Vesting period | 3 years | ||||||||
Risk-free rate | 2.36% | ||||||||
Volatility time period | 3 years | ||||||||
Expected volatility | 19.20% | ||||||||
Correlation to S&P 500 Index time period | 3 years | ||||||||
Correlation with S&P index | 0.30% | ||||||||
Awards Granted February 19, Grant Two | Restricted Stock Units | Minimum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Units ultimately expected to be awarded | 0.00% | ||||||||
Awards Granted February 19, Grant Two | Restricted Stock Units | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Units ultimately expected to be awarded | 200.00% | ||||||||
Awards Granted February 19, Grant Two | Performance Based Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Number of shares of common stock of which unit is convertible (in shares) | 20,934 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 115.90 | ||||||||
Awards Granted May 15 | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 92 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 108.11 | ||||||||
Vesting period | 3 years | ||||||||
Vesting percentage | 33.33% | ||||||||
Awards Granted May 17, Grant One | Restricted Stock | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 13,296 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 108.38 | ||||||||
Vesting period | 1 year | ||||||||
Awards Granted May 17, Grant Two | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 1,107 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 108.38 | ||||||||
Vesting period | 3 years | ||||||||
Vesting percentage | 33.33% | ||||||||
Awards Granted May 17, Grant Three | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 6,459 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 108.38 | ||||||||
Awards Granted August 15, Grant | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 990 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 94.65 | ||||||||
Vesting period | 3 years | ||||||||
Vesting percentage | 33.33% | ||||||||
Awards Granted November 15, Grant One | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 182 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 109.71 | ||||||||
Vesting period | 3 years | ||||||||
Vesting percentage | 33.33% | ||||||||
Awards Granted November 15, Grant Two | Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||||
Equity instruments granted (in shares) | 684 | ||||||||
Number of shares of common stock of which unit is convertible (in shares) | 1 | ||||||||
Fair value of equity instruments granted (in dollars per share) | $ / shares | $ 109.71 |
Stock-based Compensation - Stoc
Stock-based Compensation - Stock option activity (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Shares | ||
Beginning balance (in shares) | 442,042 | |
Granted (in shares) | 683,390 | |
Exercised (in shares) | (72,559) | (241,348) |
Ending balance (in shares) | 369,483 | 442,042 |
Weighted Average Exercise Price | ||
Beginning balance (in dollars per share) | $ 25.36 | |
Granted (in dollars per share) | $ 22.45 | |
Exercised (in dollars per share) | 20.08 | 17.13 |
Ending balance (in dollars per share) | $ 26.40 | $ 25.36 |
Weighted Average Remaining Contractual Term (years) | ||
Outstanding | 1 year | |
Aggregate Intrinsic Value (in millions) | ||
Beginning balance | $ 17.5 | |
Ending balance | $ 17.5 | |
Exercisable | ||
Number of shares (in shares) | 369,483 | |
Weighted average exercise price (in dollars per share) | $ 26.40 | |
Aggregate intrinsic value | $ 6.4 | |
Stock options | ||
Number of Shares | ||
Exercised (in shares) | (72,559) |
Stock-based Compensation - Fair
Stock-based Compensation - Fair value of assumptions for options granted (Details) - Stock options | 12 Months Ended |
Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Expected term (in years) | 4 years 2 months 12 days |
Expected volatility | 19.80% |
Expected dividend yield | 1.30% |
Risk-free rate | 1.78% |
Stock-based Compensation- Nonve
Stock-based Compensation- Nonvested options activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Options | ||
Beginning balance (in shares) | 81,068 | |
Granted (in shares) | 81,068 | |
Vested (in shares) | (81,068) | |
Ending balance (in shares) | 81,068 | |
Weighted Average Grant-Date Fair Value | ||
Beginning balance (in USD per share) | $ 49.17 | |
Granted (in USD per share) | $ 49.17 | |
Vested (in USD per share) | $ 49.17 | |
Ending balance (in USD per share) | $ 49.17 |
Stock-based Compensation - Rest
Stock-based Compensation - Restricted stock activity (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
May 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Employee Stock Purchase Plan | ||||
Compensation expense | $ 35,100,000 | $ 52,600,000 | $ 14,500,000 | |
ESPP | ||||
Employee Stock Purchase Plan | ||||
Number of shares of common stock made available for purchase to employees | 750,000 | |||
Maximum percentage of annual salary that an employee is permitted to utilize to purchase stock | 10.00% | |||
Maximum number of shares that a participant can purchase during any single offering period | 312 | |||
Maximum fair market value of stock an employee can purchase under the plan per calendar year | $ 25,000 | |||
Compensation expense | $ 100,000 | |||
Shares were reserved for future issuance | 750,000 | |||
ESPP | US | ||||
Employee Stock Purchase Plan | ||||
Exercise price per share of common stock as a percent of fair market value | 90.00% | |||
ESPP | International | ||||
Employee Stock Purchase Plan | ||||
Exercise price per share of common stock as a percent of fair market value | 85.00% | |||
Restricted Stock and Restricted Stock Units | ||||
Number of shares | ||||
Beginning balance (in shares) | 1,068,392 | 480,595 | ||
Granted (in shares) | 211,696 | 1,091,843 | ||
Vested (in shares) | (478,692) | (498,540) | ||
Forfeited (in shares) | (16,220) | (5,506) | ||
Ending balance (in shares) | 785,176 | 1,068,392 | 480,595 | |
Weighted average grant date fair value | ||||
Beginning balance (in USD per share) | $ 77.19 | $ 63.64 | ||
Granted (in dollars per share) | 112.55 | 78.94 | ||
Vested (in USD per share) | 75.57 | 67.83 | ||
Forfeited (in USD per share) | 93.38 | 71.68 | ||
Ending balance (in USD per share) | $ 87.38 | $ 77.19 | $ 63.64 |
Income Taxes - Deferred tax ass
Income Taxes - Deferred tax assets and liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Accrued compensation and benefits | $ 17.1 | $ 14.1 |
Property, equipment and technology, net | 2.6 | 2.4 |
Other | 20.7 | 20.2 |
Subtotal | 40.4 | 36.7 |
Valuation allowance | (2) | (1.6) |
Total deferred tax assets | 38.4 | 35.1 |
Deferred tax liabilities: | ||
Intangibles | (380.2) | (429.6) |
Property, equipment and technology, net | (17.4) | (17.1) |
Investment in affiliates | (75.3) | (75) |
Prepaid | (2.3) | (1.6) |
Total deferred tax liabilities | (475.2) | (523.3) |
Net deferred tax assets/(liabilities) | $ (436.8) | $ (488.2) |
Income Taxes - Components of in
Income Taxes - Components of income tax expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current tax expense: | |||
Federal | $ 125.1 | $ 141 | $ 107.1 |
State | 58.7 | 25.8 | 22.6 |
Foreign | 9.9 | 5.4 | |
Total current tax expense | 193.7 | 172.2 | 129.7 |
Deferred income tax expense: | |||
Federal | (18.4) | (227.5) | (7.6) |
State | (23.7) | (6.5) | (1.2) |
Foreign | (5.6) | (4.4) | |
Total deferred income tax expense | (47.7) | (238.4) | (8.8) |
Total | $ 146 | $ (66.2) | $ 120.9 |
Income Taxes - Deferred income
Income Taxes - Deferred income tax liability, net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | |||
U.S. operations | $ 548.3 | $ 326.7 | $ 306.6 |
Foreign operations | 22.9 | 7.7 | |
Income before income tax provision (benefit) | $ 571.2 | $ 334.4 | $ 306.6 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of the statutory federal income tax rate to the effective income tax rate (Details) | Jan. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Income Taxes | ||||
Effective tax rate | 25.60% | (19.80%) | 39.40% | |
Statutory federal income tax rate | 21.00% | 21.00% | 35.00% | 35.00% |
Change in income tax rate (percent) | (3.50%) | (55.10%) | ||
State income tax rate, net of federal income tax effect | 5.00% | 4.30% | 4.50% | |
Uncertain tax positions | 6.10% | |||
Section 199 deductions | (2.60%) | (2.60%) | ||
Other, net | (3.00%) | (1.40%) | 2.50% |
Income Taxes - Reconciliation_2
Income Taxes - Reconciliation of the beginning and ending uncertain tax positions (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | |||
Uncertain tax positions, beginning balance | $ 67.8 | $ 41.9 | $ 31.9 |
Acquired unrecognized tax benefits | 23.2 | ||
Gross increases on tax positions in prior period | 35 | 6.2 | 8.8 |
Gross decreases on tax positions in prior period | (19) | (14.7) | (0.6) |
Gross increases on tax positions in current period | 19 | 12.7 | 3.6 |
Lapse of statute of limitations | (0.5) | (1.5) | (1.8) |
Uncertain tax positions, ending balance | $ 102.3 | $ 67.8 | $ 41.9 |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2018 |
Income Tax Contingency [Line Items] | ||||||
Valuation allowance | $ 2 | $ 2 | ||||
Operating loss carryforwards | 18.8 | $ 24.9 | 18.8 | |||
Unrecognized tax positions that would affect the annual effective tax rate | 99.5 | 68.2 | $ 40.5 | 99.5 | ||
Lapse of statute of limitations | 0.5 | 1.5 | 1.8 | |||
Estimated interest costs and penalties | 1.1 | (1.5) | 2.5 | |||
Accrued interest and penalties | $ 12.6 | $ 11.1 | $ 10.2 | 12.6 | ||
Statutory federal income tax rate | 21.00% | 21.00% | 35.00% | 35.00% | ||
Income tax benefit for remeasurement of deferred tax from change in tax rate pursuant to Jobs Act | $ 3.2 | $ 191.3 | ||||
income tax benefit from effect of Jobs Act | $ 194.5 | |||||
Forecast | ||||||
Income Tax Contingency [Line Items] | ||||||
Lapse of statute of limitations | $ 0.9 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Jobs Act | |||||||||||
Increase in estimated net income due to Jobs Act | $ 191.3 | ||||||||||
Basic and Diluted EPS Numerator: | |||||||||||
Net income | $ 138.4 | $ 85.7 | $ 83 | $ 118.1 | $ 257.1 | $ 60.3 | $ 68 | $ 15.2 | 425.2 | $ 400.6 | $ 185.7 |
Net loss attributable to redeemable noncontrolling interest | 1.3 | 1.1 | 1.1 | ||||||||
Net income excluding redeemable noncontrolling interest | 426.5 | 401.7 | 186.8 | ||||||||
Change in redemption value of redeemable noncontrolling interest | (1.3) | (1.1) | (1.1) | ||||||||
Net income allocated to participating securities | (3.1) | (3.9) | (0.8) | ||||||||
Net income allocated to common stockholders | $ 137.4 | $ 85 | $ 82.4 | $ 117.3 | $ 254.6 | $ 59.7 | $ 67.3 | $ 15.1 | $ 422.1 | $ 396.7 | $ 184.9 |
Basic EPS Denominator: | |||||||||||
Weighted average shares outstanding (in shares) | 111.8 | 107.2 | 81.4 | ||||||||
Basic Net Income Per Common Share (in dollars per share) | $ 1.23 | $ 0.76 | $ 0.74 | $ 1.04 | $ 2.41 | $ 0.53 | $ 0.60 | $ 0.16 | $ 3.78 | $ 3.70 | $ 2.27 |
Diluted EPS Denominator: | |||||||||||
Weighted average shares outstanding (in shares) | 111.8 | 107.2 | 81.4 | ||||||||
Dilutive common shares issued under stock program (in shares) | 0.4 | 0.3 | |||||||||
Total dilutive weighted average shares (in shares) | 112.2 | 107.5 | 81.4 | ||||||||
Diluted Net Income Per Common Share (in dollars per share) | $ 1.23 | $ 0.76 | $ 0.73 | $ 1.04 | $ 2.40 | $ 0.53 | $ 0.60 | $ 0.16 | $ 3.76 | $ 3.69 | $ 2.27 |
Commitments, Contingencies an_2
Commitments, Contingencies and Guarantees (Details) | Sep. 28, 2018claim | Dec. 31, 2018USD ($)item | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Apr. 18, 2014item |
Loss Contingencies | ||||||
Rent expense | $ | $ 10,100,000 | $ 7,600,000 | $ 4,400,000 | |||
Minimum | ||||||
Loss Contingencies | ||||||
Lease terms | 3 months | 3 months | ||||
Maximum | ||||||
Loss Contingencies | ||||||
Lease terms | 100 months | 100 months | ||||
City of Providence | Pending Litigation | ||||||
Loss Contingencies | ||||||
The number of other securities exchanges a lawsuit has been filed against | item | 14 | |||||
VIX Litigation | Pending Litigation | ||||||
Loss Contingencies | ||||||
Number of Commodity Exchange Act claims | claim | 3 | |||||
Transaction Fee Pilot | Pending Litigation | Unfavorable Regulatory Action | ||||||
Loss Contingencies | ||||||
Number of test groups with new temporary pricing restrictions | item | 2 | |||||
Cap for removing or providing displayed liquidity | $ | $ 0.0010 | |||||
Maximum period for pilot | 2 years | |||||
Period for automatic sunset unless extended by SEC | 1 year |
Quarterly Data (unaudited) (Det
Quarterly Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Quarterly Data (unaudited) | |||||||||||
Revenues less cost of revenues | $ 334.4 | $ 270.5 | $ 283.5 | $ 328.5 | $ 265.6 | $ 269.7 | $ 266.9 | $ 193.4 | $ 1,216.9 | $ 995.6 | $ 566.4 |
Operating income | 176.5 | 126.1 | 129.1 | 167.7 | 108.7 | 119.3 | 117.8 | 26.1 | 599.4 | 371.9 | 298.2 |
Net income | 138.4 | 85.7 | 83 | 118.1 | 257.1 | 60.3 | 68 | 15.2 | 425.2 | 400.6 | 185.7 |
Net Income allocated to common stockholders | $ 137.4 | $ 85 | $ 82.4 | $ 117.3 | $ 254.6 | $ 59.7 | $ 67.3 | $ 15.1 | $ 422.1 | $ 396.7 | $ 184.9 |
Basic earnings per share (in dollars per share) | $ 1.23 | $ 0.76 | $ 0.74 | $ 1.04 | $ 2.41 | $ 0.53 | $ 0.60 | $ 0.16 | $ 3.78 | $ 3.70 | $ 2.27 |
Diluted earnings per share (in dollars per share) | $ 1.23 | $ 0.76 | $ 0.73 | $ 1.04 | $ 2.40 | $ 0.53 | $ 0.60 | $ 0.16 | $ 3.76 | $ 3.69 | $ 2.27 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Feb. 19, 2019 | Feb. 13, 2019 | Feb. 19, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Subsequent Events | ||||||
Dividends (in dollars per share) | $ 1.16 | $ 1.04 | $ 0.96 | |||
Performance Based Restricted Stock Units | ||||||
Subsequent Events | ||||||
Granted (in shares) | 41,868 | |||||
Subsequent Event | ||||||
Subsequent Events | ||||||
Dividends (in dollars per share) | $ 0.31 | |||||
Subsequent Event | Restricted Stock Units | ||||||
Subsequent Events | ||||||
Granted (in shares) | 192,733 | |||||
Granted (in dollars per share) | $ 94.16 | |||||
Vesting period | 3 years | |||||
Subsequent Event | Performance Based Restricted Stock Units | ||||||
Subsequent Events | ||||||
Granted (in shares) | 51,448 | |||||
Vesting period | 3 years |