Cboe Global Markets 10Q 2020 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34774

Cboe Global Markets, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-5446972
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

400 South LaSalle Street, Chicago, Illinois	60605
(Address of Principal Executive Offices)	(Zip Code)

(312) 786-5600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	CBOE	CboeBZX

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated filer	☒	Accelerated Filer	◻	Non-accelerated Filer	◻

Smaller Reporting Company	☐	Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:


Class		July 24, 2020
Common Stock, par value $0.01 per share		108,757,883 shares

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TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		7
Item 1.	Financial Statements (unaudited)	7
	Condensed Consolidated Balance Sheets—As of June 30, 2020 and December 31, 2019	7
	Condensed Consolidated Statements of Income—Three and Six Months Ended June 30, 2020 and 2019	8
	Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 30, 2020 and 2019	9
	Condensed Consolidated Statements of Changes in Stockholders’ Equity—Three and Six Months Ended June 30, 2020 and 2019	10
	Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2020 and 2019	12
	Notes to Condensed Consolidated Financial Statements	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 4.	Controls and Procedures	70

PART II. OTHER INFORMATION		71
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults upon Senior Securities	73
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75

SIGNATURES		76

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CERTAIN DEFINED TERMS

Throughout this document, unless otherwise specified or the context so requires:

●

“Cboe,” “we,” “us,” “our” or “the Company” refers to Cboe Global Markets, Inc. and its subsidiaries.

●

“ADV” means average daily volume.

●

“ADNV” means average daily notional value.

●

“AFM” refers to the Netherlands Authority for the Financial Markets.

●

“Bats Global Markets” and “Bats” refer to our wholly-owned subsidiary Bats Global Markets, Inc., now known as Cboe Bats, LLC, and its subsidiaries.

●

“BYX” refers to Cboe BYX Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“BZX” refers to Cboe BZX Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“C2” refers to Cboe C2 Exchange, Inc. a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“Cboe Chi-X Europe” refers to Cboe Chi-X Europe Limited, a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“Cboe Europe Equities” refers to the combined businesses of Cboe Europe and Cboe NL.

●

“Cboe Europe” refers to Cboe Europe Limited, a wholly-owned subsidiary of Cboe Global Markets, Inc., the U.K. operator of our Multilateral Trading Facility (“MTF”), our Regulated Market (“RM”), and our Approved Publication Arrangement (“APA”) under its Recognized Investment Exchange (“RIE”) status.

●

“Cboe FX” refers to Cboe FX Markets, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“Cboe NL” refers to Cboe Europe BV, a wholly-owned subsidiary of Cboe Global Markets, Inc., the Netherlands operator of our MTF, RM, and APA.

●

“Cboe Options” refers to Cboe Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“Cboe SEF” refers to Cboe SEF, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“Cboe Trading” refers to Cboe Trading, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc., operated in the United States.

●

“CFE” refers to Cboe Futures Exchange, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“CFTC” refers to the U.S. Commodity Futures Trading Commission.

●

“EDGA” refers to Cboe EDGA Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

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“EDGX” refers to Cboe EDGX Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

●

“ESMA” refers to the European Securities and Markets Authority.

●

“EuroCCP” refers to European Central Counterparty N.V., a wholly-owned subsidiary of Cboe Global Markets, Inc. as of July 1, 2020.

●

“Exchanges” refers to Cboe Options, C2, BZX, BYX, EDGX, and EDGA.

●

“FASB” refers to the Financial Accounting Standards Board.

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“FCA” refers to the U.K. Financial Conduct Authority.

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“FINRA” refers to the Financial Industry Regulatory Authority.

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“GAAP” refers to Generally Accepted Accounting Principles in the United States.

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“Merger” refers to our acquisition of Bats Global Markets, completed on February 28, 2017.

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“OCC” refers to The Options Clearing Corporation.

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“OPRA” refers to Options Price Reporting Authority, LLC.

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“SEC” refers to the U.S. Securities and Exchange Commission.

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“SPX” refers to our S&P 500 Index exchange-traded options products.

●

“TPH” refers to either a Trading Permit Holder or a Trading Privilege Holder.

●

“VIX” refers to our Cboe Volatility Index exchange traded options and futures products.

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TRADEMARK AND OTHER INFORMATION

Cboe^®, Cboe Global Markets^®, Bats^®, BYX^®, BZX^®, Cboe Options Institute^®, Cboe Vest^®, Cboe Volatility Index^®, CFE^®, EDGA^®, EDGX^®, Hybrid^®, LiveVol^®, Silexx^® and VIX^® are registered trademarks, and Cboe Futures Exchange^SM, C2^SM, f(t)options^SM, Hanweck^SM, and Trade Alert^SM are service marks of Cboe Global Markets, Inc. and its subsidiaries. Standard & Poor's^®, S&P^®, S&P 100^®, S&P 500^® and SPX^® are registered trademarks of Standard & Poor's Financial Services LLC and have been licensed for use by Cboe Exchange, Inc. Dow Jones^®, Dow Jones Industrial Average^®, DJIA^® and Dow Jones Indices are registered trademarks or service marks of Dow Jones Trademark Holdings, LLC, used under license. Russell^® and the Russell index names are registered trademarks of Frank Russell Company, used under license. FTSE^® and the FTSE indices are trademarks and service marks of FTSE International Limited, used under license. All other trademarks and service marks are the property of their respective owners.

MSCI and the MSCI index names are service marks of MSCI Inc. (“MSCI”) or its affiliates and have been licensed for use by us. Any derivative indices and any financial products based on the derivative indices (“MCSI-Based Products”) are not sponsored, guaranteed or endorsed by MSCI, its affiliates or any other party involved in, or related to, making or compiling such MSCI index. Neither MSCI, its affiliates nor any other party involved in, or related to, making or compiling any MSCI index makes any representations regarding the advisability of investing in such MSCI-Based Products; makes any warranty, express or implied; or bears any liability as to the results to be obtained by any person or any entity from the use of any such MSCI index or any data included therein. No purchaser, seller or holder of any MSCI-Based Product, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote any security without first contacting MSCI to determine whether MSCI’s permission is required.

This Quarterly Report on Form 10-Q includes market share and industry data that we obtained from industry publications and surveys, reports of governmental agencies and internal company surveys. Industry publications and surveys generally state that the information they contain has been obtained from sources believed to be reliable, but we cannot assure you that this information is accurate or complete. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on the most currently available market data. While we are not aware of any misstatements regarding industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors. We refer you to the “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and our other filings with the SEC.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negative of these terms and other comparable terminology. All statements that reflect our expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements, including statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Report. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In particular, you should consider the risks and uncertainties described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and our other filings with the SEC.

While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Some factors that could cause actual results to differ include:

●

the impact of the novel coronavirus (“COVID-19”) pandemic, including changes to trading behavior broadly in the market;

●

the loss of our right to exclusively list and trade certain index options and futures products;

●

economic, political and market conditions;

●

compliance with legal and regulatory obligations;

●

price competition and consolidation in our industry;

●

decreases in trading volumes, market data fees or a shift in the mix of products traded on our exchanges;

●

legislative or regulatory changes;

●

our ability to protect our systems and communication networks from security risks, cybersecurity risks, insider threats and unauthorized disclosure of confidential information;

●

increasing competition by foreign and domestic entities;

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our dependence on and exposure to risk from third parties;

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fluctuations to currency exchange rates;

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our index providers' ability to maintain the quality and integrity of their indices and to perform under our agreements;

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our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights;

●

our ability to attract and retain skilled management and other personnel;

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our ability to minimize the risks, including our credit and default risks, associated with operating a European clearinghouse;

●

our ability to accommodate trading volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems;

●

misconduct by those who use our markets or our products;

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challenges to our use of open source software code;

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our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status;

●

damage to our reputation;

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the ability of our compliance and risk management methods to effectively monitor and manage our risks;

●

our ability to manage our growth and strategic acquisitions or alliances effectively;

●

restrictions imposed by our debt obligations;

●

our ability to maintain an investment grade credit rating;

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impairment of our goodwill, long-lived assets, investments or intangible assets; and

●

the accuracy of our estimates and expectations.

For a detailed discussion of these and other factors that might affect our performance, see Part II, Item 1A of this Report. We do not undertake, and expressly disclaim, any duty to update any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this filing.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

(in millions, except par value data and share amounts)


	June 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	210.1	$	229.3
Financial investments		176.5		71.0
Accounts receivable, net of $1.0 allowance for credit losses at June 30, 2020 and $0.7 at December 31, 2019		376.8		234.7
Income taxes receivable		—		56.8
Other current assets		17.8		15.8
Total current assets		781.2		607.6

Investments		61.3		61.2
Property and equipment, net		75.6		47.0
Property held for sale		13.0		21.1
Operating lease right of use assets		117.8		53.4
Goodwill		2,730.4		2,682.1
Intangible assets, net		1,526.2		1,589.9
Other assets, net		60.8		51.6
Total assets	$	5,366.3	$	5,113.9
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	216.0	$	171.9
Section 31 fees payable		247.5		99.0
Deferred revenue		17.3		4.5
Income taxes payable		14.9		4.0
Current portion of contingent consideration liabilities		0.8		2.2
Total current liabilities		496.5		281.6

Long-term debt		868.6		867.6
Unrecognized tax benefits		148.8		135.9
Deferred income taxes		384.9		399.7
Non-current operating lease liabilities		137.3		46.7
Contingent consideration liabilities		19.7		—
Other non-current liabilities		24.2		26.8
Total liabilities		2,080.0		1,758.3
Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.01 par value: 20,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2020 and December 31, 2019		—		—
Common stock, $0.01 par value: 325,000,000 shares authorized, 125,976,027 and 108,757,176 shares issued and outstanding, respectively at June 30, 2020 and 125,701,889 and 110,656,892 shares issued and outstanding, respectively at December 31, 2019		1.2		1.2
Common stock in treasury, at cost, 17,218,851 shares at June 30, 2020 and 15,044,997 shares at December 31, 2019		(1,120.5)		(887.1)
Additional paid-in capital		2,704.5		2,691.3
Retained earnings		1,703.7		1,512.6
Accumulated other comprehensive (loss) income, net		(2.6)		37.6
Total stockholders’ equity		3,286.3		3,355.6
Total liabilities and stockholders’ equity	$	5,366.3	$	5,113.9

See accompanying notes to condensed consolidated financial statements.

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Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(unaudited)

(in millions, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Transaction fees	$	618.3	$	426.9	$	1,279.8	$	856.2
Access and capacity fees		55.7		54.5		113.4		108.9
Market data fees		58.7		51.8		114.9		103.4
Regulatory fees		128.7		79.7		265.5		138.4
Other revenue		7.3		7.7		16.6		15.2
Total revenues		868.7		620.6		1,790.2		1,222.1
Cost of revenues:
Liquidity payments		415.6		235.8		808.0		479.5
Routing and clearing		17.7		9.2		33.7		18.4
Section 31 fees		119.0		70.3		246.4		118.5
Royalty fees		19.4		21.9		46.8		42.9
Other		0.1		0.2		0.1		0.2
Total cost of revenues		571.8		337.4		1,135.0		659.5
Revenues less cost of revenues		296.9		283.2		655.2		562.6
Operating expenses:
Compensation and benefits		54.9		52.2		108.2		100.3
Depreciation and amortization		38.0		43.7		78.5		90.9
Technology support services		12.5		11.8		24.4		23.7
Professional fees and outside services		12.3		19.2		27.2		35.4
Travel and promotional expenses		0.9		3.0		3.0		5.6
Facilities costs		4.1		3.0		8.2		5.1
Acquisition-related costs		9.4		20.8		10.2		23.1
Other expenses		3.1		4.3		7.4		7.9
Total operating expenses		135.2		158.0		267.1		292.0
Operating income		161.7		125.2		388.1		270.6
Non-operating (expenses) income:
Interest expense, net		(7.3)		(10.0)		(14.6)		(19.9)
Other income (expense), net		2.2		4.4		0.6		(4.4)
Income before income tax provision		156.6		119.6		374.1		246.3
Income tax provision		43.0		35.1		103.1		67.7
Net income		113.6		84.5		271.0		178.6
Net loss attributable to redeemable noncontrolling interest		—		3.8		—		4.0
Net income excluding redeemable noncontrolling interest		113.6		88.3		271.0		182.6
Change in redemption value of redeemable noncontrolling interest		—		(0.2)		—		(0.4)
Net income allocated to participating securities		(0.3)		(0.5)		(0.7)		(1.1)
Net income allocated to common stockholders	$	113.3	$	87.6	$	270.3	$	181.1
Basic earnings per share	$	1.04	$	0.79	$	2.46	$	1.62
Diluted earnings per share	$	1.03	$	0.78	$	2.45	$	1.62

Basic weighted average shares outstanding		109.5		111.5		109.9		111.5
Diluted weighted average shares outstanding		109.6		111.6		110.1		111.6

See accompanying notes to condensed consolidated financial statements.

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Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

(in millions)


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	113.6	$	84.5	$	271.0	$	178.6
Other comprehensive (loss) income, net of income tax:
Foreign currency translation adjustments		(3.5)		(18.1)		(41.0)		(3.4)
Unrealized holding losses on financial investments		(0.3)		—		(0.3)		—
Post-retirement benefit obligations		1.1		—		1.1		—
Comprehensive income		110.9		66.4		230.8		175.2
Comprehensive loss attributable to redeemable noncontrolling interest		—		3.8		—		4.0
Comprehensive income excluding redeemable noncontrolling interest		110.9		70.2		230.8		179.2
Change in redemption value of redeemable noncontrolling interest		—		(0.2)		—		(0.4)
Comprehensive income allocated to participating securities		(0.3)		(0.5)		(0.7)		(1.1)
Comprehensive income allocated to common stockholders, net of income tax	$	110.6	$	69.5	$	230.1	$	177.7

See accompanying notes to condensed consolidated financial statements.

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Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Six months ended June 30, 2020 and June 30, 2019

(unaudited)

(in millions, except per share amount)


											Accumulated
							Additional				other		Total		Redeemable
	Preferred		Common		Treasury		paid-in		Retained		comprehensive		stockholders’		Noncontrolling
	Stock		Stock		Stock		capital		earnings		income (loss), net		equity		Interest
Balance at December 31, 2019	$	—	$	1.2	$	(887.1)	$	2,691.3	$	1,512.6	$	37.6	$	3,355.6	$	—
Transition adjustment for adoption of Current Expected Credit Losses standard at January 1, 2020		—		—		—		—		(0.4)		—		(0.4)		—
Cash dividends on common stock of $0.36 per share		—		—		—		—		(40.0)		—		(40.0)		—
Stock-based compensation		—		—		—		8.3		—		—		8.3		—
Repurchases of common stock from employee stock plans		—		—		(13.9)		—		—		—		(13.9)		—
Purchase of common stock		—		—		(119.5)		—		—		—		(119.5)		—
Shares issued under employee stock purchase plan		—		—		—		0.1		—		—		0.1		—
Net income		—		—		—		—		157.4		—		157.4		—
Other comprehensive loss		—		—		—		—		—		(37.5)		(37.5)		—
Balance at March 31, 2020	$	—	$	1.2	$	(1,020.5)	$	2,699.7	$	1,629.6	$	0.1	$	3,310.1	$	—
Cash dividends on common stock of $0.36 per share		—		—		—		—		(39.5)		—		(39.5)		—
Stock-based compensation		—		—		—		4.6		—		—		4.6		—
Exercise of common stock options		—		—		—		0.2		—		—		0.2		—
Repurchases of common stock from employee stock plans		—		—		(0.2)		—		—		—		(0.2)		—
Purchase of common stock		—		—		(99.8)		—		—		—		(99.8)		—
Net income		—		—		—		—		113.6		—		113.6		—
Other comprehensive loss		—		—		—		—		—		(2.7)		(2.7)		—
Balance at June 30, 2020	$	—	$	1.2	$	(1,120.5)	$	2,704.5	$	1,703.7	$	(2.6)	$	3,286.3	$	—

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											Accumulated
							Additional				other		Total		Redeemable
	Preferred		Common		Treasury		paid-in		Retained		comprehensive		stockholders’		Noncontrolling
	Stock		Stock		Stock		capital		earnings		income, net		equity		Interest
Balance at December 31, 2018	$	—	$	1.2	$	(720.1)	$	2,660.2	$	1,288.2	$	11.5	$	3,241.0	$	9.4
Cash dividends on common stock of $0.31 per share		—		—		—		—		(34.8)		—		(34.8)		—
Stock-based compensation		—		—		—		5.4		—		—		5.4		—
Exercise of common stock options		—		—		—		8.1		—		—		8.1		—
Repurchases of common stock from employee stock plans		—		—		(10.0)		—		—		—		(10.0)		—
Purchase of common stock		—		—		(35.0)		—		—		—		(35.0)		—
Shares issued under employee stock purchase plan		—		—		0.8		—		—		—		0.8		—
Net income excluding noncontrolling interest		—		—		—		—		95.4		—		95.4		—
Other comprehensive income		—		—		—		—		—		14.7		14.7		—
Net loss attributable to redeemable noncontrolling interest		—		—		—		—		—		—		—		(0.2)
Redemption value adjustment of redeemable noncontrolling interest		—		—		—		—		(0.2)		—		(0.2)		0.2
Balance at March 31, 2019	$	—	$	1.2	$	(764.3)	$	2,673.7	$	1,348.6	$	26.2	$	3,285.4	$	9.4
Cash dividends on common stock of $0.31 per share		—		—		—		—		(34.8)		—		(34.8)		—
Stock-based compensation		—		—		—		6.3		—		—		6.3		—
Exercise of common stock options		—		—		—		0.4		—		—		0.4		—
Repurchases of common stock from employee stock plans		—		—		(0.4)		—		—		—		(0.4)		—
Shares issued under employee stock purchase plan		—		—		0.1		—		—		—		0.1		—
Net income excluding noncontrolling interest		—		—		—		—		88.3		—		88.3		—
Other comprehensive loss		—		—		—		—		—		(18.1)		(18.1)		—
Net loss attributable to redeemable noncontrolling interest		—		—		—		—		—		—		—		(3.8)
Redemption value adjustment of redeemable noncontrolling interest		—		—		—		—		(0.2)		—		(0.2)		0.2
Balance at June 30, 2019	$	—	$	1.2	$	(764.6)	$	2,680.4	$	1,401.9	$	8.1	$	3,327.0	$	5.8

See accompanying notes to condensed consolidated financial statements.

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Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in millions)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	271.0	$	178.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		78.5		90.9
Amortization of debt issuance cost and debt discount		1.0		1.2
Change in fair value of contingent consideration		—		1.6
Realized gain on available-for-sale securities		(0.4)		(0.7)
Provision for credit losses		0.4		0.6
Provision for deferred income taxes		(11.0)		(11.0)
Stock-based compensation expense		12.9		11.7
Impairment of property held for sale		8.1		6.1
Impairment of goodwill		—		10.5
Equity in investments		(0.7)		(4.5)
Changes in assets and liabilities:
Accounts receivable		(144.2)		41.5
Income taxes receivable		56.8		—
Other current assets		(1.8)		(5.2)
Other assets		(12.1)		—
Accounts payable and accrued liabilities		45.3		(51.9)
Section 31 fees payable		148.5		38.1
Deferred revenue		11.6		4.6
Income taxes payable		11.1		(2.5)
Unrecognized tax benefits		12.9		12.5
Other liabilities		0.4		(4.5)
Net cash provided by operating activities		488.3		317.6
Cash flows from investing activities:
Acquisitions, net of cash acquired		(66.6)		—
Purchases of available-for-sale financial investments		(154.9)		(61.8)
Proceeds from maturities of available-for-sale financial investments		47.3		35.5
Return of capital from investments		4.5		22.0
Contributions to investments		(4.7)		—
Purchases of property and equipment		(17.2)		(19.1)
Net cash used in investing activities		(191.6)		(23.4)
Cash flows from financing activities:
Principal payments of long-term debt		—		(300.0)
Cash dividends on common stock		(79.5)		(69.6)
Repurchases of common stock from employee stock plans		(14.1)		(10.4)
Exercise of common stock options		0.2		8.5
Payment of contingent consideration from acquisition		(2.2)		—
Purchase of common stock		(219.3)		(35.0)
Net cash used in financing activities		(314.9)		(406.5)
Effect of foreign currency exchange rates on cash and cash equivalents		(1.0)		(1.5)
Decrease in cash and cash equivalents		(19.2)		(113.8)
Cash and cash equivalents:
Beginning of period		229.3		275.1
End of period	$	210.1	$	161.3
Supplemental disclosure of cash transactions:
Cash paid for income taxes	$	33.3	$	67.3
Cash paid for interest		14.4		16.7
Supplemental disclosure of noncash investing activities:
Accounts receivable acquired	$	0.7	$	—
Other current assets acquired		0.4		—
Goodwill acquired		66.4		—
Intangible assets acquired		22.3		—
Accounts payable and accrued expenses assumed		(1.4)		—
Deferred revenue acquired		(1.3)		—
Contingent consideration related to acquisitions		(20.5)		—

See accompanying notes to condensed consolidated financial statements.

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Cboe Global Markets, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Cboe Global Markets, Inc. 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 defining markets to benefit its participants and drive the global marketplace forward through product innovation, leading edge technology, and seamless trading solutions.

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 (“ETPs”), global foreign exchange (“FX”) and multi-asset volatility products based on the VIX Index, recognized as the world’s premier gauge of U.S. equity market volatility.

Cboe’s subsidiaries include the largest options exchange and the third largest stock exchange operator in the U.S. In addition, the Company operates one of the largest equities stock exchanges by value traded in Europe and is a leading market globally for ETP listings and trading.

The Company is headquartered in Chicago with offices in Kansas City, New York, London, San Francisco, Sarasota Springs, Belfast, Amsterdam, Singapore, Hong Kong, and Ecuador.

Basis of Presentation

These interim unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of condensed 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, 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.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included.

The results of operations for interim periods are not necessarily indicative of the results of operations for the full year.

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 is shown as noncontrolling interest.

Segment information

The Company has 5 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. See Note 14 (“Segment Reporting”) for more information.

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Significant Accounting Policies

With the exception of the change in the accounting for expected credit losses as a result of the adoption of Accounting Standards Update (“ASU”) 2016-13 (as discussed below in “Recent Accounting Pronouncements Adopted”), there have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, that are of significance, or potential significance, to the Company.

Accounts Receivable, net

Accounts receivable are concentrated with the Company’s member firms and market data distributors and are carried at amortized 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 accounts receivable, net, and the total owed to a member firm as accounts payable and accrued liabilities in the condensed consolidated balance sheets. On a periodic basis, management evaluates the Company’s accounts receivable and records an allowance for expected credit losses using an aging schedule. The aging schedule applies loss rates based on historical loss information and, as deemed necessary, is adjusted for differences in the nature of the receivables that exist at the reporting date from the historical period. Due to the short-term nature of the accounts receivable, changes in future economic conditions are not expected to have a significant impact on the expected credit losses.

The accounts receivable are presented net of allowance for credit losses on the condensed consolidated balance sheets and the associated losses are presented in other operating expenses on the condensed consolidated statements of income.

Recent Accounting Pronouncements - Adopted

In June 2016, the FASB issued ASU 2016-13, Credit Losses. This update replaces the incurred loss impairment methodology in GAAP with a methodology that requires management to estimate an expected lifetime credit loss on financial assets. This includes accounts receivable and notes receivable, which is included in other assets, net on the condensed consolidated balance sheets. The update also amends the impairment model for available-for-sale debt securities. The forward-looking expected lifetime credit loss model generally will result in the earlier recognition of credit losses. For public entities, the update is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this ASU on January 1, 2020 using the modified retrospective approach and did not restate comparative periods. Upon the adoption of the standard, the Company recognized an immaterial cumulative-effect adjustment to retained earnings for the estimate of current expected credit loss on financial instruments within the scope of the standard, including accounts receivable, net. Based on the Company’s high turnover and collectability of accounts receivable, as well as the monthly billing process for the majority of revenue, there was not a significant variance in the recognized loss between the incurred loss impairment methodology under the prior standard and the expected lifetime credit loss model under this ASU. The financial instruments other than accounts receivable, net that are within the scope of the standard were not materially impacted by the standard. The impact to the condensed consolidated balance sheet was immaterial in nature and there was no impact to the condensed consolidated statements of income and 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. The Company adopted this ASU on January 1, 2020 using the prospective approach, which did not result in a material impact to the condensed consolidated financial statements and disclosures.

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Recent Accounting Pronouncements - Issued, not yet Adopted

There are no applicable material accounting pronouncements that have been issued but are not yet adopted as of June 30, 2020.

2. REVENUE RECOGNITION

The Company’s main types of revenue contracts are:

●

Transaction fees - Transaction fees represent fees charged by the Company for meeting the point-in-time 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.

●

Access and capacity fees - Access and capacity fees represent fees assessed for the opportunity to trade, including fees for trading-related functionality across all segments, terminal and other equipment rights, maintenance services, trading floor space and telecommunications services. Facilities, systems services and other fees are generally monthly fee-based. These fees are billed monthly in accordance with the Company’s published fee schedules and recognized on a monthly basis when the performance obligations are met. All access and capacity fees associated with the trading floor are recognized over time in the Options segment, as the performance obligations are met.

●

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 to meet its performance obligation. 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 2 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 for meeting the point-in-time performance obligation of executing a trade on its markets. The fees charged to customers are based on the fee set by the SEC per notional value of U.S. Equities transactions and per round turn of Options transactions 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 include the options regulatory fee (“ORF”) which supports the Company’s regulatory oversight function in the Options segment, along with other miscellaneous regulatory fees, and neither can be used for non-regulatory purposes. The ORF and miscellaneous fees are recognized when the performance obligation is fulfilled.

●

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 websites.

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All revenue recognized in the condensed consolidated statements of income 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
			U.S.				European		Global		Items and
	Options		Equities		Futures		Equities		FX		Eliminations		Total
Three Months Ended June 30, 2020
Transaction fees	$	250.8	$	325.1	$	15.8	$	15.2	$	11.4	$	—	$	618.3
Access and capacity fees		23.9		20.9		4.1		4.7		2.1		—		55.7
Market data fees		17.8		35.8		1.7		3.2		0.2		—		58.7
Regulatory fees		21.0		107.7		—		—		—		—		128.7
Other revenue		4.1		1.0		—		2.2		—		—		7.3
	$	317.6	$	490.5	$	21.6	$	25.3	$	13.7	$	—	$	868.7
Timing of revenue recognition
Services transferred at a point in time	$	275.9	$	433.8	$	15.8	$	17.4	$	11.4	$	—	$	754.3
Services transferred over time		41.7		56.7		5.8		7.9		2.3		—		114.4
	$	317.6	$	490.5	$	21.6	$	25.3	$	13.7	$	—	$	868.7

Three Months Ended June 30, 2019
Transaction fees	$	185.9	$	182.0	$	28.3	$	19.5	$	11.2	$	—	$	426.9
Access and capacity fees		25.6		19.6		3.8		3.9		1.6		—		54.5
Market data fees		14.0		32.8		1.6		3.2		0.2		—		51.8
Regulatory fees		16.7		63.0		—		—		—		—		79.7
Other revenue		3.9		1.3		0.1		2.1		0.1		0.2		7.7
	$	246.1	$	298.7	$	33.8	$	28.7	$	13.1	$	0.2	$	620.6
Timing of revenue recognition
Services transferred at a point in time	$	206.5	$	246.3	$	28.4	$	21.6	$	11.3	$	0.2	$	514.3
Services transferred over time		39.6		52.4		5.4		7.1		1.8		—		106.3
	$	246.1	$	298.7	$	33.8	$	28.7	$	13.1	$	0.2	$	620.6


											Corporate
			U.S.				European		Global		Items and
	Options		Equities		Futures		Equities		FX		Eliminations		Total
Six Months Ended June 30, 2020
Transaction fees	$	535.0	$	629.1	$	51.7	$	37.5	$	26.5	$	—	$	1,279.8
Access and capacity fees		51.1		40.9		8.1		9.6		3.7		—		113.4
Market data fees		35.0		69.8		3.3		6.4		0.4		—		114.9
Regulatory fees		43.3		222.2		—		—		—		—		265.5
Other revenue		9.7		2.2		—		4.7		—		—		16.6
	$	674.1	$	964.2	$	63.1	$	58.2	$	30.6	$	—	$	1,790.2
Timing of revenue recognition
Services transferred at a point in time	$	588.0	$	853.5	$	51.7	$	42.2	$	26.5	$	—	$	1,561.9
Services transferred over time		86.1		110.7		11.4		16.0		4.1		—		228.3
	$	674.1	$	964.2	$	63.1	$	58.2	$	30.6	$	—	$	1,790.2

Six Months Ended June 30, 2019
Transaction fees	$	358.6	$	380.9	$	52.9	$	40.6	$	23.2	$	—	$	856.2
Access and capacity fees		51.6		38.6		7.5		7.9		3.3		—		108.9
Market data fees		27.7		65.7		3.3		6.4		0.3		—		103.4
Regulatory fees		31.2		106.7		0.5		—		—		—		138.4
Other revenue		8.0		2.6		0.1		4.1		0.2		0.2		15.2
	$	477.1	$	594.5	$	64.3	$	59.0	$	27.0	$	0.2	$	1,222.1
Timing of revenue recognition
Services transferred at a point in time	$	397.8	$	490.2	$	53.5	$	44.7	$	23.4	$	0.2	$	1,009.8
Services transferred over time		79.3		104.3		10.8		14.3		3.6		—		212.3
	$	477.1	$	594.5	$	64.3	$	59.0	$	27.0	$	0.2	$	1,222.1

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Contract liabilities as of June 30, 2020 primarily represent prepayments of transaction fees and certain access and capacity 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, 2020		Cash Additions		Revenue Recognition		Balance at June 30, 2020
Liquidity provider sliding scale (1)	$	—	$	9.6	$	(4.8)	$	4.8
Other, net		4.5		24.0		(15.8)		12.7
Total deferred revenue	$	4.5	$	33.6	$	(20.6)	$	17.5

(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 are amortized and recorded ratably as the transactions occur over the period.

3. ACQUISITIONS

On February 3, 2020, the Company purchased Hanweck Associates, LLC (“Hanweck”) and the assets of FT Providers, LLC (“FT Options”). Hanweck and FT Options are both providers of risk analytics market data and included in the Company’s Options segment. On June 1, 2020, the Company purchased the assets of Trade Alert, LLC (“Trade Alert”), a real-time alerts and order flow analysis service provider included in the Company’s Options segment. Of the acquisitions’ purchase price, $66.4 million was allocated to goodwill, $22.3 million was allocated to intangible assets, and $0.5 million was allocated to working capital. In connection with these acquisitions, approximately $20.5 million in contingent consideration related to developmental milestones has been recorded in the Company’s condensed consolidated financial statements.

Acquisition-related costs relate to acquisitions and other strategic opportunities, including the Merger. The Company expensed $9.4 million of acquisition-related costs during the three months ended June 30, 2020, which primarily included $8.1 million of impairment charges related to facilities and $1.3 million of professional fees and other expenses. The Company expensed $20.8 million of acquisition-related costs during the three months ended June 30, 2019 that included $10.5 million of impairment of goodwill charges, $6.1 million of impairment charges related to facilities, $2.1 million of compensation-related costs, $1.1 million of termination fees of an assigned lease agreement, and $0.8 million of professional fees. These acquisition-related expenses are included in acquisition-related costs in the condensed consolidated statements of income.

The Company expensed $10.2 million of acquisition-related costs during the six months ended June 30, 2020, which primarily included $8.1 million of impairment charges related to facilities and $2.1 million of professional fees and other expenses. The Company expensed $23.1 million of acquisition-related costs during the six months ended June 30, 2019 that included $10.5 million of impairment of goodwill charges, $6.1 million of impairment charges related to facilities, $3.4 million of compensation-related costs, $1.1 million of termination fees of an assigned lease agreement, and $1.8 million of professional fees. These acquisition-related expenses are included in acquisition-related costs in the condensed consolidated statements of income.

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4. INVESTMENTS

As of June 30, 2020 and December 31, 2019, the Company’s investments were comprised of the following (in millions):


	June 30,		December 31,
	2020		2019
Equity Method Investments:
Investment in Signal Trading Systems, LLC	$	12.4	$	12.6
Investment in EuroCCP		10.2		10.3
Total equity method investments		22.6		22.9

Other Equity Investments:
Investment in Eris Exchange Holdings, LLC		20.0		20.8
Investment in American Financial Exchange, LLC		8.6		8.6
Investment in Cboe Vest Financial Group, Inc.		2.9		2.9
Investment in Eris Digital Holdings, LLC		0.8		—
Investment in OCC		0.3		0.3
Other equity investments		6.1		5.7
Total other equity investments		38.7		38.3

Total investments	$	61.3	$	61.2

Equity Method Investments

Equity method investments include investments in Signal Trading Systems, LLC, a 50% joint venture 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 3 interoperable central counterparties, or CCPs, used to clear trades conducted on Cboe Europe Limited’s and Cboe Europe NL’s markets. As of June 30, 2020, Cboe Europe Limited owned 20% of EuroCCP and was able to exercise significant influence over the entity as an equal shareholder with 4 other investors. The Company acquired the remaining 80% interest in EuroCCP on July 1, 2020, see Note 23 (“Subsequent Events”) for more information.

Other Equity Investments

The carrying amount of other equity investments totaled $38.7 million as of June 30, 2020 and $38.3 million as of December 31, 2019, respectively, and is included in investments in the condensed consolidated balance sheets. The Company accounts for these investments using the measurement alternative given the absence of readily determinable fair values for the respective investments and due to the Company’s inability to exercise significant influence over the investments based upon the respective ownership interests held. As of June 30, 2020, other equity investments primarily reflect a 20% investment in OCC and minority investments in American Financial Exchange, LLC, CurveGlobal, Cboe Vest Financial Group, Inc. (“Vest”), Eris Exchange Holdings, LLC, and Eris Digital Holdings, LLC.

The Company’s contributed capital to OCC has been recorded under investments in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019. Under OCC’s current capital management policy, which was approved by the SEC on January 24, 2020, if OCC’s equity capital falls below certain defined thresholds, OCC can access additional capital through an operational loss fee charged to clearing members. None of OCC’s shareholders (including Cboe Options) has any obligation to contribute capital to OCC under the capital management policy, nor does any shareholder have the right to receive dividends from OCC under such policy. As such, the Company reversed the $8.8 million OCC dividend declared in 2018, which was to be paid in 2019, in other expense, net in the condensed consolidated statement of income for the six months ended June 30, 2019.

In August 2019, the Company’s ownership in Vest was restructured, including a partial sale of its interest to a third-party. As a result of the restructuring, the Company’s ownership and voting interests decreased to less than 20%

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and less than 5%, respectively, and the Company deconsolidated Vest and changed the accounting methodology to be in line with the other equity investments. The deconsolidation resulted in a reduction of net assets of $14.5 million and noncontrolling interest of $5.8 million, as well as recognition of $2.9 million investment for the Company’s remaining ownership interest. Additionally, the Company recorded an interest-bearing note receivable of $3.7 million for the consideration received from the third-party, which was recorded in other assets, net in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively.

In May 2020, Eris Exchange Holdings, LLC completed a restructuring transaction to spin out Eris Digital Holdings, LLC into a stand-alone entity. The restructuring qualifies as an exchange of ownership interest, though it required no additional consideration exchanged to execute the exchange of units. The restructuring did not result in a change in number of units owned by the Company or a substantial change in the Company’s ownership interest percentage. No gain or loss is recognized as a result of the restructuring. The Company’s investment in Eris Digital Holdings, LLC is included within “Other equity investments” in the above table.

5. 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 condensed consolidated balance sheet date and any money market funds that are considered cash and cash equivalents are classified as current assets. The Company’s marketable securities are also classified as current assets within financial investments. The Company’s financial investments are summarized as follows (in millions):


	June 30, 2020
	Cost basis		Unrealized gains		Unrealized losses		Fair value
Available-for-sale securities:
U.S. Treasury securities	$	155.6	$	—	$	—	$	155.6
Trading securities:
Marketable securities (1)		20.9		—		—		20.9
Total financial investments	$	176.5	$	—	$	—	$	176.5


	December 31, 2019
	Cost basis		Unrealized gains		Unrealized losses		Fair value
Available-for-sale securities:
U.S. Treasury securities	$	47.6	$	—	$	—	$	47.6
Trading securities:
Marketable securities (1)		23.4		—		—		23.4
Total financial investments	$	71.0	$	—	$	—	$	71.0

(1)	The marketable securities are primarily mutual funds maintained for non-qualified retirement and benefit plans, also referred to as deferred compensation plan assets. See Note 15 (“Employee Benefit Plans”) for more information.

6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of June 30, 2020 and December 31, 2019 (in millions):


	June 30,		December 31,
	2020		2019
Construction in progress	$	33.0	$	1.2
Furniture and equipment		166.7		164.4
Total property and equipment		199.7		165.6
Less accumulated depreciation		(124.1)		(118.6)
Property and equipment, net	$	75.6	$	47.0

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Depreciation expense using the straight-line method was $6.2 million and $6.1 million for the three months ended June 30, 2020 and 2019, respectively, and $12.4 million and $12.3 million for the six months ended June 30, 2020 and 2019, respectively.

As a result of the Merger, there was a reduction in employee workspace needed in Chicago, which led to the decision to market for sale the headquarters location. The Company classified the associated land, building, and certain furniture and equipment of the headquarters location as held for sale, performed an impairment assessment, and ceased depreciation effective May 1, 2019, as the Company anticipates selling the property held for sale. As of June 30, 2020, the total value of the property classified as property held for sale on the condensed consolidated balance sheet was $13.0 million. As a result of an evaluation of the headquarters location’s classification as held for sale during the second quarter of 2020, an impairment assessment was performed and an additional impairment charge of $8.1 was recorded in acquisition-related costs within the Options segment in the accompanying condensed consolidated statements of income. The impact of ceasing depreciation of the property held for sale did not result in a material impact to the condensed consolidated financial statements.

7. CREDIT LOSSES

Current expected credit losses are estimated for accounts receivable and notes receivable. The notes receivable included within other assets, net on the condensed consolidated balance sheets primarily relate to the consolidated audit trail (“CAT”), which involves the creation of an audit trail that strives to enhance regulators’ ability to monitor trading activity in the U.S. markets through a phased implementation. While the funding of the CAT is ultimately expected to be provided by both SROs (which includes the Exchanges) and industry members, until fee filings associated with the funding model are effective with or approved by the SEC, the funding to date has solely been provided by the SROs. The funding by the SROs has been done in exchange for promissory notes, which are expected to be repaid once such industry member fees are collected. Until the fee filings associated with the funding model are effective with or approved by the SEC, the SROs may continue to incur additional significant costs. The allowance for notes receivable credit losses associated with the CAT is calculated using a probability of default methodology. Accounts receivable represent amounts due from the Company’s member firms. The allowance for accounts receivable credit losses is calculated using an aging schedule. The following represents the changes in allowance for credit losses during the six months ended June 30, 2020:


	Balance at January 1, 2020		Current period provision for expected credit losses		Write-offs charged against the allowance		Recoveries collected		Balance at June 30, 2020
Allowance for notes receivable credit losses	$	23.4	$	—	$	—	$	—	$	23.4
Allowance for accounts receivable credit losses		1.1		(0.1)		—		—		1.0
Total allowance for credit losses	$	24.5	$	(0.1)	$	—	$	—	$	24.4

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8. OTHER ASSETS, NET

Other assets, net consisted of the following as of June 30, 2020 and December 31, 2019 (in millions):


	June 30,		December 31,
	2020		2019
Software development work in progress	$	0.7	$	2.6
Data processing software		85.9		84.3
Less accumulated depreciation and amortization		(59.8)		(57.2)
Data processing software, net		26.8		29.7
Other assets (1)		34.0		21.9
Other assets, net	$	60.8	$	51.6

(1)

At June 30, 2020 and December 31, 2019, the majority of the balance included long-term prepaid assets and notes receivable. See Note 7 (“Credit Losses”) for more information on the notes receivable included within other assets, net on the condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, the notes receivable balance net of allowance for notes receivable credit losses was $21.1 million and $9.2 million, respectively.

Amortization expense related to data processing software was $1.7 million and $3.4 million for the three months ended June 30, 2020 and 2019, respectively, and $3.5 million and $6.9 million for the six months ended June 30, 2020 and 2019, respectively.

9. GOODWILL AND INTANGIBLE ASSETS, NET

The following table presents the details of goodwill by segment (in millions):


			U.S.		European
	Options		Equities		Equities		Global FX		Total
Balance as of December 31, 2019	$	239.4	$	1,740.4	$	435.1	$	267.2	$	2,682.1
Additions		66.4		—		—		—		66.4
Changes in foreign currency exchange rates		—		—		(18.1)		—		(18.1)
Balance as of June 30, 2020	$	305.8	$	1,740.4	$	417.0	$	267.2	$	2,730.4

Goodwill has been allocated to specific reporting units for purposes of impairment testing - Options, U.S. Equities, European Equities and Global FX. NaN goodwill has been allocated to Futures. Goodwill impairment testing is performed annually in the fiscal fourth quarter or more frequently if conditions exist that indicate that the asset may be impaired.

The following table presents the details of the intangible assets (in millions):


			U.S.		European
	Options		Equities		Equities		Global FX		Total
Balance as of December 31, 2019	$	166.6	$	921.4	$	363.7	$	138.2	$	1,589.9
Additions		22.3		—		—		—		22.3
Amortization		(7.8)		(30.5)		(11.5)		(12.8)		(62.6)
Changes in foreign currency exchange rates		—		—		(23.4)		—		(23.4)
Balance as of June 30, 2020	$	181.1	$	890.9	$	328.8	$	125.4	$	1,526.2

For the three months ended June 30, 2020 and 2019, amortization expense was $30.1 million and $34.2 million, respectively. For the six months ended June 30, 2020 and 2019, amortization expense was $62.6 million and $71.7 million, respectively. The estimated future amortization expense is $60.0 million for the remainder of 2020, $108.0 million for 2021, $95.6 million for 2022, $84.9 million for 2023, $63.9 million for 2024, and $53.7 million for 2025.

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The following tables present the categories of intangible assets as of June 30, 2020 and December 31, 2019 (in millions):


									Weighted
	June 30, 2020								Average
			U.S.		European				Amortization
	Options		Equities		Equities		Global FX		Period (in years)
Trading registrations and licenses	$	95.5	$	572.7	$	170.4	$	—	Indefinite
Customer relationships		46.6		222.9		158.7		140.0	17
Market data customer relationships		53.6		322.0		59.5		64.4	12
Technology		28.1		22.5		22.3		22.5	4
Trademarks and tradenames		12.9		6.0		1.8		1.2	9
Accumulated amortization		(55.6)		(255.2)		(83.9)		(102.7)
	$	181.1	$	890.9	$	328.8	$	125.4


										Weighted
	December 31, 2019									Average
				U.S.		European				Amortization
	Options			Equities		Equities		Global FX		Period (in years)
Trading registrations and licenses	$	95.5		$	572.7	$	182.2	$	—	Indefinite
Customer relationships		38.8			222.9		169.7		140.0	17
Market data customer relationships		53.6			322.0		63.6		64.4	12
Technology		24.8			22.5		23.9		22.5	4
Trademarks and tradenames		1.7	��		6.0		1.9		1.2	6
Accumulated amortization		(47.8)			(224.7)		(77.6)		(89.9)
	$	166.6		$	921.4	$	363.7	$	138.2

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following as of June 30, 2020 and December 31, 2019 (in millions):


	June 30, 2020		December 31, 2019
Compensation and benefit-related liabilities	$	30.0	$	35.2
Termination benefits		0.6		6.7
Royalties		17.5		18.6
Accrued liabilities		137.7		77.8
Marketing fee payable		18.0		12.6
Accounts payable		12.2		21.0
Total accounts payable and accrued liabilities	$	216.0	$	171.9

11. DEBT

The Company’s debt consisted of the following as of June 30, 2020 and December 31, 2019 (in millions):


	June 30, 2020		December 31, 2019
$300 million Term Loan Agreement due December 2021, floating rate	$	223.0	$	222.4
$650 million fixed rate Senior Notes due January 2027, stated rate of 3.650%		645.6		645.2
Revolving Credit Agreement		—		—
Total debt	$	868.6	$	867.6

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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 the 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 entered into on December 15, 2016.

Loans under the Term Loan Agreement bear interest, at the Company’s option, at either (i) the London Interbank Offered Rate (“LIBOR”) periodically fixed for an interest period (as selected by the Company) 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 0 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, including cross-defaults from the Company’s other indebtedness, and indemnification provisions in favor of the lenders thereunder. The negative covenants include restrictions regarding the incurrence of liens, the incurrence of indebtedness by the Company’s subsidiaries and fundamental changes, subject to certain exceptions in each case. The financial covenants require the Company 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 June 30, 2020, the Company was in compliance with these covenants.

On May 29, 2020, the Company amended the Term Loan Agreement to, among other items, (i) permit liens on assets of the EuroCCP settlement and clearing business that secures indebtedness incurred in support of its settlement and clearing activities, and permit the Company’s subsidiaries to incur such indebtedness, provided that such amounts are repaid within 35 days; and (ii) provide that the LIBOR, as used in the Term Loan Agreement, may be succeeded by one or more secured overnight financing rates (“SOFR”) published by the Federal Reserve Bank of New York or another alternate benchmark rate giving due consideration to any evolving or then-existing convention for similar agreements.

3.650% Senior Notes

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 due 2027 (“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

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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 3.650% Senior 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 3.650% Senior Notes contains customary restrictions, including a limitation that restricts the Company’s ability and the ability of certain of the Company’s subsidiaries to create or incur secured debt. Such Indenture also limits certain sale and leaseback transactions and contains customary events of default. At June 30, 2020, the Company was in compliance with these covenants.

Revolving Credit Agreement

On December 15, 2016, the Company, as borrower, entered into a syndicated Credit Agreement (the “Revolving Credit Agreement”) with Bank of America, as administrative agent and as swing line lender, as well as certain lenders named therein (the “Revolving Lenders”).

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 1 or more of its subsidiaries as additional borrowers under the Revolving Credit Agreement provided that the Company guarantees all borrowings and other obligations of any such subsidiaries. As of June 30, 2020, 0 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 June 30, 2020, 0 borrowings were outstanding under the Revolving Credit Agreement. Accordingly, at June 30, 2020, $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 the Company’s option, at either (i) LIBOR periodically fixed for an interest period (as selected by the Company) of one, two, three or six months plus a margin (based on the Company’s 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 prime rate (subject to certain minimums based upon the federal funds effective rate or LIBOR) plus a margin (based on the Company’s public debt ratings) ranging from 0 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 the Company’s 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, including cross-defaults from the Company’s other indebtedness, and indemnification provisions in favor of the Revolving Lenders. The negative covenants include restrictions regarding the incurrence of liens, the incurrence of indebtedness by the Company’s subsidiaries and fundamental changes, subject to certain exceptions in each case. The financial covenants require the Company 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 June 30, 2020, the Company was in compliance with these covenants.

On May 29, 2020, the Company amended the Revolving Credit Agreement to, among other items, (i) permit liens on assets of the EuroCCP settlement and clearing business that secures indebtedness incurred in support of its

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settlement and clearing activities, and permit the Company’s subsidiaries to incur such indebtedness, provided that such amounts are repaid within 35 days; and (ii) provide that the LIBOR, as used in the Revolving Credit Agreement, may be succeeded by one or more secured overnight financing rates (“SOFR”) published by the Federal Reserve Bank of New York or another alternate benchmark rate giving due consideration to any evolving or then-existing convention for similar agreements.

Loan and Notes Payments and Contractual Interest

The future expected loan repayments related to the Term Loan Agreement and the 3.650% Senior Notes as of June 30, 2020 are as follows (in millions):


Remainder of 2020	$	—
2021		225.0
2022		—
2023		—
2024		—
Thereafter		650.0
Principal amounts repayable		875.0
Debt issuance cost		(2.6)
Unamortized discounts on notes		(3.8)
Total debt outstanding	$	868.6

Interest expense recognized on the Term Loan Agreement and the 3.650% Senior Notes is included in interest expense, net in the condensed consolidated statements of income, for the three and six months ended June 30, 2020 and 2019 is as follows (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Components of interest expense:
Contractual interest	$	6.9	$	9.9	$	14.4	$	19.7
Amortization of debt discount		0.1		0.1		0.3		0.3
Amortization of debt issuance costs		0.4		0.5		0.7		0.9
Interest expense	$	7.4	$	10.5	$	15.4	$	20.9
Interest income		(0.1)		(0.5)		(0.8)		(1.0)
Interest expense, net	$	7.3	$	10.0	$	14.6	$	19.9

12. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME, NET

The following represents the changes in accumulated other comprehensive (loss) income, net by component (in millions):


	Foreign						Total Accumulated
	Currency		Unrealized				Other
	Translation		Investment		Post-Retirement		Comprehensive
	Adjustment		Gain (Loss)		Benefits		Income (Loss)
Balance at December 31, 2019	$	38.2	$	0.2	$	(0.8)	$	37.6
Other comprehensive (loss) income		(41.0)		(0.3)		1.1		(40.2)
Balance at June 30, 2020	$	(2.8)	$	(0.1)	$	0.3	$	(2.6)

13. 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

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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, 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 measurements, 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 condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 (in millions):


	June 30, 2020
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities	$	155.6	$	155.6	$	—	$	—
Marketable securities:
Mutual funds		13.1		13.1		—		—
Money market funds		7.8		7.8		—		—
Total assets	$	176.5	$	176.5	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	20.5	$	—	$	—	$	20.5
Total Liabilities	$	20.5	$	—	$	—	$	20.5


	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities	$	47.6	$	47.6	$	—	$	—
Marketable securities:
Mutual funds		15.7		15.7		—		—
Money market funds		7.7		7.7		—		—
Total assets	$	71.0	$	71.0	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	2.2	$	—	$	—	$	2.2
Total Liabilities	$	2.2	$	—	$	—	$	2.2

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The following is a description of the Company’s valuation methodologies used for instruments measured at fair value on a recurring basis:

Financial Investments

Financial investments consist of highly liquid U.S. Treasury securities and marketable securities held in a rabbi trust for the Company’s non-qualified retirement and benefit plans, also referred to as deferred compensation plan assets. The deferred compensation plan assets have an equal and offsetting deferred compensation plan liability based on the value of the deferred compensation plan assets. 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. See Note 15 (“Employee Benefit Plans”) for more information.

Contingent Consideration Liabilities

In connection with the acquisition of Hanweck and acquisition of assets of FT Options and Trade Alert, the Company entered into contingent consideration arrangements with the former owners. The total fair value of the liabilities at June 30, 2020 was $20.5 million. That value is based on the Company’s estimate of the likelihood that certain performance targets in the respective acquisition agreements will be accomplished. Because the fair value measurements relating to the contingent consideration liabilities are subject to management judgment, measurement uncertainty is inherent in the valuation of the contingent consideration liabilities as of the reporting date. Based on the recorded balance of the liabilities, any measurement uncertainty related to this Level 3 measurement is immaterial as of June 30, 2020.

Assets and Liabilities 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. In connection with the annual impairment evaluation of goodwill and indefinite life intangibles, 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 its carrying amount. The Company did not perform an impairment test during the three months ended June 30, 2020, as there were no market events that would indicate it was more likely than not that these assets were impaired. These measurements are considered Level 3 and these assets are recognized at fair value if they are deemed to be impaired.

Equity investments without readily determinable fair values that are valued using the measurement alternative are measured at fair value on a non-recurring basis. During the six months ended June 30, 2020, no observable transactions or impairments impacted the measurements of the investments accounted for as other equity investments.

In addition, property held for sale as of June 30, 2020 was also measured at fair value, less selling costs at June 30, 2020. See Note 6 (“Property and Equipment, Net”) for more information on property held for sale.

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Fair Value of Assets and Liabilities

The following table presents the Company’s fair value hierarchy for certain assets and liabilities held by the Company as of June 30, 2020 and December 31, 2019 (in millions):


	June 30, 2020
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities	$	155.6	$	155.6	$	—	$	—
Deferred compensation plan assets		20.9		20.9		—		—
Total assets	$	176.5	$	176.5	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	20.5	$	—	$	—	$	20.5
Deferred compensation plan liabilities		20.9		20.9		—		—
Debt		868.6		—		868.6		—
Total liabilities	$	910.0	$	20.9	$	868.6	$	20.5


	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities	$	47.6	$	47.6	$	—	$	—
Deferred compensation plan assets		23.4		23.4		—		—
Total assets	$	71.0	$	71.0	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	2.2	$	—	$	—	$	2.2
Deferred compensation plan liabilities		23.4		23.4		—		—
Debt		867.6		—		867.6		—
Total liabilities	$	893.2	$	23.4	$	867.6	$	2.2

Certain financial assets and liabilities, including cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and Section 31 fees payable, are not measured at fair value on a recurring basis, but the carrying values approximate fair value due to their liquid or short-term nature.

Debt

The carrying amount of debt approximates its fair value based on quoted LIBOR or using a fixed rate at June 30, 2020 and is considered a Level 2 measurement.

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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 three and six months ended June 30, 2020.


	Level 3 Financial Liabilities for the Three Months Ended June 30, 2020
	Balance at		Realized (gains)
	Beginning of		losses during						Balance at
	Period		period		Additions		Settlements		End of Period
Liabilities
Contingent consideration liabilities	$	17.5	$	—	$	3.0	$	—	$	20.5
Total Liabilities	$	17.5	$	—	$	3.0	$	—	$	20.5


	Level 3 Financial Liabilities for the Six Months Ended June 30, 2020
	Balance at		Realized (gains)
	Beginning of		losses during						Balance at
	Period		period		Additions		Settlements		End of Period
Liabilities
Contingent consideration liabilities	$	2.2	$	—	$	20.5	$	(2.2)	$	20.5
Total Liabilities	$	2.2	$	—	$	20.5	$	(2.2)	$	20.5

14. SEGMENT REPORTING

The Company reports 5 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, as discussed in Note 1 (“Organization and Basis of Presentation”). Segment performance is primarily evaluated based on operating income (loss). The Company’s chief operating decision-maker does not use segment-level assets or income and expenses below operating income (loss) as key performance metrics; 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 totals based on the decision that those activities should not be used to evaluate the operating performance of the segments; however, operating expenses that relate to activities of a specific segment have been allocated to that segment.

Options. The Options segment includes listed options on market indices (“index options”), mostly on an exclusive basis, as well as on non-exclusive “multi-listed” options, such as options on the stocks of individual corporations (“equity options”) and options on ETPs, such as exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”). These options trade on Cboe Options, C2, BZX, and EDGX. Cboe Options is the Company’s primary options market and offers trading in listed options through a single system, known as the Hybrid trading model, which integrates electronic trading and traditional open outcry trading on the Cboe Options trading floor in Chicago. There was a temporary suspension of open outcry trading between March 13, 2020 and June 14, 2020 in response to the COVID-19 pandemic. C2, BZX, and EDGX are all-electronic options exchanges, and typically operate with different market models and fee structures than Cboe Options. The Options segment also includes applicable market data revenue generated from the U.S. tape plan, the sale of proprietary market data, index licensing, and access and capacity services.

U.S. Equities. The U.S. Equities segment includes listed equities and ETP transaction services that occur on BZX, BYX, EDGX, and EDGA. This segment also includes ETP listings on BZX, the Cboe Global Markets, Inc. common stock listing, applicable market data revenue generated from the U.S. tape plans, the sale of proprietary market data, routing services, access and capacity services and advertising activity from ETF.com.

Futures. The Futures segment includes the business of the Company’s futures exchange, CFE, which includes offerings for trading VIX futures and other futures products, as well as revenue generated from the sale of proprietary market data and from access and capacity services.

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European Equities. The European Equities segment includes the pan-European listed equities transaction services, ETPs, exchange traded commodities, and international depository receipts that occur on MTFs operated by Cboe Europe Equities. It also includes the listings business where ETPs can be listed on RMs. Cboe Europe Equities operates lit and dark books, a periodic auctions book, and a Large-in-Scale (“LIS”) trading negotiation facility. Cboe NL, launched in October 2019, operates similar business functionality that is offered by Cboe Europe, other than LIS, and provides for trading only in European Economic Area symbols. Cboe Europe Equities also includes revenue generated from the sale of proprietary market data and from access and capacity services.

Global FX. The Global FX segment includes institutional FX trading services that occur on the Cboe FX platform, non-deliverable forward FX transactions offered for execution on Cboe SEF, as well as revenue generated from the sale of proprietary market data and from access and capacity services.

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
Three Months Ended June 30, 2020
Revenues	$	317.6	$	490.5	$	21.6	$	25.3	$	13.7	$	—	$	868.7
Operating income (loss)		93.4		55.9		8.3		5.4		1.1		(2.4)		161.7
Three Months Ended June 30, 2019
Revenues	$	246.1	$	298.7	$	33.8	$	28.7	$	13.1	$	0.2	$	620.6
Operating income (loss)		80.1		36.4		19.4		5.7		(1.6)		(14.8)		125.2


											Corporate
							European				Items and
	Options		U.S. Equities		Futures		Equities		Global FX		Eliminations		Total
Six Months Ended June 30, 2020
Revenues	$	674.1	$	964.2	$	63.1	$	58.2	$	30.6	$	—	$	1,790.2
Operating income (loss)		236.8		104.9		35.2		14.9		4.1		(7.8)		388.1
Six Months Ended June 30, 2019
Revenues	$	477.1	$	594.5	$	64.3	$	59.0	$	27.0	$	0.2	$	1,222.1
Operating income (loss)		167.1		74.0		37.7		11.5		(2.0)		(17.7)		270.6

15. EMPLOYEE BENEFIT PLANS

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). 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 the Internal Revenue Code. The Deferred Compensation Plan assets, held in a rabbi trust, are subject to the claims of general creditors of the Company and totaled $20.9 million and $23.4 million at June 30, 2020 and December 31, 2019, respectively. Although the value of the plans are recorded in financial investments on the condensed consolidated balance sheets, there are equal and offsetting liabilities in other non-current liabilities. The investment results of these plans have no impact on net income as the investment results are recorded in equal amounts to both other expense, net and compensation and benefits expense in the condensed consolidated statements of income. The Company contributed $2.6 million and $3.6 million to the defined contribution plans for the three months ended June 30, 2020 and 2019, respectively, and $4.1 million and $5.2 million to the defined contribution plans for the six months ended June 30, 2020 and 2019, respectively. This expense is included in compensation and benefits in the condensed consolidated statements of income.

For employees of Cboe Europe Limited, the Company contributes to an employee-selected stakeholder contribution plan. The Company’s contribution amounted to $0.2 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively, and $0.4 million and $0.4 million for the six months ended June 30, 2020 and

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2019, respectively. This expense is included in compensation and benefits in the condensed consolidated statements of income.

16. 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 June 30, 2020, 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 June 30, 2020, Cboe Trading had net capital of $6.1 million, which was $5.0 million in excess of its required net capital of $1.1 million.

As entities regulated by the FCA, Cboe Europe Limited 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 Limited computes its FRR in accordance with its Financial Risk Assessment, as agreed by the FCA. This FRR was $21.7 million at June 30, 2020. At June 30, 2020, Cboe Europe Limited had capital in excess of its required FRR of $17.5 million.

In accordance with the Markets in Financial Instruments Directive of the FCA requirements, Cboe Chi-X Europe computes its CRR as the greater of the base requirement of $0.1 million at June 30, 2020, or the summation of the credit risk, market risk and fixed overheads requirements, as defined. At June 30, 2020, Cboe Chi-X Europe had capital in excess of its required CRR of $0.3 million. Cboe Chi-X Europe Limited is currently dormant having ceased offering its routing service in November 2018.

On March 8, 2019, Cboe Europe NL received approval from the Dutch Ministry of Finance to operate a RM, a MTF, and an approved publication arrangement in the Netherlands. As a RM, Cboe Europe NL is subject to minimum capital requirements, as established by the Dutch Ministry of Finance in the license dated March 8, 2019. As of June 30, 2020, the minimum capital requirement calculated in accordance with the license was $1.4 million. At June 30, 2020, Cboe Europe NL had capital in excess of its requirement of $4.4 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, which may include a line of credit, must be equal to at least six months of its projected operating costs. As of June 30, 2020, CFE had annual projected operating expenses of $58.8 million and had financial resources that exceeded this amount. Additionally, as of June 30, 2020, CFE had projected operating expenses for the upcoming six months of $29.4 million and had unencumbered, liquid financial assets, including a line of credit from Cboe, 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 June 30, 2020, Cboe SEF had annual projected operating expenses of $0.7 million and had financial resources that exceeded this amount. Additionally, as of June 30, 2020, Cboe SEF had projected operating expenses for the upcoming six months of $0.4 million and had unencumbered, liquid financial assets that exceeded this amount.

17. 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

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employees as a result of attaining certain age and service based requirements in the Company’s long-term incentive plan and award agreements.

The Company recognized stock-based compensation expense of $4.6 million and $6.3 million for the three months ended June 30, 2020 and 2019, respectively, and $12.9 million and $11.7 million for the six months ended June 30, 2020 and 2019, respectively. Stock-based compensation expense is included in compensation and benefits and acquisition-related costs in the condensed consolidated statements of income.

The activity in the Company’s stock options and restricted stock, consisting of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and performance-based restricted stock units (“PSUs”) for the six months ended June 30, 2020 was as follows:

Stock Options

The following table summarizes stock options activity during the six months ended June 30, 2020:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic Value
	Shares	Price		Term (years)	(in millions)
Outstanding and exercisable, December 31, 2019	10,834	$	18.59
Exercised	10,834		18.59
Outstanding and exercisable, June 30, 2020	—	$	—	—	$	—

The total intrinsic value of stock options exercised was $0.9 million and $22.4 million for the six months ended June 30, 2020 and 2019, respectively.

RSAs and RSUs

The following table summarizes RSA and RSU activity during the six months ended June 30, 2020:


		Weighted
	Number of	Average Grant
	Shares	Date Fair Value
Nonvested stock at December 31, 2019	436,013	$	92.47
Granted	183,731		117.43
Vested	(268,187)		88.07
Forfeited	(11,080)		105.47
Nonvested stock at June 30, 2020	340,477	$	108.98

RSAs granted to non-employee members of the board of directors have a one-year vesting period and vesting accelerates upon the occurrence of a change in control of the Company. Unvested portions of the RSAs will be forfeited if the director leaves the board of directors prior to the applicable vesting date. The RSAs have voting rights and entitle the holder to receive dividends.

RSUs entitle the holder to 1 share of common stock upon vesting, typically vest over a three year period, and vesting accelerates upon the occurrence of a change in control or a termination of employment following a change in control, or in the event of a participant’s earlier death or disability. Vesting will also accelerate upon a qualified retirement. Qualified retirement eligibility occurs once a holder is at least 55 years of age and has completed at least 10 years of service for grants awarded in and after 2017. 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.

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In connection with the Merger, 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 of the Merger 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 immediately prior to the effective time of the Merger (but taking into account any changes, including any acceleration of vesting of such Bats restricted shares, occurring by reason provided for in the agreement related to the Merger).

During the six months ended June 30, 2020, to satisfy employees’ tax obligations upon the vesting of restricted stock, the Company purchased 99,358 shares of common stock totaling $11.7 million as the result of the vesting of 268,187 shares of restricted stock.

PSUs

The following table summarizes restricted stock units contingent upon achievement of performance conditions, also known as PSUs, activity during the six months ended June 30, 2020:


		Weighted
	Number of	Average Grant
	Shares	Date Fair Value
Nonvested stock at December 31, 2019	132,248	$	105.75
Granted	72,975		125.62
Vested	(48,053)		108.91
Forfeited	(34,504)		109.85
Nonvested stock at June 30, 2020	122,666	$	115.18

PSUs include awards related to earnings per share during the performance period as well as awards 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 PSUs which incorporated the following assumptions: risk-free interest rate (1.36)%, three-year volatility (21.0)% and three-year correlation with S&P 500 Index (0.25). 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 1 share of the Company’s common stock. The vesting period for the PSUs contingent on the achievement of performance conditions is three years. For each of the performance awards, the PSUs will be settled in shares of the Company’s common stock following vesting of the PSU 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 a termination of employment following a change in control, or in the event of a participant’s earlier death or disability. Participants have no voting rights with respect to the PSUs until the issuance of the shares of common stock. Dividends are accrued by the Company and will be paid after the associated performance conditions are achieved and the PSUs are settled in shares of the Company’s common stock.

In the six months ended June 30, 2020, to satisfy employees’ tax obligations upon the vesting of PSUs, the Company purchased 19,456 shares of common stock totaling $2.4 million as the result of the vesting of 48,053 PSUs.

As of June 30, 2020, there were $30.9 million in total unrecognized compensation costs related to restricted stock, RSUs, and PSUs. These costs are expected to be recognized over a weighted average period of 2.0 years.

Employee Stock Purchase Plan

In May 2018, the Company’s stockholders approved an Employee Stock Purchase Plan, (“ESPP”), under which a total of 750,000 shares of the Company’s common stock was made available for purchase to employees. The ESPP is a broad-based plan that permits employees to contribute up to 10% of wages and base salary to purchase shares of the Company’s common stock at a discount, subject to applicable annual Internal Revenue Service limitations. Under the ESPP, a participant may not purchase more than a maximum of 312 shares of the Company’s common stock during any single offering period. No participant may accrue options to purchase shares of the Company’s common stock at a rate that exceeds $25,000 in fair market value of the Company’s common stock (determined at the time such options are

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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 value of the stock on the first day of the applicable offering period or the applicable exercise date.

The Company records compensation expense over the offering period related to the discount that is given to employees, which totaled $0.1 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, 710,103 shares were reserved for future issuance under the ESPP.

18. EQUITY

Common Stock

The Company’s common stock is listed on Cboe BZX under the trading symbol CBOE. As of June 30, 2020, 325,000,000 shares of common stock were authorized, $0.01 par value, and 125,976,027 and 108,757,176 shares were issued and outstanding, respectively. As of December 31, 2019, 325,000,000 shares of common stock were authorized, $0.01 par value, and 125,701,889 and 110,656,892 shares were issued and outstanding, respectively. The holders of common stock are entitled to 1 vote per share.

Common Stock in Treasury, at Cost

The Company accounts for the purchase of treasury stock under the cost method with the shares of stock repurchased reflected as a reduction to Cboe stockholders’ equity and included in common stock in treasury, at cost in the condensed consolidated balance sheets. Shares repurchased under the Company’s share repurchase program are available to be redistributed. When treasury shares are redistributed, they are recorded at the average cost of the treasury shares acquired. The Company held 17,218,851 and 15,044,997 shares of common stock in treasury as of June 30, 2020 and December 31, 2019, respectively.

Share Repurchase Program

In 2011, the board of directors approved an initial authorization for the Company to repurchase shares of its outstanding common stock of $100 million and approved additional authorizations of $100 million in each of 2012, 2013, 2014, 2015 and 2016, $150 million in February 2018, $100 million in August 2018, $250 million in October 2019, and $250 million in June 2020, for a total authorization of $1.4 billion. The Company expects to fund repurchases primarily through the use of existing cash balances. The program permits the Company to purchase shares, through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation.

The table below shows the repurchased shares of common stock under the Company’s share repurchase program during the periods presented as follows:


		Three Months Ended June 30,
	2020		2019
Number of shares of common stock repurchased		992,159		100
Average price paid per share	$	100.54	$	104.75
Total purchase price (in millions)	$	99.8	$	0.01

Since inception of the program through June 30, 2020, the Company has repurchased 15,771,049 shares of common stock at an average cost per share of $64.68, totaling $1.0 billion.

As of June 30, 2020 and 2019, the Company had $329.9 million and $171.1 million of availability remaining under its existing share repurchase authorizations, respectively.

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Purchase of Common Stock from Employees

The Company purchased 2,667 and 5,179 shares that were not part of the publicly announced share repurchase authorization from employees for an average price paid per share of $100.68 and $105.21 during the three months ended June 30, 2020 and 2019, respectively. These shares consisted of shares retained to cover payroll withholding taxes or option costs in connection with the vesting of RSAs, RSUs, PSUs, and stock option exercises.

Preferred Stock

The Company has authorized the issuance of 20,000,000 shares of preferred stock, par value $0.01 per share, issuable from time to time in one or more series. As of June 30, 2020, and December 31 2019, the Company had 0 shares of preferred stock issued or outstanding.

Dividends

During the three months ended June 30, 2020, the Company declared and paid cash dividends per share of $0.36 for an aggregate payout of $39.5 million. During the three months ended June 30, 2019, the Company declared and paid cash dividends per share of $0.31 for an aggregate payout of $34.8 million.

Each share of common stock, including RSAs, RSUs, and PSUs, is entitled to receive dividend and dividend equivalents, respectively, if, as and when declared by the board of directors of the Company. The Company’s expectation is to continue to pay dividends. The decision to pay a dividend, however, remains within the discretion of the Company’s board of directors and may be affected by various factors, including our earnings, financial condition, capital requirements, level of indebtedness and other considerations our board of directors deems relevant. Future debt obligations and statutory provisions, among other things, may limit, or in some cases prohibit, our ability to pay dividends.

As a holding company, the Company’s ability to declare and continue to pay dividends in the future with respect to its common stock will also be dependent upon the ability of its subsidiaries to pay dividends to it under applicable corporate law.

19. INCOME TAXES

The Company records income tax expense during interim periods based on the best estimate of the full year’s income tax rate as adjusted for discrete items, if any, that are taken into account in the relevant interim period. Each quarter, the Company updates its estimate of the annual effective income tax rate and any change in the estimated rate is recorded on a cumulative basis.

The effective income tax rate from continuing operations was 27.5% and 29.3% for the three months ended June 30, 2020 and 2019, respectively, and 27.6% and 27.5% for the six months ended June 30, 2020 and 2019, respectively. For the three months ended June 30, 2020, the Company recognized a lower effective tax rate due to the benefit of foreign-derived intangible income compared to the same period in 2019. The effective tax rate for the six months ended June 30, 2020 was higher than the comparable period the prior year due to excess tax benefits recognized in 2019.

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 U.S. Tax Court set the trial to start on April 20, 2020, but due to the COVID-19 public emergency, the U.S. Tax Court struck the April 20, 2020 trial date and suspended all other deadlines. 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 June 30, 2020, we have not resolved these matters, and proceedings continue in Tax Court and the Court of Federal Claims.

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20. EARNINGS PER SHARE

The computation of basic net income per common share 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 net income 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.

The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data) for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share amounts)	2020		2019		2020		2019
Basic earnings per share numerator:
Net income	$	113.6	$	84.5	$	271.0	$	178.6
Loss attributable to noncontrolling interest		—		3.8		—		4.0
Net income excluding noncontrolling interest		113.6		88.3		271.0		182.6
Change in redemption value of noncontrolling interest		—		(0.2)		—		(0.4)
Earnings allocated to participating securities		(0.3)		(0.5)		(0.7)		(1.1)
Net income allocated to common stockholders	$	113.3	$	87.6	$	270.3	$	181.1
Basic earnings per share denominator:
Weighted average shares outstanding		109.5		111.5		109.9		111.5
Basic earnings per share	$	1.04	$	0.79	$	2.46	$	1.62

Diluted earnings per share numerator:
Net income	$	113.6	$	84.5	$	271.0	$	178.6
Loss attributable to noncontrolling interest		—		3.8		—		4.0
Net income excluding noncontrolling interest		113.6		88.3		271.0		182.6
Change in redemption value of noncontrolling interest		—		(0.2)		—		(0.4)
Earnings allocated to participating securities		(0.3)		(0.5)		(0.7)		(1.1)
Net income allocated to common stockholders	$	113.3	$	87.6	$	270.3	$	181.1
Diluted earnings per share denominator:
Weighted average shares outstanding		109.5		111.5		109.9		111.5
Dilutive potential common shares outstanding		0.1		0.1		0.2		0.1
Total dilutive weighted average shares		109.6		111.6		110.1		111.6
Diluted earnings per share	$	1.03	$	0.78	$	2.45	$	1.62

For the periods presented, the Company did not have shares of stock-based compensation that would have an anti-dilutive effect on the computation of diluted net income per common share.

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21. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Legal Proceedings

As of June 30, 2020, 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 the condensed consolidated 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 remote, reasonably possible, or probable is based on its assessment of the ultimate outcome of the matter following all appeals.

As of June 30, 2020, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these legal proceedings and claims, regulatory 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 proceeding is inherently uncertain and an adverse outcome from certain matters could have a material effect on the financial position, results of operations, or cash flows of the Company in any given reporting period.

Except as set forth herein, there have been no material changes during the period covered by this Form 10-Q from the legal proceedings disclosures in the Annual Report on Form 10-K for the year ended December 31, 2019.

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. On May 28, 2019, the Lower Court issued an opinion and order denying the Exchange Defendants’ motion to dismiss. On June 17, 2019, the Exchange Defendants filed a motion seeking interlocutory appeal of the May 28, 2019 dismissal order, which was denied July 16, 2019. Exchange Defendants filed their answers on July 25, 2019. The discovery period in the matter commenced and is

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scheduled to continue through 2020. 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 by the SEC on October 16, 2018, on a separate SIFMA denial of access application regarding fees proposed by Nasdaq and the NYSE for their respective market data products. NASDAQ and NYSE filed petitions for review (“PFRs”) with the Court of Appeals for the D.C. Circuit (“D.C. Circuit”) seeking to appeal the SEC’s opinion (“Bellwether Case”). On June 5, 2020, the D.C. Circuit granted the PFRs and vacated the SEC’s finding that SIFMA could challenge generally applicable market data fees as a denial of access under Section 19(d) of the Exchange Act. In a second order entered 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 prior motion for stay of the Order. On December 3, 2018, SIFMA filed a response to NYSE’s motion for stay. 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 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, 2019 a motion 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 pending before the D.C. Circuit. On March 29, 2019, the D.C. Circuit issued an order indicating that SIFMA’s motion to dismiss will be considered with the underlying merits of the Petition for Review. On May 7, 2019, the SEC denied the Exchanges and NYSE’s motion for reconsideration of the Order. The SEC also further tolled the effectiveness of the remand order subject to the resolution of the substantive SIFMA case against Nasdaq and NYSE Arca that is already before the D.C. Circuit. On June 17, 2019, the Exchanges filed a petition for review of the May 7, 2019 SEC order denying reconsideration of the Order with the D.C. Circuit and of the Order. The Exchanges’ joint opening brief was filed on October 23, 2019, the SEC’s response was filed on November 22, 2019, the Exchanges’ joint reply was filed on December 20, 2019 and final briefs were filed on January 10, 2020. Oral arguments were held on February 18, 2020. On June 5, 2020, the D.C. Circuit remanded the Order to the SEC for reconsideration in light of the Bellwether Case opinion, i.e., that generally applicable market data fees may not be challenged as a denial of access under Section 19(d) of the Exchange Act. 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. The Company is unable to estimate what, if any, liability may result from this litigation.

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

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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, 3 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. On May 29, 2019, the federal district court for the Northern District of Illinois granted the Company’s motion to dismiss plaintiffs’ entire complaint against the Company. The state law negligence claim was dismissed with prejudice and the other claims were dismissed without prejudice with leave to file an amended complaint, which plaintiffs filed on July 19, 2019. On August 28, 2019, the Company filed its second motion to dismiss the amended consolidated complaint and plaintiffs filed their response on October 8, 2019. On January 27, 2020, the federal district court for the Northern District of Illinois granted the Company’s second motion to dismiss and all counts against the Company were dismissed with prejudice. On April 21, 2020, the federal district court for the Northern District of Illinois granted plaintiffs’ motion to certify the January 27, 2020 dismissal order for an immediate appeal. On May 19, 2020, plaintiffs filed a notice of appeal with the Court of Appeals for the Seventh Circuit (“7^th Circuit”), seeking to appeal the April 21, 2020 order granting the entry of partial final judgment and both orders granting the Company’s motions to dismiss entered on May 29, 2019 and January 27, 2020. On June 29, 2020, plaintiffs filed their opening brief with the 7^th Circuit. 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.

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 rule enforcement reviews and examinations by the CFTC. Cboe SEF, LLC is a swap execution facility registered with the CFTC and subject to routine rule enforcement reviews and examinations 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 and the CFTC’s Division of Market Oversight as well as the SEC Division of Enforcement and CFTC Division of Enforcement seeking information about the Company’s compliance with its obligations as a self-regulatory organization under the federal securities laws and Commodity Exchange Act as well as members’ compliance with the federal securities laws and Commodity Exchange Act. 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 likely outcome of any of these other reviews, inspections, investigations or other legal proceedings is expected to have a material impact on the Company’s financial position, results of operations, liquidity or capital resources.

See also Note 7 (“Credit Losses”) for information on promissory notes related to the CAT.

See also Note 19 (“Income Taxes”).

Contractual Obligations

See Note 22 (“Leases”) for information on lease obligations.

22. LEASES

The Company currently leases office space, data centers, remote network operations centers, and equipment under non-cancelable operating leases with third parties as of June 30, 2020. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets and the Company recognizes lease expense in

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facilities costs within the condensed consolidated statements of income for these leases on a straight-line basis over the lease term. Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more, and some of which include the Company’s option to terminate the leases within one year. As the implicit rate in the Company’s leases are generally not reasonably determinable, the Company applies an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. During the three months ended June 30, 2020, an additional $6.7 million of right of use assets and $13.5 million of lease liabilities were added related to a new operating lease. Additionally, the Company recognized $4.8 million related to leasehold improvement incentives paid by the lessor.

In September 2019, the Company signed a new lease to secure approximately 185,000 square feet of office space within the Old Post Office building in Chicago, Illinois, which will serve as the Company’s new global headquarters. The initial term of the lease is 187 months from the accounting commencement date, January 13, 2020. The Company has the option to renew the lease term for an additional 60 months. The total legally binding minimum lease payments for this lease are approximately $98.8 million. See Note 6 (“Property and Equipment, Net”) for information on the current headquarters location.

Additionally, in September 2019, the Company signed a new lease to secure approximately 40,000 square feet of office space within the Chicago Board of Trade Building in Chicago, Illinois, where the Company plans to build a new trading floor and office space. The initial term of the lease is 150 months from the accounting commencement date, May 1, 2020. The Company has the option to renew the lease term for an additional 60 months. The total legally binding minimum lease payments for this lease are approximately $17.1 million.

The following table presents the supplemental balance sheet information related to leases as of June 30, 2020 and December 31, 2019, respectively (in millions):


	June 30,		December 31,
	2020		2019
Operating lease right of use assets	$	117.8	$	53.4
Total leased assets	$	117.8	$	53.4

Accrued liabilities	$	10.7	$	8.7
Non-current operating lease liabilities		137.3		46.7
Total leased liabilities	$	148.0	$	55.4

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The following table presents operating lease costs and other information as of and for the three and six months ended June 30, 2020 and 2019, respectively (in millions, except as stated):


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Operating lease costs (1)	$	5.0	$	3.2	$	9.8		$	6.8

Lease term and discount rate information:
Weighted average remaining lease term (years)						12.8			9.5
Weighted average discount rate						3.4	%		3.5	%

Supplemental cash flow information and non-cash activity:
Cash paid for amounts included in the measurement of lease liabilities	$	2.6	$	2.7	$	5.4		$	4.8
Lease incentive for leasehold improvements		4.8		—		25.2			—
Right-of-use assets obtained in exchange for lease liabilities (2)		6.7		0.1		70.9			19.0

(1)	Includes short-term lease and variable lease costs, which are immaterial.

(2)	Excludes right-of-use assets and lease liabilities recognized upon adoption of the lease accounting standard in 2019 of $40.3 million and $42.8 million, respectively.

The maturities of the lease liabilities are as follows as of June 30, 2020 (in millions):


	June 30,
	2020
Remainder of 2020	$	7.4
2021		16.3
2022		16.9
2023		15.7
2024		11.6
After 2024		118.2
Total lease payments (1)	$	186.1
Less: Interest		(38.1)
Present value of lease liabilities	$	148.0

(1)	Total lease payments include $20.4 million related to options to extend lease terms that are reasonably certain of being exercised.

23. SUBSEQUENT EVENTS

On July 1, 2020, the Company acquired the remaining 80% interest in European Central Counterparty N.V. (“EuroCCP”). In connection with the acquisition, EuroCCP, as borrower, the Company, as guarantor of scheduled interest and fees on borrowings (but not the principal amount of any borrowings), entered into a Euro 1.5 billion committed syndicated multicurrency revolving and swingline credit facility agreement (the “Facility”) with Bank of America Merrill Lynch International Designated Activity Company, as co-ordinator, facility agent, lender, sole lead arranger and sole bookrunner, Citibank N.A., as security agent, and certain other lenders named therein. As of July 31, 2020, no borrowings were outstanding under the Facility. Accordingly, at July 31, 2020, Euro 1.5 billion of borrowing capacity was available for the purposes permitted by the Facility.

There have been no additional subsequent events that would require disclosure in, or adjustment to, the condensed consolidated financial statements as of and for the six months ended June 30, 2020.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto, included in Item 1 in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, and as contained in that report, the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This discussion contains forward-looking information. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

The Company is headquartered in Chicago with offices in Kansas City, New York, London, San Francisco, Sarasota Springs, Belfast, Amsterdam, Singapore, Hong Kong, and Ecuador.

Business Segments

The Company reports five business segments: Options, U.S. Equities, Futures, European Equities, and Global FX. Segment performance is primarily based on operating income (loss). The Company has aggregated all of its corporate costs and eliminations, as well as other business ventures, within Corporate Items and Eliminations; however, operating expenses that relate to activities of a specific segment have been allocated to that segment. Our management allocates resources, assesses performance and manages our business according to these segments:

Options. Our options segment includes listed options on market indices (“index options”), mostly on an exclusive basis, as well as on non-exclusive “multi-listed” options, such as options on the stocks of individual corporations (“equity options”) and options on ETPs, such as exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”). These options trade on Cboe Options, C2, BZX, and EDGX. Cboe Options is our primary options market and offers trading in listed options through a single system, known as our Hybrid trading model, which integrates electronic trading and traditional open outcry trading on our trading floor in Chicago. There was a temporary suspension of open outcry trading between March 13, 2020 and June 14, 2020 in response to the COVID-19 pandemic. C2, BZX, and EDGX are our all-electronic options exchanges, and typically operate with different market models and fee structures than Cboe Options. The Options segment also includes applicable market data revenue generated from the U.S. tape plan, the sale of proprietary market data, index licensing, and access and capacity services.

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Futures. Our Futures segment includes the business of our futures exchange, CFE, which includes offerings for trading VIX futures and other futures products, as well as revenue generated from the sale of proprietary market data and from access and capacity services.

Global FX. Our Global FX segment includes institutional FX trading services that occur on the Cboe FX platform, as well as non-deliverable forward FX transactions offered for execution on Cboe SEF, as well as revenue generated from the sale of proprietary market data and from access and capacity services.

General Factors Affecting Results of Operations

In broad terms, our business performance is impacted by a number of drivers, including macroeconomic events affecting the risk and return of financial assets, investor sentiment, the regulatory environment for capital markets, geopolitical events, central bank policies and changing technology, particularly in the financial services industry. Our future revenues and net income will continue to be influenced by a number of domestic and international economic trends, including:

●

trading volumes on our proprietary products such as VIX options and futures and SPX options;

●

trading volumes in listed equity securities and ETPs in both the U.S. and Europe, volumes in listed equity options, and volumes in institutional FX trading;

●

the demand for and the pricing structure of the U.S. tape plan market data distributed by the Securities Information Processors (SIPs), which determines the pool size of the industry market data revenue we receive based on our market share;

●

consolidation and expansion of our customers and competitors in the industry;

●

the demand for information about, or access to, our markets, which is dependent on the products we trade, our importance as a liquidity center and the quality and pricing of our data and access and capacity services;

●

continuing pressure in transaction fee pricing due to intense competition in the United States and Europe;

●

significant fluctuations in foreign currency translation rates or weakened value of currencies; and

●

regulatory changes relating to market structure and increased capital requirements, and those which affect certain types of instruments, transactions, pricing structures, capital market participants or reporting or compliance requirements, including any changes resulting from Brexit.

A number of significant structural, political and monetary issues and the COVID-19 pandemic continue to confront the global economy, and instability could continue, resulting in an increased or subdued level of market volatility, changes in trading volumes and greater uncertainty.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. We are closely monitoring developments around COVID-19 and following guidance provided by governmental and public health agencies. In response to COVID-19, we have provided frequent communications to employees, customers, regulators, critical vendors, technology equipment suppliers, data and disaster recovery centers, and other service providers and instructed non-essential employees to work from home on a temporary basis, implemented travel restrictions, and temporarily suspended open outcry trading between March 13, 2020 and June 14, 2020, without any known significant disruptions to our business or control processes. We will continue to take further actions as necessary in response to addressing COVID-19. As of the date of this report, it is too early to determine the full impact this virus may have on the global financial markets and the overall economy. Our business and operations could be materially and adversely affected by the effects of COVID-19, however, the extent to which our results could be affected by COVID-19 largely depends on future developments which cannot be accurately predicted and are uncertain. Further, changes in trading

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behavior, additional suspensions of open outcry trading, market disruptions and other future developments caused by the effects of COVID-19 could impact trading volumes and the demand for our products, market data, and services, which could have a material adverse effect on our business, financial condition, operating results and cash flows for the remainder of fiscal year 2020 and could be material during any future period impacted either directly or indirectly by this pandemic.

Components of Revenues

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.

Access and Capacity Fees

Access and capacity fees represent fees assessed for the opportunity to trade, including fees for trading-related functionality across all segments, terminal and other equipment rights, maintenance services, trading floor space and telecommunications services. Facilities, systems services and other fees are generally monthly fee-based. 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. All access and capacity fees associated with the trading floor are recognized in the Options segment. There is no remaining performance obligation after revenue is recognized.

Market Data Fees

Market data fees represent the fees from the U.S. tape plans and fees from 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 using trading and/or quoting activity. 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

Regulatory fees primarily represent fees collected by the Company to cover the Section 31 fees charged to the Exchanges under the authority of the SEC (Cboe Options, C2, BZX, BYX, EDGX, and EDGA) and are charged by the SEC. Consistent with industry practice, the fees charged to customers are based on the fee set by the SEC per notional value of U.S. Equities transactions and per round turn of Options transactions 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 principals in these transactions. Regulatory fees also include the options regulatory fee (“ORF”) which supports the Company’s regulatory oversight function in the Options segment, along with other miscellaneous regulatory fees, and neither can be used for non-regulatory purposes. The ORF and miscellaneous fees are recognized when the performance obligation is fulfilled.

Other Revenue

Other revenue primarily includes among other items, 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 websites.

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Components of Cost of Revenues

Liquidity Payments

Liquidity payments are directly correlated to the volume of securities traded on our markets. As stated above, we record the liquidity rebates paid to market participants providing liquidity, in the case of C2, BZX, EDGX, and Cboe Europe Equities, as cost of revenue. BYX and EDGA offer a pricing model pursuant to which we rebate liquidity takers for executing against an order resting on our book, which is also recorded as a cost of revenue.

Routing and Clearing

Various rules require that U.S. options and equities trade executions occur at the National Best Bid/Offer (“NBBO”) displayed by any exchange. Linkage order routing consists of the cost incurred to provide a service whereby Cboe equities and options exchanges deliver orders to other execution venues when there is a potential for obtaining a better execution price or when instructed to directly route an order to another venue by the order provider. The service affords exchange order flow providers an opportunity to obtain the best available execution price and may also result in cost benefits to those clients. Such an offering improves our competitive position and provides an opportunity to attract orders which would otherwise bypass our exchanges. We utilize third-party brokers or our broker-dealer, Cboe Trading, to facilitate such delivery.

Section 31 Fees

Exchanges under the authority of the SEC (Cboe Options, C2, BZX, BYX, EDGX, and EDGA) are assessed fees pursuant to the Exchange Act designed to recover the costs to the U.S. government of supervision and regulation of securities markets and securities professionals. We treat these fees as a pass-through charge to customers executing eligible listed equities and listed equity options trades. Accordingly, we recognize the amount that we are charged under Section 31 as a cost of revenues and the corresponding amount that we charge our customers as regulatory transaction fees revenue. Since the regulatory transaction fees recorded in revenues are equal to the Section 31 fees recorded in cost of revenues, there is no impact on our operating income. CFE, Cboe Europe Limited and Cboe FX are not U.S. national securities exchanges, and accordingly are not charged Section 31 fees.

Royalty Fees

Royalty fees primarily consist of license fees paid by us for the use of underlying indices in our proprietary products usually based on contracts traded. The Company has licenses with the owners of the S&P 500 Index, S&P 100 Index and certain other S&P indices, FTSE Russell indices, the DJIA, MSCI, and certain other index products. This category also includes fees related to the dissemination of market data related to S&P indices and PULse system terminal fees.

Components of Operating Expenses

Compensation and Benefits

Compensation and benefits represent our largest expense category and tend to be driven by our staffing requirements, financial performance, and the general dynamics of the employment market. Stock-based compensation is a non-cash expense related to equity awards. Stock-based compensation can vary depending on the quantity and fair value of the award on the date of grant and the related service period.

Depreciation and Amortization

Depreciation and amortization expense results from the depreciation of long-lived assets purchased, the amortization of purchased and internally developed software, and the amortization of intangible assets.

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Technology Support Services

Technology support services consists primarily of costs related to the maintenance of computer equipment supporting our system architecture, circuits supporting our wide area network, support for production software, fees paid to information vendors for displaying data and off-site system hosting fees.

Professional Fees and Outside Services

Professional fees and outside services consist primarily of consulting services, which include: supplemental staff activities primarily related to systems development and maintenance, legal, regulatory and audit, and tax advisory services.

Travel and Promotional Expenses

Travel and promotional expenses primarily consist of advertising, costs for special events, sponsorship of industry conferences, options education seminars and travel-related expenses.

Facilities Costs

Facilities costs primarily consist of expenses related to owned and leased properties including rent, maintenance, utilities, real estate taxes and telecommunications costs.

Acquisition-Related Costs

Acquisition-related costs relate to acquisitions and other strategic opportunities, including the Merger. The acquisition-related costs include fees for investment banking advisors, lawyers, accountants, tax advisors, public relations firms, severance and retention costs, impairment of goodwill, capitalized software and facilities, and other external costs directly related to the mergers and acquisitions, as well as compensation-related expenses.

Other Expenses

Other expenses represent costs necessary to support our operations that are not already included in the above categories.

Non-Operating Expense

Income and expenses incurred through activities outside of our core operations are considered non-operating and are classified as other expense. These activities primarily include interest earned on the investing of excess cash, interest expense related to outstanding debt facilities, dividend income, income and unrealized gains and losses related to investments held in a rabbi trust for the Company’s non-qualified retirement and benefit plans, and equity earnings or losses from our investments in other business ventures.

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Financial Summary

The following summarizes changes in financial performance for the three and six months ended June 30, 2020 and 2019 and certain non-GAAP financial measures. These non-GAAP financials measures assist management in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items management believes do not reflect our underlying operations. Please see the footnotes below for additional information and reconciliations from our condensed consolidated financial statements. “YTD” represents the six-month period ended June 30^th.

(1)

These are Non-GAAP figures for which reconciliations are provided below.


	Three Months Ended June 30,						Increase/			Percent		Six Months Ended June 30,						Increase/			Percent
	2020			2019			(Decrease)			Change		2020			2019			(Decrease)			Change

	(in millions, except percentages, earnings per share, and as noted below)											(in millions, except percentages, earnings per share, and as noted below)
Total revenues	$	868.7		$	620.6		$	248.1		40.0	%	$	1,790.2		$	1,222.1		$	568.1		46.5	%
Total cost of revenues		571.8			337.4			234.4		69.5	%		1,135.0			659.5			475.5		72.1	%
Revenues less cost of revenues		296.9			283.2			13.7		4.8	%		655.2			562.6			92.6		16.5	%
Total operating expenses		135.2			158.0			(22.8)		(14.4)	%		267.1			292.0			(24.9)		(8.5)	%
Operating income		161.7			125.2			36.5		29.2	%		388.1			270.6			117.5		43.4	%
Income before income tax provision		156.6			119.6			37.0		30.9	%		374.1			246.3			127.8		51.9	%
Income tax provision		43.0			35.1			7.9		22.5	%		103.1			67.7			35.4		52.3	%
Net income		113.6			84.5			29.1		34.4	%		271.0			178.6			92.4		51.7	%
Basic earnings per share	$	1.04		$	0.79		$	0.25		31.6	%	$	2.46		$	1.62		$	0.84		51.9	%
Diluted earnings per share		1.03			0.78			0.25		32.1	%		2.45			1.62			0.83		51.2	%
EBITDA(1)		201.6			176.4			25.2		14.3	%		466.5			359.6			106.9		29.7	%
EBITDA margin(2)		67.9	%		62.3	%		5.6	%		*		71.2	%		63.9	%		7.3	%		*
Adjusted EBITDA(1)	$	211.0		$	193.6		$	17.4		9.0	%	$	476.7		$	379.1		$	97.6		25.7	%
Adjusted EBITDA margin(3)		71.1	%		68.4	%		2.7	%		*		72.8	%		67.4	%		5.4	%		*
Adjusted earnings(4)	$	143.3		$	125.7		$	17.6		14.0	%	$	325.6		$	249.1		$	76.5		30.7	%
Adjusted earnings margin(5)		48.3	%		44.4	%		3.9	%		*		49.7	%		44.3	%		5.4	%		*
Diluted weighted average shares outstanding		109.6			111.6			(2.0)		(1.8)	%		110.1			111.6			(1.5)		(1.3)	%
Adjusted Diluted earnings per share(5)	$	1.31		$	1.13		$	0.18		15.9	%	$	2.96		$	2.23		$	0.73		32.7	%

*	Not meaningful

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The following summarizes changes in certain operational and financial metrics for the six months ended June 30, 2020 compared to the six months ended June 30, 2019:

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The following table includes operational and financial metrics for our Options, U.S. Equities, Futures, European Equities, and Global FX segments. These metrics are reviewed by our senior management in evaluating the performance of our business. The following summarizes changes in certain operational and financial metrics for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019:



	Three Months Ended June 30,						Increase/			Percent		Six Months Ended June 30,						Increase/			Percent
	2020			2019			(Decrease)			Change		2020			2019			(Decrease)			Change

	(in millions, except percentages, trading days, and as noted below)											(in millions, except percentages, trading days, and as noted below)
Options:
Average daily volume (ADV) (in millions of contracts):
Total touched contracts		9.9			7.3			2.6		35.6	%		10.3			7.2			3.1		43.1	%
Market ADV		27.6			19.3			8.3		43.0	%		27.8			19.2			8.6		44.8	%
Index contract ADV		1.6			1.9			(0.3)		(15.8)	%		2.1			1.9			0.2		10.5	%
Multi-Listed contract ADV		8.3			5.4			2.9		53.7	%		8.2			5.3			2.9		54.7	%
Number of trading days		63			63			—		—	%		125			124			1		0.8	%
Total Options revenue per contract (RPC) (6)	$	0.182		$	0.238		$	(0.056)		(23.5)	%	$	0.208		$	0.239		$	(0.031)		(13.0)	%
Multi-Listed Options RPC (6)		0.051			0.058			(0.007)		(12.1)	%		0.052			0.062			(0.010)		(16.1)	%
Index Options RPC (6)		0.870			0.736			0.134		18.2	%		0.815			0.733			0.082		11.2	%
Market share		36.0	%		37.7	%		(1.7)	%		*		37.1	%		37.2	%		(0.1)	%		*
U.S. Equities:
ADV:
Total touched shares (in billions)		2.1			1.1			1.0		90.9	%		2.0			1.2			0.8		66.7	%
Market ADV (in billions)		12.4			6.9			5.5		79.7	%		11.7			7.2			4.5		62.5	%
Trading days		63			63			—		—	%		125			124			1		0.8	%
Market share		16.1	%		15.7	%		0.4	%		*		16.4	%		15.9	%		0.5	%		*
U.S. Equities (net capture per one hundred touched shares)(7)	$	0.025		$	0.028		$	(0.003)		(10.7)	%	$	0.025		$	0.029		$	(0.004)		(13.8)	%
U.S. ETPs: launches (number of launches)		31			19			12		63.2	%		49			30			19		63.3	%
U.S. ETPs: listings (number of listings)		374			324			50		15.4	%		374			324			50		15.4	%
Futures:
ADV (in thousands)		143.8			257.4			(113.6)		(44.1)	%		236.6			244.6			(8.0)		(3.3)	%
Trading days		63			63			—		—	%		125			124			1		0.8	%
Revenue per contract	$	1.743		$	1.748		$	(0.005)		(0.3)	%	$	1.748		$	1.744		$	0.004		0.2	%
European Equities:
ADNV:
Matched and touched ADNV (in billions)	€	6.3		€	8.3		€	(2.0)		(24.1)	%	€	7.7		€	8.7		€	(1.0)		(11.5)	%
Market ADNV (in billions)		40.1			40.8			(0.7)		(1.7)	%		45.8			41.3			4.5		10.9	%
Trading days		63			63			—		—	%		127			126			1		0.8	%
Market share		15.8	%		20.3	%		(4.5)	%		*		16.8	%		21.2	%		(4.4)	%		*
European Equities (net capture per matched notional value in basis points)(8)		0.248			0.224			0.024		10.7	%		0.246			0.217			0.029		13.4	%
Average Euro/British pound exchange rate	£	0.887		£	0.874		£	0.013		1.5	%	£	0.874		£	0.873		£	0.001		0.1	%
Global FX:
ADNV (in billions)	$	31.8		$	32.5		$	(0.7)		(2.2)	%	$	37.5		$	34.5		$	3.0		8.7	%
Trading days		65			65			—		—	%		129			128			1		0.8	%
Global FX (net capture per one million dollars traded)(9)		2.77			2.65			0.12		4.5	%		2.73			2.63			0.10		3.8	%
Average British pound/U.S. dollar exchange rate	$	1.241		$	1.285		$	(0.044)		(3.4)	%	$	1.261		$	1.294		$	(0.033)		(2.5)	%

*	Not meaningful

(1)

EBITDA is defined as income before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before acquisition-related costs and impairment charges attributed to noncontrolling interest. EBITDA and adjusted EBITDA do not represent, and should not be considered as, alternatives to net income as determined in accordance with GAAP. We have presented EBITDA and adjusted EBITDA because we consider them important supplemental measures of our performance and believe that they are frequently used by analysts, investors and other interested parties in the evaluation of companies. In addition, we use adjusted EBITDA as a measure of operating performance for preparation of our forecasts and evaluating our leverage ratio for the debt to earnings covenant included in our outstanding credit facility. Other companies may calculate EBITDA and adjusted EBITDA differently than we do. EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.

(2)	EBITDA margin represents EBITDA divided by revenues less cost of revenues.

(3)	Adjusted EBITDA margin represents adjusted EBITDA divided by revenues less cost of revenues.

(4)	Adjusted earnings is defined as net income adjusted for amortization of purchased intangibles, acquisition-related costs, change in redemption value of noncontrolling interest, impairment changes attributed to noncontrolling

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interest and net income allocated to participating securities, net of the income tax effects of these adjustments. Adjusted earnings does not represent, and should not be considered as, an alternative to net income, as determined in accordance with GAAP. We have presented adjusted earnings because we consider it an important supplemental measure of our performance and we use it as the basis for monitoring our own core operating financial performance relative to other operators of exchanges. We also believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies. We believe that investors may find this non-GAAP measure useful in evaluating our performance compared to that of peer companies in our industry. Other companies may calculate adjusted earnings differently than we do. Adjusted earnings has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

(5)	Adjusted diluted earnings per share represents Adjusted earnings divided by diluted weighted average shares outstanding.

(6)	Revenue per contract represents transaction fees less liquidity payments and routing and clearing costs divided by total contracts traded during the period.

(7)	Net capture per one hundred touched shares refers to transaction fees less liquidity payments and routing and clearing costs divided by the product of one-hundredth ADV of touched shares on BZX, BYX, EDGX, and EDGA and the number of trading days for the period.

(8)	Net capture per matched notional value in basis points refers to transaction fees less liquidity payments in British pounds divided by the product of ADNV in British pounds of shares matched on Cboe Europe Limited and the number of trading days for the period.

(9)	Net capture per one million dollars traded refers to net transaction fees, divided by the product of one-millionth of ADNV traded on the Cboe FX market, the number of trading days, and two, which represents the buyer and seller that are both charged on the transaction for the period.

The following tables are reconciliations of net income allocated to common stockholders to EBITDA and adjusted EBITDA (in millions):


	Three Months Ended June 30,
	2020
	Options		U.S. Equities		Futures		European Equities		Global FX		Corporate		Total

	(in millions)
Net income (loss) allocated to common stockholders	$	93.4	$	54.5	$	8.3	$	3.5	$	1.1	$	(47.5)	$	113.3
Interest expense, net		—		—		—		—		—		7.3		7.3
Income tax provision		—		1.3		—		2.2		—		39.5		43.0
Depreciation and amortization		7.6		16.4		0.8		6.7		6.5		—		38.0
EBITDA		101.0		72.2		9.1		12.4		7.6		(0.7)		201.6
Acquisition-related costs		7.5		—		—		—		—		1.9		9.4
Adjusted EBITDA	$	108.5	$	72.2	$	9.1	$	12.4	$	7.6	$	1.2	$	211.0

	Three Months Ended June 30,
	2019
	Options		U.S. Equities		Futures		European Equities		Global FX		Corporate		Total

	(in millions)
Net income (loss) allocated to common stockholders	$	80.1	$	35.9	$	19.3	$	3.9	$	(1.6)	$	(50.0)	$	87.6
Interest expense (income), net		—		—		—		(0.1)		—		10.1		10.0
Income tax provision		—		0.3		—		2.5		—		32.3		35.1
Depreciation and amortization		9.1		17.7		0.4		7.0		7.1		2.4		43.7
EBITDA		89.2		53.9		19.7		13.3		5.5		(5.2)		176.4
Acquisition-related costs		8.7		—		—		0.3		—		11.8		20.8
Impairment charges attributed to noncontrolling interest		—		—		—		—		—		(3.6)		(3.6)
Adjusted EBITDA	$	97.9	$	53.9	$	19.7	$	13.6	$	5.5	$	3.0	$	193.6

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	Six Months Ended June 30,
	2020
	Options		U.S. Equities		Futures		European Equities		Global FX		Corporate		Total

	(in millions)
Net income (loss) allocated to common stockholders	$	236.7	$	102.2	$	35.1	$	10.3	$	4.1	$	(118.1)	$	270.3
Interest expense (income), net		—		—		—		(0.1)		—		14.7		14.6
Income tax provision		—		2.5		—		5.1		—		95.5		103.1
Depreciation and amortization		15.3		34.2		1.6		13.9		13.5		—		78.5
EBITDA		252.0		138.9		36.7		29.2		17.6		(7.9)		466.5
Acquisition-related costs		2.0		—		—		—		—		8.2		10.2
Adjusted EBITDA	$	254.0	$	138.9	$	36.7	$	29.2	$	17.6	$	0.3	$	476.7

	Six Months Ended June 30,
	2019
	Options		U.S. Equities		Futures		European Equities		Global FX		Corporate		Total

	(in millions)
Net income (loss) allocated to common stockholders	$	158.2	$	72.9	$	37.5	$	6.9	$	(2.0)	$	(92.4)	$	181.1
Interest expense (income), net		—		—		—		(0.2)		—		20.1		19.9
Income tax provision		—		0.7		—		5.0		—		62.0		67.7
Depreciation and amortization		19.0		37.6		0.8		14.5		14.9		4.1		90.9
EBITDA		177.2		111.2		38.3		26.2		12.9		(6.2)		359.6
Acquisition-related costs		9.5		—		—		0.6		0.3		12.7		23.1
Impairment charges attributed to noncontrolling interest		—		—		—		—		—		(3.6)		(3.6)
Adjusted EBITDA	$	186.7	$	111.2	$	38.3	$	26.8	$	13.2	$	2.9	$	379.1

The following is a reconciliation of net income allocated to common stockholders to adjusted earnings (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

	(in millions)				(in millions)
Net income allocated to common stockholders	$	113.3	$	87.6	$	270.3	$	181.1
Amortization		30.0		34.1		62.5		71.7
Acquisition-related costs		9.4		20.8		10.2		23.1
Change in redemption value of noncontrolling interest		—		0.2		—		0.4
Tax effect of adjustments		(9.3)		(13.2)		(16.9)		(23.2)
Impairment charges attributed to noncontrolling interest		—		(3.6)		—		(3.6)
Net income allocated to participating securities		(0.1)		(0.2)		(0.5)		(0.4)
Adjusted earnings	$	143.3	$	125.7	$	325.6	$	249.1

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Revenues

Total revenues for the three and six months ended June 30, 2020 increased $248.1 million, or 40.0%, and $568.1 million, or 46.5%, respectively, compared to the prior periods, primarily due to increased transaction fees of $191.4 million, or 44.8%, and $423.6 million, or 49.5%, respectively, as a result of increased market volumes in the U.S. Equities and Options segments, coupled with an increase in regulatory fees. The following summarizes changes in revenues for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019:


	Three Months Ended								Six Months Ended
	June 30,				Increase/		Percent		June 30,				Increase/		Percent
	2020		2019		(Decrease)		Change		2020		2019		(Decrease)		Change

	(in millions, except percentages)								(in millions, except percentages)
Transaction fees	$	618.3	$	426.9	$	191.4	44.8	%	$	1,279.8	$	856.2	$	423.6	49.5	%
Access and capacity fees		55.7		54.5		1.2	2.2	%		113.4		108.9		4.5	4.1	%
Market data fees		58.7		51.8		6.9	13.3	%		114.9		103.4		11.5	11.1	%
Regulatory fees		128.7		79.7		49.0	61.5	%		265.5		138.4		127.1	91.8	%
Other revenue		7.3		7.7		(0.4)	(5.2)	%		16.6		15.2		1.4	9.2	%
Total revenues	$	868.7	$	620.6	$	248.1	40.0	%	$	1,790.2	$	1,222.1	$	568.1	46.5	%

Transaction Fees

Transaction fees increased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three months ended June 30, 2020, the increase was primarily due to a 79.7% increase in U.S. Equities market ADV and a 53.7% increase in multi-listed options ADV, partially offset by a 44.1% decrease in Futures ADV, when compared to the same period in 2019. For the six months ended June 30, 2020, the increase was primarily due to a 62.5% increase in U.S. Equities market ADV and a 44.8% increase in overall options market ADV, including a 10.5% increase in index options ADV and a 54.7% increase in multi-listed ADV, when compared to the same period in 2019.

Access Fees and Capacity Fees

Access and capacity fees increased for the three and six months ended June 30, 2020 compared to the same periods in 2019 primarily due to an increase in logical port revenue in the European Equities and U.S. Equities segments, partially offset by decreases in membership fees and trading floor charges in the Options segment as a result of the temporary closure of the trading floor.

Market Data Fees

Market data fees increased for the three and six months ended June 30, 2020 compared to the same periods in 2019 primarily due to additional revenue attributed to the acquisitions of Hanweck and FT Options during 2020, coupled with an increase in tape plan market data revenue within the U.S. Equities segment resulting from increases in pool size and market share.

Regulatory Fees

Regulatory fees increased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three months ended June 30, 2020, the increase was primarily due to an increase in Section 31 fees as a result of higher volumes in the U.S. Equities segment, coupled with an increase in the Section 31 fee rate from an average rate of $19.40 per million dollars of covered sales for the three months ended June 30, 2019 to a rate of $22.10 per million dollars of covered sales during the three months ended June 30, 2020. For the six months ended June 30, 2020, the increase was primarily due to an increase in Section 31 fees as a result of higher volumes in the U.S. Equities segment, coupled with an increase in the Section 31 fee rate from an average rate of $16.20 per million dollars of covered sales for the six months ended June 30, 2019 to an average rate of $21.70 per million dollars of covered sales during the six months ended June 30, 2020.

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Other Revenue

Other revenue decreased for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to the loss of revenue associated with the deconsolidation of a former subsidiary in the third quarter of 2019, partially offset by additional index licensing revenue in 2020. Other revenue increased for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to additional index licensing and trade reporting services revenue in 2020, partially offset by the loss of revenue associated with the deconsolidation of a former subsidiary in the third quarter of 2019.

Cost of Revenues

Cost of revenues increased for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to higher liquidity payments as a result of an increase in volumes traded on the U.S. Equities and Options exchanges, which increased $179.8 million, coupled with an increase in Section 31 fees within the U.S. Equities and Options segments, which increased $45.1 million and $3.6 million, respectively. Cost of revenues increased for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to higher liquidity payments as a result of an increase in volumes traded on the U.S. Equities and Options exchanges, which increased $328.5 million, coupled with an increase in Section 31 fees within the U.S. Equities and Options segments, which increased $115.7 million and $12.2 million, respectively.

The following summarizes changes in cost of revenues for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019:


	Three Months Ended								Six Months Ended
	June 30,				Increase/		Percent		June 30,				Increase/		Percent
	2020		2019		(Decrease)		Change		2020		2019		(Decrease)		Change

	(in millions, except percentages)								(in millions, except percentages)
Liquidity payments	$	415.6	$	235.8	$	179.8	76.3	%	$	808.0	$	479.5	$	328.5	68.5	%
Routing and clearing		17.7		9.2		8.5	92.4	%		33.7		18.4		15.3	83.2	%
Section 31 fees		119.0		70.3		48.7	69.3	%		246.4		118.5		127.9	107.9	%
Royalty fees		19.4		21.9		(2.5)	(11.4)	%		46.8		42.9		3.9	9.1	%
Other		0.1		0.2		(0.1)	(50.0)	%		0.1		0.2		(0.1)	(50.0)	%
Total	$	571.8	$	337.4	$	234.4	69.5	%	$	1,135.0	$	659.5	$	475.5	72.1	%

Liquidity Payments

Liquidity payments increased for the three and six months ended June 30, 2020 compared to the same period in 2019 primarily due to higher liquidity payments as a result of an increase in volumes traded on the U.S. Equities and Options exchanges.

Routing and Clearing

The increase in routing and clearing fees for the three and six months ended June 30, 2020 compared to the same period in 2019 was primarily due to an increase in routed trades in the U.S. Equities segment.

Section 31 Fees

Section 31 fees increased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three months ended June 30, 2020, the increase was primarily a result of higher volumes in the U.S. Equities segment, coupled with an increase in the Section 31 fee rate from an average rate of $19.40 per million dollars of covered sales for the three months ended June 30, 2019 to a rate of $22.10 per million dollars of covered sales during the three months ended June 30, 2020. For the six months ended June 30, 2020, the increase was primarily a result of higher volumes in the U.S. Equities segment, coupled with an increase in the Section 31 fee rate from an average rate of $16.20 per million dollars of covered sales for the six months ended June 30, 2019 to an average rate of $21.70 per million dollars of covered sales during the six months ended June 30, 2020.

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Royalty Fees

Royalty fees decreased for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to a decrease in trading volume in licensed products. Royalty fees increased for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to an increase in trading volume in licensed products.

Revenues Less Cost of Revenues

Revenues less cost of revenues increased $13.7 million, or 4.8%, for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to a $6.9 million, or 13.3%, increase in market data fees and a $3.1 million, or 1.7% increase in transaction fees less liquidity payments and routing and clearing costs. Revenues less cost of revenues increased $92.6 million, or 16.5%, for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to a $79.8 million, or 22.3%, increase in transaction fees less liquidity payments and routing and clearing costs and an $11.5 million, or 11.1% increase in market data fees.

The following tables summarize the components of revenues less cost of revenues for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019:


	Three Months Ended								Six Months Ended
	June 30,				Increase/		Percent		June 30,				Increase/		Percent
	2020		2019		(Decrease)		Change		2020		2019		(Decrease)		Change

	(in millions, except percentages)								(in millions, except percentages)
Transaction fees less liquidity payments and routing and clearing costs	$	185.0	$	181.9	$	3.1	1.7	%	$	438.1	$	358.3	$	79.8	22.3	%
Access and capacity fees		55.7		54.5		1.2	2.2	%		113.4		108.9		4.5	4.1	%
Market data fees		58.7		51.8		6.9	13.3	%		114.9		103.4		11.5	11.1	%
Regulatory fees, less Section 31 fees		9.7		9.4		0.3	3.2	%		19.1		19.9		(0.8)	(4.0)	%
Royalty fees		(19.4)		(21.9)		2.5	(11.4)	%		(46.8)		(42.9)		(3.9)	9.1	%
Other		7.2		7.5		(0.3)	(4.0)	%		16.5		15.0		1.5	10.0	%
Revenues less cost of revenues	$	296.9	$	283.2	$	13.7	4.8	%	$	655.2	$	562.6	$	92.6	16.5	%

Transaction Fees Less Liquidity Payments and Routing and Clearing Costs

Transaction fees less liquidity payments and routing and clearing costs (“Net Transaction Fees”) increased for the three and six months ended June 30, 2020 compared to the same periods in 2019. The increase for the three months ended June 30, 2020 was primarily due to a 79.7% increase in U.S. Equities market ADV and a 53.7% increase in multi-listed options ADV, partially offset by a 44.1% decrease in Futures ADV, compared to the same period in 2019. The increase for the six months ended June 30, 2020 was primarily due to a 44.8% increase in overall options market ADV, including a 10.5% increase in index options ADV, a 54.7% increase in multi-listed ADV, and a 62.5% increase in U.S. Equities market ADV, when compared to the same period in 2019.

Access and Capacity Fees

Market Data Fees

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Regulatory Fees, less Section 31 Fees

Regulatory fees, less Section 31 Fees, increased for the three months ended June 30, 2020 compared to the same period in 2019, primarily due to an increase in regulatory fees based on higher reported revenue of customers in the current year. Regulatory fees, less Section 31 Fees, decreased for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to a decrease in fines and assessment fees.

Royalty Fees

Other

Operating Expenses

Total operating expenses decreased $22.8 million, or 14.4%, for the three months ended June 30, 2020 compared to the same period in 2019, primarily due to declines in acquisition-related costs, professional fees and outside services, and depreciation and amortization. Total operating expenses decreased $24.9 million, or 8.5% for the six months ended June 30, 2020 compared to the same period in 2019, primarily due to declines in acquisition-related costs depreciation and amortization, and professional fees and outside services, partially offset by an increase in compensation and benefits. The following summarizes changes in operating expenses for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019:


	Three Months Ended								Six Months Ended
	June 30,				Increase/		Percent		June 30,				Increase/		Percent
	2020		2019		(Decrease)		Change		2020		2019		(Decrease)		Change

	(in millions, except percentages)								(in millions, except percentages)
Operating Expenses:
Compensation and benefits	$	54.9	$	52.2	$	2.7	5.2	%	$	108.2	$	100.3	$	7.9	7.9	%
Depreciation and amortization		38.0		43.7		(5.7)	(13.0)	%		78.5		90.9		(12.4)	(13.6)	%
Technology support services		12.5		11.8		0.7	5.9	%		24.4		23.7		0.7	3.0	%
Professional fees and outside services		12.3		19.2		(6.9)	(35.9)	%		27.2		35.4		(8.2)	(23.2)	%
Travel and promotional expenses		0.9		3.0		(2.1)	(70.0)	%		3.0		5.6		(2.6)	(46.4)	%
Facilities costs		4.1		3.0		1.1	36.7	%		8.2		5.1		3.1	60.8	%
Acquisition-related costs		9.4		20.8		(11.4)	(54.8)	%		10.2		23.1		(12.9)	(55.8)	%
Other expenses		3.1		4.3		(1.2)	(27.9)	%		7.4		7.9		(0.5)	(6.3)	%
Total operating expenses	$	135.2	$	158.0	$	(22.8)	(14.4)	%	$	267.1	$	292.0	$	(24.9)	(8.5)	%

Compensation and Benefits

Compensation and benefits increased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three months ended June 30, 2020, the increase was primarily due to an increase in bonus expense of $4.4 million and a decrease in capitalized wages of $2.8 million due to a decrease in software projects eligible for capitalization, partially offset by a $3.8 million decline in benefits primarily due to the adjustment of deferred compensation plan assets and healthcare rebates received, and a $0.7 million decrease in equity compensation due to the acceleration of stock-based compensation in 2019. For the six months ended June 30, 2020, the increase was primarily due to an increase in bonus expense of $7.1 million, a decrease in capitalized wages of $5.0 million due to a decrease in software projects eligible for capitalization, and an increase in equity compensation as a result of forfeitures

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in 2019 that did not recur in 2020, partially offset by a $5.0 million decline in benefits primarily due to the adjustment of deferred compensation plan assets and healthcare rebates received.

Depreciation and Amortization

Depreciation and amortization decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019, primarily due to the write-off of the Cboe Command software in the fourth quarter of 2019, the change in accounting classification of the Chicago headquarters building to held for sale in the second quarter of 2019, which resulted in depreciation ceasing on the building, and the deconsolidation of a former subsidiary in the third quarter of 2019, partially offset by depreciation related to equipment placed into service in the fourth quarter of 2019.

Technology Support Services

Technology support services costs increased for the three and six months ended June 30, 2020 compared to the same periods in 2019, primarily due to increases in purchased hardware and market data support service fees for market data related to the acquisitions in 2020.

Professional Fees and Outside Services

Professional fees and outside services decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three months ended June 30, 2020, the decrease was primarily due to a decline in legal fees of $2.6 million, a decline in regulatory service fees of $2.0 million, a decline in consulting fees of $0.7 million, and a decline in contracted services of $0.6 million. For the six months ended June 30, 2020, the decrease was primarily due to a decline in regulatory service fees of $2.6 million, a decline in legal fees of $2.2 million, a decline in consulting fees of $1.1 million, and a decline in contracted services of $0.8 million.

Travel and Promotional Expenses

Travel and promotional expenses decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019, primarily due to travel restrictions implemented in March 2020 in response to the COVID-19 pandemic coupled with a decrease in marketing expenses.

Facilities Costs

Facilities costs increased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three months ended June 30, 2020, the increase was primarily due additional rent expense incurred for the new headquarters location beginning in January 2020. For the six months ended June 30, 2020, the increase was primarily due to a reversal of deferred rent expense of $1.3 million in the first quarter of 2019 that did not recur in 2020, coupled with additional rent expense incurred for the new headquarters location beginning in January 2020.

Acquisition-Related Costs

Acquisition-related costs decreased for the three and six months ended June 30, 2020 compared to the same period in 2019 primarily due to the write down of goodwill attributed to a 2016 acquisition recorded in the second quarter of 2019.

Other Expenses

Other expenses decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019. For the three month ended June 30, 2020, the decrease was primarily due to a $0.5 million decrease in miscellaneous office expenses, a $0.5 million decline in training and conference expenses, and write-offs of bad debt in 2019 of $0.4 million that did not recur in 2020. For the six months ended June 30, 2020, the decrease was primarily due to a $0.8 million decrease in miscellaneous operating expenses and write-offs of bad debt in 2019 of $0.7 million that

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did not recur in 2020, partially offset by additional one-time charitable contributions made related to the COVID-19 relief efforts of $1.0 million in 2020.

Operating Income

As a result of the items above, operating income for the three and six months ended June 30, 2020 was $161.7 million and $388.1 million compared to $125.2 million and $270.6 million, respectively, for same periods in 2019.

Interest Expense, Net

Net interest expense decreased in the three and six months ended June 30, 2020 compared to the same period in 2019 primarily due to the decrease in outstanding debt from $916.6 million at June 30, 2019 to $868.6 million at June 30, 2020.

Other Expense, Net

Net other expense increased for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to a $1.6 million decline in deferred compensation plan asset income. Net other expense decreased for the six months ended June 30, 2020 compared to the same period in 2019, primarily due to the reversal of the $8.8 million OCC dividend declared in 2018, which was to be paid in 2019, as a result of the SEC’s disapproval of the OCC capital plan during the first quarter of 2019, partially offset by deferred compensation plan asset income of $3.7 million in 2019.

Income Before Income Tax Provision

As a result of the above, income before income tax provision for the three months ended June 30, 2020 was $156.6 million compared to $119.6 million for the same period in 2019, an increase of $37.0 million.

As a result of the above, income before income tax provision for the six months ended June 30, 2020 was $374.1 million compared to $246.3 million for the same period in 2019, an increase of $127.8 million.

Income Tax Provision

The effective tax rate from continuing operations was 27.5% and 29.3% for the three months ended June 30, 2020 and 2019, respectively, and 27.6 % and 27.5% for the six months ended June 30, 2020 and 2019, respectively. For the three months ended June 30, 2020, the Company recognized increased effective tax rate benefit due to foreign-derived intangible income compared to the same period in 2019. The effective tax rate for the six months ended June 30, 2020 was higher than the comparable period the prior year due to excess tax benefits recognized in 2019.

Net Income

As a result of the items above, net income for the three months ended June 30, 2020 was $113.6 million compared to $84.5 million for the three months ended June 30, 2019, an increase of $29.1 million.

As a result of the items above, net income for the six months ended June 30, 2020 was $271.0 million compared to $178.6 million for the six months ended June 30, 2019, an increase of $92.4 million.

Segment Operating Results

We report results from our five segments: Options, U.S. Equities, Futures, European Equities, and Global FX. Segment performance is primarily based on operating income (loss). We have aggregated all corporate costs, as well as other business ventures, within Corporate Items and Eliminations as those activities should not be used to evaluate a segment’s operating performance. All operating expenses that relate to activities of a specific segment have been allocated to that segment.

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The following summarizes our total revenues by segment:


							Percentage										Percentage of
							of Total										Total
							Revenues										Revenues
	Three Months Ended						Three Months Ended				Six Months Ended						Six Months Ended
	June 30,				Percent		June 30,				June 30,				Percent		June 30,
	2020		2019		Change		2020		2019		2020		2019		Change		2020		2019

	(in millions, except percentages)										(in millions, except percentages)
Options	$	317.6	$	246.1	29.1	%	36.6	%	39.7	%	$	674.1	$	477.1	41.3	%	37.7	%	39.0	%
U.S. Equities		490.5		298.7	64.2	%	56.4	%	48.2	%		964.2		594.5	62.2	%	53.9	%	48.7	%
Futures		21.6		33.8	(36.1)	%	2.5	%	5.4	%		63.1		64.3	(1.9)	%	3.5	%	5.3	%
European Equities		25.3		28.7	(11.8)	%	2.9	%	4.6	%		58.2		59.0	(1.4)	%	3.2	%	4.8	%
Global FX		13.7		13.1	4.6	%	1.6	%	2.1	%		30.6		27.0	13.3	%	1.7	%	2.2	%
Corporate		—		0.2	(100.0)	%	—	%	—	%		—		0.2	(100.0)	%	—	%	—	%
Total revenues	$	868.7	$	620.6	40.0	%	100.0	%	100.0	%	$	1,790.2	$	1,222.1	46.5	%	100.0	%	100.0	%

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The following summarizes our revenues less cost of revenues by segment:


							Percentage of										Percentage of
							Total Revenues										Total Revenues
							Less Cost of Revenues										Less Cost of Revenues
	Three Months Ended						Three Months Ended				Six Months Ended						Six Months Ended
	June 30,				Percent		June 30,				June 30,				Percent		June 30,
	2020		2019		Change		2020		2019		2020		2019		Change		2020		2019

	(in millions, except percentages)										(in millions, except percentages)
Options	$	150.6	$	140.8	7.0	%	50.7	%	49.7	%	$	339.1	$	278.2	21.9	%	51.8	%	49.5	%
U.S. Equities		90.6		74.1	22.3	%	30.5	%	26.2	%		177.2		149.9	18.2	%	27.0	%	26.6	%
Futures		20.9		32.6	(35.9)	%	7.1	%	11.5	%		61.0		62.1	(1.8)	%	9.3	%	11.1	%
European Equities		21.1		22.4	(5.8)	%	7.1	%	7.9	%		47.3		45.2	4.6	%	7.2	%	8.0	%
Global FX		13.7		13.1	4.6	%	4.6	%	4.6	%		30.6		27.0	13.3	%	4.7	%	4.8	%
Corporate		—		0.2	(100.0)	%	—	%	0.1	%		—		0.2	(100.0)	%	—	%	—	%
Total revenues less cost of revenues	$	296.9	$	283.2	4.8	%	100.0	%	100.0	%	$	655.2	$	562.6	16.5	%	100.0	%	100.0	%

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Options

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA, and EBITDA margin for our Options segment:


									Percentage												Percentage
									of Total												of Total
									Revenues												Revenues
	Three Months Ended								Three Months Ended				Six Months Ended								Six Months Ended
	June 30,						Percent		June 30,				June 30,						Percent		June 30,
	2020			2019			Change		2020		2019		2020			2019			Change		2020		2019

	(in millions, except percentages)												(in millions, except percentages)
Revenues less cost of revenues	$	150.6		$	140.8		7.0	%	47.4	%	57.2	%	$	339.1		$	278.2		21.9	%	50.3	%	58.3	%
Operating expenses		57.2			60.7		(5.8)	%	18.0	%	24.7	%		102.3			111.1		(7.9)	%	15.2	%	23.3	%
Operating income	$	93.4		$	80.1		16.6	%	29.4	%	32.5	%	$	236.8		$	167.1		41.7	%	35.1	%	35.0	%
EBITDA(1)	$	101.0		$	89.2		13.2	%	31.8	%	36.2	%	$	252.0		$	177.2		42.2	%	37.4	%	37.1	%
EBITDA margin(2)		67.1	%		63.4	%	*		*		*			74.3	%		63.7	%	*		*		*

*	Not meaningful

(1)	See footnote (1) to the table under “Financial Summary” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.

(2)	EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $9.8 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to a 53.7% increase in multi-listed options ADV, coupled with an increase in proprietary market data revenue as a result of the acquisitions of Hanweck, FT Options, and Trade Alert. For the three months ended June 30, 2020, the Options segment’s operating income increased $13.3 million compared to the three months ended June 30, 2019, primarily due to higher revenues less cost of revenues. Operating expenses decreased $3.5 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to decreases in professional fees and outside services, depreciation and amortization, and acquisition-related costs, partially offset by an increase in compensation and benefits and technology support services.

Revenues less cost of revenues increased $60.9 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to a 44.8% increase in overall options market ADV, including a 10.5% increase in index options ADV and a 54.7% increase in multi-listed options ADV, coupled with an 11.2% increase in index options RPC. For the six months ended June 30, 2020, the Options segment’s operating income increased $69.7 million compared to the six months ended June 30, 2019, primarily due to higher revenues less cost of revenues. Operating expenses decreased $8.8 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to decreases in acquisition-related costs, professional fees and outside services, and depreciation and amortization, partially offset by an increase in compensation and benefits, technology support services, and facilities costs.

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U.S. Equities

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA, and EBITDA margin for our U.S. Equities segment:


									Percentage												Percentage
									of Total												of Total
									Revenues												Revenues
	Three Months Ended								Three Months Ended				Six Months Ended								Six Months Ended
	June 30,						Percent		June 30,				June 30,						Percent		June 30,
	2020			2019			Change		2020		2019		2020			2019			Change		2020		2019

	(in millions, except percentages)												(in millions, except percentages)
Revenues less cost of revenues	$	90.6		$	74.1		22.3	%	18.5	%	24.8	%	$	177.2		$	149.9		18.2	%	18.4	%	25.2	%
Operating expenses		34.7			37.7		(8.0)	%	7.1	%	12.6	%		72.3			75.9		(4.7)	%	7.5	%	12.8	%
Operating income	$	55.9		$	36.4		53.6	%	11.4	%	12.2	%	$	104.9		$	74.0		41.8	%	10.9	%	12.4	%
EBITDA(1)	$	72.2		$	53.9		34.0	%	14.7	%	18.0	%	$	138.9		$	111.2		24.9	%	14.4	%	18.7	%
EBITDA margin(2)		79.7	%		72.7	%	*		*		*			78.4	%		74.2	%	*		*		*

*	Not meaningful

(1)	See footnote (1) to the table under “Financial Summary” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.

(2)	EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $16.5 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to a 90.9% increase in volumes traded on our U.S. Equities exchanges. For the three months ended June 30, 2020, the U.S. Equities segment’s operating income increased $19.5 million compared to the three months ended June 30, 2019, primarily due to higher revenues less cost of revenues. Operating expenses decreased $3.0 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to decreases in depreciation and amortization and travel and promotional expenses.

Revenues less cost of revenues increased $27.3 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to a 66.7% increase in volumes traded on our U.S. Equities exchanges. For the six months ended June 30, 2020, the U.S. Equities segment’s operating income increased $30.9 million compared to the six months ended June 30, 2019, primarily due to higher revenues less cost of revenues. Operating expenses decreased $3.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to decreases in depreciation and amortization and travel and promotional expenses, partially offset by higher professional fees and outside services and compensation and benefits.

Futures

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA, and EBITDA margin for our Futures segment:


									Percentage												Percentage
									of Total												of Total
									Revenues												Revenues
	Three Months Ended								Three Months Ended				Six Months Ended								Six Months Ended
	June 30,						Percent		June 30,				June 30,						Percent		June 30,
	2020			2019			Change		2020		2019		2020			2019			Change		2020		2019

	(in millions, except percentages)												(in millions, except percentages)
Revenues less cost of revenues	$	20.9		$	32.6		(35.9)	%	96.8	%	96.4	%	$	61.0		$	62.1		(1.8)	%	96.7	%	96.6	%
Operating expenses		12.6			13.2		(4.5)	%	58.3	%	39.1	%		25.8			24.4		5.7	%	40.9	%	37.9	%
Operating income	$	8.3		$	19.4		(57.2)	%	38.4	%	57.4	%	$	35.2		$	37.7		(6.6)	%	55.8	%	58.6	%
EBITDA(1)	$	9.1		$	19.7		(53.8)	%	42.1	%	58.3	%	$	36.7		$	38.3		(4.2)	%	58.2	%	59.6	%
EBITDA margin(2)		43.5	%		60.4	%	*		*		*			60.2	%		61.7	%	*		*		*

*	Not meaningful

(1)	See footnote (1) to the table under “Financial Summary” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.

(2)	EBITDA margin represents EBITDA divided by revenues less cost of revenues.

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Revenues less cost of revenues decreased $11.7 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to a 44.1% decrease in Futures ADV. For the three months ended June 30, 2020, the Futures segment’s operating income decreased $11.1 million compared to the three months ended June 30, 2019, due to lower revenues less cost of revenues. Operating expenses decreased $0.6 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to a decrease in professional fees and outside services, offset by an increase in compensation and benefits.

Revenues less cost of revenues decreased $1.1 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to a 3.3% decrease in Futures ADV. For the six months ended June 30, 2020, the Futures segment’s operating income decreased $2.5 million compared to the six months ended June 30, 2019, primarily due to an increase in operating expenses, coupled with lower revenues less cost of revenues. Operating expenses increased $1.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to an increase in compensation and benefits, offset by a decrease in professional fees and outside services.

European Equities

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA, and EBITDA margin for our European Equities segment:


									Percentage												Percentage
									of Total												of Total
									Revenues												Revenues
	Three Months Ended								Three Months Ended				Six Months Ended								Six months ended
	June 30,						Percent		June 30,				June 30,						Percent		June 30,
	2020			2019			Change		2020		2019		2020			2019			Change		2020		2019

	(in millions, except percentages)												(in millions, except percentages)
Revenues less cost of revenues	$	21.1		$	22.4		(5.8)	%	83.4	%	78.0	%	$	47.3		$	45.2		4.6	%	81.3	%	76.6	%
Operating expenses		15.7			16.7		(6.0)	%	62.1	%	58.2	%		32.4			33.7		(3.9)	%	55.7	%	57.1	%
Operating income	$	5.4		$	5.7		(5.3)	%	21.3	%	19.9	%	$	14.9		$	11.5		29.6	%	25.6	%	19.5	%
EBITDA(1)	$	12.4		$	13.3		(6.8)	%	49.0	%	46.3	%	$	29.2		$	26.2		11.5	%	50.2	%	44.4	%
EBITDA margin(2)		58.8	%		59.4	%	*		*		*			61.7	%		58.0	%	*		*		*

*Not meaningful

(1)	See footnote (1) to the table under “Financial Summary” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.

(2)	EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues decreased $1.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to a 4.5% point decline in European Equities market share, partially offset by an increase in net capture of 10.7% and higher access and capacity fees. For the three months ended June 30, 2020, the European Equities segment’s operating income decreased $0.3 million compared to the three months ended June 30, 2019, due to lower revenues less cost of revenues. Operating expenses decreased $1.0 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to decreases in acquisition-related costs, depreciation and amortization, and technology support services, partially offset by an increase in compensation and benefits.

Revenues less cost of revenues increased $2.1 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to an increase in access and capacity fees. For the six months ended June 30, 2020, the European Equities segment’s operating income increased $3.4 million compared to the six months ended June 30, 2019, primarily due to higher revenues less cost of revenues. Operating expenses decreased $1.3 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to decreases in depreciation and amortization, acquisition-related costs, and travel and promotional expenses, offset by an increase in compensation and benefits.

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Global FX

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA, and EBITDA margin for our Global FX segment:


									Percentage												Percentage
									of Total												of Total
									Revenues												Revenues
	Three Months Ended								Three Months Ended				Six Months Ended								Six Months Ended
	June 30,						Percent		June 30,				June 30,						Percent		June 30,
	2020			2019			Change		2020		2019		2020			2019			Change		2020		2019

	(in millions, except percentages)												(in millions, except percentages)
Revenues less cost of revenues	$	13.7		$	13.1		4.6	%	100.0	%	100.0	%	$	30.6		$	27.0		13.3	%	100.0	%	100.0	%
Operating expenses		12.6			14.7		(14.3)	%	92.0	%	112.2	%		26.5			29.0		(8.6)	%	86.6	%	107.4	%
Operating income (loss)	$	1.1		$	(1.6)		168.8	%	8.0	%	(12.2)	%	$	4.1		$	(2.0)		305.0	%	13.4	%	(7.4)	%
EBITDA(1)	$	7.6		$	5.5		38.2	%	55.5	%	42.0	%	$	17.6		$	12.9		36.4	%	57.5	%	47.8	%
EBITDA margin(2)		55.5	%		42.0	%	*		*		*			57.5	%		47.8	%	*		*		*

*	Not meaningful

(1)	See footnote (1) to the table under “Financial Summary” above for a reconciliation of net income to EBITDA and adjusted EBITDA, and management’s reasons for using such non-GAAP measures.

(2)	EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $0.6 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to higher access and capacity fees and a 4.5% increase in Global FX net capture, partially offset by a 2.2% decrease in Global FX market ADNV. For the three months ended June 30, 2020, the Global FX segment’s operating income increased $2.7 million compared to the three months ended June 30, 2019, primarily due to a decline operating expenses. Operating expenses decreased $2.1 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to decreases in depreciation and amortization and professional fees and outside services.

Revenues less cost of revenues increased $3.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to an 8.7% increase in Global FX market ADNV. For the six months ended June 30, 2020, the Global FX segment’s operating income increased $6.1 million compared to the six months ended June 30, 2019, due to higher revenues less costs of revenues, coupled with a decline in operating expenses. Operating expenses decreased $2.5 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to decreases in depreciation and amortization and professional fees and outside services, partially offset by an increase in compensation and benefits.

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Liquidity and Capital Resources

Below are charts that reflect elements of our capital allocation:

We expect our cash on hand at June 30, 2020 and other available resources, including cash generated from operations, to be sufficient to continue to meet our cash requirements for the foreseeable future. In the near term, we expect that our cash from operations and availability under our revolving credit facility will meet our cash needs to fund our operations, capital expenditures, interest payments on debt, debt repayments, any dividends, potential strategic acquisitions, and opportunities for common stock repurchases under the previously announced program. We may also utilize excess cash on hand to pay down amounts outstanding under the Term Loan Agreement. See Note 11 (“Debt”) of the condensed consolidated financial statements for further information. On July 1, 2020, in connection with the Company’s acquisition of EuroCCP, EuroCCP as borrower and the Company as guarantor of scheduled interest and fees on borrowings (but not the principal amount of any borrowings), entered into a Euro 1.5 billion committed syndicated multicurrency revolving and swingline credit facility agreement (the “Facility”). The Facility is available to be drawn by EuroCCP towards (a) financing unsettled amounts in connection with the settlement of transactions in securities and other items processed through EuroCCP’s clearing system and (b) financing any other liability or liquidity requirement of EuroCCP incurred in the operation of its clearing system. Borrowings under the Facility are secured by cash, eligible government bonds and eligible equity assets deposited by EuroCCP into secured accounts. As a result, should the Facility be drawn by EuroCCP it could potentially impact EuroCCP’s liquidity, and we can give no assurance that this Facility will be sufficient to meet all of such obligations or sufficiently mitigate EuroCCP’s liquidity risk to meet its payment obligations when due. Additionally, a default of the Facility may allow lenders to accelerate any related drawn amounts and may result in the acceleration of the Company’s other outstanding debt to which a cross-acceleration or cross-default provision applies, which may limit the Company’s liquidity, business and financing activities.

Our long-term cash needs will depend on many factors, including an introduction of new products, enhancements of current products, the geographic mix of our business and any potential acquisitions. We believe our cash from operations and the availability under our revolving credit facility will meet any long-term needs unless a significant acquisition is identified, in which case we expect that we would be able to borrow the necessary funds to complete such an acquisition. In addition, we do not expect COVID-19 to have a material impact on our liquidity or capital resources, including cash from operations or uses of cash, or change our ability to access capital markets in the near term or the foreseeable future.

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Cash and cash equivalents include cash in banks and all non-restricted, highly liquid investments with original maturities of three months or less at the time of purchase. Cash and cash equivalents as of June 30, 2020 decreased $19.2 million from December 31, 2019, primarily due to share repurchases under the share repurchase program, purchases of available-for-sale financial investments, cash dividends paid on common stock, and acquisitions, partially offset by our results from operations. See “Cash Flow” below for further discussion.

Our cash and cash equivalents held outside of the United States in various foreign subsidiaries totaled $53.8 million as of June 30, 2020. The remaining balance was held in the United States and totaled $156.3 million as of June 30, 2020. Our cash and cash equivalents held outside of the United States as of December 31, 2019 totaled $85.8 million, and are held in various foreign subsidiaries. The majority of cash held outside the United States is available for repatriation, but under current law, could subject us to additional United States income taxes, less applicable foreign tax credits.

Our financial investments include deferred compensation plan assets as well as investments with original or acquired maturities longer than three months but that mature in less than one year from the balance sheet date and are recorded at fair value. As of June 30, 2020 and December 31, 2019, financial investments consisted of U.S. Treasury securities and deferred compensation plan assets.

Cash Flow

The following table summarizes our cash flow data for the six months ended June 30, 2020 and 2019, respectively:


	Six Months Ended
	June 30,
	2020		2019

	(in millions)
Net cash provided by operating activities	$	488.3	$	317.6
Net cash used in investing activities		(191.6)		(23.4)
Net cash used in financing activities		(314.9)		(406.5)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(1.0)		(1.5)
Decrease in cash and cash equivalents	$	(19.2)	$	(113.8)

Net Cash Flows Provided by Operating Activities

During the six months ended June 30, 2020, net cash provided by operating activities was $217.3 million higher than net income. The variance is primarily attributed to the change in Section 31 fees payable of $148.5 million, the adjustment for depreciation expense of $78.5 million, the change in income taxes receivable of $56.8 million, and the change for accounts payable and accrued liabilities of $45.3 million, partially offset by the change in accounts receivable of $144.2 million for the six months ended June 30, 2020.

Net cash flows provided by operating activities were $488.3 million and $317.6 million for the six months ended June 30, 2020 and 2019, respectively. The change in net cash flows provided by operating activities was primarily due to the increase in net income and the changes in accounts receivable, accounts payable and accrued liabilities, and Section 31 fees payable balances for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Net Cash Flows Used in Investing Activities

Net cash flows used in investing activities were $191.6 million and $23.4 million for the six months ended June 30, 2020 and 2019, respectively. The variance is primarily due to additional purchases of available-for-sale financial investments, net of proceeds from maturities, and acquisitions, net of cash acquired for the six months ended June 30, 2020.

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Net Cash Flows Used in Financing Activities

Net cash flows used in financing activities for the six months ended June 30, 2020 and 2019 were $314.9 million and $406.5 million, respectively. The variance is primarily attributed to the $300.0 million principal payment of long-term debt during the six months ended June 30, 2019, partially offset by share repurchases, which were $219.3 million and $35.0 million for the six months ended June 30, 2020 and 2019, respectively.

Financial Assets

The following summarizes our financial assets as of June 30, 2020 and December 31, 2019 (in millions):


	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	210.1	$	229.3
Financial investments		176.5		71.0
Less deferred compensation plan assets		(20.9)		(23.4)
Less cash collected for Section 31 Fees		(189.4)		(69.0)
Adjusted Cash (1)	$	176.3	$	207.9

(1)

Adjusted cash is a non-GAAP measure and represents cash and cash equivalents plus financial investments, minus deferred compensation plan assets and cash collected for Section 31 fees. We have presented adjusted cash because we consider it an important supplemental measure of our liquidity and believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies.

Debt

The following summarizes our debt obligations as of June 30, 2020 and December 31, 2019 (in millions):


	June 30, 2020		December 31, 2019
Term Loan Agreement	$	225.0	$	225.0
3.650% Senior Notes		650.0		650.0
Revolving Credit Agreement		—		—
Less unamortized discount and debt issuance costs		(6.4)		(7.4)
Total debt	$	868.6	$	867.6

As of June 30, 2020 and December 31, 2019, we were in compliance with the covenants of our debt agreements.

In addition to the debt outstanding, as of June 30, 2020, we had an additional $150.0 million available through our revolving credit facility, with the ability to borrow another $100.0 million by increasing the commitments under the facility. Together with adjusted cash, we had $326.3 million available to fund our operations, capital expenditures, potential acquisitions, debt repayments and any dividends as of June 30, 2020.

Dividends

The Company’s expectation is to continue to pay dividends. The decision to pay a dividend, however, remains within the discretion of the Company's board of directors and may be affected by various factors, including our earnings, financial condition, capital requirements, level of indebtedness and other considerations our board of directors deems relevant. Future debt obligations and statutory provisions, among other things, may limit, or in some cases prohibit, our ability to pay dividends.

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Share Repurchase Program

In 2011, the board of directors approved an initial authorization for the Company to repurchase shares of its outstanding common stock of $100 million and approved additional authorizations of $100 million in each of 2012, 2013, 2014, 2015 and 2016, $150 million in February 2018, $100 million in August 2018, $250 million in October 2019, and $250 million in June 2020, for a total authorization of $1.4 billion. The program permits the Company to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation.

Under the program, for the three months ended June 30, 2020, the Company repurchased 992,159 shares of common stock at an average cost per share of $100.54, totaling $99.8 million. Since inception of the program through June 30, 2020, the Company has repurchased 15,771,049 shares of common stock at an average cost per share of $64.68, totaling $1.0 billion.

As of June 30, 2020, the Company had $329.9 million of availability remaining under its existing share repurchase authorizations.

OCC Capital Plan

The Company’s contributed capital to OCC has been recorded under investments in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019. Under OCC’s current capital management policy, which was approved by the SEC on January 24, 2020, if OCC’s equity capital falls below certain defined thresholds, OCC can access additional capital through an operational loss fee charged to clearing members. None of OCC’s shareholders (including Cboe Options) has any obligation to contribute capital to OCC under the capital management policy, nor does any shareholder have the right to receive dividends from OCC under such policy. OCC did not pay its shareholders any dividend or other return on the retained portion of their capital contributions. As such, the Company reversed the $8.8 million OCC dividend declared in 2018, which was to be paid in 2019, in other expense, net in the condensed consolidated statement of income for the six months ended June 30, 2019.

Commercial Commitments and Contractual Obligations

As of June 30, 2020, our commercial commitments and contractual obligations included operating leases, data and telecommunications agreements, equipment leases, our long-term debt outstanding, contingent considerations and other obligations. See Note 21 (“Commitments, Contingencies, and Guarantees”) to the condensed consolidated financial statements for a discussion of commitments and contingencies, Note 11 (“Debt”) for a discussion of the outstanding long-term debt, and Note 22 (“Leases”) for discussion on operating leases and equipment leases.

Off Balance Sheet Arrangements

As of June 30, 2020, we did not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a result of our operating activities, we are exposed to market risks such as foreign currency exchange rate risk, equity risk, credit risk, and interest rate risk. We have implemented policies and procedures to measure, manage and monitor and report risk exposures, which are reviewed regularly by management and our board of directors.

Foreign Currency Exchange Rate Risk

Our operations in Europe and Asia are subject to currency translation risk as revenues and expenses are denominated in foreign currencies, primarily the British pound, Singapore dollar, Hong Kong dollar, and the Euro. We

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also have de minimis exposure to other foreign currencies, including the Swiss Franc, Norwegian Kroner, Swedish Krona and Danish Kroner.

For the three and six months ended June 30, 2020, our exposure to foreign-denominated revenues and expenses is presented by primary foreign currency in the following table:


		Three Months Ended						Six Months Ended
		June 30, 2020						June 30, 2020
					British						British
		Euro (1)			Pound (1)			Euro (1)			Pound (1)

		(in millions, except						(in millions, except
		percentages)						percentages)
Foreign denominated % of:
Revenues		0.1	%		2.8	%		0.1	%		3.1	%
Cost of revenues		0.0	%		0.7	%		0.0	%		0.9	%
Operating expenses		0.5	%		5.5	%		0.4	%		6.6	%
Impact of 10% adverse currency fluctuation on:
Revenues	$	0.1		$	2.4		$	0.2		$	5.8
Cost of revenues		0.0			0.4			0.0			1.0
Operating expenses		0.1			0.7			0.1			1.8

(1)	An average foreign exchange rate to the U.S. dollar for the period was used.

Equity Risk

Our investment in European operations is exposed to volatility in currency exchange rates through translation of our net assets or equity to U.S. dollars. The assets and liabilities of our European business are denominated in British pounds or Euros. Fluctuations in currency exchange rates may create volatility in our reported results as we are required to translate foreign currency reported statements of financial condition and operational results into U.S. dollars for consolidated reporting. The translation of these non-U.S. dollar statements of financial condition into U.S. dollars for consolidated reporting results in a cumulative translation adjustment, which is recorded in accumulated other comprehensive income (loss) within stockholders’ equity on our condensed consolidated balance sheet.

Our primary exposure to this equity risk as of June 30, 2020 is presented by foreign currency in the following table:


	British
	Pounds (1)
	(in millions)
Net equity investment in Cboe Europe Limited	$	779.4
Impact on consolidated equity of a 10% adverse currency fluctuation		77.9

(1)	Converted to U.S. dollars using the foreign exchange rate of British pounds per U.S. dollar as of June 30, 2020.

Credit Risk

We are exposed to credit risk from third parties, including customers, counterparties and clearing agents. These parties may default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. We limit our exposure to credit risk by considering such risk when selecting the counterparties with which we make investments and execute agreements.

We do not have counterparty credit risk with respect to trades matched on our exchanges in the U.S. and Europe. With respect to listed equities, we deliver matched trades of our customers to the National Security Clearing Corporation (“NSCC”) without taking on counterparty risk for those trades. NSCC acts as a central counterparty on all equity transactions occurring on BZX, BYX, EDGX and EDGA and, as such, guarantees clearance and settlement of all of our matched equity trades. Similarly, with respect to U.S. listed equity options and futures, we deliver matched trades

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of our customers to the OCC, which acts as a central counterparty on all transactions occurring on Cboe Options, C2, BZX, EDGX and CFE and, as such, guarantees clearance and settlement of all of our matched options and futures trades.

With respect to orders Cboe Trading routes to other markets for execution on behalf of our customers, Cboe Trading is exposed to some counterparty credit risk in the case of failure to perform on the part of our clearing firms, Morgan Stanley & Co. LLC (“Morgan Stanley”) or Wedbush Securities, Inc. (“Wedbush”). Morgan Stanley and Wedbush guarantee trades until one day after the trade date, after which time NSCC provides a guarantee. Thus, Cboe Trading is potentially exposed to credit risk to the counterparty to a trade routed to another market center between the trade date and one day after the trade date in the event that Morgan Stanley or Wedbush fails. We believe that any potential requirement for us to make payments under these guarantees is remote and accordingly, have not recorded any liability in the condensed consolidated financial statements for these guarantees.

Historically, we have not incurred any liability due to a customer’s failure to satisfy its contractual obligations as counterparty to a system trade. Credit difficulties or insolvency, or the perceived possibility of credit difficulties or insolvency, of one or more larger or more visible market participants could also result in market-wide credit difficulties or other market disruptions.

We do not have counterparty credit risk with respect to institutional spot FX trades occurring on our platform because Cboe FX is not a counterparty to any FX transactions. All transactions occurring on our platform occur bilaterally between two banks or prime brokers as counterparties to the trade. While Cboe FX does not have direct counterparty risk, Cboe FX may suffer a decrease in transaction volume if a bank or prime broker experiences an event that causes other prime brokers to decrease or revoke the credit available to the prime broker experiencing the event. Therefore, Cboe FX may have risk that is related to the credit of the banks and prime brokers that trade FX on the Cboe FX platform.

We also have credit risk related to transaction fees that are billed in arrears to customers on a monthly basis. Our potential exposure to credit losses on these transactions is represented by the receivable balances in our balance sheet. Our customers are financial institutions whose ability to satisfy their contractual obligations may be impacted by volatile securities markets.

As a result of the acquisition of EuroCCP on July 1, 2020, the Company will be exposed to further credit risk through our clearing operations. The credit risk is predominantly in the event a clearing participant fails to meet a financial or contractual obligation. EuroCCP mitigates this risk through minimum capital requirements for clearing participants and monitoring their financial health. EuroCCP holds material amounts of clearing participant collateral, both cash and non-cash deposits, which are held or invested primarily to provide security of capital while minimizing credit risk as well as market and liquidity risks.

On a regular basis, we review and evaluate changes in the status of our counterparties’ creditworthiness. Credit losses such as those described above could adversely affect our condensed consolidated financial position and results of operations. Any such effects to date have been minimal.

Interest Rate Risk

We have exposure to market risk for changes in interest rates relating to our cash and cash equivalents, financial investments, and indebtedness. As of June 30, 2020 and 2019, our cash and cash equivalents and financial investments on the condensed consolidated balance sheets, were $386.6 million and $223.9 million, respectively, of which $62.2 million and $47.7 million is held outside of the United States in various foreign subsidiaries as of June 30, 2020 and 2019, respectively. The remaining cash and cash equivalents and financial investments are denominated in U.S. dollars. We do not use our investment portfolio for trading or other speculative purposes. Due to the nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates, assuming no change in the amount or composition of our cash and cash equivalents and financial investments.

As of June 30, 2020, we had $868.6 million in outstanding debt, of which $645.6 million relates to our 3.650% Senior Notes, which bear interest at fixed interest rates. Changes in interest rates will have no impact on the interest we

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pay on fixed-rate obligations. The remaining amount outstanding of $223.0 million relates to the Term Loan Agreement, which bears interest at fluctuating rates and, therefore, subjects us to interest rate risk. A hypothetical 100 basis point increase in interest rates relating to the amounts outstanding under the Term Loan Agreement as of June 30, 2020 would decrease annual pre-tax earnings by $2.3 million, assuming no change in the composition of our outstanding indebtedness. We are also exposed to changes in interest rates as a result of borrowings under our Revolving Credit Agreement, as this facility bears interest at fluctuating rates. As of June 30, 2020, there were no outstanding borrowings under our Revolving Credit Agreement. See Note 11 (“Debt”) to the condensed consolidated financial statements for a discussion of debt agreements.

Item 4. Controls and Procedures

a)Disclosure controls and procedures. The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

b)Internal controls over financial reporting. No changes occurred in the Company’s internal control over financial reporting during second quarter 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Cboe Global Markets, Inc. incorporates herein by reference the discussion set forth in Note 19 (“Income Taxes”) and Note 21 (“Commitments, Contingencies, and Guarantees”) of the condensed consolidated financial statements included herein.

Other than the legal proceedings below, there have been no material updates during the period covered by this Form 10-Q to the Legal Proceedings as set forth in Item 3. of our Annual Report on Form 10-K for the year ended December 31, 2019.

Transaction Fee Pilot

In December 2018, the SEC approved a transaction fee pilot in national market system (“NMS”) stocks (the “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 Court of Appeals for the D.C. Circuit (the “D.C. Circuit”) asserting the pilot is unlawful. The pilot was published in the Federal Register on February 20, 2019 and was scheduled to become effective on April 22, 2019. On March 28, 2019, the SEC granted a partial stay of the pilot, agreeing to delay implementing its fee-and-rebate and data-publication requirements until after the D.C. Circuit decides the pending challenges. The data-gathering requirement of the pilot’s pre-pilot period remains in effect. On May 21, 2019, the SEC issued its notice to announce the effective period for the pre-pilot, which was designated as July 1, 2019 through December 31, 2019. On June 3, 2019, the Company, along with other equities exchanges, filed an opening brief with the D.C. Circuit. The SEC filed its opening brief with the D.C. Circuit on July 25, 2019, the exchanges’ reply brief was filed on August 26, 2019 and final briefs were filed on September 10, 2019. Oral arguments were held on October 11, 2019. On June 16, 2020, the D.C. Circuit granted the Petition for Review, vacated the pilot and remanded the matter back to the SEC for reconsideration. The 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.

Consolidated Data Plans

On May 6, 2020, the SEC issued a final order (the “Order”) that would require U.S. equities exchanges and FINRA to develop and file a new consolidated data plan (the “Plan”) that would replace the three current U.S. equities tape data plans and require certain governance provisions, such as changes to the voting structure. Pursuant to the Order, the Company and the other U.S. equities exchanges and FINRA are required to file the proposed Plan for public comment before the SEC takes any definitive action on such new plan. Until and if the SEC approves a new plan, the current data plans will continue to govern. On June 29, 2020, the Company filed a Petition for Review in the Court of Appeals for the D.C. Circuit (the “D.C. Circuit”) asserting the Order is unlawful. The Order may cause the Company’s equities exchanges, BZX, BYX, EDGX, and EDGA, to require additional resources to comply with or challenge the Order and it may have a material impact on our business, financial condition and operating results if, for example, there is a negative impact on the market data fees the Company’s equities exchanges are able to charge. The Company intends to litigate the matter vigorously.

Item 1A. Risk Factors.

Other than the risk factors listed below, there have been no material updates during the period covered by this Form 10-Q to the Risk Factors as set forth in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2019. These risks and uncertainties, however, are not the only risks and uncertainties that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also significantly impact us.

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Any of these risks and uncertainties may materially and adversely affect our business, financial condition or results of operations, liquidity and cash flows.

The COVID-19 pandemic and its effects could have a material adverse effect on our business, financial condition, operating results and cash flows.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. Our business and operations could be materially and adversely affected by the effects of COVID-19, however, the extent to which our results could be affected by COVID-19 largely depends on future developments which are uncertain and cannot be accurately predicted. Governments, public institutions, and other organizations in countries and localities where cases of COVID-19 have been detected have taken, and may take additional, emergency measures to combat its spread, including implementation of travel bans and closures of offices, factories, schools, public buildings and businesses. These measures may interfere with the ability of our employees, vendors, technology equipment suppliers, data and disaster recovery centers, and other service providers to perform their respective responsibilities and obligations relative to the conduct of our business. In particular, between March 13, 2020 and June 14, 2020, we temporarily suspended open outcry trading in response to COVID-19. In addition to uncertain expenses we may incur due to COVID-19 as part of us providing a safe and healthy work and trading environment and in connection with our eventual return to our offices, we may also be subject to claims from employees or customers alleging failure to maintain safe premises and restrictions with respect to protocols relating to COVID-19. Further, changes in trading behavior, impacts to trading behavior due to the temporary suspension of open outcry trading, market disruptions, additional temporary suspensions of open outcry trading, temporary regulatory measures and other future developments caused by the effects of COVID-19, including a re-occurrence of cases, could impact trading volumes and the demand for our products, market data and services, which could have a material adverse effect on our business, financial condition, operating results and cash flows and could heighten many of the other risks described in the Risk Factors as set forth in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2019.

Our clearinghouse operations expose us to associated risks, including credit, liquidity, market and other risks related to the defaults of clearing participants and other counterparties.

On July 1, 2020, we completed our acquisition of EuroCCP, a European central counterparty that provides post-trade services, including clearing, to stock exchanges, multilateral trading facilities and for over-the-counter equities trades. EuroCCP acts as a central counterparty that, for its clearing participants, becomes the buyer to every seller and the seller to every buyer. As a result, it guarantees the timely performance of the obligations of buyers and sellers and takes on the risk of the performance of the transactions that it clears. Additionally, as a critical Financial Market Infrastructure, EuroCCP is subject to strict business continuity requirements and regulatory oversight. Thus, we are subject to risks related to operating our clearinghouse, including the risks of default by clearing participants and counterparties, due to bankruptcy, lack of liquidity, operational failure or other reasons, and the risks associated with the adequacy of participants’ margin and default funds. These risks could subject our business to substantial losses, reputational harm, regulatory consequences, including litigation, fines and enforcement actions, and the inability to operate our business, including the continued development of the European derivatives buildout.

To mitigate the credit risks related to defaults of clearing participants and other counterparties, including the market risk that we would only be able to close out a defaulting participant’s positions at a loss, there are minimum participation criteria to become a clearing participant and clearing participants are required to provide collateral to cover the margin requirement and default fund contributions. No guarantee can be given that the collateral provided will at all times be sufficient or provide absolute assurance against us experiencing financial losses from defaults by the participants or counterparties on their obligations. In addition, although such collateral is preferably held in European central banks and central securities depositories, there are occasions where commercial banks are used, which can expose us to risk of default by those banks. In addition, EuroCCP entered into a Euro 1.5 billion committed syndicated multicurrency revolving and swingline credit facility that is available to be drawn by EuroCCP towards (a) financing unsettled amounts in connection with the settlement of transactions in securities and other items processed through EuroCCP’s clearing system and (b) financing any other liability or liquidity requirement of EuroCCP incurred in the operation of its clearing system, however we can give no assurance that this facility will be sufficient to meet all of such obligations or sufficiently mitigate EuroCCP’s liquidity risk to meet its payment obligations when due. Substantial

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amounts of the collateral, and any amounts drawn under this facility, may be at risk if a clearing participant defaults on its obligations to our clearinghouse and its margin and default fund deposits are insufficient to meet its obligations. We cannot assure you that the mitigating measures, policies, safeguards and risk management procedures will be sufficient to detect problems or to protect us from a default or that we will not be materially and adversely affected in the event of a significant default.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share repurchase program

In 2011, the board of directors approved an initial authorization for the Company to repurchase shares of its outstanding common stock of $100 million and approved additional authorizations of $100 million in each of 2012, 2013, 2014, 2015 and 2016, $150 million in February 2018, and $100 million in August 2018, $250 million in October 2019, and $250 million in June 2020 for a total authorization of $1.4 billion. The program permits the Company to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation.

The table below shows the purchases of equity securities by the Company which settled during the three months ended June 30, 2020, reflecting the purchase of common stock under the Company's share repurchase program:


				Total Number of	Approximate Dollar
				Shares Purchased	Value of Shares that May
				as Part of Publicly	Yet Be Purchased Under
	Total Number of	Average Price		Announced Plans	the Plans or Programs
Period	Shares Purchased	Paid per Share		or Programs	(in millions)
April 1 to April 30, 2020	—	$	—	—	$	179.7
May 1 to May 31, 2020	446,024		99.32	446,024		135.4
June 1 to June 30, 2020	546,135		101.54	546,135		329.9
Total	992,159	$	100.54	992,159

Purchase of common stock from employees

The table below reflects the acquisition of common stock by the Company in the three months ended June 30, 2020 that were not part of the publicly announced share repurchase authorization. These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the price of certain stock options that were exercised.


Period	Total Number of Shares Purchased	Average Price Paid per Share
April 1 to April 30, 2020	—	$	—
May 1 to May 31, 2020	533		99.98
June 1 to June 30, 2020	1,504		101.85
Total	2,037

Use of Proceeds

None.

Item 3. Defaults upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.



Exhibit No.		Description
10.1		Amendment No. 1 to Term Loan Credit Agreement, dated as of May 29, 2020, by and among Cboe Global Markets, Inc., Bank of America, N.A., as administrative agent, and the lender parties thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-34774) filed on June 3, 2020.

10.2		Amendment No. 1 to Credit Agreement, dated as of May 29, 2020, by and among CBOE Holdings, Inc., Bank of America, N.A., as Administrative Agent and as Swing Line Lender, the lender parties thereto, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-34774) filed on June 3, 2020.

10.3		Facility Agreement, dated July 1, 2020, by and among European Central Counterparty N.V. as borrower, Cboe Global Markets, Inc. as guarantor, Bank of America Merrill Lynch International Designated Activity Company, as co-ordinator, facility agent, lender, sole lead arranger and sole bookrunner, Citibank N.A., as security agent, and certain lenders named therein, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-34774) filed on July 1, 2020.

10.4		Amendment No. 16 to the Restated License Agreement, dated November 1, 1994, by and between Standard & Poor’s Financial Services LLC (as successor-in-interest to Standard & Poor’s, a division of McGraw-Hill, Inc.) and Cboe Exchange, Inc. (f/k/a Chicago Board Options Exchange, Incorporated), made as of April 1, 2020 (filed herewith).

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14 (Filed herewith).

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14 (Filed herewith).

32.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (Filed herewith).

32.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (Filed herewith).

101.INS		XBRL Instance Document (Filed herewith). — The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document (Filed herewith).

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document (Filed herewith).

101.DEF		XBRL Taxonomy Extension Definition Linkbase (Filed herewith).

101.LAB		XBRL Taxonomy Extension Label Linkbase Document (Filed herewith).

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document (Filed herewith).

104		Cover Page Interactive Data File (embedded as Inline XBRL document).

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CBOE GLOBAL MARKETS, INC.
	Registrant

	By:	/s/ Edward T. Tilly
		Edward T. Tilly
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: July 31, 2020

	By:	/s/ Brian N. Schell
		Brian N. Schell
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
Date: July 31, 2020

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Cboe Global Markets (CBOE) 10-Q2020 Q2 Quarterly report

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