CBOE - Earnings call transcript Q3 2017 | Cboe Global Markets, Inc.

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Operator

Good morning, and welcome to the Cboe Global Markets Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I now would like to turn over the conference to Debbie Koopman. VP of Investor Relations. Please go ahead Ma’am.

Debbie Koopman

you call. us thank quarter our and conference earnings morning for for joining third Good

an call more Ed update our Brian the Vice of the the initiatives. On our today, review Alan Deputy President quarter detail, will and Then, guidance results metrics. update financial provide quarterly and CFO, discuss and CEO, third-quarter CFO, on will provide an our XXXX certain Schell, an Dean, on including will strategic Tilly, our in Executive our overview Chairman and results

Following Q&A. Strategy their COO, Q&A our call comments, we Chief will and John Officer, open will Also the to Chris President our for joining and Deters. Concannon us be

I'd that point out like include this addition, the to several will In slides. presentation use of

slides downloadable and each. is the on of Relations presentation slide showing copy the on website. commentary A the available Investor our portion providing be will of We

and judgment certain of judgments refer results in update any factors full our forward-looking statements, During to implied statements. the information, materially no conference as not and future our for publicly differ events to new any result which call. statements undertake involve future after obligation forward-looking future statements, remarks, may guarantees this filings any hold, outcomes or forward-looking SEC forward-looking affect discussion with the expressed Actual uncertainties. is represent that risks or we our the Please a may from of statements. otherwise, a We whether forward-looking are we of make performance what on reasonable, what some these while and believe assumptions, current will may and are these

we as non-GAAP in and the our earnings course defined morning, will referring be to of measures During call the reconciled materials. this

reconciled combined to results, refer in non-GAAP also also will earnings materials. We our are which adjusted

Global February to in the had combined supplemental regarding provide As the on discussion you of XXXX. acquisition of as results combined XXXX, information order our operations beginning completed acquisition closed Markets XX, at the The present results. of Bats if we our know, Bats a

I'd the Now, to turn like to Ed Tilly. call over

Ed Tilly

year up SPX the VIX ADV and driven trading set compared by with ago. third-quarter and index you us of on which a volume per continued saw continued in futures the a strong in the products, XX%, strong decrease our revenue options to thank compared daily with record average volume XX% a ongoing XX% second XX.X% equities quarter, volume options an to record XX.X% year. earnings for and with $X.XX European and options in volatility. morning volume market our to for the FX $XXX Good up low led third and share XX% consecutive average on industry. quarter for trading continued the and quarter, was a record Debbie. was respectively. in last quarter market VIX of Overall adjusted to I am by Global options, third trading pleased million, despite against to share year, high in Global and outperform Index net share quarter, third prior growth VIX futures proprietary options volatility. today. you, all-time joining increased the at to Markets, third-quarter proprietary Cboe U.S. XXXX increased due in compared Thank products quarter We report our third increased previous low daily both XX% year’s XX%,

listings end to of of at executed to forward through trades quarter, ETF captured the will new of bringing grow total trading the Marketplace our preparing FX are a to SEF. XXX XX% new a XX listings record transfers XX% continued third XX% NDFs Cboe single non-deliverable and in We transactions, The transfers. ETF of of in September, all November. on on launch iShares, XX Year-to-date with day September. from trade ETP we launches NDFs and Cboe and

Our of listings now ETP XX%. stands at all U.S. market share

quarter’s XX. touch we new will which the initiatives, and October Before recapping on key I our Company on mission unveiled name, commitments,

blends with already by Cboe, the informally name reach us, Bats. afforded us many global what new extended of called the Our acquisition

Our potential marketplace, commitment product an to our seamless is leading-edge to fueled mission, by powering of relentless stay ahead innovation, solutions. and technology, evolving trading

lens quarter a the take commitments. past at three Let’s look the through of these

has to growth greater, been ability innovation innovations nor Our to product driving bring our has never market. commitment new to through

us allows new classes product the line cycle product of diversified aspect represent development asset and every for building innovation. to our Our new shape blocks

as exposure to the launch followed XXX. to our such due of flagship provide new XX market represented currently Indices in U.S. options to designed regulations potential proprietary equity September, who hold European options ETFs The to the options allow will to we we widely products, on sectors Sector to exposure. XXX European In target U.S. investors S&P on Additionally, cannot S&P certain S&P equity options tap franchise. long-standing continue plans announced Select

extended our in Europe leverage year-end. will launch expect options, market We which to Sector we by to reach

Our second commitment state-of-the-art with Company is to differentiating leading-edge, our technology.

and on onto to as of and and migration maximize track on XXXX Exchange Futures form platform September foundation is the platform positive. platform new customers business and disseminate The enables ongoing our to to feedback also to migration Cboe Bats The existing progressing calculate technology our value our index better call seamless XX, third growth. XXXX. progress proposition technology to alike held the and February data to the exchanges Bats foundation planned shareholders update for remains indices. our new customers of implementation launch. our of our we the is for quarter for will index In migration remains Cboe Working our of key the new a expect us their proprietary with of The and well customers for our on track growing closely serve for first We Company’s and the is the for migration. conference

Preparations of for underway of Exchange Bats the the CX to Options May planned migration to the are Bats XX, also is for migration Options which preparing Exchange the simultaneously are technology, We XXXX. platform. Cboe for

are which October the order we Book, for Order complex XX, Complex Options The SPX the operation. quarter to and be will EDGX Exchange launched system, On second targeting first be to step successfully we designed in book XXXX. efficient the adaptable Hybrid the migrating of most options

We In new acquisition the last exchanges all expect Bats the the by benefits of functionality execution to week Silexx for once throughout orders complex form immediate to and that institutional in and customers Europe foundation we technology equities, caters and Silexx, handled operator system Markets, to to customers announced EDGX and to futures of supports markets, news, trading and migrate Asia. access technology. other provide a order all XX multi-asset our Cboe global Global options a U.S. management The roughly provides developer and platform of to including the

We trade analytics to customers execution an streamlined are pleased provide and to industry-leading with additional, tools. data, channel

through on with view commitment trading seamless blend customer analytics an customers solutions products value-added collaboration. navigational example, to changing education the and is regulatory and data, navigate Our providing and MiFID help opportunity coupled II, third for environment services. We distinctive tools as a trading of a emphasis with to

completed for fourth their II MiFID our place. MiFID now II systems. customers foremost was is successfully of our that final with test all compliance in ample and say release, ahead readiness we with software to time I’m Our functionality to pleased needed and to operational goal provide exchange

large were Our Periodic Both the in offering, operating with of in quantities trading volume auctions lit to Large which day, of designed Scale limit enable trade to and MiFID II, developed impact. caps and in find Auctions the pools. our dark were low platform market investors a anticipation stock trading new book block expected under throughout are to liquidity

quarter the annual now thank operating entire we months the at and one who Our commitment to early record product is outside Markets. Management Europe company, are September, members collaboration solutions Europe enjoyed that team at bigger, just attendees, supported just to by Conferences, highlighted first a products represent held new sixth recently, ability Cboe, our who education. bolder are London. In Global held new the and FX as lines like our with Asia. we Cboe at great RMC This often as in eight RMC European participants third cutting-edge including had RMC would with opportunity in adopters our to is by market credit U.S., products Cboe equities. and services, closing, provide of deal. I ongoing team Europe and are team for which now quarter, our attendance our of to a It commitment is after close Most reporting the interact annually customer trading Risk our

and a been our seeing Our team company over, integration our before collective this our has work positioned quarters time, I is like the time. The throughout great effort has history for I Cboe integral for Global of us truly of customers is the your over Markets, outstanding Every transformational the there ongoing an team and company. years creation excitement But our but in shareholders thank efforts of you would that, step our contribution in to come to together. not of company. to Alan come. him member to to thank his With the turning last in power the for potential the to

for Crash after our in in guidance, journey him financial major floor XX As guide important, to the electronic his major support S&P service counsel XXX has his our Alan of the Cboe service was milestones, accomplishment instrumental IPO from midst a dedication, from challenging environment, aftermath in basis very membership years a challenges, ascent He you deal our Bats and a I through on to company. of Alan. major past and our transition XX our will events, of a and you, including thank know, steadfast Cboe. to daily be He to Market with Cboe the those between transformative the to lent successfully helped of for years. company. Over friendship. retiring successful shareholder-based including an trading, Alan wise to and the XXXX, More organization of

Alan Dean

good kind Well, thanks morning appreciate and those everyone. I Ed, words

for begin all the thank years. and on of the you call, Before support I’d over to I managers, like portfolio analysts, shareholders your

been CFO the with to my enjoyed As of all much the It of work opportunity one to interact you. has job is so I’ve so have pleasure a reasons I had Cboe, consummate many that professionals. with of

Chris at that and hands Brian ride course Ed, good I off financial of with sunset, Cboe Schell in know as helm. the with into is I Lastly, the

Now onto quarter. the

activity in strong of XXXX. On same continued posted quarter in options January me will due on driven industry-wide out primarily market give for third includes our review with which another growth equities not results, results. against quick revenue, transaction to present quarterly the low a index but year-over-year begin, this X. the the quarter to XXXX. in combined and we that addition and U.S. Bats decline GAAP review XXXX financial were Before quarter provide trading XXXX basis on the Therefore, turn into flat of period. if along Brian third business, of proprietary deeper financial quarter strength backdrop to comparable it the and in had I largely year volatility the of a quarter I as continued will entire that with period compared our the the results non-GAAP non-transaction occurred the over of record Bats on products let relatively quarter, point third focus to To trading snapshot our basis, dive the by adjusted results our X, Bats the additional XXXX, an our March then reflect on it variances a

$XXX Our and Adjusted diluted rose points revenue third the adjusted earnings operating million up basis last over XX% million, was $XXX.X XXX $X.XX nearly adjusted operating to per of down Adjusted were share XXXX's third margin above of quarter. XX.X%. combined X% quarter. year's net expenses XX% increased

Now I'll over Brian. to turn it

Brian Schell

you lie that for as for we me that XX look to strive the you value all with honored Alan. upon partnership past reported these as our our forward succeed the you, am of create significant Thank demonstrated capitalize over And efforts further I work to well team continuing to say our stakeholders months. investor/analyst long-term to community I let today. thank and with as and ahead the of results to by our us, opportunities Cboe as

extent exchange higher with Starting the Now key other and fees. detail. offset and other a increases driver item market growth these The lesser fees. fees building decrease fees incurring, was in steadily some transaction fees represent decline by to revenue, this and of net during lower revenue regulatory and data we let’s third run fees regulatory reflects review revenue, costs. more a in the the to reduction were primarily cover to somewhat These services quarter in quarter regulatory net rate forward. in expectations and a lower going good costs we use believe record resulting for seen are regulatory this We've line the the in fees quarter year royalty

share revenue quarter. higher the fees as multiply-listed well quarter, increase by from fees, in from for up exchanges or The the Net from Total in or $XX.X XXXX. except segment, with X.X up for data both offset market higher index options transaction U.S. XX%. options. This XX% market and contributing in higher each million largest the to quarter, SPX options transaction XX%, was U.S. segment, with third somewhat contribution mix up a primarily by combined royalty options, volume the were we with increases. third increase options at higher an the in growth our in higher primarily index Cboe's market by data. revenue options Looking options of revenue Equities, up decrease shift VIX share ADV, achieved percentage across net million from transaction compared industry points $XX market XX% a our revenue million year's net increases XX% to net was of as business somewhat RPC, led or due million adjusted higher-RPC X% for discounts. driven market business contributed million, proprietary revenue of revenue index in by $XX.X $XXX.X revenue a our in options fees. to increase share quarter compared in revenue offset last $XX.X The In the futures reflects in and for and options with options revenue, was third XX.X% were segment, XX% fees and Net combined by

XX% of of and consecutive record million business above this Futures, second was a segment in quarter. reflects a primarily $XX.X for This by comparable changes the driven in Moving RPC our posted revenue fastest increase highest RPC. and to futures ADV fee growing last January was of RPC year's increase XX% ADV impact increase The Net in X% increase the year. implemented quarter.

excludes saw primarily growth VIX year. XX% XX% organic of products proprietary our legacy combined quarter, net organic contribution, accounted Bats for at the Looking Cboe’s this basis, year particularly growth, futures to and options. revenue strong XX% for transaction of proprietary due we last a VIX which to products, the On fees compared

volumes non-transaction down to decline U.S. X% primarily slightly, fees, an was in X.X a that The of in Turning of another unchanged. net net nearly overall net results volatility, percentage low equities capture offset point typically We by volumes Equities, transaction driven quarter in decrease were lower results traded witnessed revenue market share, and and which revenue. by growth market percentage a volume lower which reflect off-exchange. higher with in

data and net continued shortfall fees, previously, growth proprietary and in exchange fees noted services market other transaction the nearly solid As in fees. offset with growth in revenue non-transaction

response We in quarter, growth coming customers market customers approximately our offerings, growth XX% the remainder data revenue to from to of new continue and of additional changes. sales existing to proprietary the pricing XX% see which positive had the or with from customer

by both reflecting quarter. versus are currency net dollar FX in revenue. by rose percentage fees driven million. daily growth was market increase a FX decline in for Market Net reflecting response data XX% fees Cboe revenue XX.X%. on basis XX% increase increased notional decline points non-transaction somewhat platform, in increase expanding European and equities a point transaction the look offset our by for the to year's The Net primarily and X% traded third in XX last base. And capture. share increase market We from average X% X% quarter, transaction This share. market European in resulted up $XX.X capture, net by X.X market fees, our encouraged somewhat a were an net value on higher forward and to increased net X% the our transaction local basis the in offerings in equities customer revenue to volumes to for further Global a offset

expenses, last to combined for or year's the for expenses quarter, slide Turning expenses X% adjusted next million $XXX.X quarter. total adjusted third of operating the to down $X.X details this million compared

the variances benefits in the and detail, corporate-wide favorable consulting of services. other third In we expenses by primarily in and audit and a at compensation resulted and services, fees, legal fees and and staffing comp benefits, driven outside the $X.X and amortization. services, quarter, are realized realization depreciation overhead. outside Looking primarily professional The expense and in lower million declines for synergies, reductions fees the of professional synergies, seen which and reduction reflect fees in

of as million a in result GAAP running expect ahead synergies year end synergies $XX for we realization of run-rate XXXX. is Our the approximately with now plan to and

pulled However, savings. believe at time we this just the forward we have some of

we result, you are be integration changing as our a realized We providing progresses. with to updates to forecast the in further forward synergies long-term. look As our not of

expense year $XXX we the Looking original expenses our range reduction million XXXX, million in from to range million. at our the guidance expect operating adjusted $XXX $XXX million, for of reflecting to to be of full now $XXX a

call. tax effective to earnings tax guidance effective expect of The incorporates GAAP tax year the of the Moving guidance to well to XX% the as XX.X% quarter charge rate law quarter re-measure fourth other for of XX% in now the full range for in recognized be quarter. XX.X%, tax of impact to adjustments. of expected rate enacted effective to one-time the with earnings positions, XX% XX.X% July. on as rate million adjusted XX.X% on taxes, non-GAAP tax third range third was of changes year to on compared guidance on be The the range our XX%. XX.X% combined $X.X in to This deferred We the the tax income to provided we Illinois within XX% adjusted excludes rate our our last a to the in is XX% and for the early corporate the income for a range of prior in earnings

to assuming reflecting year code, increase Looking the with tax significant Illinois the XXXX, full effective changes of we rate tax income the no federal compared XXXX, impact out the expect to to and changes. rate tax

in million million, expenditures $XX we better to addition, quarter. $XX a we be on of previous $XX In our expect fourth to reflecting $XX year guidance our million and as for million of project range capital now the visibility timing versus costs enter to the

We our depreciation also amortization. reaffirmed and for guidance

Turning to in capital shareholder long-term focus create to the allocation, we on value. most capital manner continue to allocating efficient

As utilizing through quickly prioritize to excess debt our possible. down and capital growth pay investing in by such, as as capital of our dividends we the returning business, cash

Our $XXX of once reduce quarterly strong us again still our and flows, debt million, additional ending third the cash by million results which generated and million. while $XXX cash payout of with quarter investments an to enabled dividends $XX.X adjusted

of debt was ratio turns X.X flexibility. months on turn the while XX our the from to roughly to, combined times, based leverage sheet to quarter X.X enhance look will specific at to end are trailing currently a down and continue have the since don’t first we EBITDA second quarter. balance adjusted target managing EBITDA we And, to Our we quarter-end a X.X ratio de-lever

services are non-transaction while the which you the share year, capital we shareholder on remain allocation with momentum summarize, With build products built make improved allocating shareholders the make open quarter, power third our during to in fundamentals and experienced morning. margins; streams and though the strong scale for our model, management; the revenue reducing depending ongoing index believe repurchases, strength we base in value. organic strong we have focus we over your customers generating solid we the continued growth; leveraging of circumstances. and and throughout not to Debbie will our return realization; focus to integration the any share to our third to we with to uniquely capital producing on on of and on a market serve of profitability our needs will this back on products, To track, disciplined and it business of revenue; higher on continuing In demonstrate potential an the the the debt While quarter time with did growing we plan our exciting expense of pipeline, cost turn Q&A repurchases diversifying innovative synergy our by stabilizing opportunistic thank quarterly and closing, call. positioned dividends. portion instructions for that, to capital I proprietary

Debbie Koopman

At to get allow would to please limit will per questions. we this Operator? queue, ask your permits, free we to second time point, question. take if time happy back to We Brian. Feel in to be that one to everyone. you Thanks, take person a questions the and get

Operator

Yes, thank from first Repetto you. Sandler with Instructions] And question comes the O'Neill. [Operator Rich

Rich Repetto

Yes, good morning, guys.

to First of maestro congratulate I Alan, expenses. want the just

I guidance, the think you will when synergies, XQ synergies it's target only the the fitting that for beats he announces you lower you expenses, still the his keep on outlook. but same increase us retirement the

Ed Tilly

the Rich, of here. He’s him in out not I kicked room.

Rich Repetto

I’ve Alan enjoyed more. expenses manipulated It’s market but way, I'm going my to data, consistent. about been I Chris here. to going the question, stick ask with to Any never being was

guidance think up still XQ if $XX of the think with at you million of synergies there's and rate million at level. our at low we do level, about $X $X So expect stayed run if come to you expenses – for synergy you million and same the that still end how another I out and And when get I take you come the out. take you’d

time one expense why you could is the for XQ? just guidance it what explain last is So

Alan Dean

maestro Rich, Brian. we have a expenses, new of

question. Brian So I’ll let handle that

Brian Schell

Rich. Hi,

are on. reflected things that the of guidance are have fourth in couple We know some for a year. that reflects expenses in – the increase full going to we going that’s that seasonal mean, I So, quarter

in more far of the we’ve seen quarter, we expect the as the change. fourth seen rate what loaded rate, we’ve So changes run obviously, any as than earlier

guided that conservative with perfectly that feel we we've range, comfortable around very to. the think So range we it's still

that far of So, said, modeled. made expect a you see you real driver have do maybe this in little might there the where we where than where fourth you're is quarter year as what I uptick different as that bit headed, an like a than you model

Rich Repetto

you. Thank it. Got

You’ve Thank been Brian. well, trained you.

Operator

the question Thank next Jeremy with you. comes Campbell from And Barclays.

Jeremy Campbell

just to capital on I Hey, I about, a dividend deployment that here. don't mean, can the below business little out, you you’re of of okay, to the and touch the guiding going down But more you think have – cash aside side. EBITDA. bit how excess from reinvesting you are guys thanks. a and really wanted about currently that flow organically those you know you're kind target forward? thinking just paying guys turns now you're prioritizing in that I And free mentioned capital two

Brian Schell

Yes.

achieving repurchase tools So sheet quarterly look surprise allocate we our – again, capital that turn I’d be can focus are at the restore interest done capital look at those of upgrade continue to that continues some their at us at we share opportunity, the shouldn't to items we to we way a flexibility, delevering dividends, sheet continue longer-term there we review the look effectively. we've And projecting end from through board. where goal to still potentially the there. We up the and point, agencies generate, help some goal, to no that expense that continue on this use of the have We enhancing conversation flows, our to if reducing look the to any available continuing on again, so where maybe and we with there potential all we we are if an where the predictability to does are, deploy say, shorter-term that balance positive we're to balance what past is going of as definite that getting even perspective, benefits our and again, guarantees rating the flexibility. in continue any various to a cash on ratios, increased

think quarter-over-quarter. about continued we've So consistent pretty it. that's to how It’s

Jeremy Campbell

Great. Thank you.

Operator

Thank comes you. question America. with Michael the next Bank from Carrier And of

Michael Carrier

side. just on Thanks, guys. Maybe one regulatory question, the

got some we of on on were were you’ve market recently the easing the dealers potentially seen data. market markets, impact capital some makers capital on support there like on flipside, options. some back focus But So for the and way ratios from there treasury the the

opportunity of I the all there, forward, when if in terms change are look going these market the any place? data of your terms just or put you on some users in of guess market, So in in of at points the recommendations

Chris Concannon

this take that Chris one. Concannon, is So I’ll

First opinions that over – treasury been it of have all, of the market there's we’ve and structures. years to of reports, been all many as we the favorable which some voiced view when comes regulation several

particular look how they makers we bank mentioned treasury the the reports clear market across as their as you about, trade. quite and view So favorable in them One our when board. is at you impacts capital and capital that

largely trend from it's On trend and has particular. we're for well-positioned. that the in market action that in But is the report, makers a will SPX our being only think see we various treasury agencies. obviously, favorable come we in So data, market market regulatory continue,

we coming at are with suggests market because well-positioned much a lower alternative. that organic Our we're the growth

clients reflecting having And one a investors that and at data trying Asia it's find solutions that planet also data that's market in of U.S. viewed opportunity just and lower as in costly. and market a looking growth are less around so as market global reasons of our data to U.S, by are market we're but Europe why opportunity the the and cost data in not both the in revenue is we're opportunity, our here

we're about market to data So costs. well-positioned the treasury like talk light we of feel report, in

Michael Carrier

Okay, lot. thanks a

Operator

Sachs. from Blostein Goldman with Thank you. Alex question And the next comes

Alex Blostein

guys. morning, good Hey,

Ed Tilly

morning. Good

Alex Blostein

revenue the here. from Bats' So migration wanted of of to technology follow-up you guys over on the couple kind next products platform earlier the discussion, highlighted Cboe of into quarters

to So later CFE on in SPX I quarter. QX, VIX second the guess, and see then and products going sounds we're like Index

obviously company that a that create revenue been of that idea has Now kind our a couple year? this it’s the combined incrementally, terms time pretty you’re you've in what more customers, could for spending so and with of seen of any opportunities backdrop far robust quarters,

Ed Tilly

me turn and really – not just want to migrating onto add to to let are are XXXX technology. Brian early before and But be to new migration over you is actually, actually that the I the color, technology. a hybrid, SPX clear, moving Bats it right, CX Chris to Yes, CFE some true

clarification, with point So expectation your going a line just we're roll out. so in of to is what

users Bats As targeted always really really future I to will we've table and and side. be on technology far me, join ask a the perspective, opportunities, will the moving from as to benefit the what the greatest

just needs massive processing if recognized What those. past you quotes look team the wonderful now, really by orders shortcomings current an that's the exchange that trader’s with and of platform is built options some perspective at redo to futures Chris matching – So we actually years from have someone able completely and is amounts processing Isaacson expertise used and of that quotes. of has experts when of the his and in been to of amounts massive was quotes in over recall, quarters primarily that a that we perspective, was technology the of we’ve a the

what global VIX the on be to be we is our leapfrogging on So sure. the interact standard exchange able greatest will expectation you the for think, a should benefit to that with and futures futures or

moving So looking biggest benefit, and migration our futures think then, hybrid. the quarter to onto CX the after we SPX forward

then, has and happy get to if add was there to So some. think that, into it. And a I more color, got happy Chris follow-up to

Chris Concannon

CX We investment the the, only the will And of as add October be book started rolled view technically. the in in that's future out that EDGX as XX. our Yes. CX. an integration complex order series And well I on as the complex launched I'll that already

in we you as think So the started migration about October. it,

migration is also by and we that product a We May, to of index February to is all CX obviously, part the an moving have followed migration new SPX hybrid CFE announced, in platform. in the then,

seen success off on we're start. complex We've book in EDGX and launch good of order So migration, the underway. to a it's the the so already very

Alex Blostein

Great. lot. a Thanks

Operator

from Worthington JPMorgan. you. comes Thank the Ken next And with question

Ken Worthington

some in in I question. you're technologies. of is you Thank a testing question. Okay. the new taking the to This follow-up totally believe Alex's beta

particularly was but It maybe well what the believe – So there's technology new are What seeing clients other any others seeing already pace if far? I I trading what those are are using that from the impacted of CFE sort those guess, I'm interested as could And are or seeing and be the you believe I'm by customers versions takeaways? I wrong, thus of new clients right, early are case. technology. are from Thanks. I we totally there in guess, of you is, who the that

Brian Schell

we in in our days platform. really to to market, only Really, between it's predict Ken. but for and behavior are learn making pounding is on a are prediction is trading. those require, system results the alluded on original we the the outcome touching positive very department new higher the There's where a positive test their have all look platform you messages but with throughput. it having from But don't clients those our typically the the APIs standards the platform enjoying platform nothing early clients correct. We're CFE interactions Thanks, new on platforms way that new you our and have testing to any sure outcomes. just for days platforms and at because testing in more can the early in that is as Ed client too QA it's our Obviously, and not clients our clients, to

Ken Worthington

Great. Okay. you. Thank

Operator

with And question you. from Voigt KBW. the comes next Thank Kyle

Kyle Voigt

morning. good Hi,

one synergies, of think follow-up go were over year, deck well I hit When the than from the versus to million. slide three-year you're original $XX on of synergies into $XX I you integration of less a IT-related. last XX% just million year synergies back outlined the to target So going acquisition the the

I think you've corporate just only in And $XX synergies overhead. million comp so far most like sounds were have prepared non-IT-related. been remarks, your the from of and realized it

I And So targets? how IT-related that reconcile maintaining I synergies a with, little that still guess, am come IT right do take synergy to the the thinking long-term I of big bit of to in realize? the and typically synergies part most longer yet you remain

Brian Schell

So I consistent. think that's pretty

the actually thought that hit. So sooner forward would to going them of out we’ll happened built about pull expectation couple hit that talk to synergies. XXXX. – we actually the thought some Longer as to we we when XXXX non-IT far is as of we had close We've things of some extended non-IT where whereas were be realize the target much into for we in range they able that we is just were more that’s

of to So be numbers way, lay platform. how and those being question a is synergies systems continue you've big numbers with out the when with migration pulled in run have still is. we've to not are parallel and of and final kind continued the answered parallel. continued changing well, going everything do lot than forward. I we're it to that that The realized, process kind bulk your with of we've happens yet talk almost Consistent Because be we those already, exactly are that’s guidance number people and here associated third stronger about done technology we've out of we’ve that nailed although that are to to going maintained think that that with that so a further in seeing

So cost, and along it's have power all cost, you the just the with comp have going it. not the you everything connection

that to will that and costs not certain until those off. fall come continuing are maintain continues so So to platforms off

out. CX happens, thing migration we actually is we that that, why back original and alter example, five-year slide actually reinforce CFE three-year, reason happens for or – the number we a other will occur when that the when to The other call have it that put continue we'll is actually have that the to when

provide change that to question, may think do when to, or the kind ask may insight so we’ll number And is, we of not. or insight I have follow-up when

to migration that's and along then, us. CX think update for that's be CX you actually we CFE, I to need the when with further everything an into with the going is take built into look platform get and from requirements and would what going to finalized we've

Kyle Voigt

Brian. Thanks,

Operator

comes Brian Bedell the from Thank Bank. Deutsche with question next you and

Brian Bedell

Great, thanks very a much. different Good morning. Maybe just to catch on to maybe that team angle. and

all, As we of I and type share, the complex business, don’t market in from of if any us the CFE the targets first book platform within can adding you I options I and like pricing, kind know CX order as timeframe But with for, share improvement share I’d married of get. about migrate competitive over think you pricing what to guess, weapon is, to reduce options question what the XXXX is, to I the think pricing the guess, potential focus you is want to asking about how be gain Is broader as the across that with do on a there platform? as I'm going in market a strategy? over, conversion,

Chris Concannon

Chris. it’s take I’ll So that.

we're current around and for to I the think give would when the functionality of do think to perfecting structure for there's migration that migration functionality we that platform, micro delivering. Today, We platform we're Book, a it's is Order clients clients around Complex for think that is, around the really order first on waiting their that the asked have market about platforms like the we functionality focus a of clients, the net the install functionality. benefit types. our auctions, that

for make client trading sure our that is a demand the on So itself satisfy we're net we platform. client with trying migration positive That to everything into migration. the have wrapped to

the the current functionality. our opportunity improves us So platform does and provide our share we business. The in our about is market tools that of grow demand Options in segment help platform to our multi-list think by on and functionality migration clients

I say. too XXXX we comment how view about we So won't early pricing Obviously, think to that's It's and in way the pricing in it. XXXX. on

Brian Bedell

Okay.

Ed Tilly

Let to follow-up, driving answers been point, the to to Chris responsive won’t change me technology always pricing, competitive just be pressures, your that. we've

will by product across product, not not what at technology classes, and we be So will so type that driver can, driven. order competitive the behind technology be by functionality pricing. looking all order environment functionality the the asset and will we the be It holistically migration looking by type but and

Brian Bedell

Great, clear is that thank you. very

Operator

Thank Autonomous. Vincent you question and comes next from the Hung with

Vincent Hung

what you there. lease talk has specifically about – you growing contract the more this done you've this, success can and SPX Hi, are the the further around options innovation in year, that to week planning enhance had the

Ed Tilly

Yes.

the complex, very can you outpaced I growth just we much the talk entire gave greatest in the general of Weekly and we the it resembles index look contract. think and that at and And out highlights quarter, last complexes is report that this you’ve pointed proprietary SPX in the one that's industry and quarter. if

Their active our comfortable SPX strategy at user's user the is Weekly's the globe, and SPX every reflected in perspective the in in I and comfort of making that particular it what risk the group the really we fund, their – customers in RMC hedging perception growth. in end at the quite and but conferences very around active very what taking if very have short-term, our in think we Weekly's, positions that's very to the investors learned look is talking the various short-term. honestly, the The retail, who short-term, trading and theme short-term. confidence hedge in day the is

at look you. over that Friday that in we that are just confident, people volume, you out reflected the SPX in the the we look That boy, outcry many third if is if time. institutional But aren't contract, The insight that that's months open give still base. high

term futures that Weekly months the short-term the look that of in front the look If shows the our just time VIX the VIX in much still level structure in at the than is website, you SPX trading the higher price out primarily at that up you contract. back in is over months

Vincent Hung

Thanks.

Operator

you from with Fargo. Thank Wells next and comes Chris question the Harris

Chris Harris

specifically, expectations? Thanks. is bit the it first quarter are the you next guys provide Can you what index in planned guess, I of your to more what and little new a year? on color platform launch

John Deters

and index as construct to is that a in is John Today, fast Deters. been enhancements it platform upgrades pretty quick technology. Sure which new with matching life really coupled, not a The technology, this system. for closely edge stand-alone the of piece starts Chris, allows our has

an typically So its edge in cutting-edge the matching involving just will do with our Stage coupling, more options. make it's Stage complex technology. And X, futures weather onwards, in from to stuff, is really then, to effort it it or positions, business, about indexes, they mold platform include our what and well constantly we X it better, really we be the and think we derivatives if index are specifications, which you remove

to highest chasing type the index suit this that we're technology indexed objective. be complex most really will and products So build proprietary

Ed Tilly

I happen going think the step, first that's taking and that's to your and the quarter that of first matching then, grow is the in there. John, key we'll technology from the out hedge business

John Deters

That is right.

Chris Harris

Thank you.

Operator

and you Herbert next question from Thank with Ben comes the Citi.

Ben Herbert

question. good Thanks Hi, the for morning. taking

in on Europe up the into and might market to follow share related to you anything like MiFID? seeing XXXX Just be discussion specifically

Brian Schell

our market really have going is dark. where In to is Mark the And would team and Scale trying number Well London sign think a through I in trades and think and and are members the Chris of it accommodate of and I share perspective that, uncertainty and all a I been have accommodating and and I up. both of Large It's a from the in show MiFID and board really buzz I made the office in periodic solution just prepared really, launch, our low and options a take office done Hemsley can to was is offered visits. that still lot mentioned larger volume otherwise what remarks, impact,

one, want by As enjoyed region and think the I add now But with the think color. number readiness, a as far two We various, to do can MiFID share to and for number you team across add Europe. is as but perspective, customers color. our between some two room Chris, There Chris, in you spot I region, share, preparing it is is it's right from some for? London number

Chris Concannon

that, MiFID before of team II’s London start MiFID commitments clients. we've date in January. that to all solutions The the clients We put early, accomplished really MiFID MiFID all readiness And comply everything Sure, strategy in hands be them mean II. it in XXXX their the delivered and ready our – products provide with to for II our I wanted help was has readiness. in on

over final a and have summer. a We larger release just release recently the

that mentioned, Ed As are for platform. on all now Large Those certain internalisers. auctions interact MiFID Scale, II to clients for systematic for things our quoting periodic benefits and requires In

II. providing those with about has and had post MiFID that of So, I market And focus we're team our goes we way feel deal products share in that the terms MiFID, challenges to facing are good with on solutions the live. before MiFID think about product some thinking don't about the to clients clients,

Ben Herbert

Great, thank you.

Operator

from the comes Fannon question Dan you Jefferies. and Thank next with

Dan Fannon

Thanks good M&A Wanted just morning. to on general in follow-up just

Ed Tilly

cut out. are you Dan

Dan Fannon

Sorry, can you me. hear

Debbie Koopman

Now we can.

Ed Tilly

now Yeah, can, we try again.

Dan Fannon

of you in and for should Yeah, if bit. then, acquisition you the more guys? backlog, that could And a small you priority general, obviously think about think strategy little a kind bit maybe the few announced you forward, talk discuss maybe how we think just then, about a ago, as a about weeks little going maybe M&A

Ed Tilly

the on I turn sheet, we Deters at. to get XXXX. to flexible through the in complex a Alan led Silexx heart the very Before look of proprietary can it over growing really show John at but balance the is what us is weeds This road into really that the strategy from M&A changed keeping hasn’t

Now looking be we share across asset on we'll how with both our class, regions. in presence grow in asset classes broader our different the

we higher to priority, that Cboe first will has an think If build So opportunity, bolt-on if we'll in Isaacson at solution. smaller a is there a look look legacy done we past. for time-to-market is Chris the transactions

announced proceed Don't large-scale recently the in short-term. you really, expect we've M&A as deal. we've to and So should us Silexx done as us in the expect

will as grow complex, but M&A. this focused system large-scale the on and bolt-on, Silexx on time here proprietary over Think no big various now far want out really the as Number Silexx? eye across we that's offices. little it's business, asset And priority. growing will that's our keep and always will be our index of the We M&A, across migration, John integration entire add our John how as usual classes, in attention X But all into business got the but color to a and we're right get organization, to

John Deters

Deters. This thanks John Ed. Yeah, is

our – our Silexx how kind users might we So how do of products new we to rate example bolt-on it for going is I a or M&A example and internally prime you of a run perfect services. deals acquiring by tools building with of and might right. by Ed bolt-on, about Really platforms forward. think think framed can almost create new engage either

participants a So a and multi-asset ready connectivity key reach channel to end marketplaces. to last for user markets we partnership And we're with as Silexx, products in acquired really owning time. platform the XX global so in class that be is is to with go our the broker-neutral it's over call with The really this exchange that and Silexx will mile platform, important it the And user to broker fully capabilities. recognize directly users we services. reaching – end globally end about is our our a first

an view user because So it's for be mold we'll to be globally. a really kind it very end it able evolve the because sort just and while it, products of it's our utility that we and we'll a technology, think is of with from very material able high a financial ideal will young so our shape business channel its platform point to its the use for platforms of of not

Dan Fannon

Thank you.

Operator

follow-up you. Jeremy Barclays. from a Thank question the next And Campbell is with

Jeremy Campbell

for thanks follow-up. Hey, the

they're with as seems know, pursuing know a that I announced product yours Just it's kind a on Gemini to but bitcoin. space, touch on that product the potential futures nascent the white of quarter, development. competitor asset Cboe and develop large still in lot were still new phase product announced futures but itself you of to I well. class of developmental, here partnering recently last want bitcoin in

can about think first-to-market So product really are may in it does an timeline? approvals some how other of Is update the versus give advantage like be there? have the a you just or where Cboe competitive you thing, on And pricing, ones? the maybe us you dynamic type

Ed Tilly

regulator the Our the I of currencies you're at we a crypto advantage. general, globe. of our recognize the This by product way development No, sort look have you that's products our end our think very pretty small what attention to across in with market we the look CFE, U.S. all at and giving yet. of have this big you a recognized our we in comfortable listening the lot of right, are a regulated on market digital not that captures our users, always them futures lit is the if key exchange. But exposure of is

market. offering a So surprising of CME as I think transparent not same benefits the recognizes

different a and true ours have hedger and development, Now used mind, for we’ve Options. is in with taken trader we model VIX the the approach that a really a into designed Futures we

difference the the actual futures accursed our trades to trader, by result replicate settle to our auction. trade their the we ability Gemini. the So futures at and after price of is actual these our on exchange, will the trading ability Gemini for on a CFE, who's resulting on Gemini that, on position settlement is In

approach Our is different four which competitor the indices. over time index, taking an value a is of across

this perspective, up But exposure currency like And really moment I be as very, We're the looking for there from that a a that really we very making our fight. first crypto bitcoin, hedger's clear agnostic exchanges, We in bitcoin. at our we launch perspective, easy converge in number think know time for ether now a So playbook contract whether may survive to are successful that or not and interesting. so ultimate that's to the to really in is across difference. will want we hedge difficult is that while customers know bitcoin. to the are of what hedger's right trades be Gemini for various price it with we VIX from so really traders that opening to

want So Chris, you to add something?

Chris Concannon

and the space a by encouraged suggesting It believe does by I in believes currency It's town But winner think and in going as across crypto the it currency, that we validates the the to I'm our currency. validation. crypto space be in And currency certainly crypto validate, competitor announcement. crypto the the that of encouraged certainly recent I'm is is just Sure. what not loser. say overall, well. what I’ll future

our opportunity over regulated of to I market encouraged billion a And close introduce market class so midsize mentioned. focus liquid on listed equity ETF. dealt with once stock one a think asset to this talking of futures to trading coming markets. to certain do an envision think That's we a is you We're and opportunity, space. our the about important time, the it's you everyone's we're is relatively small point have day. bitcoin by do space like we ETFs a that as bitcoin, It also regulated do futures on out $X

the space. are people future overall currency the and the encouraged space space encouraged by So and how that about thinking of crypto

Alan Dean

where think other the with process. CFTC, I are It's we the your for again on where very us will a to but difficult question a approval able gauge when of questions coming make Gemini the on regular decision. been We our date. that was answer regulator, from we we've speculate think all wouldn't partners, the to

we operational-ready you as the on up-to-date learn approval keep and that are process We we will as unfolds.

Jeremy Campbell

lot. thanks Great, a

Alan Dean

Sure.

Operator

next the And of you. of Carrier Bank from a Michael America. is Thank follow-up question

Michael Carrier

just guys. and This Thanks Brian. Alan for is

mentioned taxes, the the on just So Illinois tax. you

I think you higher. indicated for next year,

that on understanding by the meaning you actual the underlying risk options, at when bitcoin just are guys, the the Just trying SEC of understand reform you have if lines it's just the new But CFTC just futures and there. just on conversation, it's on the products have get do that versus some as But positive then, an if flip is potential the we when regulated, there of maybe yet that asset? opportunity understand you I'm some underlying might the whether to the there's guys trying offset, know on that you any the tax to different sizing contract. versus early. regulation look I and And maybe not side, then like that the – or sort

Ed Tilly

let have bitcoin. and I answer get Chris to don’t can we their Brian Why Alan then and and back

Alan Dean

not you to overall quite what that to right reg XXXX. We're of we XXXX know still – how So now impact yet. it kind year. code want interchange, And kind halfway guidance was I'm impact of still saw give the was the through question going some we incremental on the state reflects the see the to the There's Illinois we on the had through within passed income statement. it specifically, on happens going kind of work effective with

guidance for So of XXXX. will broader issue as but own flag together. kind time the next on that we you get we we Likely for our

U.S. kind top changes, someone we end of clearly, As what's a far big bracket, far been as at it's the as benefit proposed of federal Cboe's as the the – earnings. to primarily the pay position in where

There's going for pay both on and it's negatives we'll a XX%. largely basis be that positive tax cash to paying much but full more we're in an what in basis So ultimately to positive taxes. there, and effective us rate

still what’s may or from of probably right the not up happening. it's to think early now what of ebbs kind what's change likely end and to to because speculate been and I proposed flows may

big looks So benefit our an positive, bottom going and a we that tax it corporate component stay stands to the largely be on obviously, an but way again, basis reduction if Both basis tuned would from it right through in it view from to its strong very now impact a rate a a current effective rate of be form. well we’d as – line. as cash

Brian Schell

So I of why let's who would. is other regulation really, – same it we as as is and bitcoin, and opposed Gemini think found the any get exchange crypto looking choose for exchanges a the really would a listed the to question oversight we partner, your to around the it transparency globe

regulation describe transactions on the to through really I color our ultimately exchange. and Gemini and to and transactions can from on our you our what's structure futures attractive Chris, CFE And exchange then add the the then, ability want the futures look and Gemini. So of

Chris Concannon

was regulated was by authority New Banking not chose welcomed chose Gemini to that be the our first, they the Really York Sure. that with the partnership of required, State attracted of it. to it one embracement things but regulation. us They and

market has it to So commodities, commodity there you brings so a doing of exchange as and now opportunity commodity. look derivative the terms to custodian is underlying we their around hedging have Have out it determined what market, for regulated how positions world bitcoin they that's as you overall commodities market an CFTC in partner are are standpoint, markets of of many think it about in and the of a really the did Gemini the that bitcoin, a from their And does it regulated that a that is you its a unregulated. of a what that provides And entity a look it when I commodity at come professionals how manages what's the conclusion regulation. market. taking we're unique here, is views found a that embraced and regulated

need Gemini, of are, to we're market a to our embracement join So call because users result that Gemini in professional the of regulate the they're I'll markets participants they semi-regulated as able and we know what regulation. do underlying who is largely

Michael Carrier

lot. a thanks Okay,

Operator

that And last to would the call the Koopman any Debbie I you. comments. Thank closing to question. return for like was

Debbie Koopman

you. this completes call morning. you. your Cboe our Thank Global appreciate interest Thank This in Markets. We time continued and

Operator

Thank conference presentation. now concluded. today's for attending The has Thank you you.

now may disconnect. You

Cboe Global Markets (CBOE) 7 Nov 172017 Q3 Earnings call transcript