CBOE - Earnings call transcript Q4 2017 | Cboe Global Markets, Inc.

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Operator

Good morning and welcome to the Cboe 2017 Fourth Quarter Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I'd now would like to turn over the call over to Debbie Koopman. Ms. ahead. go please Koopman,

Debbie Koopman

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

an strategic On guidance results Chairman Executive overview discuss for provide of and metrics call Vice for CEO, on the today, will quarter XXXX. will certain the Ed President and our quarter financial provide Schell, fourth Then, and Brian initiatives. Tilly, CFO, our update our our an and financial XXXX

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

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

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

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

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

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

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

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

Ed Tilly

good for many morning. for and to thank Markets. Cboe quarter on Thank I us you I strong you, Wednesday, you joined today. a of at on us fourth call pleased know am joining Debbie, Global XXXX report thank you, again and our

A we year of Global Markets, our increase teams, am while acquisition industry the serve superior year. As and what X% a strong of services, growth, set that year options outpacing off XX% customers our out with approach two including to integrate one the Chiefly, and overall. to we within the volume anniversary average combined to report, do tremendous of Bats products company we to I gratified basis, to on fourth our accomplished business first continuing great lines. gain made a the quarter respective of capped an grow in total daily by

at one New use XX% share FX ETP volume, platform, and average share largest over market in Matching previous market options record An Record with in of trading. to listings, SPX in volume another a XX%. with notional trading Large by in Cboe Scale our end, Europe. of year's now Record fueled daily our facilities Engine. London increased trading block the An of year. in in total which trading and record XXX the all number VIX our futures, each SPX year drove increase increasing high trading, Weekly's bringing in XX% time

reach Our product and positions in strides making in Bats, XXXX, ability key with expanded fully our leverage our great business increased while deliver lines global line. superior to integration more across to us results

key I a and at areas. leading trading to in stay those recent power relentless seamless our to potential, mission Our minute solutions. to take will progress of look an our innovation, edge marketplace evolving ahead is three to commitment by fueled technology product here

by launch bitcoin our evidenced Our listed of XBT. innovation, product. world's Bitcoin futures commitment Futures, Cboe regulated to drive December The exchange growth XXth was product first through

continues a billion. exchanges our in traded, XX, notional futures, XXX,XXX successful trading to worked value by of our auction trading XBT in XBT steadily representing to migration technology commitment designed. proprietary on $X.X the to We providing build to Bats Moreover, of first of time central as the the had superior early an over over with are settlement orderly contracts settlement efficient, process the The January encouraged Cboe which marketplace. exactly transparent on technology. At is and customers

migration remains growth. We call feedback on We key. Exchange to held December, company's conference The February technology our power track of ongoing maximize with Bats their value our expect XX, fourth customers XXXX. proposition in positive. and the migration for Cboe our our closely to is and the Working customers to with remains Futures

We May launched index the our for business, new successfully disseminate simultaneously and enables indices. foundation XXXX. growing migration preparing planned better of our existing are new to on CX options for as add for XXnd. us January calculate platform XX, exchange and and serves the The to pleased data am I that we new for platform index

trading advocacy, enhancing to new the and education. regulatory committed customer's experience, are through technologies, We

II designations are expected environment help viewed customers Europe, products exchanges. an in the of by created our for continue Japan services. alternative, added with the access in were to the We listing approval believe by encouraged seeking we we staff the benefits continue as Hong Cboe by Global subsequent inroads opportunity the by to The increase to SEC our changing the on the ETF to vigorously work add but deliver regulators, recently our SEC's as growing by navigate delay approved of advocating Kong equity permission can a We and MiFID XXth. to Markets to behalf auction, on Equities Close U.S. on These lists U.S. respective customers, global non-Cboe appeals competitive of our securities. CMC from customers, closing resolution. behalf favorable work preparations and for receiving Cboe proactively process made approval CMC the will a of match and We We a markets, for and with value business. to of competitors SEC our January proposal to on regulatory investors Market

company. We have our European still to companies into very is overall in already that combining while a It credit superior year, is product two our our these entire deliver greater new an early small uptick days. while to encouraging, offerings, that even are results able a in business piece given the also successfully volume throughout one of were strong team, seen

reach As and With our a growing that, our I exchanges targets. to result, to synergy classes, asset growth execute to our our to our now positioned including acquisition it continue will over well products, expanding on are we across migrating global technology, achieving turn Bats Brian. initiatives, proprietary

Brian Schell

good Ed and to Thanks morning everyone.

comments with general begin, our grow I the relate that fourth as overachievement expansion XXXX, On earnings basis, heard we non-GAAP to I Summarizing versus unless with compared increases revenue, to the results continued for each quarter and coupled driven X% strength by all to you noted, to results, growth. same in theme the that a of Bats. based specifically that everyone, remind and us quarter including year combined fourth our Before from my non-transaction expense quarter backdrop throughout segment. XXXX, prior the follow our our period results, increase revenue, across XXXX adjusted low the and posting combined XXXX, net net continue results have margin want of growth in solid business to fourth on revenue, are financial market volatility, of leading combined of products, synergies, with expense discipline against proprietary indexed primarily

for our $X.XX, our for adjustments. each of capture diluted key reforms. key we $X.XX as release this tax the In press in our the of our revenue the revenue point, issued operating quarter, or legislation largest influencing come each tax in lower had segment margin. for futures highlight drivers segment. index lower the and was well as deferred reflects index drove of our flat earnings adjusted basis growth improvement increase our in given regulatory Decline with diluted was an somewhat in the revenue our impact as we contributed tax expenses benefit to quarter, increase in X% Options recorded a net The on a the year. options resulted provide due which full deck, some products which royalty key combined and tax fees, and in segments, offset the fees, point slide the and traded. segment, in this performance organic regulatory variances. XXX shift morning We in The net I'd of regulatory driven lastly, between X% of of is the Our transaction and to gains, royalties growth, non-GAAP EBITDA a $XXX on by our in as quarter a products, path volume our in primarily reform by metrics fees Adjusted higher onetime of fourth in mix point operating revenue per our like in in and XX costs. At overview to More lift X% relatively an operating basis volume adjusted approximately increase higher payments. margin, included well up which revenue XX% licensed our million for the per later share revalued December, liability, share

$XX to XXXX's to be month, full net regulatory our below we lowered revenue revenue of regulatory year and million. options However fee regulatory this expect XX% XXXX's about XX%

revenues in regulatory our However, line given be for have fees bottom from regulatory no costs, XXXX. this that impact used must on should

to delivery noted, and plan remain we SPX did the our with with our in we of and and As education, programs, options. over-the-counter in In aimed as proprietary products, development such XXXX, record volumes. volume XXXX, growing large, Ed ongoing we incentive both proprietary efforts VIX focused on trades at index those our as continue on products, to retail business various focus growing

overall While on some net may be impact the programs, RPC, expect to the incentive put we positive. pressure

futures; contract and year with growth to we another Turning volume record both RPC. in had

latter feed and the modification day our trade program, reflecting quarter, the a year. fourth entire impact the had on With favorable which for a RPC to

to we have believe trading a be CFE participants provide migration and successful enhanced optimistic trading, which a about a positive continue month, we XXXX, this with tools technology experience. market trading as For on better we impact later will

lower driven overall revenue, partially offset XQ fees. XXXX exchange. off by U.S. was revenue equity traded in a volumes in slightly, non-transaction volume higher growth levels produced volatility net up lower percentage to low continued and The of Turning by net transaction equities,

this shows, for for accounting data market As full Proprietary SIP flat and the was Market quarter revenue the our market gain. year, year-over-year nearly of all data slide revenue data

XX% Proprietary saw and customers, existing the the new data and approximately Our for growth customers changes. the coming a each from sales a fourth remainder year, quarter to Market with from in of of additional revenue XX% or pricing

as additional see revenue, to continued proprietary we in European trading. data reflecting consolidation the U.S. fees XX%. growth of industry transaction off pound XX% potential equities we revenue, While on well increased net to growth sterling a expect a On pressure non-transaction local and expect on basis, continued and as increased from for the in downward basis, benefitting currency strength net versus SIP market revenue XXXX, of dollar the revenue also in exchange Net due dollar.

efforts building new regulatory high equities global marked overall notional suite with and data point year, plan been full both while traded a for Matching Ed experiencing and progress we revenue continuing for As increased this the of for the our in showed fill European success addresses FX the with to to quarter early that ready, on share our our on to platform. new has the look to Net noted, on be core Engine products, was daily our the Cboe steady expanding Much a and MiFID volumes FX on under fourth forward the diversifying offering. our rates. the new this We volume II. London services FX by of requirements focus better driven We revenues year spot of average and focus offering, products and are market the day grow one, also growth market regime.

relatively were guidance. expenses; total $XXX of prior with quarter our for to operating the Turning compared line million year, with flat and in expenses adjusted the

key decline incentive increase based compensation, in aligned the synergies. expense and performance. professional reflects at reflects Looking The variances, compensation fees realization and outside of with the services, our benefits financial in higher operational the primarily and

services. XXXX, synergies year fees from $X.X We expense pre-tax quarter and realized million outside $XX.X fourth in approximately run the and million million compensation and XXXX For benefits GAAP with in respectively, $XX and professional primarily full rate synergies. ended and we

expected the we earlier forecasting expense For run synergies related to realization XXXX, $XX forecast. of equivalent originally still CX. XXXX too come million expenses. synergies rate mind, a run-rate XXXX, the savings for projected we planned, largest technology revise long Most to than are while synergy of expense is are to incremental run total and our reflecting from term synergy rate million. expense exchange, toward rate And is early projected expected our is an weighted relative it of of or run $XX migration for in expense XXXX our to the IT the Keep most complex heavily

run forecast. once on any to we CFE better As we further stated be complete rate we target guidance migration CX the date long complete in our technology previous in provide for revisions technology to CX we to technology calls, after term synergy to migration. on the expect plan And a the make of migration, position May, expense a

sterling, we operating expectations to million, be year expense reflecting includes this to in our be [indiscernible] Looking XXXX recent we expenses an at for of of full the X% the XXXX, the in versus strength Silexx or revenues. to XXXX. the million for $XXX range acquisition, benefit with adjusted pound guidance expect related of and increased million approximately associated that net adjusted to our up X% guidance Note, expenses, expenses our expenses $X incremental offsetting the primarily for that have X% $XXX expenses operating

about which and million, results. acquired depreciation will $XX assets, is amortization is of our excludes expense; in which amortization and excluded non-GAAP million, million expense be to to our total from intangible expected Turning be to included guidance, $XX $XXX of

investment Options platform. spending is XXXX Lastly, and $XX software range investment trading in expected migrate includes to Cboe million ongoing Futures well from the technology technology, Bats to support our to as million, $XX Cboe's which on and to in the capital exchanges current to proprietary as

recently income included a are our U.S. most reform. spend results one-time corporate U.S. impacted benefit enacted and $XXX results of tax fourth future Now some our through companies, the time taxes; let's positions. on Consequently, like a of remeasurement our tax million, current by quarter deferred

fourth XX%, tax However, range rate the for again quarter our on effective was call. last provided our earnings we guidance on adjusted within the approximately

earnings a Looking impact primarily from U.S. XXXX, statutory corporate in predominance in of to of given tax our further tax contribution, on the corporate Cboe see rate, expect reduction driven by and the our rate XX%. XX% at significant we reduction tax reform overall to the

Cboe, also earnings. a deductibility and of referred However the number new tax introducing law incremental the XXX, and notably, both domestic repeals Section foreign to on deduction, production to of deductions as activities relevant most expenses the certain taxes other

of expected State increase, reduction the adjusted reform to points. We guidance expect This XX.X%. tax rate rate XXXX, tax tax Illinois percentage on impact the range in the a net effective of our effective corporate in rate total and enacted of July net an the in be a tax in full range year of to to XX.X% resulting XX X the tax reflects in earnings of

we allocation; efficient on long create the term to manner shareholder remain capital most focused in value. Turning to allocating capital

the evaluate is our to not and expected priorities to increase rate in earnings through with corporate our return our debt increases, business, the goal continue have down cash, tax allocation additional and steady pay of provide our reduction share growth in invest capital capital We repurchases. changed. to dividends, While annual a of plan

focus us while ongoing of enabled base index out to results growth. and proprietary summarize, during momentum to on plan ending realization, flows, resulting producing million, dividends we continued return back call and expense revenue strong XXXX, I to on once experienced quarter, by dividends. synergy adjusted X.X our of reducing integration Ed. growing reduce and $XXX capital and expense quarterly on cash again business additional with by products, built and still will strength ratio to demonstrate generated of With which shareholders $XX Diversifying management, allocation through and million over capital in of the streams, our disciplined leverage investments turn improved million, Our throughout the with while and the and $XX the our year leveraging we cash times. pay non-transaction track, debt continuing strong profitability higher stabilizing organic quarterly on focus to nearly scale of strong margins, with debt, our a To that, revenue, of fourth a our a model,

Ed Tilly

Thank you, Brian.

tied linked AUM at and Before opening to ETP for roughly I'd follow-up and take as futures Wednesday. VIX of to of VIX up first XX% long for assets, Q&A, provide trading on interest is areas XXXX top, slide on ETPs, short our which This quarterly ETP both like percentage between basis, the a a and call long two relatively on VIX flat moment futures. most QX you trading, to January to XXXX. of shows average represent The of the who VIX and short,

During the increased same by period, ADV overall VIX futures XX%.

be with So asset in CFE, execution to have QX a efforts VIX and while XX%. professionals. range the of unique base, associated no educate demonstrates reliant next Unique grow on is our important, participants, dealers, from X,XXX in increase market trading broad increased of continue slide our to managers, to of growth activity. X,XXX ETP and how market assets in representing ETP longer number in XXXX This futures user the QX accounts traders brokerage trading proprietary makers, an accounts, including XXXX, user encompassed

our overseas up growth user During interested has global in hour from XX%. trading these particularly with been this accounts, accessing session, users, period, strong

consisting of holders we of of representing that from contracts. last futures and volume activity It's XX,XXX Wednesday, of the issuers of XIV note, ETPs VIX important as X% in all who As than a VIX these investing you to trading, non-institutional we approximately thank about daily less I reported trading today see average mentioned the SPXC of is with again sophisticated of and time, holdings, employ of diverse ETPs, institutional just total both part your XX% and mix users, period, Wednesday. the for remainder represented strategies. inverse

see continue any to the market condition. volatility every growth Debbie, as Q&A I focus. that, of of in an over for of call. will the in VIX trading virtually a change We on make under redouble these instructions The utility efforts. We trading turn market educational and our portion to futures it the to primary is a result conditions options opportunity educational With products

Debbie Koopman

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

Operator

[Operator Instructions]. And Repetto Richard the O'Neill. question first Sandler with from comes

Richard Repetto

and they what to investors think what from thing highlight, not one important, of one people has I question Yeah. you stay question. got but complex, more the Cboe Good what because there Wednesday thing Brian for a certainly, debacle, -- would and inverse on guess you are will has concern the Chris. morning I You I -- call try -- only or is ETF and to would Ed, my broad, Thank with you and you been slides Ed, the the this is, do at you broad follow-up highlight are overwaiting significantly here you you? guess this overall growth the in been down, the are either the I look things are stock do on of inverse morning you ETPs. question February, think if ETF think maybe few the concern or the that think missing?

Ed Tilly

terrific growth so the result so. And utility VIX is is and has difficult application incredibly question. a rate, evolving as make The that it to Rich, - model. and Cboe. the therefore to adoption too understand a and rate, been Well

the world we you markets enjoy, calm. growth, position know, tremendously in in So sideways, are when envious markets incredible and as growth industry, the enjoy profit world go the and we when

those the proprietary story. them the equity kind So result, our the fit Cboe continue will a missed the that and and missed growth as products in view have stocks, of like at buckets, to to attempt potential, into times past,

on do leading product story technology our we that you world the So years throughout my one you mix we and telling from and into missing unique from had XXXX, have supplement IPO been key piece platforms. class -- that this how was, the perspective, with

anniversary. vast So we up on remedy acquisition that, the our one with we that are year coming

it Bats the week the of seen and an U.S. has U.S. that So we followed have opportunity incredible of technology, combination, if Quarterly story. we reflected over in market, most U.S. a The now an incredible record the calls with is benchmark look coupled equities, at or we benchmarks, on it. corrections world, to volatility you platform. them. The now denominated just and the volumes past, absolutely have But past; there the view setting market, talked as combination growing European past this dollar two. express is widely in FX about the in have had the have any

the We These teaching the have to We seen opportunities. those back go get in to street. past. are

near people have conversion. We

the into telling You is but all that is are into resonate. may story market, been that tomorrow, leadtime we to is tell, That over trading not to long. know are story These the this able volume we the the have unique that conversion be Cboe. make It in for in a call those events years. turns markets

sorry built continue and heads what moves. the here look something marketplace and educate So But little at utility we add? the Chris, to I advantage we take have do and the we appreciate set scratch the of question, certainly have marketplace here how these our the Rich. when to there, rant because, we for to

Chris Concannon

you tool is fairly new to SPX the whether that player add a SPX I will events I events and VIX us protect portfolios. if is a for how selling SPX to your your an -- it's you complex portfolio, players efforts over Yeah large these for used, package, educational the wonderful VIX last for that, to using. most or were portfolio people's being and were is what are is package as effort an that along seen of protect successful us just or our and year, This VIX have around one are then using and our to institutional from Ed. the that event complex, it's products the the of is add the into protection, Monday, if selling items like an primary Rich, our the complex, because

being two institutional funds, I holdings about that damage those caused So are they I it, those short benefitted and look, But concerned we you we selling right at look funds, and and exposure. am when portfolio look from in these in selling have is of but the at have terms in -- I know professionals when look the at protection been XXXX, now, need are funds. how at what been an doing, certainly all in time what high of

So the this. in I that's think is story that missed

options markets, story something U.S. other we designed, The markets and and U.S. on when only the on breaks. the the Monday, equity again not all stories futures but stress, media stories well. unfortunately, yesterday, print exceptionally doesn't markets, exactly only U.S. as worked the print They tremendous and performed under is, markets, that

John Deters

in under already increase in rapid $XXX it's point as yesterday. assets important increase million have to in from almost million these -- The $XXX seen since to $XXX Chris' is you open in this in Further is million AUM But being our the I the have days going we strategies. exposure, showed institutional about John. VIX away, how point our strategy really think you limited. that. We told we not short short SPXC Rich, out, players largely the direct ETF exposure to VIX, that of is

end XXXX back into increased We and to and XXXX, people XXX% the the But short at did seeing where VIX are flee following made What issuers people strategy are the of its saw now. it strategy. this a from happen, we happened, that year, So low by decision notes. is the not short within not that strategy. VIX their a again what self-interested is redeem did couple rotating

Richard Repetto

for guys and color Thanks the feedback. the Great.

Ed Tilly

business tell the Rich. we could You love

all of out bashing gate. the for that Sorry right

Richard Repetto

Thank get I it. you.

Operator

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

Sameer Murukutla

guys. for Carrier. good Hey, This Sameer Murukutla Mike morning on

for on Brian. management in questions Just a few capital wrapped one

share guess, on rate, you details needs tax you Given view the on has guess know since decent new changed give And to what I going the your Alan cash and are? minimum you repurchases forward? somewhat us us lower your an retired, can on has I are give going valuate leverage; update Brian, how more you can leverage

Ed Tilly

Alan? Who's

Brian Schell

Alan, if you listening, are Ed. that was

So The then minimum leverage repurchases, this. think to I share balance. let's opportunity the talk just make cash sure about share repurchase I got and

-- in So incremental rate. as in your really from million repurchases reduction, continues to put alternatives we board, so, we our we XXXX, I capital debt capacity with a capital XXXX, your allocation regularly And And of previously a the million all reduction in deploy there. Again, our and $XXX debt such, indicated, great lower including our is more flows we address and be towards dividends. approximately share $XXX our left with is, expected strong which capital evaluate share the directly, the if share repurchases, and cash to tax think question incremental cash as from XXXX, which topic focus or repurchase capacity of current allocation volumes authorization. year-to-date position continue the have a discuss of under current us to to

said, So table. on all the like there it's I

put a in As our -- always all -- it, up term evaluate the XXXX leverage great sheet us open leverage, and long have a to roll-in ratio, I and to was balance targeted that the we just of mentioned, objective looking at we options, question environment the to about flexibility. achieve next don't as never kind but

operating a for capital tried for looked $XX kind have of or allocation to an throughout million we kind cash, type standpoint, what I we target, end what $XXX working as happen of saw about you there working had that was the as that sheet, of or any roughly cash inflows period, million XXXX. And from we kind the at for towards various minimum always -- to been the needs of might that's so call that for capital balance quarter, outflows. number, say, it is would far due during And of on as the minimum the and

that range we as might any a that's the as kind kind of needs have quarter. incremental during far we of So ballpark,

Sameer Murukutla

for Thanks all those Perfect. answering questions.

Operator

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

Ken Worthington

Thanks morning. good Hi, for question. taking my

in range in You XX% rates CME have both and XXXX. to tax the XX%

think XX.X%, taxes guidance from And because the XX%. to mentioned tax this in maybe, earnings, small you -- conservative incremental What foreign being your are you out you an CME's is to business just in Can maybe out assumptions? remarks, I how still earnings here? that's modest can benefit figure your maybe foreign to trying XX.X% to Your pretty am is is flush prepared falls Thanks. on I you the speculate more me, perspective. on

Brian Schell

Sure.

of and so I a regularly, earlier. of from we not and those don't that's have rates reconciliation So a we I John compared the all talk detailed tax items. -- talked have about that something had couple on things; but

losses towards a you whether I about bucketed versus bigger to lose the look can don't the more section the I XXX. and down X% deduct, corporate that, modest, goes it the obviously, state high to talk from federal rate, or as being -- cash level, take it impact that as we your smaller tax kind you XX% I tax a reduction as the actually then XX% was I pretty bit specifically can of a the would on to X% anyone impact, benefit But as will break that that reduction, we rate only how of Illinois, I every say as the us XX% X% at speak and appreciate little the you Cboe well know. both as else, So if at awesome, far that's flows. the to of because state to and X% actually much quarter, And from more up benefit,

is, one know, area is are jurisdictions complex the lays because speculation a potential very as income. to they and that's out, of how is reporting that area, where very you So this unique and it's

mentioned unique each I bunch very-very I those $XXX different in each rates is, relative or or bucket expenses which mix will The impact. and the whether larger -- it could be other were expense again, have of items, tax both because it million of would miscellaneous The foreign be a to company, now. and to a whether shift, base, of a other be put institution that it different could smaller a earnings base

new was the the basically -- high kind on tax kind introduced, the of have on that assets. high yield You of

does rate and percentage that of have reduction. us I impact, makes points overall X kind that say, the of remaining so the XX tax gets to change up And would that to that an down impact,

Ken Worthington

Okay. Thank you very much.

Operator

And Kramm next you. Alex from comes with Thank question UBS. the

Alex Kramm

from guess, non-event. for just the -- kind that you so everyone. good two I you as back questions that were off, a combine or kind couldn't high. the to obviously, off it's them meaning has so out, morning asked, But optimistic be this the come of of more pointed Hey I and XX% wanted Ed, know, first guys is Rich stock come to

push little the So do confidence allocation, I should a your bit, hear of Brian's comments opportunistic in right how think some but it out stock, maybe level capital like, management, you buying and to when you back here? on comes delevering senior terms considering be now,

Ed Tilly

think bit Brian a specific maybe good more to said. little a I question, what it's and

we year, flexibility, very the ago look to have is world we and for sheet far us. the of free, balance been at the advice as would with think closing a we believe of last as it number delevering. is was place That team. at we we than management goal are senior this at what is differently the you a nice the on of was year one was deal. And goal What Brian Our saying, shared board and the the

of an migration. are in and middle the platform integration the We

kind we see we how to focused continue timing be forward. one is the going So This of the on. deals of that's

week question and going is repurchase the shares. asking, management senior ask exactly what the to right our are is opportunistically is to next board -- into the get is, back You this and time

to like shareholders, telling the our considering deleveraging to the change and flexibility cash of repurchases, are whether the it's balance the is, we you, in We a share be back dividend. modes the and and adding our board and all regular recommendation methods to that we should sheet, return of continuation entertaining

table, of has the will this you. pointing everything we more a So can three that, I I even next past make assure but the out days, Alex, and on done what stock the is timing, focus your painfully week, over appreciate

Alex Kramm

you Thank your right. for All comment. personal

Operator

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

Alex Blostein

growth. makers, new a of on taking short what XX, you Other guys Hey the strategy. by the sense guess, wanted difficulty types page, you can what's that guess, percentage obviously has on the customer any guys of participants about users, I And question. volatility guys. all this I time, give back you in market talk XX% [indiscernible]? Thanks to unique go growth appreciate that information, the user growth would a you slide deploying thank for and because makeup us, that. morning. the than short Good so that this to I gathering period When of been I the for highlight

John Deters

is Yeah Alex, John. this

the distributed hours, give we the global So in been has user been I'd user participants otherwise I described apart think the -- he in that in that outsized we those perspective our comments. base with seen well pretty his can market saying Ed across -- growth have start from think trading categories, growth the participants has I

So it's very based. broad

I appreciate two in the the strategies, most and and ebb with just just assets can of this environment, and of somewhat you that application institutional the new strategies, strategies in these this the short would flow representatives, has past. short with strategy The and and think and employing fact. they see the those consistent one you two but that about will guess, are of so, changes percentage But and users market it's the indicator. employment see long is a short. be the I of new in And been users flow, what this think of ebb

little the on me of VIX more Let market just you our changing participants, give in a particularly the composition color complex. futures

the the of being classic So real from maker to sell customer and trading firm firms classic the three color buy origin, buy being you side, type. of on the explain, what have am maker, member that -- look and if that by each of of broad in QX XXXX, market, side, being period, non-member those makers XXXX market into happy and and I at we same so customer, origin buckets, Firm sort proprietary more market side, market to think mean. seen kind split ADV QX we some

cohort so We firms the makers. have is a little buy bit in of market growing we classic is stable, side, about if then fairly there a And customers, just XX% in have market a And seen representation see then, participants. firms been growth from strongly. really about growth similar, of smaller XX%, less that's

community, this ratio users, means, new users, comes out what customers, market. end side maker three every That the from about in doing VIX one, spins market. is of futures So the all business contract approximately, that that the from generates are real to contracts market new benefit buy new the more in makers from and more into coming kind so customer, three participants new that's of of the market in VIX a activity having

Ed Tilly

tech. it's Let me migration to Bats of just But of this all before this. like the markets add when Alex, look is kind because lost at growth

of the for more in those and then to and to domestically migration. that expected, technology waiting appeal introduce have about be So go to the to users tech, the performance globally excitement new out can't types the and able and excited and being order handling, that that's order we our all been these around upgrade enhancements the and

be date, So we think the timing, moving better. into couldn't the February really XXth

eyes is looking our So to migration, VIX a around the great. all on of the timing forward think contract, world we and with the futures

Alex Blostein

guys. Great. Got Thanks it.

Operator

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

Brian Bedell

of number Wednesday's for And [indiscernible]. everything VIX and it's XX, to totally call. forma Maybe to numbers think can strategy, Good would exposure just to to and Chris, year, the on out, been talk think one that I sense for if have question. then morning there. say, driving what's go Thanks ETP any -- were in, of if then be maybe the sense the entire Great. going mean to, shortfall, of people to even and sneak you you you especially you I short a about for continue, guess talk the what And we FX that folks. appreciate come if want pretty vol usage, I just about hotspot, sort maybe sort you of you pro just if dramatically then those you if for if more that get is try we about this portion a could guys? just one to there volumes your back, can saying what slide But -- increasing you if that's expand

Chris Concannon

measures been talk Chris, is VIX business and in The FX down. will spot growing, down XX% XXXX. market, a has can revenue, It's about Sure. start to The overall been the with then I complex. we has hotspot in that most by a FX was the exciting by it hotspot, market, measures, very flat is some up

growing -- what is spent working really as year market in FX matching straight market. are the it and equity lot as a more our pool efforts notional liquidity volumes. on, in a we looking was, mastering than So right and really our the Really, we well Harkins last inside liquidity under the right and with was our complicated takers, market the Bryan share, overall

measures, and are takers clients, really analysis, quality our right the have finding out of pushing clients we having Only to makers a reacting the right So deal really but data deployed to the liquidity them. market execution great the are better in pair. them the experience,

has the with Matching -- much New with service speeds from it's running So the turnover. York would the technology. higher our London driver I been FX we London a I to add that so much at higher it's it's has combined say growth. been upgrades Engine delivered, The would of platform, in technology really that level upgraded

fastest should, is it That that only the the we Matching be so Reuters FX an planned are the opportunity that took really in seeing it London as we firsthand. for growth always growing have Again London matching London. on for now in would business. spot attacking the We was as London are us, we and area, Engine competition match

Ed Tilly

FX, Cboe On Chris.

Chris Concannon

Cboe On FX.

John Deters

drilling is more. John, the speak down will on XX bit little first question This I a to slide and

short the from expand ETPs. if from more could be ETPs the and of and was, direct of So the would direct The to first from sort long short you short question total X%. the volume like volume long part

long the strategies employ, percentage, the employing that, double term to showed volume short those stripes; the there rope spreads [ph] way term short So term all short. -- volatility there. dozen -- precise the outside the term strategies And long, long strategies. a short you that you participants ETPs, market to can futures short, from of terms for give that our What or strategies short is long. overall ARB X.X% trading long say variety number not and Can't more short short a in literally calendar the of for are strategies a short, it's of of and we VIX from we

So the this who of VIX is strategy outside a strategy short many, professionals. those true, ETPs, employ the are true and

we this the market not made point strategy VIX participants. going away. that, short gets those back is So for earlier the In to particular,

and an this days we seen the terms since performance. once you volatility you again. have XXX% historic in When VIX the doubles, increase last event earlier to norms, we XXX%, the week, by increase had have increases the level by VIX reset of We don't in spike, couple you the it strategy like by short level, and when of already XXX%, of volatility

of are at matter it's days. tends know we quite professionals a where work point in a VIX exceptional level are and where and this, well. of So now handful really doubles just we of an occurred, to a That's point event, short the when -- a at VIX the increases strategy

Brian Bedell

color. you. That's great Thank Okay.

Operator

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

Ben Herbert

the good Hey, Thanks question. morning. for taking

might into integrating year? maybe you see kind spending versus the platforms and this really Just what growth the run rate on, of be gears wanted there, to guide, OpEx you shift how organic

Brian Schell

We that's the -- it incremental growth we the the, line me, or that of historically, items typically how while I expenses. built me, increase an a in I have my to there excuse X% offset, about into -- remarks that and to is necessarily I kind about targeted, call the -- noted or true -- a overall, I not think call revenue a see, rate expenses, there it's revenue synergy true side. the associated have excuse -- will you attached items -- if that target. on to the mentioned, X% core will the So guess that we in it those as are

what rate in, mean, run call was range, range actually business I forward. call the that, When numbers X% percentage think rate to number, a synergies, as are that if example, of at expense factor realized, some be XX%-ish for limit of are you roll of realized we X% X% realize, of that to element, for kind to closer run-rate, impact to it, it are to realized. look we of still run but core -- that that the the the and be X% not in XXXX. the they rate it going we you actually We because are -- actually the to as in the and what trying just we obviously you going run that saw, that call

to So that parameters to it in how trying are are tried well to we we still check. we that within when item say, doing, expense keep line manage

Ben Herbert

you. Thank

Operator

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

Chris Harris

thanks. Great,

made point strategies lot about night, back the coming you as definitely other think normalizes, long the I a So guys vol sense. vol of makes

over market, years, for if out volume the has us? can that levels to vol? Just the maybe been few of much you wondering is there any the quantify How way you guys due low extreme do of last

John Deters

is good So a question. John. Chris, It's this

overall long long and strategies almost bit more in consistent because flip probably volume to, think fairly over a is time, it X% terms, short, is the than back forth -- wanted sort percentage the consistent that exposure tend volume we combined and short and of a terms. think to in I number. And little I

the it's volatility long But customers, the of to associated the overseas last not during ETPs, in a at record, when this with record certainly time couple long we the We strategy before. because evidence of interesting the maintain. volume, as because I we of strategy assets short that's would time, was vol VIX vol grow will the and hit we ago, a we new hard, will returning, very transparent, our best sure, and it's was volumes the the have, And a So I is point future hit note, XXXX, penetration mentioned assets, I percentage beginning of that a days daily maintain. that am metric. think, -- etcetera, hit penetration to

vol predictable, people records So the hits migrate strategy hit we there. vol, when it's the short long and hard, to

vol high bit we $X.X terms ballpark off in long today. we that billion a of strategy, that couple in assets of but today, the for of So strategy little are the long had we days in the are ago kind of a

those result are it's and in -- volume equation. mathematical in in CFE. a strategy, There the the dollars strategies clearly, dollars So the are to

Ed Tilly

day, really hedged it's and so, give trade, probably XX. and other are XX that and traders we options. have seen imagine I'd level That's let the VIX can wholly in other a gap [ph] is you VIX trading at year perspective, the futures. add, Chris of XX we it's strategy And XX trade when or the trade XX on options, VIX the XX. interesting and call in gamma vertical you vertical an the trading XX you options and But very and becomes referenced not trade options, the example from a options much half, more the Those in its a at between the the the option That good between low change actually day. really historic starts that and just VIX of if VIX. I level didn't

sustained because any seen So had volatility of we haven't haven't level we that, here.

trade that see again environment, as past. we this years up picking in So well. would I have it's will we given seen a expect, that that

John Deters

notion I'd They traders volatility. just the love that products add Chris, love -- velocity. trade And professional have to to trade of

is Now professional the it's up was the itself, VIX that short very and users. at of volatility, the we turned with the you this environment, of now the have of among attractive becomes vol-vol -- trade velocity also XXXX, attractive another muted has you trade, an and have a look if -- In muted. regardless vol-vol in notch, long,

Chris Harris

you. Thank

Operator

question the from And next with Rosenblatt. Chris comes you. Allen Thank

Chris Allen

regulatory down and Good I growth non-transactional service being access where fees? potentially some offset revenues? pressure fees within market fees exchange about is ask pointed am other morning to You SIP wanted next there data, I opportunities everyone. in cash just year, and equities? wondering

Brian Schell

far at of to there. have I another opportunity the do projection it's and couple get the out, why in trading as the that's there landscape, is that and do on what that's kind But fees, happens see, far potentially and split some market -- out. think we yes continued a offer. of exchange consolidation, look flowing kind proprietary have for as On will rate, project certainly, and far then into positive going pressure, we of access to appropriate, services as to can't it a opportunity, as least the and we if side, and We across will same we the those momentum data rationalize that, exchanges, we that on to happens as that that's there. the as where equities I that proprietary we as growth, think continued equity going to it take -- So that be our obviously the we see while side, what That we as that's -- the specific see with again, over share, not growth and obviously of items revenues. success something continued the industry

at come as that's the to will it far the that it regulatory because just size of separate while fees, as even pressure, I the what as a to a non-transaction bit revenue core, do going grow of of the not under you it's as fees, drag out, on, in part of far going -- and would kind we pulling call So That I little will offering. as past. which pure out look of -- that of those think, non-transaction of -- the the SIP, category, or have kind has kind

do see XXXX. pockets into we heading of some So growth

Chris Concannon

feeds, I would look Chris. is our proprietary is. opportunity just that I at when largest Chris, really the that's data where add, this

overseas Asia, out a are success of see also is of real competition. demand is We of from than with U.S. continuing our There time much great to at cost a data, products equity, coming lower for Europe. demand that in the out deal

and things focused demand So the that continues the are as are do That to thrive, on the to do. and products we very ETFs, seeing the ETF market demand U.S. U.S. is in. that in to they explode come continue designed

products seeing also as as a We inbound, are not the of real-time But growth, demanding demand are growth. only in data. for result those at you international AUM they that look

So the growth very opportunity our excited in products proprietary about XXXX. data in

Chris Allen

Thanks.

Operator

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

Kyle Voigt

good Hi, morning.

the and futures current Just earlier examples know some remains environment think question that VIX of But structure trading. I attractive, really in in the you gave trading environment. VIX in of market on another you for flat that Ed, cited also XXXX, any early market condition, said term you VIX and that the as I you, but the structure, a term at bit, a what's in into this I despite if into I know why term XXXX, volatility structure, changed? would in environment have time. key we a were if reason flat the XXXX inverted not, an move with guess concern we uptick volumes an lagging good

Ed Tilly

not rarely of about flat, with term lasting. we just It's deal you not that and is inverted time, it's of very trade into historically, out, as you sustainable. see Inverted a great back into remain structure, the moving long volume the now, XX% will inverted, point Flat and trade.

As is flat.

markets, reduce we if curve I and are volatility. insuring measure enough. the upward you of flat is -- of expected can't it's When sloping normal usually look you involved. just why and rarely, And a lot time, expectation VIX the a is there a time, again, have over over if pure is written that S&P has say a more not down, natural. we uncertain risk of that which portfolio about out price time, do So there over XXX, just VIX the been

long are if obviously lasting, do think a of we some I into never back the So they and from strategies that flat, but go normal change, we remain perspective, shape. historical

while the But So the flat, marketplace, of flat, we see on a out what into I some strategies. is accordingly. our making bit that and expect, are of participants coming the trade trades would muted

a to sloping expect return upward would curve. So I an

Unidentified Company Representative

And unfold. support have rates rates uncertainty where just to in XXXX, now, economic about will time we moves significant really overall got XXXX, in about have environment period Ed, versus to just the Kyle, different real you late where think and you are early

first adds and yield and in choppiness got equity to the reflected in a realized You All XXXX, coming curve in different question got volatility. time XXXX where were terms credit from entirely have you market many-many where itself, up for an actually years, have into of the situation flat the sentiment. we these in

Kyle Voigt

Thank you.

Ed Tilly

let look at. give one to Kyle, just you me more

the and it and a used one it's the to effect on in expectations on volatility. I past, your realized now, have good think it's mindful vol implied We be of on

and we always when low, right and is is perceptions, shape vol very high. to realized said have and an inverted realized this buoyant that volatility when is anchor, So volatility now is high, that it's because realized so is

out So that's it's of relationship to trade. that tends relationship the be that and that whack,

to eye time. an keep So realized, will going change as is guidance you some that give curve how on to that and over

Operator

is next the from Alex Kramm And a you. UBS. Thank question follow-up with

Alex Kramm

Hey, thanks for squeezing me in.

wanted to a and Chris fees. market data non-transaction for little about Just Allen's come other to back question, bit the

I like, market and or about proprietary you in this migration the lot so, as even in stuff this exist that like think primarily depth a You may how have data that the the didn't but throw was more but business that will before, answer business? data, structure. talked about whole futures around that, books, equities, do of off like month

can market in have you if there been I more And I there market you at in terms participation out, opportunity the a there? that lot of considering a don't So is all, the schedule be you know, can growing mean, fee data us the shouldn't sell? that help yet, pointing but of

Ed Tilly

Great question Yeah. Thanks question. answer helping for me the better.

February the So about Heads migration. Xth are very migration. here. absolutely, is the futures down excited we

new are for data new but the platform, creating not we only products. putting in opportunity We a are

platform. of coming a of our be depth book feed futures off that We will have

of We data on demand, our at CFE growth growth top we the we if have showed that deal look of of of a and book use. users great a the also of feed, you have you our and chart the platform, reflective the of that's

have of the users So with of price. of end eyeballs every book a both product, now needs is those real-time one on typically top depth to data, book, and at priced a potential higher for that

with the very go. excited So where opportunity will new Obviously, about about platform. very the data the excited

product. Just our data our demand bitcoin our launch futures on market futures put in

continue grow. will we the for additional So the product course XXXX, think to demand over with data launches of that futures

Alex Kramm

about guess? to I But too early obviously, talk size,

Ed Tilly

Very excitement Yeah. right But early of now. high. my size to is about talk level

Alex Kramm

lot come follow-up, smaller since And doesn't a too. are in really us a surprised listed But piece. up have multiply business like, here become because then has the we it those options anymore, volumes lastly,

equity has So any seems but obviously than going there I maybe would have volatility, there more it -- what's the like been know people expected. been commentary market? in has more in options on general like,

would any helpful. comments be So

Ed Tilly

very seen, volumes. the multi-list an that in years activity volume sometimes options muted, explosion have business. the of recent have seen after Look, That's several we No. in declined more we in

that deliver being and even with able the our were our on platforms replatforming So worked focus options. will you, about But we activity. on we tell product, of futures multi-list in excited XXXX, growth a I are in recent lot to

in the exciting And platform XXXX, on we the launch. delivered about for our complex Ajax, great the delivered is order book platforms our have book in was of complex one CX as book most record So platform complex since order and was that a after what's platform. production that record order we seen the just that,

complex CX, show very and we that will book different deliver we that in of So it's similar. slightly in a form to exciting very complex that the a with CX but looks itself book see order opportunity when order the growth have, that

Alex Kramm

again. you Thank Alright.

Operator

the for Thank you. would return to like time, we comments. call And to any at this closing management

Debbie Koopman

much to you. very you to and Thank Okay. interest for Thank forward you. speaking your today, look

Operator

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

may You disconnect. now

Cboe Global Markets (CBOE) 9 Feb 182017 Q4 Earnings call transcript