CBOE - Earnings call transcript Q2 2018 | Cboe Global Markets, Inc.

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Operator

Hello, and welcome to Cboe Global Market’s 2018 Second Quarter Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

Now, I’ll turn the conference over to Debbie Koopman. please go ahead.

Debbie Koopman

you. Thank thank call. us and quarter our for conference earnings you morning, for joining second Good

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

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

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

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

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

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

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

Ed Tilly

and for us Thank good and today. you, joining you Debbie, thank morning

ticker our of a listing transfer by plans and, strong exclusively was own Cboe the list our Cboe $X.XX, of yesterday’s Before quarter XX% pleased move company’s XXXX own exchange operator, Global announcement on as XXXX symbol, to our existing now primary our on I’m venue. X%. stock jumping it revenue internally report quarterly into million, our our the on of point leading to which year-over-year is earnings stock second on increased adjusted leverages XX, we of $XXX “CBOE.” Markets of Markets, to a report, share to per market equities on our pride a with net at The Global September touch I’ll strengths our up where under

year time on dividend long-term cash our future of our increased the focus we allocating in create reflecting Additionally, ongoing $X.XX share our that to our as marks this cash authorization our the repurchase eighth per consecutive year increased the dividend has our second flow shareholder capabilities Board share. and by and week, raised our and repurchase confidence business we by earlier $XXX to announced value. authorization, This raised this capital efficiently million the board third our quarter generating share XX%,

at going now the in environment a forward. Turning and to volume look quarter second the

We for prior the value success growing continued our FX year. notable by quarter to XX% from market, average daily second see in notional the

was powerful index tools our SPX in for story saw revenue options, In risk SPX set the in quarter, form growth options. ongoing growth European primarily the addition, we healthy XX% widely-traded options SPX investors globally. capture. the stronger a major VIX growth management course, the world, The driven by the most double-digit in Trading increased Together of quarter. Equities, for in of for and complex

to continued the in basis. and saw the the The Daily or the to stock in choppy are direction simply weeks – S&P were, traders to – trading At swings. before those hedge Clearly, following moves becoming created and VIX our which more we a second exposure February than opportunities February, in hedge, of quarter SPX the cost into times and and two products average, XXX and as use the second position market our U.S. Index to on reflects X moves in VIX intraday quarter. market relative looking past, close-to-close the price effective trade on for As SPX options historically the way a at the elevated market unique in monetize alpha them VVIX same market. levels. time, conditions options option on monetize favored continued than opportunistically the options to of cost to traders greater we’ve volatility increasingly generate said attuned take properties a

for favorable important quarter, short measured volatility because returns term by futures trading generates the the traders were strategies difference it is in This futures the lingering volatility-related it second premium, difficult the for harvest instability conditions market for first-and consistently and While SPX ETPs. prices. made structure in the using to futures premium second-month VIX VIX VIX roll-down between

June, as the in remained war, trades over contango growing first stock seeing July, our XX May opportunities levels. solid, the In roll-down was to global XX from only in just change. the their in futures With in futures upward-sloping Recently, about markets the recovering curve that more February and that options largely conditions have how expect threat and seen and averaging before VIX traders we VIX roll-down the July. a we the February though, prices just expect and premium Index when and VIX short use in between time and said return forth and times a the curve we trade change, recovered to since XXXX. more VIX for many day, market Not We’ve As average pattern move to a in demand of lows, for the products to market we moved shift third of conducive options, a only average was large upward-sloping every stable, hedges. to back is below are volatility trended and premium flat, ever-present what XXXX under strategies. see has we it was began but SPX volume

remain currently robust volume XXX million now around option and traders size of consistent tools commitments over update We Since growth months for With the and SPX and VIX past go-to U.S. in our offer options any to average, particularly trading has in moments of of to the and in that, in SPX on end every market VIX offers and environment. face the seamless averages we liquidity a by notional displayed on our strategic on contracts. product risk conditions, laser complementary for in tools of displayed hybrid each moving month significantly, a other our encouraged note leading-edge trading the displayed SPX world, focused trading has in complex platform Regardless proprietary equities. size SPX few which are the size our provide market trading take at innovation, solutions manage set options, increased and to XXXX. here April, the two to challenge initiatives. value to be an of our growth, in products markets, are recent hedging market here of $XXX technology. of confident I’ll a set we I’ll global continues that exceeded

Conference fall up a As quieter typically the held out this to we mini-RMC traders front and November. Risk a gearing addition Management our Aviv volatility summer regroup in as are trading expand program of on to the Tel we of be with season, come in

Asia annual Ireland Tel RMC will Europe RMC will in Hong follow in this Aviv precede and Our event our year’s Kong. annual

Israeli market We have seen introducing VIX trading strong options RMC look in and forward to growing to region. interest the in and futures the and

plan to the credit quarter, to expected efficiently marketplace market in We in allow standardized, risk see participants launch our globe. with potential will globally customer review. demand We hedge Cboe proprietary on iBoxx bonds futures, iBoxx increase our innovation U.S. vehicle. with subject the centrally-cleared of of corporate later the which the corporate creation to trading growing to are U.S. this participate trillion and use based continue format trading tap products or market one-day around to where $X.X bond to to we leveraged product corporate to futures a ETFs Cboe and we into regulatory this Treasury expertise bond strong mini-RMC the bond

be index. very on feedback product, received customer have bond futures this exchange-listed will first product corporate positive the which We a broad-based to linked

we working be collaboration to IBHY intend futures space the space, pleased to with into take further in our from to product first ongoing BlackRock presence credit are and Cboe futures through iBoxx expand and tradable to with significant step for We that Markit. Markit represent reality. concept a

continue the venue to the We On positioned to July customers is are diligently a which is Europe based open the competitive our for leaves across Netherlands establish to Amsterdam well believe supportive world. to EuroCCP, business a also Xrd, is we UK’s plans announced well-known our for us there. new prepare clearinghouse in Amsterdam, us pan-European financial working a after European planned given serve stake exit in post-Brexit location which from Union. of also and market ownership We infrastructures, and

derivatives the relations of a equities Additionally, which deep we markets. share (AFM) we Financial with Dutch understanding believe Authority and have longstanding, the Markets and the good bank, for central

busy our team the closely the Hemsley We plans, Brexit executing venues. will who similar Investment continue to European is preparedness. UK existing to are UK, EU to our our and and and Exchange in both also services operate Recognised customers, working in intention offer ensure with Mark are

to in markets. to of migration, on-time for completion well on fully strong CX several XXXX. closing, our experience thank customers another the and of our October engaged CX all Options successfully with now and Bats our leave Exchange, Cboe proprietary common, team are for introduction Options migrations, world-class onto trading technology. migration targeted In migration of for I the May preparation goal our would equities, and Turning CFE us of XXth options Cboe quarter. and technical We a of completed like of Cboe ultimate in on Exchange enhancements now migration our futures across our the exchanges providing track X, the The

of and expanding groundwork to I Brian. futures, can to potential With advancing by that continued we that, all the will accomplish turn to coming months in over it our forward look educational the quarters. and by growth and roll Cboe our shareholders power planned the technology global our of future to now We efforts our lay iBoxx integration. for with out I customers

Brian Schell

And Ed. everyone. good Thanks morning,

Before XQXX compared unless comments to our on I are remind I that and results. adjusted everyone based specifically noted, non-GAAP XQXX relate my begin, want to as to

X%, increased operating slide grew our adjusted provide The million our deck revenue Ed X%. operating press X%, and results up XX% quarter. and adjusted transaction $X.XX. adjusted financial X%; we each as variances. an revenue grew diluted to As segments, summary, finally, In earnings noted, fees non-transaction reported this per net revenue net issued and with $XXX expenses share up for key of already volume X% And revenue we our solid overview well EBITDA on capture of for grew the release our key as morning of metrics the

well from this like was to by year. disclosures I’d X% a The our at increase of in Form SPX X% each traded shift Additional be At RPC index briefly decrease in drivers index in increased the fees the contract, net highlight can pricing increase the products as our point, our of per revenue key – a performance a segment, XX-Q from offset by morning. coming mix influencing resulted from beginning volume. reflects our in also options the net options, options, higher segment. daily in primarily average transaction changes primarily found the implemented of driven with this In X% slightly which as filed more in some revenue

multiply-listed volumes. more as was higher business, more our higher market down industry we as, options profitable this than flow our primarily as well options share While attracted offset to in by was RPC, market;

schedule net Turning participants with fees. XX% revenue trading resulted Xst. volume for ADV in qualifying capture, decline enhance recently a the to revenue the modified Futures, futures, a lower To mix shift latter decrease reflecting August in X% VIX the and from for towards XX% – effective fee a with changes in RPC we decrease the in

data revenue Equities, higher revenue data was primarily revenue X%, U.S. up proprietary X% increase net grew recoveries. and by to primarily to the was data due in X% market XX%. in second up The audit market revenues, Turning up SIP market SIP quarter, which driven with

the this our proprietary increase at the came of the revenue, beginning pricing quarter from from in of changes at growth about majority came market XX% implemented Looking however, data subscription the year; growth. the

year capture mix from price response do the fees changes a a additional first for Cboe well revenue in from and we to unpredictable, audit the expect market we line revenue consolidation. the volumes. our Net pressure as net European due our to The Equities Higher quarter. in absent relative recoveries, both changes January implemented we growth proprietary net basis, favorable versus assuming pound January quarter. to our as net industry on expect implemented access with with the XX% has basis, We strong this XX% second rate half continued well the on SIP the FX in market record in increased X% currency fees for and resulted market price net reflecting primarily on capture, XXXX in rate periodic due in sterling dollar revenue which auctions the for as XX%. as On strength increased growth higher a given data quarter, decline dollar. downward data to auctions revenue and, as periodic no strong as reflecting market Global U.S. transaction and second matching growth expect Xst. despite pricing volume, significant grew increase which driver, nearly U.S. transaction of response data better-than-expected the Net be a were well higher any net and Xst. pricing as product reported shift, of One fees non-transaction revenues, customer to key changes benefit we for The a changes, was the capture capture healthy any are And revenue local

share quarter declined volumes the XX% modestly strong our second XX.X%. first it market grew year-over-year quarter, versus remained and at While

result technology spot enhancements our believe in more provisioning. we While market well the FX of effective continue our favorable, as overall the growth been has liquidity share ongoing as to market is

and to lower timing expense bonus versus X% adjusted year’s total year-to-date primarily programs was up and adjustments of expenses in the million expense and financial of which our expenses, salary compared last variance operating software second under the we year higher $XXX with salaries, incentive is quarter. benefits, were resulting development; a last combined wages quarter, as result to compensation, key Turning X) capitalization with compensation for The relating annual of the in company. X) and aligned performance higher recognition harmonized differences from

such quarter, gross-up of incremental acquisition, the expenses of In expenses million pointed out impacting associated in are our there the the last and we incremental the our As year-over-year on currency impact comparability, OPRA-related sterling with earnings pound call, Silexx items being total, several expenses. the strength expenses accounted the as with $X.X this increased these for about largest.

If adjust about X%. up those also items, would for be expenses you

million guidance reconfirming of in our to are We $XXX expense to range be the $XXX full-year million.

realized bringing million in For to from synergies benefits, the we and $X.X pre-tax synergies, second expense $X.X quarter, expense year-to-date million. primarily compensation

last in to Turning above adjusted of approximately income guidance quarter XX.X%, in XXXX the to tax of guidance annual effective XX.X%. our end rate The reflects of of The but second tax reform. our favorable earnings on the range XX%, taxes, XX.X% we tax decline the quarter with line call. was impact provided rate the effective earnings earnings in on on corporate primarily high adjusted was our

quarters within are expected reaffirming be a We at adjusted third to the our XX.X% for end, with range. of the tax annual tax expect and the we effective rate earnings XXXX, the XX.X% higher for that fourth range rate to to on be but in guidance

versus capitalization. more to lower $XX depreciation now guidance of efficient our This amortization. change million In spending $XX technology and CapEx $XX we be million expect previous lowering to for We addition, software million. reflects and CapEx are guidance to for development our million $XX and

our to part, $XX versus depreciation lowering also million for lower million, $XX of to previous and to million, in are $XX amortization our We CapEx. guidance the guidance million $XX reflecting,

returned investing this growth through cash Moving of stock shareholders position flow to $XX of quarter business quarter deployment our and nearly while and of our to payments. enabled more dividends. our million million capital repurchases, than share million making of allocation, in our $XX of and results, favor repurchases also capital dividend We reprioritize strong the share financial $XX financial this in to common generation us

profit focus to disciplined our class on products, index on the And and for by first by and leveraging to higher instructions track, growing the diverse million for increased quarter times. repurchase we as adjusted of as to capital margins, producing quarter leverage share, third demonstrate growth quarterly underscoring share ratio dividends and expense U.S. that, to allocation returning of prepare our set our management, the into have delivered index Ed We ongoing authorization we – of raised return ended share mentioned, through our continued and commitment $X.XX on unwavering our directly shareholders in nearly X.X with bond of repurchased $XXX value with Year-to-date a was to at them. and cash per proprietary shares and asset quarter and – Cboe broad-based I’ll last approximately In Cboe Q&A integration raising for addition, XXst, to focus X.X on results expand business, plan though even a over XX% portion $XXX dividend shareholders common Board scale Debbie, our the leverage quarterly to to it by stock by turn our an In solid quarterly in with by dividend. streams, part of futures, enhancing repurchases continuing call. corporate capital the investments $XXX unchanged revenue capital cash launching our from the million our million ratio summary, million. our new July

Debbie Koopman

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

Operator

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

Rich Repetto

guess or that’s more morning, anecdotal that we’re et question guess cyclical permanent? any the the rather everybody’s mind, but clients volume guess, guys. guess first cetera, seasonal I you give than can across is low in board, because what is And I slowdown, I Good the – I you’re this comfort the give on you from you can hearing how seeing volumes? anything us Yes. do is what July, us

Ed Tilly

good Ed, Yes, Rich. and question. Thanks. It’s Thanks the morning. for

across we’re major marketplace and and marketplace. think gate employed I structural out the is and been the to, We those attention how who SPX U.S. feedback what spot that last hearing I’d the second have of this the part much right the really for gets bright of those market. actually in this the is and seen looking position how in of market you’re and that the for just really much cyclical a a probably in from of over us years board, and are strategies is out draw have thinking couple continues this the the to hedgers of point Rich,

those you premium kind just to that we purposely by away basically that do return February coming VIX that with the a our and showing to X. a harvesting talk and into structure, trades seeing. up that? I what lot in And to those I gone the Futures. our the showed it, that off to setting structure general, customers and profile we strategies of when were in mean market just present VIX used have really prior to to have I roll-down about the think now expecting are expect are coming back options the guarantee strategies but We strategies side risk is cyclical in coming back. volumes market the marketplace of market this are term for in in would a SPX structure, a see if So, keep VIX terms reemployment we’re is of what can’t I

a this return expect on that. would market to condition I see So, in

uptake in shifting for some seen we’ve general, the pretty in market seen good We’ve options. in As volume. multi-list some

any pure I marketplace. strategies heart and think is, to simple basic shows override perform the the Retailers where going well basics back strategies. with in that that retail option

we come, months seen we So happen to is market have favorable in trades the past. predict what the way exactly can’t the in setting while that will to the is up

Chris, predict good some So in impossible up structure volumes or continuation tell for We’ve add? forward. marketplace we anything that of going we’ve that been at the us a again, it, for will – the further seen setting never of this the is to past. to you strategies but – the

Chris Concannon

No.

that the and in SPX the SPX I the in hybrid. we’ve and Just in of to reflective is to even that quarter think liquidity the is some July of seen then year-over-year year-over-year the growth related re-platforming

to structural point the and out of changes. So, I made structural the changes we that it’s feeling we’re think have to important product those really benefit

Ed Tilly

it I And that cause in your changes those think liquidity. shows to really up point;

And in it so to it’s certainly there employ need strategies, is a strategies, marketplace, options. the Chris’ we also point, in is the the and VIX various when liquidity to SPX, see in

confident So, from those customers, that able be will satisfy to there the we’re is market demand the when needs. is liquidity our ready there and coming

Rich Repetto

I know you. his generation is working machine. Chris Thank volume on

that got to as You’ve cranked well. up get

Ed Tilly

he Yes. can it make If would, he Rich. so,

Rich Repetto

you. Thank

Chris Concannon

It’s Rich. working in FX,

Rich Repetto

Definitely.

Operator

the And Worthington next you. JPMorgan. thank comes from with question Ken Yes,

Ken Worthington

for background you noise. and for thank the the I question, Hi, taking apologize

always for on said is you holders I changes with made But pricing pricing a working you And you the think to then now core changes to you VIX. VIX past, time muck missed that pursued guess permanent the fees. in apologize And changed right and changes the – didn’t in disaster there? I and there? you was well what’s Why want I make recovery impact in pricing. are quarter, RPC changes. the this in number it, if producing you I of You’ve pursuing see prices do

Thank to about your and the the levels you press you thoughts time given are power connectivity now what activity broadly, pricing on pricing have there? the you. on As in right and think data, more be being aggressive

Brian Schell

it’s So, Ken, Brian.

look. prediction that will The on obviously, we first can’t is the pricing, give where a part

were what of with away, as the things lower what think of of volume we a some dynamics couple block trading with of can far And of as the some that we’ll the players, generate ETPs about to that capture VIX a RPC actually reflects second who the far we Futures see. market, the related at some as volume quarter with of talked the somewhat some in the during quarter that we I mix seeing were a as lower of saw tier. those which volume saw some qualified more associated lower the without of also significant were going

So that was obviously the back increase of where mix that of had the baseline level different mix. wouldn’t the The overall we some But change expect referenced, from say, I absent we that some I’ve last that XQ last see to of some up recall where that, the that in we mix an would to saw absent be of volumes. client other set of were, previously we’ll year expectation we changes to quarter. when

Chris Concannon

the beginning the adjustments. what quite chose – attractive delay And saw it’s pricing. VIX the pricing we because post to VIX to with VIX at a our we just that pricing We platform annual look looking of wanted at migrating COC. that, behavioral originally looked We migration and Chris. change for pricing on were to was the changes adjustment. we other add, to Futures I’ll We year the change been of have Ken, it some

create would So the mix this really eliminate was long I the say, that quarter-to-quarter. that some from adjustment to would had of we overdue. day-trader pricing It rebate is,

continue overtime. more more our a balance to and should that that revenue, clients we importantly, – for that RPC healthy we happy it for this of – attractive charge regard where because around results of RPC, charge data, to With And connectivity. we we grow area we create a very and much overcharge, charge question that non-transaction more but call much business, migration. your I migration So business have with of what stable not for now the our access, we’re paused with a to

clients, So clients. terms that’s to careful new to adding way balance best outperform in our a is proprietary growth, continues grow market Certainly, have. that and data new really subscriptions revenue new that of it’s the we

we’re that. so And excited about very

John Deters

at talking than the that volume has Ken, this non-transaction mark kind was headwinds about John. in revenue Futures is break we of with XX more definitely greatest when risk. is terms for that that the look out of I’d our opportunity and Chris of it segments Page segment, segment really mix

Ken Worthington

Great. much. Thank you very

Operator

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

Alex Kramm

morning, – Yes. quarter-over-quarter. and Actually, the everyone. on thing were segue to Page fees, notice I in I the they the to just harp but thanks the services wanted down is about that segment, because XX. Futures but for number Hey, $X.X good do exchange Maybe there, did I one on, ask million, actually to only which XX% other small are

connectivity what’s you So, at which on number at and paying that or are massively quite when less VIX for something, look in I I is look looks whatever. going your franchise, it like some clients

for it if in been out and particular, that what maybe, little something you. has a that area, say, because, maybe, people client of types scene in flush you back just a Thank that’s obviously, about while. bit So pull wondering

Brian Schell

So, it’s Brian. Alex,

the shifting where non-transaction accounting in fall the and that it provide the standpoint. buckets of different a revenue of is just kind that the some to as look and to – We we’ve may Bats new about. Chris’s a from different I technology, business with a at a it point technologies look categorize nice earlier services of non-transaction implemented we’d pure parts it’s So, looked the segue at from think collectively fees Chris, we in and kind of of underlying of

way, and fees So we at in and access services other a exchange look fees collectively. very

of category to another. from So growth the on I one too focused wouldn’t differentiation get

tech for and into we some this different value. fees the implementing ended how the of into is and that So, shifting of it more really the we falling bucket, kind deliver how up we access of charge how

and have speed, in at they’re some now the on of those that the platform at and services. CFE do, the If is clients and stats the our reflective you look that look capacity what able to

fees. other away versus access showing people of a running and in that’s up services more So from fees decline exchange

Chris Concannon

need point for market You together services, two in that and really more these that and data at to there’s CFE. just add least access risk fees even exchange to items page fees than add the opportunity I again look together at out

Alex Kramm

you. Thank Okay.

Operator

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

Ben Herbert

update the slide give you’re morning. to and lot around there? accounts, go seeing good in new just then wanted for Futures user taking anything around quarter question. on us appreciate just complex, my Hey, of back but you CFE VIX there a could some a was quarter-over-quarter to and kind mix Thanks of if discussion growth I last I there

Chris Concannon

Thanks. The It’s prior Obviously, studying around on Chris, active user and users from post-migration. this. the that migration thing active the the focused important most and we’ve active users really continued were sure the to making in we user accounts I’ll migration. our was story accounts, take

So the story strictly in that’s around was were migration. we quarter, that trying that to – last the the because was CFE why convey it

also was at migration activity certainly successful the We of in our looked mix migration CX and the on the CX.

it that really migration. the more around activity and the So was immigration that around continuing focused

Ed Tilly

different that important. Chris, CFE point, I your Bats bringing up We never of to had was had CX. who users, than very to lot tech think a written

using customers number and that of of some and were for the So, to Bats very those tech. first important time, as mindful writing

Ben Herbert

you. Thank

Operator

the from Jeremy question Barclays. with next And Campbell comes

Jeremy Campbell

thanks. Hey,

for level all structural issues that February. of I has if higher? it aside, will see some curve guess in VIX, now think where that? of kind a of about users? guess, the else? Just visibility issues that the incremental of where the of for volumes the And delevered we kind kind them, there’s that Is you of where that of we've back thinking do demand your VIX how ETPs I or a little are lot from? coming do move How but you around to do demand happened the think volumes, and kind global here. in Retail bit secular And next adoption you second a products – about put shape of you been in about talked ETP something of

Ed Tilly

Well, it’s great question. a

up with to seen trade that The marketplace. million setting for the strategy trader remember, that year. I it’s, think of was premium begun $X.XX is that say XX,XXX what don’t the we know missing I’d up market’s where really, back, coming in we’re for see, well. but setting us into that and saw last have hedging end back trades there common these really, into contract are trade reference up as I What and back the see of for February. look the strategies. if marketplaces, for of the along they’ll go you at hedging is strategies year We price we’ll environment perfect come relative SKU, last come and this into contract pretty unknowns. that trade still hedge relative lot to as I know, you we’ve if marketplace, unknown you copycat would And – those tagalong you is option Those of a the market for and that SPX. all lining the VVIX hedging a and up version versus lot which really anticipate the structure XX,XXX with a the the the see smaller in are I might a VIX look the good then of or and cost million VVIX with good into give and

I as that then expect grow come to either and volume So, a back result. see

really I’ll As and a money, back really ETP we’re inverse then same won’t and and easy shorting It’s in premium down. noticing What SXX went noticing changed, roll-down how roll retail customer you is named position VXX. take and that’s base roll-down delevered [ph], for that collection what that take it a wrongly away be forget The sophisticated rolled showing in structurally collection simple up that of that strategy with is the that the the and that ETPs, most and simple. was we’re and ETP down retail, that collect opportunity go a advantage to position that the traders, down, buy, really the really inverted. to was being roll

normal that down user the volatility So, out, the seen that structure short same you pointed in and very a strategies as VXX employ to exposure same in that the is looking the roll we’ve VXX the is pivot interest in to successful grow. were

to we our to to finally what point we’re that’s doing, answer. marketplace we and to are I those is of from we’re the but back at “hey, education this need used I and street would that’s go strategies And It’s can there, to.” think, expect back. what out It where coming see something and market, say, and persistence a pretty the you familiar. into So best there some takes coming

John Deters

It’s I captured was is Ed talking think to the that premium point an about. – think insurance of about secular this the marketplace. this our way is this John, to – shift,

used insurer word writers got a are you’ve provide always we nothing February marketplace, that the the in is insurance the and but their secular got insurance writers, where that risk insurers, and needs you’ve the we’ve an event regrouping a who really event constant. our you’ve that their reads, there’s when the and the people remarks. resonate. marketplace, in for in needs that the traders hurricane Ed do that, process, about and assess we participation that insurance, will every earlier in in the the And So, hedge regrouping, volatility regroup marketplace had confidence risk, insurance through a There’s got after like asses prepared exclusively buying got our the go

Jeremy Campbell

Great. Thanks lot. a

Operator

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

Michael Carrier

you Brian, two guys. Thanks to of maybe some Hi. the maybe guidance clarifications. starting gave,

the just on first, So, data. market

guys on some you still seeing trending just You but And overall slower. see the be net mentioned and expense you lower, in basis, same, that guess, will the a SIP business? proprietary, was kept do I you’re then growth. amortization likely the but on still growth guidance, depreciation

was have do a I that that understand of the the some do you increase comp, we if wanted in just flexibility, given on to remain backdrop, particularly and we guess, some to a what I muted saw kind just offset of So volume sort there.

Brian Schell

All right. Good question.

let’s talk So, the data about first. market

we’d still big the actually that overall comments I quarter. overall, the success on – are But the in what’s somewhat unpredictable. be contribution of a they optimistic been that earlier the kind So, auto proprietary been variance obviously, and is the about that in of – on are the given outpacing dollar has just percentage outpacing, the that’s growth with basis of somewhat been there SIP like have, said unknown, recovers a obviously, in the

the Our carry to actually given where basis flattish over-year for category, helping they year- quarter SIP revenues been are. each though and even may has be that

given implemented. we have the So, remain subscriptions, still both flash optimistic pricing been changes user growth that and the

So, growth we the still see there.

that so that recoveries far the hasn’t in We’re audit optimistic the and changed. Any variance certainly been we’ve upside still and seen XXXX. really has on

proprietary, the is growth rate the several last we I that said, been guidance, with expense again, the On and like XX% the trend that’s had, quarters.

across said, So expands about as doing that continue we the classes. we’re excited to geographically like I other there be asset and work that

respect they growth respect muted, as and revenue the amount a will is if measures with the how element, that to side, the couple various year that which beginning mechanisms of the say, that scenario, grow for going to of at don’t bonus comp, within With times do to potentially or level growth. based on dynamics that in are example, is more of to we're expense our the lot self-correcting expectations talked of expectations, the on On fall. of And the have necessarily a there. comp volumes, of becomes about we one muted, earnings going

will less may and accrual And be so actually reverse that even itself.

see you – that you would in number. some see So some will contraction

other thing very that's upside I technology they that team is the a if wages is good of are we standpoint actually potentially some doing less and wages mentioned goes than they efficiency into job cash an a earlier the capitalized it actually is The up driving on how flow standpoint. dollars a less capitalizing capitalizing did that year. last as little spending the – bit how from they're But they're at, from look actually

GAAP But far as a ends has flow but cash being shows it net-net, up, it negative obviously, slightly higher expense. efficient a impact, more as results, in a slightly spend. So overall it up

bit So you as that's might have that more a expected elevating well. maybe little what than

Michael Carrier

Okay. Thanks a lot.

Operator

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

Brian Bedell

folks. you about, the strategies. Great. to vol back Maybe go Thanks. the morning set terms short- Ed, in of Good talked of increasing just up usage to that

talk see SPX of things Chris, RPC second to options whether the back RPC do the options? you think are people I VIX the substitution VIX with guess, you that about, then seeing this in move futures and increase we could SPX VIX the short-vol can interplay – quarter bit lot options the be environment forward into little an a SPX effect the you complex due the first we embrace more, options, and in the independent But We if complex extent the volumes conjunction to pickup maybe of versus usage and where all strategies? see to will premium we And increasing in think as SPX. the a an of quarter, of days. few was talked on quarter in would the VIX do you a we with see improvement options quarter could about the this the in last Or between just options

Ed Tilly

– it we some and pivot the moving Brian into ask SPX to difference the I'll in see the ask entire make me one how remain other we try to it what to into maybe But let I'm see on mix and hedging benefited way hearing to normal-term speak simple just change can SPX, think S&P from that of I there. that does of So, and Is complex kind intention. a your we a see is, a capturing if specifically structure, does the maybe go volume and of the XXX all just if I way… VIX if flat? the I'm increased back

Brian Bedell

said yes, durability one on on of two-part what It's the that you of mix. exactly and terms a – just the short- then It's question. in strategies vol Yes.

Ed Tilly

Good.

I movement. some So expect do

There don't is typical hedging you missing structure. completely SPX, structure SPX so I will an opinion higher to it and up a and it's shift – is come the the trade on at away into level a term is XXX you've historically hedge VIX. is back we what you're see the need and the term back around on when options from the strategies call basically been, S&P those are into gone volatility just down come think your not SPX the so That flat. users. just VIX and goes that vol, opinion gone they you've But XXX have they with because If today VIX some than and into

those So and XX.X. sidelined position a or be trending to that month that have the strategies average that between average might there the difference are on is now to XX taking trending of a the roughly that sideline, in front the are and that's month been

down that in in of are positions That VIX on this in strategies all option harvesting the premium is So the found dependent trade complex. rolled term those the not – XXX. in structure, found

that are market the today. So in strategies are not just there

a in And – you gives and that million a what contract so is of $X.XX right? expression hope vol. in look a little – look is take to forward that, that to volatility express an great using I example the $X So the in trade is

As for part the of maybe think the the I Brian, second shift question. benefits, mix you in take can the

Brian Schell

the you kind when think looked largely RPC saw and – year-over- in Yes. year the And at that this from will contract growth options of may numbers. of a the volume been results people level whether become X%, while somewhat a – the all index high I Options reflecting increase growth have muted segment, was and rate, the the of some

and this period If you from improvement SPX VIX, rate mix, – improvement a X% VIX, that a contract. VIX think you'll XX-XX of ago to per the pure period going SPX XX% about to SPX roughly year on of a more just roughly the XX% a of see being or mix $X.XX

and can volume mix flattish it, the, very it bottom was that basis. can be more we'll of the well on the results think So very you favorable, see that shift line from year-over-year despite powerful obviously, just to call extent top line I how a as pure

Brian Bedell

perfect. Thanks. that’s Yes, Great.

Operator

Thank you.

Goldman next comes Our with Sachs. from Alex question Blostein

Alex Blostein

morning, Thanks. Hey, the guys. good business. options you Question around for multi-listed

buck the on the what's you else? look of or kind if is share Cboe kind So particular, market like maybe it And year-over-year combined side. of results it still volume there really it far. that? retail Cboe on that? then Bats third so something trend quarter into sense driving at slipping, driving hit Any in looks the is Is What's

Chris Concannon

for been of retail that stepping Great, volume into back in overall a we’ve Really options this demand, in in options, the retail seeing challenges really market even That's years. environment. of grow And first impressive about the seeing global markets. number see by multi-list very the use question. it's driven to the time we're in excited given and other

products a But of to to capture all excited around overall, to adjusting of we're share the the and impact different decision it's of up of about And our obviously, have comfortable features EDGX XXXX position at many relative markets. very we're our offering and the the our We And made different of them We're market about multi-list. the detriment market. market because our various capture the capture functionalities. beginning of So four Obviously, we clients. with share. outcome going I'm very excited performance one did carrying we our very with migration platform. That forward. what CX happy CX That's have major left.

migration to XXXX. to excited our we and share be market our continue prior So in our around capture

Operator

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

Chris Harris

guys if wonder implications is I for by a potential regulatory comment as you investigation there's negative whether OCC could to agencies. under Cboe? any few

Ed Tilly

from We obviously, speculation as is of around a not OCC, on to investigations on regulator, any going just board the we're comment in general.

speculation articles on around opinion regulator, from until print no we'll So actually there's a have written OCC. in

Brian Schell

just add. I'll And

I an is of filing, an products, is our multi-list to is the forward. recently a clearing indicator the SEC fund products as which reduction has recognized That think clearing going we And important products. the beneficial our reduction that an expected formula – it's approval fund how all in there OCC SEC works. well proprietary saw an our important, of as just

Chris Harris

Thank you. Okay.

Operator

And Voigt the KBW. from question comes Kyle with next

Kyle Voigt

morning. good Hi,

question a your on I missed to from moving Sorry if this, NASDAQ but own just exchange. listing your

Thanks. Cboe highly correct corporate the expect listing continue A We the updated listing on of and added great success to some ETPs Global think only Markets just across we that in listing it's isn't of then some Look, to our larger thoughts one we've you'd Chris shelved point, those market largest count recently ETPs been on the to eventually our continue First Trust, question. market. list at that Concannon now exchange? but Should ETP the listing maybe I strategy. market. ETP grow one issuers entering opportunity And on we think be ambitions focused and thinking Bats issuers. just the No, listings. had focused previously We corporate ETP we've the space in targeted on your - of

be NASDAQ listed in the a our wanted Cboe’s on ETP our Exchange. listing our our we sell issuers. about primary excited isn’t we're listings to to business listing both So being with primary favorite to way ability to switching well belief be to as We exchange our wanted by listing reflect Cboe the as ETP

in look success, at listings, We the the has we continued success all about area, is would have just of expect a that don’t IEX we success opportunity As listing very ETP and there. business corporate of focus our had very corporate in can lack and the listings. the on excited corporate here challenging listings sit we

Ed Tilly

list NASDAQ to they’d us. happy we’re But like if

Chris Concannon

True.

Brian Schell

answers that question? Hope your

Kyle Voigt

Okay. thanks. Yes,

Operator

next Patrick comes Raymond you. James. question from O’Shaughnessy And the with Thank

Patrick O’Shaughnessy

have planned build a Can cash credit to whether received space the extend speak your your credit market? or the to Hey, on presence contract? role in feedback corporate you plans play good a plans to participants build a bond from morning. space you’ve note, somewhat whether market the from a in index And futures the credit to on you related presence

Chris Concannon

you favorite feedback been iBoxx funds product. the exceptional. futures It’s announcement Cboe The Great talking has question, – of the because up iShares market. futures time the since our products, to one that credit iBoxx we’ve our of first some recent – in the brought the gotten is

from, it’s for a seeing opportunity benefit bank of users has some a The cleared not quite been our us. conversation So index product, the in demand finding only very the partners end futures. also to having a great bond exciting high but corporate

hedging iBoxx So the instrument futures we excited that identical about making in in are having as are that these a players and seen we’ve and our proprietary – demand market And in well. the VIX markets really overall, futures makers also VIX the the benefit are that seen are other in is ETFs we’ve ETPs. the market

So huge they as see benefit. want to anything? well, we it them John, and know a do you quite add

John Deters

think about receive asked It’s been product I’m a interesting I team, feedback Chris. development for is the it, one glad Yes, an the yes. Patrick, team they because this you us. for the have. it’s for – Thanks, to inspiring

launch, word it’s ETP think our futures contrast largely spread markedly I a different the press-driven from and where quite through process.

to about word-of-mouth. really it Here, terms we’ve of elegant word underserved because people very ecosystem, in been into been of this because lot structure a in distribution is pickup massive spread a taps press. the almost and the is think, catering I And market. there we’re a it’s, how by It’s ETP hadn’t – in its created learned viral credit that

think we launching it something And design. we’ve to tapped summer. so into product I forward with special And really look this this

right We’re with on track development.

summer a launch. expect we announcement, our during said we As

Chris Concannon

distribution our been side have product. of the by both quite as reaching certainly, Our to exceptional us is launch, partners add They’re discussion and quite this as the in network just through iShares, BlackRock. distribution helpful. network sales early about side the their I’ll is of skill market Their with out force days They’re set well and their impressive, clients. excited

about we’re partnership, we’re space, space that excited really this dabbled way. So into this stepping about excited the excited and today, we in credit haven’t big a we’re the very about product in,

Operator

is next Brian question from follow-up And the you. Thank Okay. Bedell. a

Brian Bedell

buyback, standard your $XXX It and VIX relative say, to in I’ve ever. cheapest with you basis, on about buyback below accelerate story just think moving evaluation, of seen might actually in average talk, Maybe, a Brian, very pace looks improve deviations the the can the stock the at if the thanks remaining particularly, looking you S&P, peers. side the Great, much. the into just just PE if two on that certainly, Maybe, near-term? index about to million capacity and the authorization the almost like it’s it’s the volume

Brian Schell

Yes.

and capital, think very I view. that reflective buyback, the levels. opportunity our share well think first conversations dialogue certainly we’ve do far very we certainly good these of have clear point as as as a on quarter deploy the with is repurchase We their second of the quarter at board to as been So,

kind as continue. say flow anything else as and we something – we’ve expect, we’ve we from – been and on the I far absent been, it leverage and or grow will continue we’ve we’d trend standpoint, to it, So it a that from that of though to with see cash obviously, able hand operations. cash with, aggressiveness accelerating obviously that that done as

couple said the and deploy is unless would else being expectations go you’d be I leverage good borrow, at any differently you’ve there’s consistent that what that, with what level, significantly think we’ve that seen certainly and this don’t a capital. to is of I quarters we’d increasing all we’ve in this place out to see But do and the something no So, said like to be equal. our said, change. that first And able also

Brian Bedell

thank great. Okay, you.

Operator

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

Chris Allen

July follows the fee this, think, on ask back on stay June request, SEC increase morning, proposed everyone. I wanted the for a issued actions asking I they when Good information. tape. more changes a by consolidated on And recent to pushed XX, some against fee they

was well? about the wondering data there how moving for any data forward? I fees. market your impact into as you’re data And on you’re about SIP how So thinking Is about thinking that factored fees view thinking SEC’s is proprietary how –

Chris Concannon

first, answer Chris, think our fee result it’s organic growth look the market we That’s and it, zero we to of as see that. data Really, there. Chris. at adjustments. proprietary about I’ll continue

internationally aggressive ago, well. competition continues So fee, that an subscribers, which we’re as excited is and U.S., a attract users than to but not here the lower much our new while new obviously, only set the in fees

our non-display continues growth FX. to really Really, So European data, with the options, their activity really discussions functions the data around around and the interpretation, CTA futures, when platforms, and of around in around our proprietary being action the weeds there about all how SIP, interpretation look prospects the kind we market be regard prior the it’s CTA an and the both rule and think first proprietary of interpret market filing about around on the to we across around discussed is and you at think in an the SIP. plan. recent SEC with SEC of that display the the interpretation The in CTA,

market them engine certainly the We don’t flat all all So time. data over huge see data. is being SIP asset I our And platforms the the don’t all as of as on the from growth – we at our to the down proprietary focus proprietary classes. various and data the side. CTA for stress a look But is really, across of

is across will out. play to continue data. continue the on back those to again, all action think an treat to how certain distribute interpretation those the We But discussions recent platforms really around see the platforms. to SEC I growth discussion, CTA that CTA But healthy on market the

Chris Allen

guys. Thanks, it. Got

Operator

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

Debbie Koopman

your this you. We call appreciate our Thank company. Keith. continued Thank That our you, concludes morning. interest in

Operator

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

now lines. your may disconnect You

Cboe Global Markets (CBOE) 3 Aug 182018 Q2 Earnings call transcript