CBOE - Earnings call transcript Q3 2018 | Cboe Global Markets, Inc.

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Operator

Good morning and welcome to the Cboe Global Markets' 2018 Third Quarter Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

Now, I’d like to turn the conference over to Debbie Koopman. Ma'am. ahead, go Please

Debbie Koopman

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

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

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

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

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

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

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

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

Ed Tilly

increased of million. to our Global I'm quarter you, thank we and for share per by Markets at of adjusted to XXXX Cboe Debbie, our $X.X pleased joining us $XXX morning third good on net where XX% report year-over-year revenue you Thank today. and earnings strong with

Our build the long-term success options manage SPX nearly Cboe solid around at saw throughout double-digit through million for our slowly investors to average to the in in then We ongoing continue quarter share enable as pace, and Trading to turned to VIX continue the Other returning the to and in from of value month while month shareholders grow over the in FX quarter quarter capital over the our included surge market prior results a XX% notional our to rose repurchases. October increased. volatility the world for $XX options us dividends increasing highlights where QX trading year. financial invest quarter risk. XX% futures volume third And volume and for daily growth XXXX.

saw European also look in volatility and with our the beyond. share continued and We landscape volume. I’ll equities now the growth quarter business throughout market increase in at

returned in in saw market to VIX stock with futures steady its in all-time averages volume and market the VIX now major structure bull upward longest we complex. product we along are As term history, highs shape the our sloping normal running increases hit

year. index we futures to we environment current the growth of in Yet that lingering premium, options large different in hedges futures structure see record shock strategies volatility in this volatility volumes to and was XXX capture to substantially VIX The volatility the and term the expected, options. market the February. began saw risk of to suggest second was a comparable what VIX an we in flat S&P fueled we SPX October led to VIX return than led and volatility And in decline VIX by move is return XX% effect that As VIX February of unsustainable. the experienced in the that higher trading earlier in the used trades quarter

quality in open to build enable encouraged gate the these on of with expectations to Corporate early Index changes innovation, is Corporate out line hedges compressed reposition days Bond our features Cboe we to on corporate that and just worldwide leading-edge Bond We with products the index Corporate interest of the traders of to solutions exposure collaboration and testament the Product repricing futures in Markit allowing correction occurred saw and remain Volume close move $X.X VIX of our Yield VIX saw marketplace into market. of High to believe were launch in see a entry continue as monetize the on report September segments hedge was commitments of iShares providing the we gain Investment-Grade tactically. on to of IB bond IBHY to I’m change. time for options expect growth few in which over design in X. when an trillion by conditions, of Index of the We and cornerstone on the market Markit it our successful designed technology. remains a rather utility orderly Regardless growing days XX, risk the positions that iBoxx we markets of key Bond both roughly Cboe pleased and to innovation not Blackrock this strong Corporate expectations and with was our over product February, their exposures Index difference see liquidity and with seamless we risk our weeks We has Bond and community. as SPX our and strategy. trading. participants and its market were right focused training to period the October a collaboration

steadily our products forward We look space expanding in of use further increase are enthusiastic going to the products with these about prospects to our presence and additional forward.

continue II adoption. strong into and XX the new for solutions now put where months regulatory Cboe see MiFID we Europe we place in Turning to to regime are this

auctions as itself book leading periodic Trading blossom. our while a relationship has BIDS platform with non-continuous established continues to Our

record logged with and powered another Our volume. platform, BIDS by million quarter Block Trading Cboe €XXX technology LIS daily

prepare We continue for to Post-Brexit a World. diligently

We deal will an the are allow which EU serve the customers absence effectively of between exit EU. our venue agreed an us to establishing of in UK process the in in the Amsterdam and

regulators We’re to onboard currently the venue. working with customers and Dutch our preparing to new

us monitoring to our Brexit We possible will respond are alter can to strengths. to as as also negotiations developments be prepared and any cause that quickly

Cboe technology, our of migration we October and X, exchange date of the to proprietary to now final in Cboe multi-phased on track migration target XXXX. reach a options onto Turning migration exchanges of engaged now fully Bats are are

class experience pleased are We and ultimate across options, providing one than our markets. equities, our are a now all trading goal that of with we less from year customers futures single world our away

closing. provide Given moment an before the on data recent important views attention equity to matter our I’ll take on market a fees,

First, I on would to base. strategy our Cboe’s has as user market like and to growth remains reiterate it focused relates revenue expanding that been data

exchange recent meet confident SEC week a our concerning its order its offered meet clarified exceeded requesting which products to are did we our customer opinion SEC We our in of suite believe of authority to by the in the market the which filed implicates innovate arena issuing in regard fees to proposition These to fees directly and the will are this order needs competitively the the and we our data We our SEC filings, to some order value Cboe customers SEC demand. the motion Cboe With not the misunderstanding stand of the the products order. some and and to offerings roundtables tailored will requesting prevail. classes. continue across the are SEC by that involve hopeful and priced last asset market vacate SEC vacate motion and data

to growth provide trading customers and upon Futures in the our and for could I With litigation advancing remain strong development thank quarters take shareholders In months to quarter initiatives to resolve, would continuing team come. Brian. product to power solutions closing, through on building groundwork third continued with to of strong focused Bond successful to for While continuing our Corporate our rollout forward of accomplish for that to lay and growth and to a I our our we potential future likely that the the can that, October. technology like volume drove and our by look the over all the Cboe by integration. of I will seamless it customers we turn years

Brian Schell

morning good and Ed Thanks everyone.

from of issued X%, fees net my our in drivers up XX% are a briefly up index key quarter in influencing volume quarter $X.X down based In by quarter deck in capture noted, somewhat in grew begin, like fees And on The by our of a as want somewhat and options. in diversified summary, revenue options in on primarily quarter highlight by that $XXX segments XX% XXXX report of revenue. operating mix nominally slide X% million In revenue grew to our to net transaction our daily increase access morning $X.X of a release income share fees to third well worth compared XX% revenue our despite We net provide options driven our achieved It’s solid Adjusted adjusted offset revenue reflecting as results. overview this of to and average million transaction per operating transaction Index our performance our results noting of in the X%. were our and products million for net $X.X. of XXXX I'd that remind in comments decline specifically proprietary metrics options. the with segment. declined non-GAAP our decline options everyone in $X.X I million adjusted expenses diluted relate another options each more some $X.X for results. non-transaction volumes was X%. or XX% reflecting finally, key to these offset fixed key Before increases earnings million segment operating adjusted decreased X% and increase fees the third volume decline SPX an press was each and of multi-listed from we unless net variances. financial I revenue as

accounting a as the the volume at a from both The year. XX% However, and volumes. offset a somewhat SPX. VIX of in options throughout SPX multi-listed in improved month was the the higher Index ADV industry our driven by mentioned, in increase options RPC impact options ADV The month pricing decline was higher a changes as index increase primarily in quarter resulting mix X% as implemented volume of by percentage for shift beginning in with Ed over well of options business

RPC in as down quarter for transaction increase net to Our last reflected for third on the options we focus from year’s multi-listed an market share quarter. in overall our continued optimizing was fees XX%

to due revenue. growth ADV in was capture. resulted volume the from decline somewhat which revenue in futures, higher fewer decrease in a Turning RPC, RPC to a X% with lower offset non-transaction year-over-year XX% decline net trades have a by in shift mix revenue block a in the and also

XXX,XXX quarter was quarter October picked last a record and heightened to RPC of ADV the VIX the versus quarter, volume impact of year. for of changes However, well compared August setting as up in a second October surged quarter more XX% October futures contracts implemented volume favorable the fee on overall third and as X% second above up XX% third up third of in futures the monthly X, volatility as in half the had October. reflecting VIX mix.

increases fees to and net and grew other revenue exchange fees. Turning Equities by primarily in X% services driven U.S. net transaction

As and we revenue market XX%. XX% market increased data data expected, fell proprietary SIP

our customers on industry As client cost focus continue our attracting proprietary meet by new an growing innovating on market provider plan to los efforts data to needs. we and

historical as relatively continue currency We flat initial up revenue, equities recoveries growth capture Debt fees market apps favorable driver SIP a market Global well auctions volume The Net capture Net strong transaction volumes on European January for downward reflecting higher U.S. auto market key transaction to price maintained revenue and XX% volumes. net revenue basis and on which points non-transaction on market market growth a reflecting this resulted due share trends. growth local the pressure and X and revenues. disciplined increased were in on percentage quarter have dollar changes this volumes, expect and XX% basis our year. share and net XX.X%, LIS for both data and as we higher up to consolidation reflects implemented at the schedule. higher strong net captures FX from market XX% as X, periodic year-over-year. The stronger favorable nearly pricing relative share, grew

and were quarter The lower Turning retirement accelerated last total expenses result third X% two, expense and lower target adjusted and in depreciation year’s million the pace advertising with or assets XXXX primarily certain the compared expenses, $XX one operating reduction variances promotional in recognized due key quarter. to and expenses the expenses. travel for and down XXXX to related of amortization of

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

the on about quarter be suffer a it other financial fourth and lower our and our we expense end and benefits metrics. levels that will While variable to range, as depend at performance third expect on will volume of compensation is just based of

to compensation million. synergies third $XX.X pretax the in we quarter expense realized synergies benefits primarily from expense For year-to-date $X million and bringing

our was approximately the XX%. XX.X%. the of corporate slightly annual range income The of effective taxes XXXX of tax favourable quarter to third decline rate primarily the to reflects on XX.X% our end adjusted earnings rate earnings tax about guidance quarter tax Turning on of the in was low XX% below reform. impact adjusted The for effective

XX.X% We XX.X% expect are fourth for reaffirming the at for to quarter with the the to annual range our end higher tax of on to that be the adjusted expected tax of be rate range. earnings the rate effective within guidance year we

we and of CapEx $XX for to for million. our of to million guidance In addition, $XX depreciation million amortization $XX $XX and are million reaffirming

capital approximately the fourth the new management, $XXX producing and shares business focus repurchased margins revenue of to share was results growing cash asset the launching on by repurchases. futures, capital Cboe allocation by index results, U.S. Debbie turn broad-based continuing look call sharing plans our shareholders. the to to quarter on ended have stock position of our to our demonstrate in and to be set on of while call. scale enabled return to X% of to continued business capital Moving integration to adjusted returned streams, of X.X to bond investments shareholders million repurchase quarter into track to generation stock With our quarterly on dividends. Q&A quarter forward class disciplined continue to diverse and corporate portion this the dividends we We our We continue of February. proprietary invest and I index in capital the Year-to-date to over call million also quarter products, nearly focus of XXXX last expanding common and the outlook $XXX the allocation, our unchanged shares that, program of results expense fourth returning earnings instructions September of leveraging nearly quarterly summary, growth profit share on first nearly of million in that cash In will times. in and We $XX our our a share quarter for from under higher through for to our $XX us for $X.X ongoing flow Cboe strong representing million financial solid outstanding. million ratio at $XX shareholders million financial and with leverage common growth repurchases delivered our and

Debbie Koopman

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

Operator

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

Richard Repetto

Chris, Ed, Sox, Red good did mention and Ed Yes, Sox? Brian and morning good Red you the morning

Ed Tilly

what a was about man. I outstanding, season Rich to,

take the question next please? Okay we can

Richard Repetto

that are I you know I’ll say on market guess a October different, data that, that the sustainable we've you. Is us sustainability volume. increased little and that than would more going I the any after I wanted can seen X was on that of start factors February? you be the the you hey, the lot get volume Thank spike and we much to in to And but then might VIX Slide other volume stuff or and drop the guess, to February? that off saw first, questions, start are a point anecdotal, off you than what on to know off I positively X pointing different

Ed Tilly

great thanks Yes, question. Rich,

being X in your that look spike really short and risk at and period of exactly in remarks The X are So you not time a repriced. the prepared is orderly in point. difference did and market to happened the time as was to adjust give way an

the forward the this a spike from So a result. shift What’s that we’re us and yes, just that those and then October, term market warn reprising day events correction indicates through that back that in or the the big different aside information. going the saying in to the correction that two risk structure That charts or as the is the XX in is term time XX difference difference so, not structure a months. caused XX%

We haven’t information digested that all yet.

and sustainable we That roll look the risk and shift wouldn’t have strategies for will between an language is going environment we I’m around haven’t scenario and elevated perhaps that around a So level and done these absorbed going this do talks as marketplace spike So power. the am fully I I’m down I in outcome more orderly around stay. in to, that to market. and events, from, the I I more a the follows don’t in hey, this are elections to here a know, the a past come market rates VIX market we forward and marketplace in the shift elevated of hear VIX is I shift the to to What XX. move seen what adjustment think for our trade, as to comments think premium the over this returns saying, now, normal a uncertainty another to from then much we and certainly February? that shifting strategies making perhaps XX structure. in at mean that time partisan healthy time. going means, what in a the the What uncertainty continuing cost months employ is more capture we’ll see sustainable haven’t But term market, differently Fed President's the Trade an that customers

volatility the single XXXX. one EPS individual go Correlations is a really me seen that imply? single stock since a of we haven’t weaves look step August more into low stock about at volume. What does that and Let are at if high we worry stocks volatility, has raised and

So marketplace higher is environment past. entire been the helps volatility it a Hope in Rich. in than that the has

Richard Repetto

thank helpful you. Ed, very Yes,

Operator

Thank comes Fannon Company. next and from you Jefferies Daniel & the question with

Daniel Fannon

the looking you mentioned of with of continued some Thanks, good morning. trend? those us of to traditional that in to how equity then you I the businesses mean, the thinking give down fourth guess data, at headwinds And sense being I kind quarter forward. be thinking your in guess just an of to kind kind growth the a beyond offset volumes market could data, in quarter guess the of revenue down just think side? rest and we and about as about you’re of the about market of that I start SIP going be somewhat shouldn’t I

Chris Concannon

Sure, take it's Chris, I’ll that.

ten regard mentioned to flat with that I the last to SIP relatively the years we’ve SIP over the So down actually. is think always

Obviously the with the of at sharing fluctuations SIP the share of move a our on market will so look of share data market the share market revenue SIP growth as formula, does as SIP of don’t in we the it. determine revenue. the based moves So SIP engine

to and of versus revenue. that to a the as result share the lead in a Now market revenue we see formula higher for higher of SIP higher the sharing market can tend the over-the-counter and exchanges vol.

strategy, to at at priced I'm data the are strategy, and Looking product a of market by offering highly and market. depth with large including data competitively are top multiple which across future complex [ph] we FX think of and from clients market our priced book demand types we our looking very products our our the all strategy, strategy, equities, of entire proprietary our [ph] offering book European in our competitive in a

So some it's really a not a that strategy unlike in competitors see users other growth strategy we this adding space. pricing by

as to have So and we those adding use a we offering prices. the of options we result both see priced competitive that and in competitively continue equities hopefully users

Daniel Fannon

you. thank Great,

Operator

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

Brian Bedell

good customers morning maybe May strategies as get seen options And you way VIX just back thanks mix different types you folks. it with to Great, October shift being of are the seeing the as like it, sort first types are looks of in options in just can shift at during talk customer what saw the previously on volatility, were of but come usage in opposed you've to that weaving more to from what trends summer? the that a more about we're the a towards of the dynamics dormant looking quarter, back be conditions and then of the compared market to extent used that to, of sort on seeing SPX well. a we so October if you're people and in

Ed Tilly

I think you Sure, really it out laid right. so

the Again last the I positions. prior haul hedging, to large saw the in monetize a put the in in great months look of and after long we what are you to monetization using call, VIX we think on products at options time that positions earnings the basically great different have VIX October. saw users those been trades increase a If what doing, that

So the we VIX complex. in saw a lot of option that

a normal contract is see buying reverting VIX really puts, on and mean a is also state. in this which just structure a term We outright the is that not backwardation of

lot at to this well we am its saying take look I and seems puts buying outright that and just elevated mean. asset going to the be see and beyond selling position So of a a

a hedge monetize options easiest to difference quarter. a that SPX. then Not in SPX the overnight really in that's your So even the it in that's you've is this range in to to last point a - had and positions not the SPX and makes market we range. That options. easy the the seen really, close open monetize surprisingly, And hedging market are over seen a the selling futures, we're is VIX class that month vol its our when futures at this also see look VIX front and into are look just we VIX back is you mean beyond, if at in month cheaper. when is customers doing VIX rolling position strategy. again, just that taking above the options that, asset front then month of back backwardation month a out

So, there's a not over lot last customers now. employing of have strategies that the are we our that seen quarter

grow the to for shift, options contracts in we As to year really pretty SPX everybody option October. mix VIX return continued XXX,XXX up have That's has all picked to strategies. and VIX did remarkable what

So rotation out and conditions that of all very of see and the we expectations in but as market risk all complex is healthy, SPX change. and in will VIX

Brian Bedell

a you curve see mean done inverted the little a like had a even that's in I if if impacting or bit, as October flat the curve don't late a futures? little instead that it inverts on just bit curve headwind here

Ed Tilly

We there still. yet, haven't got we're

the last market uncertainty is of back long upward the this month. in trader's call recall You're back most to perspective, right. on or to three sustainable. market's The saying a lessened the from time if difference vol. the shift go four Rich's lasting in you is again earnings really market We question think that uncertain from no opinion the move the These flat, We'll, days last the is flat an backwardation. has the

the XX from we'll our and in around XX premium mid-month down a lot to strategies become up month as interesting few that opposed in XX hear strategies think will XX again roll and next to and conferences in really So XX. front management risk about we months

John Deters

in VIX, John market of environment. options. strategies this of lot terms is incremental was the of VIX are Ed this in terms describing In A just

the strategies just because long the are still seen. calls been still seeing of we've orderly out priced reasonably the people calls employing VIX of alive money VIX that we've move So they

hedging equity an strategy baskets. are for their still to that's using exposures people impactful So

Chris Concannon

growth Chris. October. only month this futures the just see that ETP not and a I'll also during we're we October, in Yes, record add of complex month did seeing the but in VIX

in in February that like complex seen added versus AUM strike, a it complex complex increase that month we're real vol harder volume VIX throughout much a and and bird October a was higher growing was So handle futures in we've in more is of for the as seeing versus much October. really spike to that VIX February. the well comparing the traders as orderly

Brian Bedell

Okay, that's great color. in question. different get Thanks, for I'll a Thanks. back queue just

Operator

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

Michael Carrier

thanks and just the both are o seeing have just European and that, you look sustainable you it a making guess get like are haves guys the the on sense, so in you equities, outlook, the come you nots of Hi, some view side, are as Maybe your you lot. think continue this environment? opportunistically strength competition want the back changes with a method, question to on at I good market the revenue the to you in gain or some can share of I just the when

Ed Tilly

out years with It We're build of All out. us BIDS to hundreds excited and several thousands right, it’s a in out built that and year took method partnership opportunity us build strategy to our hours about of our a man our Europe. very at took great was question. least solutions

at that but of out substantial our exchange all seeing have And it as in that's share, higher in rates various Europe, So of investment the members. we're well. that would book higher capture growth the market provide growth continued for in solutions build literally offerings Europe the also that our MiFID to LIS part is by the competition seeing we take we're

market are it call come scale our market. offerings over-the-counter flow or I large Many those market any market So, alternatives. see seeing with into the the in don't those moving so terms continue have offerings against has feeling our successful that goal offerings grow that. exchange they will and our of periodic market, many new against while we're alternatives with and competitors of that share offerings, from of products of benefits I'll MiFID's to offering them the our continue overall auction, competitor, we the that we to of our exchange grow and in the to in compete been

Europe. can around have with wait. a as Brexit even in about about Ed We strategy good his Brexit, we with Brexit excited we're a So go have get do Brexit. But strategy we forward. execute we'll we feel to do clarity a be prepared prepared mentioned We on method our hard laying when remarks,

Michael Carrier

question Thank Operator you, lot. a thanks next a comes Citigroup. nd Ben with the Alright, from Herbert

Ben Herbert

for Thanks question. Hi, good the taking morning.

non-U.S. volatility touch to the education products, pace growth and or just pickup wanted of if on any there cycle? in you're customer interest the seeing Just particularly

Ed Tilly

I first look really where get European in at the trading and from originates the that hours think difficult. the floor direction is we

Some hours of primarily for Asian XX,XXX just key as of a October the the perspective to market liquidity desk, customers European this I European before what our through most hours day of of amazing But perhaps I hearing the for and Aviv VIX come think is we we'll some have be the hours opens, extended because but the being a risk or I say trading of a through trading their than Asian us, from are day. the come spike. really What our had is next We've product and days the some so that track in to origination conversations contracts will in feedback utility near in are customers directly I making telling. uncertainty, decisions shows hours think open most you European useful we're get us there's our telling New hours having York of first in and usefulness near day trading even the XX the is some when being very a desks market our futures that of U.S. those the the XX excess management difficult some U.S. will XX reach desks trading other with open outside conference York route. of from Tel New firsthand us tell week, trading

to anything management turnout add? excess people up conference XXX We ever very, big Aviv. in Tel for in have very Chris, first of a our risk signed

Chris Concannon

they users lock a to I the our And the on in were some true really long just we years at at put where of in the just when portfolio those market of of to in and complex. have users of looking we're return. September conversations current a and user Dublin, would growth unfazed complex add, the events. excited the conference and looking end in their Europe intimate got management on a some look VIX new and February by had fairly and opportunity about risk market year we bull base our We Yes, with hedges XX bull in our

Europe So, very throughout by our encouraged of users and some growth Europe. opportunities the in current

Ben Herbert

Thank you.

Operator

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

Ken Worthington

of I talked my topic the past. pricing taking Hi Thanks kind for good in about we to wanted question. morning. dig a power, into

curious and from to areas well. else You Behind what I'm called how much out revenue we some where about approaching really is, typical in leveraging as others might price talk of seen equal again the being increases? we've prices. of you've a growth hear power a expect year Maybe scenes all pricing changed how bunch the you're

Chris Concannon

power that Hey the exercise the very power. I sensitive take appreciate the certainly question. pricing Ken, question, about market We little in Chris. competitively world. offer data We I'll don't product. it's pricing priced a bit a word

we've you're across some If our year moves made this you're, complex. of I pricing think that to referring the

of share moving not result moves us seen power revenue complex. and not some benefit where capture, our higher made we equities active have had equities volumes XXXX of higher We don't have are across you've price, we pricing certainly that but in the moving any pricing declines and our on a have in market

VIX look for announced VIX in clients in us adjustments in some range, pricing customer number Those of schedule customers, in our on frequent make pricing been October. a we're benefit and recent we member the did recently to of seen in fee an pricing on to adjustments futures putting customer you futures have repricing the trying tiers, And for our the introducing futures really people recent terms our fee schedule incentives so If optimal old for have was incentives VIX certainly at pricing that schedule our our of customers and in those match complex. trader. our we've

member larger clients, our have incentives our larger built fees. in that volume to customers will similar some incentives So, of our are

Ed Tilly

increase it even And and going certainly, then that power is historically can't upward I the on part will count products greatest really pricing rarely, revenue adoption I in I that even from come look think the movement we don't customers of from a always back further specifically of adoption. coming expansion forward anticipate in our question, growth but price second from we've to the of our and new the the

Chris Concannon

to option market, We the the look in at repriced And in compete did over we where that particular, strategy, if large XXXX. counter market aggressively you have we swap VIX the our with capture blocks.

opportunity. that and the in benefit October here in now of both at that look We've to continue November. We pricing had

using a our not we volume So increase price leverage and capture. to are to as increase leverage

Ken Worthington

Okay great, thank you very much.

Operator

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

Chris Harris

particular us give to that, related done a then leakage there, the volume guys. certain of work on as any to made and settlement the and result to still improvements more you've process hey an the wondering from noticed VIX Thanks, Can you have in settlement process? customers update whether new you there's be

Chris Concannon

coming auction and transparency great rules auction. participation to a being we published only we to we and around lot liquidity assisted with providing really in work makers putting of focused of year a question, in work When imbalance was our of our were liquidity to I'll area, settlement moving to to in where of at most the put work increase the increasing participation electronic the because in SPX streaming that this hybrid was of wanted the members as the maker we've looked the earlier these transparency on several healthy auction. the So in they not the the into only really of auction, providing for also change and last moves a over Most call that the and the liquidities the of seen, information a our but providing discussing levels was around moving the technology We've to but on what to material result disseminated, as result those the the be We'll run months come we've the future, specs auctions needed the in in what's market the great prices respect market an helped liquidity saw the that Bats we with liquidity that liquidity SEC imbalances. it disseminated, liquidity and on the so imbalances of to was providers in the with we auction. offsets enhancements the so closely using Providing recent come change that not but more And during to a was auction. those offset our largest our the did we migration assist we makers recent certain ensure to was key, a that where auction, huge offering that some deal the place publishing and the in the auction be platform rules our market then auctions. where our also worked changes into auction. think coming, made has being CX and to market we will most that and clarity will makers how with imbalance, into the

Chris Harris

you. Thank

Operator

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

Alex Blostein

options in going of guys. morning little on non-transactional side business. what's to learn a Hey, I bit the hoping good the was on

active market, growth expect multi growing couple grow do kind pretty the the I guess part over last options talked you visitor quarters. what's part so that market going to see of on there? flip of the on about some actually think, still Bats nicely. and flattish guys there been legacy have data And the of I season side of that in and it's opportunity been the business

expect So the buckets trends maybe forward? what dissect both kind should in we of going and

Chris Concannon

of repeat the part you the can Alex, question? second

Alex Blostein

market been that’s growth of Yes, opposite what's access of options actually what been the the the fees kind kind the growing, so visit in there? so of driving in multi was data, we've seen

Chris Concannon

question, it's Great, people up show as charging for it's so share share platform. a to on growing healthy put to your balance of great and

compared are So we've as in of trying at making as balance time. very healthy and this space to migrations of to had we platforms a, same the you doing I grow attractive can have they our other think appreciate platforms and some far that a share the to

trying we're we're So comes our revenue clients to when it very sensitive, when for have platforms. non to charging migrate transaction

higher And competitive list obviously the whole by in and non-transaction a So be aggressive through space but some large go we've in seen transaction hesitant regard decision we not fees, multi very while and been on we've options market space, migrations. to With as volumes capture. price. to options the we price decline offset in to be very that's the these share made higher

did we the reap we're only strategy platforms. were our multi in we've cautious we're But going list of a in appreciate in XXXX also as business that our we benefits volumes as and you to XXXX. here So market to access with on XXXX options in the into data, higher happy again have seeing but to for how XXXX strategy been those we're very compared migration charging not

John Deters

this John. Alex, is

you appreciating has data value been value think contracts list opera's the options far when the the SIP terms options multi say options and the a encouraged Chris’s reason perspective OCC equity robustly let's million a more another more XXXX why of lagging October, while on options But big market have Opera trends there see month market share. as in of side. you lot options becoming data driver metric, it's the market valuable in the year-to-date over in data by very volumes in clearing XXX when I thus is been we'll think It's a as market and overall data look think, and a to is growing that the whole at market. I the on that’s really hasn't I stream we're

Alex Blostein

thanks. helpful That's

Operator

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

Kyle Voigt

do have question can Hi, that and talk drive ability VIX, for just management adoption of on your you but you Cboe thinking big risk about good the to about to drive from another know morning when end of I on selling guess all VIX outside maybe you're here, trade segment conferences, see bank your here? from more I clients runway for the having as into relying more longest partners of user directly growth adoption? you more And the of base, instead client

Ed Tilly

development business on turn the before a plan forward. over it's question I to going it think just great Chris I and

rotation, at the SPX these I those are that really conversion if - those, customers, already that individual I That complex. rather and multi the having of one involve hedging strategy. into is think a but they not basic but are lowest direct us are easiest small overwrite for employ engaged hanging a look the When doesn't you already not fruit the and conversion in the approach are funds say to SPX. benefits the that's and easiest. complex that about for just We've hedging, strategy that ball recognizing talked into a

easiest talking to insurance S&P exposure get they industry the Those has power begin of the we're advisors of because convert and contracts. embedded the that are the utility So derivatives with. really in XXX the to about many really in and

Chris Concannon

wonderful distribution, strategy or think institutional are are the you pension our I mean, direct I even in think with by have we force large It's are whether are Europe. now it's offering in on actively us it's to to that to users so to long But consultants go companies the insurance because rely we the it’s taken conversations with critical employed funds, those in we engaged BIDS. bank the distribution. dependent talking VIX dialogue partners end a in distribution the complex, partnership and the When scale are of product. throughout term those do funds, with clients through we that we with here our same opportunity direct direct wonderful we users. are vault We on a the U.S. with relationship so pension will at continue look to They a talking our have Europe for our sales having bank our the complex, in partners. our in

bringing for our exchanges is we partners. SPX and do direct it complex our the our our but so that sale to now to complex We direct in are engaged sale bank the the and sale. user. equities in VIX direct relationships establishing are a Europe our are products we of and now They with products ultimately end So both

Kyle Voigt

Thank you.

Operator

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

Vincent Hung

with to want probably sound you the debates commission. so the bring is in these last don't out? at that is issue but behind angry based debate? think resonated things from the They week, if to the soul what what new the commission to for way the a I it's incremental hard saw to closed so Hey, you have anything, table Chris this play get back sense One hurt years, over doors really their issues the of round

Ed Tilly

Chris, taken I with attack approach on the think in willy-nilly industry? maybe SIFMA the that you can their start

Chris Concannon

Great, thanks. I market prepared. Great question. might I was be expecting a question, data so

that's NASDAQ likely and so already, won’t several take near of debate. running and litigation as commission debate. out litigation at underway data point be because the term obviously engaged is with debate resolved level NYC the involved long been a yes is This in resolve you and years it back So a it this the goes our specific could decade over clients. has to the It market

ahead. have we road So long a

by HFTs As hired filings directly banks, all SIFMA quite challenges investment or those were our of of large handful us people to you compete with dark challenge was by random. pool it, that operators, by about our a filings, think internalizers,

other were data related that While half the of the filings were half and we to on. largely connectivity offer market products services access related,

actually some no and associated had include them that included lowered filings filings that we of those filings of Some fees fees it. with

of products In some renaming fact filings our specifically. were

you direction doing see you're a is. space quite SEC It's hear fairly own you have So in unique laughable we what regulator a your can through I've your say sit can most industry, filings, as I the competitors, competitive we influence career it a look it's space. that my strategic spent in at where of not what someone have exchange space, when it's your

You And directly new dark largest have against offering have your an competing eight you you. pool every largest you compete by to new a internalization exchange clients, years introducing a five your clients strategies. or and consortium against to consortium

was Bats a Stock and was NSX a you Edge consortium, was a ECN consortium. consortium, Direct Exchange was a when think about [ph] XXXX Philadelphia a consortium, back So brute in itself

to entry competition of random there's ironically approves the the Department finds this of So Justice the on exchanges consolidation space a level new can see and basis. regular into you and be fierce

to have your this conclude in really no an with head competition that there to be So the was sand in space. you’d ostrich

it think and the roundtable, was data the these unique the of the able exchanges helpful and optionality quite really in competitive laid the first where clients the to roundtable have. the debate products that about because the products the was that of actually really were of offerings many As I out information provide time really

to have and the the on the their the fact laying data enjoying York a volatility able there having provided. step the thought is and you record some offering. some margin take the groundwork result given now And exchanges in provide the information were a investment unique we much that look earnings economic record New of the of you largest here, you will revenues, result. brokers for their that you if So roundtables enjoying that and I margins growth NASDAQ are as litigation have of assist with Ironically, for in unique banks rents on price in of competitive was out largest at helpful back a and consolidation as pressures involved have higher HFT's

Country the complaining tonics to at fees, So about gin bunch sitting and look at mind the to they have drinking that really is caddies a around tips of the our pay comes you what Club. golfers analogy when the

are that rents having this quarter. economic So given in that it's a we're clients the our unique debate enjoying

on, a so Winkle Van will my like answer step right that gone and and look than will to a on I'll debate has on go there. is take at Rip it end is this look back I when continue, this starting this, necessary. So longer at a Ed debate that point, and

Ed Tilly

And Chris just really was shy which good. of angry

Vincent Hung

Thanks.

Operator

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

Patrick O'Shaughnessy

educating that are to flow alienating VIX, people so of kind up when you depend of battle dealer the the lose about could talking on the data distributing up one, there think Equities, is market terms in the broker follow about that and that debate risk a last against? war think and you about community that When there of other not the maybe and a but win Hey distribution is data. in risk you, how come market's that might you you on were all just they for you order just in partner U.S. contracts a your you but

Chris Concannon

in that exchanges one offering, the careful we about. our are most question, in have great are a you It's the pricing one When of we about the competitively priced think space. that we

lower and where we competition. that have small no are time. we the had a prices than Our first are challenged the the increase for been filings offering of price Many price

through priced market management approach for offering is our a wonderful a makers. SECs risk is our options for it it's options and and priced maker. process options market risk for clients buying critical product a allows that for the but offended when It market by an maker, offering think and our some I charge to competitively, for able options, aren't efficiencies offering, when that about a I get So our we taking think our size these we to about position of Recently rights the confident have our that that provide, the I'm clients offerings. we're markets terribly management,

So, offerings our demand, provided many client reasonable. offerings of were priced that by were very

a were the think up indiscriminately. of caught really filings challenge I all across was what somewhat in we SIFMA exchange board

are ability trying it that price I our but the is priced battle in the battle, offer to we that we're side it's when you out a think products But on a some competitively about on largest exchanges clients, the to confident non-transaction and product. the very of transaction defend side. as with battle pointed of their So

Patrick O'Shaughnessy

you. helpful. That's Thank

Operator

from Bank. is Deutsche next Brian followup Bedell Thank you. a with And question the

Brian Bedell

up Great, for thanks My much. actually. very is follow Chris happy

the the industry let's sort to making a I guess in SIP back litigation, we realistically, your I've comes the long what's resolved restructured? the would say just the proprietary versus data, and could industry, you data could everyone potentially more view envision long proprietary if on and and SIP assumption that picture market for term? think just favorably happening of of exchange way the be the to at gets or mean of maybe market SIP the term restructured, were Just between looked how the data. interplay you looks that just past table I litigation how the if the about for be that you know

Chris Concannon

that obviously roundtable lot about. question of great and a a one was it's the Sure, time spent talking

would the structure rule statute require about congressionally SEC have that through the writing with wrestle that's with It has SIP, one option. SEC and SIP come. a wrestle to think I to of the major As required change offering for will to you the years

plan SIP the some whether compromise exchanges come table is, offerings new option the require all exchanges the second would those structure [ph] within the to The the so that would make and to new to filings. agree a the for new file exchange or SIP, SIP, industry the to under and the governance the structure have of it's of achieve each on NMF filings structures that, and

think structure the had the SIP. new adding to I the an of governance. there our think ways thinking is something the if roundtable, openness additional or think to with time flexible an opportunity exchanges the regard SIP to the was I you'll be listen information SIP to about to very among SIP. long willingness expressing there to a Certainly for been to do We on

of, So a of and from I exchanges is the coming fairly do offerings making by I'd call public attack to in DC. encouraged compromise table that think I'm on what light exchanges coming

in on years. do down could so, involved you're position puts negotiate opportunity many SIP where there's to think litigation And for litigation all which in a compromise us Unfortunately, take difficult it's I the an the road. structure when

Brian Bedell

bit will It's gets be resolved interesting quite effectively? until so really down pushed a it road litigation the

Chris Concannon

you litigation, necessarily, with the filing against in No, in you're very cautious same that not involved are parties where to you're litigation. briefs you if going but compromise be

and it's to public us hard feeling come are compromise. mood in I do the for there to if So continued think, difficult table the time a on assaults it's of exchanges, the

time. difficult we're And so, I think a in

we’re new we when our it moving speeds it’s faster there than than there can the and Again, SIPs tiered comes a hopefully SIPs the you’re dialogue structure businesses comes and difficult this are closed any except exchanges go around do moving debate that SIP. it IEX are thinks is to not really the have who SIP time that think when think for notion when the passing don’t the than moves, it on IEX at I looks public before, the long open about things and faster maybe so to I a an revenue doors creatively term market, growth that driver behind XX that’s of is so and ever SIPs at SIP, mics IEX. faster again two to talking and is

we think, that. again, that think compromise, I when I’m the tier So I down the a think gets a that just level. two market doesn’t about it exist to hope I at turned exchanges notch. But public the by assault encouraged willingness expressed

Brian Bedell

you Okay and when contract VIX just exchange, a you then at Miami that think much? quick just quickly Chris comment spikes lookalike were by at potential on a has the to going any and Bats launch volatility challenge on you get to tried whether the options not or so

Ed Tilly

on be contract time But Bats to complex the hedge. trading recognized really that bring VIX There lookalike is in that that really bit leader to spikes ETP that very fuels the those marketplace. Hedging it using volatility so puzzling the sorry, in in with listed approval to the game after VIX contract an a going there's products I'm that the start futures it's would we with futures not spikes successful the me commented a our We've for marketplace. ETP contract, products to today. not the as our actually got a introduced first what the that's futures the earlier. industry exactly let was contract and ED, you’re referring this that is late in VIX, this So

incur in hedging would any futures contract, ETPs. success spikes expect complex similar absence there's if So to VIX I our to in futures

Chris Concannon

any us. for more We going raise benefited VIX there's a doesn't only the to exposure. any adoption in I by to lookalikes ways think be in that concerns variety and volatile of

Ed Tilly

utility our recognize mixing the their strategies all for hedging result. of into I think we We're a benefit will customers in volatility as

Brian Bedell

much. very thanks Great,

Operator

a Sandler you follow question next O’Neill. Rich the is also Repetto from with and Thank

Richard Repetto

has let I again, there's a of of a Commissioner out question, on at certain his nagging gone cave and Yes, got quite the risk I know Chris call the long SEC have has reasons as the you made you briefly as a hold, comments you go could of number the through just many about why medallions exchanges and licenses, the medallions you do?

Ed Tilly

analyst a piece that there a Sure, is Chris. good this really wrote on

Chris Concannon

it. read I think I

think So it Look, regulated a model question. about way unlike in is most if is great Rich, it U.S., the business exchanges are you the unique a fairly businesses.

SEC structures exchange same a really and a standard to that model in pricing and model. We by deliver a exchange never we pricing really The never unique allowed have license. single client have unique within allowed the exchange, standard has

models pricing market certain exchange to Reg that's and Obviously book of chose building protection certain by another on MS are client the top certain and for introducing introduce SEC has and the really of that exchange we models influenced exchange of its certainly demands, and top development of value model. exchanges the So of [ph] exchanges. part single a

that a one one has exchange it, model business demand client exchanges a on platform unique unique across operate. migrate we pricing consolidate, they So and mix, exchange each and exchange in has you each as different a as see can exchange each the imbedded has exchanges to unique all because don't

filter we fee exchanges pilot, of I pilot And have surprise medallions the again can restrict once been - obviously that have in of as it us a additional six flexibility I've on have this might for an that Now a comes introducing about around while XXXX, be, and price control have talked I we what pilot on fee price. exchanges. introduce going would come we additional this but then to we would great last, mouth. fifth use. transaction to space back, how a in commentary as don't out we requiring a a probably exchange in view the to you of don't sometimes mention a and exchange Rich, light transaction Again, I'll pricing my book

Richard Repetto

That me. doesn't surprise

Chris Concannon

exchanges confidence. compete most but integrity called of and someone SEC said In this piece is the the investor to important that fierce remember it important the at confidence to also national the and important is competition, investor it's of

So think national account investor have we that appropriate our the that take aggressively and not markets the because investor about it's we debate into confidence confidence. public attack when just so to dialogue, in damage I to

Richard Repetto

thank Understood, you.

Operator

Thank return more no as there are management would comments. closing to you. any And for I to the like floor questions,

Debbie Koopman

completes in and continued you. time call our We the interest morning. Thank you. That company. this your Thank appreciate

Operator

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

lines. now disconnect may You your

Cboe Global Markets (CBOE) 2 Nov 182018 Q3 Earnings call transcript