CBOE - Earnings call transcript Q4 2018 | Cboe Global Markets, Inc.

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Operator

Good morning and welcome to Cboe Global Markets 2018 Fourth Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. And now I'd like to turn the call over to your host today, Debbie Koopman. ma'am. ahead, go Please

Debbie Koopman

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

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

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

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

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

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

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

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

Ed Tilly

XXXX at joining quarter proprietary today. notably and financial Cboe across most Thank of in trading lines Debbie, in and by record fueled the and results to fourth for products. for Markets, I'm morning, you trading record increased thank pleased year good all us business you, and report our Global our

Our an our in of In increased expanded rates, results to rising part September, hitting reach market in of market touch the sharply and of plan a December, on our strong market recession. XXXX. effectively the After fears brief results by product tensions performance ability rallying XXXX. those I to volatility, in all-time high briefly and a stock escalating global highlight fell on entered business for before how overview XXXX high-level stocks our in leverage interest during will quarter, build demonstrated global fourth each close investor line. risk on lines the bear trade After and out fueled to we territory

correction that unlikely that to which market annual robust falling decline for its in new index changing an to of the crisis the and averaged the financial reflects the volatility since XX more become equity the returns the risk largest same the volatility that since XXXX decline attractive daily warned SPX and volatility SPX and are XXXX the market XXXX, risk normal the Despite record in Realized the than S&P in Index, past investors the year-end, was suffered period our unusual fourth S&P the for was by activity proprietary that while in X% the For options backdrop enjoyed fueled options, an will the Index They continue. point tool. stocks. over factors observers years condition increase and trading volatile which and for most XXX the was especially inverted XX, VIX agree and XXX generally X%. perceptions made quarter, VIX an XX, products. cost-effective marked implied the hedging rapidly XX% trading of Large a year, since moves higher

options in using As for hedges equity VIX and demand options that futures such, XXXX. will expect we SPX increase in

As provide environment. complementary and suite manage to most And we investors in in SPX any help options conditions. use depending market on proprietary options frequently tandem unique futures risk of tools index many noted, VIX products our customers and market in

The respond Specific our user better to we've growing markets. diversified reached response, of year Given where SPX consecutive proprietary options products education. increased widespread new Scandinavia continue groups seen XXth but or the volume hours. sixth the quarter of increased fourth never branching in year trading XX% use emphasis quarter. into no In hedge commodity volume, segments options previous to existing greater. trading VIX record markets East, the portfolios allocation and sales we key in asset global with a fueling around has trading while out Fourth volatility, include in the year-over-year such to and education down we've the volume futures. as been VIX Asia demand our an revamped not the quarter and funds a year penetrating geographies record yet we've rose for VIX from And futures consecutive identify futures, with on marketing Whether Middle Similarly, teams for in further and target advisers, high managers investments set previous adoption. to over record VIX market volatility. new and

and XXXX. that provide closely saw trading. to also options the side XXXX a buy VIX partner banks working with these to with to on build on in sell-side with have incentives small increase campaign volatility in in VIX are are further communities to that trend to sales increased demonstrate underway to intend a Efforts focused portfolio. broad can from the We a allocation demand We powerful impact

utility actively to We run room complex, and but growth. in and for we In new retail virtually any SPX of also the new globally, of focused on growing see hedge both use to plan remain what the educating sales the participates directed very where in a which a climate. playbook institutions campaign options committed users fund successful we community, SPX XXXX, on market existing institutional has been VIX considerable in and

through to firms base market and pensions global trading among we hours actively see retail opportunity efforts during continue partnerships large to continue global asset to significant educational and where managers. while, believe increased institutional including retail considerable non-U.S. segment potential our are client and still and trading our And to see key in will regions there's we our we growth educate with overseas untapped accordingly. for increasing We

overall increased Turning options for options fourth U.S. for the our daily while business. the Markets average the in quarter XX% index record fourth making XX% at Global in the year year, Multi-list that trading quarter Options XX% one Cboe and rose now the XX% in XX% to increased year the options quarter for number the XXXX, consecutive Options and category. volume marketplace. sixth

Mini-SPX In increase addition we our options trading XXXX, regulatory XSP, EDGX in on also look subject through which our our Cboe to the growing Exchange VIX market to to adding by review. initiatives trade options aforementioned SPX options to and them

We continue index product marketplace to our grow to also through plan innovation.

XX next We Dow We plan indices pleased material rollout yesterday, are on Sector Options a to products Indices Sector S&P of and Select suite XX of type week. Select Index Options the Options remaining Indices. on launched Jones expand to launch on the with our to

Options new alternative European customers funds, due seeking Options particular expect on including exchange-traded have regulations. an investors alternative utility We the certain to to to European an for seeking

positive our in increase the marketplace. the was now in XX% and Growth Turning in by industry year. over fueled for to results the a equities equities U.S. ADV XX% quarter, previous

total. ETP listings number of also the quarter, bringing fourth business to of grew in year's total at our ETP Our over increase end, XXXX's an XX% XXX

now VXXB, [ph] [REIT] offering the volatility ETP ETP, which replaces includes VXX. largest Our

industry our that the as the the filed no issuing its SEC users are Cboe about data excited recent Cboe's in provider. One market continue reconsider products, we impact distribute growth data Feed meet unchanged. in client motion needs potential that flagship as remains fee on providing that schedules feeds has and position that on products authority relates We And focused our market sales to we including leveraging to and data existing our around the and order, ongoing an XXXX, exceeded I for remain order, order strategy the it our a growth while our its market revenue we should reiterate to data as globe. low-cost expanding while believe

execution on don't marketplace are to been We operational fees the order us front. and to was Rules meet entered well-positioned proposition tailored us that which believe for in offered and competitors this offering needs value noted associated the changed we've also Further, priced the and today's at these value costs capacity competitive the than medallions asset bring any and to data market product are it market. by and we enable mix, and our should room in see much and different that for much feeds equities And are to our leave Bats confident routing cross offerings, our XXXX in compressed exchange our discount efficiencies, we to always in four We considerably. regard customers data materially. landscape a relative products. competitors customers. when our is new prices to suite Bats committed it lower of equity unique hybrid of subsequently to the U.S. space, With fully be relating trading down remain

opposed will we it should with DNA. confident ability customer benefits industry unique nimble model be possible in to also inactive. our leave business needs We will transaction our pilot meet is of every and pilot. U.S. well-positioned continue to the the and at fight business we to regard feed the pilot believe remain Evolving compete against aggressively turn, We equities to model are our our but equities us the be will to and fiercely

Trading platform equities. logged XXXX. LIS, another quarter by now Turning block our European powered XX% for over Cboe record European trading to XX% quarter. the BIDS increased and technology

result adoption a the in rapid were the the needs of results meet market strong MiFID under place put Our we to services II. of

of migration of the a only Bats to not that, futures through XXXX business thank Global notional with over new line. average for with regulatory success continue equities record launch when our was up exchanges turn alike. the to product final EU deliver is fourth across venue Cboe's our advanced to in redefine solution the to would on daily to credit year platform. but ways markets for It a We combined Xth like entire XX% another positioning team build and Cboe experience greatly and trade are now plan I initiatives results fourth we're by improving and the I quarter on year all preparing the quarter continue our to our review. the Moreover, strong of subject in in closing environment and our Brian. results With We to customers it In great trading a through We a expanded in here, making technology, options in to those that product of and our grow build post-Brexit and value planned completion a and to October that the X% to with technology in for relentless able on record liquidity. world-class innovation, to that commitment seamless the leading-edge markets XXXX we team to stages will industry-leading will Amsterdam will to benefit are FX to shareholders single customers' year leading in outlined data XXXX. analytics a books. for plan

Brian Schell

you morning. thank Thanks, let my this good us add joining everyone. Ed, and for morning And me

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

mentioned, quarter. As record Ed a had Cboe

$X.XX. revenue expenses And X%, up was non-transaction diluted adjusted XX% our up share operating of net fees adjusted up transaction operating margin increased earnings XX% revenue with basis to grew points. net XX.X%, per adjusted up Our XXX X%, finally, XX%,

morning resulting options in The across Our XX% margin on revenue for some a from with options deck options, SPX up options, offset million. per metrics multi-listed in growth average increase XX% options for VIX segment, of performance by growth inherent in in each pricing index an operating reflected growth and beginning industry year. and our index an contract quarter nearly transaction our up in as volume and the expansion The fees focus fees, a RPC, of driven operating release This issued in a new segments reflecting in increase the increase changes segments. model. previous for allowed $XX set reached capture in SPX we shift slide with a achieve net of was million key volume options each accounting In business and is our in high influencing Options the us both record daily the options, driven of the a million revenue to increase overview multi-listed in index revenue our as X% net higher highlight our of increase $XX volume key each primarily key XX% somewhat XX% results variances. reflecting our from were surpassing in our business drivers decrease a segments. multi-listed resulted driven of I'd record increase which ADV for by transaction the volume our to trading by expense by XXXX the in in with briefly $XX percentage our or was well well of of Options growth this in combined volume million revenue option management as The the as provide at in on disciplined options and XX% press implemented higher revenue mix and volumes. leverage $XX like XXXX. Industry net primarily operating

Our as continue quarter for increase quarter optimizing we multi-listed Options in fourth down XXXX, which from is XX% transaction our fees the last in the reflected year. for on net year's focus XX% for overall market share a RPC in and was to

the in XXXX for following a posted modified by in mix due in block Turning the XXXX. increase year-over-year, for capture. and demand growth technology with the in quarter shift from to XX% connectivity higher revenue in which February year X% May the and a CFE CFE's also non-transaction RPC by offset RPC. fewer net fees ADV, somewhat or primarily capacity a volume have in data driven of in which a futures, XX% revenue migration trades market was of primarily decline lower were fees, increase to resulted

services equities, offset somewhat revenue Net in X% transaction market fees lower the were fees. net driven Turning data fell growth transactions the net fees XX%, and share. and revenue XX%. -- and revenue net ADV, to primarily data SIP capture proprietary quarter driven net exchange U.S. in increases industry grew by higher increased by by market and other market

stronger year-over-year. XX% volumes grew capture. capture favorable XX market option reflecting points revenue market stronger unchanged reflects U.S. on on volumes. XX% strong We currency we growth increased net XX.X%, was net market FX year-over-year SIP absent changes volumes, The net from increased higher to expect quarter, data revenue growth net basis market significant Net transaction revenues. European and and LIS Net were recoveries capture equities relatively reflecting XX% XXXX, to relative non-transaction have on higher nearly this both driver, in for higher in no captures. resulted assuming basis share. be favorable basis, as a for share which dollar Net and The and transaction up periodic local growth market Global share auto in market and and up fees revenue key a the

for resulting incentive-based $XXX quarter, to in were up variance compared Total The strong to operating compensation, nearly and was higher our expenses Turning aligned expense the quarter. $XX from in million fourth with million million last and operational estimate expenses: X% year's expense rate driven $XX and compensation of exit key benefits, by XXXX. million XXXX $XX exited We previous versus of $XX expect XXXX synergies run a financial of still performance. to and we with with rate and cumulative synergy run million our adjusted

want year we actually expense with expectation visibility in synergy and to how expect to you to Additionally, realize we of our this incremental provide much XXXX.

many quarter, of migration run realize targeted we incremental XXXX year. CX were than earlier two percentage significantly the platform decisions XXXX, CX XXXX, percentages realized, as in planned and rate the And lower during approximately and a shortly were of to expect is and which XXXX, migrations in million higher synergies of fourth the CFE to the $XX after synergies that XX% XX% previous years. Given and is respectively, occur completed we In vendor closing the XX% in personnel made XXXX. in

remaining of plan that rate XXXX. XX% million We approximately estimate synergies the run also realize of $X to we in

guidance the full discussion the our we'd range as for With and expense XXXX. to XXXX now like for year preliminary synergy context, a review

For to to reflecting $XXX operating range slightly in expect XXXX, to down of for our million we adjusted expenses XXXX. be $XXX to a be expectation flat versus expenses million, nominally

offset of to XXXX, in realized Our XXXX XXXX projected expense the expense, expenses range to be likely Depreciation XXXX, a is of our will XXXX of in is and our to similar through total and $XXX a to excludes in $XXX is our intangible core the reflect the for to million million. XXXX. significant benefit excluded be rate carryover With of to expect non-GAAP acquired benefit $XX expected synergies, $XX the respect the results. CX amortization $XXX attained This guidance, business. assets migration which included X% million, million, of in which expense reflecting amortization core growth to million expenses support X% we growth from adjusted about which

spend a Lastly, CapEx corporate million, of range increase driver our to assumption office an $XX from to in XXXX. third our $XX possible forecast the incremental from that A is headquarters is leasing increase and of spend. the in Chicago million capital will of $XX relocation in additional for accounting the we million XXXX for expected about an significant

plans to capacity our We of potential likely capital until provide the spending. technology clarity. includes, to and refresh to if share The we have in to investment ongoing more to time decide systems software be half and able at budget add Brexit-related second our increased But we also enhance would expect to which the this no capital we do incur expenditures relocate at not point. definitive would XXXX, including

Turning to income taxes.

below range on XX.X%, earnings tax guidance corporate the annual was about reform. for income XX.X% The rate effective relating of earnings decline in quarter favorable The XX% was items reflects Our on positive discrete of of the XX%. fourth state adjusted quarter rate primarily the taxes. our several reflecting effective impact tax adjusted tax to to XXXX

for adjusted expectation to the expect fewer items We is the range XXXX, realizing on to effective for XX% earnings XXXX higher year, in which favorable XXXX. to within the discrete annual rate than due tax be XX% a of of

a to on allocating capital long-term in shareholder Turning allocation. capital remain manner to efficient We create focused most value.

results, position while financial returning cash business, the ended our cash our financial $XX to adjusted through were Instead, in quarter, $XXX repurchases realized invest million share dividends. fourth We during continue also we quarter conserved towards growth of year the strong flow us of to with We the strategic and active generation, to acquisition. During of nearly cash not enabled nearly potential near-term a XXXX. million. the in shareholders fourth

point While do this out the to in transaction potential issuing that, ultimately we no stock want I any any or we to it relating specifics unable to deal, there its term are this if near leverage with not significant successful completing incurring in to anticipate are and provide will respect is funding. assurance occur, we

share to repurchases. Turning

share X.X our of currently on approximately disciplined XXXX. and from full plan ratio Q&A by million I'll shares X% we to of continue at our as and for the ongoing portion invest that, of our growing the year profit record allocation capital slightly focus In for the $XXX availability Cboe and demonstrate proprietary the growth capital revenue XXXX, With business plan was Debbie continue instructions our We down million results the both representing delivered expense For we focus call. share track of management, for times year-end, stock dividends continuing our our quarter repurchase outstanding. leveraging of share allocation. diverse to a index over the in to repurchased nearly shares X.X our margins, of as times Cboe third leverage in of part summary, turn million business, year And returning to At $XXX repurchases. program. integration end of evaluate on of while set to scale always, repurchases higher X.X capital overall the through growth it common have quarterly under of shareholders share repurchase and to the under on quarter producing, products the streams, and on our program

Debbie Koopman

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

Operator

Yes. All right.

the question-and-answer Sandler begin comes this And Rich session. will first We Instructions] from [Operator O'Neill. with Repetto question now morning's

Rich Repetto

could year. if the volumes and right on Brian. think first on again strong of strong everybody's see and Good Ed. see about, need question XXXX volumes and conditions January market now you asking that the I happening would morning, specifically conditions November. return half often But -- what latter higher December get guess, and you congrats in in the February, you And Good to that to is I to-date Ed. a we what morning, most quarter expound the in on saw more we

Ed Tilly

Thanks, start… Rich. to mentioning or Thanks pat either not Brady the for

Rich Repetto

It was be Mike. going to That was good.

Ed Tilly

am changing market after that great by are a It where that does The the a question environment. we record-setting I the and quarter we're risk, exchange in followed customers off record-setting was. strategies environment our I up that question were quarter am - coming sure. reassessing get and market operator as every successful is

not that's us. unusual So for

as We've marketplace, us of and and about the talked strategies the surface the is certain and You've that past, through that think surface. December lot in early flat. call rest more for level changes we when I seen that in volatility flow. of I'd ebb that continued to began what But lead January late specifically, and rally out did at the the flatness is a look

the return VIX can a as into the hedge. we've hedge The as using cheapest that the calls recall VIX weeks cost is You change in that. the using that I change that only of seen VVIX a the know over options as last

Look us on the of well. not really the that and does February. What is the that one environment in last you'll and days, building uncertainty. now base That's early It's just it So serves we're volume. back what few we've surprising. is obviously, story. the market readjustment part And over January seen seen perceptions and change see the January in return to as we've so now

in of through year of All still starting that rest risk volumes the same the are there. September those factors out drove market

So we find in at we ourselves perception. in early shift to products well-positioned. the see volumes rebuilding really our were liquidity changing looking on And correction the week The of that fall. take in we ready already over the last a beginning the are perhaps used to of

So Street it back. that volumes and we market. can like reassessing. already. that in the coming they're the our up We shift see The we says show see And

can we happy get So I if surface weedy the there and pretty hope to that and a get there's answers and other in Greeks question. can follow-up go --

John Deters

behind orderly. that VIX. somewhat we're the is down taking the about John, say. the is is AUM in The And they what this like views ecosystem the in been right in And products too lot fact fact as to VXXB. all about past deep are VIX. know take of those directional Rich, indicative level the recently ETP directional for not of that with we GLA And we the I particularly just is think transition it somewhat case see asked that's weeds, taking a views the now really to but there you've We

relative where low in see VVIX – a options cost. level the we the of low the the opportunity and So is with I here really think

Ed Tilly

billion trackers billion. it's went up $X.X in January to AUM, -- John, change two think point on of coming or the $X.X and the ETP a in from Rich's following question, I just those to Rich, and day about day last ago out it's about to off

see from that a those return But do is unusual. you to this resetting that worked. have customers' So perspective strategies our not

Rich Repetto

congrats helps it. the And thanks Got pats. Ed. a lot, and the That for

Ed Tilly

Rich. Right,

Operator

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

Alex Blostein

the XXXX. I I Can like Good guidance the to to in sounds I want if timing ability, environment ultimately guess, transition in synergies. core your talked with to and morning. XXXX obviously, of is go you guys. expenses makes the synergies, you by X% talk that your to about about little is X% over XXXX and it that's expense -- So think sense, Hey, base on your accelerating Xx? net x a and what's X% Brian revenue softer? And flex why

Brian Schell

Yes.

historical and this bit and of say, -- organization that we I'll from looked in little you new look of combined call a of multiple far markets. being this as operating if at, is, a Cboe kind environment So large at as

If base that noise you other look of at on. core kind expense all the without -- the going of of

I know, we -- at XXXX that expense you look X% saw X% that we XXXX call that in If more to of XXXX, be tried though and I X% that, to think, grow some core may to range. traditionally, X%.

So it I think bit. little we saw creep up just a

two guidance because range, XXXX it, here, X% is of then, to to -- out. roughly, that I year that to some to that, going far XXXX number we're think implicit essentially return to call having X% far as years almost as as that higher it's going strong goes. we to lower provided as we're that that slightly think very And have I again, a start where of of part

being little a So bit we're conservative.

things could the Some but where outside before larger range happen, have it's not as a of we entity. been

Operator

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

Ken Worthington

about MEMEX. your comments love consortium morning. at the Hi. hear Good to I'd

has remarks mentioned You in business always your the competitive. that been prepared

to action And direct and specifically, exchange to you I threat maybe Cboe? greater on peers. to leading actions think your what here? think are you're their dealers thoughts are brokers broadly below frustration, do What the a extent priced taken here

Ed Tilly

front to. this that's the to And competition less dark quite to the and regulatory clarity do is a question. there be -- may a options up the or transparent in equities what's of as pool. great Bats opposed And in happening and we see market, -- may history well. in competition is referring what competition The [ph] It's in [U.S.] to can market its we've in we're lit in we arb Cboe where market, not and I'm competition said a competing when in used multi-list what dark

So on, what entrant we're facing head really a used it's new to.

low-cost time this provider had this provider The call the are what market the has refer don't low-cost last from changed. we his market as And on We morning. we is many different Bats perspective a -- in joined believe have The on to X.X, the has entrant. leading changed. And fronts. think -- structure Chris Isaacson we that. our is Fees new I

perspective. has But There about So are a low-cost entrant. Chris' talk and head-on. be is committed think that that what's going refer I'm to lightly I group providers And that the think issues liquidity we a let him competition come through some any formidable that as going are this I different you together. there provider But from very, and name who's take perspective new NYMEX. I to very will don't today to been that his who is that I for know to will difficult for others XXXX. from are compete I'll we comment ask

Chris Isaacson

question the Ken. Appreciate Ed. Thanks

employees this one X.X. the of was founding of has Bats been Bats and I as So, phrased

per time for fees. not then. on capture on that that There's the since and calls our non-transaction different. transaction As XXX is growth low-cost remarks there's of all now. fees frankly obviously, tailwind really the And But mentioned, fees. of And new the And the NMS. is was focus in out we here. provider as non-transaction that there's -- compressed borne Transaction Reg and customer products say Bats of revenue they've on market growth prepared at many really substantially NMS on effects based are were raising revisit been and to started his roughly fees. Ed and fee Ed are $X.XX mentioned NMS just now a Reg Bats shares

ready could incredible we're that well-positioned. But we're we're positioned Bats, we you compete a well. and to operator deal look I as an rationale the if making proprietary we're what we mean competitor. integration And and think that around we promise -- machine far extraordinarily fulfilling to that between this think a be products. mean as exchange fighting was So, also has against at Cboe about lean it formidable

Ed Tilly

we that hear for It's or the That's Rich which if way a management against. ever of is group you been headline. also wonderful Ken fees team understand far. I outkicked see a think we'll or learn so They've going a more filing coverage.

really needs will be it's and many we we filed, have compete. because details. So, when we But -- transparent do, to don't we

Ken Worthington

very Thanks Great. much.

Operator

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

Kyle Voigt

your a there good felt like we it product for me. Maybe most If we Hi, fastest-growing just followed penetration, the felt SPX by was morning. geographic broad VIX opportunity and back past runway was VIX the by actually But VIX customer the over just growth. where five let's looking four followed product been further longest options. a one then futures ago, years, has say for for years go

your view VIX with in to which And inning at forward? bigger guess of question see all So, SPX? changed and for is I product growth kind going respect has the you the are we what runway do for

Ed Tilly

term changed Risk environment options. as years their us XXX VIX environment. a we're SPX ago. Yes, story use the in inbound of I It's to to on And fine-tuned We've It of risk the Management change products is VIX the is When structure, S&P every rewarding different to these higher they VIX perception structure. these volatility of futures is over to its out because I the exposure. there's in the the use going these have hedge. hedge. any That's began than products change we I'm focus. on realized them to stress or do great to tandem users have tandem VIX options we today. from in the focus and on these I depending I'll using five one your the the that Those hedge products way changed the left basket re-rank users futures. prepared you're would much risk. does go-to the change. a S&P from to have volatility now effect the It which to talks and strategies realized was demand XXX. perception on -- use how proprietary in depending sophisticated. awe implied one getting about products implied, our on but as our products reason use is the we where going our a money changes. in environment, bigger rather and other never is mentioning But some Conference based market And term their really see do And say the call. of happened now wouldn't really how a expect use asking think Meaning it's risk how market stack remarks, more this three increased in I geographies in the pivot they for also talked me years ability at market is we perception globally. what's was on It's evolved. I I'm of focused

Kyle Voigt

you. Thank Great.

Operator

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

Jeremy Campbell

Hey, you. thank

captured came at up So you the option market something board. sequentially being I'm there, that you pretty multi-listed here. just strong Was the I selective? volatility they is pretty there's this RPCs And looking the specifically if guys quarter, were think revenue and that materially at bit. across during of and kind just looking around obviously, a the share RPCs in wondering noted But also down Brian, then

the of and get a to like these XXXX. trying underlying Just go rates dynamics where capture sense in

Brian Schell

was combination the of far saw as it as you think I So what quarter. things a in several fourth

a wouldn't tiers the selectively As market look I so at to volume trying much and as looked move you away. we at call participation,

tiers hit whether going may maybe on I reflects of not get may you're to strategy certain hit tiered. tiers have may being again that noise depending think with or larger that not changed. quarter-over-quarter firms being some certain And

RPC the strong So share side. the you net you're which fourth very the that benefited market on saw very lost seeing Maybe with. side. was pleased some outcome, on very, they of quarter, a again, Cboe it Again which, in transaction

going some noise. see that of you're to so And

a what to of expect quarter-to-quarter strong into RPC that going potentially So on basis not. probably an see XXXX, I

any to try make -- -- make it we pricing share because we not our exclude trying to and certain also just flow, we're just it have chasing the impact meaningful but flow market unprofitable not to line. it's bottom of because to So want about doesn't gather to be sure disciplined very

some on to enhance sticky things different So that across maintain ultimately create And make their some not. market like noise at focus -- focusing competitors to over line to disciplined around I trying schedule. and said, consistency on we doing it RPC be our looking quarter. share one the has try try not and that see the or being at the that market much time. been see share, -- that we may top schedule, any our price so But Again, we very

Ed Tilly

been acts of look can total chase market the capture And competitors balancing point, We more that's a for We've one to respond tools. share opportunity. blend Brian's of revenue maximizing as always a the But got share this all We rational way. the in with our revenue, we playbook. when of at the in share. sake don't if

that key of high So in to I of really, really and point, players fourth and its to closer then tiers. a average to -- result a to Brian's come expect couple volumes capture as down that back its outlier missing some quarter

Jeremy Campbell

you. Thank Great.

Operator

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

Alex Kramm

of like in Brian coming will say got and what expense are everyone. but a is I Chris look I look it just the side here. come out, what morning at more I and week, Well terms that think for here happening team this and of and I what's the down to T by which month, the Good like back projects realized. also super by at Wanted is to to and the cost it from new be -- But actually looks is really minute, opportunity and a rest slide synergy XX Hi. helpful.

well, wonder surprising that you do haven't turned already. over? like seems they handle yet? I that that stone be haven't a discovered you of haven't all sudden we is they So Will think seen find detailed that before? something very, still what look got a It at they it something and there very I Or could

Ed Tilly

I'll let Chris it. do

Chris Isaacson

at together end to in This very, more Chris that. we this for to the hit take be expenses. as is I get the we looking when And closer integration try Isaacson. very of I plan, us. as clear we disciplined it I'll were clarity we much think October, put does mean,

So, forward. the quite really the -- experience Brian as together what we along realize good we're going I cost new far software -- as all agility the we think the going opportunities this to run XXXX in And -- the we we're cost more finishing doing on for that's migration. not platform team, we're the going frankly, we're to of with have out synergies as excited going just organization to needed, work what have and for feel but of going across to rate where about platforms. about releases we're also us a taking And our as weekly have give

Brian Schell

add to that. I'd just

or And various pretty they to a the I looking obviously that people on of where continue sure change or confident to -- our had reimbursed to confidence sense was. enhance will. initiative XXXX, or refine And into out becomes we that's that we make little for guidance to you we've the when As obviously evaluate we incremental out -- or when steakhouses. going that progress the are we that beat a we felt had that getting less. always and to down schedule drive we expenses are we going this, any on through that's Chris year expensive can we us we had whatever to to and Debbie going and project point was that Chick-fil-A a expenses, and providing and said key at visibility again said good that. We there certain saw the whether a sandwiches up as as because firmer obviously will provide like And that those

about very disciplined things we a those and at. that all it's be little take look good to look So on continue

Alex Kramm

All right. Thank you.

Operator

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

Brian Bedell

Great. much. Thanks very

FX, to If looks for just the sort revenue back in you sequential having of structural equities rates, and European they're increase especially several a come capture very quarters. nice could like Global

back you of are you've sustaining? comments earlier year? coming averages expecting sort So -- just do refocused on pull see in we that to your the Or that back outlook I impact think then to on And Brexit that on operating the side, a comment And on side…. capture any if data from on an market from then the sort you're way you European proprietary maybe the can perspective. revenue just of when

Debbie Koopman

the you're think there rules Brian. breaking questions the on I

Brian Bedell

there. stop I'll right. All

Ed Tilly

one Brian, of let take four. the me

of So from goal the That's out. Brexit and set then their what heart MiFID successful up. really customers regulator the the to Europe cooperating and set have mindful for It's with new goal. That's perspective from based a expecting to us pan-European is around disruption our Mark a used was opportunities Brexit access. what continuation the that team have need gave and the in and in around the was it our seizing of and is II governance continuation to that Similarly but are certainty marketplace. customers what is really operation working And of as that that underway, access process no is. and we've that business the

with aside, the other And but is of like. we're what what any operation the Brexit, that really after any now. look put team clearly know So we on. of if know just more operator that's end right could the continuation is focused that's We really what than day opportunities don't we the at the don't dealing

the turn I'll So three it Brian Chris. and other over to for questions

Brian Norman

a overall little when observations of about you from an look think tide. looked Global at enhance growth. much segments not talk those -- equities while businesses you European the the came industry you growth volumes about FX at on just the When higher and and bit So, overall overall the their as did the

call it and I'll driven both increased Global for by things almost by those organic market share doing. growth that the European businesses equities You stronger we're of saw of both FX or kind

particularly again they FX. well solid year had as Now, last quarter fourth

XXXX. in into saw think and fourth saw I ramp-up to quarter continuing XXXX growth its initial beginning you enhance significant of that you

So that management. disciplined you're seeing

to and they're initiatives that business. liquidity analytics the that the around to see using You continue grow

On mix options higher periodic the side, it's and a European LIS. the of the equities with capture

that of market top it. the so driver then bigger on was the and actually share And

So, the component growth. of big just volume that wasn't as of a industry overall

has launching out able expect value-added capture continue do find levels as would that's So standpoint as a historical capture of a their those something we from to and that really seeking of utilization what customers goes, because products than team of. to to been are that that far and see lot higher

Chris Isaacson

Europe there, to add capture in that I Brian's we just periodic partnership suite them utility would options, higher I some we have greater think for BIDS, certainly LIS have our very think of a customers point, been And at a for full products with with ago great Yeah. MiFID trading but and work sell-side and be to on that by for presented we buy-side be to both not by a Hemsley many follow-through see a that ready but for received there opportunity ready opportunities year in well MiFID seize Mark and that us the just and XXXX. team to

run and our their to well for don't better opportunity And do truly is an continuity, because they anyone as any customer, can closer And them XXXX. is necessarily think data to to change about still us. But business you and more amazing their with on improve experience intelligent room as else. eventually create can we more Ed your we analytics we said, having your on This about closer story them in Brexit FX, so value. will think Brian there's we getting as As get than that have platform. better said so trading customers more know conversations provide

Ed Tilly

opinion in prepared We October was but the they and reconsideration SEC But the impact motion -- ceded considering market get as We is I filed I they've And strategy user don't and going for have grow SEC our set we act in data. And know in on to any compliance think motion. the and SEC's do one that just believe remind has authorities the doesn't stayed order. is the when the to my base. a its really new forth said remarks. you users to the the original that last they're

new we're out our our to So in the feed. users intact. remain in bring And to meantime trying fees

strategy. change than the we'll -- things our nothing other So new on remain to as date keep we fees And up regulator, intact. the there and you with involve

Brian Bedell

much. very the for I’ll in queue Thanks Great. one more. get back

Ed Tilly

it to Looking forward Brian.

Brian Schell

through We're XX. six

Operator

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

Michael Carrier

Good morning. your just Brian capital tax thanks. and on a question Hey comments.

So, M&A, were more opportunities so deal. that the bigger Or maybe create strategic a like you the could we future more And potentially has picture maybe mentioned investments focus in just over Is about financial the resume? kind guys necessarily or some M&A, some thinking guess out no I not near-term that see also like buybacks there of maybe potential that buyer there like transactions the optionality. have when long-term of when you're is? but like bring year done actually quarter still you some can benefits? kind where recently given that past conclusion more to and are around given

Brian Schell

talk me -- let the just of address about So, -- buyback. the specifically kind

are. said capital we've we've the hey past broader a obviously in buyback any allocation where we're that in out policy as not So, is made we'll in -- or a habit of saying our of is we're point we alternatives one pursue. of time or At one this

the in we're whether So, against and valuable portfolio with or well. right continuing kind want think to approach to it's think it sense sitting to we can that be or that's we actually we that as as now just say, is something that's price. that well something we like has the hey we alternatives outside weigh not have now But opportunities cost that very see a invest to I add to we do And synergy we something long-term might said that of whether continue Markets to topline impact all we're think a we Global manage Cboe in of approach. that add again, going that organic makes reduction right to growth growth reemphasize strategically

of thoughts how a some kind a about thinking other some the of of that. to I'm little investment have more as few opportunities, over of John kind going we're it about to far As -- turn the bit

John Deters

Yes.

in I directly We gives Cboe before. laser-focused us management I talked integration like in and I I'll observation the what opportunistic. the are We're you've at on think tunnel. going And the think that light as What mean and of Bats. back opportunity is short at think And about see correct. things consistent -- just consistently an operator. heard can months. we a looking few be sticking here I like landing there. this do us to to now. we've coming the team say a October talk are and always We're we to of being the start for the on we generally draw a So Michael quarters about line very that up We end we categorically. your many with that market. it exchange And is love

you'll Those that us And the types platforms end the or cases, with us that customer, that and we some platforms produce complementary. efficiencies, bring interesting of data potentially in that so familiar that know are help about. closer also realize we'll to see are think sets platforms like

Michael Carrier

lot. a Thanks Okay.

Operator

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

Chris Harris

year good in fees. It for access Hey a and growth was guys. exchange

Just wondered if you outlook about and talk in for revenue the XXXX beyond. can categories those

Brian Schell

say that to category. take those a at and I continue So, would we the look broad across optimize

equity far to seeing just earlier upside of largest to us We like at as and point. data – the to around book continue opportunities again, look be Ed we we the be which year clients, about I new top at And all the on data the side for even -- kind continue also futures it continue of the pipeline organically. equity there from market and this to new side, build growing that geographies, that data across not it's try side. is the see think the -- It's think the as primarily index mentioned continue We're -- -- whether think that into asset classes. new a just we

there. to continue see opportunity We

as continue the to could at more services about and As at to far and access markets gear those all and exchange look tech noise more the it, one we capacity any we're and as you access is and they're call to our the those align again, they're to other classified, potentially category, because and side aligning see the those as look some it. it fees using and the how doing different technology how things you'll on – we're that

the are we're the systems, see really name a not changes, it's how sometimes, simple you it's I reflective data. like name And said, change, building consuming and of but how clients the just but the again,

disciplined that I – It's will seen there's changes and on side versus look continued about we're still But there continuing transaction to So be to XXXX. for numbers our digit pricing. for what still we're optimistic single there. and growth very been we any opportunity we've to lower the

Ed Tilly

Yes.

also think at see to looking and I Chris will I submitted maybe, than Brian's fees we're capacity change the are BZX think we different. and file connectivity that equities we how as at that may point, fees you things how rather

a So, of words. just couple maybe

Brian Schell

Yeah.

well it And pay a in has and pay would misnomer. fees been the access for the really, So but fees, as physical of paying is capacity. on they're for that of customers what that markets logical for form port have really our really Chris, port as to kind they been

they And effectively they're going doing our as they're so or some cloud think about as AWS that's And is what for provider on paying markets use it somebody use. what to well.

filing capacity put just we effectively rule port. a fees for for a on in equities BZX So logical

access. we if for view that's need they'll that, but capacity, so as yeah buy as story will buy related will there. our customers incremental to the they'll they part more operating And increases, just our need their as So they the markets. that charges related But more. less, need the charges so of less, capacity And

Operator

question next And Hill the comes you. from Thank Ken with Rosenblatt.

Ken Hill

wanted you some made. guys back everyone. M&A have good Hey, to to circle just I of the morning, comments

of that the probably specifically, kind a get that hoping comment have nature, now that. about BIDS. owning of could generally speak rumored that where could was but of And you some an I lot know, how color of regulatory regulation One the the broker-dealer a with you actually precludes guys or given bit deals you a of comfort largely I can't is provide right on little more exchange deal there out you

Ed Tilly

But but out and specifically right. don't out specifically, our really We we Well, we question, successful forget remarks we I is you any partner is will we the pointed – with prepared that, introduce can't in to M&A as up think the we've in relationship. comment it's heated aspect. BIDS. this BIDS comment that point on Europe, a very as had rumors on

So on that today. I don't have further really anything

Ken Hill

Thanks.

Operator

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

Ben Herbert

morning. Hey, good

capital likely capital maybe dividend thinking about on XXXX? deleveraging out as potential the and continued or the to Just of buyback are further follow course at up of return, we any a maybe return increase wanted variable over XXXX excess look either to sort looking you substantial

Brian Schell

market to debt minimum year to reiterate the very frequent the given specifically allocation Or board our said, we very, I we're or to where and made Like repurchase way that kind from of haven't options know for have. they'd other there's at and or this inorganic comments pursue. the been just they basis is stock we to committees be may approach to -- changing circumstances that that side, I plan various again, capital be to opportunities about or at be whether the a allocate a we one activity coming any various what share our dividend again so a capacity with side going whether activity my trading. want say here's that on we some an or conversation definitive earlier I'll is quarterly a have

to we give So And sit you. we sense to it's for provide not we'll or of think it. the point this to it because -- that it's what cash put and it's appropriate to try to -- deliver we too early at to use don't makes most want other We is than evaluate continue think back kind I shareholder it to returning either on to ours. the think guidance

Ben Herbert

Thank you.

Operator

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

Patrick O'Shaughnessy

Hey good morning.

vehicles where interest on open client an forward? for Can education credit sales more volatility update an an your that your in provide futures expectations pretty and and in in credit remained despite going has volume market ETF efforts theoretically should So product you in hedging and be and corporate so demand. environment scant far bond uptick your

John Deters

Yeah is familiar you're the a Patrick, behind with question. products. case great this It's John. those I use know

marketplace. potential for pleased users do in dialogue that, saying instance, product. users we -- We product with what out the like we're this start how brand-new really I'd end overall with a So hearing in look trend see that are engaged and that? our like there for at that the are we things customer at look What the the first end teams

we Next, user connectivity. at look the

progress risk there. this connecting brokers want to facilitate our transactions see So their to and and you setting product up then models to beginning customer

big to see going not You're bang. a

steady third to last volume come and And only going third, numbers. then seeing slow the progress then You're that. see and and only we're

would I case the of brand-new some that this, think So yet. numbers this product of while clear user expect this the -- products us, come of kind user beyond is class our of a base this. that with they've like for even This asset volume this going time for connectivity base the like brand-new base. aren't been level product product is Even user a question with own what we brand-new in to dynamic -- is did for a is familiarity because not

an the is are for world for today? exposure to gaining of product largely doing And futures or swaps. class what end hedging them. user asset base this So the through they entirely Well type new is

off beyond how is. just margin, futures. conversations intrigued in have really the do of Once of here's the use you benefits because It's people those is instrument the terms part you have light they're education the are we So in bulb put goes and what the conversations, in on, -- But to you people evident. terms of there. and get once cost and have in to of these terms all your market shift the they're ability just it transparency, positions so

trajectory So that see it'll time. we'll over be a play out

Patrick O'Shaughnessy

Great. John. Thanks

Operator

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

Alex Kramm

an we're as update this just last in think question the initiatives. on you don't the Thank new or you. think at I the on MSCI lot very I at what's we've you year ICE are new over products guess, the very going quick I with give option us prior and doing Can side? since recent futures on, what look a successful. environment calls. And about on heard

or wondering, still we that should attention that's in side? be just what's So, if on on, - something paying happening

John Deters

was growth That's had just the actually really in misnomer. relative fastest-growing SPX product one and John. base. the is product we It's in the to a is SPX comment for set referring questioners a It's MSCI the this VIX. statement low the Alex a So, past set And question. our product earlier that about albeit from year. our actually Interestingly good a of

had similar over XX those increase products. of be volume evolves terms January from time. -- traded. you a to that XX in And a something terms So interest will trend But XXX% see the of these open that we January in for two

a So build. This this our market. evolve is long-term how in products is new

money it when years one them. commit Day key off we cycle is when sticking point sticking these where the seeing adopt trade. to was us. effort virtuous accretive it get volume of when It's the really and three for we -- to products, here You where But workflows in of never when make this volume ago that today the you promotional the is customers every launched the mind their -- to to is are it is products over liquidity. not time

we again from seeing now as out we're base. play So, low right a that it's But speak.

Alex Kramm

very All right, Thanks. helpful.

Operator

with also O'Neill. next Thank you. the Rich Repetto question And Sandler from is follow-up a

Rich Repetto

Yeah. Hi, Ed. I'm going to I two transparent. be questions. got brief

pick, You want can which you answer. one to

to ever need the the Cboe an frame, just as you on of on think M&A Or -- or M&A What just would give cetera? far Or to accretion, revenue like kind do you expect modeling? there? non-transaction be time what for the for single-digit we stated transaction guidelines Can it have side, us about digit? single et the grower First, what should items. as high percentage be you

Ed Tilly

love question, the them Let take me to second both. answer Rich. We

on of specific trade and and that's as then as earlier not successful October evidenced in executing Livevol Silexx comfortable what over you've words our in process. We a this the migration Bats changer, you're on a seen even that at the deals. can level the either set trade asking accretion ultimately the M&A. the integration. when And But our in and given scale process -- as was in we guidelines today, with later John's have that first time. and of board us Obviously even transformative past, large or board as touch with major We is in past acquisition we out game -- the on customer love a

the size. comfortable interested spectrum gotten still very far are a after we as in as The So deal. delever board with ability our has to

on the mind keep an size. just I So, open

timing not for deals. guideline. given that have we accretive We on like accretion, As

M&A. in head. your to than the goal our and So, to goal put that. specific promised that But in back just of any put we -- board's the shareholders major more won't I the what get first is our deliver

along comfortable You to question. will but tack-ons larger-scale M&A. on with I it very to see turn and over way, Brian revenue non-trans bolt-ons And will need the

Brian Schell

Yeah.

that. as growth call have growth when a either to technology port kind And a kind due look we've fees, you we to back expect a changing we to platforms the rate how earlier see growth would the say it as reasons then And – delivered rate those that look services like of or to users in low the to basically be – dynamics also mid-single-digit things non-transaction provide capacity, largely that as the if are rate on. the I or you the the at on capacity with services, are how would of tends that of reflect adjusted get new benefits from So I the a potentially that's whether drag say those as it base of delivered – non-transaction using that, and overall a SIP such comments it. biggest greater of the fees, large associated probably what's you'll necessarily addressed going or whatever a being it re-priced we all one at That revenue. well structure we Chris the

a during CX. of And lot XXXX so we change, with expect see would to

And more more so rate. there's substantial going changes in change a from XXXX growth that to be likely

Rich Repetto

you Got much. it. very Thank

Operator

from also We Bank. Bedell a this Deutsche with Brian one have follow-up

Brian Bedell

but recurring more. revenue I one Great. got the question, add patience, guys. Thanks for Rich – will question my non-recurring

use to I how opportunity Ed, maybe talk what effort large getting as is part you embrace can the is. think the the penetration them currently you it is more your if time? advisers to frequently? of franchise to new and growth getting for there it just it mentioned target penetration about for and think commodity the more use strategies organic And about the you CTAs first the the trading opportunity Or is volatility or it

Ed Tilly

It's a little of both.

or roll long the that they'd from we've position. some story. had a we in three We long that's years CTAs express VIX using if exposure the market embedded coming that able – a put in by and have futures the a expressing by look long futures U.S. continuing So, really volatility the strategy market the U.S. short Europe being in certainly entering to position user really VIX over to short so past very futures seen a space, like to or strategies in the place large

new that team the target. so biz – new the And I We focusing is out that's group out what dev designed on on among be So why users. newly that's a relatively there, focusing understand team us. will for there's demand think our our

Brian Bedell

displace Or really another get new use trying And strategy that? to to and is them basically more a it not targeting it an on of is end-use way?

Ed Tilly

the market. in in in a roll-down Again, that of well to exposure in U.S. a a its futures soft you to VIX U.S. No, really use the these express risk, level-specific same long S&P you're maintain on case is still roll-down linear for but maintain – market XXX. one no. if wrong exposure if losses. think case replacing. small you is specific or looking not risk in a that have to short And VIX zero position But exposure It's small the a products constant to for this historically the all and strike if it's of

way really the no wouldn't they but different It's would positions to replace think really long enhance. U.S. We the beauty don't it express or products. market. a short That's just these So replace. of in

Brian Bedell

Great. much. Thanks very

Ed Tilly

Sure.

Operator

Debbie the Thank you. I'd And at as closing Koopman any for present, there questions return to floor like are no comments. to more

Debbie Koopman

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

Operator

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

now may your lines. disconnect You

Cboe Global Markets (CBOE) 8 Feb 192018 Q4 Earnings call transcript