CBOE - Earnings call transcript Q3 2019 | Cboe Global Markets, Inc.

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Operator

Good morning, and welcome to the Cboe Global Markets 2019 Third 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.

[Operator Instructions] Please note this event is being recorded.

I'd now like to turn the call 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.

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

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

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

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

will guarantees future During materially hold. future the some Actual are reasonable, from statements our on any and may risks which expressed implied forward-looking these believe judgments what outcomes forward-looking in involve may judgment current uncertainties. and represent statements. or differ these of we results forward-looking make performance not remarks, and our certain what assumptions, And is we while statements, are

information, our that events undertake publicly call. full for the with of the future or forward-looking statements, statements. conference discussion any update otherwise this result factors to SEC new no a refer may Please of forward-looking filings any to after affect a We obligation as whether

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

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

Ed Tilly

integration migration XXXX Cboe initiatives provides the executing successful Cboe focus to options our report for to continue value we completed joining our experience for proposition was thank Global our the shareholders the trading our company's the pleased on single Markets Debbie. customers exchange of a growth to X. completion on on on exchange The October third proprietary I'm Good with where for you, Thank which That our and long-term and step including world-class migration strategic today. you technology of technology. morning across final enhancing financial marked multi integration markets drive our at customers results quarter alike. to us

also step accelerating technology growth integration enables to our the research and efforts and we forward new the a enhancing our of to toward pivot global major as our development state-of-the-art us redirect building organic technologies platform including data This distribution of from products.

customers thank our to grateful for working assistance. throughout for with We're and them us effort. loyalty I this major their

to are and of update an upgrading overview their and service. committed evolving technology we to turn to volatility landscape them trading initiatives trading provide products. proprietary our the needs continually I to to meet our on increase With an and return our unparalleled In that will growth with strategic with

volume U.S.-China options volume options. XX% the SPX XX% led year-over-year climbed and drive rose X% Index third trade resolve to war a plans activity. to in options options Index in and at quarter. third concrete of in futures uncertainty Equity rate remain the each September with strong responded forward. markets continued. Reserve volatile global and ongoing this easing believe going quarter lack cuts July, in regarding this We with week as growth earlier Federal further remained combined non-committal instance a but continued increase by in VIX increase a concerns and the The hedging higher Cboe in trading

centrally and XXX,XXX all-time FLEX more to hit the high record Cboe SPX customizable with investors than to contracts. risk to options alternative a of interest flex OTC manage a a new open cleared market. also way trade provide

and an growth tied the driver. increase the billion data record of According of year based based be past track decade. end $XX assets advances is ETFs Auction for at used biggest to and management Morningstar under one a this of strategies strategies the on by continued mutual options August key to funds at of to XX% a

by with options management address customer more index contract we to responded smaller Monday needs. adding able provides trading expiring customers a our risk ahead to their options notional SPX granular XSP Looking to an demand contract our which mini

In and the addition Friday weeks presidential explorations we positioning XX,XXX options interest contracts precision Open XX in just over election. November listed to greater XX going trading. four October first SPX options around into providing XXXX of grew the

in now by August the VIX in early linked levered long January complex. growth level which XXXX linked continues highest both increased in Volatility growth primarily in October robust by XX% futures XX volume XQ, volatility to and to AUM X.X Turning its to ETP year-over-year driven since and long funds. billion continued ETP driven reached volumes be and

AUM long versus in XX% its levered of XX% just previous AUM total high over represented and Long XXXX. January of under

conference event latest is The and increasing and Education European to our near risk of the record XX held in products. year derivatives client management. proprietary the explore number we from outreach in all hosted and strategy expanding for drew Management customer of key to our in trading Munich. Xth this Annual September base participants a Risk countries In

Industry ranging how use experts will strategies risk. manage institutional and delivered requirements how from affect to portfolios over in XX option margin capital investors different presentations changes to with themes

primary our focus. Organic growth remains

management talent client's including evolve solutions. industry We needs risk teams our sales and continue to deliver better best-in-class adding top to our and address coverage

Now European equities. turning to

thanks I morning industry Cboe As expertise contributions of of by many several remains future in Hemsley to strong Europe outstanding team for trading, years Cboe offer announced company. success the successful is for of end more my and leadership, deep technology of Europe the expected to for retire and valued after this while positioning capital to experts his include sincere opportunity XXXX counsel. markets months take Mark's President establishing would a like Mark XX this February at Mark Cboe

and force and of technology our Howson successful been CEO to the Dave many and Cboe strategy has with product Since David the shape is expected in launches Europe of closely driving initiatives. XXXX has Mark. currently to our company joining succeed Europe to worked Mark drive behind

developments team. a our part is other In EU appointment with and Cboe support Netherlands-based customers he and Dave's an for European trade equities and conduct and trade activities venue to reporting markets has succession Cboe full provide plan the facility Area trading reporting recently of launched we management trading to board venue of Europe the global long-established stocks. Economic

to cross-border venue Our to fully positioning us service expand to operational should base PAN- trading also continue customer Dutch business. regulatory enables future while developments equity and us European our political further our hamper

post Europe. designed remain to While launched we’ve in closing which quarter this response equities the rise closing across to overall solution session. cost post new trading cross for European The is service bring to to trading European activities provide competition we closed August looking the auction a trade volume to markets. continued third XX their needed in In customers execute past intended light volume effective Cboe one-stop

throughout laying on closing thank integration massive for little quarter no the In our made and time foundation to progress the be like customers conclude and Their to third our team disruption our a and company's successfully commended. for ongoing growth. the technology with upgrade to I'd is ability to to

opportunities in global our on now efforts expansive With to the we continued Our Cboe considerable one see foundation markets. at this set platform. products growth we redoubling for organic place world-class trades are unique mine and

new efforts We resources our our reach define focus our new to tomorrow. to our with set and of and the technology customers and customer standards efficiently will salesforce a expand and marketplace initiative leverage trading educational to to revamp

With will that turn it to over I now Brian.

Brian Schell

morning Thanks everyone. good Ed and

up our to XX% quarter Before third I adjusted non-transaction XX%. begin revenue net increased I earnings transaction third and quarter specifically margin as non-GAAP finally XXXX that points our net revenue Overall want diluted comments X% XXXX relate per fees rose unless compared based everyone our X% share nearly up with with to are and to remind XX% to Adjusted on noted to results. is basis my XXX adjusted XX% increasing $X.XX. up EBITDA and

morning we to the our capture release overview well an variances. slide business deck our metrics segments segment. like operating of the The provides key drivers press key as I'd performance key on as briefly our revenue and each highlight of in some this of each influencing revenue volume in for issued

A and the data streams, mid proprietary consistent in our year-to-date growth growth they expectations increased X% X% has theme single of a for line our year last for access Combined and to same the market period compared to digit this fees. year quarter been Cboe capacity with and the high recurring XXXX. revenue in in

revenue of attributable capacity units. of was nearly this growth market fees incremental this growth across term and incremental about proprietary opportunity also of the a subscriptions of We over the see our additional long our continue migration all the of completion asset technology that the relates to provide will result data to to XX% believe it as our access opportunity of and XX% was classes quarter

$XX segments. was Now net or I'd data non-transaction and the net increase fees million transaction fees our in market primarily revenue growth in turn option segment to with like In driven fees XX%. our up to by XX%

Index average XX% up ADV RPC revenue up daily or options the quarter was X%. for was volume per contractor and

volume order market a offset points options ADV decline based our our basis in second higher was year-over-year as share member increase within In reflecting to in change latter by a basis reflecting compared XXXX XXX points rebates mix quarter XX% products. the up XXX With increased lift SPX over driven RPC moved multi XX% by in and an flow.

in in or and revenue net resulted XX% increase ADV a in increase Turning increase X% to futures. primarily $X RPC. XX% million from

year-over-year higher as The the implemented part lower impact of pricing of based latter the well XXXX reflects as primarily RPC rebates. new in volume

from the CFE. launch of in was as expected revenue related and included exchange million Futures be with included agreement $X.X result recurring other futures a incremental financial a of American is item. to not received to This also income FX equity revenue an on

This revenue a aimed capture on Net offset of and to in a third The resulting net sip XX% the additional second in second from a reflects $X of Market to third in share. changes to decrease was Turn last revenue market flat decline capturing with fee net by quarter. [indiscernible] the equities. in share result capture from of transaction quarter down year's primarily X% due at was XXXX higher increased XX.X% similar data from increase XX.X% just market as ADV. U.S. up decline amount. a fees quarter or audit somewhat implemented was slightly million quarter recoveries net

capture reflecting in was translation XX% a the capacity reflecting European on for LAS increase and strong On higher foreign basis revenue and net lower which impact offset market by somewhat of continued lower market to The was a and revenue Net somewhat of market due timing to X% basis dollar currency resulted Decline Swiss and reflects the decrease revenue and share increases to growth decreased outcome unfavorable X% fees in currency a favorable Brexit U.S. ongoing fees volumes a includes and licensing local transaction market access of in the from share net fees revenue. attributed down transaction offset periodic volumes. and and trade equities the net by revenue lower reporting auction volumes other portion XX% non-transaction revenue. volume. in The equivalency. of final only around We transaction uncertainty capture. non

FX market global decline volumes revenue in reflecting by offset reflecting somewhat of X% impact net in XX% decreased Net this changes XXXX. increase the quarter made a in capture X% fee primarily a

down In share was XX.X% XX addition market year-over-year. basis of points

decrease last $XX expenses quarter in in compensation targeted our Total benefits X% million compensation versus third financial expenses. and and primarily based versus to performance Turning performance. year-to-date equity quarter. adjusted incentive with a was expense The compensation. key aligned for is incentive variance down about were in resulting based operating Decline the from year's

guidance our year-to-date expense guidance year As to compensation a of our range primarily full benefits original of to relative result million down million decrease we in expectations to our to million previous from be million $XXX XXXX the $XX in adjusting $XX are and the $XXX range.

continuation trading headquarters our of XXXX to expected benefit to The referenced short-term takes XXXX, other corporate expensive of to XXXX of some $X in million floor expect organic guidance $XXX approximately the in investing things incentive expenses. transitioning which moving range XXXX technology migration in in duplicate and XXXX CX absence XXXX, favorable from million a expense support still in be the realized which account new to the our With into creates it achieving growth which we Ed our and in targeted adjustments to earlier. million to initiatives synergies of among compensation respect $XXX our

on impact the XXXX once We plan to versus finalize business our guidance our expense including capitalized. call XXXX we completed of earnings from potential amount software plan any negative next the expense development have P&L

updated a we May high concluded the line migration energy in are target XXXX. run complete established and technology in confidence. of migration of with technology team Isaacson degree with reaffirming his final rates the With plan our the of Chris

XXXX XXXX $X exit be expect run that of synergies Note the operating a run rate We will in expenses. $XX million remaining XXXX to revenues to indexed versus million. with with of synergies in reduction reflected of in $XX rate million cost

Turning to income taxes.

Our for decrease XX.X% rate benefits our than effective due earnings of the below XXXX tax was upon rate adjusted and recognized primarily third guidance income prior lower quarter last tax completion tax to tax The year's XX.X%. quarter on rate our was and return. related reform U.S. federal the to of

XX.X% XX%. our We adjusted on XXXX range year adjusting full from be a XX.X% earnings XX% rate are in to to of tax guidance to down

from a million expect improvements down guidance also adjusting to associated with spending move to capital dollars shift those Chicago our leasehold headquarters for million million relocation. are in We their XXXX. to We million $XX $XX to now into due $XX timing for $XX to

for to $XX reaffirming are amortization our we Furthermore million guidance XXXX. $XX depreciation, for range of million

Before capital potential discussed our sometime are the from I sale the expected cash sale until be our is of and $XX call. to note sale allocation in to review our XXXX. earnings to less headquarters than proceeds last activities like be that the I'd building in potential the received likely not million we

distributions we repurchases reinvesting committed acquisitions a in opportunistic to providing shareholders share that dividends consistent maximize organic in value. potential and to remain capital our growth, order our business includes through complimenting capital allocation and allocation disciplined our increased Turning shareholder and to strategy to steady

available approximately During XXXX. share by $XX including October of through this Furthermore, we authorization million share over returned sharing shareholders and to million in authorization quarter our million repurchase XXth, the $XXX million dividends week new purchases. had $XX through October board increased repurchase third at this over of share $XX and we earlier authorization million repurchase $XXX our

During our term the under loan used we reduced quarter debt agreement. $XX also million to

end million $XXX have $XXX at of in and need the at million quarter short-term stands now million. leverage quarter stands of second a availability ratio the times our revolver from times quarter we funding cash debt Our our under $XXX and end X.X down At with we the ended if at X.X arises. adjusted

business, In is freedom proprietary performance our index on technology summary, focus Cboe to disciplined allows stage allocation opportunistic growing of growth sheet on and with capital streams, our balance dividends targets, by growth a shareholders through the for continued setting focus long initiatives, term and revenue strategic the expense capital markets that business and initiatives both the resources on defining management on to leverage in growing the scale our and recurring returning executing plan flexibility our our our repurchases. globally, invest delivering of to maintaining share our short synergy term leveraging products, organic us

Q&A portion turn will Debbie on With call. the that I it over of instructions for to the

Debbie Koopman

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

Operator

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

Richard Repetto

Yes. Good Brian. morning morning Good Ed.

First I a want success decade know a contributor shout to now. give a Mark. he's out European big to to over I the been

some. So we're miss to going

-- Next

Ed Tilly

Thank you.

Richard Repetto

midpoint. run outperform carryover would certainly this quarter at still and synergies. some expense an mean take guidance it you'd Brian for expect what this when that you I of the the you mean XXX for guidance look I looks to guidance at and the what compared like Next a year X% XXX increase through year, guess the next still call load the the year midpoint it's on we get I numbers to I your

right So could got where through numbers? the you these that walk those looking expense us how initially increases at you're least a you at in now

Brian Schell

clarify about just you to Richard XXXX? talking are for

Richard Repetto

Yes.

Ed Tilly

gave a kind math there through you that look about we of put the for that of we how through of were when as kind we're think to kind So list to kind back of items range again getting for impact of your that when XXXX you some the you I if accounting of of walk you consistent out of briefly a you just the a walk and leadership senior is favorable factor there. with I'll calculus some at items that adjustments departure we in is XXXX look had need through there

million like target I'm I rolling make to think add hoping base know organization. rehab million we I million, $XX quantified forward. to personally the When it what another quantify expense $X just that on to $X to $XX million to the right back that incentive on entire That's compensation that you for call previously. back would to

and When the laid the table Koopman the and the in and that of you those benefit you and Debbie looking out round look our analysts finance XXXX get $XX at a fully understand laying didn't the XXXX. hit the with today expense benefit run into income to we've is statement million in out rate of all thanks roughly working and coming timing team for helping synergies impact here table investment understand of the that we how we're

that roughly if offset even largely our look at over base and that roughly over growth synergies roughly realize. take $XXX expense low time million historical ranging that's the to incremental growth the offset at rate X% if That's on you it's a of X% back to been core synergies the of largely we end you X% of

as organic do to low growth we've incremental talk additional want the we're plow heard of back the ten focusing require that for operating expense. fifteen going to to range we as on then of continuing as in into and our you've far what the business us the to us efforts investments with XXXX puts that's about that So expenses into

the some some with that we high-class of we occupancy technology to short about card bit and is do a this is follow that a the a and wonderful how is have at efficiency which expenses term talked process of of We've GAAP. world-class of we capitalization really our of wild we look technology little duplicate the the have have and they problem develop team that software there

is triggers that of smaller such doesn't but the one a develop footprint accumulation development spend on they which threshold. implement it and project follow such have for dollars allow GAAP that large absolutely capitalization it and speed they We any the of our software a

it therefore immediately sheet expensed. that and it's enters balance So just the

is on while and the benefit efficient much short-term money a a until amortization basis standpoint years doesn't when cash say what a the issue better a show it's organization cash down basis P&L GAAP where in the reality the eventually So of in It it flow up time. flow shows expense more much spending been up doesn't road off. has over more just actually as if from and show X-X-X we're up runs it as capitalized

and with we to have easily into a problem it's those try highlight so get efficiency and I look the quickly wonderful problem my back head it's you again back that shake and very for anyway range. have at XXXX to killing the six but wonderful So to add it a items so Chris model from but that but rate me and that we'll as five, you're out run four, everyone very

Richard Repetto

any I for smart Okay. about make guy that comments and running through won't Thanks

conservative. being Alan

Brian Schell

listening. he sure is am I

Richard Repetto

is right he proud sure am I now. He is.

Operator

JPMorgan. Thank comes from the Worthington and with you Kenneth next question

Kenneth Worthington

morning. good Hi,

for products CX then the result protocol VIX contemplated for are launch have the the a as new mentioned you being seen trading result or functionality data and of that SPX implemented are in and the or far you access other for as and now new migration to thus a changes trading of the what migration. metrics changes technology opportunity With

update here? you your So timing on thoughts can or us even

Brian Schell

pleased Yes on good extremely thus for successful the Thanks what morning seen to we've Ken. migration the I'm question. report and far.

the and we're seen the the is in we've post mentioned migration exchanges Ed a more is fourth seen options world-class across platform. the end far our platform futures week and deterministic common thus weeks at what what first we've now As today four of equity

now actually already weekly on Brian As mentioned software releases. we're

new our major respond liquidity. improved controls pretty So VIX more which a we've normal and complex now us better we improve handling a order integration to to operations as settlement capacity, better found part better a some allows customers risk the also of in process There's agile this material made to to enhancements way.

about very the traded at had VIX, report we asking of to a as XXX,XXX market. pleased convergence You're XX, and right we VIX better Those contracts certainty settlement. our settlement SPX of providing result included traded first changes for a changes mid October monthly those almost

rules and by global have to this volatility a around more into we're continue access as better we'll enforcing this We settlement. migration spread improved as of the improve in customers market and granular what we resulting first and can led and We tighter to the are so overall VIX data pleased auction we're clarity leader we about the and increased lot the to all XX% continue a far visibility to them market about because participation well members participants. seeing settlement has a auction as engage providing systematically how process see but the thus with that extremely to around

the for in is key initiatives The excited about asked about platform. we of XXXX really also the XXXX. one data You platform very data the

Let's to and for decision customers. our within platform. better One Two provide say we markets. of enable with have actionable really that making data-driven to all across five insight our us goals

products. a to We products want way. better standardize better new our and talked facilitate measure in efforts increased monetize Brian about geographies finally and We that distribution and both and sales to define Ed across historical but customer tradable in especially data our and segments our our want and

just finished and platform we getting data that migration. just we're So started

right help doubling derived market usage, give if Cboe and better visibility market is investments that that us business the for to that cross we've and but can analytics us FX think highlight effort is a even us in this we enhanced in and phase we're you extremely think our Smaller made really that about made. platform capital in and data product down XXXX. design around with the management excited better data we now this this about driven for and on previous So solve We're going efficiencies has liquidity Livevol previous growth investments investments line. give

Kenneth Worthington

integration Chris flex the we of think FLEX out out left called and and and interest. growth I you open the Silexx

So maybe if in you enhancements a way. does too touch much can bit that to SPX color for the offering on add it a and product bigger because

a just maybe on that. couple So words

Brian Schell

of the Silexx traded There's folks customers Part and we the and this front opportunity enter for enter FLEX we as for about more front to bought the week all year obviously day integration as we we to features is on XXXX. the Yes. expect used add came have forward growth migration through work a end list continue two the Silexx flex that and with we'll saw orders immediately flex through contracts on more that tremendous than excited that Silexx functionality the showed our end years Silexx we and list to and we're now been have FLEX. be that's ago and for already first flex the XXX,XXX first to brought XXXX platform on you laundry to we the the where and there

Kenneth Worthington

or those and I the I'd break product the potential recognizing our of adoption points able And more increase much stress punch of certainly being you how like in new capital and offsets to with that of capital bigger in products product we customers one existing then efficiencies identifying should new efficiencies made expect ways make margin engage can't existing offsets sets enough to want and our among ways. a with

but of XXXX a it's the to it the So deliver a as of information to we effort and completion coming what a want of this lot is platform result marketplace.

Kenneth Worthington

Okay. Great. very Thank much. you

Operator

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

Michael Carrier

Good guidance question. XX. Hey on clarifications taking Brian two in just thanks morning for and the the

maybe do low like XXXX So XX but it that million and environment volumes whole just hit metrics the or incentive guess wanting mentioned predict what in you tougher comp side. I you need that for to or incentive just obviously on to just seems industry that comp. to not the level you XX given was meet is

make tell just into then for like tax be but would environment of to to So for lower any and just Thanks. guidance want XX does that you expectations on helpful. tied your similar XX there or your a sure revenue too flow guide, mentioned that's the kind early into

Brian Schell

for to what a XX target we be, targets and on growth. Thanks. that just XXXX obviously it and business again will our not I all and be that are upon would the far as and would say a things we Good better it final so can what our those we the questions should will that board and is as clarification set and contingent compensation with for disclose this have will as proxy can just be I are XXXX that what in we that broadly extent we things where environment of nature say that but our is work plan and we our

comp make We is with sure are largely there focused on growth and incentive it's growth. an alignment to that be

on those numbers what were than previously. where provide than paid numbers are are other clarity the this [indiscernible] sounds value business they to grow can I this as assure that deliver that you and net there's really shareholder can't better we the I that you are an we expectation and So so

I be mean as go. metrics as just specific number flipped metrics don't far on I a to have So those that to you give don't but

Ed Tilly

to more answer our needs. the base to kind team though for the our have that so and That's field there's and and and use has we're the services go story a that's little and comp already team case to an already tell the bit be it where has last it over in and the global starts. started ready growth structure a little for that's and team a going of in story repeating growth our customers’ the from it If with and that's and said been demand question that last for we align board started the on knowledge the better XXXX business take organic investment an Brian me built how our is client organic and months we Let product incentive cycle quarter how to is well what to align board we higher that's we're December our built presenting customer going six really we've the XXXX but the for with what coverage restructure changes sales redefined identified people. the plan

John Deters

able we're on was this here John what that that talking build our which terms also understand in targeted of services then them. how to those efforts precisely intentional Chris are and while reaching global Michael doing need to tie-in those and benchmark very is about data target educating just topic with a XXXX is an be platform area in we out in and performance to clients efforts we a to teams particular they've our there's where client our once

a So accelerate of XXXX. growth a all is our really of holistic kind into this effort to organic

Ed Tilly

what discrete and predictable items you X% seen that XX lower if back roughly then effective if peak to at where lower where think and an effective XX% if context we've what's driving at tax look on you The clearly at look driven numbers for for the out think were you we I the we XXXX have rate and rate tax the you've lowered in rate. was the year-over-year example our that rate as rate items had if about follow-up for just you you in tax a look kind necessarily aren't that XX discrete and look XXXX lower tax our and guided of of if that and by of numbers largely close at been that

guidance. If say and we where in to that look of get of close would you I they've look our XXXX that given relative the of of is updated clarity other have returns marginal some XX% as exchanges. do the just the of some anchors and we be seen order but recognize with intangible technical goes. base. those they've you received benefit and the range It's closer and kind composition what their other it's that rate and have know foreign that large just of largely discrete benefit at return about and where - revenue of back far talked a items from received it's the we've that XX% XX run level XX% that of indicative tax of I exchanges will - same There benefit around where around items midpoint have as magnitude discrete we income derived the final XXXX as that at are out not some. are the level of we to XX% XXXX the we and they We some XX as as the not

the So rate. have we continuation into same similar others don't going reported expect XXXX to that what

Michael Carrier

all Thanks Alright. the for color.

Operator

next the and you from Thank question comes [indiscernible].

Unidentified Analyst

trade quantify you update also percentage looking just you've question Good the based in up impacts us impact Thanks. about what follow terms floor impact kind migration. the from of of color market the wanted book market to for earlier to on terms key morning may just the the currently migration? initial trading terms from of CX In in any any where and a on everyone. something can whether the impact Ken's spreads I the on quality seen depth of for be of trade for they continue the products to perspective of in stand give of in impact an

Ed Tilly

question. Thanks take Yes. I'll Chris. that

want the yes on any just I'd after Friday I thanks the it's to early our weeks to and all traded on just So draw to we're it traded day but a customers say firm conclusions in on we are Monday. little four offer given will migration customers

metrics is say that So upon hard electronic depending quality and floor you. I is percentage market the give break higher All I have can day. between or to any liquidity trading lower two roughly maybe the don't firm or same and metrics the a

identical We continue volumes and what they are to market see were. that share to basically

from volume if five you XXth days what they on For were October the instance fourth and market amazing basically our in Friday identical look to pretty my the were share the at migrations October which perspective. was after our of

Thanks engagement the associates. by our great and a customers effort to Cboe

quality So the color on to on call around lot forward. metrics to that a spreads into can how metrics tighter going critical We the say a probably leading settlement little be exactly some VIX that. quality settlement. said more provide next XX% on I provide did I market are going early as

any what as early to So as but far have we've positive seen too conclusions. firm

Operator

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

Alex Kramm

Hey good morning everyone.

Just wanted to second. shift gears business for to equity

a I wanted it ask gave flush and out and good of is think the decline the third maybe little a why like you quarter-over-quarter color mean volume bit the you net quarter capture a to more just obviously pricing is decent I I reason quarter. amount kind of decline. I on

were But for orders the it the think left million terms and pickup Your if quarter-over-quarter. revenues I even at $X may mean in the back data XX% you market look including the you up volumes I to out whole of quarter-over-quarter. segment revenues

math you seem doing just So because the make sense. what wondering doesn't are there exactly to

Brian Schell

where to it that that either were this Alex that's going announced market managing consecutive a the a that we slip we that we believe play number of some market a we're that continues is access that's and of the with share potentially were the at the a have changes our net revenue know of value medallions reestablish is we capacity I'll in and term as is on promote we series versus we to the made it were such pricing value that changes various today year sitting a point clear or making that were our call prior we could data, that where very where in the second a the long-term requires we long and and quarter-over-quarter are where was the closer market it a we changes fair knew call that of we shorter that term with business we wanted not exchange it fees. than level of it of we higher value but quarter year-over-year to the happy and of or we and pricing looked share those overall number pricing that

look it and they're encourage overall a we manage we of people term what is at to have certainly that change hopefully take at way you the trend business. to over of looking a to why in encourage. view that at it we're so combination look point versus I'd the doing It's longer value So same quarter-over-quarter

Ed Tilly

market this for gain to but covered trying net that today Brian would really all we're not feature it invite or today in edge well on primarily X X market even this we market on to has now in and to share this the preparation we We're the for go the quarter third made exactly and said and Brian functionality priority. intended buying long to shares based with business as continue committed investment to do to as is where Alex that's edge come capture launch and retail based lower compete that we're as pleased and we was The along. book. a back quite new in with term on a market capture the a retail that priority share on we progress we will

Alex Kramm

Make is you. Thank competitive. sense. It

Operator

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

Brian Bedell

margin in for back morning to adjusted guys. XXXX about expenses and different go Good Maybe just a on operating lens. lens the think Great. it Thanks.

on of high a different could from third of and in you expense outlook to margin the of as then liquidity that XXXX can results So point wanted as new Brian and about components possible you just the this view quarter headquarters if do we that's just number. comment the duplicate this maybe or to the it talk in better expenses the is what you this improve XXXX transition the on the as improve think extent to quarter margin think solid system I that functionality then and trading about volume

Brian Schell

Okay.

liquidity group [indiscernible] I to move those the look duplicate were I we'll at going the me then [indiscernible] at to anyway. I'm item think sure want don't I margin. they the maybe expense address together and but we'll am volume/improvement the try me as improve probably about so there questions the so and try and trading team will I think hopefully last to and let's to to talk will try

we margin. we have So business to is that the X a that we manage margin threshold margin I the don't have and EBITDA have of have percent by

maybe and so the annual effective of how run income hit core at I other doing. for we short-term an basis rate quarter looking we quarter had that a kind of measure over we're of always quarter if that look are they one versus you a aren't that, were you to and over at this what of period margins look particular of it's some example better any had some we're part least at at Again on time think a

not of in lot in is said we this it revenues environment the nice did different reflective show probably look and that. is and certainly one an quarter the some circumstances synergies we've when any that organization you is to times margin as if were excess basis XXX% out this is more EBITDA see to a in to in doing, up at it of again incremental this where an again in of and like is becoming you're but measure a that's which income a lot versus I and that and term. and starting a do way and what earn It this goes There certainly you you or points that quarter quarter we over declines something like revenue to cost incremental periods and different the to when was seeing on an performances the the is back the a to over that this particular look seeing we're you at closer did the by to that closer we activities discipline synergies claim items up introduce XX margin activities efficient we probably is margin bunch of that on XX% of in long a see or XXX it better to would we're XX.X% inconsistent roughly that that a something reported those of expect

that we future So margin where may time able there to XX% are be mode mode with better we be businesses margin that which of targeting over When incremental a time. be you efficient I we're slightly very in that's lower to continue on to at into quarters demonstrate but that in when something the margin may some incremental we that excess but period scale achieve volume see a growth would one and driving. you not put up investment we've any in great as of check all been think revenue go see

just something and we that short-term impact some both we reconciliation locations we'll as of which a impacts rate the as again XXXX of of roll the order as of provide clarity how the on really primary as more much to expenses carry that's the into of call that more again a next efficient more want XX overall that expense side headquarters XX the far in that reasons and a duplicate On of that actually ourselves out of XX preparing won't is of a is up coming floor to the costs XX that on but that's that the and is location XXXX. for long-term achieve this magnitude trading on earnings the will moving far we run the we benefit one and show in guidance as provide little some bit as

Ed Tilly

for how with over the migration I doesn't like one think before upgrade. than technology originate the and know common the in think allows really look system it's better comment to their turn integration. enhancements to marketplace is market I customers in to on think this it represented platform Chris volume I express express important best to for So a to another be It to our I they us at technology

of risk we'll desires and So the best think of expression forward. their get I going their

a the XXXX second around to listing in presidential that list at uncertain cycle what certainly demand us remarks series provide the you the and answering to adoption going prepared new importantly of first and series our back need. is the point is and looking the if is More first, October and a open and hedge them to the world be to I interest forward and ability November to that's with looking the this think for November, street refer election SPX a

XXXX. and how I'd around say also primary That's a there's which evolve telling to interest we at the an never potential more us seen. we've pickup look a

of team punch I most actually and the got able we're is customers Chris minimize in be a going and but into So from we've really ready be products front said as be the team the upgrade to having on explaining to our the use the systems of Chris to who's don't street the is having what completed. already I setting want case it I opportunities the to this to uncertainty them up importantly though but out importance perspective going readiness to want in XXXX

Brian Schell

adjusting. mentioned facilitate and it's that flex those controls to customers them month better risk long the expect safety few better I tuning lot going products side that and risk our those system such believe the with the to facilitate probably We more for or the functionality first really are the the and best new believe already to it the as on. better different handling represent a are but The the and as with I mentioned massive and their who over mentioned interests hence better are still with it so two next should catching that was These ultimately and system trading that. the complex able controls, they feel the they honestly I customers. all Honestly mean this through I us Yes. are facilitate on is term new technology feels for we risk get that new functionality features than as their also technology about they're being as facilitate their to and over long still it will weeks. manage old the term migration help

Brian Bedell

so That's great Thank color. you much.

Operator

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

Kyle Voigt

one good just Hi, do Maybe this sorry expenses. but just morning. to more on

How growth of globally that in growth expense color range expense organic X% as but often review then look that expenses team yes rate X% growing term is if that management could it more that or X% think your the certain the more been by or is you X% wondering forward. investment. that's them that's [indiscernible] long requires organic kind that's global under historically XXXX the also if and going a to that expense guidance where segment right peers the at and going your growth of to is rate provide range Just X% the incremental also shaping just not long-term is whether you mentioned most you versus that to

Ed Tilly

come any and of that's just right not far footprint the our of a has is we form it” driving hardware XX do have that changes XX what incremental don't of a investment, it's that's I have efforts that a think think form necessarily and now incremental strategy time rate what I on a to what I that do an and whether as into driving that into but think mean and today but typically the of goes. growth and focus think I expense this I sudden strategy been to big we go going suite such of don't whether it hardware I a theme spend going we whether through growth been organization I of longer-term insight in the or proprietary is our driver that product the nature all consistent “that as is over that's technology, it's of of to in efficient a that's great question think back our I

contribute standpoint of to in impact big not long again the necessarily growth technology that rate a refresh that's at higher that's continue the look X% to I hardware X% going our term. If from to to a driver

I we going more to to initiatives show what going identify XY is that say or around I I looking to to facilities it's would projects it activities here's and activities would that's going we see. versus in up look being where are item of core versus show in specific up would line that show more It's the in So have to you what expect at at is think around rate growing it's cost. Z the it's able and compensation growth it up

Ed Tilly

spend it we money want out to order willing a is and unique We interaction grow want this bit. product the product. that face of points aspect product and a Brian in and that and not time. and time to go Brian I think this there expense there's set distributing to on kind as we're this more the out penetration mature way We're a touched broadly the also

We difference us are look what growth. think in this is life is or to a and you a not futures when the us. it's VIX little that cycle I end it compare at of competitors growth and puzzling term us they product. bit It's for growing long options our are Organic we VIX to to big SPX a a truly organic

Brian Schell

think there it's that longer-term that I point to the is perspective. Again you have have Yes.

there So, believe we a if pursue. strong real that to that is we need that something potential has is growth

return the particular any expense could You make up investment. that year to that and one accountable that potentially number we see but ourselves in hold tick have sure has appropriate on

Ed Tilly

goes I think and our performance target our profile proprietary when way high requires some the and way strictly data digits we and think beyond I the organic by growth profile, And that growth we products the look data to growth investment. that crop at mid are single

and incremental the typically And our that we trading we proprietary venues that because our products. sell data in do data supports

profile. looking expense So, that low mid at we it's digits just growth this implies beneficial cycle. whole growth If complex single very were the different to a trajectory, in

Kyle Voigt

helpful, thank much. so you really That's

Operator

Thank from question and comes the f next you

Alex Blostein

features, or everyone. industry options. to derivative of October Cboe at look proprietary SPX big get month your a morning challenging the the a underperforming quite cash perspective for be whether on but other whole seen seem in I we've I hoping good Hey, as to buckets. was trends markets sort when the exceptions, products at Things

little hood of migration of the whether what's caused color look slowdown any going term kind has at because temporary like ETP whether of get So, looking on to VIX external structure. we underneath AUM metrics or sort the a sort more it's if

It doesn't in but lot weaker. look a particularly we've the different feel seen past the what than volumes

a So, Thanks. sense kind trying on. to going what's get of

Ed Tilly

macro far this from without the made every Hey we absolutely a it. live what I into day It's believe Alex, we call market love we it observation us. can't

do to you're think happy So, right. and that I

Tuesday let's we week last and take compare them the products and stack Monday those week together. this and ones of So, you the outlined proprietary

market. in yesterday You small volumes comparing we to a effect and the and change Wednesday our and in the or them adjustment see just small

market. X.X time point that X.X It's your of of change in just in stack product to million million contracts. to to massive So, period yesterday a X.X small perception X.X short to and change the the it's million compared a a

happens trend it's on observed whether last will or and not continue And not the this correction. small what that months upward over we've slight or a and

Liken quarter the the this same. had that when looking second observations this February and the to January in on we is back were the probably we call the volumes,

and the January If of catch-up hedging. the very missed you last rally the interest end you year around was of little in and February, continued through at played entire Christmas month in Eve there started

opposed is the VIX chasing the we how our in at as how calls our that and upside observations SPX money the as interest to buying look and measure complex we what the engagement upside puts. You're and in and hedging

to So, insures focused volume high. a one-year at everyone then and three was on since weeks ago low one-year was demand call downside call buying a

that are forward. are look trends and look catch that's what our see our model up. while can engaging the in predict future, we how do past we we patterns at going and marketplace customers and So, understand customers the the engaging We how in no the

around before to So, that ready into uncertainty is the for back chasing. I in XXXX when yesterday the go am the very and observation the to after in comfortable and customers hedging back I and done engage there and anticipated demand watching you're day

last that's color often to what that's as be that comment but we can real-time and over as two is so, to the update weeks in so do the more you happy we'll we do. or And

Alex Blostein

But that to really migration do have it. the much protocol. Got with itself didn't

Ed Tilly

period. instant, with had to and say when if to Cboe because to dollar-denominated would again see hedge if back come you it just risk global there's a the I engagement, volumes need you it's and do nothing it's come

Alex Blostein

it, Got thanks.

Operator

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

Chris Harris

for that the see of complex then you. give thoughts Thank RPC might better RPC. a your us you Can related with outlook multi-list and CX we across to the stability guys kind of migration in on

Ed Tilly

with look U.S. competitive equities. nature we'll at would with start earlier talked the of you about about already I that. heard it So, let's We've start comments

don't And that way. environment so, in and competitive see we any changing with

to that we are to provide and position Chris what Isaacson continue do doing highlighted our pricing we about continued bring continuing focus things retail we we change. and and talked competitive and in priority customers the to the on through our to our a functionality enhance not and just benefits

So, will expect competitive to from necessarily environment. the equally From environment obviously different but radically the we options, it be U.S. pricing equity that an the talk that standpoint. don't or is from U.S. we also standpoint multi-list change

we've we're some of doing I benefits say on where seen we the seen Cboe of migration and particularly would to the technology an are multi-list there. We've the with what platform respect actually improvement various see of to when the we

seen of we and the the an a RPC quarter, seen on and factors mix we've BCX, a mix. we shift participants little share in the CX third bit the market of or have at Ajax look look concentration back we increased in and when influencing But larger changes and

we slight rebate decline Also rebate. when multi-list, increased the the volume on years the volume saw the market the in based with higher see resolving maker with you an

seen --. bad that's thing as we've far that's thing and So, that good as happen a not a

Brian Schell

predict. to hard Very

Ed Tilly

far as goes. And to where as very predict hard that

a share it's the within that we but probably that hit potentially we it's whether see with net volumes obviously market think while offset to or bottom ago I that and out? incremental have a that $X.XX bottomed we $X.XX capture by multi-list. respect So,

due growth will quarter-over-quarter. as we very see some what we've far competitive business to also that's and our ebbs we've environment seen respect that's done Again liquidity, as that FX, uniquely products With some curated in bringing. and a to that we're the flows different

that. what about that's amount and and around talked done We've pricing different full the

flows So, that that's a of story see macro as some we been volumes. well nice and ebbs may very the may some traditionally depress growth though even

efforts there reasonable standpoint. from see to continue We that

John Deters

are on add periodic trade size European business. like larger auctions helped the frequent new the the that's the trades, for trading going equities as introduced to that what's equities has Cboe LIS. up RPC waiting in capture people just us though even The gone on we've and Brexit the higher as mechanisms is I European less the with and the happen

So, multi-list in think we're as can definitely very we providing higher the looking they're more introducing because or customers. we're offer trading capture, trading about also mechanisms yes value at competitive in capture competitive our that to markets. But potentially situations those and

Brian Schell

And then on proprietary. up the to wrap

a we ratchet mentioned up As the far need growth. this as far that growth believe not we price because Ed where cycle, again show earlier, incremental and are as where we as is as revenue our

do a move as a secular needle unit this story, is it's to as far of standpoint. is organic story, a RPC this and how story we volume a not that revenue This is

a that's the line being we driver not forward showing in revenue lever a anticipate So, that big for up us item. going

line-item. that to rebates that There revenues be would mix on some not largely volume planning price up shifts show we've we're due adjustments mentioned through might but might and up. specifically be the incremental that things may some at something that show RPC it's adjustments driving There

Operator

comes from you. And then the with Lau next & Company. Owen Thank Oppenheimer question

Owen Lau

thank morning my for Good you question. and taking

to and program. up retail related priority comments Just Chris's ethics following

of like online like backdrop your have past firms conversation month? the other trading with bookish has the brokers Given zero over and commission, the been what

are you important execution terms there's think Cboe additional do position rebate than in if resources, be the capture more any to then going quality in of allocating opportunity terms of you. finally, how to Thank And So, going forward you getting would any. trade?

Chris Isaacson

for Yes. very Well, questioning question there. and thanks the astute

faster priority they think that's very time their quality orders. and bringing execution are to is brokers today reason that on for focused a want retail out the retail retail execution I So, we're limit

wholesalers be and brokers the orders can marketable going zero the focused already on those retail impact quality. execution to but going order the are to come The how their will execution. with think priority improve time commissions their limit enhanced continue The they're very to exchanges to orders routing, retail to will back limit I which and

regime disclosure that XXXX demand positive called rule development. or fact, on more focused more I be out about will disclosure a rule flow. think a coming order which routing And XXX practices for in there's scrutiny payment around is there In may additional

a priority. excited win is this get forward a look and It's But for We potentially some newer better trading win for customers institutional a as why in to they'll retail retail for orders think well. are that XXXX of brokers. about we functionality bringing also retail type it's outcome we

John Deters

Owen, natural I sort trend by about of think it's I'd add a just quite we Chris I and just way It's is out. and -- zero this this number. level a think I progression step the an a is high John. playing absolute a points it great is

it takes by So, people surprise.

But conversation that's have the point the XX brokers. years, a crux wind impact if has of were really the with some the down you broadly, we sort to we competitive of back the And not and equities been of execution where pressures. And fees this were meeting first our economic the clock dramatically on. of feel come we exchanges XX to years going quite retail

customers More point, to monetizing aren't to the getting absolutely being make in disadvantaged. your Chris's that have through you're Because spread, it's sure bid-as around way if quality. you some execution compensated basically

to over have place, brokers. really that's data right time. like finance of where analysis, right and and democratizing back overall. what They're to should have grow to see help friends retail you great have the in to So, about They're algorithms the up the ours have we that the we you pie that's that

Owen Lau

helpful. that's very you Thank much, very

Operator

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

Debbie Koopman

Thanks.

continued We morning. Global appreciate call Cboe of and bit interest second Markets. your time this The in

Operator

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

lines. your disconnect now may You

Cboe Global Markets (CBOE) 1 Nov 192019 Q3 Earnings call transcript