Q1 2023 Cboe Global Markets Inc Earnings Call

Brian Chandler Executive Vice President CFO , and Treasurer will provide an overview of financial results for the quarter as well as discuss our 2023 financial outlook. Following their comments, we will open the call to Q&A also joining us for Q&A will be Chris Isaacson, our Chief operating officer, Dave.

Dave Howson, our president and our Chief strategy Officer, John Deters I'd like to point out that this presentation will include the use of slides, we'll be showing the slides and providing commentary.

A copy of the slide presentation is available on the Investor relations portion of our website.

During our remarks, we'll make some forward looking statements, which represent our current judgment on what the future meal. While we believe these judgments are reasonable. These forward looking statements are not guarantees of future performance and involve certain assumptions risks and uncertainties actual outcomes and results may differ materially from what is expressed or implied in any forward looking statements. Please refer to our filings with the SEC.

For a full discussion of the factors that may affect any forward looking statements. We undertake no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise after this conference call.

The call. This morning will be referring to non-GAAP measures as defined and outlined in the earnings materials now I'd like to turn the call over to Ed.

Thank you Ken good morning, and thanks for joining us today before I begin I want to take a moment to recognize see Bose 50th anniversary, which took place last week. It was a monumental milestone for the company and I was excited to celebrate with our associates around the globe.

Throughout our 50 year history, <unk> has been driven by unique vision and an unwavering commitment to continually innovate to meet the evolving needs of the global financial industry.

From pioneering options and volatility trading to introducing new technologies and market models CFO has transformed the way market participants transfer risk and build capital.

Our series of strategic acquisitions in recent years have greatly expanded the breadth and depth of placebo network, making us the dynamic company that we are today, each and every quarter. We have built upon our strong foundation and this quarter is no different.

I'm pleased to report a record first quarter earnings for <unk>, reflecting the continued endurance of our business during the quarter. We grew net revenue by 13% year over year to a record $471 million and adjusted EPS by 10% to a record $1 90. These.

These record breaking first quarter results were driven by strong volumes across our derivatives franchise, specifically, our proprietary index option products and the continued global expansion of our data and access solutions.

Our derivatives business delivered another outstanding quarter as total net revenue increased 29% driven by the strength of our index options and volatility products and solid volumes in multi list options trading.

During the quarter total net revenue in our data and access solutions business increased 9%, while total net revenue and our cash and spot market business decreased 12%.

We continue to make progress delivering on our top strategic priorities derivatives data and access solutions and see potential I'll touch on derivatives and data access solutions in a moment.

First I want to provide an update on single digit.

During the quarter seaborne digital continued to onboard new participants as liquidity deepened at our spreads compressed to competitive levels compared to other U S based platforms.

February represented our best month to date with Adv up more than $100 million, we had a record first quarter seven 4 billion trading.

2023 is not only an anniversary or placebo, but it also marks the 40th anniversary of SPX options and the 30th anniversary of the VIX index. The success of both our fixed franchise and suite of S&P 500 index option products as a result of years of innovation and perseverance driven by our unwavering.

<unk> belief in the potential from the beginning.

These products was robust during the quarter. The recent enhancements implemented to expand access to SPX and excess P, including expanded training hours and new explorations have created new opportunities for customers. During the first quarter SPX options Adv increased 59% to a record $2 8 million Contra.

<unk>, including a single day record of $4 2 million contracts traded on March 10.

Building on the strong momentum we saw last quarter, our mini SPX options contract is known by the ticker excess P increased 195% year over year.

Additionally, a D V from Pixar options increased 18% year over year in the first quarter.

In both SPX and access P. We continued to see many market participants opening and trading positions on the same day the options expire as they engaged in tactical trading strategies around market events ADP.

ADP for SPX options opened on the same day of exploration otherwise called zero at DTE comprised nearly 43% of overall SPX volumes in the first quarter and nearly 45% of SPX volume in April .

We believe there has been a fundamental evolution in how customers are trading this product and we anticipate this volume to continue.

We also continued to see increased demand from our non U S customers and liquidity providers, the ability to trade SPX and VIX products across all time zones day and night.

As a result, we have seen a sizable increase in volume during our global trading hours session with Adv for SPX, and VIX options, increasing 121% and 118% respectively year over year.

Turning to our fixed products Adv for VIX options increased 18% year over year to over 718000 contracts traded in the first quarter, while VIX futures Adv remains steady at 223000 contracts first.

First quarter volume in multi listed options increased 1%. So an adv of 11 million contracts in March CFO reached a record $337 million total contracts traded across its four options exchanges.

50 years ago, we found that the listed options industry and despite its immense growth. We believe that we are still in the early stages of the evolution of this market. We continue to lead the industry forward continued enhancements to our ecosystem of products to suit the needs of various customers. Most recently, we announced the launch.

Some of the <unk>, one day volatility index the market seeks to measure the expected volatility of the S&P 500 index over the current trading.

Justice the VIX index has grown to become one of the most recognized tools in the marketplace. We believe the one day VIX index will be a complementary addition to market participants seeking to better understand the current equity market volatility.

During the quarter. We were also excited to announce our plans to expand that product suite CFO Europe derivatives to include single stock options I'm, leading European companies. These products are expected to be available for trading in November of 2023, and cleared by CFO , Claire Europe subject to necessary regulatory approvals with the utility and flex.

The ability that options provided in any market environment as well as the very trading strategies utilized by a diverse customer base. We believe we will continue to see demand from new and existing customers as they discover the benefits options can provide to their portfolios.

We are pleased with our continued solid growth of our data and access solutions business, which posted another strong quarter with total net revenue increasing 9%. We continued to enhance our bundled data offerings in cloud strategy packaging high quality data from across our markets and delivering it to customers globally in a consistent and cost effect.

With manner, extending the reach of our content and the opportunity for this business during the quarter. We were excited to launch the C. But one options feet a product designed for the retail options trading.

This high quality data feed provides retail investors with cost effective real time data.

You won't notice it is imperative to help equip the burgeoning retail community with the information they may need to invest responsibly.

She most enduring success over the past half century as reflected in the unrivaled position that we hold today.

Our global derivatives and securities ecosystem.

Covered our derivatives business. It will now touch on highlights from our cash and spot markets.

And our global FX business that revenues were up 8% year over year in the first quarter as the business expanded spot market share to a record 19%, but the average daily spot notional value traded of $45 billion.

In Europe , the CFO your equities business increased first quarter market share three percentage points year over year to 24, 9%. Additionally, CFO bids Europe had another strong quarter with 36, 3% market share extending each one is the largest European block trading venue 12 consecutive months.

She vote clear market share to 34, 1% in the first quarter up from 32, 2% in the prior year quarter, making it the largest pan European current venue.

In Japan, we saw equities market share growth of four 8% during the first quarter up from three 8% a year ago. We also remain on track for the seaborne, Japan technology migration and expected launch of <unk>, Japan in the fourth quarter of this year subject to regulatory approval further extending our reach of the bids network into another.

Key global equity markets.

In summary, <unk> delivered an outstanding first quarter to start the year continuing the momentum of our record 2022.

While we have a long term view of our business, we are committed to investing in the near term.

A solid foundation for future sustainable growth with this perspective, we are confident we can build out our success and continue to deliver value to our customers and shareholders for the next 50 years with that I'll turn it over to Brian .

Thank you Ed and then highlighted seatbelt posted another record quarter to start 2023.

Adjusted diluted earnings per share for the first quarter was up 10% on a year over year basis to a record dollars 90. The record revenue performance was again driven by the continued organic growth of our derivatives franchise as well as a steady contribution from our data and access solutions business.

<unk> was not only appeared a robust financial performance and it also marked a period of meaningful advancement for many of our strategic initiatives we.

We believe that striking the right balance between monetizing today's opportunities are.

And investing in the future of our company is crucial for the long term growth of CFO .

To quickly touch on some of the high level takeaways from the first quarter before delving into the segment performance.

Our first quarter net revenue increase of 13% set another quarterly record at $471 million led by the strength in our derivatives markets category and the solid results from our data and access solutions business.

Specifically derivatives markets produced 29% year over year organic net revenue growth in the first quarter as the market continued to find increasing utility in our index options complex with the rise of zero DTE trading in global trading hours.

You didn't access solutions net revenues increased 9% up 6% aren't organic basis during the quarter.

We are pleased with the overall performance of the category and even more excited by the numerous catalysts, we expect to accelerate growth over the course of this year.

Cash is spot markets net revenues decreased 12% during the quarter or 13% on an organic basis as we faced difficult industry volume comparisons versus the first quarter of 'twenty, two and a three percentage point impact from a stronger dollar.

Adjusted operating expenses increased 28% to $186 million and adjusted EBITDA of $310 million also notched a quarterly high of 10% from the first quarter of 'twenty two.

Turning to the key drivers by segment.

The performance of our options segment was again very strong delivering the highest growth of any segment for the quarter with net revenue increasing 28% results were driven by robust volumes in our index business and strong revenue per contract or RPC, given the favorable mix shift trends.

Total options Adv was up 9% as our higher priced index options Adv increased 49% over <unk> 22 level RBC moved 27% higher given a continued positive contribution of index options and a stronger mix of higher priced SPX options in our index business.

And market data and access capacity fees were up 8% and 9% respectively as compared to <unk> 22.

One additional item worth calling out for the segment in the first quarter was the 51% year over year increase in options royalty fees somewhat higher than previous quarterly growth rates roughly 75% of the increase was related to higher volumes in our SPX and VIX options. The remaining 25% increase was.

Related to the last scheduled reset in royalty fees with S&P, which took effect at the beginning of the first quarter.

This last scheduled adjustment to contract rates as part of our current agreement with S&P that runs through 2032 33, making the first quarter a good run rate ratio of royalty fees to proprietary volume moving forward.

North American equities net revenue was flat on a year over year basis results benefited from Neo which was acquired in June of 'twenty, two contributing $5 6 million in net revenue during the quarter.

In addition, access and capacity fees increased 9% as compared to <unk> 22, while market data declined 7% on the back of lower Sip revenue.

Net transaction fees were flat given softer industry volumes and market share in our U S businesses.

And while our U S. Foreign exchange market share has trended lower on an absolute basis.

Our share has remained relatively constant when adjusting for the increase in off exchange market volume activity seen during <unk> the <unk>.

Industry volume and market share headwinds were offset by the positive contribution from the neo acquisition during the quarter.

The Europe , and APAC segment reported a 14% year over year decline in net revenue.

However, adjusting for a $3 $5 million FX impact given the stronger dollar during the quarter.

Net revenue fell by a more modest 8% on a constant currency basis impacted by softer volumes in Europe .

The lower activity levels were partially offset by a three one percentage point increase in market share on a year over year basis, making CFO Europe , the large stock exchange in Europe again.

And she boat clear Europe also grew market share during the quarter from 32% to 34%.

First quarter net revenue was flattened the futures segment as a 4% decline in net transaction fees was offset by an increase in access and capacity fees lower volumes with a primary driver of the decline in net transaction fees falling 9% during the quarter non transaction revenues continue to perform well with access capacity fees up 18%.

<unk> and market data flat to the first quarter of last year.

And finally net revenue in the FX segment was up 8% compared to last year building on the very strong momentum we saw from the FX segment during 'twenty two.

Net transaction fee revenue was up 8% as average daily notional value increased by 7% and market share yet another record at 19% for the quarter.

Turning now to see both data and access solutions businesses net revenues were up a solid 9% in the first quarter up six 2% on an organic basis net revenue growth continued to be driven by additional subscriptions and units accounting for 70% of access fee and market data growth in the first quarter.

While our six 2% organic net revenue growth rate for the quarter finished slightly below the low end of our 7% to 10% full year guidance range, we feel confident in our ability to accelerate trends over the back half of the year.

Specifically with the recent launch of seaborne options, we expect to see an uptake of clients for all of our CFO one data feeds in the second half of 'twenty, three adding incremental revenue for the DNA business.

In Australia, we finished our successful technology migration and launched our bids offering in the region at the end of the first quarter. Following the migration, we expect to see increased demand for seaborne data in Australia.

With what we have seen following past technology migrations around the globe.

Adding to that positive momentum is the enhanced distribution that CFO global cloud now provide offering incremental sales potential for our suite of data products.

We also anticipate solid trends from sabre global entities with good momentum around index licensing.

We are experiencing new global customer wins, and risks and market analytics and see opportunities coming online and distribution.

From a timing perspective, we anticipate most of this acceleration will occur in the second half of 'twenty three landing us in our 7% to 10% organic net revenue growth guidance range for the full year and putting us in line with our medium term expectations outlined at our November 2021 Investor day.

Turning to expenses total adjusted operating expenses were approximately $186 million for the quarter up 28% compared to last year, excluding the impact of acquisitions owned less than a year adjusted operating expenses were up 19% or $28 million for the quarter, largely reflecting higher head count as compared to the first quarter.

Last year as well as some inflationary comp adjustments and higher professional fees and outside services as compared to <unk> 22.

Moving to our expense guidance, we are reaffirming our full year 2003 expense guidance range of 769% to $779 million. This compares to our 2022 expense base of $652 million.

The three basic components of the year over year increase are outlined on slide 17 of our earnings presentation.

<unk> from 2022 acquisitions.

Growth investments and core expense growth.

At a high level, while the aggregate expense range remains unchanged, we expect a 3 million dollar <unk>.

<unk> expenses from 2022 acquisitions to be entirely offset by higher anticipated consolidated audit trail or cat project expenses cost that we have limited control over.

Looking at the details of our three expense categories.

Anticipate that 2022 acquisitions of <unk>, and <unk> will add approximately 33% to $35 million in incremental expenses in 'twenty, three where again, calling out growth generating investments given the numerous attractive opportunities. We see today. These are investments, we're making today to help drive incremental revenue to our bottom line in future years.

Specifically, we are investing in global listings DNA expansion and more aggressive marketing campaign and targeted product and services R&D efforts across our ecosystem.

2023, we continue to expect growth investments to be in the range of 28 $30 million.

The last component and the largest portion of the year over year increase remains our core expense growth totaling approximately $56 million to $62 million.

Our new range is $3 million higher than last quarter, given the increased expectations for cat project costs and 23, while our outlook for investments in infrastructure and inflationary factors remains unchanged.

We will continue to exhibit operational efficiency, while investing where we see opportunities overtime.

We believe the investments we are making today positioned CFO well to generate attractive returns in the years ahead.

Now turning to a summary of full year guidance on the next slide we are reaffirming the 'twenty three guidance. We introduced last quarter. In addition to the previously noted DNA organic net revenue growth rate of 7% to 10% range for 'twenty. Three we expect acquisitions helped lessen ear, who can truly around half a percentage point to total net revenue growth in 'twenty three.

Hi.

And we are reaffirming our organic total net revenue growth.

The range of 7% to 9% for 23. This remains above our medium term guidance of 5% to 7% introduced at our Investor day, a year and a half ago a function of our confidence in the durable growth of our business and the progress we are seeing behind the investments we have made to increase the access and distribution of our products and markets globally.

Last quarter, we introduced guidance, calling for an expected contribution of 27% to $33 million in 'twenty three for minority investments benefiting our other income line and <unk>, we recognized a $14 million gains on the company's investment in seven Rich fund, which owns trading technologies.

And are reaffirming our full year expectation of a 27% to $33 million benefit.

We look for the impact of minority investments become a regular and recurring contributor to company earnings and are providing our best estimate of the benefits we anticipate in 'twenty three.

Outside of our annual guidance.

Interest expense for the first quarter of 'twenty three was $15 1 million for Q2, we expect net interest expense to be in the range of $15 million to $16 million.

On the capital front, our focus has been and remains maximizing shareholder value through effective use of our capital.

In the first quarter, we returned a total of $123 million of shoulders.

In the form of a 50 cent per share quarterly dividend and $70 million in the form of share repurchases overall, we remain well positioned to invest in the business support our dividend and Opportunistically repurchase shares when we believe our stock price does not adequately reflect the underlying fundamentals of our business as we did in the <unk>.

First quarter.

We have $148 million in remaining capacity on our share repurchase authorization as of April 32023.

Our leverage ratio for the quarter remained at one five times in line with fourth quarter levels remain comfortable with our debt profile, having locked in low medium to longer term fixed rates, averaging below 3% on over 80% of our total debt.

The first quarter of 2003 was an excellent start to the year, we look forward to building on our record results.

Software investments behind the numerous growth initiatives, we have generating durable returns for shareholders in many quarters and years to come.

Now I'd like to turn it back over to Ed for some closing comments before we open it up to Q&A. Thanks.

Thanks, Brian in closing I want to thank our valued customers engaged with US every day, providing liquidity to our markets utilizing our products and services and supporting our vision. They are valued partners that have been critical to our success over the last 50 years I am extremely proud of our people past and present, who have helped.

<unk>, an incredible company and continue to chart the future success for CFO . Our 50 year legacy is built on trust relentless innovation and a drive to disrupt the status quo Howard by the exceptional strength of our people.

Whether we have created an exchange like no other the exchange for the World stage.

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

Okay.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Using a speaker phone please pick up your handset before pressing the keys.

Any time your question has been addressed and you'd like to withdraw. Your question. Please press Star then two again, please limit yourself to one question and feel free to rejoin the queue.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Rich Repetto with Piper Sandler. Please go ahead.

Good morning, Good morning, Ed.

Good morning.

Good morning, and I agree you can see you guys continue to rewrite how people look at risk management.

Zero DTE stuff has been the most resilient asset class announcements.

The spike in volume and volatility in March.

So I guess my question relates to the new thing things that you can do to continue that on.

Can you talk about maybe how the one day VIX one day ball index could impact trading and X X P. A contract and then is there any possibility you see other exchanges with proprietary products increasing pricing.

Possibility up leveraging pricing on these products.

Really good lifestyle lets take a half a step back.

Deal with the VIX One day first and then we'll go over to Dave on product product expansion and some pricing and just as a as a recall.

Benchmark VIX.

30 day implied number we use real prices remember rich of the S&P 500 to calculate that non tradable benchmark and that was really put out to the marketplace. As information, we believe that the more information and transparency that we have into the markets the better informed customers traders will be.

So it's that line of development that we followed with the one day.

And when you you point out the explosive growth of zeros that started about a year ago are about you know it was we say close to half of the SPX volume in one and two day expiring. The 30 days fixed number was not capturing the implied volatility and one in two days and so we.

Wanted to put a benchmark out there that informed the market on what short term implied volatility looked like a better picture so think of it this way.

If you look at the Chicago 10 day forecast May 16th for example, let's say 70 and Sunny.

That's really interesting until you go outside and it's 40 and rating is the 10 day wrong absolutely not we're just not capturing we're looking through today's thunderstorm and looking out 10 days, we wanted to capture today's forecast and that is what the implied volatility measure in one day and that is to inform investors.

On a better look at short term uncertainty.

Our expansion in pricing and growth, let me turn it over to Dave and we'll give you a little bit more color on the zeros, thanks, Ed and thanks, rich fed funds yet.

Sustaining consistent volumes that in the days to exploration.

We look at the SPX family, we do really see it as a family of products and you mentioned that the.

The excess fee products the wound.

Sized contract as the SPX and what we see you can see some figures asked some good grades as the excess D. Contracting. So as customers also begin to fund utility in the small products and what we find is through the education of end user customers that coming to the.

Complex and growing we hear from our customers that new account openings.

Meaningfully increased in Q1.

Custom is trading the SPX and the <unk> family and indeed, we see graduations from X SP use it to SPX as well as people finding also utility in the X SP contract itself, you talked about pricing there as well and when we look across actually all business in general our priorities is to expand.

Need for us to increase that pricing across that.

From a product landscape at this point really is about further adoption and when we look at the trends.

It looks it looks very positive.

Okay got it thank you and thanks for the weather analogy that helps.

Excellent. Thanks.

The next question comes from Michael <unk> with Morgan Stanley . Please go ahead.

Great. Thank you and good morning, maybe just continuing with the last thread around continuing to drive further adoption just on the X P. Ax product, maybe you could talk about the institutional usage of zero Dte's, where does that stand today, what are some of the stuff that you guys can take to increase usage by institution for <unk>. What are some of the most compelling use cases that you're seeing there.

And how that may differ from other customers that are using this euro D. Ts. Thank you.

Yeah, I think what we really try to point to and distinguish what's been written and we've been very consistent saying that the first adoption. The first users as I say almost a year ago, we're coming from retail platforms, primarily that does not mean that this was a retail play.

So we think institutional.

More professional customers coming off that IV platform and think of sweat those were the ones that we have been pointing out over time as the early adopters now we see a more broad use we see higher touch desks engaging.

Look at where we are informed by our customers. We are in the business of listening.

And we listened to Thomas.

Who gave color from the IV platform and said the adoption is just beginning.

And in some of the categories and the users studying that he sees so we do see more and more adoption and thats for the use case.

It really is to capture the news of the day. This really allows investors to pinpoint.

The uncertainty in the daily news cycle to trade around that news without buying weeks or months of premium to hedge against or take a position in a short term moves. Great example, two days ago I don't want Friday exposure I want to know in <unk>.

Around what the fed is going to say $1 30 central time, and that's my that's the risk I'm trying to isolate one day is a perfect example, on how to capture that move without having to buy premium that last days and weeks and months into the future. So weird measuring the potential is.

The amount of inbounds that we have for data around and modeling short term exposure and the data around what is trading open interest strike.

The dispersion around various strikes in one day. So we know that Theres a great. There's a great amount of study and back testing going on with the use case and we're encouraged by the commentary and the feedback that we're getting from our user groups more broadly.

Not just in the first movers.

Great. Thank you.

The next question comes from Daniel Fannon with Jefferies.

Go ahead.

Thanks, Good morning wanted to follow up on data and access solutions, 6% growth. You are and then you have your medium term target of seven to 10, and Brian you walk through I think several upcoming Rollouts.

In the back half of the year that should accelerate growth was hoping you could maybe contextualize or put some numbers around some of those initiatives you talked about bids as an example, where you would without before maybe help us think about what that's been in terms of incremental contribution.

It seems like that could all those initiatives could make me next year's numbers look like some even higher than it's been in some of the metrics. We've seen here recently, so wanted to get into a little bit further into what you talked about.

You know that based on client feedback of near signing signing hasn't set starting to kick in so each of those items right. So as we kind of break that down as far as the CFO one.

Products and coming on with respect to options. So we see a very good pipeline around that and what that looks like and that again that is more of a second half item, that's probably one of the larger elements of that.

That second half growth if we look at.

Australia and that new platform, that's something we see incrementally and growing over time. So that's maybe not as immediate hit but again when you look at the cumulative basis, and then continuing to call. It.

Incrementally increase the growth rate over prior year right. So you have new clients entering in that platform again, we see that adding to the overall growth rate.

The other items that we mentioned in the.

With the global indices are.

With the risks and market analytics some of the stuff. We're seeing you know with with distribution as a service that's more pipeline driven as we look at those clients see what's there looking for those sign ups.

And so it's hard for us to say, specifically I should say it is hard for us to say, we're not going to say is the specific each one of those line items, but we feel good about that in the aggregate as far as helping to contribute again, it's getting us back to that growth rate that we had laid out I don't know if I missed any other points.

And certainly that the revenue profile for the year is really maybe up to our own projections and expectations about acceleration in the second half of this year.

Uniformity of the technology with the Australia platform really does help the adoption of data and we've seen that elsewhere, as Brian mentioned and notably around the cloud 17% of new users actually in Q1 came from Australia, you said boots on the ground re platforming completed really does increase the uptake and interest in.

And the data from the region, we've done the re platforming and then mentioning on the indices from the real highlight is the options overlay indices that are really adding a lot of traction right now without business and with our guests.

And then the risk management and analytics leave you the data and access solutions business, our global analytics capability that we rolled out in Q1. The addition of European data really picking up.

Clients in Europe , as well as some of the pipeline looking.

Good for the rest of the year and as Brian said at the top that the C. But one options product as part of that broader C. By one family about packaging of data really part of the growth that we see are realizing in the second second half of this year.

Okay. Thank you.

The next the next question comes from Owen Lau with Oppenheimer. Please go ahead.

Good morning, and thank you for taking my question could.

Could you please give us a little bit more color on see both digital and I think as you talk about you're Onboarding more partners, but how many more partners in your pipeline do you expect to on board in the coming months do you have any timeline and also what is your plan to launch more new products. Thanks a lot.

Joe Thanks for the question. So the we reported it in the prepared remarks that the record volumes that we'd seen in particular in February the tightening of the spreads the depths and proving that the syndicate members were half way through on boarding those now seeing the benefit.

And optimize them interact with the platform and continue to build.

Build out.

We look forward and we're looking forward to and continue to engage with C. FTC on the margin futures a prequel.

Okay.

Okay. It's Angela.

The next question comes from Brian Bedell with Deutsche Bank. Please go ahead.

Great. Thanks, Good morning folks if I can just after one clarification question to Brian and then a strategic question around Canada.

Just on the I think you mentioned, if I wrote it down correctly $14 million gain in the other non op line in <unk> and then and then reiterating the 27 to 33 guidance I just wanted to see if the guidance includes that gain which would imply like $5 million a quarter in non up other income.

And then.

Western would be on on the candidate strategy. It looks like you gained about 100 basis points of market share linked quarter.

And just if you can talk about.

Your ambitions there in terms of that continued share improvement.

Your view on the momentum in Canada.

Yeah. So.

Short answer is yes. It does include the accurate game, so as we look at that.

That forecast.

And the guidance. It does include this current quarter.

And so talking because the Canadian strategy, what are the benefits and being having.

A meaningful market share in every market open to competition as we've got a broad playbook to look too anecdotal incentive customers to engage and seek that counts alone where we should go next youre right. The market share has improved and we think very pleased to see that that's become.

A number of tactical strides with teams deployed first in wage is a number of execution consulting or insights pieces, where we provide commentary on the relative benefits of a full books, we have available for trading underneath him as.

I see about Canada panning out.

This finding different utility with our customers as we engage them and to continue to I think what you'll see in the futures continued enhancements around pricing around functionality and feature sets and in particular that you also mentioned that this has been a great story for us last quarter I talked about having 75 buy side.

On the platform now, it's 103 and in fact.

At least 30 days all Canadian by such that you really see the power of the global network convince kicking in in a single quarter. If you contrast that to Europe as being well established and the number one platform. We have over 250 buy side that so rapidly catching up to that account in Canada. So we see great benefits of that global network.

<unk>.

Bringing benefits to the local Canadian market place that and when you look across the world.

We have 40% market share in Canada, where 25% in April in Europe , and around about 20% in Canada. So these are these are benchmarks that we look to as we think about whether you can get.

Excellent. Thank you.

The next question comes from Kyle Voigt with K B W.

Please go ahead.

Hi, good morning.

A follow up question for me on one day backs.

And in terms of of how female potentially monetizing the development of that index is the index really solely meant to help kind of facilitate trade them provide more granular market data for clients that are trading DTE and some other let's say products or would it also be possible to launch a derivatives product based off of one day because at some.

Point in the future, it's not sure the tactical difficulties of doing that so maybe you could expand a bit around that.

Yes, so the track record that we have if you look back in VIX VIX was first a benchmark then became a tradable futures contract. So.

That is the playbook that will use so right now with one day VIX out there the process that we've got now is to educate the market will digest the information and as you can observe this has been quite a volatile.

VIX benchmark, meaning we can see we see days of 50 70, 90% moves in the one day.

And that 30 day more typical 10% move so the models and understanding of measuring short term.

And the feedback loop that we have with customers will allow our siebel labs to explore the possibilities of a tradable product. So stay tuned that as always the objective here is how to turn our indicators are that are useful to the marketplace and to tradable product.

<unk> offer various hedging and different exposures exposures. So yes, the plan would be to develop something that we can bring to the market.

As tradable.

Understood. Thank you.

The next question comes from Alex <unk> with Goldman Sachs. Please go ahead.

Hey, guys. Good morning, Thanks for taking the question.

In prior meetings, you talked about increased utilization of SPX daily options by market makers to delta hedge et cetera can you update us on any incremental details you sort of seeing on that front any color on what percentage of SPX volume that activity comprises today and ultimately how do you think about.

<unk> view and all in cost of doing that versus trading alternative products largely on C means Amy.

Yeah, It's a great question and it's one that we'd begin we begin to observe I would say over the last six months and trending a little bit.

Higher as liquidity increases are in the dailies, so, but I want I want to first say that the ecosystem.

The power of the 500 complex.

For for Us and all of the development and all of the benchmarks in our expansion relies on an incredibly deep liquid futures market. So our market makers are huge huge customers of the CME futures, we need that futures market to be to be deep and liquid so where a champion of.

The ecosystem in general now.

Now naturally if you're a market maker in your trading zero day.

Your ideal hedge is a the exposure that matches up with the initiating trade. So if you're opening as part of your liquidity provider obligation and selling at a daily call the least effective or the most expensive hedge you can have as a futures contract that you may have to trade out of.

At the end of the day, that's a two future churn and that's not a bad thing, but what would you rather do you'd rather have a hedge that expires at the same time as the initial trade that would be another option in the daily.

So not surprisingly marketmakers look now to a very liquid.

Daily option market for the first hedge and that trend and we are.

Anticipating to continue not because of the futures contract is necessarily bad. It's just that it will require it may require at the end of the day, another futures trade where option to option both options would roll off at the same time. So that's what we talk about when we look at another use case it is.

Like exposure hedged like exposure Super efficient very cost effective and that is not to take away from a very vibrant and liquid market across the street. So that is a trend that continues it's just optimizing trading from our market makers perspective very natural.

And it's a progression because of the market is so deep and so liquid in the dailies.

Great very helpful. Thank you.

The next question comes from Andrew Bond with Rosenblatt Securities. Please go ahead.

Hey, good morning, just following up on CBOE did you guys provide any more color around your margin futures application with a C and D C and if theres been any change in your discussions with the regulator given some of the recent rhetoric and enforcement action from the FCC and Additionally, do you think approval will drive greater trading activity soon after or are you finding that cluster.

We are just still waiting for greater regulatory clarity and more broadly thanks.

Yeah. Thanks, Andrew the conversations with the CMT see continue the application is still with the CMT seeing going through the process. We have a number of SDN lined up and ready to.

Begin to wambold once we receive that application and from that things will once.

Save onboard and things will move pretty pretty quickly.

Andrew. This is this is John just one other thing to note there as we look at the environment things have really picked back up to where they were in 'twenty. Two in terms of core nodes in terms of active accounts on the.

<unk> network.

The issue is that while a lot of that activity is in the U S spot trading is hampered by the regulatory environment, We think as Dave mentioned the derivatives products that we're preparing really changed that because theres a theres full regulatory clarity around that product set so that's an enabler and our point of view.

Yeah.

Great. Thanks, guys.

This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.

I have a closing remark and thanks for letting me take the opportunity.

Sorry, rich, but we want to take a moment to note that this is your last call out of retirement later this summer.

Everyone knows rich has just been a constant on the CBOE <unk> earnings call since our IPO in 2010.

And one of the first to just to understand the power of this index franchise and always highlighting the durability of our product product set so rich we wish you all the best in everything you do in the future and certainly look forward to seeing you at your conference in June . So thank you so much for the years and years of coverage and dialogue.

Yeah.

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

Okay.

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