Q4 2023 Cboe Global Markets Inc Earnings Call
Speaker Change: [music].
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Operator: Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the CBOE Global Markets fourth-quarter earnings call. At this time, all lines have been placed on mute to prevent any background noise.
Speaker Change: Ladies and gentlemen, thank you for standing by I would like to welcome everyone to the FIFA global markets fourth quarter earnings call at.
Speaker Change: At this time all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number 1 once again. Thank you.
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Speaker Change: Thank you I will now hand, the call over to Ken Hill, Vice President of Investor Relations and Treasurer, you May begin your conference.
Operator: I will now hand the call over to Ken Hill, Vice President of Investor Relations and Treasurer. You may begin your conference. Good morning, and thank you for joining us for our fourth quarter earnings conference. On the call today, Fred Tomczyk, our CEO, and Dave Howson, our global president, will discuss our performance for the quarter and provide an update on a strategic initiative. Then, Jill Griebenow, our Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, will provide an overview of our financial results for the quarter, as well as discuss our 2024 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. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each.
Kenneth Hill: Good morning, and thank you for joining us for our fourth quarter earnings conference call on the call today, Fred Thompson, our CEO and Dave Howson, our global President will discuss our performance for the quarter and provide an update for our strategic initiatives.
Kenneth Hill: Joe agreement.
Kenneth Hill: Dave Vice President Chief Financial Officer, and Chief Accounting Officer will provide an overview of our financial results for the quarter as well as discuss our 2024 financial outlook. Following their comments, we'll open the call to Q&A also joining us for Q&A will be Chris <unk>, our chief operating officer.
Kenneth Hill: I would like to point out that this presentation will include the use of slides, we will be showing the slides and providing commentary on each a downloadable copy of the slide presentation is available on the Investor relations portion of our website.
Kenneth Hill: A downloadable copy of the slide presentation is available on the Investor Relations portion of our website. During our remarks, we'll be making some forward-looking statements, which represent our current judgments. Holdings Inc., CBOE, 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 the, During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our, Now I'd Good morning, and thanks for joining us today.
Kenneth Hill: During our remarks, we'll be making forward looking statements, which represent our current judgment on what the future may hold and 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.
Kenneth Hill: The SEC report full discussion on 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 during.
Kenneth Hill: During the call. This morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials now I'd like to turn the call over to Fred.
Fred Thompson: Good morning, and thanks for joining us today.
Fred Tomczyk: I hope 2024 is off to a great start for everyone. I'm pleased to report strong fourth quarter and full year results for CBOE Global Market. During the quarter, we grew net revenue by 9% year-over-year to a record $499 million and adjusted diluted EPS by 14% to $2.06. These results capped another record year, which saw us grow net revenue 10% to a record $1.9 billion and adjusted earnings per share 13% to a record $7.80. Our outstanding results were driven by record trading volumes across our derivatives business, continued durability and growth of our data and access solutions business, and disciplined expense management. Our derivatives business delivered another record quarter as total organic net revenue increased 18%. As more investors embraced the utility of options to help navigate any market environment, we saw total options average daily volume increase to a record 14.9 million contracts, driven by a 24% increase in index options.
Fred Thompson: 2024 is off to a great start for everyone.
Fred Thompson: I am pleased to report on a strong fourth quarter and full year results foreseeable global markets.
Fred Thompson: During the quarter, we grew net revenue by 9% year over year to a record $499 million and adjusted diluted EPS by 14% to $2 in success fees.
Fred Thompson: These results capped another record year, which saw us grow net revenue, 10% to a record $1 9 billion and adjusted earnings per share of 13% to a record $7 80.
Fred Thompson: Our outstanding results were driven by record trading volumes across our derivatives business.
Fred Thompson: <unk> durability and growth of our data and access solutions business and disciplined expense management.
Fred Thompson: Our derivatives business delivered another record quarter as total organic net revenue increased 18%.
Fred Thompson: As more investors embrace the utility of options to help navigate any market environment. We saw total options average daily volume increased to a record $14 9 million contracts driven by a 24% increase in index options.
Fred Tomczyk: We saw record volumes across our tweak of S&P 500 index options products, with fourth quarter ADV and the SPX contract increasing 22% year over year to 3.3 million contracts. We also saw solid performance in our volatility product suite, with VIX options up 33% year over year. Our data and access solutions business continues to perform well, and we continue to have a strong conviction in this business going forward as we look to unlock value and revenue opportunities across the globe. During the quarter, organic net revenue in our data and access solutions business increased 7%. Net revenue and our cash and spot markets business decreased during the quarter, finishing a year of more muted volume activity across global equity markets.
Fred Thompson: We saw record volumes across our three S&P 500 index options products with fourth quarter ADP in the SPX contract, increasing 22% year over year to $3 3 million contracts.
Fred Thompson: We also saw solid performance in our volatility product suite with VIX options up 33% year over year.
Our data and access solutions business continued to perform well and we continue to have a strong conviction on this business going forward as we look to unlock value and revenue opportunities across the globe.
Fred Thompson: During the quarter organic net revenue in our data and access solutions business increased 7%.
Fred Thompson: Net revenue on our cash and spot markets businesses decreased during the quarter, finishing a year or more muted volume activity across global equity markets.
Fred Tomczyk: Overall, it was a strong quarter for both transaction and non-transaction growth that capped an excellent year for CBOE. Over the last few years, CBOE has built out a unique global derivatives and securities network. With a network largely built, and nearly all the acquisitions integrated, we are now turning our attention to unlocking the value of this network through strategic organic growth initiatives. As I highlighted last quarter, I'm focused on three key priorities that I believe will further strengthen CBOE and enhance shareholder value over the longer term. One is sharpening our strategic focus. 2.
Fred Thompson: It was a strong quarter for both transaction and non transaction growth.
Fred Thompson: An excellent year for CFO.
Fred Thompson: Over the last few years <unk> has built out a unique global derivatives and Securities network.
Fred Thompson: With a network largely built.
Fred Thompson: All of the acquisitions integrated we are now turning our attention to unlocking the value of this network through strategic organic growth initiatives.
Fred Thompson: As I highlighted last quarter I'm focused on three key priorities that I believe will further strengthen siebel and enhance shareholder value over the longer term.
Fred Thompson: One sharpening our strategic focus to effective allocation of our capital and three developing talent and management succession.
Fred Tomczyk: The effective allocation of our capital and 3. Developing talent and management succession We're working through our strategic review now, but I wanted to provide you with some framework of how we're approaching this process. First, we're analyzing the secular trends driving market activity today and how we can continue to maximize our core competencies and leverage our global platform and superior technology. We continue to see several key secular trends reshaping trading and capital markets. As I sit here today, those trends continue to gather momentum and propel our business forward. First, the globalization of markets and, subsequently, our customer.
Fred Thompson: We are working through our strategic review now, but I wanted to provide you some framework of how we're approaching this process.
Fred Thompson: First we're analyzing the secular trends driving market activity today, and how we can continue to maximize our core competencies and leverage our global platform and superior technology.
Fred Thompson: We continue to see several key secular trends reshaping trading and capital markets.
Fred Thompson: As I sit here today, those trends continued to gather momentum and propel our business forward.
Fred Thompson: First the globalization of markets and subsequently our customer base.
Fred Tomczyk: Our global customer base wants access to all of our trading capabilities. They're looking for efficiencies and a consistent experience trading across asset classes and geographies, which we can deliver. Second, the unprecedented rise of the retail customer has transformed the U.S. market in recent years.
Fred Thompson: Our global customer base wants access to all of our trading capabilities.
Fred Thompson: Looking for efficiencies and a consistent experience trading across asset classes and geographies, which we can deliver.
Fred Thompson: Second the unprecedented rise of the retail customer has transformed U S market in recent years.
Fred Tomczyk: As with many global trends, we believe what has transpired in the U.S. market will evolve in other global jurisdictions as those markets typically follow a similar evolution. We believe this new generation of retail investors is here to stay and is becoming more sophisticated as they increase their use of options to help execute their trading and investing strategies. We continue to see opportunity to service this key segment as the retail wave expands globally. Finally, technology and data, including emerging areas like cloud computing and artificial intelligence, continue to transform the world we live in and as a fuel that helps drive trading in our markets and products. As our customers engage with markets around the world, high-quality technology and easily accessible, relevant data are paramount. What differentiates CBOE and enables us to leverage these trends is our core strength. First, the global footprint that we've now assembled.
As with many global trends, we believe what has transpired in the U S market.
Fred Thompson: <unk> two other global jurisdictions as those markets typically follow a similar evolution.
Fred Thompson: We believe this new generation of retail investors is here to stay and becoming more sophisticated as they increase their use of options to help execute their trading and investing strategies.
Fred Thompson: We continue to see opportunity to service. This key segment as the retail wave expands globally.
Fred Thompson: Finally technology and data, including emerging areas like cloud computing and artificial intelligence continue to transform the world. We live in and is a fuel that helps drive trading in our markets and products.
Fred Thompson: As our customers engage with markets around the world high quality technology and easily accessible relevant data is paramount.
Fred Thompson: What differentiates IBO and enables us to leverage these trends as our core strengths.
Fred Thompson: Our global footprint that we have now assembled second a renewed focus on superior technology and three our emphasis on greater product innovation.
Fred Tomczyk: Second, our renewed focus on superior technology. And third, our emphasis on greater product innovation. Our recent acquisitions have helped us to hone these core strengths, and we now have a solid foundation for continued organic initiatives that we expect to drive revenue growth and earnings growth in 2024 and beyond. Today, we are the only truly global derivatives and securities exchange.
Fred Thompson: Our recent acquisitions have helped us to hone these core strengths and we now have a solid foundation for continued organic initiatives that we expect to drive revenue growth and earnings growth in 2024 and beyond.
Fred Thompson: Today, we are the only truly global derivatives and securities exchange.
Fred Tomczyk: Our global equities footprint spans seven of the top 10 global equity markets, creating an unrivaled, consistent trading experience for our global customers. These equity markets have provided strong and consistent cash flow generation for our business. But importantly, we see securities markets as the foundational element.
Fred Thompson: Our global equities footprint spend seven of the top 10 global equity markets, creating an unrivaled consistent trading experience for our global customer base.
These equity markets have provided strong and consistent cash flow generation for our business, but importantly, we see securities markets as the foundational element.
Fred Tomczyk: Table stakes in creating products and services that span the equities and derivatives landscape. Another strength is our technology, which has enabled us to be a nimble and efficient operator of securities markets around the globe. With two major technology migrations completed last year, in Australia and Japan, we now have all but one of our equities and equity derivatives markets running on our common technology platform. Our final technology integration is planned to take place in early 2025 with the migration of our Canadian market to CBOE technology.
Fred Thompson: Bold steaks, and creating products and services.
Fred Thompson: The equities and derivatives landscape.
Fred Thompson: Another strength is our technology.
Fred Thompson: Which has enabled us to be nimble and efficient operator of securities markets around the globe.
With two major technology migrations completed last year in Australia, and Japan, We now have all but one of our equities and equity derivatives markets running on our common technology platform.
Fred Thompson: Our final technology integration is planned to take place in early 2025 with the migration of our Canadian market to see both technology.
Fred Thompson: With nearly all of our acquisitions fully integrated we are well positioned to unlock incremental value from our global network by investing in organic growth initiatives in all of our businesses, while enhancing and leveraging our global technology platform.
Fred Tomczyk: With nearly all of our acquisitions fully integrated, we are well positioned to unlock the incremental value from our global network by investing in organic growth initiatives in all of our businesses while enhancing and leveraging our global technology platform. Over the last two years, our product innovation has driven an incredible evolution in the options market that makes us even more confident about the durability of our business. We've seen an increasingly diverse set of market participants turning to shorter duration options across our SPX complex, and continuously hedging and repositioning on a day-in-and-day-out basis, not just during times of market volatility. Prior to the launch of Tuesday and Thursday options in the spring of 2022, zero DTE as a percentage of SPX activity was in the low 20% range.
Over the last two years, our product innovation has driven an incredible evolution in the options market that makes us even more confident about the durability of our business.
Fred Thompson: We have seen an increasingly diverse set of market participants turning to shorter duration options across our SPX complex.
Fred Thompson: <unk> hedging and repositioning on a day in and day out basis, not just during times of market volatility.
Fred Thompson: Prior to the launch of Tuesday, and Thursday options in the spring of 2022 zero of ETE as a percentage of SPX activity.
Fred Thompson: As in the low 20% range.
Fred Tomczyk: In 2023, that reached 45% for the year and moved to 50% in January. While some product innovations like zero DTE drive immediate volumes, we know that other innovations, like setting up a new derivatives market in Europe, take time. The remarkable thing about our business is that the core engine can continue to churn and produce revenue in the short term while we continue to incubate new markets for long-term growth. In summary, we remain focused on creating a healthy ecosystem of products and services that create short, medium, and long-term opportunities. Helping to enable a cadence of consistent growth. Additionally, we remain well positioned due to our disciplined capital allocation strategy. During the fourth quarter, we paid off all of our outstanding variable rate debt, and we're in a very good place with our leverage ratio as we begin 2024.
Fred Thompson: In 2023 that reached 45% for the year and moved to 50% in January.
Fred Thompson: With some product innovations like zero ETE drive immediate volumes, we note with other innovations like standing up a new derivatives market in Europe take time.
Fred Thompson: The remarkable thing about our business is at the core engine can continue to churn and produce revenue in the short term, while we continue to incubate new markets for long term growth.
Fred Thompson: In summary, we remain focused on creating a healthy ecosystem of products and services that create short medium and long term opportunities helping to enable a cadence of consistent growth.
Fred Thompson: Additionally, we remain well positioned due to our disciplined capital allocation strategy.
Fred Thompson: During the fourth quarter, we paid off all of our outstanding variable rate debt and we are in a very good place with our leverage ratio as we begin 2024.
Fred Tomczyk: We remain committed to maintaining a flexible balance sheet while investing in organic growth initiatives, our technology capabilities, and operating efficiencies to drive revenue growth and optimize our margin, and thereby drive earnings growth. Finally, talent development and succession planning remain a priority for us. We continue to develop leadership in all functions across the company and optimize our organizational structure to support our global strategy. I'll now turn the call over to Dave. Thanks, Fred.
Fred Thompson: We remain committed to maintaining a flexible balance sheet, while investing in organic growth initiatives, our technology capabilities and operating efficiencies to drive revenue growth and optimize our margin and thereby drive earnings growth.
Fred Thompson: Finally talent development and succession planning remains a priority for me.
Fred Thompson: We continue to develop leadership in all functions across the company and optimize our organizational structure to support our global strategy.
Fred Thompson: I'll now turn the call over to Dave.
Dave Howson: Brett as we enter 2024, we are well positioned to capitalize on these trends and build on our record 2023 results. You have heard me speak in the past about the foundational elements that make up our ecosystem and the process. We follow a meeting of our cash data and derivatives volume.
Dave Howson: As we enter 2024, we are well positioned to capitalise on those trends and build on our record 2023 results. You have heard me speak in the past about the foundational elements that make up our ecosystem and the process we follow for moving up our cash, data, and derivatives value ladder. I want to start by outlining the ways we have strengthened the CBOE Foundation before looking at how we plan to unlock organic value across the ecosystem in 2024, starting first with the cash and spot marks.
Dave Howson: I want to start by outlining the ways, we have strengthened the seabed foundation before looking at how we plan to unlock organic value across the ecosystem in 2024.
Dave Howson: Starting first with the cash and spot market in 2023, we enhanced our presence in every major market open competition around the globe, making the biggest advancements in the Asia Pacific region.
Dave Howson: In 2023, we enhanced our presence in every major market open to competition around the globe, making the biggest advancements in the Asia Pacific region. In March 2023, we completed our technology migration and bids rollout for CBOE Australia. And in the fourth quarter, we completed our technology migration and launched the BizNetwork in Japan. This migration not only provided a uniform infrastructure to enhance our performance and trading capabilities in the region, but it unlocked opportunities across our value ladder for incremental data product offerings and the ability to add adjacent asset classes over time. With the Australian migration complete nearly a year ago, it serves as the most recent example of this expansion strategy in action.
Dave Howson: In March 2023, we completed our technology migration and bids Rollouts placebo, Australia and in the fourth quarter, we completed our technology migration and launch of the fifth network.
Dave Howson: Japan.
Dave Howson: This migration not only provided a uniform infrastructure to enhance our performance and trading capabilities in the region.
Dave Howson: Lots of opportunities across our value add up for incremental data product offerings and the ability to add adjacent asset classes over time.
With the Australia migration complete nearly a year ago. It said that the most recent example of this expansion strategy in action since the migration CEVA, Australia has seen a solid increase in this market share with CEVA is continuous cash market share, finishing December 21, 2% up three five percentage points.
Dave Howson: Since the migration, CBOE Australia has seen a solid increase in its market share, with CBOE's continuous cash market share finishing December at 21.2%, up three and a half percentage points as compared to December of 2022. The benefits of our regional expansion are not isolated to cash equities, though. As we move up the value ladder, we see data and access solutions in the region grow, with the Australian market for data and access services growing by 11% in 2023. The gains in Australia are illustrative of the broader globalization trend benefiting the data and access solutions business. In fact, the fourth quarter represented the highest quarter ever for data sales to customers outside the U.S. CBOE Global Cloud, our real-time data streaming service, allows customers efficient access to CBOE's robust suite of market data products. Today, nearly 80% of our cloud customers are located outside of the United States.
Dave Howson: As compared to December 2022.
The benefits of our regional expansion are not isolated to cash equities that as we move up the value ladder, we see data and access solutions in the region grow with Australian market data and access services growing by 11% in 2023.
The gains in Australia are illustrative of the globalization trend benefiting the data and access solutions business. In fact, the fourth quarter represented the highest quarter ever for data sales to customers outside the U S C.
<unk> global cloud, our real time data streaming service and our customers efficient access to <unk> robust suite of market data products.
Dave Howson: Today, nearly 80% of our cloud customers are located outside of the United States with the demand for 24, seven access to market and market data only growing.
Dave Howson: With the demand for 24-7 access to markets and market data only growing, last on our value ladder but certainly not least, as we think about expanding our derivatives capabilities, we remain steadfast in our efforts to bring a U.S. market experience to the global population. Shifting market behavior takes time, and we are still in the early stages of this journey, but we are well aligned with the global ambitions of our broker-dealer partners. We see Europe as a market ripe for this evolution, with the value of volume traded for equity and index options running at just 6% of the size of the value traded in the US, despite comparable GDP. In the fourth quarter, our European Derivatives Exchange, CEDEX, posted its best quarter since launch with volumes up 85% year-over-year. Completing our index trading capabilities in the region, we successfully launched our single stock options offering in November. We currently have options on 127 companies in production today, with plans for over 300 names later this quarter, subject to regulatory approvals, and expect to commence a liquidity provider program in the months ahead.
Last on our value ladder, but certainly not least as we think about expanding out derivatives capabilities. We remain steadfast in our efforts to bring a U S market experienced a global participants she.
Dave Howson: Shifting market behavior takes time and we are still in the early stages of this journey, but we are well aligned with the global ambitions of our broker dealer partners.
Dave Howson: We see Europe as a market right for this evolution with a value of volume traded for equity and index options running at just 6% of the size of the value traded in the U S. Despite the comparable GDP.
Dave Howson: In the fourth quarter, our European derivatives exchange Scitex posted its best quarter since launch with volumes up 85% year over year more importantly, completing our index trading capabilities in the region. We successfully launched our single stock options offering in November we currently have options on 102.
77 companies in production today with plans for over 300 named later this quarter subject to regulatory approvals and expect to commence a liquidity provider program in the months ahead.
Dave Howson: The movement of the value ladder from cash to data to derivatives provides the framework for establishing a flywheel of revenue generation. Turning to slide 8, it was another record quarter for SBX and a record year for the overall index business as investors turned to our S&P 500 Volatility Toolkit to help navigate markets. SBX Options volumes grew a robust 31% to a record ADV of 2.9 million contracts in 2023. Activity in the fourth quarter was a record 3.3 million contracts.
Dave Howson: Movement up the value ladder from cash to data to derivatives provides the framework for establishing a flywheel of revenue generation.
Dave Howson: Turning to slide eight it was another record quarter for SPX and a record year for the overall index business as investors tend to our S&P 500 volatility toolkit to help navigate markets.
Dave Howson: SPX options volumes grew a robust 31% to a record adv of $2 9 million contracts in 2023.
Activity in the fourth quarter was a record $3 3 million contracts, notably while volumes grew across the board we saw a more pronounced Joe and coal volume as investors tend to auctions to quickly adjust that portfolio in the face of changing market conditions.
Dave Howson: Notably, while volumes grew across the board, we saw a more pronounced jump in call volume as investors turned to options to quickly adjust their portfolios in the face of changing market conditions. Meanwhile, we continue to see sustained traction in our zero to expiry oxygen. Zero DTE activity grew a remarkable 60% year-over-year to comprise 45% of overall SBX output. These ultra-short-dated options have given investors the ability to hedge risk, generate income, and express directional views more precisely and frequently. In our VIX complex, as markets rallied last year, volatility levels fell, with the VIX falling from an average of 26 in 2022 to 17 in 2023.
Dave Howson: Meanwhile, we continued to see sustained traction in our theaters to expiry options.
Dave Howson: At ETE activity grew a remarkable 60% year over year to comprise 45% of overall SPX activity.
Dave Howson: These ultra short dated options and giving investors the ability to hedge risk generate income and expressed directional views more precisely and frequently.
Dave Howson: In our VIX complex as markets rallied last year volatility levels fell with the VIX falling from an average of 26 and 2022 to <unk> 17 in 2023, the lower VIX levels drove core buying as investors look to the convexity VIX options to help protect against potential black Swan events.
Dave Howson: The lower VIX levels drove call buying as investors looked to the convexity of VIX options to help protect against potential black swan events. Overall, VIX-ADV jumped 40% to a record 743,000 contracts last year. As volumes continue to grow, so does the demand for new data sets, indices, and tradable products. We had many noteworthy developments in 2023. In partnership with S&P Dow Jones Indices, we launched the CBOE One Day Volatility Index in April, options on futures for our CBOE IBOX Bond Index Futures in July, the CBOE S&P 500 Dispersion Index in September, and in October, we further expanded our benchmark VIX methodology by launching a new suite of four credit volatility.
Dave Howson: Overall, VIX Adv jumped 40% to a record 743000 contracts last year.
Dave Howson: As volumes continue to grow so does the demand for new dataset indices and tradable products.
Dave Howson: We had many noteworthy developments in 2023 and partnership with S&P Dow Jones indices, we launched <unk> One day volatility index in April options on futures for our CEVA <unk> Bond index futures in July the CEO of S&P 500 dispersion index in September and in October we further expanded our benchmark.
Dave Howson: <unk> methodology by launching a new suite of full credit volatility indices.
Dave Howson: Turning to slide nine as we start 2024, we see a supportive backdrop unfolding for index products aided by strong secular forces and cyclical tailwind.
Dave Howson: Turning to slide 9, as we start 2024, we see a supportive backdrop unfolding for our index products, aided by both strong secular forces and cyclical tailwinds. The increased utilization of options as a tool has been underway for decades, but we are still just scratching the surface on widespread adoption. Investors have become increasingly sophisticated over the years, an interest we've looked to foster through our leading investor education platform, the Options Institute. With additional online platforms planning to offer cash-settled products in the year ahead, we see a runway to higher levels of accessibility and activity across our suite of derivative products. As you heard me mention earlier, the opportunity to bring a U.S. market experience to global participants is increasingly compelling. While our current efforts are aimed at providing a single access point to trade pan-European products, over time, we expect to leverage our access to other regions like Asia Pacific.
Dave Howson: The increased utilization of auctions in the tool has been underway for decades, but we are still just scratching the surface and widespread adoption.
Dave Howson: Investors have become increasingly sophisticated over the years and interest we look to foster through a leading investor education platform the options Institute.
Dave Howson: With additional online platforms planning to offer cash set of products in the year ahead, we see a runway to higher levels of accessibility and activity across our suite of derivative products.
Dave Howson: As you heard me mentioned earlier the opportunity to bring a U S market experienced a global participant is increasingly compelling.
Dave Howson: While our current efforts are aimed at providing a single access point to trade Pan European products over time, we expect to leverage our access to other regions like Asia Pacific.
Dave Howson: To date this shows up both directly through the continued growth in global trading hours activity in 2023, SPX GTH expanded by a robust 85% and fixed GTH activity was up a solid 45%. Despite the growth across the complex GTH for SPX.
Dave Howson: Today, this shows up most directly through the continued growth in global trading hours activity. In 2023, SBXGTH expanded by a robust 85%, and VIXGTH activity was up a solid 45%. Despite the growth across the complex, GTH for SBX options still represents under 3% of overall activity, and GTH for VIX options represents less than 1% of all VIX volumes, leaving meaningful potential for expansion.
Options still represents under 3% of overall activity and GTH for VIX options made up less than 1% of all VIX volume, leaving meaningful potential for expansion.
Dave Howson: As we have seen in other markets, traders continue to demand greater flexibility in managing their risk profile. The growth in Zero DT activity speaks to the burgeoning need to manage intraday risk at greater levels. Importantly, this trend remains firmly in place across market cycles and volatility ratios.
Dave Howson: As we have seen in other markets traded continue to demand greater flexibility in managing their risk profile the growth in zero DTE activity speaks to the burgeoning need to manage interest rate risk at greater levels.
Dave Howson: Importantly, this trend remains firmly in place across market cycles and volatility regime.
Dave Howson: Magnifying the impact from the structural tailwinds I just covered, there are a number of cyclical factors working in our favor today. A common misconception that we often hear is that we need higher volatility or a market sell-off to drive options volume growth. As you can see from the chart on the slide, this is far from the truth. Investors have turned to options to help manage risk when the outlook is uncertain. However, it's important to note that risk runs both ways.
Dave Howson: Magnify the impact from the structural tailwind I just covered there are number of cyclical factors working in our favor today.
One misconception that we often hear is that we need high volatility or a market selloff to drive options volume growth as you can see from the chart on the slide this is far from the truth investors of tense options to help manage risks when the outlook is uncertain.
Dave Howson: It's important to note that risk runs both ways and as we saw in Q4 investors Ted options to help manage the upside potential in the market buying calls to quickly increase the equity exposure in the face of falling 10 year rates in fact, our Q4 2023 record volume days.
Dave Howson: And as we saw in Q4, investors turned to options to help manage the upside potential in the market, buying calls to quickly increase equity exposure in the face of falling 10-year rates. In fact, our Q4 2023 record volume days all occurred on market updates.
Dave Howson: All occurred a market update.
Dave Howson: And the last quarter was a record period for our SPX complex, despite the index moving 11% higher and volatility levels falling dramatically. We believe that auctions provide an increasingly durable stream of revenue. Unlike cash equity products, auctions expire on an increasingly frequent basis, particularly as investors embrace shorter-duration trading strategies.
Dave Howson: And the last quarter was a record period for SPX complex, despite the index, moving 11% higher and volatility levels falling dramatically.
Dave Howson: We believe the options provide an increasingly durable stream of revenue.
Dave Howson: Cash equity products options expire and increasingly frequent basis, particularly as investors embrace shorter duration trading strategy.
Dave Howson: This means that traders must continuously reassess the market, taking on and adjusting positions to manage risk, hedge exposure, or generate income. Turning to slide 10, I want to highlight some of our more recent product innovations. In January 2024, we increased access to shorter duration products with the launch of Tuesday and Thursday expiring Russell 2000 and mini Russell 2000 index weekly options, providing small cap investors with some of the same tools available to SBX traders. For XSP, despite the roughly 80% ADV growth produced during 2023, we are even more excited about the potential for the XSP contract in 2024. We believe potential margin relief from the SEC will allow additional customers to benefit from XSP's many advantages. Overall, the potential for regulatory approval coupled with the likelihood of our cash settled products to be offered on additional online platforms should help catalyse incremental XSP uptake.
Dave Howson: This means that traders must continuously reassess the market, putting on and adjusting positions to manage risk hedge exposure will generate income.
Dave Howson: Turning to slide 10, I want to reinforce some of our more recent product innovations in January 2024, we increased access to shorter duration products with the launch of choose they enthuse the expiring Russell 2000, and many Russell 2000 index weekly options, providing small cap investors with some of the same tool.
Dave Howson: <unk> available to SPX trading.
Dave Howson: The access fee. Despite the roughly 80% Adv growth produced during 2023, we are even more excited about the potential for the <unk> contract in 2024, we believe potential margin relief from the SEC will allow additional customers to benefit from excess piece many advantages.
Dave Howson: Overall, the potential for regulatory approval, coupled with the likelihood for our cash at certain products to be offered on additional online platforms should have capitalized incremental excess peak uptake.
Dave Howson: On the data side, our partners play an important role in our growth. In 2024, we are excited to expand our collaboration with MSCI to include the launch of two new volatility indices and three new tradable products, subject to regulatory approval. This is a great example of our continued relationship with MSCI and the growing demand for both more volatility indicators and tradable products to better manage market demand. Touching more broadly on our data and access solutions business on slide 11, we posted another record quarter results, with revenues increasing 7% on a year-over-year basis. For the full year, DNA grew 9%, with organic growth making up 7.5% of the 9% growth.
Dave Howson: On the data side, our partners play an important role in our growth in 2024, we are excited to expand our collaboration with MSCI to include the launch of <unk> volatility indices, and three new tradable products subject to regulatory approval. This is a great example of our continued relationship with MSCI.
And the growing demand for both more volatility indicators and tradable products to better manage market risk.
Dave Howson: Switching more broadly on our data and access solutions business on slide 11, we posted another record quarter results with revenues, increasing 7% on a year over year basis for the full year DNA grew 9% with organic growth, making up seven and a half percentage points of the 9% growth the year over year.
Dave Howson: The year-over-year growth was again driven by client expansion and additional unit sales of our expanding portfolio of access and data solutions. Outside of our cloud capabilities, as I mentioned earlier, we saw the opportunity to grow our business by strengthening our distribution capabilities, expanding our index capabilities, and providing greater access to our markets around the world. I started my prepared remarks outlining the process we follow when building out our ecosystem of capabilities.
Dave Howson: Growth was again driven by client expansion and additional units out of our expanding portfolio of access and data solutions.
Outside of our cloud capabilities that I mentioned earlier, we sold the opportunity to grow our business by strengthening our distribution capabilities, expanding our index capabilities and providing greater access to our markets around the world.
Dave Howson: I started my prepared remarks outlining the process, we followed when building out our ecosystem of capabilities.
Dave Howson: As we think about the key trends across our businesses, we believe we are well aligned in each of our major categories. This not only helps drive more durable revenue generation for more established products, like our SPX suite, but also allows for the build-out of newer initiatives that can leverage a robust infrastructure already in place. Digital assets is one such product that touches each segment of our business. As we see markets increasingly move digital, we believe there will be greater demand for trusted and transparent markets.
Dave Howson: As we think about the key trends across our businesses. We believe we are well aligned in each of our major categories.
Dave Howson: This not only helps drive more durable revenue generation for more established products like our SPX suite, but also allows for the buildout of newer initiatives that can leverage our robust infrastructure already in place.
Digital assets is one such product such as each segment of our ecosystem.
Dave Howson: As we see markets increasingly move digital we believe there will be greater demand for trusted and transparent market.
Dave Howson: We were honored to have been chosen as the listing venue for six of the 11 Bitcoin ETFs made available for trading in January. Looking beyond the listing, cash trading, and data benefits, a more vibrant crypto ecosystem is advantageous to our recently launched Margin Futures product. In January, CBOE Digital became the only U.S. regulated exchange to offer spot, leveraged derivatives, and clearing on a single platform. 2024 is off to a strong start, and we look forward to capitalizing on the numerous opportunities across our business to drive long-term shareholder value. With that, I will turn the call over to Jill.
Dave Howson: We were honored to have been chosen as a listing venue for six of the 11 Bitcoin Etfs made available for trading in January.
Dave Howson: Looking beyond the lifting cash trading and data benefits a more vibrant crypto ecosystem is advantageous to our recently launched margin futures products.
Dave Howson: In January by digital became the only U S regulated exchange to offer spot leverage derivatives and clearing on a single platform <unk>.
Dave Howson: 2024 is off to a strong start and we look forward to capitalizing on the numerous opportunities across our business to drive long term shareholder value.
With that I will turn the call over to Jim.
Jill Griebenow: Thanks, Dave. As Fred and Dave highlighted, CBOE posted a strong fourth quarter with adjusted diluted earnings per share of 14% on a year-over-year basis to $2.06, equaling our previous quarterly record. On a full-year basis, adjusted diluted earnings per share were up 13% to a record $7.80, as CBOE generated strong net revenue growth of 10%, hitting a record $1.9 billion for 2023. I am incredibly pleased with the 2023 results and will provide some high-level takeaways from the quarter before delving into an assessment of the segment results and our 2024 guidance. Our fourth-quarter net revenue increased 9% to finish at a record $499 million. The growth was again driven by the strength in our derivatives markets category and the solid results from our data and access solutions.
Jim: Thanks, Dave.
Jim: You've highlighted deboe posted a strong fourth quarter with adjusted diluted earnings per share up 14% on a year over year basis to $2 and success equaling our previous quarterly record.
Jim: On a full year basis, adjusted diluted earnings per share were up 13% to a record $7 80.
Speaker Change: As Steve will generate a strong net revenue growth of 10% hitting a record $1 9 billion for 2023 I'm incredibly pleased with the 2023 result, and will provide some high level takeaways from the quarter before delving into an assessment of the segment results and our 2020 guidance.
Speaker Change: Our fourth quarter net revenue increased 9% to finish at a record $499 million. The growth was again driven by the strength of our derivative market category and the solid result from our data and access solutions.
Jill Griebenow: Specifically, derivatives markets produced 18% year-over-year organic net revenue growth in the fourth quarter, as we set numerous records across our proprietary product franchise for the fourth quarter and full year. Data and Access Solutions net revenues increased 7% on an organic basis during the quarter. We are pleased with the revenue trends and are confident in our ability to deliver durable growth in 2024. Cash and spot market net revenues decreased 11% during the quarter on an organic basis.
Speaker Change: Specifically derivative markets produced 18% year over year organic net revenue growth in the fourth quarter as we set numerous records across our proprietary product franchise for the fourth quarter and full year.
Speaker Change: Data and access solutions net revenues increased 7% on an organic basis. During the quarter. We are pleased with the revenue trends and are confident in our ability to deliver durable growth in 2024.
Cash and spot markets net revenues decreased 11% during the quarter on an organic basis, given headwinds in our north American Equity's business.
Jill Griebenow: Given headwinds in our North American equities business, adjusted operating expenses increased 9% to $192 million, with the year-over-year growth driven by higher compensation and benefits during the quarter. And adjusted EBITDA of $321 million grew a solid 10% versus the fourth quarter of 2022. Turning to the key drivers by segment, our press release and the appendix of our slide deck include information detailing the key metrics of our business segments, so I'll provide some highlights for each. The option segment provided robust growth to cap an outstanding year. Net revenue grew 15%, led by a strong contribution from our index business and favorable revenue per contract trends given the mix shift of index options. Total options ADV was up 2% as our higher priced index options ADV increased 24% over fourth quarter 2022 levels. Revenue per contract moved 20% higher given a continued positive contribution from the higher capture index product. And access incapacity fees were up 6% as compared to the fourth quarter of 2022. However, North American equities net revenue was down 10% on a year-over-year basis in the fourth quarter.
Speaker Change: Adjusted operating expenses increased 9% to $192 million with a year over year growth driven by higher compensation and benefits during the quarter.
Speaker Change: And adjusted EBITDA of $321 million grew a solid 10% versus the fourth quarter of 2022.
Speaker Change: Turning to the key drivers by segment, our press release and the appendix of our slide deck include information detailing the key metrics of our business segments.
Speaker Change: I'll provide some highlights for each of the option segment provided robust growth to cap an outstanding year net revenues grew 15% led by a strong contribution from our index business and favorable revenue per contract trend given the mix shift to index option.
Speaker Change: It'll options Adv was up 2% as our higher price index options Adv increased 24% over fourth quarter 2022 level rare.
Speaker Change: Revenue per contract moved 20% higher given a continued positive contribution of higher capture index products and.
Speaker Change: And access and capacity fees were up 6% as compared to the fourth quarter of 2020.
Speaker Change: North American equities net revenue was down 10% on a year over year basis in the fourth quarter, driven by lower net transaction fees the.
Jill Griebenow: Driven by lower net transaction volumes, the decrease was driven by a decline in our U.S. equities on exchange net capture as unfavorable mix shifts and higher client volume pushed more clients into higher tiers, resulting in a negative impact on our overall net capture rate. With our recent fee filings, we have already taken steps to enhance our capture dynamics while maintaining market share as we look to maximize revenue potential for the segment. Partially offsetting some of the headwinds in the U.S. on exchange business, Canadian equities and our business were solid for the quarter. And on the non-transaction side, access and capacity fees increased 7%, and proprietary market data was up 6%. The European APAC segment reported a 9% year-over-year increase in net revenue, as stronger non-transaction revenues and favorable foreign exchange trends again outpaced volume headwinds in European equities.
Speaker Change: The decrease was driven by a decline in our U S equities on exchange that capture as unfavorable mix shift and higher client volumes pushed more clients into higher tiers.
Speaker Change: <unk> and a negative impact on our overall net capture rate.
Speaker Change: With our recent SEC filings, we have already taken steps to enhance our capture dynamics, while maintaining market share as we look to maximize revenue potential for the segment.
Speaker Change: Offsetting some of the headwinds in the U S on exchange business Canadian equities in our base businesses were solid for the quarter and on the non transaction side access and capacity fees increased 7% and proprietary market data was up 6%.
Speaker Change: The Europe and APAC segment reported a 9% year over year increase in net revenue as stronger non transaction revenues and favorable foreign exchange trends again outpaced volume headwinds and European equities.
Jill Griebenow: Market Data, Access and Capacity, and Other, which includes the positive impact of interest income during the quarter, were up a combined 14% on a year-over-year basis. Transaction revenue in Japan and Australia benefited from solid market share gains. The futures segment reported the strongest year-over-year growth of all of our segments for the quarter, with net revenue of a robust 21 percent. Activity in the segment accelerated as volumes increased 21 percent on a year-over-year basis, and rates per contract improved by 2 percent. On the non-transaction side, access and capacity fees continued to perform well, up 6 percent versus the fourth quarter of last year, and market data revenues increased by 15 percent. And finally, net revenue in the FX segment notched another quarterly gain, growing by 12%, making it the 11th consecutive quarter of year-over-year net revenue gains for the segment. Net transaction fees revenue was up 8% as average daily notional value increased by 15%.
Speaker Change: Market data access and capacity and other which includes the positive impact of interest income during the quarter as a combined 14% on a year over year basis.
Speaker Change: Transaction revenue in Japan, and Australia benefited from solid market share gain.
Speaker Change: The future segment reported the strongest year over year growth of all of our segments for the quarter with net revenue up a robust 21%.
Speaker Change: Activity in the segment accelerated as volumes increased 21% on a year over year basis and rate per contract improved by 2%.
Speaker Change: On the non transaction side access and capacity fees continued to perform well up 6% versus the fourth quarter of last year and market data revenues increased by 15%.
Speaker Change: And finally net revenue in the FX segment notched another quarterly gain growing by 12%, making it the 11th consecutive quarter of year over year net revenue gains for the segment.
Speaker Change: Net transaction fees revenue was up 8% and average daily notional value increased by 15% and market share had another record at 21, 3% for the quarter.
Jill Griebenow: And market share hit another record, at 21.3% for the quarter. Turning now to CBOE's Data and Access Solutions business, net revenues were up a solid 7% on an organic basis in the fourth quarter, bringing the full-year total net revenue growth to 9% and organic net revenue growth to 7.5% in 2020. Net revenue growth continued to be driven by additional subscriptions and units, accounting for 84% of the organic market data growth and just over half of the organic access and capacity fees growth during the fourth quarter. We are pleased with the organic net revenue trends for this segment and believe the momentum positions us well to hit our 2024 and medium-term guidance range of 7 to 10 percent. More specifically, we expect to see continued strength from increasing demand for access across our global markets, particularly given our leverage to growing asset classes and expansion into new regions.
Speaker Change: Turning now to see both data and access solutions.
Speaker Change: Net revenues were up a solid 7% on an organic basis in the fourth quarter, bringing the full year total net revenue growth to 9% and organic net revenue growth to seven 5% in 2023.
Speaker Change: Net revenue growth continued to be driven by additional subscriptions and unit accounting for 84% of the organic market data growth and just over half of the organic access and capacity fees growth during the fourth quarter.
Speaker Change: We are pleased with the organic net revenue trends for this segment and believe the momentum positions us well to hit our 2024 and medium term guidance range of 7% to 10% more specifically, we expect to see continued strength from increasing demand for access across our global markets, particularly given our leverage to growing asset class.
Speaker Change: <unk> and expansion into new regions.
Jill Griebenow: Proprietary Data Sales and Options Analytics are benefiting from the sustained growth across our derivative complex. And finally, we anticipate a continued focus on our sales effort to distribute our content globally. From Market Data to Indices, Adding to the Enhanced Distribution Capabilities that the CBOE Global Cloud Presents. Turning to expenses, total adjusted operating expenses were approximately $192 million for the quarter, up 9% compared to last year.
Speaker Change: Proprietary data sales and options analytics benefiting from the sustained growth across our derivatives complex.
Speaker Change: And finally, we anticipate a continued focus on our sales effort to distribute our content globally from market data to indices, adding to the enhanced distribution capability that vascepa global cloud for that.
Speaker Change: Turning to expenses total adjusted operating expenses were approximately $192 million for the quarter up 9% compared to last year. The increase was the product of compensation and benefits given higher head count as well as higher technology support services to support the investment in our key growth initiatives during the quarter.
Jill Griebenow: The increase was a product of compensation and benefits given higher headcount, as well as higher technology support services to support the investment in our key growth initiatives during the quarter. As we look ahead on slide 18 to our 2024 guidance, we are introducing our full year 2024 Adjusted Expense Guidance range of $795,000 to $808 million. After two years of relatively elevated expense growth as we integrated numerous acquisitions and invested heavily in growth initiatives, we are slowing the pace of expense growth to help provide greater margin stability moving forward. Our 2024 expense guidance of $798 to $808 million represents roughly 6% growth on the bottom end and 8% growth on the top end, or just under a 5% increase at the midpoint if using the fourth quarter of 2023 as a baseline.
As we look ahead on slide 18 to our 2024 guidance, we are introducing our full year 2024, adjusted expense guidance range of $798 million to $808 million.
Speaker Change: After two years of relatively elevated expense growth as we integrated numerous acquisitions and invested heavily in growth initiatives. We are slowing the pace of expense growth to help provide greater margin stability moving forward, our 2024 expense guidance of $798 million to $808 million represents roughly 6% growth on the bottom end and.
Speaker Change: 8% growth on the top end or just under a 5% increase at the midpoint using the fourth quarter of 2023 at the baseline.
Jill Griebenow: Importantly, this lower growth rate should not be viewed as a lack of desire or ability to invest in attractive long-term growth opportunities across our businesses but rather highlights a more refined effort to manage expense growth to better align with revenue generation and stabilize the margins of our businesses. Looking at our full-year guidance more broadly, we are introducing an organic total net revenue growth range of 5 to 7% for 2024. This is in line with our medium-term guidance of 5-7% introduced over two years ago as we continue to execute on our vision for the company. We are also introducing a DNA Organic Net Revenue Growth Target Range of 7% to 10% for 2024, also in line with our medium-term expectations.
Speaker Change: Fortunately this lower growth rate should not be viewed as a lack of desire or ability to invest in attractive long term growth opportunities across our businesses.
Speaker Change: But rather highlights a more refined effort to manage expense growth to better align with revenue generation and stabilize the margins of our businesses.
Speaker Change: Looking at our full year guidance more broadly we are introducing an organic total net revenue growth range of 5% to 7% for 2024.
Speaker Change: This is in line with our medium term guidance of five 7% introduced over two years ago as we continued to execute on our vision for the company.
Speaker Change: We are also introducing a DNA organic net revenue growth target range of 7% to 10% for 2024 also in line with our medium term expectation.
Jill Griebenow: The DNA category has been a durable growth driver over the years, and we remain comfortable in our ability to hit our objectives in 2024. In the other income line, we anticipate a $37 to $43 million benefit in 2024 from positive mark-to-market gains on our investment in the Seven Ridge Fund, which owns Trading Technology. Our full-year guidance on CapEx calls for an expected range of $51 to $57 million in 2024, and depreciation and amortization is expected to be in the range of $43 to $47 million for the year. We expect the effective tax rate on adjusted earnings under the current tax laws to come in at 28.5% to 30.5% in 2024.
Speaker Change: The DNA category has been a durable growth driver over the year and we remain comfortable in our ability to hit our objectives in 2024.
Speaker Change: And the other income line, we anticipate a 37% to $43 million benefit in 2024 from positive marks on our investment in the <unk>, which are trading technology.
Speaker Change: Our full year guidance on Capex call for an expected range of $51 million to $57 million in 2024, and depreciation and amortization is expected to be in the range of $43 million to $47 million for the year.
Speaker Change: We expect the effective tax rate on adjusted earnings under the current tax loss to come in at 28, 5% to 35% for 2024.
Jill Griebenow: And finally, outside of our annual guidance, we expect net interest expense to be in the range of $10 to $11 million for the first quarter of 2024. Before moving on from our guidance section, I want to spend a minute on slide 19, to highlight how CBOE has performed against our medium-term expectations historically. Looking back over the last six years, we've performed well against our targets as we have executed on our strategic ambitions. Our goal for the last few years has been to grow total organic net revenues by 5-7% and organic DNA revenues by 7-10% each year, something we have consistently achieved.
Speaker Change: And finally outside of our annual guidance, we expect net interest expense to be in the range of $10 million to $11 million for the first quarter of 2024.
Speaker Change: Before moving on from our guidance section I wanted to spend a minute on slide 19 to highlight how <unk> has performed against our medium term expectations historically.
Speaker Change: Looking back over the last six years, we performed well against our target as we have executed on our strategic ambition.
Speaker Change: Our goal for the last few years has been to grow total organic net revenues by 5% to 7% and organic DNA revenues by 7% to 10% each year something we have consistently achieved.
Jill Griebenow: Given the durable nature of both our non-transaction and transaction businesses, particularly given the increasingly recurring nature of our derivatives franchise, we believe we are well positioned to build on our historical performance and look forward to innovating and leveraging our global platform. 2024 is off to another strong start.
Given the durable nature of both our non transaction and transaction businesses, particularly given the increasingly recurring nature of our derivatives franchise.
Speaker Change: We believe we are well positioned to build on our historical performance and look forward to innovating and leveraging our global platform.
Speaker Change: 2024 is off to another strong start and as we have done in the past, we will fine tune our annual guidance expectations to reflect the current environment throughout the year.
Jill Griebenow: And, as we have done in the past, we will fine-tune our annual guidance expectations to reflect the current environment throughout the year. On the capital front, our focus remains maximizing long-term shareholder value through effective capital management. In the fourth quarter, we returned a total of $58.5 million to shareholders in the form of a $0.55 per share quarterly dividend.
Speaker Change: On the capital front, our focus remains maximizing long term shareholder value through effective capital management in the fourth quarter. We returned a total of $58 $5 million to shareholders in the form of a 55 per share quarterly dividend.
Speaker Change: In addition, we repurchased $5 8 million in shares at the end of the fourth quarter.
Jill Griebenow: In addition, we repurchased $5.8 million in shares at the end of the fourth quarter. Moving forward, we will look to opportunistically repurchase shares given our continued strong free cash flow generation. Turning to our balance sheet, we paid down the remaining $75 million on our term loan facility during the quarter.
Speaker Change: Moving forward, we will look to opportunistically repurchase shares given our continued strong free cash flow generation.
Speaker Change: Turning to our balance sheet, we paid down the remaining $75 million on our term loan facility during the quarter, our fourth quarter leverage ratio declined to one two times from one three times in the prior quarter as a result of the debt Paydown.
Jill Griebenow: Our fourth-quarter leverage ratio declined 1.2 times from 1.3 times in the prior quarter as a result of the debt paydown. Overall, we remain comfortable with our debt profile and the balance sheet flexibility it affords. Having locked in low, medium to longer-term fixed rates, averaging below 3% on our outstanding debt. Embedded in our expense, revenue, and capital expectations, we are always looking to strike the right balance between investing in future growth and optimizing our margins. We look forward to executing on our growth drivers in the year ahead and delivering solid shareholder returns in 2024. Now, I'd like to turn it back over to Fred for some closing comments before we open it up to Q&A.
Speaker Change: Overall, we remain comfortable with our debt profile and the balance sheet flexibility it affords having locked in low medium to longer term fixed rate averaging below 3% on our outstanding debt.
Speaker Change: Embedded in our expense revenue and capital expectations. We are always looking to strike the right balance between investing in future growth and optimizing our margin. We look forward to executing on our growth drivers in the year ahead, and delivering solid shareholder returns in 2024.
Speaker Change: Now I'd like to turn it back over to Fred for some closing comments before we open it up to Q&A.
Fred Thompson: We are excited about both the near and long term opportunities to grow and expand our business and believe we have strong momentum as we head into 2024.
Fred Thompson: We are well positioned to leverage our global footprint, our leading edge technology and continued product innovation to unlock the value of our global network that sibolga scope.
Fred Tomczyk: We are excited about both the near and long-term opportunities to grow and expand our business and believe we have strong momentum as we head into 2024. We are well positioned to leverage our global footprint, leading-edge technology, and continued product innovation to unlock the value of the global network that CBOE has built. And I am excited about the opportunities we see to drive revenue and earnings growth across our platform. 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.
Fred Thompson: And I am excited about the opportunities, we see to drive revenue and earnings growth across our platforms.
Speaker Change: 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 as time permits we'll take a second question.
Speaker Change: Yes.
Speaker Change: Thank you at this time I would like to remind our teleconference participants in order to ask a question. Please press the star followed by the number one on your telephone keypad.
Speaker Change: Our first question comes from the line of burden bullish from Barclays Capital. Please go ahead.
Burden Bullish: Hi, good morning, and thanks for taking the question.
Burden Bullish: Wanted to ask about the revenue guidance for this year.
Operator: At this time, I'd like to remind our teleconference participants that in order to ask a question, please press the star followed by the number one on your telephone key. Our first question comes in on the line from Ben Bodish from Barclays Capital. Please go ahead.
Burden Bullish: Joe you made a comment about how you're well positioned to build on historical performance and if you look at the last three years have been well above that range.
Burden Bullish: And I guess the question is sort of are you sticking with your medium term target or does 5% to seven represent sort of how you see the year unfolding right now.
Ben Herbert: Hi, good morning, and thanks for taking the question. I wanted to ask about the revenue guidance for this year. You know, Jill, you made a comment about how you're well-positioned to build on historical performance, and if you look at the last three years, you've been well above that range. And I guess the question is sort of, are you sticking with your medium-term target, or does five to seven represent sort of how you see the year unfolding right now? And maybe kind of alongside that, how do you maybe frame up the OPEX guidance in the context of revenue growth? I think you sort of indicated, well, if there's a lot of opportunity, we might spend more. If there's less opportunity, we might spend less. How do those pieces all fit together?
Burden Bullish: Kind of alongside that how do you maybe frame up the opex.
Speaker Change: Guidance in the context of the revenue goes I think you've sort of indicated well if theres a lot of opportunity we might spend more if theres lots of opportunity we might spend less how do those pieces all put together. Thank you.
Speaker Change: You bet I'll start us off here and I think when looking at our revenue guidance of the 5% to 7% as you alluded to that's our medium term guidance that we're going out there with really looking at the strong finish to 2023 looking at that momentum building and steadily over 2024, we did have a strong January though so we will continue to monitor.
And obviously, we'll adjust the guidance going forward on a quarterly basis as it relates to the operating expense piece again trying to harmonize that with revenue opportunities feel very comfortable now that we're at more of a steady state with the guidance range that we've got out there with to the extent, though that we identify ret.
Fred Tomczyk: Thank you. You bet. I'll start us off here.
Jill Griebenow: And I think when looking at our revenue guidance, the 5 to 7%, as you alluded to, that's our medium-term guidance that we're going out there with, really looking at the strong finish to 2023, looking at that momentum, building in, you know, steadily over 2024. We did have a strong January, though, so we will continue to monitor, and obviously, we'll adjust the guidance going forward on a quarterly basis As it relates to the operating expense piece, again, trying to harmonize that with revenue opportunities, I feel very comfortable now that we're at more of a steady state with the guidance range that we've gone out there with. To the extent, though, that we identify revenue-generating opportunities, we are definitely well-positioned to invest in those, and we'll evaluate those as they come. Okay, great, thank you.
Speaker Change: And youre generating opportunities, we are definitely well positioned to invest in those.
Speaker Change: And we'll evaluate those as they come.
Speaker Change: Sure.
Speaker Change: Okay, great. Thank you.
Speaker Change: You bet.
Speaker Change: Thank you. Our next question comes from line of Dan Fannon of Jefferies. Please go ahead.
Daniel Thomas Fannon: Hi, Thanks, Good morning, Fred I was hoping to get an update on your goal of sharpening Cboe's focus as we think about 2024 are there certain segments or products that are de emphasized in terms of investment.
Daniel Thomas Fannon: And more specifically, how do you think about or your thoughts around the strategic importance of the FX business, which doesn't really seem to harmonize with some of your other products.
Jill Griebenow: You bet. Thank you. Our next question comes from Dan Fannon of Jeffreys. Please go ahead. Thanks. Good morning.
Dan Fannon: Okay. So first I think on the sharpening of focus.
Daniel Thomas Fannon: Fred, I was hoping to get an update on your goal of sharpening CBOE's focus. As we think about 2024, are there certain segments or products that are de-emphasized in terms of investment? And then more specifically, how do you think about or your thoughts around the strategic importance of the FX business, which doesn't really seem to harmonize with some of your other products? Okay, so first, I think about the sharpening of focus
I'd go back to when I was on the board and the strategy of CMO was more asset classes or geographies and I thought that was pretty broad so now I'm the CEO basically.
Dan Fannon: Want to sharpen that focus.
Dan Fannon: Sure.
Dan Fannon: We've always been on my predecessor about sharpening our focus on making some choices.
Dan Fannon: I think where we are right now is basically rebuilt this global network. We've got the global platform and got most of the technology conversion, we have one left.
Dan Fannon: I think thats now up to us to sharpen our focus in terms of where we see the biggest opportunities to invest organically to drive growth across our platform. We have one common technology.
Fred Tomczyk: I mean, I go back to when I was on the board, and the strategy of CBOE was more asset classes, more geographies, and I thought that was pretty broad. So now that I'm the CEO, I basically want to sharpen that focus, which I have always been to my predecessor about sharpening that focus and making some choices. I think where we are right now is basically that we've built this global network, we've got the global platform, we've got most of the technology converted, and we have one left. I think it's now up to us to sharpen our focus in terms of where we see the biggest opportunity to invest organically to drive growth across that platform now that we have one common technology platform. Definitely, the M&A activity has slowed down and will continue.
Dan Fannon: Technology platform definitely the M&A activity.
Dan Fannon: Slow down and will continue to be slowed down, but we will continue to look at things on an opportunistic basis, where we see something that's sort of been.
Dan Fannon: <unk> to us, but we want to make sure it's strategic it's financially attractive and it drives shareholder value overtime.
Dan Fannon: With respect to the FX business.
Performing well.
Dan Fannon: It's been a good business for us so.
Dan Fannon: So we remain happy with our business I.
Dan Fannon: I understand our core game as securities and Securities derivatives businesses.
Dan Fannon: The Opex business continues to perform well for us.
Dan Fannon: And we don't need the money or anything so I think right now we're very comfortable with our position.
Dan Fannon: And certainly.
Speaker Change: John I would add obviously, the FX business performed very well with that market share of 21, 3% and when do you think about it in relation to the other businesses. It is a global business and we are building a global securities and derivatives network and the technology platform that runs the FX business really suits the needs of that space very well and it allowed us to.
Fred Tomczyk: We will continue to look at things on an opportunistic basis where we see something that's of interest to us, but we want to make sure it's strategic, it's financially attractive, and it drives good shareholder value over time. With respect to the FX business, it's performing well. It's been a good business for us, so we remain happy with that business. I understand our core game is securities and securities derivatives, but the FX business continues to perform well for us, and we don't need the money or anything, so I think right now we're very comfortable with our position. Certainly.
Step into an adjacency there with only a small incremental investment as we look at the U S. Treasuries platform that we've been building out and that we launched and we now seeing early trades and a good pipeline that should the business has that has a good runway for us and it being global and the overlap of client basis synergy that really something we find white house.
Speaker Change: Yes, as we go through the strategic review.
Speaker Change: Continuing to sharpen our focus.
Dave Howson: Down there with Al, obviously, the FX business has performed very well, with that market share up at 21.3%. And when you think about it in relation to the other businesses, it is a global business, and we are building a global securities and derivatives network. And the technology platform that runs the FX business really suits the needs of that space very well and has allowed us to step into an adjacency there with only a small incremental investment, as we look at the U.S. Treasuries platform that we've been building out. And there we have launched, and we're now seeing early trades and a good pipeline there. So the business has a good runway for us, and being global, and that overlap of client-based synergies there, really something we find quite powerful. And, you know, as we go through the strategic review, we'll continue to sharpen our focus. But as we're early in the process, once we get through it more, we'll be clear to everyone about exactly how we're sharpening our focus.
Speaker Change: Early in the process once we get through it more clearer.
Speaker Change: Clearer to everyone about exactly how we're sharpening our focus.
Speaker Change: Understood. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the Ken Worthington of Jpmorgan. Please go ahead.
Kenneth B. Worthington: Hi, good morning, and thanks for taking the question it looks like the pace of relative growth in zero TCE is leveling off in SPX. So its 44% in <unk>, 48% in <unk>.
Kenneth B. Worthington: You said it was 50% in January is there a logical ceiling in terms of how high zero DTE can be of total SPX volumes and how do you think about growth of SPX over the next few years, if CET zero DTE is not a principal driver.
Kenneth B. Worthington: Thanks, a lot Ken.
Kenneth B. Worthington: SPX volumes there in Q4 about $3 3 million.
Kenneth B. Worthington: <unk> contracts are the goods. So we went into January as well as we go through when you think about the SPX complex and then even take a step back to overall CEVA as volatility toolkit that we talk about that it is a complex that investors have found great utility to be nimble and to manage that uncertainty whether it be hedging positioning and repositioning.
Dave Howson: Thank you. Thank you. Our next question comes from the line of Ken Worthington of J.P. Morgan. Please go ahead.
Kenneth B. Worthington: Hi, good morning, and thanks for taking the question. It looks like the pace of relative growth in zero TTE is leveling off in SPX. So it's 44% in 2Q, 48% in 3Q. You said it was 50% in January. Is there a logical ceiling in terms of how high zero DTE can be in terms of total SPX volume?
Kenneth B. Worthington: Turning portfolio across tenants is not just about their dth and Thats why you see that fluctuation in the percentage of trading the easier it really depends on what's happening some of our biggest volume days have indeed seen a lower proportion of DT trading as people reposition their portfolios potentially catch up to our market.
Kenneth B. Worthington: Well simply hedge a boarder portfolio. So thats essentially zero DG has flexed over time, it's really in that range of 40 to 50.
Dave Howson: And how do you think about growth of SPX over the next few years if zero DTE is not a principal driver? Thanks a lot, Ken. SBX volumes there in Q4 were up at 3.3 million contracts with a good, solid run into January as well. When you think about the SBX complex and then even take a step back to overall CBOE's volatility toolkit that we talk about, that is the complex that investors have found great utility to be nimble and to manage that uncertainty, whether it be hedging, positioning, and repositioning portfolios across tenants. It's not just about zero DTE, and that's where you see that fluctuation in the percentage of trading that is zero DTE really depends on what's happening. Some of our biggest volume days have indeed seen a lower proportion of zero DTE trading as people reposition their portfolios, potentially catch up to a market rally, or simply hedge a broader portfolio. So that percentage of zero DTE has flexed over time. It's really in that range of 40% to 50% there.
Kenneth B. Worthington: To incent that.
Kenneth B. Worthington: And the great thing that we see overall utility is a complex and with zero.
Kenneth B. Worthington: So could you drill down one step further and we've seen that evolution I think relative known retailer engagement and the usage of this shorter dated tenants last year round about 55 to call it 60%.
Kenneth B. Worthington: <unk> SPX was what we call non retail which includes professional retail and non retail segment. This quarter just gone, it's nearly 70% round about 68% so great thing David.
Kenneth B. Worthington: The engagement from the institutional side of the market that really finding greater utility and as you mentioned <unk> in general that show today to Turner.
Kenneth B. Worthington: Applicability for customers out there we added Tuesday Thursday, as we said in the prepared remarks to the Russell complex really allowing small cap investors. Many of the same stress strategies that they enjoy.
Kenneth B. Worthington: <unk> large cap U S market index.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Alex <unk> with Goldman Sachs. Please go ahead.
Alex: Hey, guys. Good morning, staying on the SPX question for another minute it looks like the volumes in January have really decoupled versus that of other equity market. So January SPX volumes think up over 20 year over year.
Dave Howson: But the great thing that we see is the overall utility of the complex. And with zero DTE itself, if you drill down one step further, we've seen the evolution of the growth of non-retail engagement in the usage of those shorter-dated tenants. Last year, around about 55%, or call it 60% of overall zero DTE in SPX was what we call non-retail, which includes professional retail in that non-retail segment. This quarter just gone, it's nearly 70%, around about 68%.
Alex: <unk>, obviously is a contributor but it looks like the month, Lisa grow as well.
Alex: That's sort of very much in contrast to what are we seeing in single name options and cash equities in Cme's equity derivatives. So just curious what has been the driver is there anything new kind of happening underneath the surface with respect to the new customer basis or.
Dave Howson: So a great thing there is the engagement from the institutional side of the market. They're really finding greater utility. And as you mentioned, zero DTE in general, that shorter-dated tenant applicability for customers out there, we added Tuesday and Thursday, as we said in the prepared remarks, to the Russell complex, really allowing small-cap investors many of the same strategies that they enjoy in the bigger SPX large-cap US market index there. Great, thank you very much.
Alex: Just broader adoption that you could point to.
Alex: We see some rotation.
Alex: Different strategies deployed and we see in.
Alex: Many of our customers talking about actually an interest in some of the single name options capability.
Alex: And these calls likeness a variety of liquidity providers and retail brokers really continuing to engage in auctions.
Alex Blostein: Thank you. Thank you. Thank you. Thank you. Our next question comes from Alex Blostein of Goldman Sachs. Please go ahead.
Alex: General.
Alex: The overall adoption, so index option and particularly the SPX is really that elevated macro uncertainty that people are beginning with managing their portfolios on the macro basis. They just use the uncertainty the fed inflation.
Dave Howson: Hey, guys, good morning. Staying on the SBX question for another minute, it looks like the volumes in January have really decoupled versus sort of other equity markets. So, you know, January SBX volumes are up over 20 year-over-year, zero DTE obviously is a contributor, but it looks like the monthlies are growing as well. That's sort of very much in contrast to what we're seeing in single name options and cash equities and CME equity derivatives. So just curious, what has been the driver?
Alex: Gross estimates and of course, the U S election is really contributing to people I'm really telling to that index suite to really be able to manage that portfolio risk and actually find that June exposure. So as I look throughout the throughout the year.
Alex: Okay.
Speaker Change: Alright. Thanks.
Speaker Change: Thank you. Our next question comes from the line of Alex Kramm from UBS financial. Please go ahead.
Alex Kramm: Hey, good morning, everyone, sorry, if I missed this earlier, but can you talk a little bit more about capital allocation in particular as it relates to share buyback I think the fourth quarter, I think roughly $6 million or so but I know you also paid off some debt so with that now behind us.
Alex Blostein: Is there anything new kind of happening underneath the surface with respect to new customer bases or just broader adoption that you could point to? We see some rotation there, certainly as different strategies are deployed, and we see and hear many of our customers talking about an interest in some of the single name options capability. We hear on earnings calls like this that a variety of liquidity providers and retail brokers are really continuing to engage in options in general. The overall adoption for index options, in particular the SBX, is really that elevated macro uncertainty that people are dealing with managing their portfolios on that macro basis as they adjust to news, uncertainty, the Fed, inflation, growth estimates, and, of course, the US elections, which are really contributing to people really turning to that index suite to really be able to manage that portfolio risk and actually fine-tune exposures as they look throughout the year.
Alex Kramm: Can you talk about the pace of buybacks, you see and how you think about it.
Alex Kramm: Opportunistic versus consistence.
Alex Kramm: Framework for this year.
You bet, so as you've alluded to that we did have I mean, just $5 $8 million worth of share repurchases in the fourthquarter. So considered relatively light, but if you look back on a historical basis, we do have a history of being heavier on the repurchase Brian during the first quarter of each year and then also as Ive alluded to we have paid off.
All of the floating rate debt, which gives us affords us more in the way of capacity and ability to deploy capital. So as we've done in the past we will continue to be opportunistic as it relates to share repurchases. If we see any perceived weakness in the share price, we will absolutely get added back to eat back behind it.
Dave Howson: All right, thanks. Thank you. Our next question comes from the line of Alex Kramm from UBS Financial. Please go ahead. Yes. Hey, good morning, everyone. Sorry if I missed this earlier, but can you talk a little bit more about capital allocation, in particular as it relates to share buybacks? I think in the fourth quarter, you had roughly 6 million or so, but I know you also paid off some debt.
Alex Kramm: And then again just continue with our routine practice as well on top of that.
Speaker Change: Makes sense. Thanks.
Alex Kramm: Okay.
Speaker Change: Thank you. Our next question comes from the line of code now of Oppenheimer. Please go ahead.
Oppenheimer: Good morning, and thank you for taking my questions.
Oppenheimer: Thank you for providing slide nine about 2020 for catalyst could.
Oppenheimer: Could you please add more color on these complements a wider adoption and expanded access.
Alex Kramm: So with that now behind us, can you talk about the pace of buybacks you see and how you think about it from an opportunistic versus consistent kind of framework for this year? Thanks. You bet.
Oppenheimer: Greg you can remind us how many existing retail platforms.
Speaker Change: Index options trading.
Jill Griebenow: So as you've alluded to, we did have, I mean, just $5.8 million worth of share repurchases in the fourth quarter, which is considered relatively light. But if you look back on a historical basis, we do have a history of being heavier on the repurchase front during the first quarter of each year. And also, as you've alluded to, we have paid off all of the floating rate debt, which gives us more in the way of capacity and ability to deploy capital. So, as we've done in the past, we will continue to be opportunistic as it relates to share repurchases. If we see any perceived weakness in the share price, we will absolutely get back behind it. And then again, just continue with our routine practice as well on top of that. It makes sense.
Speaker Change: Any more you expect to come online in 2024, and then for global trading hour, how should we think about incremental volume. Thanks.
Greg: Thanks, very much Evan.
Expanding access is obviously, a big focus for US now with a global footprint that allows us more boots on the ground more access to local customers, who would like to gain access and exposure to the seabed volatility tool came in particular, the SPX and VIX options.
The single digit percentage of overall volumes that we see in global trading hours really we think provides a solid runway when we look at the potential come barrel comparable without that and so our focus is really adding new retail brokers and brokers internationally that you spoke about that we've got several coming on in <unk>.
Jill Griebenow: Thanks. Kenneth, Thank you. Our next question comes from the line of Owen Lau of Oppenheimer.
Owen Lau: Please go ahead. Good morning, and thank you for taking my questions. Thank you for providing slide nine about the 2024 Catalyst. Could you please add more color on these catalysts of wider adoption and expanded access? It would be great if you could remind us how many existing retail platforms have index options trading, and how many more do you expect to come online in 2024? And then, for the global trading hour, how should we think about incremental volume? Thanks. Thanks very much, Owen.
Greg: <unk> 24, including obviously, we've heard on previous earnings calls. The addition of Robinhood likely later on this year, which we find very exciting for the complex as a whole from the SPX all the way through to the excess product and Thats really a key focus for us on voting new participants to the <unk>.
Greg: But also I would note that the expansion of the institutional the non retail engagement.
Greg: The SPX complex has been really compelling and interesting for us as that liquidity has built the quality of the order books the pricing the capability to trade as a win.
Dave Howson: The expanding access is obviously a big focus for us now, with a global footprint that allows us more boots on the ground, more access to local customers who would like to gain access to the CBOE Volatility Toolkit, in particular the SPX and VIX options there. The single-digit percentage of overall volumes that we see in global trading hours really, we think, provides a solid runway when we look at other potential comparables out there, and so our focus is really adding those new retail brokers and brokers internationally that you spoke about there. We've got several coming in 2024, including, obviously, as we've heard on various earnings calls, the addition of Robinhood likely later this year, which we find very exciting for the complex as a whole, from the SPX all the way through to the XSP product. That's really a key focus for us, onboarding new participants into the complex.
Greg: Investors need to really drawing new strategies as well for example from Q asked desks and so on so we're excited about new strategies and new funds deploying capital into SPX.
More broadly so that really speaks to that increased one reduction not just from retail, but totally new institutional strategy second gain benefit from that solid ecosystem that we've been able to build out.
Speaker Change: Alright, Thanks, a lot.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the line of Michael <unk> from Morgan Stanley. Please go ahead.
Michael: Hi, Good morning, I was hoping you could speak to some of the new indices that you've launched over the past year.
Across asset classes, including the credit volatility indices, and maybe you could talk to some of the opportunities that you see for introducing tradable products, where that stands with that product roadmap looks like across asset classes and as you look out over the next couple of years, where might there be other opportunities for creating other proprietary index related products.
Dave Howson: But also, I would note that the expansion of institutional and non-retail engagement in the SPX complex has been really compelling and interesting for us as that liquidity has built the quality of the order books, the pricing, and the capability to trade as and when investors need to. It's really drawing in new strategies as well, for example, from QIS desks and so on, so we're excited about new strategies and new funds deploying capital into SPX more broadly. So that really speaks to that increased wider adoption, not just from retail but from new institutional strategies that can gain benefit from that solid ecosystem that we've been able to build out. Alright, thanks a lot.
Speaker Change: Thanks very much.
Speaker Change: Product development haven't see though really is that simplification.
Speaker Change: Potentially OTC and complex strategies really striving to bring capital efficiencies to our customers across wallet size is bringing investment strategy is to own wallet size is just look at the global trading hours. We just spoke about think about.
Michael J. Cyprys: Thank you. Our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead. Hi, good morning.
Speaker Change: <unk> is bringing the SPX exposure to the S&P 500 exposure to a smaller wallet side the Russell Tuesday.
Michael J. Cyprys: I was hoping you could speak to some of the new indices that you launched over the past year across asset classes, including the credit volatility indices. And maybe you could talk to some of the opportunities that you see for introducing tradable products, where that stands, and what that product roadmap looks like across asset classes. And as you look out over the next couple of years, where might there be other opportunities for creating other proprietary index-related products? Thanks very much.
All good.
Speaker Change: Organic.
Speaker Change: Initiatives when you think about the indices, we launched last year, you've got the dispersion index and the credit mix as you mentioned the dispersion index that we aim to have a future available on that.
K till later this year subject to regulatory approvals and final product design requirements, and then thinking about the expansion of the MSCI contracts III, new tradable products to volatility indices that more exposures you've got now it's IBO with index options, you have global exposure to see but U S exposure and you've got small cap.
Dave Howson: The focus of product development here at CBOE really is that simplification of potentially OTC and complex strategies, really striving to bring capital efficiencies to our customers across wallet sizes, so bringing investment strategies to all wallet sizes. So just look at the global trading hours we just spoke about. Think about the XSP as bringing the SPX exposure, the S&P 500 exposure to a smaller wallet size, the Russell Tuesday, Thursday there; all good organic initiatives. When you think about the indices we launched last year, you've got the dispersion index and the credit VIX, as you mentioned. The dispersion index there; we aim to have a future available on that indicator later this year, subject to regulatory approvals and final product design requirements.
Exposure that you can trade with the potential for further product development from.
Speaker Change: And then we mentioned finally, new asset classes, we've already got the Ibrox credit futures that first listed.
Speaker Change: Credit feature available in the United States really amenable to funds cannot trade securities to be able to manage their risk and hedge any portfolio risk that as well the options on futures. We launched last year also bringing optionality to that to that new asset class and when you combine them together you think about credit makes with the credit.
Future as you think about dispersion index next to the VIX Index you have got a variety of indicators from a variety of slightly to exposures in asset classes that customers can come to see by and in a single price manage all of those in a single place. So what you should see expect to see placebo is as we build these links.
Dave Howson: And then think about the expansion of the MSCI contract, three new tradable products, two volatility indices there, more exposures you've got now at CBOE with index options. You have global exposures, you've got U.S. exposure, you've got small cap exposures that you can trade with the potential for further product development from there. And then we mentioned new asset classes. We've already got the IBOX credit futures, the first listed credit future available in the United States, really amenable to funds that cannot trade securities to be able to manage their risk and hedge any portfolio risk there as well. The options on futures we launched last year are also bringing optionality to that new asset class. And when you combine them together, you think about credit VIX with credit futures, you think about dispersion index next to the VIX index, you've got a variety of indicators from a variety of slices of exposures and asset classes that customers can come to CBOE and, in a single place, manage all of those in a single place.
Speaker Change: Quiddity pools in these ecosystems that we will incrementally push these forward, but always we got to be led by customer demand. So we are going to go wherever our customers asked us to go so that will be in April thing process as we go through year to year.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from the line of Brian Bedell of Deutsche Bank. Please go ahead.
Brian Bedell: Great. Thanks, Good morning folks thanks for taking my question, maybe shifting gears.
Brian Bedell: Outside the U S.
Brian Bedell: The Canadian migration onto the <unk> platform and that the combination.
And match now can you just talk about.
Brian Bedell: Weather.
Thats more of a efficiency.
Brian Bedell: Initiative or is that something that you think.
Brian Bedell: Ken Ken.
Brian Bedell: Your market share in Canada, and maybe just talk broadly about your strategy.
Dave Howson: So what you should expect to see from CBOE is that as we build these liquidity pools and these ecosystems, we will incrementally push these forward. But we're always going to be led by customer demand, so we're going to go wherever our customers ask us to go. So that will be an evolving process as we go through it year to year. Great, thank you. Our next question comes on the line from Brian Bedell of Deutsche Bank. Please go ahead.
Brian Bedell: Yes.
Brian Bedell: You have been bringing bids there as well.
Brian Bedell: If you could touch on.
Brian Bedell: Listings game plan with Neil.
Brian Bedell: Yes, Brian Good morning, This is Chris Isaacson I'll start that.
Christopher A. Isaacson: The <unk> migration to see bow technology planned for Q1 of next year I would say, it's all of the above yes, we do expect it to be more efficient.
Brian Bedell: Great. Thanks. Good morning, folks.
Christopher A. Isaacson: As part of our platform migrations has become more efficient to please our customers, but then on the back of those migrations, we have historically seen market share growth as well as data and access solutions revenue growth or pull through.
Brian Bedell: Thanks for taking my question. Maybe shifting gears outside the U.S., the Canadian migration onto the CBOE platform, and that's the combination of NEO and MatchNow. Can you just talk about whether that's more of an efficiency initiative, or is that something that you think can enhance your market share in Canada? And maybe just talk broadly about your strategy. I know you've been bringing bids there as well, and if you can touch on your listing game plan with NEO. Yeah, Brian, good morning. This is Chris Isaacson.
Christopher A. Isaacson: In fact, it's happening right now both in Australia, and Japan, So we want to bring not just greater efficiency, but greater functionality to the Canadian market and a unified platform.
Christopher A. Isaacson: We have already launched bits there when we migrated match now back in 2022.
Christopher A. Isaacson: What we want to continue to grow bids in Canada.
Christopher A. Isaacson: As well as provide that unified platform. So in order for us to realize our aspirations in Canada, we need to complete this migration.
Christopher A. Isaacson: I'll start that. So yeah, with the new migration to CBOE technology planned for Q1 of next year, I'd say it's all of the above. Yes, we do expect it to be more efficient. Well, you know, part of our platform migrations has become more efficient to please our customers. But then, on the back of those migrations, we have historically seen market share growth, as well as data and access solutions, revenue growth, or pull through, which, in fact, is happening right now, both in Australia and Japan. So we want to bring not just greater efficiency but greater functionality to the Canadian market on a unified platform. We have already launched bids there when we migrated to MatchNow back in 2022, but we want to continue to grow bids in Canada, as well as provide that unified platform.
Seamlessly as we've done elsewhere in the World and we're really pleased that this is the final one on the list to do we're going to do a excellently, while we also focus on organic growth initiatives.
Speaker Change: And so I would add to that a little bit and that the customer networks and relationships, we have globally and we've been able to bring to bear in Canada look at the market share to 15, 3% from 36.
Speaker Change: Year over year, and with that common platform that global reach it means that we're able to also turbocharge.
Speaker Change: And all of the training initiatives from a single platform, we can bring new functionality to Canada and that common experience, Chris talked about and then as you mentioned that the corporate listings business in Canada.
Christopher A. Isaacson: So in order for us to realize our aspirations in Canada, we're going to complete this migration seamlessly, as we've done elsewhere in the world. We're really pleased that this is the final one on the list. We're going to do it excellently while we also focus on organic growth. Certainly, I would add to that a little bit in that the customer networks and relationships we have globally alone, we've been able to bring to bear in Canada. Look at the market share growth to 15.3% from 13.6% year over year. And with that common platform, that global reach, it means that we're able to also turbocharge bids and other trading initiatives with a single platform. We can bring new functionalities to Canada and that common experience Chris talked about. And then there are listings.
Speaker Change: Strong part of the business and with our exchanges around the world for a small incremental investment we can actually begin to offer customers a global experience and thats showing through actually in the ETP growth that we've got from listings perspective in North America 56, New Etp's launched in Q4.
Speaker Change: Again steady fall in Q3 and in fact in January already we're on track for 14, New ETP. So just think about the uniformity of that global scale really germane into into the fall from there as we think about all of our footprints around the world.
Speaker Change: Great. Thank you very much.
Speaker Change: Our next question comes from line of Karl Void from K DWP. Please go ahead.
Karl Void: Hi, Good morning, maybe a question on the U S cash equities business, you mentioned the unfavorable mix shifts the volumes, but also some of the fee changes that you've recently made that should bring back up the capture rate. So I guess can you just elaborate on the competitive environment. There is that what is primarily driving the shift in volumes.
Dave Howson: You mentioned that the corporate listings business in Canada is a strong part of the business there. And with our exchanges around the world, for a small incremental investment, we can actually begin to offer customers a global experience. And that's actually showing through in the ETP growth that we've got from a listings perspective in North America. 56 new ETPs launched in Q4 against 34 in Q3. And in fact, in January already, we're on track for 40 new ETPs. So just think about that uniformity, that global scale really coming to the forefront there as we think about all of our footprints around the world. Great, thank you very much. Thank you. Our next question comes from the line of Kyle Voigt from KPW. Please go ahead. Hi, good morning.
Karl Void: Is it something else driving it and the fee capture there has been a pretty wide range with fee capture down about 40% sequentially. So just wondering if you could help frame how much of the fee capture decline in <unk>, you could potentially recapture with these fee changes as we look out to the first quarter.
Karl Void: Yes.
Karl Void: The headline is strong the market dynamic in December.
Karl Void: Headlines for Q4, when you look at our addressable.
Kyle Voigt: I have a question on the US cash equities business. You mentioned the unfavorable mixed shift of volumes, but also some of the fee changes that you recently made that should bring back the capture rate. So I guess, can you just elaborate on the competitive environment there? Is that what is primarily driving the shift in volumes, or is something else driving it?
Karl Void: Market share across Q4, it's around about 26% of the addressable market. So thats outside of the Trs that closed in December it went up to 2027% and that market dynamic as you mentioned is a confluence of contributing factors that was number one volume take 12 4 billion shares.
Dave Howson: And the fee capture there has been in a pretty wide range, with fee capture down about 40% sequentially. So just wondering if you could help frame how much of the fee capture decline in 4Q you could potentially recapture with these fee changes as we look out to the first quarter. Yes, certainly.
Karl Void: On a daily basis in December higher than the 10% to 11 or so from prior months the mix shift to higher percentage of sub dollar trading in December went up to 19% of overall trading versus 13% from.
Karl Void: From earlier months, and certainly showing that a higher retail engagement in December and finally layering on to that higher activity from market makers pushed customers up through tears in December and really reduce that capture and NGL phase.
Dave Howson: I think the headline is a stronger market dynamic in December and the headline for Q4. When you look at our addressable market share across Q4, it's around about 26% of the addressable market, so that's outside of the TRS at the close. In December, it went up to over 27%. And that market dynamic, as you mentioned, there's a confluence of contributing factors. That was number one. Volumes hit 12.4 billion shares on a daily basis in December, higher than the 10 or 11 or so from prior months.
Responded as is convention in U S equities market on a monthly price change basis in January we've seen our capture come back up.
Karl Void: We've managed to maintain market share while doing that.
Karl Void: And on small changes for February and we expect that trend to continue achieving stable market share. So really headlined as market dynamics fee changes allow us to be more competitive that but we are doing a number of things to be more competitive across our multi list environments throughout the rest of 2024.
Dave Howson: The makeshift, the higher percentage of sub-dollar trading in December went up to 19% of overall trading versus 13% from earlier months, and certainly showing that higher retail engagement in December. And, finally, layering onto that, higher activity from market makers pushed customers up through tiers in December and really reduced that capture. And as Jill says, we responded, as it is convention in the U.S. equities market on a monthly price change basis in January. We've seen our capture come back up, and we've managed to maintain market share while doing that. We announced more changes for February, and we expect that trend to continue whilst achieving stable market share. So really, the headline is market dynamics.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the Patrick Murray of Piper Sandler. Please go ahead.
Patrick Murray: Yes. Good morning, Thanks for taking my question I just had a question on CBOE digital.
Patrick Murray: I think Dave you said in your prepared remarks, you that digital assets was an area, where youre going to see greater demand going forward.
Patrick Murray: I think on the last call.
Patrick Murray: Maybe alluded to possibly pulling back some.
Patrick Murray: Desman CBOE digital wanted to see how maybe some things played out.
Dave Howson: Few changes allow us to be more competitive there, but we are doing a number of things to be more competitive across our multi-list environments throughout the rest of 2020. Thank you. Thank you. Our next question comes from Patrick Mody of Piper Sandler. Please go ahead.
Patrick Murray: Just in the wake of this equity.
Patrick Murray: Do you have approval was hoping to just get an update on your vision for that business and maybe.
Patrick Murray: How do you expect.
Patrick Murray: Seems to evolve over the next couple of years. Thanks.
Speaker Change: Okay. Thanks, Patrick.
Patrick Mody: Yeah, good morning. Thanks for taking my question. I just had a question on CBOE Digital. I think, you know, Dave, you said in your prepared remarks that you thought digital assets were an area where you were going to see greater demand going forward. I think on the last call, Fred had maybe alluded to possibly pulling back some investment in CBOE Digital, wanted to see how maybe some things played out. So, you know, just in the wake of this Bitcoin ETF approval, I was hoping to just get an update on your vision for that business and maybe, you know, how you expect things to evolve over the next couple of years. Thanks. Okay, thanks, Patrick.
Speaker Change: Yes, certainly.
Speaker Change: Faces with a regulatory uncertainty has caused SaaS cluster take longer to develop both than we anticipated.
Speaker Change: Having said that there continues to be an asset class sensor theres a lot of interest.
Patrick Murray: And what many participants are looking for is what we're trying to build a regulatory friendly robust market for crypto.
Well, obviously, we are happy we got the crypto ETF so.
Patrick Murray: We've launched margin futures so we're.
Patrick Murray: Doing that.
Patrick Murray: But we also recognize it's going to take time to build an ecosystem for our new and emerging asset class.
Fred Tomczyk: I mean, certainly, this space with regulatory uncertainty has caused this asset class to take longer to develop than we anticipated. Having said that, there continues to be an asset class that there is a lot of interest in. And what many participants are looking for is what we're trying to build, a regulatory-friendly and robust market for crypto. Obviously, we're happy we got the crypto ETFs out.
Patrick Murray: So we're trying to be patient, but continue to focus on it right now we're very much focused on.
Patrick Murray: Building up a derivative side of the crypto market.
Patrick Murray: Which is our bread and butter, that's what we're known for and that number two building on our robust ecosystem of both retail and institutional market participants.
Patrick Murray: As I said these things take time with the new and emerging asset class.
Patrick Murray: Yes.
We'll continue to monitor that good decisions accordingly.
Fred Tomczyk: We've launched Margin Futures, so we're doing that. But we also recognize it's going to take time to build an ecosystem for a new and emerging asset class. So we're trying to be patient but continue to focus on it right now. We're very much focused on A, building out the derivative side of the crypto market, which is our bread and butter. That's what we're known for.
Patrick Murray: We think we'll be patient here.
Patrick Murray: We continue to try to innovate and build a more robust market.
Patrick Murray: On behalf of derivative side, that's where we're focused right now.
Speaker Change: Great. Thanks for the color.
Speaker Change: Thank you as a reminder, if you'd like to ask a question. Please press the star followed by the one on your telephone.
Speaker Change: Okay.
Speaker Change: So what youre, saying.
Fred Tomczyk: And then, number two, building on a robust ecosystem of both retail and institutional market participants. And as I said, these things take time with a new and emerging asset class. But we will continue to monitor, make decisions accordingly. But we think we'll be patient here and continue to try to innovate. And build a more robust market and build off the derivative side.
There appear to be no further questions at this time, Mr. Ken Hill, Vice President Investor Relations, and Treasurer and turn the call back over to you.
Kenneth Hill: Okay. Thanks, everyone.
Kenneth Hill: For the time your time today, we have a robust investor conference schedule here over the next five to six weeks.
Kenneth Hill: Hope to see many of you <unk>.
Speaker Change: All the best to 2024 effects.
Speaker Change: Thank you. This concludes today's conference call. Thank you.
Patrick Mody: That's where we're focused right now. Great. Thanks for the call. Thank you. As a reminder, if you'd like to ask a question, please press the star followed by the one on the right. There appear to be no further questions at this time. Mr. Ken Hill, Vice President of Investor Relations and Treasurer, I turn the call back over to you. Okay, thanks, everyone. Thanks for your time today. We have a robust investor conference schedule here over the next five to six weeks. And we hope to see many of you. All the best for 2024. Thanks. Thank you. This concludes today's conference call. We thank you for participating, and you may now disconnect.
Speaker Change: You for participating and you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].