Q2 2024 Cboe Global Markets Inc Earnings Call
Operator: Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise.
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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We'd now like to turn the conference over to Ken Hill, Treasurer and Head of Investor Relations. You may begin.
Speaker Change: I'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Speaker Change: Now, let's turn the conference over to Ken Hill, Treasurer, and head of Investor Relations you may begin.
Kenneth Hill: Good morning, and thank you for joining us for our second quarter earnings conference call. 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 our strategic initiatives. Then Jill Griebenow, our Chief Financial 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.
Speaker Change: Good morning, and thank you for joining us for our second 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 on our strategic initiatives.
Joe <unk>: Joe <unk>, our Chief Financial Officer will provide an overview of our financial results for the quarter as well as discuss our 2024 financial outlook followed.
Kenneth Hill: 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. A downloadable copy of the slide presentation is available on the investor relations portion of our website.
Speaker Change: Their comments, we will open the call to Q&A also joining us for Q&A will be Chris Isaacson, our chief operating officer.
Speaker Change: 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 during our remarks, we'll make some forward looking statements, which represent our current judgment on what the future may hold and while we believe these judgments or reason.
Unknown Executive: During our remarks, we will make some 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 guaranteed to perform and involve certain assumptions, risks, and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statement. Please refer to our filings with the SEC for a full discussion of these factors that may affect any forward-looking statement.
These forward looking statements are not guarantees of future performance and involve certain assumptions risks and uncertainties.
Speaker Change: Actual outcomes and results may differ materially from what is expressed or implied in any forward looking statements. Please refer to our filings with the SEC for a full discussion of these factors that may affect any forward looking statements.
Unknown Executive: 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 the call this morning, we will be referring to non-GAAP measures defined and reconciled in our earnings material. Now, I'd like to turn the call over to Fred.
Speaker Change: 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.
Speaker Change: During the call. This morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings material.
Speaker Change: Now I'd like to turn the call over to Fred.
Frederic Tomczyk: Good morning, and thanks for joining us today. I'm pleased to report on strong second-quarter results for Cboe Global Markets. During the quarter, we grew net revenue 10% year-over-year to a record $514 million and adjusted diluted earnings per share by a robust 21% to $2.15. These results were driven by a contribution from each part of our ecosystem, with improved volumes in our cash and spot market. Solid volumes across our derivatives franchise, specifically our proprietary index option and futures products.
Fred Thompson: Good morning, and thanks for joining us today.
Frederic Tomczyk: Continued expansion of our data and access solutions business and disciplined expense management. Our cash and spot markets category performed very well in the second quarter, with revenue increasing 15% on a year over year basis. The contribution was broad-based, with each of our global regions posting solid growth as compared to the second quarter of 2023. Our derivatives business delivered another solid quarter as organic net revenue increased 11% year over year.
Fred Thompson: I'm pleased to report strong second quarter results foreseeable global markets during.
Speaker Change: During the quarter, we grew net revenue, 10% year over year to a record $514 million.
Speaker Change: Adjusted diluted earnings per share by a robust 21% to $2.15.
These results were driven by a contribution from each part of our ecosystem.
Speaker Change: With improved volumes at our cost in spot markets.
Frederic Tomczyk: We saw solid volumes across our suite of S&P 500 index option products, with second quarter ADB and the SPX contract increasing 9% year-over-year to 3 million contracts. We also saw strong year-over-year growth in our volatility product suite during the second quarter, as ADB increased 8% in fixed options and 30% in fixed futures. Given the secular and cyclical tailwinds in place, we believe we're well positioned as investors continue to utilize options in their portfolios and trading strategies.
Speaker Change: I'll, let volumes across our derivatives franchise, specifically, our proprietary index options and futures products.
Speaker Change: Expansion of our data and access solutions business and disciplined expense management.
Speaker Change: Our cash and spot markets category performed very well in the second quarter with revenue, increasing 15% on a year over year basis.
Speaker Change: Contribution was broad based with each of our global regions posting solid growth as compared to the second quarter of 2023.
Speaker Change: Our derivatives business delivered another solid quarter as organic net revenue increased 11% year over year.
Speaker Change: We saw solid volumes across our suite of S&P 500 index option products with second quarter Adv in the SPX contract, increasing 9% year over year to 3 million contracts.
Speaker Change: We also saw strong year over year growth in our volatility product suite during the second quarter as the Adv increased 8% and VIX options and 30% and VIX futures.
Speaker Change: Given the secular and cyclical tailwind is in place. We believe we are well positioned as investors continue to utilize options in their portfolios and trading strategies.
Frederic Tomczyk: Our data and access solutions business continued to deliver durable results, with organic net revenue increasing 5% year over year for the second quarter and running at approximately 7% through the first six months. We are optimistic about our outlook for this business as we look to further leverage our global network ecosystem to drive growth. Overall, it was another solid quarter for both transaction and non-transaction revenue.
Our data and access solutions business continued to deliver durable results with organic net revenue, increasing 5% year over year for the second quarter and running at approximately 7% through the first six months.
Speaker Change: We are optimistic on our outlook for this business as we look to further leverage our global network, an ecosystem to drive growth.
Speaker Change: Overall, it was another solid quarter for both transaction and non transaction revenues wrapping up a strong first half of the year, which has seen us grow adjusted diluted earnings per share by 17%.
Frederic Tomczyk: Wrapping up a strong first half of the year, which has seen us grow adjusted diluted earnings per share by 17%, we look forward to building on these strong results in the second half of 2024. From a strategic perspective, I remain centered on sharpening our strategic focus in areas where we see the most valuable growth opportunities for Cboe. Throughout the strategic review process, we have made a number of adjustments to our strategy, including dialing back on M&A activities and reallocating resources to align with our core strengths.
We look forward to building on these strong results in the second half of 2024.
Speaker Change: From a strategic perspective, I remain centered on sharpening our strategic focus in areas, where we see the most valuable growth opportunities for CEVA throughout the strategic review process. We have made a number of adjustments to our strategy.
Speaker Change: Including dialing back on M&A activities.
Speaker Change: Allocating resources to align with our core strengths.
Frederic Tomczyk: Including winding down our digital spot market and refocusing on digital asset derivatives, and lower our expense growth. Stabilizing our margins and changing our capital allocation strategy away from M&A activities to increase investments in organic growth initiatives and return capital to our shareholders. The strategic review has provided us with a framework to hone our strategy and determine how to best leverage our core strengths, reallocate our resources internally, including investing in our global technology platform, and position the company for continued growth over the longer term, while returning capital to our shareholders through a combination of dividends and share
Speaker Change: Including winding down our digital spot market and refocusing on digital asset to revenues.
Speaker Change: Lowering our expense growth stabilizing our margins.
And changing our capital allocation strategy away from M&A activities to increase investments in organic growth initiatives and returning capital to our shareholders.
Speaker Change: The strategic review has provided us with the framework to hone our strategy and determine how to best leverage our core strengths.
Speaker Change: We allocate our resources internally, including investing in our global technology platform and position the company for continued growth over the longer term.
Speaker Change: And returning capital to our shareholders through a combination of dividends and share repurchases.
Frederic Tomczyk: To that end, refocusing our view of the company as both an import and export business helps enable us to unlock even more of our global growth potential. Over the last few years, we have been very focused on the export type of business, expanding into new geographies and deploying our exchange technology and data to create better trading experiences for our customers across the globe. We've also exported our US derivatives market model to Europe, leveraging our proven blueprint for success in the US to build up new markets and regions. As we entered these markets and listened to our customers, we found opportunities to grow our import business. Through my traveling and talking to our global client base over the last nine months.
Speaker Change: And refocusing our view of the company as both an import export business helps enable us to unlock even more of our global growth potential.
Speaker Change: Over the last few years, we have been very focused on the export type of business expanding into new geographies and deploying our exchange technology and data to create better trading experiences for our customers across the globe.
Speaker Change: We've also explored our U S derivatives market model to Europe, leveraging our proven blueprint for success in the U S to build out new markets and reach their customers.
Speaker Change: As we enter these markets or listened to our customers, we found opportunities to grow our import business.
Speaker Change: For my traveling and talking to our global client base over the last nine months.
Frederic Tomczyk: I've learned there is a huge appetite to invest in the U.S. market, and our analysis confirms this trend. While our customers want to trade and invest in their local markets, they are also eager to gain access to the investment opportunities in the U.S. market. They are excited about the innovation that Cboe has brought to their local markets and our investments in our technology, and they are optimistic about the investment opportunities that they continue to see in the U.S. market.
Speaker Change: There is a huge appetite to invest in the U S market at our analysis confirms this trend while our customers want to trade and invest in their local markets. They are also eager to gain access to the investment opportunities in the U S market.
Speaker Change: They are excited about the innovation that <unk> has brought to their local markets and our investments in our technology and they are optimistic about the investment opportunities that they continue to see in the U S market.
Speaker Change: Representing nearly 45% of the 190 trillion global equity market cap.
Frederic Tomczyk: Representing nearly 45% of the 109 trillion global equity market cap, the U.S. equity marketplace is by far the largest and one of the fastest growing markets in the world. Foreign holdings of U.S. equities reached nearly $14 trillion last year, growing at an approximately 10.5% CAGR over the last decade. And we expect this trend will endure as the growth of retail investors globally continues, and different markets implement legislative changes that are expected to create opportunities for CBOE. The S&P 500 index is the dominant global equity benchmark, with an estimated 16 trillion benchmarked and indexed to it, more than any country's individual market cap globally, through our SPX Options Complex.
Speaker Change: Equity marketplaces by far the largest and one of the fastest growing markets in the world.
Speaker Change: Foreign holdings of U S. Equities reached nearly 14 trillion last year growing at approximately 10, 5% CAGR over the last decade.
Speaker Change: And we expect this trend will endure as the <unk>.
Speaker Change: Growth of the retail investor globally continues and different markets implement legislative changes that are expected to create opportunities foreseeable.
Speaker Change: The S&P 500 index as the dominant global equity benchmark with an estimated 16 trillion benchmark index to it.
Speaker Change: More than any countries individual market cap globally.
Speaker Change: Through our SPX options complex, the ability to facilitate risk management and the import of foreign investment back into the U S market as a significant and growing opportunity.
Frederic Tomczyk: The ability to facilitate risk management and the import of foreign investment back into the U.S. market is a significant and growing opportunity. We continue to see significant opportunities in the Asia Pacific region, where we see growing demand for our index options products. We serve as an efficient and accessible way to gain exposure to the US market. And in the first half of this year, three global banks- Putu Hong Kong, Weebo Thailand, and Samsung Futures added various Cboe products to their platforms, including SPX options.
Speaker Change: We continue to see significant opportunity in the Asia Pacific region specifically.
Speaker Change: Where we see growing demand for our index options products, which serves as an efficient and accessible way to gain exposure to the U S market.
Speaker Change: In the first half of this year three global brokers.
Speaker Change: To Hong Kong, we both Thailand.
Speaker Change: And Samsung futures at a various seabolt products to their platforms, including SPX options further expanding access to our product suite.
Frederic Tomczyk: Further expanding access to our products. We see this as a long-term secular trend, and we are eager to help facilitate access to the U.S. market. International participants are highly valuable to the US market, as diversity of opinion and goals helps to lead to a better trading ecosystem. Whether it be through global trading hours, new products, or education, will continue to help investors access the liquidity and efficiency of the US market, while also providing trusted markets in local regions worldwide.
Speaker Change: We see this as a long term secular trend and we are eager to help facilitate access to the U S markets.
Speaker Change: International participants are highly valuable to the U S market as diversity of opinion and goals helps to lead to a better trading ecosystem, whether it be true global trading hours new products. Our education will continue to help investors access to liquidity and efficiency of the U S markets while all.
Speaker Change: So providing trusted markets in local regions worldwide.
Speaker Change: We believe the secular trends that are reshaping trading a capital markets, including the globalization of markets.
Frederic Tomczyk: We believe the secular trends that are reshaping trading and capital markets, including the globalization of markets, the rise of retail investors, the increased use of options by market participants to manage risk efficiently, generate income, and take speculative positions, and the technology and data revolution, create excellent opportunities for Cboe. The strategic review process has enabled us to examine long-term growth and value creation opportunities and reposition and redeploy resources to leverage our strength against those opportunities we see in the market.
Speaker Change: <unk> of the retail investor the increased use of options by market participants to manage risk efficiently generate income and take speculative positions and the technology and data revolution create excellent opportunities foreseeable.
Speaker Change: The strategic review process has enabled us to examine long term growth and value creation opportunities.
Speaker Change: And rate position and redeploy resources to leverage our strengths against those opportunities we see in the market.
Speaker Change: The strategic review should be viewed as a journey and not an event and you will see us continue to refine our strategy over time.
Frederic Tomczyk: The strategic review should be viewed as a journey and not an event, and you will see us continue to refine our strategy over time. Finally, we remain well positioned due to our strong balance sheet combined with our disciplined approach to the allocation of our capital. Our approach to capital allocation focuses on a balanced mix of reinvestment and co-operation, including our technology platform. Prudent Expense Management Strategic investments that drive sustainable growth and return capital to our shareholders.
Speaker Change: Finally, we remained well positioned due to our strong balance sheet combined with our disciplined approach to the allocation of our capital.
Speaker Change: Our approach to capital allocation focus is on a balanced mix of reinvestment in core operations <unk>.
Speaker Change: <unk>, our technology platform prudent expense management strategic investments to drive sustainable growth and returning capital to our shareholders.
Frederic Tomczyk: During the second quarter, we repurchased 90 million shares and will continue to be opportunistic with our share repurchase efforts. Overall, we remain committed to maintaining a strong and flexible balance while investing in organic growth initiatives, our technology capabilities, operating efficiencies, and thereby driving durable revenue growth, optimized margins, and earnings growth for the firm. I'll now pass the call over to Dave to discuss the business line results in more detail.
Speaker Change: During the second quarter, we repurchased 90 million of shares and we will continue to be opportunistic with our share repurchase efforts.
Speaker Change: Overall, we remain committed to maintaining a strong and flexible balance sheet, while investing in organic growth initiatives, our technology capabilities operating efficiencies and.
Speaker Change: And thereby driving durable revenue growth optimize margins and earnings growth for the FERC.
Speaker Change: I will now pass the call over to Dave to discuss the business line results in more detail.
David Howson: Thanks, Fred. Starting with our global derivatives category, Q2 was a tale of two halves. Volatility spiked in April on the back of rising geopolitical tensions in the Middle East, with the VIX index hitting a year-to-date high of 19 before falling precipitously in May and June, with June ranking as the least volatile month since November of 2019. Not surprisingly, index option volumes were particularly strong in April, with SPX recording its highest monthly ADV of 3.3 million contracts, driven by a notable increase in put volumes as hedging demand picked up.
Dave Howson: Thanks, Brad starting with our global derivatives category Q2 was a tale of two half volatility spiked in April on the back of rising geopolitical tensions in the middle East with the VIX index hitting a year to date high 19 before falling precipitously in May and June with June ranking at the least.
Dave Howson: Volatile month since November 2019.
Dave Howson: Now surprisingly index option volumes were particularly strong in April with SPX recording its highest monthly adv of $3 3 million contract driven by a notable increase in pulp volumes as hedging demand picked up while activity normalize in May and June overall second quarter SPX Adv was still.
David Howson: While activity normalized in May and June, overall second-quarter SPX ADV was still up a solid 9% year-over-year to 3 million contracts. Zero DTE options made up 48% of overall SPX activity in Q2, unchanged from the previous quarter.
Dave Howson: I saw a 9% year over year to $3 million contract.
Dave Howson: D G options made at 48% of overall SPX activity in Q2 unchanged from the previous quarter.
David Howson: VIX option volumes, on the other hand, surged higher in Q2, up over 18% quarter over quarter to an ADV of 843,000 contracts, making it the third largest quarter on record behind the first quarter of 2018 and ahead of even Q1 2020's COVID-driven spike. Investors have flocked to VIX Options to help hedge against potential tail risk, whether it be geopolitical shocks or macroeconomic surprises, with year-to-date ADV on track to exceed even last year's all-time high.
Dave Howson: VIX options volumes on the other hand said timing Q2.
Dave Howson: 18% quarter over quarter to an adv of 843000 contracts, making it the third largest quarter on record behind the first quarter of 2018 and ahead of even Q1 2020, Covid driven spike.
Dave Howson: Investors have flocked to VIX options to help hedge against potential tail risk whether it be geopolitical shocks when macroeconomic surprises with year to date Adv on track to exceed even last year all time high.
David Howson: On the back of this unprecedented interest in VIX options trading, we're excited to expand the access and utility of Cboe's VIX product suite with our planned October launch of options on VIX futures, subject to regulatory review. These will be options that physically settle into the underlying front month big future, and they will trade on our futures exchange, CFE. This is important for two reasons.
Dave Howson: On the back of this unprecedented interest in VIX options trading we're excited to expand the access and utility see both VIX product suite with our planned October launch of options on VIX futures subject to regulatory review.
Dave Howson: These will be options that physically settled into the underlying front month, VIX future and they will trade on our futures exchange Cfe.
Dave Howson: This is important for two reasons.
David Howson: First, it allows us to provide access to VIX options products to a wider set of market participants in the U.S. and abroad that may not have access to our securities options exchange. Second, it allows us to offer more tenants to meet customer demands. We're especially excited to expand our volatility toolkit ahead of this year's U.S. election, which has historically been a meaningful volatility catalyst for markets and where demand for options to help manage risk is particularly strong. For example, the VIX index jumped over 10 points in the month leading up to both of the last two elections.
Dave Howson: It allows us to provide access to VIX options products to a wider set of market participants in the U S and abroad that may not have access to our securities options exchange.
Dave Howson: It allows us to offer more tenants to meet customer demand.
Dave Howson: We are especially excited to expand our volatility toolkit ahead of this year's U S elections, which is totally being a meaningful volatility catalysts for markets and where demand for options to help manage risk is particularly strong.
Dave Howson: For example, the VIX index jumped over 10 points in the months, leading up to both of the last two elections. In addition to introducing auctions of VIX futures. We also plan to launch <unk> S&P 500, various features in September subject to regulatory review.
David Howson: In addition to introducing options on VIX futures, we also plan to launch Cboe S&P 500 Variance futures in September, subject to regulatory review. Cboe's Variance Futures will provide an exchange-listed alternative to over-the-counter variance swaps and introduce yet another way to trade volatility around the US election as well as other key categories. Our commitment to continually innovate is often cited by customers as one of the key reasons they're eager to partner with us.
Dave Howson: Both various futures to provide on exchange listed alternative to over the counter various swaps and introduce yet another way to trade volatility around the U S election, as well as other key catalysts.
Speaker Change: Our commitment to continually innovate is often cited by customers is one of the key reasons that eager to partner with us.
Speaker Change: As we continue to make investments in our products and our markets our customers are responding by increasing their collaboration with us.
David Howson: As we continue to make investments in our products and our markets, our customers are responding by increasing their collaboration with us. Whether it be making enhancements to better compete in SBX0 DTE options, setting up to trade in GTH ahead of the US election, or the international import of business as more retail brokers come online for options trading in different geographies. Strong client engagement and an exciting product pipeline make us confident that we're well positioned to continue to grow our derivatives business for the rest of the year.
Speaker Change: <unk> be making enhancements to better compete in SPX options setting up to trade in GTH added in the U S election for the international important business is more retail growth has come online for options trading in different geographies strong client engagement and an exciting product pipeline make us confident.
Speaker Change: We are well positioned to continue to grow our derivatives business for the rest of the year.
Speaker Change: Outside of the U S. Specifically, we continue to make sustained progress exporting our U S derivatives model to Europe, leveraging our blueprint in the U S by deploying our exchange technology to create better trading experiences for customers in Europe, So our European derivatives platform CTX.
David Howson: Outside of the U.S. specifically, we continue to make sustained progress exporting our U.S. derivatives model to Europe, leveraging our blueprint in the U.S. by deploying our exchange technology to create better trading experiences for customers in Europe through our European derivatives platform, CDEX. We saw the first equity options trade on SEDEX in June, with nearly 14,000 lots traded in 201 distinct options during the first month of trading.
Speaker Change: We sold the first equity options trading <unk> in June with nearly 14000 lots traded in 201 distinct options during the first month of trading.
David Howson: On the index side, spreads tightened on the back of our recently implemented Liquidity Provision program, helping improve the quality of our book for index options. From a participant perspective, during the second quarter, we announced two noteworthy developments, with the addition of interactive brokers as a direct trading participant of Cdex and a clearing participant of Cboe Clear Europe, in addition to IMC becoming a new direct trading participant in June. While we still have a great deal of work ahead, we are pleased with the milestones hit during the second quarter and look forward to building on that momentum in the quarters ahead.
Speaker Change: On the index side spreads tightened on the back of our recently implemented liquidity provision program, helping improve the quality of our book for index options from.
Speaker Change: From a participant perspective during the second quarter, we announced two noteworthy developments with the addition of interactive brokers at the direct trading participant CX and clearing participant to see basically Europe. In addition to IMC, becoming new direct trading participants in June.
Speaker Change: While we still have a great David well pad, we are pleased with the milestones hit during the second quarter and look forward to building on that momentum in the quarters ahead.
Speaker Change: Taking a look at the cash and stock businesses across regions.
Speaker Change: Second quarter results were very strong with year over year net revenue growth, reaching a robust 15% each region. So year over year increases as CEVA leveraged its scaled infrastructure to monetize a healthy market backdrop.
David Howson: Each region saw year-over-year increases as Cboe leveraged its scaled infrastructure to monetize a healthy market backbone. Looking at the various regions, in North America, U.S. on-exchange net capture rates improved markedly as a result of pricing changes we made in the first half of the year, as well as a dramatic shift in customer mix given the meme stock activity. Moving forward, we expect to continue to look to strike the right balance between market share and capture to maximize the revenue outcome.
Speaker Change: Looking at the various regions in North America U S. On exchange net capture rates improved markedly as a result of pricing changes we made in the first half of the year as well as the dramatic shift in customer mix, given the mean stopped activity.
Speaker Change: Moving forward, we expect to continue to look to strike the right balance between market share and capture to maximize the revenue outcome.
David Howson: In Canada, we produced another 50 basis points of market share improvement as compared to the second quarter of 2023 and remain on track with our final technology integration, the migration of our Canadian market to Cboe technology in early 2025, subject to regulatory review. Moving over to Europe, while closing auction activity hit another record high, constituting an estimated 27% of on-exchange market share unavailable to Cboe in Q2, we retained our leading market position during continuous trading, accounting for 31% of intraday activity for the quarter. Periodic Auctions also notched another market share record, and Cboe Bids Europe retained the distinction of being the largest platform of its type for the 27th month in a row in June.
Speaker Change: In Canada, we produced another 50 basis points of market share improvement as compared to the second quarter of 2023 and remain on track with our final technology integration the migration of our Canadian market to see both technology and early 2025 subject to regulatory review.
Speaker Change: Moving over to Europe, while closing auction activity hit another record high constituting an estimated 27% of on exchange market share unavailable to see both in Q2, we retained our leading market position during continuous training accounting for 31% of intra day activity for the quarter.
Speaker Change: Periodic auctions also notched another market share record and CEVA based Europe retained the distinction of the largest platform of its type for the 27th month in a row in June.
David Howson: As we look to adjacent areas of the market for future growth, we remain on track for a fourth quarter launch of our Securities Financing Transactions Clearing Services, subject to regulatory review. And finally, turning to Asia-Pacific, we saw continued strong momentum in Australia and Japan. In Australia, Cboe continued its market share gains with market share for the quarter finishing at 20.8%, up 2.4 percentage points from the second quarter of 2023. In Japan, market share continues to set records, reaching 5.5% for the second quarter, a 1.4 percentage point improvement versus the second quarter of 2023.
As we look to adjacent areas of the market for future growth. We remain on track for a fourth quarter launch of our securities financing transactions clearing services subject to regulatory review.
Speaker Change: And finally, turning to Asia Pacific, We saw continued strong momentum in Australia and Japan.
Speaker Change: In Australia, CEVA continued market share gains with market share for the quarter, finishing at 28% up two full percentage points from the second quarter of 2023.
Speaker Change: In Japan market share continues to set records.
Speaker Change: Five 5% for the second quarter, a one four percentage point improvement versus the second quarter of 2023.
David Howson: In addition, volumes increased by a very strong 71% as compared to Q2 of 2023. Cboe's positive momentum in Japan has continued into the third quarter with solid volumes and market share. The APAC region remains one we are incredibly excited about moving forward.
Speaker Change: In addition volumes increased by a very strong 71% as compared to Q2 of 2023 levels.
Speaker Change: <unk> positive momentum in Japan has continued into the third quarter with solid volumes and market share.
Speaker Change: The APAC region remains when we are incredibly excited about moving forward not only do we see the opportunity to more effectively monetize our ecosystem of transaction and non transaction businesses in local markets like Australia and Japan.
David Howson: Not only do we see the opportunity to more effectively monetize our ecosystem of transaction and non-transaction businesses in local markets like Australia and Japan, but as we grow, we look forward to fueling the import of derivatives activity into the US. We anticipate making measured investments to maximize our brand and sales efforts in developing regions. While we are in the very early stages of realizing this opportunity, the onboarding of three new brokers out of Asia-Pacific early this year highlights the underlying demand for exposure to Cboe's US benchmark product.
Speaker Change: But as we grow we look forward to fueling the import of derivatives activity into the U S.
Speaker Change: We anticipate making measured investments to maximize our brand and sales efforts in developing regions. While we are in the very early stages of realizing this opportunity the on boarding of three new brokers out of Asia Pacific early this year highlights the underlying demand for exposure to see both the U S benchmark products.
Speaker Change: Turning to data and access solutions net revenues grew 5% as compared to the second quarter of 2023, the slower second quarter growth was as a result of longer sales cycles, and an outsized one time back bill payment and our index business hitting in the second quarter of 2023, creating a more difficult.
David Howson: Turning to data and access solutions, net revenues grew 5% as compared to the second quarter of 2023. The slower second quarter growth was as a result of longer sales cycles and an outsized one-time back-bill payment in our index business hitting in the second quarter of 2023, creating a more difficult comparison against softer-than-expected collections in Q2 of 2023. And whilst the first half results are trending slightly below our guidance range of 7-10% for the year, we anticipate the slower trends will prove transitory, given the initiatives we have in place to accelerate revenue expansion in the third and fourth quarters. Given the year-to-date results and our second half expectations, we anticipate hitting the low end of our 7-10% guidance range in 2024.
Speaker Change: Comparison against softer than expected collections in Q2 2024.
Speaker Change: And what's the first half results are trending slightly below our guidance range of 7% to 10% for the year, we anticipate a slower trends will prove transitory given initiatives, we have in place to accelerate revenue expansion in the third and fourth quarters given.
Speaker Change: Given the year to date results and our second half expectations, we anticipate hitting the low end of our 7% to 10% guidance range in 2024.
David Howson: Specifically on the access solutions side, we are excited about the momentum behind our dedicated cause offering, greatly enhancing our exchange access layer. Dedicated Cause is a new offering launched this year to help market participants improve determinism, reduce latency, and enhance their ability to effectively navigate the market. We are currently live on all four of our US equities markets with strong initial interest and have plans to roll out the technology in Europe in the fall.
Speaker Change: Typically on the access solution side, we are excited about the momentum behind our dedicated cause offering greatly enhancing our exchange access layer dedicated code is a new offerings launched this year to help market participants improve determinism reduce latency and enhanced our ability to effectively navigate market.
Speaker Change: <unk>.
Speaker Change: We are currently live on all four of our U S equities markets with strong initial interest and have plans to rollout the technology in Europe in the full debt.
David Howson: Dedicated Cause is another example of leveraging Cboe's strong global technology infrastructure to provide scaled solutions to customers across our ecosystem. Looking internationally, approximately 40% of this quarter's growth came from outside of the U.S. We saw a notable uptick in Canada behind sales of our Cboe1 data product, as well as solid momentum in Europe and Australia. As we think about expanding our global footprint, Cboe Global Cloud has been instrumental in extending our connectivity with clients. During the second quarter, nearly 80% of Cboe Global Cloud sales came from outside the Americas.
Speaker Change: Dedicated code is another example of leveraging <unk> strong global technology infrastructure to provide scaled solutions to customers across our ecosystem.
Speaker Change: Looking internationally approximately 40% of this quarters growth came from outside of the U S. We saw a notable uptick in Canada behind sales of our <unk>, one data product as well as a solid momentum in Europe and Australia.
Speaker Change: As we think about expanding our global footprint Seawell global cloud has been instrumental in extending our connectivity with clients.
Speaker Change: During the second quarter, nearly 80% of <unk> global cloud SaaS came from outside the Americas.
Speaker Change: Moving forward, we anticipate being able to shift greater resources to the development of DNA opportunities as we move from the integration efforts with our technology resources to revenue enhancing capabilities.
Jill Griebenow: Moving forward, we anticipate being able to shift greater resources to the development of DNA opportunities as we move from integration efforts with our technology resources to revenue-enhancing capabilities in our data and access solutions category, particularly as it relates to enhancements around U.S. options in the quarters ahead. The breadth of our cash and derivatives markets provides us with an unrivaled position to harvest, aggregate, and deliver custom data sets and services closer to customers, both current and prospective, and we look forward to investing behind those opportunities.
Speaker Change: Data and access solutions category, particularly as it relates to enhancements around U S auctions in the quarters ahead.
Speaker Change: The breadth of our cash and derivatives markets provides us with the unrivaled position to harvest aggregate and deliver custom data sets and services closer to customers, both current and prospective and we look forward to investing behind those opportunities.
Speaker Change: See about our second quarter results highlight the power of the entire ecosystem with cash in spot market data and access solutions and derivatives all delivering durable results in the third quarter is off to a great start and we look forward to leveraging the global footprint of our scaled infrastructure to enhance revenue generation.
Jill Griebenow: Cboe's second quarter results highlight the power of the entire ecosystem, with cash and spot markets, data and access solutions, and derivatives all delivering durable results. And the third quarter is off to a great start. We look forward to leveraging the global footprint of our scaled infrastructure to enhance revenue generation across cash, data, and derivatives. With that, I'll turn the call over to Jill.
Speaker Change: Cash data and derivatives.
Speaker Change: With that I will turn the call over to Jim.
Jill Griebenow: Thanks, Dave. As Fred and Dave highlighted, Cboe posted a strong second quarter with adjusted diluted earnings per share up 21% on a year-over-year basis to $2.15, equaling our previous quarterly record. While the second quarter results are notable for a number of reasons, I believe the most powerful message they illustrate is our focus on driving margin stabilization as a result of durable revenue growth against diligent expense management, as well as the robust capital return results on display throughout the first half of 2024. I will provide some high-level takeaways from this quarter's operating results before going through an assessment of the segment results.
Jim: Thanks, Steve as Fred and Dave highlighted CMO posted a strong second quarter with adjusted diluted earnings per share up 21% on a year over year basis to $2 15.
Jim: Equaling our previous quarterly record while the second quarter results are notable for a number of reasons I believe the most powerful message to illustrate is our focus on driving margin stabilization as a result of durable revenue growth against diligent expense management as well as the robust capital return results on display throughout.
Jim: First half of 2024.
Jim: I will provide some high level takeaways from this quarter's operating results before going through an assessment of the segment results.
Jill Griebenow: Our second quarter net revenue increased 10% versus the second quarter of 2023 to finish at a record $514 million. The growth was driven by strengths in our cash and spot markets and derivatives categories, as well as solid results from our data and access solutions business. Specifically, cash and spot market organic net revenues grew 15% versus the second quarter of 2023, with all geographies producing solid year-over-year growth. Derivatives markets produced 11% year-over-year net revenue growth in the second quarter as our proprietary product franchise continued to provide increasing utility to the market.
Jim: Our second quarter net revenue increased 10% versus the second quarter of 2023 to finish at a record $514 million.
Jim: The growth was driven by strength in our cash and spot markets and derivative category as well as solid results from our data and access solutions business.
Jim: Specifically cash in spot markets organic net revenues grew 15% versus the second quarter of 2023, with all geographies producing solid year over year growth.
Jim: Derivative markets produced 11% year over year net revenue growth in the second quarter as our proprietary product franchise continued to provide increasing utility to the market.
Jill Griebenow: Data and Access Solutions net revenues increased 5% on an organic basis during the quarter. Despite the second quarter slowdown, we are confident in our ability to hit the lower end of our 7 to 10% targeted net revenue growth range for 2024. Adjusted operating expenses increased 2% to $197 million for the quarter, with the year-over-year growth driven by higher compensation-related expenses given the strong year-to-date revenue results, as well as professional fees and outside services, offset by favorable results in travel and promotional expenses.
Data and access solutions net revenue increased 5% on an organic basis during the quarter.
Jim: Despite the second quarter slowdown we are confident in our ability to hit the lower end of our 7% to 10% targeted net revenue growth range for 2024.
Jim: Adjusted operating expenses increased a modest 2% Q1 hundred $97 million for the quarter with a year over year growth driven by higher compensation related expenses, given the strong year to date revenue results as well as professional fees outside services offset by favorable results in travel and promotional expenses.
Jim: And adjusted EBITDA of $341 million grew a healthy 16% versus the second quarter of 2023 importantly, as a result of our strategic focus on revenue generation and diligent expense management, we continued to make meaningful progress in stabilizing our adjusted EBITDA margins during the quarter.
Jill Griebenow: An adjusted EBITDA of $341 million grew by a healthy 16% versus the second quarter of 2023. Importantly, as a result of our strategic focus on revenue generation and diligent expense management, we continue to make meaningful progress in stabilizing our adjusted EBITDA margins during the quarter. Our second quarter adjusted EBITDA margin expanded by three and a half percentage points on a year-over-year basis to 66.3%. Turning to the Key Drivers by Segment, our press release and the appendix of our slide deck include information detailing the key metrics for our business segments, so I'll provide some highlights for each.
Jim: Our second quarter adjusted EBITDA margin expanded by three five percentage points on a year over year basis to 66, 3%.
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 for our business segment. So I'll provide some highlights for each.
Jill Griebenow: Net revenue in the options segment grew 8%, led by higher index options transactions. Total options ADD was up 1%, driven by a 9% increase in index options volume. And revenue per contract moved 9% higher as index options represented a higher percentage of total options volume. North American equities net revenue increased 8% on a year over year basis to a record level in the second quarter, reflecting higher net transaction clearing fees and access and capacity fees.
Net revenue in the option segment grew 8% led by higher index options transaction fees.
Speaker Change: Total options Adv was up 1% driven by a 9% increase in index options volume and revenue per contract moved 9% higher as index options represented a higher percentage of total options volume.
Speaker Change: North American equities net revenue increased 8% on a year over year basis to a record level in the second quarter, reflecting higher net transaction and clearing fees and access and capacity fees.
Jill Griebenow: The increased net transaction and clearing fees were driven by higher U.S. exchange and off-exchange net capture rates, as well as higher volumes in market share in Canadian equity. On the non-transaction side, access and capacity fees increased 6% as compared to the second quarter of 2023.
Speaker Change: Increased net transaction and clearing fees were driven by stronger U S exchange and off exchange net capture rate as well as higher volumes and market share in Canadian equities.
Speaker Change: On the non transaction side access and capacity fees increased 6% as compared to the second quarter of 2023.
Jill Griebenow: The European APAC segment produced a 15% year-over-year increase in net revenue, resulting from strong growth across both transaction and non-transaction revenues. Transaction revenue in Australia and Japan benefited from continued market share gains, as well as greater volumes versus the second quarter of 2023. The futures segment recorded 19% net revenue growth for the quarter, with higher net transaction and clearing fees reflecting a 28% increase in ADV. On the non-transaction side, market data revenues were up 10%.
Speaker Change: The Europe and APAC segment produced a 15% year over year increase in net revenue, resulting from strong growth across both transaction and non transaction revenues.
Speaker Change: Transaction revenue in Australia, and Japan benefited from continued market share gains as well as greater volumes versus the second quarter of 2023.
Speaker Change: The futures segment reported 19% net revenue growth for the quarter with a higher net transaction and clearing fees, reflecting a 28% increase in adv.
Speaker Change: On the non transaction side market data revenues were up 10%.
Jill Griebenow: And finally, the FX segment delivered a quarter of record net revenue with an 11% year over year increase driven by higher net transaction and clearing fees. Market share was 20.2% for the quarter as compared to 19.5% in the second quarter of 2023. Turning now to Cboe's data and access solutions business, net revenues were up 5% on an organic basis in the second quarter. Net revenue growth continued to be driven by sales outside the U.S., with approximately 40% coming from international growth, the largest increase coming in Canada related to our Cboe One product.
Speaker Change: And finally, the FX segments delivered a quarter of record net revenue with an 11% year over year increase driven by higher net transaction and clearing fees.
Speaker Change: Market share was 22% for the quarter as compared to 19, 5% in the second quarter of 2023.
Speaker Change: Turning now to see both data and access solutions business net revenues were up 5% on an organic basis in the second quarter net revenue growth continued to be driven by sales outside the U S with approximately 40% coming from international growth the largest increase coming in Canada related to our <unk> product.
Jill Griebenow: The strong second quarter international sales growth helped more than double overall sales annual contract value as compared to first quarter levels and highlights the many ways we can monetize our ecosystem of exchange networks across the globe.
Speaker Change: The strong second quarter international sales growth helps more than double overall sales annual contract value as compared to first quarter levels and highlights. The many ways, we can monetize our ecosystem exchange networks across the globe.
Speaker Change: And while new sales may only provide a partial benefit in the quarter to occur. We believe the sales trends are a strong leading indicator of potential future revenue growth for the business.
Speaker Change: We continue to believe DNA is well positioned and anticipate an acceleration in trends in the third and fourth quarter.
Jill Griebenow: And while new sales may only provide a partial benefit in the quarter they occur, we believe the sales trends are a strong leading indicator of potential future revenue growth for the business. We continue to believe DNA is well positioned and anticipate an acceleration in trends in the third and fourth quarters, helping us deliver on the lower end of its revenue growth guidance of seven to 10%. More specifically, we expect to see continued strength from demand for access across our global markets, particularly as we increase our presence in new geographies and leverage the distribution capabilities of Cboe Global Cloud, the expansion of dedicated cores, greatly enhancing our exchange access layer, and increased capabilities around our US options data and access solutions as we reallocate technology resources from integration efforts to organic revenue-generating enhancements.
Speaker Change: Helping us deliver on the lower end of DNA revenue growth guidance of 7% to 10%.
More specifically, we expect to see continued strength from demand for access across our global markets, particularly as we increase our presence in new geographies and leverage the distribution capabilities of seaport global.
Speaker Change: The expansion of dedicated course greatly enhancing our exchange access layer and increased capabilities around our U S options data and access solutions as we reallocate technology resources from integration effort to organic revenue generating enhanced.
Speaker Change: Turning to expenses total adjusted operating expenses were approximately $197 million for the quarter up a modest 2% compared to the second quarter of last year.
Jill Griebenow: Turning to expenses, total adjusted operating expenses were approximately $197 million for the quarter, up a modest 2% compared to the second quarter of last year. The increase was a result of higher compensation and benefits, as well as an increase in professional fees and outside services, partially offset by a decline in travel and promotional expenses.
Speaker Change: Increase was a result of higher compensation and benefits as well as an increase in professional fees and outside services, partially offset by a decline in travel and promotional expenses.
Jill Griebenow: Looking forward, we are reaffirming our full-year 2024 adjusted expense guidance of $795 to $805 million. Our guidance factors in stronger-than-expected revenue trends we have seen to start the year and supportive revenue expectations for the second half of 2024, putting some upward pressure on our short-term incentive bonus accrual but is balanced by our strong expense discipline, leaving our overall guidance unchanged for the year. Importantly, the guidance provides an opportunity for continued investment in the businesses.
Speaker Change: Looking forward, we are reaffirming our full year 2024, adjusted expense guidance of $795 million to $805 million.
Speaker Change: Our guidance factors in stronger than expected revenue trends, we have seen to start the year and supportive revenue expectations for the second half of 2020 for putting some upward pressure on our short term incentive bonus accrual, but it's balanced by our strong expense discipline, leaving our overall guidance unchanged for the year importantly, the.
Speaker Change: <unk> provides opportunity for continued investment in the businesses, we anticipate that the continued reallocation of resources from integration efforts to areas like the DNA enhancements I just covered our derivative technology upgrades and marketing spend will provide attractive returns in the quarters ahead.
Jill Griebenow: We anticipate that the continued reallocation of resources, from integration efforts, to areas like the DNA enhancements I just covered, or derivative technology upgrades and marketing spend, will provide attractive returns in the quarters ahead. Outside of our adjusted expense results, we recorded a number of one-time accounting adjustments I want to briefly touch on. Following the digital business realignment we announced in April, Cboe recorded an $81 million charge representing the non-cash impairment of intangible assets related to the Cboe Digital spot market wind down.
Jill Griebenow: In addition, we reported a $16 million impairment as a result of a routine review of the carrying value of CBOE's other minority investments. These charges are considered one-time and are excluded from our second quarter adjusted operating expenses.
Speaker Change: Outside of our adjusted expense result, we recorded a number of onetime accounting adjustments I want to briefly touch on <unk>.
Speaker Change: Following the digital business realignment, we announced in April <unk> recorded an $81 million charge, representing the noncash impairment of intangible assets related to the cyber digital spot market wind up in.
Speaker Change: In addition, we reported a $16 million impairment as a result of a routine review of the carrying value of CEVA other minority investments.
Speaker Change: These charges are considered onetime and are excluded from our second quarter adjusted operating expenses.
Jill Griebenow: As we look ahead on slide 16 to our 2024 guidance, we are increasing our full-year organic net revenue growth range to 6 to 8% from the higher end of 5 to 7%. The updated guidance reflects our strong first half results, solid July activity, and a supportive outlook for the second half of the year. Looking at our full guidance more broadly, while we anticipate hitting our DNA organic net revenue guidance range of 7 to 10 percent for the year, we are guiding to the lower end of the range given the softer second quarter results. We anticipate a steady increase in DNA revenue growth throughout the back half of 2024, given incremental demand for our dedicated cores offering, as well as continued geographic growth in our DNA business.
Speaker Change: As we look ahead on slide 16 to our 2024 guidance, we are increasing our full year organic net revenue growth range to 6% to 8% from the higher end of 5% to 7%.
Speaker Change: Updating guidance reflects our strong first half results solid July activity and a supportive outlook for the second half of the year.
Speaker Change: Looking at our full guidance more broadly, while we anticipate hitting our DNA organic net revenue guidance range of 7% to 10% for the year. We are guiding to the lower end of the range given the softer second quarter results, we anticipate a steady increase in DNA revenue growth throughout the back half of 2024, given incremental demand for our deadhead.
Speaker Change: Hated course, offering as well as continued geographic growth and our D&A business.
Jill Griebenow: Our expectation for non-operating income is unchanged at $37 million to $43 million in 2024. We continue to anticipate $33 to $37 million from positive marks on our investments to help our earnings and investments line and $4 to $6 million in largely dividend income to flow through our other income line. Our full-year guidance range for CapEx remains at 51 to 57 million for 2024, and depreciation and amortization is expected to be in the range of 43 to 47 million for the year. And finally, we continue to 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: Our expectation for non operating income is unchanged at $37 million to $43 million in 2024, we continue to anticipate 33% to $37 million from positive marks on our investments to help our earnings and investments line and 4% to $6 million and largely dividend income to flow through our other income line or.
Speaker Change: Full year guidance range for Capex remains at 51% to $57 million for 2024, and depreciation and amortization is expected to be in the range of <unk> $43 million to $47 million for the year.
And finally, we continue to expect the effective tax rate on adjusted earnings under the current tax loss to come in at 28, 5% to 35% for 2024.
Turning to our balance sheet, our second quarter leverage ratio remained at one one times, we remain comfortable with our overall debt profile in the balance sheet flexibility it affords having locked in low medium to longer term fixed rates, averaging roughly two 8% on our outstanding debt.
Jill Griebenow: Turning to our balance sheet, our second quarter leverage ratio remained at 1.1 times. We remain comfortable with our overall debt profile in the balance sheet flexibility it affords, having locked in low, medium to longer-term fixed rates, averaging roughly 2.8% on our outstanding debt. As Fred highlighted earlier, a core tenet of the ongoing strategic review is the effective allocation of capital. As such, you have seen us pull back on our M&A activity, choosing to allocate capital to higher-return internal projects or to shareholder returns in the form of share repurchases and dividends.
Brett highlighted earlier, a core tenant of the ongoing strategic review is the effective allocation of capital.
Brett: As such you have seen us pull back on our M&A activity choosing to allocate capital to higher return internal projects or to shareholder returns in the form of share repurchases and dividends.
Jill Griebenow: In the second quarter, we repurchased $90 million in shares, bringing total repurchases for the first half of 2024 to $180 million. We have continued our repurchase activity to start the third quarter, buying back an incremental $25 million in the month of July. Moving forward, we plan to continue to opportunistically repurchase shares as appropriate, given our expected strong free cash flow generation and flexible balance sheet. Also, in the second quarter, we returned a total of $58.2 million to shareholders in the form of a 55 cents per share quarterly dividend.
Speaker Change: In the second quarter, we repurchased $90 million in shares bringing total repurchases for the first half of 2000 $24 million to $180 million. We have continued our repurchase activity to start the third quarter buying back an incremental $25 million in the month of July.
Speaker Change: Moving forward, we plan to continue to opportunistically repurchase shares as appropriate given our expected strong free cash flow generation and flexible balance sheet.
Speaker Change: Also in the second quarter, we returned a total of $58 $2 million to shareholders in the form of <unk> 55 per share quarterly dividend factor.
Jill Griebenow: Factoring in share repurchases and dividends paid in the first half of 2024, Cboe returned nearly $300 million to shareholders, representing an attractive 65% of adjusted earnings being paid out as repurchases and dividends. As always, we aspire to allocate capital and resources in the most value-enhancing way, striking the right balance between investing in future revenue growth and optimizing our margins. We look forward to building on our first half trends and delivering durable shareholder returns in the quarters ahead. 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: Factoring in share repurchases and dividends paid in the first half of 2024, Steve O returned nearly $300 million to shareholders, representing an attractive 65% of adjusted earnings being paid out as repurchases and dividends.
Speaker Change: As always we aspire to allocate capital and resources in the most value enhancing way striking the right balance between investing in future revenue growth and optimizing our margin. We look forward to building on our first half trends and delivering durable shareholder returns in the quarters ahead.
Speaker Change: Now I'd like to turn it back over to Frank for some closing comments before we open it up to Q&A.
Frederic Tomczyk: In closing, we are pleased to report another strong quarter delivering 21% growth in earnings per share year over year. That caps a strong first half with 8% net revenue growth and 17% earnings per share growth year over year. As we have continued with strong revenue growth, brought down our expense growth and stabilized our EBITDA market, reallocated our resources to invest in technology and organic growth initiatives, and allocated our capital away from M&A towards strengthening our balance sheet and returning capital to our shareholders.
Frank: In closing we are pleased to report another strong quarter, delivering 21% growth in earnings per share year over year.
<unk>, a strong first half with 8% net revenue growth and 17% earnings per share growth year over year as we have continued with strong revenue growth.
Speaker Change: Brought down our expense growth and stabilize our EBITDA margins.
Reallocated, our resources to invest in technology, and our organic growth initiatives.
Speaker Change: That allocating our capital away from M&A towards strengthening our balance sheet and returning capital to our shareholders.
Frederic Tomczyk: For the first half of 2024, we have returned 65% of our adjusted earnings to our shareholders through a combination of dividends and share repurchase. Our balance sheet is strong, and we're well-positioned to continue to return capital to shareholders and take advantage of opportunities as they arrive.
For the first half of 2024, we have returned 65% of our adjusted earnings to our shareholders through a combination of dividends and share repurchases.
Speaker Change: Our balance sheet is strong and we're well positioned to continue to return capital to shareholders and take advantage of opportunities as they arise.
Operator: At this point, we'd be happy to take questions. We ask that you please limit your questions to one per person to allow time to get to everyone. Feel free to get back in the queue, and if time permits, we'll take a second question. Thank you.
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 and if time permits we'll take a second question.
Speaker Change: Okay.
Speaker Change: Thank you the floor is now open for questions.
Operator: The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you're called upon to ask a question and are listening via
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via the loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. And again, it's star number one to join the queue. Your first question comes from the line of Dan Fannon of Jeffreys. Your line is open. Thanks.
Eldon: Eldon and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.
Eldon: Called upon to ask a question in or listening via loud speaker on your device. Please pick up your handset to ensure that your phone is not on mute when asking your question.
Eldon: And again its star one to join the queue.
Speaker Change: Your first question comes from the line of Dan Fannon of Jefferies. Your line is open.
Operator: Absolutely. Good morning, Dan.
Dan Fannon: Thanks, Good morning.
Dan Fannon: I guess to start on the data and access solutions.
Dan Fannon: Understanding that you think it's going to accelerate in the back half of the year, but still we're hoping you could elaborate on why we're coming in at the lower end of the range here.
Speaker Change: For the year and what I think was mentioned is kind of transitory and some of the trends. If you could just elaborate on whats draw what drove some of the more moderate growth year in the first half of the year and then again why do you think that will change prospectively.
Dan Fannon: Okay.
Unknown Executive: Thanks for the question. As we look at the first half of the year so far, we're coming up around about 7% gross year today. And the reasoning for the Q2 software results there is a lot down to timing. Timing plays a big factor in the data and access solutions business, in general. We saw a different timing for some of the enterprise sales, and we're seeing some longer sales cycles for some of our product services and offerings. We also saw a difference in timing in some of the cash collection timings during the quarter.
Speaker Change: Absolutely good morning, Dan Thanks for the question.
Speaker Change: As we look at the first half of the year. So far we are coming up around about 7% growth year to date and the reasoning for the Q2 softer results.
Speaker Change: Is a lot down to timing timing plays a big factor in the data and access solutions business in general.
Speaker Change: We saw a different timing to some of the enterprise sales and we're seeing some longer sales cycles with some of our products services and offerings. We also saw a difference in timing some of the cash collection timing during the quarter and then of course as we mentioned on the call. There was a backfill of large back then in Q2 of 2023, which caused the hardest.
Unknown Executive: And then, of course, as we mentioned on the call, there was a back bill, a large back bill, in Q2 of 2023, which caused for harder comparisons. And then the other factor this year has been a little bit of the larger customer consolidation that we saw take place having a small impact on the revenues there. And so timing throughout as we look forward will also play its part.
Speaker Change: <unk> and then the other factor this year has been a little bit of a logic customer consolidation that we saw take place having.
Speaker Change: <unk> impact on the revenues there.
Speaker Change: And so timing throughout as well.
Speaker Change: Florida will also play its part.
Speaker Change: The confidence we have in hitting that lower portion of the 7% to 10% guide comes from three before.
Unknown Executive: The confidence we have in hitting that lower portion of the 7-10% guide comes from three or four key areas, and that's new sales, it's new products, it's pricing, and it's the new technology efforts that we've really been able to focus on this year as a result of finishing off those technology migrations in Asia Pacific throughout last year. So the full force, almost the entire technology team, is really coming back to focus on our core, focus on what SIBO is best at. So I'll go through those sections, and I'll also pass it on to Chris to talk a little bit more about that technology investment that we see giving us some durability throughout this year and into next year.
Speaker Change: Key areas and Thats new sales edge.
Speaker Change: New products pricing and it's the new technology efforts that we've really been able to focus on this year as a result of finishing off those technology migrations in Asia Pacific throughout last year.
Speaker Change: So first of all most of the technology teams really coming back to focus on our core focus somewhat CEVA is baxter.
Speaker Change: Those sections and I will also add.
Speaker Change: Chris to talk a little bit more about that technology investment that we see giving us some durability throughout this year and into next year, So net new sales.
Unknown Executive: So there are new sales. We doubled the amount of ACV sales in Q2 versus Q1, and we'll see the benefit of those sales coming through throughout the rest of the year. We were really pleased to see the continuation of sales of data and access solutions internationally, with 40% of that growth coming from outside of the US. And when you think about the macro uncertainty for the rest of the year, we certainly see more demand for access and capacity and for data as we go throughout time here.
Speaker Change: Double the amount of HCV sales in Q2 versus Q1, and we will see the benefit of those sales coming through throughout the rest of the year.
Speaker Change: Really pleased to see the continuation of sales of data and access solutions internationally with 40% of that growth coming from.
Speaker Change: The U S and when you think about the macro uncertainty for the rest of the year, we certainly see more demand for accessing capacity and for data as we go throughout throughout time here new products, some packaging and bundling that all new index.
Unknown Executive: New products, some packaging, and bundling there of our new index channels and services that we see going forward. And, of course, we were pleased to see the sale of our CBOE1 data up there in Canada. Pricing changes will also play their part. As you know, we aim to have high-value, cost-effective data feeds, but we will perform price comparisons and review where we think we're undervalued. And then when we come to technology, those system enhancements we've been able to put in place for the equity markets, that access layer improvement is really important for this year and rolling out into Europe and the rest of the world into 2025, and that new technology effort is really allowing us to produce new data insights, insights into the activity on our platforms, which provide value for customers that they're willing to pay for, Craig and Dan. I'll go into that
Speaker Change: Channels and services.
Speaker Change: We see going forward of course, we were pleased to see the sale of our <unk> one data up there in Canada.
Speaker Change: Pricing changes will also play that Paul as you know we aim to have high value cost effective data phase, but we will perform.
Paul: And price comparisons and review why we think we're undervalued.
Paul: And then when it comes to technology system enhancements, we've been able to vote for the equities market access Larry.
Speaker Change: <unk> is really important for this year and rolling out into Europe, and the rest of the world into 2025 and that new technology as it really allowing us to produce new data insights insights into the activity on our platform, which provides value for customers that are willing to pay for.
Christopher Isaacson: Great. Now, I'll dive down a little bit further on the technology improvements. So, we've been making some pretty substantial investments in leading-edge technology that is just starting to come to the market and bear fruit. As Dave mentioned, we've got even greater focus on our organic efforts now that the migrations are largely done, except for Canada, which remains and will complete in the first quarter of next year.
Speaker Change: Great and then I'll dive down a little bit further on the technology improvements, we've been making some pretty substantial investments in leading edge technology that are just starting to come to the market and bear fruit.
Speaker Change: Dave mentioned, we got even greater focus on our organic efforts now that the migrations are largely done except for Canada that remains and will complete the first quarter of next year and these technology improvements are improving access to data and insights.
Christopher Isaacson: And these technological improvements are improving access to data and insights. On the access side, in U.S. equities, that was finished on July 1st, so in the second half, we'll see the full benefit of that. And then in options, we're also in the second half of the year planning to roll out improvements in all access data and improvements and a new access architecture for one of our four markets, and then we hope to roll it out to others in subsequent quarters.
Speaker Change: On the access side from U S. Equities, we just completed dedicated cores across all four equity markets that was finished on July one so in the second half, we'll see the full benefit of that.
Speaker Change: Alright.
Speaker Change: And options we're also in the.
Speaker Change: Second half we plan to rollout improvements at all access data and improvements a new access architecture for all of our four markets and then we hope to roll it to others.
Speaker Change: Subsequent quarters, we're improving market data that we just made a rollout here at the end of July with improved market data and then some new services to provide greater insights for our customers into their trading activity and how they can optimize their behavior.
Christopher Isaacson: We're improving market data. In fact, we just made a rollout here at the end of July with improved market data and then some new services to provide greater insights for our customers about their trading activity and how they can optimize their behavior. And finally, I'll mention, as we enter this election season, or we're actually fully in the election season, certain issues will continue both from election and Geopolitical Issues. The demand for access and capacity is only anticipated to grow, and we're going to continue to invest to provide greater access for our customers to that demand.
Speaker Change: And finally, I'll mentioned as we enter this election season over actually fully in the election season uncertainties will.
Speaker Change: We will continue both for the elections.
Speaker Change: Geopolitical issues.
Speaker Change: The demand for accessing capacities only anticipated to grow and we're going to continue to invest to provide greater access for our customers. So that demand grows.
Patrick <unk>: Thank you. Your next question comes from the line of Patrick <unk> of Piper Sandler Your line is open.
Operator: Thank you. Your next question comes from the line of Patrick Moley from Piper Sandler. Your line is open.
Patrick <unk>: Yes, thanks for taking the question.
Unknown Executive: Yeah, thanks for taking the question. I just had one on the international opportunity for index options. Could you help us size that opportunity overseas relative to the US? How do you anticipate the mix between institutions and retail to sort of evolve over there? And then, just broadly, when we think about the competitive landscape in index options, Fred mentioned the $16 trillion in AUM that's benchmarked to the index. How much of a competitive advantage is that for you when you think about other players that might try to replicate the success you've had in the US overseas?
Patrick: So I just had one on the international opportunity for index options could you help us size.
Patrick <unk>: That opportunity overseas relative to the U S. How do you anticipate the mix between institutions and retail to sort of evolve over there and then just broadly when we think about the competitive landscape and index options, Brad mentioned that 16 trillion in AUM its benchmark in the index how much of a competitive advantage is that for you when you think.
Speaker Change: About other players that might try to replicate the success <unk> had in the U S overseas. Thanks.
Speaker Change: Thanks, very much for those questions.
Unknown Executive: Thanks. Thanks very much.
Unknown Executive: Thanks very much for those questions. As we think about international expansion, the secular trends we mentioned and the prepared remarks are really important to consider when considering that increase in assets benchmarked against the US capital market. With the S&P 500 index options complex and all of the volatility toolkit we put around that, Cboe really is the home to really manage that equity volatility risk for global participants. So, that creates an appeal for both those institutional and those retail customers, with three retail brokers coming on board this year.
Patrick: As we think about international expansion.
Speaker Change: Secular trends, we mentioned then.
Speaker Change: Prepared remarks are really important to consider that increase in assets benchmarked against the U S capital market with the S&P 500 index options complex and all of the volatility toolkit, we put around that ciba really is to.
Speaker Change: To really manage that equity volatility risk for global participants. So then that creates an appeal for both those institutions and those.
Speaker Change: Retail customers with three retail brokers coming up both this year.
Unknown Executive: We can see a good runway for those efforts. Operating globally gives us the ability to talk to our customers globally about what they need and how they need to access our market. So the runway for us, we feel, is quite long.
Speaker Change: We can see a good runway for those efforts operating globally gives us the ability to talk to our customers globally about what they need and how they need to access our market. So the runway for US we feel is quite long one of the markets. We do use but it's not the metric to use.
Unknown Executive: One of the markers we do use, but it's not the metric to use, is the percentage of trading of SPX in global trading hours. That's around about 2% or 3% at this point in time, but it's important to say that as we bring on those customers, they do trade a lot, of course, in the regular trading hours where the bulk of the trading activity takes place at this point in time. You mentioned the competitive differentiator here.
Speaker Change: Essentially the trading of SPX in global trading hours Thats round about 2% to 3% at this point in time, but it's important to say that as we bring on those customers. They do trade a lot of course in the regular trading hours, where the bulk of the trading activity takes place at this point in time.
Speaker Change: You mentioned the competitive differentiator for us that global complex of equity volatility.
Unknown Executive: For us, that global complex of equity volatility risk to be able to manage, be able to manage that there, the toolkit that we expand when we think about our product development pipeline, really excited about VIX futures, various futures coming on board later this year, and VIX options on futures, which is an interesting one to mention because that is a futures product. VIX options on futures allow volatility as an asset class to really now be accessed by customers that cannot trade in a U.S. security-based options environment.
Speaker Change: Mix to be able to manage we have to manage that that would be the toolkit that we expand when we think about our product development pipeline really excited about VIX futures <unk> futures coming on board later, this year and VIX options on futures, which is an interesting one to mention because that is a futures product based options on futures.
Speaker Change: Allows volatility.
Speaker Change: As an asset class really now to be accessed by customers that cannot trade in the U S security based options environments. So that's interesting to institutional players around the globe. So really as we broaden out our product set it becomes interesting to institutional players and that drove our retail price really.
Unknown Executive: That's interesting to institutional players around the globe. Really, as we broaden out our product set, it becomes interesting to institutional players, and that draw for retail players really continues throughout time. So our focus will be sales, footprint in the region, marketing, and the brand, and focusing on how we can get our data closer to our customers internationally. And you see that coming through there with that 40% of data and access sales happening outside of the United States. Your next question comes from the line of Brian Bedell of Deutsche Bank. Your line is open. Oh, great. Thanks. Good morning, folks. Maybe just switch to the index options franchise on the revenue capture rate.
Speaker Change: Continues throughout time.
Speaker Change: So our focus will be sales footprint in the region.
Speaker Change: Marketing marketing and brand and focusing on how we can get our data closer to our customers internationally do you see that coming through that without 40% data and access.
Speaker Change: Happening outside of the United States.
Speaker Change: Your next question comes from the line of Brian Bedell of Deutsche Bank. Your line is open.
Operator: Your next question comes from the line of Brian Bedell of Deutsche Bank. Your line is open. Oh, great. Thanks. Good morning.
Brian Bedell: Great. Thanks, good morning folks.
Speaker Change: Maybe just switch to the index options franchise on the revenue capture rate.
Speaker Change: Good.
Speaker Change: On your proprietary products, increasing for the increasing sequentially for the last three quarters is kind of Adam.
Speaker Change: A little bit of pullback in the second quarter. So just maybe the drivers of that and then how you see that.
Speaker Change: Going forward do you see that re expanding.
Speaker Change: From here or.
Speaker Change: Or it's going to be more volatile based on mix.
Speaker Change: Sure.
Unknown Executive: Really, you hit it right at the end. The mix shift is the driver for the RPC changes there. We haven't made any pricing changes to affect anything. It's really about the mix of the products. And that brings us back to talking about the beauty of the volatility toolkit we've got at Cboe with the SBX options, the VIX options, and the, as well as, you know, on the futures side, the VIX futures providing a great suite of utility.
Speaker Change: So where do you think you hit it right at the end.
Speaker Change: The mix shift is the driver for the RPC changes that we havent made any pricing changes to affect anything its really about the mix of the products and that brings us back to talking about the beauty of the volatility Tokyo Scarlet fever, with the SPX options VIX options and.
Speaker Change: As well as future side fixed futures, providing a great suite of utility for example that we sold the rotation into small caps. This quarter, we saw a rush.
Unknown Executive: For example, we saw the rotation into small caps this quarter. We saw RUT hit record days, and there, of course, a different capture for RUT versus SBX as well. So we see that the mix shift is the ebb and flow of the toolkit as our customers use the VIX or the SBX differently throughout time. So nothing particularly to signal for the forward look there.
Speaker Change: Record days and that of course, a different capture for rux versus SPX.
Speaker Change: As well so we see that mix shift is having.
Speaker Change: Slide the toolkit as a cost.
Speaker Change: Misused.
Speaker Change: Well the SPX differently throughout time, so nothing particularly to signal for the forward look on that.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Alex Kramm of UBS Financial Your line is open.
Operator: Your next question comes from the line of Alex Kramm of UBS Financial. Your line is open.
Unknown Executive: I just wanted to come back to the international expansions you talked about. First of all, it's a little bit surprising that there are still stones to be turned over. Maybe you can be a little bit more specific.
Alex Kramm: Yes, Hey, just wanted to come back to that international.
Speaker Change: Expansion that you talked about.
Speaker Change: First of all a little bit surprising that theres still stones to be turned over but.
Unknown Executive: From both a customer and a customer perspective, is it more retail than institutional that's untapped? And then maybe from a regional perspective, where do you see the biggest opportunities to expand sales and marketing? And since I mentioned sales and marketing, you know, obviously, there's a cost to that. So as you expand and focus more internationally, should we expect you to ramp up spending? Or can that be absorbed by your at your cost? Right.
Speaker Change: Maybe you can be a little bit more specific is it from both a customer perspective is it more retail than institutional that's untapped and then maybe from a regional perspective, where you see the biggest opportunities.
Speaker Change: Two to expand sales and marketing and since I mentioned sales and marketing.
Speaker Change: Lee.
Lee: There is a cost to that so as you as you expand and focus more internationally should we expect you ramping up spending or can it be absorbed by your by your cost base.
Speaker Change: Great.
Unknown Executive: Great. I'll potentially go in reverse there, Alex.
Alex Kramm: Potentially going the first Alex.
Lee: The spend as we look at sales and marketing.
Speaker Change: Growth that is really I would call incremental on top of that existing global footprint you data of course, the general expenses increase in the last few years, which we've really been focused on bringing bringing down our focusing on margin.
Speaker Change: <unk> allowed us to put in place the footprint that we now gain the benefit of that scale of infrastructure really important for us to be able to leapfrog off as we think about increased sales of mounting asset sales will be in terms of head count north of 100 people, but really being able to cover that vast area, we say Asia Pacific.
Unknown Executive: The spend, as we look at sales and marketing growth there, is really, I would call, incremental on top of that existing global footprint. You did, of course, see general expenses increase in the last few years, which we've really been focused on bringing down and focusing on margin. That expense allowed us to put in place the footprint that we now gain the benefit of. That scaled infrastructure is really important for us to be able to leapfrog as we think about increased sales and marketing here.
Unknown Executive: The sales will be, in terms of headcount, not 100 people, but really being able to cover that vast area. We say Asia Pacific, but it's a region of countries. When we think about countries in the Asia Pacific, of course, we start from where we already are, which is Australia and Japan, but there are also opportunities we see in South Korea, in Taiwan, and elsewhere, Singapore in the region to really have hubs of really focused activity, three on boards this year.
Speaker Change: Hey.
Speaker Change: It's a region of countries when we think about countries in Asia Pacific of course, we start from where we already are which is Australia in Japan, but also opportunities, we see in South Korea, and Taiwan and elsewhere, Singapore in the region to really have hopes of rate focused activity to three of them.
Unknown Executive: We're in the retail brokerage space, and we do see increases in institutional access as we go through. As we've spoken on previous calls, we can't always see the origin of the order and the end user, but in our conversations around the world with customers, we do look to help break down access barriers, and those access barriers include a pathway to a securities options market in the US, and it includes jurisdictional regulatory approvals for us to be able to market in-country, and those are the things that we really focus on on a country-by-country basis, which is why, just to reinforce the point from before, having a VIX options on futures capability that we will eventually roll out on a 24-5 basis becomes very interesting.
Speaker Change: Both this year, where in the retail brokerage space and we do see increases in institutional access as we go through.
Speaker Change: Okay.
Speaker Change: Previous calls we talk always see the origin of the euro in the end user but in our conversations around the world with customers.
Speaker Change: We look to help breakdown access batteries in those access barriers include a pathway to a securities options market in the U S and it includes jurisdictional regulatory approvals for us to be able to market in the country and those are the things that we really focus on a country by country basis, So which is why I just named.
Speaker Change: For support from before having a VIX options on futures capability that we will eventually rollout on a 25 basis becomes very interesting stat institutional client base around the world.
Operator: Your next question comes from the line of Craig Siegenthaler of Bank of America. Your line is open.
Speaker Change: Your next question comes from the line of Craig Siegenthaler of Bank of America. Your line is open.
Speaker Change: Okay.
Unknown Executive: Hey, good morning, everyone. Robinhood is the second largest options trading platform in the US and one of the biggest crypto platforms with their 24 million accounts. They plan to launch index options to their clients in 4Q. And I know you're also seeking additional regulatory approval for both crypto ETFs and crypto index options with the Russell via the FTSE brand. Could crypto ETF options and index options be part of the initial launch at Robinhood later this year, which could have an even bigger impact on your volumes? Or should we think about this more as phase two?
Speaker Change: Hey, good morning, everyone. So Robin Hood is the second largest options trading platform in the U S and one of the biggest crypto platforms. Two went through 'twenty 4 million accounts. They plan to launch index options to their clients in for Q.
Speaker Change: And I know you were also seeking additional regulatory approval for both crypto Etfs and.
Speaker Change: In Crypto index options with the Russell via the FTSE brand.
Speaker Change: Could crypto ETF options and index options the part of the initial launch it at Robinhood later, this year, which could have an even bigger impact to your volumes, where should we think about this more as a phase two.
Speaker Change: Okay.
Unknown Executive: The short answer is think about it more as phase two. There's a number of regulatory, structural, and infrastructure-based obstacles we need to knock down, but we're really looking forward to working on those with our customers and the regulators to be able to bring ETF options on crypto ETFs to the marketplace. We're really pleased to offer listings, the five ETF listings on ETF Ethereum that we brought to market recently, as well as the six Bitcoin ETFs we've already got on the platform.
Speaker Change: The short answer is think about it more as a phase two.
Speaker Change: A number of regulatory and structural and infrastructure base obstacles, we need to knock down, but we're really looking forward to working with our customers and the regulators to be able to bring.
Speaker Change: <unk> options on crypto Etfs to the marketplace.
Speaker Change: We're really pleased to offer.
Speaker Change: Things are five Etfs.
Speaker Change: Listings on ETF.
Speaker Change: Listings that we brought to market recently as well as the six bitcoin Etfs, we've already got on the platform.
Speaker Change: The Robin Hood launch at the end of this year is really focused on the index options and cash settled index options, which we think will be a really.
Unknown Executive: The Robinhood launch at the end of this year is really focused on index options and cash settled index options, which we think will be a really great new product set to access those 24 million funded accounts. In particular, when you consider Robinhood's focus on the active retail trader customer base, the characteristics of the cash settled index options really will appeal to that customer base. And we're super excited about that, and we'll be looking to lean into that with joint marketing and educational efforts with our Options Institute and in conjunction with Robinhood throughout the rest of this year. Your next question comes from the line of Ben Budish of Barclays. Your line is open.
Speaker Change: Great New product set to access the 24 million funded accounts.
Speaker Change: In particular, when you consider Robyn hopes focus on the active retail trade and customer base.
Speaker Change: Characteristics of the cash settled index options, we will appeal to that customer base that we're super excited about that and we'll be looking to lean into that with joint marketing and educational assets with our options Institute, adding conjunction with robinhood throughout the rest of this year.
Ben <unk>: Your next question comes from the line of Ben <unk> of Barclays. Your line is open hi.
Operator: Hi, good morning.
Ben <unk>: Good morning, and thanks for taking my questions.
Speaker Change: I was wondering if you could unpack what's happening in July a little bit clearly we've seen the VIX start to rise can you talk a little bit about the customer mix I know for some time there has been a narrative around increasing adoption and consumption of data by new kind of trading firms. So to what degree are you seeing.
Speaker Change: Pick up from any new customer sets in July what does the mix look like thank you.
Ben <unk>: Okay.
Speaker Change: Thanks very much for the question, yes, certainly so.
Unknown Executive: Thanks very much for the question. Yes, certainly, we saw pickups into July with a number of records across the volatility toolkit coming through there. The makeshift is really in the usage of the products.
Speaker Change: Ups into July with a number of our records across the volatility toolkit coming through that the mix shift is really in the usage of the products. There is no specific client shift that we've seen in July in its own right, but what it is worth saying is that they engaged.
Unknown Executive: There's no specific client shift that we've seen in July in its own right, but what it is worth saying is that the engagement from our existing customers and the inbound from new customers is what really gives us excitement for the rest of the year. A couple of examples there We see, with that two years' worth of data that you mentioned, an increase in the number of QIS looking to put out products and strategies there.
Speaker Change: <unk> from our existing customers and the <unk> and.
Speaker Change: Inbounds from new customers is what really gives us excitement for the rest of the year couple of examples that we see with that two years' worth of data that you mentioned an increase in the number of QRS.
Ben <unk>: Looking to put out products and strategies that we see a continuation of liquidity provide its using <unk> SPX options to hedge their positions, which is a really interesting development we've mentioned.
Unknown Executive: We see a continuation of liquidity providers using zero DTSPX options to hedge their positions, which is a really interesting development we've mentioned at times in the past. And then you think about the new liquidity providers, major liquidity providers that are coming to us from other asset classes, whether it be futures or equities, really looking to get involved in the complex there. And then with the mid-shift, with retail brokerages coming through: really, really exciting.
Ben <unk>: In the past and then you think about the new liquidity providers major liquidity providers coming to us from other asset classes, whether it be futures are equities really looking to get involved in the complex that.
Ben <unk>: And then with the mix shift.
Speaker Change: Retail brokerage is coming through really really exciting and then towards the end of this year as we just discussed. The addition of a robinhood estimation is particularly exciting.
Unknown Executive: The customer is particularly excited. And Ben, I just might add a couple of points on these options we're seeing. We're on record for a record pace for the entire year, as people see the utility and use our entire volatility suite. And then the rotation into small caps a bit. We just saw a record in July, I think our second best month ever, best since 2018 in run options. We see some customer behavior there as they rotate and adjust too.
Speaker Change: And then I just might add a couple of points there.
Speaker Change: VIX options, we're seeing you know we're on record for a record pace for the entire year as people see the utility and using our entire volatility suite.
Speaker Change: And then the rotation into small caps a bit we just saw a record in July on our second best month ever best since 2018.
Speaker Change: In rut options. So we.
Speaker Change: We see some customer behavior there.
Speaker Change: They rotate adjust to.
Speaker Change: Just to market conditions.
Speaker Change: I just think we are seeing increased volatility in July.
Speaker Change: With whether it's what's going on on the political side in the U S with the election coming up whether it's geopolitical.
Speaker Change: Zero political or rotation.
Speaker Change: And then other asset sectors with small to small cap sector. So theres a lot going on in the market right now and Thats, helping in July.
Speaker Change: Your next.
Operator: [inaudible] Your next question comes from the line of Owen Lau of Oppenheimer. Your line is open. Hi, good morning. Thank you for taking my question. Just want to follow up on the last question about maybe talking about fixed futures and
Operator: Your next question comes from Owen Lau of Oppenheimer. Your line is open. Hi, good morning.
Speaker Change: Comes from the line of Owen Lau of Oppenheimer. Your line is open.
Owen Lau: Hi, Good morning. Thank you for taking my question just wanted to follow up the last question about maybe talk about the VIX futures and options Adv were quite strong in the second quarter is actually in April I, just wanted to get a better sense about the driver of the strength and then you talk about kind of this volatility.
Speaker Change: In July I am just wondering how we should think about the mix between SPX and VIX going into that.
Speaker Change: Go ahead.
Speaker Change: The election in November.
Speaker Change: Thanks.
Unknown Executive: Thanks, Owen. Yeah, this really is the story of the volatility toolkit. We're seeing investors gravitate towards that toolkit to be able to manage risk, both the upside as well as the downside. VIX options, particularly, we've been talking about this for a little while, is that the lower VIX, the historically low VIX in general that we've seen for most parts of this year, when we see that volatility spike, such as we did yesterday to go over 19, or during April, we saw it pop to 19 around those volatility events that occurred.
Speaker Change: Really the story of the volatility toolkit I was seeing investors gravitate towards that toolkit to be able to manage risk both to the upside as well as the downside.
Speaker Change: VIX options, particularly we've been talking about this for a little while is that the lowest makes the historically low VIX in general that we've seen for most parts of this year when we see that volatility spikes such as we did yesterday to getting out of the 19 oriented enjoying April we saw it pop to 19 around there is volatility events that occurred.
Speaker Change: So we see customers and monetizing of rolling those VIX call options, all those fixed cost spreads they've got in place and then we see the resetting enrolling of those as we go through time looking to prepare for that tail risks that may may well occurred, particularly when you think about the macro environment geopolitical risks.
Unknown Executive: We see customers then monetizing or rolling those VIX call options or those VIX call spreads they've got in place. And then we see the resetting and rolling of those as we go through time, looking to prepare for those tail risks that may well occur, particularly when you think about the macro environment. We've got geopolitical risks.
Speaker Change: Before elections, which I still came really big catalyst for volatility on those daily economic data is whether it be cpi's central bank rate decisions or earnings calls. So when we think about VIX options VIX futures when you see a spike in VIX, we see really large VIX futures days yesterday, we saw.
Unknown Executive: We've got elections, which are historically a really big catalyst for volatility, and daily economic data, whether it be CPIs, central bank rate decisions, or earnings calls. So when we think about VIX options and VIX futures, when you see a spike in VIX, we see really large VIX futures days. Yesterday, we saw over 400,000 VIX futures contracts trade as volatility popped over to 19.5 yesterday. SBX options always continue to play their part, whether it's at the shorter end of the curve or managing that longer-term exposure in and through and beyond the elections there, so that the utility of each product, used in conjunction as well as in isolation, is really what we see developing over time.
Speaker Change: 400000, VIX futures contracts trade volatility popped over to <unk> to <unk> 19 in the half yesterday SPX options always continue to play that path, whether it's in the short term I think we're managing that longer term exposure in and through and beyond the <unk>.
Speaker Change: Actions assay.
Speaker Change: Utility of each product used in conjunction as well as in isolation is really what we see developing over time and then our job is to continue to innovate products around that and so when you think about the differences between implied and realized volatility very step forward variance futures on exchange transfer.
Unknown Executive: And then our job is to continue to innovate products around that. And so, when you think about the differences between implied and realized volatility, step forward, and volatility futures. On exchange, transparent, and capital efficient for a trading strategy, which has recently become very hard to achieve OTC because of the unclear margin rules. So bringing that on exchange is an exciting development there, along with those VIX options on futures, all before the US election. So a really interesting setup for the rest.
Speaker Change: On capital efficient threat for trading strategy, which has recently become very hard to achieve OTC because of the uncleared margin rules, so bringing that on exchange and exciting development that that along with those VIX options on futures all before the U S election, so really interesting setup for the rest of the year.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Kyle Voigt of <unk>. Your line is open.
Operator: Your next question comes from the line of Kyle Voigt of KBW. Your line is open. Hi, good morning. Thanks for taking the question. Maybe just a question on capital allocation. So even with
Kyle Voigt: Hi, good morning, Thanks for taking the question maybe just a question on capital allocation, so even with the $150 million or so of capital returned in the quarter you still built up cash on the balance sheet now with about $600 million cash and net leverage continues to come down.
Operator: Hi, good morning. Thanks for taking the time to answer the question. Maybe just a question on capital allocation. But even with the $150 million or so capital return in the quarter, you still built up cash in the balance sheet now with about 600 million cash, and net leverage continues to come down. So first, just in terms of building up some cash over the past year, I guess, is that being driven at all by wanting to retain some M&A flexibility, or is something else driving that?
Speaker Change: So first just in terms of building up some cash over the past year I guess is that being driven at all by wanting to retain some M&A flexibility or something else driving that and secondly, even though M&A has been de emphasized I'm assuming that there could still be some M&A that would be attractive I guess can you comment on M&A hurdles and if youre seeing any.
Operator: And secondly, even though M&A has been de-emphasized, I'm assuming that there could still be some M&A that would be attractive. I guess, can you comment on the M&A hurdles and if you're seeing anything interesting in the market from an M&A perspective? Well, I'm not going to talk about any of that.
Speaker Change: Anything interesting in the market.
Speaker Change: From an M&A perspective.
Speaker Change: Well I'm not going to talk about imaging and we think we're looking at right now I will pass. Your question. However, having said that I think building up some cash and having flexibility. There is always a good thing to have to deploy at opportunity.
Unknown Executive: As you never know what tomorrow is going to bring here, But yeah, I've always said, you know, I did not say there would be no M&A. I've always said it'll be more selective, and it'll be more significant M&A. What we've learned over the last three years is that a lot of small M&A causes a lot of work and immigration work, particularly in our technology area, which is an important part of our business.
Speaker Change: You never know what Tomorrow's Garner prime here.
Speaker Change: But I've always said.
Speaker Change: I did not say there'll be no M&A ive always said it will be more.
Speaker Change: Selective it'll be more significant M&A.
Speaker Change: What we've learned through the last three years, there's a lot of small M&A causes.
Speaker Change: There's a lot of work in immigration work, particularly in our technology area, which is an important part of our business our.
Unknown Executive: So if we're going to do M&A going forward, and that will continue to be one of our options and things we look at, it'll be more significant and much more targeted and in line with our strategy. Your next question comes from the line of Stephanie Ma of Morgan Stanley. Your line is open.
Speaker Change: So if we're going to do M&A going forward and that will continue to be one of our options and things. We look up it will be more significant and much more targeted and in line with our strategy.
Speaker Change: Your next question comes from the line of Stephanie MA of Morgan Stanley. Your line is open.
Operator: Your next question comes from the line of Stephanie Ma of Morgan Stanley.
Speaker Change: Hi, This is Stephanie filling in for Mike maybe just one on sabot global cloud how meaningful is the contribution uptick today, how do you see that progressing over the next few years and maybe you can just elaborate on some of your initiatives and steps you're taking to expand that.
Speaker Change: Thanks.
Speaker Change: Thanks, Stephanie.
Unknown Executive: Thanks, Stephanie. Cboe Global Cloud has been a really interesting addition for us over the last couple of years, with nearly 80% of customers and revenue coming from outside the US. It's really part of that theme of putting data closer to our customers and, in fact, putting data closer to more potential customers. And it forms a key part of our global expansion plans, as well as the diversification of revenue streams. The ability for us to have a one-stop shop for historical data for package and bundle data insights, as well as data feeds, is really tremendously powerful.
Speaker Change: <unk> Global cloud has been a really interesting addition faced over the last couple of years.
Speaker Change: Nearly 80% of customers and revenue coming from outside the U S. It's really part of that thing of putting data closer to our customers and in fact, putting data close to more potential customers in a farm is a key part of our global expansion plans as well as the diversification of revenue streams the ability for us.
Speaker Change: To have a one stop shop for historical data for package and bundle bundle data insights as well as data phases is really tremendously.
Speaker Change: We don't break out the contribution of <unk> global cloud from the rest.
Speaker Change: But in terms of a strategic priority for US. It certainly went up then I'll pass it to Chris to give some more.
Unknown Executive: We don't break out the contribution of Cboe Global Cloud from the rest, but in terms of a strategic priority for us, it's certainly well up there. And I'll pass on to Chris to give some more. Yes, Stephanie, as Dave said, it's really important for us to get our data and access closer to customers where they can use our products, data, and insights. So we were very committed to this, and we think we're still in the very early innings of this, as Dave mentioned, most of the growth in Cboe Global Cloud has come outside the US. And, you know, to maybe answer Alex's earlier question, we're still very
Chris Isaacson: Stephanie as Dave said, it's really important for us to get our data and access closer to customers, where they can use our products data and insights. So we were very committed to this we think we're still in the very early early innings of this as Dave mentioned most of the urgency for global cloud to come outside the U S and maybe to Alex's earlier question, we're still very.
Unknown Executive: We are in the very early innings of our global presence. We're a relatively young global company having just expanded globally in the last two or three years. So part of the secular trend we think is for that import opportunity that's been mentioned in the script is that as we get our data closer to customers, they're going to get that data in and then be able to import their trading traffic into the U.S. as they better understand our data.
Speaker Change: Early innings in our global presence for a relatively young global company, having just expanded globally in the last two or three years. So are the secular trend. We think is part of that import opportunity. That's been mentioned in the script is that we as we get our data closer to customers as theyre going to.
Speaker Change: Get that data and then to be able to import their trading traffic into the U S. As they better understand our data so.
Speaker Change: Look for us to continue to make investments receive a global cloud.
Speaker Change: Our data products closer to those customers.
Speaker Change: Your next question comes from the line of Alex Blaustein of Goldman Sachs. Your line is open.
Operator: Your next question comes from the line of Alex Blostein of Goldman Sachs. Your line is open.
Unknown Executive: So look for us to continue to make investments in Cboe Global Cloud and get our data and products closer to those customers. Your next question comes from the line of Alex Blostein of Goldman Sachs. Your line is open. Hey, good morning. Thanks for taking the question as well. I wanted to follow up on the expansion of the VIX product line.
Alex Blaustein: Hey, good morning, Thanks for taking the question as well I wanted to follow up on the expansion of the <unk> product lineup you mentioned earlier in the prepared remarks.
Alex Blaustein: Talked a little bit of a options and VIX futures. So maybe some early feedback you're getting from the trading community on what the uptake there could be I guess, how are you thinking about just kind of expansion of that product set relative to fixed regular options.
Speaker Change: Whether there could be any cannibalization of your choice you this kind of like opening up the broker market.
Alex Kramm: Thanks, Alex.
Speaker Change: So the VIX options on futures build capability to have that convexity.
Speaker Change: For a broader set of customers as we sake customers that cannot today access use security based.
Speaker Change: Options is that new customer base that we're excited about and with any new customer base, that's going to take time to seed and build so we're excited about the product. We're excited about when we expand that to 24 five and also key point here is that we can extend that.
Speaker Change: Tenants to a shorter dated tenants with this product as well so think about that general desire and then the secular trend towards shorter end of the curve.
Speaker Change: We can begin to access that with this product. So there is two key drivers for our.
Speaker Change: Level of excitement around this product is a new customer range internationally and within the U S that can't access use security based options and the ability to go into the shorts renters suggests that's a really interesting prospect for us.
Speaker Change: Your next question comes from the line of Ken Worthington of Jpmorgan. Your line is open hi, good morning.
Operator: Your next question comes from the line of Ken Worthington of J.P. Morgan. Your line is open. Hi, good morning.
Unknown Executive: So that's a really interesting part of it for us. Your next question comes from the line of Ken Worthington of J.P. Morgan. Your line is open. Hi, good morning. To follow up on Patrick's question earlier,
Speaker Change: On on Patrick's question earlier in the call as you think about the continued investment in European Index options. I think the thesis has been that index options are much smaller part of market cap than seen in the U S. So maybe first remind us when did the CBO launch.
Speaker Change: Our local index options in Europe, what sort of Adv or are you seeing right now there and the strategy I think has been a build it and they will come what is your conviction level that this vision really is the correct one.
Ken Hill: Thanks, very much Ken.
Unknown Executive: Thanks very much, Ken. It's worth saying, as we have from the start, that this is really Cboe taking a long view, a long view to the ability to grow the markets in Europe and bring the utility of options. That secular growth that we've seen in the US, we see that being really of great utility to the European economy, the European retail investor, and the European institutions if we can bring that US-style market structure to Europe.
Speaker Change: As we have from the start that this is really see by taking a long view along with you to the ability to grow the market.
Speaker Change: Europe and bring the utility of options that secular growth that we've seen in the U S. We see that.
Speaker Change: Being really have great utility to the European economy European retail investor in the European institutions.
Unknown Executive: So exporting our capabilities and our know-how to bring that market structure of a US on-exchange, on-screen market in a capital efficient manner to customers. The milestones we've hit since we launched are also worth pointing out. We think we're at the point of having a minimum viable product now, and that's really marked by the milestone of rolling out single stock options. That then complements the index futures and options that we've had, and then the milestones this year, which are really interesting, showing that major global customers are aligned with that view.
Speaker Change: If we can bring that U S market search to exporting our capabilities and our know how to bring that market structure of our U S on exchange.
Speaker Change: On the screen market in a capital efficient manner.
Speaker Change: Estimates.
Speaker Change: The milestones we've had since we've launched our radio also worth pointing out.
Speaker Change: I think we're at the point of having a minimum viable product now and Thats really marked by the milestone is rolling out single stock options and complements the index futures and options that we've had and then the milestones this year, which is really interesting showing the global major.
Speaker Change: Major customers are aligned with that view that includes interactive brokers, who came on board this quarter as well as IMC and know that anchor tenant liquidity provider, we talked about on the call. The liquidity provision programs, we've seen the market quality improvement futures and index options.
Unknown Executive: That includes Interactive Brokers, who came on board this quarter, as well as IMC, another anchor tenant equality provider. We talked about on the call the Equality Provision Programme; we've seen market quality improve in futures and in index options. And then also when we think about the ADV there, we did about 850 contracts a day in June and coming into July, that's holding steady. Our goal forward is to focus on education with the Options Institute, and I guess the last point I would make on this is that this is all built on top of a scaled infrastructure in Europe.
Speaker Change: And then also when we think about the.
Speaker Change: Adv that we did about 850 contracts a day in June coming into July that's holding steady or go forward is to focus on education with the options Institute.
Speaker Change: And I guess the last point I would make on this is that this is all built on top of a scaled infrastructure in Europe and so.
Unknown Executive: So it's an incremental investment; it's not making us sweat too much, so we can have patience as we build on that scaled infrastructure and those key anchor tenants come on board, sharing that vision with us really.
Speaker Change: And incrementally invest.
Speaker Change: Investment it's not.
Speaker Change: Making sweat too much. So we can have patients as we build on a scale of infrastructure and.
Speaker Change: Key anchor tenants coming onboard sharing that vision with us really gives us the confidence to continue the course.
Speaker Change: Unfortunately, we've run out of time for questions.
Operator: Unfortunately, we've run out of time for questions. I will now turn the conference back over to the management team for closing remarks. Well, thanks for joining us today, everyone. As we said, we've had a strong quarter and a strong first half. We've got lots of initiatives on the
Speaker Change: I'll now turn the conference back over to the management team for closing remarks.
Unknown Executive: Well, thanks for joining us today, everyone. As we've said, we've had a strong quarter and a strong first half. We've got lots of initiatives on the go here that we feel good about. And with the environment that we're entering here for the balance of the year, we've had a good start to the third quarter with July's trading results. As we look through the US election and geopolitical events, rotations between different parts of the market as events unfold, even as much as you know today, I mean, we feel pretty good about the rest of the year. The balance sheet is strong, with a good cash position and good EBITDA margins.
Speaker Change: Well, thanks for joining us today everyone.
Speaker Change: As we've said we've had a strong quarter, we've had a strong first half.
Speaker Change: We've got lots of initiatives on the go here, but we're feeling good about.
Speaker Change: And what sort of environment that we're entering here over the balance of the year. When we thought it could start to the third quarter with July trading results.
Speaker Change: Through the U S election, geopolitical events, some rotations between different parts of the market and so thats helpful.
Speaker Change: And as much as you know today.
Speaker Change: We feel it's pretty incredible the rest of the year, our balance sheet is strong our cash position.
Speaker Change: EBITDA margins also.
Speaker Change: We feel very good about where are we in a good position to take advantage of opportunities we see in the market.
Speaker Change: We'll talk to you next quarter.
Speaker Change: This concludes today's conference call you may now disconnect.
Operator: This concludes today's conference call. You may now disconnect.
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