Ken 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 will open the call for Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of our website. 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of these factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Fred.

Dave 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. While activity normalized in May and June, overall second quarter SPX ADV was still up a solid 9% year-over-year for 3 million contracts. 0DTE options made up 48% of overall SPX activity in Q2, unchanged from the previous quarter. 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 risks, whether it be geopolitical shocks or macroeconomic surprises with year-to-date ADV on track to exceed even last year's all-time high. 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 VIX future and they will trade on our futures exchange CFE. This is important for two reasons. First, it allows us to provide access to VIX options products to a wider set of market participants in the US and abroad that may not have access to our securities and options exchange. And second, it allows us to offer more tenants to meet customer demand. We're especially excited to expand our volatility toolkit ahead of this year's US 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. 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 catalysts. Our commitment to continually innovate is often cited by customers as one of the key reasons they're eager to partner with us. 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 SPX 0DTE 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 makes us confident that we're well positioned to continue to grow our derivatives business for the rest of the year. Outside of the US specifically, we continue to make sustained progress exporting our US derivatives model to Europe, leveraging our blueprint in the US by deploying our exchange technology to create better trading experiences for customers in Europe through our European derivatives platform, CEDX. We saw the first equity options trade on CEDX in June with nearly 14,000 lots traded in 201 distinct options during the first month of trading. 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 CEDX and the clearing participant of the Cboe Clear Europe, in addition to IMC becoming 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. Taking a look at the Cash and Spot businesses across regions, second quarter results were very strong with year-over-year net revenue growth reaching a robust 15%. Each region saw year-over-year increases as Cboe leveraged its scaled infrastructure to monetize a healthy market backdrop. Looking at the various regions, in North America, US 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. 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 the largest platform of its type for the 27th month in a row in June. As we look to adjacent areas of the market for future growth, we remain on track for our 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] (ph) 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. In addition, volumes increased by a very strong 71% as compared to Q2 of 2023 levels. 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. 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 earlier this year highlights the underlying demand for exposure to Cboe's US benchmark products. 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 [backfill] (ph) 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 2024. And whilst the first half results are trending slightly below our guidance range of 7% to 10% for the year, we anticipate the slower trends will prove transitory, given 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% to 10% guidance range in 2024. Specifically on the Access Solutions side, we are excited about the momentum behind our dedicated cores offering, greatly enhancing our exchange access layer. Dedicated cores is a new offering launched this year to help market participants improve determinism, reduce latency and enhance their ability to effectively navigate markets. 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. Dedicated cores 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 US. We saw a notable uptick in Canada behind sales of our Cboe One data product, as well as a 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. Moving forward, we anticipate being able to shift greater resources to the development of D&A opportunities as we move from the integration efforts with our technology resources to revenue-enhancing capabilities in our Data and Access Solutions category, particularly as it relates to enhancements around US options in the quarters ahead. The breadth of our cash and derivatives markets provides us with the unrivaled position to harvest, aggregate and deliver custom datasets and services closer to customers, both current and prospective, and we look forward to investing behind those opportunities. 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 will turn the call over to Jill.

Fred 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 margins. We allocated 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. 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. 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:

Thank you. The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Dan Fannon of Jefferies. Your line is open.

Dave Howson:

Absolutely. Good morning, Dan. Thanks for the question. As we look at the first half of the year, so far, we're coming up around about 7% growth year-to-date. And the reasoning for the Q2 softer 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 to 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, some of the cash collection timings during the quarter. And then, of course, as we mentioned on the call, there was a backfill, a large backfill in Q2 of 2023, which calls 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. And the confidence we have in hitting that lower portion of the 7% to 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 of the technology team really coming back to focus on our core, focus on what Cboe is best at. So, I'll go through those sections and I'll also pass 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. So, those 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. And 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. New products, some packaging and bundling there of our new index channels and services that we see going forward. Of course, we were pleased to see the sale of our Cboe One data up there in Canada. Pricing changes will also play their part. As you know, we aim to have high-value cost-effective data feed, but we will perform price and 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 book through for the equities markets that access layer improvements really important for this year and rolling out into Europe and the rest of the world into 2025. And that new technology effort 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.

Operator:

Thank you. Your next question comes from the line of Patrick Moley of Piper Sandler. Your line is open.

Dave Howson:

Thanks very much for those questions. As we think about international expansion, the secular trends we mentioned in the prepared remarks are really important to consider that increase in assets benchmarked against the US capital market with the S&P 500 Index options complex, and all of the volatility talk that we put around that, Cboe really is the home to really manage that equity volatility risk for global participants. So, then that creates an appeal for both those institutional and those retail customers with three retail brokers coming on board this year, 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 is the percentage of trading of SPX in Global trading house. That's around about 2% or 3% at this portion 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. As you mentioned the competitive differentiator there, for us, that global complex of equity volatility at 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, variance 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 allows volatility as an asset class really now to be accessed by customers that cannot trade in the US security based options environment. 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 draw for retail players really continues throughout time. So, our focus will be sales footprint in the region, marketing, marketing and brand and focusing on how we can get our data closer to our customers internationally. And you see that coming through there with our 40% of data and access sales happening outside of the United States.

Brian Bedell:

Great. Thanks. Good morning, folks. Maybe just switch to the index options franchise on the revenue capture rate, just, I think that's been on your proprietary products increasing for the -- increasing sequentially for the last three quarter, kind of had a little bit of pullback in the second quarter. So, just maybe the drivers of that? And then, how you see that going forward? Do you see that re-expanding from here or it's going to be more volatile based on mix?

Operator:

Your next question comes from the line of Alex Kramm of UBS Financial. Your line is open.

Dave Howson:

Great. I'll potentially go in reverse. Alex, 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, really important for us to be able to leapfrog off as we think about increased sales and marketing here. So, 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. And when we think about countries, in Asia Pacific, of course, we start from where we already are, which is Australia and Japan, but also opportunities we see in South Korea, in Taiwan and elsewhere, Singapore in the region to really have hubs of really focused activity. The three onboards this year were 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 orderer 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 a country-by-country basis. So, 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 to that institutional client base around the world.

Craig Siegenthaler:

Hey, good morning, everyone. So, Robinhood is the second largest options trading platform in the US and one of the biggest crypto platforms, too, 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 to your volumes, or should we think about this more as a Phase 2?

Operator:

Your next question comes from the line of Ben Budish of Barclays. Your line is open.

Dave Howson:

Thanks very much for the question. Yeah, certainly 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. 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 inbounds 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 desks looking to put out products and strategies there. We see a continuation of liquidity providers using 0DTE SBX 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 makeshift with retail brokerages coming through, really, really exciting. And then towards the end of this year, as we just discussed, the addition of Robinhood as a customer is particularly exciting.

Fred Tomczyk:

And I just think we're seeing increased volatility in July, whether it's what's going on the political side in the U.S. with the election coming up, or whether it's geopolitical or the rotation from AI and into other asset sectors to small cap sector. So, there's a lot going on in the market right now, and that's helping in July.

Owen Lau:

Hi, good morning. Thank you for taking my question. Just want to follow up the last question about maybe talk about the VIX futures and options, ADV, were quite strong in the second quarter, especially in April. I just want to get a better sense about the driver of this trend. And then you talked about kind of these volatility continuing in July. I'm just wondering how you think about the mix between SPX and VIX going into the election in November. Thanks.

Operator:

Your next question comes from the line of Kyle Voigt of KBW. Your line is open.

Fred Tomczyk:

Look, Kyle, I'm not going to talk about anything we're looking at right now, if that's your question. However, having said that, I think building up some cash and having flexibility is always a good thing to have to deploy on opportunity, because you never know what tomorrow is going to bring here. Like I've always said, I did not say there will be no M&A, I've always said it'll be more selective, it'll be more significant M&A. What we've learned for the last three years is a lot of that small M&A causes -- it causes a lot of work, immigration work, particularly in our technology area, which is an important part of our business. 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.

Stephanie Ma:

Hi, this is Stephanie filling in for Mike. Maybe just one on Cboe Global Cloud. How meaningful is the contribution uptake 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 the Cboe Global Cloud? Thanks.

Chris Isaacson:

Yeah, 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're very committed to this. We think we're still in the very early innings of this. As Dave mentioned, most of the growth of Cboe Global Cloud has come outside of the US. And maybe to Alex's earlier question, we're still very early innings in 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 -- as far as 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 US as they better understand our data. So, look for us to continue to make investments in Cboe Global Cloud and get our data and products closer to those customers.

Alex Blostein:

Hey, good morning. Thanks for taking the question as well. I wanted to follow up on the expansion of the VIX product lineup you mentioned earlier in the prepared remarks. So, you talked a little bit about options in VIX future. So maybe some early feedback you're getting from the trading community on what the uptake there could be? I guess how you're thinking about just kind of expansion of that product set relative to VIX regular options and whether there could be any cannibalization or you truly see this kind of like opening up the broader market? Thanks.

Operator:

Your next question comes from the line of Ken Worthington of JPMorgan. Your line is open.

Dave Howson:

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, European retail investor and the European institutions, if we can bring that US-style market structure. So, exporting our capabilities and our know-how to bring that market structure of a US on-exchange and on-screen market in a capital-efficient manner to customers. The milestones we've hit since we've launched are really 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 global major customers are aligned with that view. That includes Interactive Brokers, who came on board this quarter, as well as IMC, another anchor tenant liquidity provider. We talked about on the call the liquidity provision program, we've seen the 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 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. And 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 coming on board, sharing that vision with us, really gives us the confidence to continue the course.

Fred Tomczyk:

Well, thanks for joining us today, everyone. As we've said, we've had a strong quarter, we've had 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 over 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, geopolitical events and rotations between different parts of the market as events unfold, even as much as today, we feel pretty good about the rest of the year. The balance sheet is strong. We've got a good cash position, good EBITDA margins, so we feel very good about where we are. And we're in a good position to take advantage of opportunities we see in the market. We'll talk to you next quarter.

Kenneth Hill:

Good morning and thank you for joining us for our first 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 the 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 will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of our website. 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual performances and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, after this call. During this call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Fred.

David Howson:

Thanks, Fred. Starting with the strong results in the global derivatives category. Despite the cyclical headwind of low volatility in Q1 with the VIX Index averaging just 13.7%, the lowest in over 5 years, SPX options volume remains strong. Average daily volume was up a robust 17% year-over-year to 3.2 million contracts, finishing just shy of the all-time high set in Q4 last year. In fact, January and February ranked as the second and third highest SPX volume month on record through the first quarter. We believe investors took advantage of the low levels of volatility to more cheaply hedge their portfolio with SPX puts making up a higher share of the total volume. Hedging demand was particularly strong in our VIX auction suite with VIX core volume ADV up 4% quarter-over-quarter to over 500,000 contracts as investors took advantage of the low levels of VIX to our cheap tail protection. The resilience of our index options volume in the face of cyclical headwinds speaks to the strength of the secular drivers of our business which we outlined in detail on the last earnings call. We continue to lean into these and see further room for growth. For example, in January we launched Tuesday and Thursday expiries for our Russell 2000 index options completing the set of daily expiries to small cap stocks. While still early days, Russell 2000 index options volumes hit a 5-year high ADV at 79,000 contracts in February. And the share of 0DTE volume grew from 8.7% in Q4 to now 12%. Within our more established SPX product, volumes increased 17% year-over-year and 0DTE options increased a robust 32% year-over-year and grew 3% from Q4 level to a new record of 1.54 million contracts. 0DTE options has made up 48% of overall SPX activity in Q1, up 2 percentage points from last quarter. The rise of retail options trading is another secular trend we're excited to build on, with more platforms coming online for index options trading later this year, giving retail investors expanded access to our products. To that end, we are thrilled to see our margin relief plan approved by the SEC recently which we believe will make it easier for investors to overwrite index options on ETFs that track the same index. This is expected to benefit not just our SPX XSP options complex but also our Russell 2000 and MSCI suite of index options as well. Overwriting funds have grown tremendously in popularity in recent years with total AUM jumping more than 6-fold since the pandemic to now over $130 billion. Anecdotally, we're also seeing more interest from the retail and RIA [ph] community in using these options to enhance their portfolio. We see this margin relief approval as an additional catalyst for wider adoption of options by the retail community. Even without a turn in the macro environment, we believe we are well positioned for the rest of the year as we continue to execute on our strategic initiatives. However, if we do get a shift in investor sentiment, as was the case in April, we expect to benefit as traders harness the full versatility of our S&P 500 volatility tool kit. For example, with the market set of April, VIX options volume surged to a 6-year high with daily volumes exceeding 2.6 million contracts on April 12 on the back of escalating Middle East tensions. That's higher volume than we saw during the 2020 COVID crisis, despite the VIX index hitting a high of just 19 last month versus 82 in March 2020. VIX options through April are on pace to report it’s second highest quarter on record at current levels. While Q1 was characterized by a consistent market running amidst low volatility, Q2 is looking a lot more precarious amidst heightened geopolitical tensions and greater macro uncertainty. As investors grapple with resurgent inflation, rising rates, not to mention the U.S. election later this year, we believe the need to use options to dynamically manage positions, hedge exposures and generate income only increases. And while trading metrics in North America remained strong during U.S. hours, volumes traded in U.S. products during non-U.S. hours continue to increase. During the first quarter, SPX global trading hours activity increased 41% as compared to the first quarter of 2023. And in April, we saw SPX GTH activity increase 73% versus Q2 2023 levels and VIX GTH increased 69% over the same period. With GTH activity accounting for just 3% of April's SPX activity and less than 1% of VIX options activity, we continue to see an attractive path forward for non-U.S. customers to increase access to the U.S. markets. Looking at the business more globally, we hit some notable milestones on our European derivatives platform CEDX. Total index derivative volumes again hit record levels in March, beating the prior record by 26% positioning us for future growth. We broadened the list of single-stock options traded on CEDX to more than 300 companies across 14 European countries at the end of March. And on April 1, we initiated and revamped our liquidity provider programs in the region. Client feedback has been promising, and we look forward to providing greater customer efficiencies through our Pan-European approach to trading and clearing. D&A net revenues grew 8% compared to the first quarter of 2023, driven primarily by client expansion and additional unit sales of our expanding portfolio of access and data products. Speaking to the breadth of D&A business, during the quarter each region and every business line outside of digital saw net revenue increase. In fact, 43% of data growth in the first quarter came from outside of the Americas. We saw outsized contributions from Australia where D&A net revenue grew 19%, and Europe where net revenue increased a strong 10% on constant currency basis. We believe future growth will be fueled by strengthening our distribution capabilities through areas like cloud, further expanding our index capabilities and providing greater access to our markets around the world. Taking a look at cash and spot businesses around the globe, first quarter results were solid. It's worth noting though, our ability to expand our cash and spot reach benefits more than just our transaction revenues. The continued progress we make in these markets has the potential to add additional revenue streams in tangential areas around the globe. In North America, we saw U.S. on-exchange net capture rates rebound from December lows to finish in line with first quarter 2023 levels. Furthermore, Canadian market share improved by 4 percentage points to 15.3% during the first quarter. And we remain on-track with our final technology integration, the migration of our Canadian market to Cboe technology in early 2025 subject to regulatory reviews. Moving over to Europe. During the first quarter, Cboe Europe was the region with the largest exchange by value traded, a testament to the strong breadth of our product offering in the region. As we look to expand our capabilities into related areas with untapped addressable markets, we remain on-track for a third quarter launch of our securities financing transactions clearing services, subject to regulatory review. Cboe's SST business will clear stock lending activities for market participants. With the introduction of stricter capital requirements, we believe now is the right time to leverage our clearing capabilities to bring a solution to the market with the potential to meaningfully reduce risk-weighted assets for our customers. We've [indiscernible] backing of 9 key industry participants spanning banks, clearing firms, asset managers and custodians, and look forward to bringing this service to market in the months ahead. And finally, turning to Asia Pacific. We saw strong momentum in Australia and Japan. In Australia, Cboe continued it’s market share gains with total market share for the quarter finishing at 20.4%, up nearly 2 percentage points from the first quarter of 2023. In Japan, not only did market share reach 5% in the first quarter, a full percentage point higher than the 2023 average but volumes grew a robust 72% as compared to year ago levels. Those trends have continued in the second quarter with Cboe Japan market share hitting a single-day high of 6.5% on April 23. With our APAC integrations behind us, we look forward to competing more aggressively in the market to expand our transaction and non-transaction revenues. Overall, Cboe remains incredibly well positioned to consistently grow revenue across the firms. This means not only leaning in a more established product areas like our index business but allowing newer areas to leverage a robust infrastructure already in place. Earlier, Fred spoke to some of the key strategic impacts of our recently announced digital reorganization. I want to provide some additional context on how the move leverages our global derivatives and clearing capabilities. On the derivative side, the reorganization reinforces the integrated global view we take with not only our derivatives franchise but all of our businesses at Cboe. By consolidating Cboe's futures products onto one market, Cboe's Futures Exchange, also known as CFE, pending a regulatory review and certain corporate approvals, we can leverage the totality of our derivatives capabilities to grow our businesses, while creating efficiencies for market participants. Specifically, that means reducing complexity for clients by allowing them to connect to one global platform for all of their U.S. futures trading needs. As part of CFE, newer products like digital asset futures can leverage tried-and-true CFE capabilities to accelerate the go-to-market timeline for products like options on futures and complex orders for digital products, expanding the toolkit of solutions available to clients. In addition, these products will be able to tap into a seasoned and global sales force, a resilient technology infrastructure and a unified management team under the leadership of Cathy Clay, our Executive Vice President of Global Derivatives. On the clearing side, we are equally excited about the opportunities presented by unifying our clearing operations on a global basis. Vikesh Patel, currently President of Cboe Clear Europe, will also oversee U.S. clearing. Cboe Clear Europe will continue to operate as a pan-European central clearing counterparty for European equities and derivatives. Adding Cboe Clear Digital under the global clearing umbrella provides a cohesive clearing approach that spans equities and derivatives in Europe to Bitcoin and Ether futures in the U.S. The result is Cboe having great control of its product development destiny from ideation through to clearing considerations. Across the firm, we continue to leverage our core strengths and find pockets of growth in our cash, data and derivatives categories. The first quarter of 2024 was very strong and we look forward to driving further growth in the quarters ahead. With that, I will turn the call over to Jill.

Fred Tomczyk:

In closing, I would like to thank our team for the continued progress made throughout the first quarter. 2024 is off to a strong start and we believe we are well positioned for another strong year.

Operator:

[Operator Instructions] Our first question comes from the line of Patrick Moley from Piper Sandler.

Jill Griebenow:

Sure. You bet. Thank you for the question, Patrick. So if you saw, obviously, first quarter, very strong net revenue results coming in 7% higher than first quarter 2023, really fueled by the derivatives markets business, as well as D&A, very strong contribution there. So that, coupled with, again, the very strong April we saw just -- again, gave us confidence in guiding to the higher end of that 5% to 7% range. We'll obviously keep an eye on this and get another quarter of results under our belt and come back to the group in early August with refined projections. But feel good at the moment with that 5% to 7%, that higher end there.

Operator:

Thank you. Our next question comes from the line of Alex Kramm from UBS.

David Howson:

Yes. Alex, thanks for the question. We remain confident in the 7% to 10% guide, and particularly as we had in the call notes [ph], the growth year-over-year in all asset classes in all regions that we saw throughout the quarter, solid growth from 57% from new subscriptions and new units. And then also encouragingly, 43% of the growth -- the market data and access services was from outside of the Americas; that's a record growth percentage was outside of the Americas. Continued strong engagement there with 79% of customers for the cloud from outside of the Americas as well. And so as we think through the rest of the year -- and as you say, Q2 last year was elevated versus Q1 in terms of growth somewhat but then continued throughout the year of last year. But when we think about this year, more data on net. We've got Cboe Australia with re-platformed just over a year ago resulting in 15% year-over-year growth from Cboe Australia D&A there. We've got more products to package and bundle from those 27 markets in different ways and be able to deliver them to our customers where they're at over the cloud. And then finally, it's an exciting year for Cboe as we've been able to turn attention towards technology enhancements in the core platform. And the access layer improvements that we're bringing to market this year and into next year, we think will represent incremental value that customers are willing to pay for, and should also enhance our competitive position within those venues themselves, in particular, in the U.S. options and equities landscape. So overall, confident with the 7% to 10% guide where we stand today but of course, we'll update you next quarter as well.

Operator:

Thank you. Our next question comes from the line of Craig Siegenthaler of Bank of America.

David Howson:

Great. Thanks very much for the question. You're right, 48% of SPX was 0DTE in Q1 and April was 50%. We see those variations as we go through the months, depending on what's actually happening in the environment there. But we think about the breakdown that we normally give you of retail to non-retail and where non-retail does include professional retail, we saw a continued increase year-over-year, whereas now just under 1/3 is retail and just over 2/3 is non-retail as versus round about 59% of non-retail in Q1 of last year. So what we see there is more funds, more strategies, more PMs coming to the marketplace, and more systematic strategies coming towards the shorter end of the curve. And as we think about it now, we're eclipsing second anniversary of adding the Tuesday and Thursday expirations and there is a tremendous amount of data now, and that data is used by institutional and systematic funds in order to be able to train models. And we're seeing some of the outcome of that in the complex as we go forward. And the interesting point as we grew 3% of 0DTE versus Q4 and Q1 is that that was across volatility ratings and market cycle; so it grew in a lower volatility environment in Q1. So as we look forward, we continue to see a shorter-term risk management strategies. People have been deploying less sensitive to the broader macro trends.

Ben Budish:

Hi, good morning and thanks for taking the question. I wanted to follow-up on the outlook. You mentioned that there are some kind of volatility related events coming up later in the year that could be drivers for the SPX complex. I also recall not too long ago, you were talking about 0DTE as being a more like recurring revenue stream, at least versus things like equities which are sort of you trade once and you can kind of settle it because it's got a shorter-time expiration, you tend to enter into a new contract. So, I guess what are your thoughts on sort of the recurring nature of the 0DTE complex? How much growth are you sort of seeing from that sort of user or users that are becoming more regular users versus how much do you perhaps expect will come from a pickup in volatility or normalization in VIX levels later in the year? Thank you.

Fred Tomczyk:

Just to add something to Dave's comments is, I think the comment we made before that we do see option trading revenue much more recurring than equity trading revenue. And the reason is, as Dave said, it's because they expire. You have to reput your position on. So to me, that applies to the whole option revenue stream, not just to 0DTE.

Operator:

Our next question comes from the line of Brian Bedell from Deutsche Bank.

David Howson:

Yes. Absolutely. The 43% growth rate from outside the Americas, that is certainly a good lead indicator as we see that grow quarter-over-quarter. A example for us where we have customers around the world taking one data set being drawn in by, for example, the access to the U.S. equity market data as, let's say, a CFD provider out in Australia. But once you're in, you've got a common platform, you've got the API access, you can then find a myriad of other data puts that you can find useful to yourself and your user base. And we do see users taking one data item from us from the cloud and then expanding laterally across interest across those 27 markets. And then we think about access to the derivatives complex, we've seen some really good onboarding this year from retail brokers out in the Asia Pacific region. So really encouraging that in order to onboard for the platform, you need access to data. And then when you get access to the platform, what we're seeing there is a really good beachhead for activity in the SEF, Southeast Asia Pacific region, bringing activity back into the U.S. core complex. So in summary there, we see -- we do see people taking data units from us on the cloud and then expanding laterally in that. And the benefits of having that single technology platform and that single consistent access point are really bringing great utility for our customers as they don't have to deploy technology resources for multiple APIs and multiple data sets. They can easily take new data sets that interest them with a very low to no incremental technology effort to do that.

David Howson:

Absolutely. And we certainly take a one-firm approach to our sales here at Cboe, where we're training all of our salespeople globally on all of the data and assets that we have within Cboe. So if you're in Australia, you know to talk about the risk market and analytics options capability that we've got that we can bring to the market, our index, our derivative index capability but also the raw data from those 27 markets and those incremental insights that we're able to produce on top of that body of data.

Brian Bedell:

Great. Thank you so much.

Owen Lau:

Hi, good morning and thank you for taking my question. I actually have a broader question about Cboe. So over the past 2 years, Cboe has benefited from high growth of 0DTE. And now we have identified many small incremental revenue and expense opportunities. You talked about land-and-expand strategy and doing more buybacks. It just feels like the profile has changed. So if you can help me over the next 2 years, what should investors focus on to gauge the investment there for Cboe?

Owen Lau:

Got it. Thanks a lot.

MichaelCyprys:

Good morning. Thanks for taking the question. I just wanted to go back on the D&A revenue growth target, 7% to 10% just looking out over the next couple of years. Just curious where you see the biggest opportunity within there to drive growth ahead. What -- which product specifically do you think will be the biggest driver or contributor there? And is this new portion would be coming from new products versus from existing products that you're going to drive greater penetration of the existing customer set versus new customers?

Christopher Isaacson:

Michael, it's Chris. I just might add here, as Dave mentioned, we're just very, very focused on increasing access and distribution of all of our data. The Cboe Global Cloud growth has been great, especially driven outside of the U.S. And we will be pushing to use distribution mechanisms like that to get our data closer to customers where it could be a win-win for them as they want more data, not just in real time but they want data at the time of doing research, et cetera, so that they can better trade on our markets. And then the access improvements that Dave spoke about, as now we can unlock this global network because all the platform migrations are done except for Canada which is coming in March of next year. We'll be rolling out those access improvements first in the U.S. and then around the world. These are material upgrades in our technology platform which speaks to the power of a global network and a global platform. We can build something once and then roll it out all over the world to the benefit of our customers.

Alex Blostein:

Fred, one for you. I just want to get your mark-to-market on where we are in this sort of strategic review journey you've guys have been on. After the decision on Cboe Digital, are there other areas where you think you guys are looking to sort of pivot away from? And if so, what could that look like? And just one follow-up for Jill. The $11 million to $15 million in annualized savings that you highlighted, is there a revenue offsetting impact as well? Or are you really speaking to the operating income effect from these changes?

Jill Griebenow:

You bet. So the $11 million to $15 million in contemplated savings on an annualized basis is really the expense portion. So not expecting anything material from a revenue impact perspective in 2024, very consistent with what we messaged last week.

Operator:

Our next question comes from the line of Kyle Voigt of KBW.

David Howson:

Thanks very much, Kyle. You rightly pointed out the record month in March for index derivatives and Q1 being up 30% year-over-year. We did revamp the liquidity provider program starting in Q2 to really refine those and focus on the type of liquidity, the concentration that we are looking for. That, along with the extension of the number of single-stock options coverage in Q1, we now cover over 90% of OI and ADV and -- on the European landscape. So what it gives is a full unit of offering now with single-stock options and futures and options on our index products. We've got more market makers coming on board as we go through the rest of the year and we're eagerly anticipating the knowledge of a major global retail brokerage platform in the coming months. All that will then begin to form the core liquidity ecosystem that we'll be able to build on, produce more sales and marketing efforts in conjunction with our customers and talk to those retail brokers that are looking to expand internationally as well as those funds that are looking to deploy capital into Europe. And so what we'll do throughout the rest of the year is monitor those volumes and that activity in the platform progresses. And as you speak to profitability and revenues in search is worth reflecting on the fact that this is all built on top of a scaled infrastructure, the scale of infrastructure in Europe that lies on top of the largest pan-European equities exchange which is profitable, the largest cash equity clearinghouse as well. So we've got scale. So the incremental investment here for us is relatively small and affords us the opportunity to be patient and continue to work with our customers to onboard to what is brand new exchange product set and clearinghouse which does take time. So it will be a journey. So we'll be continuing to review that as we go throughout this year and into next and keep you updated with that.

Patrick Moley:

Just a modeling question on the buyback. Appreciate that it's -- you're being opportunistic but it was rather large in the first quarter relative to what you've done recently. And it seems like it was pretty strong in April. So can you help us just kind of frame and understand the size and pace of that buyback from here? Anything you can give us would be great.

Operator:

We have a follow-up question from Owen Lau of Oppenheimer.

David Howson:

I'm sorry, could you repeat the second half of that question, please? We've got the competitive element for the first half. The second half, we -- the line broke a little.

David Howson:

Great. Thanks for the clarification there. So when we looked at the overall landscape here is we took into account our own assets, capabilities and strengths here at Cboe. And we looked at where we saw the greatest opportunity set which was in the correct term derivative space. And so once again, we look to lean on our scaled infrastructure and the existing global resources. What we think makes this move attractive for us is that we get to bring those crypto digital futures onto a single venue, a single venue with an existing broad distribution and customer base. It gets brought onto a single technology stack which runs all of our global equities, futures and options market, a familiar set of functionality which leapfrogs the functionality we have today on Cboe Digital Exchange to add a range of versatile functionality that futures customers want. We also get a clearinghouse that clears these products and potential other new product innovations in the crypto derivatives space which then allows us to define our own destiny. It allows us to have autonomy around that product duration and that timeline to market. And then as a global derivatives team, have scale and expertise around the world for derivatives but also that scale and expertise around the world for clearing to broad to bear in unison onto the digital asset space. So we think derivatives is where it's at for us. We think we're good at that. We've got the technology and the people to be able to give us an edge and create an alternative liquidity pool for people to express and manage exposure to crypto assets at Cboe.

Operator:

A final follow-up question comes from Michael Cyprys of Morgan Stanley.

David Howson:

So for us today, we have 2 iBoxx futures contracts and we have options on those futures contracts as well available to customers. For us, having a futures product is particularly useful for those fixed income funds who can't trade securities and sort of the ETFs are locked off to them. So having the ability to manage and hedge exposure is particularly useful there but also for international customers to get those -- that access to an aligned future which align deeply -- which tracks very closely to the 2 key benchmarks here, the LQD and HYG, ETFs. So the underlying -- to allow access and exposure there to manage those exposures is particularly used for the international aspect also comes into play as a future to be able to access that from international participants as well. So for us, it's the, first, into credit as we go through that alignment to the core underlying exposure is the key differentiator to Cboe's credit offering because it does align the HYG and LQD products very, very closely and a touch of exposure there.

Fred Tomczyk:

Okay. Thanks, everyone. Thanks for your questions today and thanks for calling in. We're off to a great start to 2024. And we look to continue the momentum for the rest of the year.

Kenneth Hill :

Good morning and thank you for joining us for our fourth 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 Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, will provide an overview of our financial results for the quarter, as well as discuss our 2024 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each. 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 are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now I'd like to turn the call over to Fred.

David Howson :

Thanks, Fred. As we enter 2024, we are well positioned to capitalize on those trends and build on our record 2023 results. You have heard me speak in the past about the foundational elements that make up our ecosystem and the process we follow for moving up our cash, data, and derivatives value ladder. I want to start by outlining the ways we have strengthened the Cboe Foundation before looking at how we plan to unlock organic value across the ecosystem in 2024. Starting first with the Cash and Spot Markets. In 2023, we enhanced our presence in every major market open to competition around the globe, making the biggest advancements in the Asia Pacific region. In March 2023, we completed our technology migration and BIDS rollout for the Cboe Australia, and in the fourth quarter, we completed our technology migration and launch of the BIDS network in Japan. This migration not only provided a uniform infrastructure to enhance our performance and trading capabilities in the region, but it unlocked opportunities across our value ladder for incremental data product offerings and the ability to add adjacent asset classes over time. With the Australian migration complete nearly a year ago, it serves as the most recent example of this expansion strategy in action. Since the migration, Cboe Australia has seen a solid increase in its market share, with Cboe’s continuous cash market share finishing December at 21.2%, up 3.5 percentage points as compared to December of 2022. The benefits of our regional expansion are not isolated to cash equities though, as we move up the value ladder, we see data and access solutions in the region grow, with Australian market data and access services growing by 11% in 2023. The gains in Australia are illustrative of the broader globalization trend benefiting the Data and Access Solutions business. In fact, the fourth quarter represented the highest quarter ever for data sales to customers outside the U.S. Cboe Global Cloud, our real-time data streaming service, allows customers efficient access to Cboe's robust suite of market data products. Today, nearly 80% of our cloud customers are located outside of the United States with the demand for 24/7 access to markets and market data only growing. Last on our value ladder but certainly not least. As we think about expanding our Derivatives capabilities, we remain steadfast in our efforts to bring U.S. market experience to global participants. Shifting market behavior takes time, and we are still in the early stages of this journey, but we are well aligned with the global ambitions for our broker-dealer partners. We see Europe as a market right for this evolution with the value of volume traded for equity and index options running at just 6% of the size of the value traded in the U.S. despite comparable GDP. In the fourth quarter, our European derivatives exchange, CEDX, posted its best quarter since launch with the volumes up 85% year-over-year. More importantly, completing our index trading capabilities in the region, we successfully launched our single stock options offering in November. We currently have options on 127 companies in production today with plans for over 300 names later this quarter, subject to regulatory approvals and expect to commence a liquidity provider program in the months ahead. The movement of the value ladder from cash to data to derivatives provide the framework for establishing a flywheel of revenue generation. Turning to Slide 8. It was another record quarter for SPX and a record year for the overall Index business as investors turn to our S&P 500 volatility toolkit to help navigate markets. SPX options volumes grew a robust 31% to a record ADV of 2.9 million contracts in 2023. Activity in the fourth quarter was a record 3.3 million contracts. Notably, while volumes grew across the board, we saw a more pronounced jump in coal volume as investors turn to options to quickly adjust their portfolios in the face of changing market conditions. Meanwhile, we continue to see sustained traction in our 0DTE expiry options. 0DTE activity grew a remarkable 60% year-over-year to comprise 45% of overall SPX activity. These ultra short-dated options have given investors the ability to hedge risk, generate income and express directional views more precisely and frequently. In our VIX complex, as markets rallied last year, volatility levels fell with the VIX falling from an average of 26 in 2022 to 17 in 2023. The lower VIX levels drove core buying as investors look to the complexity of VIX options to help protect against potential black swan event. Overall, VIX ADV jumped 40% to a record 743,000 contracts last year. As volumes continue to grow, so does the demand for new data sets, indices and tradable products. We have many noteworthy developments over 2023. In partnership with S&P Dow Jones Indices, we launched the Cboe 1-Day Volatility Index in April, options on futures for our Cboe iBoxx Bond Index futures in July, the Cboe S&P 500 Dispersion Index in September. And in October, we further expanded our benchmark VIX methodology by launching a new suite of four credit volatility indices. Turning to Slide 9. As we start 2024, we see a supportive backdrop unfolding for our index products, aided by both strong secular forces and cyclical tailwinds. The increased utilization of options as a tool has been underway for decades, but we are still just scratching the surface on widespread adoption. Investors have become increasingly sophisticated over the years and interest, we've looked to foster through our leading investor education platform, the Options Institute. With additional online platforms planning to offer cash settle products in the year ahead, we see a runway to higher levels of accessibility and activity across our suite of derivative products. As you heard me mention earlier, the opportunity to bring a U.S. market experience to global participants is increasingly compelling. While our current assets are aimed at providing a single access point to trade pan-European products, over time, we expect to leverage our access to other regions like Asia Pacific. Today, this shows up both directly through the continued growth in global trading hours activity. In 2023, SPX GTH expanded by a robust 85% and VIX GTH activity was up a solid 45%. Despite the growth across the complex, GTH for SPX options still represent under 3% of overall activity. And GTH for VIX options made up less than 1% of all VIX volumes, leaving meaningful potential for expansion. As we have seen in other markets, traders continue to demand greater flexibility in managing their risk profile. The growth in 0DTE activity speaks to the burgeoning need to manage intraday risk at greater levels. Importantly, this trend remains firmly in place across market cycles and volatility ratios. Magnifying the impact from the structural tailwinds I just covered, there are a number of cyclical factors working in our favor today. A common misconception that we often hear is that we need higher volatility or a market sell-off to drive options volume growth. As you can see from the chart on the slide, this is far from the truth. Investors have turned to options to help manage risk when the outlook is uncertain. However, it's important to know that risk runs both ways. And as we saw in Q4, investors turned to options to help manage the upside potential in the market, buying calls to quickly increase the equity exposure in the face of falling 10-year rates. In fact, our Q4 2023 record volume days all occurred on market updates. And the last quarter was a record period for our SPX complex despite the index moving 11% higher and volatility levels falling dramatically. We believe that options provide an increasingly durable stream of revenue. Unlike cash equity products, options expire on an increasingly frequent basis, particularly as investors embrace shorter-duration trading strategies. This means that traders must continuously reassess the market, putting on and adjusting positions to manage risk, hedge exposure or generate income. Turning to Slide 10, I want to reinforce some of our more recent product innovations. In January 2024, we increased access to shorter-duration products with the launch of Tuesday and Thursday expiring Russell 2000 and Mini Russell 2000 index weekly options, providing small-cap investors with some of the same tools available to SPX traders. For XSP, despite the roughly 80% ADV growth produced during 2023, we are even more excited about the potential for the XSP contract in 2024. We believe potential margin relief from the SEC will allow additional customers to benefit from XSP's many advantages. Overall, the potential for regulatory approval coupled with a likelihood for our cash-settled products to be offered on additional online platforms should help catalyze incremental XSP uptake. On the data side, our partners play an important role in our growth. In 2024, we are excited to expand our collaboration with MSCI to include the launch of two new volatility indices and three new tradable products subject to regulatory approval. This is a great example of our continued relationship with MSCI and the growing demand for both more volatility indicators and tradable products to better manage market risk. Touching more broadly on our Data and Access Solutions business on Slide 11, we posted another record quarter results with revenues increasing 7% on a year-over-year basis. For the full year, D&A grew 9% with organic growth making up 7.5 percentage points of a 9% growth. The year-over-year growth was again driven by client expansion and additional unit sales of our expanding portfolio of access and data solutions. Outside of our cloud capabilities that I mentioned earlier, we saw the opportunity to grow our business by strengthening our distribution capabilities, expanding our index capabilities and providing greater access to our markets around the world. I started my prepared remarks outlining the process we follow when building out our ecosystem of capabilities. As we think about the key trends across our businesses, we believe we are well aligned in each of our major categories. This not only helps drive more durable revenue generation for more established products like our SPX suite but also allows for the build out of newer initiatives that can leverage a robust infrastructure already in place. Digital assets is one such product that touches each segment of our ecosystem. As we see markets increasingly move digital, we believe there will be greater demand for trusted and transparent markets. We were honored to have been chosen as a listing venue for 6 of the 11 Bitcoin ETFs made available for trading in January. Looking beyond the listing, cash trading and data benefits, a more vibrant crypto ecosystem is advantageous to our recently launched margin futures product. In January, Cboe Digital became the only U.S. regulated exchange to offer spots, leverage derivatives and clearing on a single platform. 2024 is off to a strong start, and we look forward to capitalize on the numerous opportunities across our business to drive long-term shareholder value. With that, I will turn the call over to Jill.

Fred Tomczyk:

We are excited about both the near- and long-term opportunities to grow and expand our business and believe we have strong momentum as we head into 2024. We are well positioned to leverage our global footprint, our leading-edge technology and continued product innovation to unlock the value of a global network that Cboe has built. And I am excited about the opportunities we see to drive revenue and earnings growth across our platforms.

Operator:

[Operator Instructions] Our first question comes from the line of Ben Budish from Barclays Capital.

Jill Griebenow:

You bet. I'll start it off here. And I think when looking at our revenue guidance of the 5% to 7%, as you alluded to, that's our medium-term guidance that we're going out there with really looking at the strong finish to 2023, looking at that momentum, building in steadily over 2024. We did have a strong January though, so we will continue to monitor. And obviously, we’ll adjust the guidance going forward on a quarterly basis. As it relates to the operating expense piece, again, trying to harmonize that with revenue opportunities, feel very comfortable now that we’re at more of a steady state with the guidance range that we’ve gone out there with. To the extent, though, that we identify revenue-generating opportunities, we are definitely well positioned to invest in those, and we’ll evaluate those as they come.

Dan Fannon:

Fred, I was hoping to get an update on your goal of sharpening Cboe's focus. As we think about 2024, are there certain segments or products that are deemphasized in terms of investment? And then more specifically, how do you think about -- or your thoughts around the strategic importance of the FX business, which doesn't really seem to harmonize with some of your other products?

David Howson:

So, Dan, I would add, obviously, the FX business performed very well within that market share for 21.3%. And when you think about it in relation to the other businesses, it is a global business. And we are building a global securities and derivatives network. And the technology platform that runs the FX business really suits the needs of that space very well. And it allowed us to step into an adjacency there with only a small incremental investment as we look at the U.S. treasuries platform that we've been building out. And there, we launched and we're now seeing early trades and a good pipeline there. So the business has a good runway for us. And it being global and that overlap of client base, the synergy there really something we find quite powerful.

Operator:

Our next question comes from the line of Ken Worthington of JPMorgan.

David Howson:

Thanks a lot, Ken. SPX volumes there in Q4 about 3.3 million contracts, a good solid run into January as well as we go through. When you think about the SPX complex and then even take a step back to overall Cboe’s volatility toolkit that we talk about, that is the complex that investors have found great utility to be nimble and to manage that uncertainty where we will be hedging, positioning and repositioning portfolio across tenants. It's not just about 0DTE, and that's where you see that fluctuation in the percentage of trading that is 0DTE really depend on what's happening. Some of our biggest volume days have indeed seen a lower proportion of 0DTE trading as people reposition their portfolios, potentially catch up to a market rally or simply hedge a broader portfolio. So that percentage of 0DTE has flexed over time. It's really in that range of 40% to 50% there. But the great thing we see is that overall utility of the complex. And with 0DTE itself, if you drill down one step further, we've seen that evolution of the growth of non-retail engagement in the usage of shorter-dated tenors. Last year, around about 55% to, call it, 60% of overall 0DTE in SPX was what we call non-retail, which includes professional retail in that non-retail segment. This quarter just gone, it's nearly 70%, around about 68%. So great thing there is the engagement from the institutional side of the market, they're really finding greater utility. And as you mentioned, 0DTE, in general, that shorter-dated tenor applicability for customers out there, we added Tuesday and Thursday, we said in prepared remarks, to the Russell complex really allowing small cap investors many the same strategies that they’re enjoying in that -- in the bigger SPX large-cap U.S. market index there.

Alex Blostein:

Staying on the SPX question for another minute. It looks like the volumes in January have really decoupled versus sort of other equity markets. So January SPX volumes think up over 20 year-over-year. 0DTE obviously is a contributor, but it looks like the monthlies has grown as well. That's sort of very much in contrast to what are we seeing in single name options and cash equities and CME equity derivatives. So just curious what has been the driver? Is there anything new kind of happening underneath the surface with respect to the new customer bases or just broader adoption that you could point to?

Operator:

Our next question comes from the line of Alex Kramm from UBS Financial.

Jill Griebenow:

You bet. So as you’ve alluded to, we did have, I mean, just $5.8 million worth of share repurchases in the fourth quarter, so considered relatively light. But if you look back on a historical basis, we do have a history of being heavier on the repurchase front during the first quarter of each year. And then also, as you’ve alluded to, we have paid off all of the floating rate debt, which gives us -- just affords us more in the way of capacity and ability to deploy capital. So as we’ve done in the past, we will continue to be opportunistic as it relates to share repurchases. If we see any perceived weakness in the share price, we will absolutely get in back to the -- behind it. And then again, just continue with our routine practice as well on top of that.

Owen Lau:

Thank you for providing Slide 9 about 2024 catalyst. Could you please add more color on these catalysts of why the adoption and expanded access? It will be great if you can remind us how many existing retail platforms have index options trading, how many more you expect to come online in 2024? And then for global trading hour, how should we think about the incremental volume?

Operator:

Our next question comes from the line of Michael Cyprys from Morgan Stanley.

David Howson:

Thanks very much. The focus of product development here at Cboe really is that simplification of potentially OTC and complex strategies, really striving to bring capital efficiencies to our customers across wallet sizes, so bringing investment strategies to all wallet sizes. So just look at the global trading hours we just spoke about, think about the XSP is bringing the SPX exposure, the S&P 500 exposure to a smaller wallet size, the Russell Tuesday, Thursday there, all good organic initiatives. When you think about the indices we launched last year, you've got the dispersion index and the credit VIX as you mentioned. The dispersion index there, we aim to have a future available on that indicator later on this year, subject to regulatory approvals and final product design requirements. And then think about the expansion of the MSCI contract, three new tradable products, two volatility indices there, more exposures you’ve got now at Cboe. With index options, you have global exposures, you’ve got U.S. exposure and you’ve got small cap exposures that you can trade with the potential for further product development from there. And then we mentioned finally, new asset classes. We’ve already got the iBoxx credit futures, that first listed credit future available in the United States, really amenable to funds that cannot trade securities to be able to manage their risk and hedge any portfolio risk there as well. The option on futures that we launched last year will also bring optionality to that new asset class. When you combine them together, you think about credit mix with a credit future as you think about dispersion index next to the VIX Index, you’ve got a variety of indicators from a variety of slices of exposures and asset classes that customers can come to Cboe and in a single place, manage all of those in a single place. So what you should see -- expect to see from Cboe is as we build these liquidity pools and these ecosystems that we will incrementally push these forward. But always, we’re going to be led by customer demand. So we’re going to go wherever our customers ask us to go. So that will be an evolving process as we go through year to year.

Brian Bedell:

Great. Maybe shifting gears outside the U.S., the Canadian migration onto the Cboe platform, and that's the combination of NEO and MATCHNow. Can you just talk about whether that's more of an efficiency initiative? Or is that something that you think can enhance your market share in Canada? And maybe just talk broadly about your strategy. I know you've been bringing bids there as well, and if you can touch on your listings game plan with NEO.

David Howson:

And certainly, I would add to that a little bit in that the customer networks and relationships we have globally alone we've been able to bring to bear in Canada, look at the market share growth to 15.3% from 13.6% year-over-year. And with that common platform, that global reach, it means that we're able to also turbocharge BIDS and other trading initiatives. With a single platform, we can bring new functionalities to Canada and that common experience Chris talked about. And then you mentioned that the corporate listings business in Canada is a strong part of the business there. And with our exchanges around the world for a small incremental investment, we can actually begin to offer customers a global experience. And that’s shown through actually in the ETP growth that we’ve got from a listings perspective in North America, 56 new ETPs launched in Q4 against 34 in Q3. And in fact, in January already, we’re on track for 40 new ETPs. So just think about the uniformity of that global scale really coming into the forefront there as we think about all of our footprints around the world.

Kyle Voigt:

Maybe a question on the U.S. Cash Equities business. You mentioned the unfavorable mix shift of volumes but also some of the fee changes that you recently made that should bring back up the capture rate. So I guess can you just elaborate a competitive environment there? Is that what is primarily driving the shift in volumes? Or is it something else driving it? And the fee capture there has been in a pretty wide range with fee capture down about 40% sequentially. So just wondering if you could help frame how much of the fee capture decline in 4Q you could potentially recapture with these fee changes as we look out to the first quarter?

Operator:

Our next question comes from the line of Patrick Moley of Piper Sandler.

Fred Tomczyk:

Okay. Thanks, Patrick. I mean, certainly, this space with the regulatory uncertainty has caused this asset class to take longer to develop both than we anticipated. Having said that, there continues to be an asset class that there’s a lot of interest in. And what many participants are looking for is what we’re trying to build

Fred Tomczyk:

Okay. Do you want me to say anything?

Kenneth Hill:

Okay. Thanks, everyone. Thanks for the time -- your time today. We have a robust investor conference schedule here over the next five to six weeks, and we hope to see many of you. All the best to 2024. Thanks.

Kenneth Hill:

Good morning. Thank you for joining us for our third quarter earnings conference call. On the call today, Fred Tomczyk, our Chairman and CEO, and David Howson, our Global President will discuss our performance for the quarter and provide an update on our strategic initiatives. Then Jill Griebenow, our Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, will provide an overview of our financial results for the quarter, as well as discuss our 2023 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; and our Chief Strategy Officer, John Deters. 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 are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Fred.

David Howson:

Thanks, Fred. As Fred noted, our strategy yielded solid results during the third quarter as we continued to advance our top strategic growth priorities, Derivatives, Data and Access Solutions, and Digital. Before moving to the record results for our Derivatives and D&A businesses, let me provide an update on our Digital segment. We are working with our customers and the CSEC on final preparation for the planned launch of Margin Futures in the first quarter of 2024 subject regulatory approvals. Within large Cboe Digital will be the first US regulated crypto native exchange and trading house to offer spot and leverage derivatives on a single platform. We look forward to bringing this unique product to market. Turning to Derivatives and Data and Access Solutions. Last month we made important leadership changes to further support our global growth strategy. Cathy Clay, who previously led our Data and Access Solutions business was appointed the Global Head of Derivatives. A new role for the organization as we reorganize the team for the next chapter of global growth. Furthermore, we tapped our strong range of talent to promote Adam Inzirillo to Global Head of Data and Access Solutions. By aligning our organizational structure to the global nature of the business we anticipate harnessing the full strength of Cboe increasing efficiency and collaboration across business lines and regions, while enabling our competitive and our world-class products and services in a globally consistent manner to our clients. Turning to Derivatives on Slide 8. It was another record of quarter for the business as traders and investors turned to our flagship S&P 500 and fixed index products while navigating the uncertain macro environment. SPX volumes surged 21% to a record ADV of 2.9 million contracts in the third quarter. While our mini SPX contract SXP jumped 82% year-over-year. Within SPX, the fastest growing segment continued to be the zero data expiry options gaining 33% year-over-year. Investors use these for hedging, income generation, expressing views on market direction and more. The diversity of using is what we expect to continue to see strong and sustainable use is zero DT options regardless of what the market is doing or where the fix is trading. These options opened up a whole new risk premium for investors to capture namely intraday risk. And it’s uncertain to increase is regarding the longer term macro picture, interest in capturing shorter term trends and dislocations have led to a higher share going to zero DT options, now, comprising around 48% of all SPX volumes in the third quarter. However, it's important to note that while the zero DT options are making up a bigger part of the pie, the pie itself is growing, as well. Other expiries are also seeing high volume including our standard monthly SPX options contracts that expires in the third Friday of every month. We believe that bonus are being used less as we diversify our equity risk and investors are increasingly turning to options to help hedge their portfolios. That hedging demand helps explain why VIX option volumes are been so strong with ADVs surging 60% year-over-year even as a world VIX levels are staying. Investors use VIX options primarily to protect against potential black swan events, which typically happen when volatility levels are known or in the work when least expected. We believe the appeal of buying VIX call options is to potentially capture that context move and the VIX triples or quadruples something that is harder to do when the VIX index was in the mid-20s last year versus the mid-teens of this year. The macro and geopolitical risks rising across the world, we're seeing strong global demand for our products. With SPX and VIX options ADV during global trading hours increasing 95% and 10% respectively year-over-year. As markets change our derivatives products remains well positioned for customers in any market environment. Our VIX plan-based products anchor a remarkable toolkit that allows customers to choose the right products, size and expiry to meet their needs, be it risk management or income generation. Documenting the burgeoning activity posted by our derivatives business, Cboe is continuously working to expand its suite of data products to enhance the overall trading ecosystem. In collaboration with S&P Dow Jones indices, Cboe’s products innovation Cboe Labs recently launched several new benchmark indices for market participants. We were incredibly excited to bring to market Cboe S&P 500 dispersion index known by Ticker DSPX as well as our four new credit volatility, indices. Early market reception has been extremely favorable and B2B’s indices are designed to provide investors with key information to help them better manage their strategies and portfolios potentially fueling further growth in our tradable products. On the innovation front in Europe, we are excited about the upcoming launch of single stock options on the Cboe European Derivative Exchange beginning next week. The commitment secured from leading market participants ahead of the launch highlight the opportunity to materially advance the European options market for clients. As we plan to introduce the liquidity provider and market maker programs in the first quarter of next year subject to regulatory approval, we anticipate volumes on the platform to grow. We see the largest single stock options as a key milestone for our European derivative initiatives and our broad ambition of creating the leading market growth, the management around the globe. Moving to Slide 10 our Data and Access Solutions business posted record results during the third quarter, with net revenue increasing 8.7% on an organic basis. The durable year-over-year growth was fueled by an expanding global customer base and an evolving portfolio of market data solutions. Through our data offerings and cloud strategy, we can package high quality data from across markets and deliveries to customers globally in a consistent, and cost-effective manner extending the addressable markets for this business. We continue to see solid customer adoption of Cboe global cloud, a real-time data streaming service that provides simple, effective access to Cboe’s robust suite of market data. Nearly 80% of customers utilize this service are located outside of the Americas reflecting our expanding global footprint. Additionally, through our cross-region sales efforts many customers are subscribing to multiple data products offered by Cboe global cloud in the simple, efficient, access to high quality data service. As we look across our global network on slide11, we continue to build on a solid foundation of our global cash equity business while we have a strong presence in seven of the top 10 global equity markets, serving a diverse customer base. While overall performance in our cash and spot market reflected the muted volumes we saw across global equity markets during the quarter, we are on upbeat about the long-term potential. With 80% of Cboe’s market share grew 17.9% in the third quarter, up from 16.7% in the previous year as momentum continued to build post our technology migration. Later this month, we expect to complete the technology migration of Cboe Japan from a world-class technology stack and launch Cboe with Japan subject to regulatory approvals further expanding our unique block trading network to this important market. We are grateful to our customers for that partnership and look forward to providing them with the best-in-class trading experience that our global customers have come to rely on at Cboe. In Europe, the Cboe Europe equities business reported market share of 23.2%, while Cboe BIDS Europe experienced another strong quarter a remains the largest block trading venue in Europe. Cboe Clear Europe’s market share grew to 33.8% in the first quarter, up from 33.6% in the prior year quarter. In North America, Canadian1equities market share rose to 15.2%, up from 12.2% in the third quarter of 2022, while US equities market share fell to 12.7% compared to13.3% in the prior year period, Cboe’s addressable market share which excludes both the auctions and the foreign exchange volumes remained stable. Lastly, our global FX business had another record quarter. Net revenues were up 6% year-over-year in the third quarter as the business expanded spot market share to a record 20.2%, up from 17.8% a year ago. Our NDF offering which trades on Cboe SEF our Swap Execution Facility continued to see strong results with the volumes increasing 19% year-over-year with ADV of $1.1 billion. These record results were driven by new prime growth and increasing utilization of our platforms by existing clients. In summary, Cboe delivered another outstanding quarter and we see strong momentum as we head into the final months of the year and into 2024. With our strong foundation of derivatives, cash and spot markets, coupled with our Data and Access Solutions, we will continue to harness the power of our markets to deliver innovative products and services to our customers. As we show up our strategy and focus we see even more opportunity for Cboe to maximize its global potential and drive further value for our shareholders. With that, I will turn the call over to Jill.

Fred Tomczyk:

Thanks, Jill. In summary, I want to thank the entire Cboe team for the warm welcome, and the incredible achievements over the last quarter. Cboe’s success this year and over the last 50 years is a testament to the enduring strengths and resiliency of the team who continue to rise to any occasion and deliver results. I'm very excited about the future of Cboe Global Markets. 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 into queue, and if time permits, we'll take the second question.

Patrick Moley:

Yes. Good morning. Thanks for taking my question. Fred, I just wanted to dig into the three key priorities you laid out in your prepared remarks. I was hoping you can maybe elaborate on the comments you made about refining the strategic vision. What areas are you focused on? Where you see the most opportunity for improving efficiencies? And what impact would you expect this to have on your overall expense growth going forward? Thanks.

Patrick Moley:

Yes, it does. I'll hop back in the queue. Thanks.

Dan Fannon:

Thanks. Good morning. Wanted to follow up on that and maybe if you could talk about capital allocation going forward, the authorization last week and then the message we heard this morning sounds similar in terms of how you guys have allocated capital previously, but should given the organic and sharpening focus of the business should we think about buybacks and as more of a focus here in the near term.

Dan Fannon:

Thank you.

Chris Allen:

Yeah, morning, everyone. I wanted to follow up on basically the last two questions. Just in terms of stabilizing EBITDA margins and potential room for improvement there. Any colors in terms of specific opportunities that you see and any color on a timeframe to expect some room for improvement there?

Operator:

Our next question comes from Ben Budish with Barclays. Your line is open.

Fred Tomczyk:

I wouldn't say it was much of a disagreement between Ed and I, as much as I didn't think there's a strategy provided enough focus to the organization and focusing where we allocate our capital in terms of M&A. So that, but I don't think there was a difference of opinion on strategies, so to speak. It's much more about narrowing it. So, that's - I don't know what I'll say there. Anybody else?

John Deters :

This is John. I think really integrations and focused today the press point for past acquisitions. And we do see as a consequence of the way, we approach integration deep integration that our return on invested capital for the tranches of deals that we pursue improves over time to be managed that those returns for three to five year outcomes. And so we're still in process there.

Ben Budish:

Got it. Thanks for the incremental color. Thank you.

Craig Siegenthaler:

Good morning, everyone and thanks for taking my question. And also want to wish both Fred and Ken a congrats on the new roles. Just starting with index options volume, the long-term trajectory here is obviously very robust. But there has been a deceleration over the near term. So, I wanted to see what you attribute the slowing to in your view? And then also, do you think this Zero Day contribution, which is now in the high 40% rate is close to secular equilibrium? Or do you think Zero Day mix could move higher? Thank you guys.

David Howson :

Yeah, just to add on that – having seen index options slow down and continue to rise, equity volumes are off as they are relevantly low. But index options continue to grow and into October it continues to grow.

Operator:

Our next question comes from Alex Kram with UBS. Your line is open.

Fred Tomczyk:

Yeah, maybe I'll start and I’ll turn it over to Dave for a second. But we just launched European derivatives. So it's a little early to make a judgment on it. Contrary to it I think there's two different ways of people look at derivatives in different markets. Sometimes they want access to the US, and if you talk to our clients, our bigger clients, they continue to tell me anyway that there's a lot of demand for liquidity moving into the US. So that's one point. And second point, obviously, it's very early with respect to the multi-list European option expansion here. So I don't, I wouldn't pre-judge it at this point. The last thing we have some better perspective on that.

Alex Kram:

Very Good. Thanks for the color.

Owen Lau:

Good morning, and thank you for taking my question. So massive speculation about the future ownership of Cboe recently. And Fred, you also mentioned the succession planning in your prepared remarks. Could you please elaborate that point a little bit more? Thank you.

Owen Lau:

Sorry. You mentioned the succession planning in your prepared remark. Could you please just elaborate that point a little bit more? Thank you.

Owen Lau:

Thanks a lot.

Alex Blostein:

Hey, good morning everybody. Thanks for the question. I was hoping we could spend a couple of minutes and just again to some of the expense trends you highlighted both for the year and maybe get your own thoughts into ‘24. The specific area I was hoping to kind of double point into the consolidated audit trail. I know it's been a pretty big drag on expenses for you guys this year. Just curious how do you see that evolving. There's obviously things that come out of the SEC that could make this better for Cboe and others next year and beyond? So, maybe again help us frame the cat sort of costs drag this year. How you are thinking about it for next year? And your early thoughts for ‘24 expenses. Thanks.

Operator:

Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Fred Tomczyk:

Thanks very much for the question. Yeah, we've been huge proponents of the last decade of the benefits that a consolidated tape would bring Europe, clearly hugely beneficial for the US marketplace. So that single pane of glass of the globe into the equity markets. And then the fixed income markets in Europe is something we've really been pushing for. The recent developments show reasonably good structure coming through there is some consolidated tape, which we are very interested in I may even think about whether or not we would want to be the provider of that consolidated tape. And not likely to see an actual tape come through though till about 2026 given the way the process grown. So really important, really for that overall capital markets in Europe. And as the PAN European exchange of the Pan European Clearing House, we really fit the comeback capital markets union model, very, very well that. I just don't care what the derivatives market in many ways when you think about our approach being a PAN-European approach. Once again a single stop shop there enabling us to offer greater capital efficiency and let on the transparent on the model that with the Cboe Europe having the ability to access all of the CSDs around and provide a more cleaner and capital-efficient, post-trade solution. And then when we think about the prognosis for the business and how we're going. You mentioned that that guide that we've got single stock options coming in a couple of weeks. And as that begins, we gain traction we will be able to take a look at how that's building and consider the revenue profile, growth profile as that comes into that.

Operator:

Our next question comes from Kyle Voigt with KBW. Your line is open.

Fred Tomczyk:

Thanks a lot. Excellent question. And we've, if I give you a little walk around the arc of pricing, we've got in Q3, 59% came from organic subscription and unit growth there. And so, when we think generally about pricing across the data franchise, we are really focusing on distribution and really great opportunity, particularly, over in Asian-Pacific and in EMEA to sell our data products there. We saw 39% of the growth in Q3 coming from outside of Americas. We see a good runway there. So focus predominantly on distribution and broadening access. We’ve got consistent pipes to deliver our data revenue – come out of revenue there, again 78% or nearly 80% of that revenue is coming internationally. So, good runway there. Surprising but so, we could use when moving across the scale, really it's about that runway of new users. But we are talking about the competitive markets that we go in for the transactional basis, that’s really looking to maximize the revenue per contract, the market share and the market quality down. That's a, that's still where teams have hooked down to a. fine art. And then when we come to the proprietary products there, the answer is yes. We can adjust the pricing of the trading of SPX options as we need to, but when you think look back to my earlier answer, that momentum was seen in that growth. At the moment it’s continuing and its broadened the adoption and as Chris mentioned fabulous opportunity there in global trading hours as we again look to that international capability. And also think about those retail brokers coming through into next year. So, pricing is right priced at the moment. It’s cost-effectively placed to build liquidity, manage risk in that complex or something that in general we will look though to see where we can enhance some value in the same the pockets there, but broadly. But again that’s about expanding the access and distribution.

Kyle Voigt:

Very clear. Thank you.

Andrew Bond:

Hey, good morning. Just want to get your thoughts on SEC's latest market structure proposal, it looks to ban volume-based pricing to exchanges. Can you walk us through maybe why providing the tiers is important for liquidity provisioning? And how does it impact competition not just with other exchanges, but off exchange markets and the broker internalization?

Andrew Bond:

Okay. Thanks.

Michael Cyprys:

Hi, good morning. And thanks for taking the question. Wanted to ask on the index options suite with the SPX dailies. You now have SPX going out 30 days, but maybe you can just remind us on the SPX. expiries, what do you have the on 30 days? And to what extent might there be any sort of innovation opportunities to fill out more maturities to allow more precise hedging with longer duration? And potentially expand the user base even more? I guess in another way, why not have daily is going out 365 days instead of just 30 days?

John Deters :

Mike, I just mentioned that we - so, we had Tuesday, Thursdays, about a year and a half ago, but we added the fifth, the fifth week of dailies, the Tuesdays Thursdays, in the last few months and that was based on customer demand. So as Dave said, his customers demand more and we think we have appropriate liquidity provision. We'll continue to add strikes if the market wants.

Operator:

Our final question is a follow-up from Owen Lau with Oppenheimer. Your line is open.

Fred Tomczyk:

Thanks Owen. As we've been talking about, we're really excited about the launch of our margin futures product in early 2024 that great engagement from customers and SCMs as we build out that project. As following that we do have further derivatives products in the pipeline. The thing that’s unique about Cboe Digital once we have that launched is that the spot and the margin futures will be on the same technology platform underneath the same regulatory umbrella. So, over the same APIs, over the same connections, you can trade both the spot and those physically and cash settle or cash settled margin futures all on the same platform there. So, real unique value being added to that. And then when we think about the prognosis for the future, we think about the - hopeful approval of those spot if and spot Bitcoin ETFs, which we will know more about in the New Year. At Cboe, we're supporting eight issuers of those ETS with five data sharing agreements in place. And so when they come to market, not only do we get to list of products and have to trading, but actually the ecosystem that we have there with that US-based regulated exchange and clearing house to support those authorized participants and market makers who will be supporting and needing to manage their exposure in those products. A good ecosystem benefit is coming there. And then when you look at the regulatory direction, although it may have slowed it’s certainly coming in Cboe’s direction where we run a transparent, regulated, customer first, intermediate-driven model.

Operator:

There are no further questions at this time. I will now turn the call back to the management team for any closing remarks.

Operator:

This concludes today's conference call. Thank you for joining us. You may now disconnect.

Kenneth Hill:

Good morning. Thank you for joining us for our second quarter earnings conference call. On the call today, Ed Tilly, our Chairman and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then Jill Griebenow, our Executive Vice President, Chief Financial Officer, Treasurer and Chief Accounting Officer, will provide an overview of financial results for the quarter as well as discuss our 2023 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; Dave Howson, our President; and our Chief Strategy Officer, John Deters. I'd like to point out that this presentation will include the use of slides. We 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 are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Ed.

Jill Griebenow:

Ed, thank you for that kind introduction. I couldn’t be more excited to build on the strong momentum at Cboe today. As Ed highlighted, Cboe posted a strong second quarter, with adjusted diluted earnings per share up 7% on a year-over-year basis to $1.78. The performance was led by continued strength from our Derivatives franchise, as well as a steady contribution from our Data and Access Solutions business. As we have done in prior quarters, we looked to maximize long-term shareholder value through monetizing today’s opportunities while investing in future growth initiatives. I want to highlight some high level takeaways from the strong second quarter performance before providing a more detailed assessment of our segments. Our second quarter net revenue increased 10% to finish at $467 million, driven by the strength in our Derivatives Markets category and the solid results from our Data and Access Solutions business. Specifically, Derivatives Markets produced 21% year-over-year organic net revenue growth in the second quarter as the market continued to find increasing utility in our toolkit of proprietary products. Data and Access Solutions net revenues increased 9.4%, up 7.4% on an organic basis during the quarter. We are pleased with the sequential organic revenue improvement in the second quarter and remain excited by the catalysts we see in the second half of the year. Cash and Spot Markets net revenues decreased 11% during the quarter or 12% on an organic basis, as the trading environment remained muted across the globe. Adjusted operating expenses increased 22% to $192 million and adjusted EBITDA of $293 million grew a solid 7% versus the second quarter of 2022. Turning to the key drivers by segment. Our press release and the appendix of our slide deck include information detailing the key metrics for each of our business segments, so I’ll provide some summary thoughts. The performance of our Options segment was again very robust, delivering the highest growth of any segment for the quarter, with net revenue increasing 20%. The results were driven by strong volumes in our index business and favorable revenue per contract, or RPC, trends given the mix shift to index options. Total options ADV was up 10% as our higher priced index options ADV increased 38% over 2Q22 levels. RPC moved 16% higher given a continued positive contribution of higher capture index products. And market data and access capacity fees were up 11% and 5%, respectively as compared to 2Q 2022. North American equities net revenue was down 2% on a year-over-year basis. Results benefited from NEO, which was acquired in June of 2022, contributing $3.6 million in inorganic net revenue during the quarter. In addition, access and capacity fees increased 6% as compared to 2Q 2022 and market data increased 1% as proprietary market data growth outpaced a decline in SIP revenues. Net transaction fees were down 13% given softer industry volumes and market share in our US businesses. And while our US on-exchange market share has trended lower on an absolute basis, our share has remained relatively constant when adjusting for the increase in off-exchange market volume and auction activity seen during the second quarter. The Europe and APAC segment reported a 5% year-over-year decline in net revenue, impacted largely by softer industry volumes in Europe. The lower activity levels were partially offset by a nearly one percentage point increase in market share on a year-over-year basis. And Cboe Clear Europe also grew market share during the quarter from 31% to 34%. Second quarter net revenue was down 1% in the Futures segment as a 3% decrease in net transaction fees was partially offset by an increase in access and capacity fees. Lower volumes were the primary driver of the decline in net transaction fees, falling 11% during the quarter. The decline in activity was partially offset by a 9% increase in RPC, helped by pricing tweaks we made in the VIX complex in April of this year. On the non-transaction side, access and capacity fees continued to perform well, up 6% versus the second quarter of last year. And finally, net revenue in the FX segment was up a solid 7% as compared to last year, marking the ninth straight quarter of year-over-year net revenue gains. Net transaction fees revenue was up 6% as average daily notional value increased by 7% and market share hit another record at 19.5% for the quarter. Turning now to Cboe’s Data and Access Solutions business. Net revenues were up a solid 9.4% in the second quarter, up 7.4% on an organic basis. Net revenue growth continued to be driven by additional subscriptions and units, accounting for 77% of organic access fee growth and 63% of organic market data growth in the second quarter. We are pleased with the sequential acceleration in organic net revenue growth and remain confident in our ability to hit our full year guidance range of 7% to 10%. Over the second half of the year we expect solid contributions from proprietary data sales, benefiting from the sustained growth across our derivatives complex. We also anticipate solid trends from Cboe Global Indices with good momentum around index licensing. In Australia, we saw a solid uptick in data sales and access since the migration, in line with what we have witnessed following past technology migrations. We expect that momentum to continue, adding to the enhanced distribution capabilities that Cboe Global Cloud presents, providing incremental sales potential for our suite of data products. We also expect to make modest pricing increases in areas where our pricing has been consistent for many years, but the utility being offered has increased dramatically. Following the selective enhancements, our products are expected to remain competitively priced relative to peers, and we remain focused on the value proposition for our customers. Turning to expenses. Total adjusted operating expenses were approximately $192 million for the quarter, up 22% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 19% or $30 million for the quarter, largely reflecting higher headcount as compared to the second quarter of last year, an increased travel and promotional spend given our 50th anniversary celebration and increased corporate brand marketing costs, and the second quarter also included a one-time $5 million true-up in June to reclassify certain capitalized charges to operating expenses in the technology support services line. Note that we do not expect any further adjustments for previously capitalized charges to impact our expense or capitalized charges moving forward. Moving to our expense guidance. We are lowering our full year 2023 expense guidance range to $766 million to $774 million from $769 million to $779 million. The three basic components of the year-over-year increase are outlined on slide 18 of our earnings presentation; expenses from 2022 acquisitions, growth investments, and core expense growth. Looking at the details of our three expense categories. We expect the two 2022 acquisitions to add approximately $30 million to $31 million in incremental expenses for 2023, below our previously expected range of $33 million to $35 million, as hiring slowed in our digital business in part due to ongoing regulatory uncertainty. While we are still incredibly committed to the digital business, we continue to watch the regulatory landscape closely and adjust our spending to match the revenue environment. Moving onto growth generating investments. We anticipate that the investments we are making in the business to help drive incremental revenue to our bottom line will be in the range of $25 million to $27 million. Our new range is roughly $3 million lower than our prior range, but we remain committed to investing in high return areas like DnA expansion, a more aggressive marketing campaign and targeted product and services R&D efforts across our ecosystem. The last component is our core expense growth, totaling approximately $59 million to $64 million. As a reminder, this includes our expectations for CAT project costs in 2023, investments in infrastructure and inflationary factors on our business. Our updated estimates factor in an incremental $5 million for CAT expenses as well as the one-time reclassification of certain capitalized charges to operating expenses of $5 million. These higher charges were partially offset by lower expected depreciation and amortization expenses. Moving forward, we will continue to put capital to work in value-enhancing ways across our ecosystem, while striving to strike the right balance between the revenue opportunity available and the expense outlay required to enhance value for shareholders. Looking at our full year guidance more broadly on the next slide, we are making some positive revisions to reflect our solid year-to-date performance and our constructive forward outlook across our businesses. At a high level, we are reaffirming our organic total net revenue growth range of 7% to 9% for 2023, but we now expect to finish at the higher end of the range for the year. This remains above our medium term guidance of 5% to 7% introduced at our Investor Day a year and a half ago, a function of the meaningful engagement we have seen across the toolkit of products at Cboe. As mentioned earlier, we are reaffirming our DnA organic net revenue growth rate of 7% to 10% percent for 2023, in line with our medium term expectations. Given the company’s positive marks on its investment in the 7Ridge Fund, which owns Trading Technologies, we now expect the other income benefit from minority investments to be in the range of $34 million to $40 million, up from our prior guidance calling for $27 million to $33 million. We are lowering our full year guidance on depreciation and amortization to $40 million to $44 million from $48 to $52 million, and we expect the effective tax rate on adjusted earnings under the current tax laws to come in at 28.5% to 30.5% in 2023, unchanged from our previous guidance. Outside of our annual guidance, net interest expense for the second quarter of 2023 was $13.9 million. For 3Q, we expect net interest expense to be in the range of $12 million to $13 million. On the capital front, our focus has been, and remains, maximizing long-term shareholder value through the effective use of our capital. In the second quarter, we returned a total of $61 million to shareholders in the form of a $0.50 per share quarterly dividend and $8 million in the form of share repurchases. Our leverage ratio declined slightly to 1.4 times from 1.5 times in the prior quarter as we paid down $140 million on our term loan facility that matures in December of this year. We remain comfortable with our debt profile, having locked in low, medium to longer term fixed rates, averaging below 3% on nearly 90% of our total debt. In summary, the second quarter of 2023 was another solid quarter at Cboe. I could not be more excited about the outlook for the company, and I look forward to delivering solid returns for shareholders in the quarters ahead. Now, I’d like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Kenneth Hill:

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.

Benjamin Budish:

Hi. Good morning, and thanks for taking the question. Ed, I wanted to -- I was hoping you could unpack a comment you made earlier about your expectation that you mentioned the evolution in how customers trade as you were talking about the growth in SPX volumes. I was wondering if you could unpack that a bit in terms of where do you think the next sort of legs of growth come from. Is it more adoption of shorter-dated contracts? Is it more customer types? Is it more kind of global adoption of SPX? Where do you see that coming from in the next 12 to 18 months?

David Howson:

Absolutely. And it's been really encouraging to hear from our customers on calls like these about the increased projections for engagement in the options market in general. And here at Cboe, we've got a whole toolkit of products that we see as complementary to each other that might either be used together or in isolation to manage risk and hedge exposure throughout any market environment. And as part of that toolkit, we see the XSP product, and a little reminder on what it is for those of you out there. The XSP product is a one-tenth-size SPX contract. It's very much the cash settled index options contract for the SPY user. You can deploy all of the strategies that you employ in SPX, also in XSP. And XSP has three defining categories, and that's the fourth kicker that Ed just mentioned. The first of those is that the XSP contract is a cash settled broad-based index contract. So, you don't have a chance of being physically delivered or needing to physically deliver the underlying. At the end of day, at the expiry, you move cash. The second point is that it's European exercise. There's no opportunity to be exercised or assigned early before expiring. And the third point there is the potential for beneficial tax treatment, that potential for 60/40 long-term, short-term capital gains treatment. And then we come to the evolution that we're looking at as we eagerly await the final regulatory approvals required to really access -- XSP to access that ability for cash settled index options written XSP, written against ETFs, read SPY, that track the same underlying option. And so, there you can see the opportunity for margin offsets for hedging. For example, when you override a long SPY position with a short XSP position, you can get that margin treatment there. So, what we expect from that is a good deal of increased activity there and certainly encouraging for us to hear that retail brokerage platforms are looking to onboard cash settled index options in the future.

Benjamin Budish:

Got it. We'll appreciate the very thorough answer. Thanks.

Alex Kramm:

Yes. Hey, good morning, everyone. I want to ask another question on the zero DTE favorite topic of everyone. I think there's an expectation from some investors that that's called phenomenon. It's going to expand into other areas and obviously other exchanges are talking about it. And I'm particularly curious as that happens also into like single stock options, et cetera. Like two things. One, what's your roadmap from your perspective? And what is the expectation? And then secondarily, is there a risk that as that zero DTE phenomenon, again, sorry, it goes into other areas that it potentially takes away from what you've seen and benefited from on the index side? I guess, what I'm trying to say is there's only limited attention, limited capital that people can put to use. And if some of those trading strategies gravitate elsewhere, maybe you actually end up losing out. Sorry for the lengthy question. Hopefully, it makes sense.

Alex Kramm:

Very good. Thanks, guys.

Kenneth Worthington:

Hi. Good morning. Thanks for taking my question. Maybe changing gears, can you talk about the outlook for a spot Bitcoin ETF in the U.S.? It seems like a crypto ETF would touch a number of businesses at Cboe. So, what might broad-based approval for a spot ETF mean for the company?

Kenneth Worthington:

Great. Thank you very much.

Patrick Moley:

Yeah. Good morning. Thanks for taking my question. So, congrats on a strong quarter, and Jill, congrats on the new role. It hasn't even been a month, and you're already bringing expense guidance down, so we like to see that. But I was hoping maybe, Jill, could just talk a little bit about how she's approaching the role and maybe the ways that she might differ from her predecessor, and I guess specifically as that relates to expense management. Thanks.

Patrick Moley:

All right. Great. Thanks. I'll hop back in the queue.

Brian Bedell:

Great. Thanks. Good morning, and thanks -- and welcome, Jill, as well. Actually, just following on to that question, the prior one, as we think about the M&A strategy, obviously, you've built a substantially large global exchange through a series of acquisitions. But as we move into next year, should we be thinking about the focus on product introduction as opposed to more deals? And if we can think about how -- or if you can describe how the incremental margins may be favorable in product launches versus acquisitions. And what I'm trying to get at is, at what point do you think we can swing back to positive operating leverages as early as next year?

Jill Griebenow:

You bet. So, just from a capital allocation perspective, our strategy will remain consistent. The various levers or belts that we have to inform that, obviously, is investment in our business. That can either be organic, inorganic. We also have over time really grown the steady dividend rate. We'd expect that as well going forward. And then finally, share repurchases are a tool that we've utilized as well. And going back to the inorganic growth, we have, for certain acquisitions, basically financed those. As you saw during the second quarter, really did start to delever on the term loan that matures in December of this year. So, do have the leverage rate down to a very comfortable 1.4 times there. And again, just really wouldn't see any noticeable changes to the capital allocation approach. It's really a balance of those factors over time depending upon what the environment is.

Operator:

Thank you. And the next question comes from Michael Cyprys, Morgan Stanley.

David Howson:

Thanks Michael. It's Dave Howson here. We -- during the quarter, actually more philosophically, we look at both our transaction businesses and our Data and Access Solutions businesses a little bit differently. On the transaction side, we continuously review our pricing to make sure we maintain a competitive stance and to ensure that we're reflecting the value of our offerings and also looking for where perhaps over time maybe the usage patterns of our products and some of the price schedules there has changed over time and requires changing. Also, we use it to try and encourage a greater diversity of flows. You saw that certainly through the second quarter. More broadly on the transaction businesses, if you look at multi-list options or U.S. equities, we constantly look to optimize for market share, market quality, revenue capture, and overall maximizing revenues across the franchise there. And then when we come to Data and Access Solutions, we had a 67 -- 77% came from new users and -- one second -- about 75% from new units, subscribers there. And on the pricing point, we generally look to see periodically where perhaps we've had our prices remain consistent for a while and look to review those to make sure that they remain competitive, but also remain in line with the general movement through time there. And so going forward as we look at the DnA group, we think there will be about a third of the growth there coming from pricing changes.

Operator:

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

Edward Tilly:

Thanks Kyle. Yes. So, as you rightly pointed out, there's new venues coming to the multi-list options space in the coming months. And really what we look at there is, again, the balance between market share and market quality and revenue capture there, the RPC. And we see ourselves coming into this period with around about 27% market share, so a solid position there. The new entrants so far are looking at, as you mentioned, that price time maker/taker portion of the market, which today represents around about 20% of the overall market. And certainly, if the past is anything to go by, the pricing schedules there will be highly aggressive and really going for that lower margin type of business within that frame.

Andrew Bond:

Hey, thanks. Good morning. Can you stand upon the opportunity for corporate listings, and specifically if CBOE plans to build out a team to compete with NYSE, NASDAQ in the U.S. for corporate listings, or will the focus be on international markets and the potential for dual listing in the U.S.? Thanks.

John Deters:

And Andrew, this is John. Just one point to follow on that last item that Dave mentioned strategically. This is really what we mean when we talk about building one of the world's largest derivatives and securities networks to drive growth and value creation. Now that we've touched seven of 10 largest markets, almost 80% of the world's GDP, the opportunity to create services and offerings that bind all that together, that add value for our global customers, and that drive revenue growth is substantial, and this is a great example of that.

Operator:

Thank you. And the next question is a follow-up from Brian Bedell with Deutsche Bank.

Edward Tilly:

So, let's take these in reverse. So, Chris, maybe some comments on what we see and the process that you're aware of on the entire CAT exposure and build. And then, Jill, maybe you can come in on the cost and how we see that. It's not totally transparent. We'll say that up front. And then we'll get into the other two questions, Brian, if that's okay.

Chris Isaacson:

Hey, good morning, Brian. Yeah. So on the CAT build, our visibility, as we mentioned, is quite limited. We have some visibility, but it's limited, so we can't really say exactly when it's going to end. And Jill can look -- Jill can advise here on what she knows and what we know. But unfortunately, our visibility is going to be there.

Edward Tilly:

I think, David, if you could walk down the difference between a global product perhaps, and then the network effect and the data that comes off of these exchanges and how we've already tried to offer access to data and the differences in our data, and then, of course, the BITS network, which has its latest rollout expected in November. And we can talk a little bit about that. And then let me say up front, David, while you're getting your thoughts together, that what we recognize in the beauty of operating in different jurisdictions are liquidity providers are our biggest sources of global liquidity are in each and every one of the jurisdictions that we operate. So giving them through the technology migrations that Chris and the team have been rolling out, and again, we look to complete that in November in Japan, is a constant, repeatable expectation on how to view and to face Cboe and then global customers. So, in various stages of a global offering, and we can walk through a little bit, as I say, the data and access, but really from a liquidity provider, we want to be where they are, where their exposures are, and with global products, that's a little bit different. But go ahead, David.

Brian Bedell:

Super helpful. Thank you so much.

David Howson:

Yeah. Thanks Chris. We mentioned it in an earlier answer there that we made some changes in the early part of this quarter. We expect about one-third of incremental growth across DnA to come from pricing increases.

David Howson:

There were always a portion of pricing increase there. It's a slight increase potentially there to the proportions, but it's not really a change in philosophy or approach.

Operator:

Thank you. And the next question is also a follow-up from Michael Cyprys with Morgan Stanley.

Edward Tilly:

Absolutely. A couple of channels I would speak about there. One is the Cboe Global Indices Feed themselves and then also the Cboe Global Indices Business. At the Feed, we began the exclusive distribution of Morningstar indices in this quarter and have seen some good enterprise sales there and see some good forward-looking pipeline there as well. And also, we've built out common APIs to allow us to onboard new data sets from new customers very, very quickly there. So, for low incremental lift, we can add to that distribution as a service for data providers and index providers alike. In terms of the indices where we see great traction is really in the derivative overlay benchmarks. And this is an area where we see beautiful flywheel effects. The derivative overlay indices forming those defined outcome products, which you see are really coming strongly to market in the United States and now globally. So, that's where the flywheel comes in, the ability for us to calculate these indices and then list the products that are benchmarked against those indices and then enjoy trading revenues and market data revenues off the back of that. So, I would really point to that defined outcome space, in particular for the derivative overlay benchmarks. And indeed, this quarter, we also began to calculate our own indices for our European index platform.

Operator:

Thank you. And that concludes the question-and-answer session. I would like to return the floor to management for any closing comments.

Kenneth Hill:

Great. That completes our call for today. Thank you so much for your time and interest in the company, and have a great weekend everyone.

Ken Hill:

Good morning. Thank you for joining us for our first quarter earnings conference call. On the call today, Ed Tilly, our Chairman and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then Brian Schell, our Executive Vice President, CFO and Treasurer, will provide an overview of financial results for the quarter as well as discuss our 2023 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; Dave Howson, our President; and our Chief Strategy Officer, John Deters. I'd like to point out that this presentation will include the use of slides. We 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 are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and outlined in the earnings materials. Now I'd like to turn the call over to Ed.

Brian Schell:

Thank you, Ed. As Ed highlighted, Cboe posted another record quarter to start 2023. Adjusted diluted earnings per share for the first quarter was up 10% on a year-over-year basis to a record $1.90. The record revenue performance was again driven by the continued organic growth of our Derivatives franchise as well as a steady contribution from our Data and Access Solutions business. 1Q was not only a period of robust financial performance, but it also marked a period of meaningful advancement for many of our strategic initiatives. We believe that striking the right balance between monetizing today's opportunities and investing in the future of our company is crucial for the long-term growth of Cboe. I want to quickly touch on some of the high-level takeaways from the first quarter before delving into the segment performance. Our first quarter net revenue increase of 13% set another quarterly record at $471 million led by the strength in our Derivatives markets category and the solid results from our Data and Access Solutions business. Specifically, Derivatives markets produced 29% year-over-year organic net revenue growth in the first quarter as the market continued to find increasing utility in our index options complex with the rise of 0DTE trading and global trading hours. Data and Access Solutions net revenues increased 9%, up 6% on an organic basis during the quarter. We're pleased with the overall performance of the category and even more excited by the numerous catalysts we expect to accelerate growth over the course of this year. Cash and Spot Markets net revenues decreased 12% during the quarter or 13% on an organic basis as we faced difficult industry volume comparisons versus the first quarter of 2022 and a 3 percentage point impact from a stronger dollar. Adjusted operating expenses increased 28% to $186 million, and adjusted EBITDA of $310 million also notched a quarterly high, up 10% from the first quarter of 2022. Turning to the key drivers by segment. Our press release and the appendix of our slide deck include information detailing the key metrics for each of our business segments so I'll just provide summary thoughts. The performance of our Options segment was again very strong, delivering the highest growth of any segment for the quarter with net revenue increasing 28%. Results were driven by robust volumes in our index business and strong revenue per contract or RPC, given the favorable mix shift trends. Total options ADV was up 9% as our higher-priced index options ADV increased 49% over 1Q 2022 levels. RPC moved 27% higher given the continued positive contribution of index options and a stronger mix of higher-priced SPX options in our index business. And market data and access capacity were up 8% and 9%, respectively, as compared to 1Q 2022. One additional item worth calling out for the segment in the first quarter was the 51% year-over-year increase in options royalty fees, somewhat higher than previous quarterly growth rates. Roughly 75% of the increase was related to higher volumes in our SPX and VIX options. The remaining 25% of the increase was related to the last scheduled reset and royalty fees with S&P, which took effect at the beginning of the first quarter. This last scheduled adjustment to contract rates is part of our current agreement with S&P that runs through 2032, '33, making the first quarter a good run rate ratio of royalty fees to proprietary volume moving forward. North American Equities net revenue was flat on a year-over-year basis. Results benefited from NEO, which was acquired in June of 2022, contributing $5.6 million in net revenue during the quarter. In addition, access and capacity fees increased 9% as compared to 1Q 222, while market data declined 7% on the back of lower SIP revenue. Net transaction fees were flat, given softer industry volumes and market share in our U.S. businesses. And while our U.S. on-exchange market share has trended lower on an absolute basis, our share has remained relatively constant when adjusting for the increase in off-exchange market volume activity seen during 1Q. The industry volume and market share headwinds were offset by the positive contribution from the NEO acquisition during the quarter. The Europe and APAC segment reported a 14% year-over-year decline in net revenue. However, adjusting for a $3.5 million FX impact given the stronger dollar during the quarter, net revenue fell by a more modest 8% on a constant currency basis, impacted by softer volumes in Europe. The lower activity levels were partially offset by a 3.1 percentage point increase in market share on a year-over-year basis, making Cboe Europe the largest stock exchange in Europe again. And Cboe Clear Europe also grew market share during the quarter from 32% to 34%. First quarter net revenue was flat in the future segment as a 4% decline in net transaction fees was offset by an increase in access and capacity fees. Lower volumes were the primary driver of the decline in net transaction fees, falling 9% during the quarter. Non-transaction revenues continued to perform well with access and capacity fees up 18% and market data flat to the first quarter of last year. And finally, net revenue in the FX segment was up 8% compared to last year, building on the very strong momentum we saw from the FX segment during 2022. Net transaction fee revenue was up 8% as average daily notional value increased by 7% and market share hit another record at 19% for the quarter. Turning now to Cboe's Data and Access Solutions business. Net revenues were up a solid 9% in the first quarter, up 6.2% on an organic basis. Net revenue growth continued to be driven by additional subscriptions and units, accounting for 70% of access fee and market data growth in the first quarter. While our 6.2% organic net revenue growth rate for the quarter finished slightly below the low end of our 7% to 10% full year guidance range, we feel confident in our ability to accelerate trends over the back half of the year. Specifically, with the recent launch of Cboe One options, we expect to see an uptake of clients for all of our Cboe One data fees in the second half of Q3, adding incremental revenue for the D&A business. In Australia, we finished our successful technology migration and launched our BIDS offering in the region at the end of the first quarter. Following the migration, we expect to see increased demand for Cboe data in Australia, consistent with what we have seen following past technology migrations around the globe. And to that positive momentum is the enhanced distribution that Cboe Global Cloud now provides, offering incremental sales potential for our suite of data products. We also anticipate solid trends from Cboe Global Indices with good momentum around index licensing. We are experiencing new global customer wins in risk and market analytics and see opportunities coming online in distribution. From a timing perspective, we anticipate most of this acceleration will occur in the second half of 2023, landing us in our 7% to 10% organic net revenue growth guidance range for the full year and putting us in line with our medium-term expectations outlined at our November 2021 Investor Day. Turning to expenses. Total adjusted operating expenses were approximately $186 million for the quarter, up 28% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 19% or $28 million for the quarter, largely reflecting higher headcount as compared to the first quarter of last year as well as some inflationary comp adjustments and higher professional fees and outside services as compared to 1Q 2022. Moving to our expense guidance, we are reaffirming our full year 2023 expense guidance range of $769 million to $779 million. This compares to our 2022 expense base of $652 million. The 3 basic components of the year-over-year increase are outlined on Slide 17 of our earnings presentation

Ken Hill:

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

Rich Repetto :

Good morning. Good morning, Ed.

Rich Repetto :

Good morning. And I agree, you guys continue to rewrite how people look at risk management. And the zero DTE stuff has been the most resilient asset class since the spike in volume and volatility in March even. So I guess my question relates to the new thing -- the things that you can do to continue that on. Can you talk about maybe how the 1-day, VIX 1-day ball index could impact trading and this XSP contract? And then is there any possibility you see other exchanges with proprietary products increasing pricing? Any possibility of leveraging pricing on these products?

Dave Howson:

Thanks, Ed, and thanks, Rich, for pointing out the sustained and consistent volumes there in the zero days to expiration. As we look at the SPX family, we do really see it as a family of products. You mentioned that the XSP product, the one-tenth size contract of the SPX. What we see, you can see some in the figures there, some good growth of the XSP contract itself as customers also to find utility in the small products. And what we find is through the education of end users and customers that are coming to the complex and growing, we hear from our customers that new account openings meaningfully increased in Q1 with those customers trading the SPX and the XSP family. And indeed, we see graduations from XSP users to SPX as well as people finding also utility in the XSP contract itself. You talked about pricing there as well, Rich. And when we look across actually our business in general, our priority is expanding access and distribution, getting that incremental users engaged in the products or viewing our data. So, at this point in time, we don't see a particular need for us to increase their pricing across the product landscape at this point. Really, it's about further adoption. And when we look at the trends, it looks very positive.

Dave Howson:

Excellent, Rich. Thanks.

Michael Cyprys:

Great. Thank you. Good morning. Maybe just continuing with the last thread around continuing to drive further adoption just on the SPX product. Maybe you could talk about the institutional usage of the 0DTEs. Where does that stand today? What are some of the stuff that you guys can take to increase usage by institutions for 0DTEs? And what are some of the most compelling use cases that you're seeing there and how that may differ from other customer sets that are using the 0DTEs? Thank you.

Michael Cyprys:

Great. Thank you.

Daniel Fannon:

Thanks. Good morning. I wanted to follow up on Data and Access Solutions. The 6% growth you -- and then you have your medium-term target of 7% to 10%. And Brian, you walked through, I think, several upcoming rollouts in the back half of the year that should accelerate growth. I was hoping you could maybe contextualize or put some numbers around some of those initiatives. You talked about BIDS as an example where you've rolled it out before. Maybe help us think about what that's been in terms of incremental contribution. And it seems like that could -- all those initiatives could make maybe next year's numbers look like some even higher than some of the metrics we've seen here recently. So I wanted to get a little bit further into what you talked about.

Dave Howson:

Yes. And certainly, the revenue profile for the year is really living up to our own projections and expectations with that acceleration in the second half of this year. And the uniformity of the technology with the Australian platform really does help the adoption of data. And we've seen that elsewhere as Brian mentioned. And notably around the cloud, 17% of new users actually in Q1 came from Australia. So boots on the ground, re-platforming completed, really just increased the uptake and interest in the data from the region. We've done the re-platforming. And then mentioning on the indices from the real highlight is the options overlay indices that are really getting a lot of traction right now with our business and with our customers. And then the risk management and analytics sleeve in the Data and Access Solutions business, that global analytics capability that we rolled out in Q1, the addition of European data really picking up clients in Europe there as well as the pipeline looking good for the rest of the year. And as Brian said, on top of that, the Cboe one options product as part of that broader Cboe one family, that packaging of data really part of the growth that we see realizing in the second half of this year.

Operator:

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

Dave Howson:

Sure. Thanks for the question. So the -- we reported in the prepared remarks there the record volumes that we've seen in particular, in February, the tightening of the spread, the depths improving that. The syndicate members, we're over halfway through onboarding those now and seeing the benefit as they optimize that interaction with the platform and continue to filled out as we look forward. And we're looking forward to and continue to engage with the CFTC on the margin futures approval.

Operator:

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

Brian Schell:

Yes. So short answer is, yes, it does include that current gain. So as we look at that forecast and the guidance, it does include this first quarter.

Brian Bedell:

Excellent. Thank you.

Kyle Voigt:

Hi. Good morning. Just a follow-up question for me on one day VIX. And in terms of how Cboe potentially monetizes the development of that index, is the index really solely meant to help kind of facilitate trading, provide more granular market data for clients that are trading 0DTE and some other listed products? Or would it also be possible to launch a Derivatives product based off of one day VIX at some point in the future? Just not sure the technical difficulties of doing that, so maybe you could expand a bit around that.

Kyle Voigt:

Understood. Thank you.

Alex Blostein:

Hey, guys. Good morning. Thanks for taking the question. In prior meetings, you talked about increased utilization of SPX daily options by market makers to delta hedge, et cetera. Can you update us on any incremental details you're sort of seeing on that front? Any color on what percentage of SPX volume that activity comprises today? And ultimately, how do you think about customers' view an all-in cost of doing that versus trading alternative products largely on CME [indiscernible]?

Alex Blostein:

Great. Very helpful. Thank you.

Andrew Bond:

Hey, good morning. Just following up on Cboe Digital. You guys provide any more color around your margin futures application with the CFTC and if there's been any change in discussions with the regulator, given some of the recent rhetoric and enforcement actions from the SEC? And additionally, do you think approval will drive greater trading activity kind of soon after? Or are you finding that customers are still waiting for greater regulatory clarity more broadly? Thanks.

John Deters:

Andrew, this is John. Just one other thing to note there as we look at the environment, things have really picked back up to where they were in 2022 in terms of core nodes, in terms of active accounts on the Bitcoin network. The issue is that while a lot of that activity is in the U.S., spot trading is hampered by the regulatory environment. We think as Ed mentioned, the Derivatives products that we're preparing really change that because there's full regulatory clarity around that product set. So that's an enabler in our point of view.

Operator:

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

Operator:

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

Ken Hill:

Good morning and thank you for joining us for our fourth quarter earnings conference call. On the call today, Ed Tilly, our Chairman and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then Brian Schell, our Executive Vice President, CFO and Treasurer, will provide an overview of our financial results for the quarter as well as discuss our 2023 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; Dave Howson, our President; and our Chief Strategy Officer, John Deters. I would like to point out that this presentation will include the use of slides. We will be showing 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 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now I'd like to turn the call over to Ed.

Brian Schell:

Thanks, Ed, and good day to all of you. Let me remind everyone that unless specifically noted, my comments relate to 4Q '22 as compared to 4Q '21 and are based on our non-GAAP adjusted results. As Ed highlighted, Cboe posted another incredibly strong quarter to cap off a record year. Adjusted diluted earnings per share for the fourth quarter was up 6% on a year-over-year basis to a record $1.80. The strong performance was again characterized by the continued growth of our Derivatives franchise as well as a steady contribution from our Data and Access Solutions business. Over the course of the year, we made meaningful progress advancing our numerous initiatives, plans that span multiple asset classes and geographies. We see these investments as driving growth in Cboe as reflected in our 2022 record results and in the healthy outlook we have for our businesses. I want to quickly touch on some of the high-level takeaways from the fourth quarter before delving into the segment performance. Our fourth quarter net revenue increased 17%, setting another quarterly record at $457 million led by the strength in our Derivatives markets category and robust results from our Data and Access Solutions business. Specifically, Derivatives markets produced 33% year-over-year organic net revenue growth in the fourth quarter as innovations like Tuesday, Thursday expirations continue to resonate with customers and fuel same-day trading in our SPX complex. Data and Access Solutions net revenues increased 13%, up 10% on an organic basis, finishing a very strong year where D&A organic revenue increased by a very healthy 12%. Cash and Spot Markets net revenues decreased 5% during the quarter or 7% on an organic basis. Adjusted operating expenses increased 28% to $177 million. Adjusted EBITDA of $292 million also notched a quarterly high, up 11% from the fourth quarter of 2021. And as noted previously, our adjusted diluted earnings per share was a record $1.80, up 6% compared to last year's quarterly results. Turning to key drivers by segment. Our press release and the appendix of our slide deck include information detailing the key metrics for each of our business segments. So, I'll just provide summary thoughts. Our Options segment was a standout for the quarter, again delivering the strongest growth with net revenue increasing 35%. Results were driven by robust volumes in our index business and stronger revenue per contract, given the favorable mix trends. Total options ADV was up 15% as our higher-priced index options ADV increased 55% over 4Q '21 levels. RPC moved 25% higher, given a continued positive mix shift to index products and a stronger mix of higher-priced SPX options in our index business. And lastly, we continue to benefit from another quarter of double-digit growth in market data and access and capacity fees, up 34% and 15%, respectively, as compared to 4Q '21. North American Equities net revenue increased by 5% year-over-year. Results benefited from NEO, which was acquired in June of '22, contributing $5.5 million in net revenue during the quarter. In addition, access capacity fees increased 10% as compared to 4Q '21, and market data was up 4%. Net transaction fees fell by 4%, given a mixed volume environment across our businesses, softer market share and capture rates. The Europe and APAC segment reported a year-over-year decline in net revenue for the fourth quarter of 15%. However, adjusting for a $5.6 million FX impact given the stronger dollar during the quarter, net revenue fell by a more modest 4% on a constant currency basis, impacted by softer industry volumes in Europe. The lower activity levels were partially offset by a 5.1 percentage point increase in market share on a year-over-year basis, making Cboe Europe the largest stock exchange in Europe, again for the quarter. Fourth quarter net revenue decreased 10% in the future segment as transaction fees declined 15% on a year-over-year basis. Lower volumes were the primary driver of the decline, falling 16% in the fourth quarter '22 as compared to fourth quarter of '21. Non-transaction revenues continued to tick higher with access capacity fees up 2% and market data up 25% as compared to 4Q '21. And finally, net revenues in the FX segment were up a strong 14% as compared to 4Q '21, capping a very strong year for FX, where net revenues grew an impressive 18%. Net transaction and clearing fees in the fourth quarter benefited from a 21% increase in average daily notional value and higher levels of market share, hitting another quarterly record of 18.4%. Turning now to both Data and Access Solutions business. Organic revenues were up an impressive 12% for the full year. Net revenues were up 13% year-over-year in the fourth quarter, up 10% on an organic basis. As we have seen in past quarters, net revenue growth continues to be driven by additional subscriptions and units, accounting for over 90% of access fee growth and 58% of market data growth. In our data and access businesses, we saw robust physical and logical port usage in our options and equities businesses driven by increased demand for trading capacity. And on the market data side, the equity's top of book and options depth of book products continued to perform well. Cboe Global Indices feed also benefited from some pricing enhancements during the quarter. In 2023, we anticipate that trends will remain resilient as we are forecasting 7% to 10% organic net revenue growth for Data and Access Solutions, in line with our medium-term guidance range outlined at our November 2021 Investor Day. Turning to expenses. Total adjusted operating expenses were approximately $177 million for the quarter, up 28% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 21% or $28 million for the quarter, largely reflecting higher headcount as compared to fourth quarter of last year as well as some inflationary comp adjustments and additional incentive compensation in 4Q '22. Moving to our expense guidance. We are introducing a full year 2023 expense guidance range of $779 million. This compares to our 2022 expense base of $652 million. There are three basic components to the year-over-year increase outlined on Slide 17 of our earnings presentation that I want to walk through in detail, namely expenses from 2022 acquisitions, revenue-enhancing investments we are making in our business and core expense growth. The first component is the normalization for the two transactions ErisX and NEO, we completed in 2022. We anticipate these deals will add approximately $36 million to $38 million in incremental expenses in 2023. In our expense base, we are again calling out growth-generating investments we are making, given the numerous attractive growth opportunities we see today. These are costs we expect to drive incremental revenue to our bottom line, furthering the robust growth trends we have enjoyed over the past few years. Specifically, we are investing in global listings, DNA expansion, a more aggressive marketing campaign given our 50-year anniversary as a company and targeted R&D efforts across our ecosystem. In 2023, we expect revenue-enhancing investments to be in the range of $28 million to $30 million accounting for roughly 4.5 percentage points of our 2023 adjusted expense growth. The last component and the largest portion of the year-over-year increase is our core expense growth, showing approximately $53 million to $59 million or 8% to 9% of our expense increase in 2023. I think it's important to understand the moving pieces within our core expense base. First, we continue to invest in the infrastructure of our business. As we strengthen our footprint as a multi-asset class global exchange and services provider, we will continue to invest behind a robust technology offering to deliver a best-in-class client experience. Roughly 2% of our expense growth in '22 was related to core infrastructure. And we would expect a similar contribution this year as we continue to build a cohesive offering around the globe, facilitating the expanded capacity, access and distribution of our products and services globally is important to our success, and we will continue to ensure Cboe can meet the needs of our clients. Unrelated to our infrastructure spend is an incremental two percentage points of expense growth we are attributing to the Consolidated Audit Trail or CAT project. These costs, which we have limited direct control over, are expected to add an incremental $10 million to $15 million to our 2023 expense base based on our initial estimates. The remaining core piece is related to our day-to-day cost of doing business. In '22, we talked about some inflationary pressures impacting these expenses. And while we do still feel some of those pressures today, we expect core day-to-day expenses to be up a modest 4% in '23, down from the 7% growth we saw in '22. Cboe has enjoyed some of the most consistent and most durable revenue growth, operating margins and earnings generation in the industry. The expense forecast we are providing today highlights the continued investment we are making to sustain those trends moving forward. To state this more directly, it is because of the investments we have made in our business that we generated record '22 results and are able to guide to a robust seven to nine percentage point increase in organic total net revenue in the year ahead. We believe that the investments we make in '23 will position us well to generate attractive return for years to come. Now turning to a summary of full year guidance on the next slide, I want to call out some highlights for '23 following our record net revenue results in '22. For Data and Access Solutions, we expect net revenue growth to be in the 7% to 10% range for '23, in line with the medium-term guidance of 7% to 10% we introduced at our Investor Day a little more than a year ago. We expect acquisitions held less than a year to contribute around 0.5 percentage point to total net revenue growth in '23. Most importantly, we are guiding our organic total net revenue growth in the range of 7% to 9% for 2023. This is above our medium-term guidance of 5% to 7% introduced at our Investor Day a little more than a year ago, a function of our confidence in the durable growth of our business and the progress we are seeing behind the investments we have made to increase the access and distribution of our products in markets globally. During this year, we are introducing an expected contribution of $27 million to $33 million for minority investments benefiting our other income line. Cboe has made and we'll look to continue to make investments in businesses that align with our strategic vision. Our 4Q '21 investment in 7RIDGE with Cboe becoming a limited partner in the acquisition of Trading Technologies is a great example of how we plan to utilize our network of partners to invest in strategic assets. We look for the impact of these investments to become a more regular contributor to company earnings and are providing our best estimate of the benefits we anticipate in '23. We are introducing full year guidance on depreciation and amortization of $48 million to $52 million and expect the effective tax rate on adjusted earnings under the current tax laws to come in at 28.5% to 30.5% in '23. Outside of our annual guidance, interest expense for the fourth quarter of '22 was $15.7 million. Moving forward, we expect interest expense to be in the range of $14.5 million to $15.5 million for 1Q '23. On the capital front, our focus has been and remains maximizing shareholder value through the effective use of our capital. In the fourth quarter, we returned total of $53 million to shareholders in the form of a $0.50 per share quarterly dividend and $15 million in the form of share repurchases. Year-to-date '23, we've also repurchased $30 million of our shares. We remain well positioned to invest in the business, support our dividend and opportunistically repurchase shares with $188 million in remaining capacity on our share repurchases authorization as of January 31, 2023. Our leverage ratio decreased to 1.5x at the end of the fourth quarter, down from 1.7x at September 30 and from 1.9x from June 30, reflecting our significant growth in earnings as well as the repayment of $120 million of our term loan facility in 4Q '22. And through prudent debt capital markets transactions, we have also locked in low medium- to longer-term fixed rates averaging below 3% on over 80% of our total debt. Overall, we remain committed to maintaining a flexible balance sheet and striving to put capital to work in the most value-enhancing way possible for shareholders. Given where we are today in our capital structure, we plan to shift slightly to prioritize opportunistic share repurchases over further debt pay down, given our leverage ratio at 1.5x at the end of 4Q '22. In summary, 2022 was a tremendous year of record revenue generation and earnings growth. We expect that momentum to continue, fueled by the attractive investments we are making across our ecosystem. We are incredibly pleased with the start to '23 and look forward to delivering attractive returns to our shareholders in the quarters ahead. Now, I'd like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Ken Hill:

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.

Rich Repetto:

Yes. I guess my question is going to be focused on expenses and expense growth. I guess, Brian, I calculate last year the overall expense increase when you subtract the acquisitions was 13.5%. And I thought we would expect a step down. It looks like 13% ex the acquisitions again this year. So, I guess when you look at just the core -- everything beyond the acquisitions, so can you explain, what's the tangible payback? I know you had something about minority investments, but is this the ongoing -- it looks like other exchanges are investing less than half of that, and just trying to understand this 13% growth rate each of the last two years in investments and core expenses.

Dave Howson:

Thanks, Brian. Yes. As Brian said, really, we're looking for the revenue investments to really capitalize on opportunities that we see to build on the foundation that we've built. We've got this tremendous network, 26 markets around the globe. We're looking to lean into where we have momentum to build on those strong foundations to offer differentiated offerings, but also to look for white space to look for the opportunity to move into those adjacencies with it from a position of strength. I'd probably call out the -- Brian gave a great backdrop of the previous year. You'll see that continuing into this year. And in particular, as you look at the results of 2022, these should really all be pretty -- make some good sense. As to the five areas top entailed with marketing and surrounded with marketing throughout the message here. So you've got Derivatives, you've got D&A, listings, BIDS and research and development. Certainly, Derivatives there, you heard Ed and Brian describe a great result. So leaning into education, content, sales and marketing, that global trading hours tripling volumes in 2022 really looking to lean into that as we think about broadening the access and distribution, XSP, the Mini-SPX being added to 24x5 in the back end of last year with the addition of Tuesday, Thursday, really sales and marketing there pushing into the APAC region and really capitalizing on the boots on the ground we have from the Asia-Pacific acquisition. D&A exceeded my expectations for 2022. That 12% growth, they're fantastic. And so continue to lean in their sales, quantitive analytic marketing as we look to move those products and services into -- throughout the rest of the globe. Think about our options analytics capability we're going to be bringing to Europe. Cloud is a great theme that's been here throughout the years. 2022 saw 72% of all revenue as incremental sales. That's across the nine products, five regions that we've got set up for cloud right now. And we're really looking forward to investing this year to add Cboe Digital data to that, some great spreads coming through this year from Cboe Digital, adding a new quality data set to the CCC-wide channel 24/7 data that's leaning into expanding the distribution there. And last year, we saw themes around defined outcome and override strategy bench for the index business. We saw great gains in 2022 as well. And then the continuous theme of selling the package and bundle data so Cboe One Canada there really showing great green shoots for this year. Listings is another one I'd probably drill down a little bit more into. The opportunity that is afforded us by having those listings exchanges around the world is unique. We get to provide a global cohesive offering across legal frameworks, liquidity provision in conjunction with our liquidity partners and also access and help navigating global regulators as we go there. So, great opportunity there coming off that great standpoint, number two in the U.S. as an ETP listings, venue with 28 increase in some rather large name issuers in the U.S. And then BIDS, BIDS has been a great story for us since the beginning of the partnership. But after we closed the acquisition with BIDS, we saw us spring to the -- grow to the number one block trading venue in Europe there. So we're leaning into that with people, sales and marketing this year as we think about Asia Pacific. Canada, 76 buy side added within one year. And when you look at the 243 connected to Europe, you can see the growth potential there that we're going to be leaning into as we go through into the Asia Pacific region. Then research and development, key thing for us, we're a product company with some world-renowned products. We formed Cboe Labs this year to really focus completely on how we can develop new ways to measure and benchmark exposures and bring those to the marketplace to afford our customers a range of defined outcome opportunities, which we saw really come to fruition in the SPX complex, in particular, last year. And finally, marketing wraps the whole thing. It's about people, technology, working with partners and suppliers from the tailwind of our 50th year anniversary here as we go into new regions with new products, Asia Pacific and lean into digital, bringing our awareness to new regions, new audiences so that we can better penetrate the markets that we operate in.

Ken Worthington:

With the syndicate in place now for Cboe Digital, can you give us more details on the investments you plan to make here? And I think one of the goals is to enhance flow in the platform for 2023. If you can give us some approach on how you want to build that liquidity. And to the extent that things have changed for Cboe Digital since FTX has imploded, how has your strategy evolved in the recent quarter since the environment seems to have changed quite a bit?

John Deters:

Ken, this is John Deters. Just a couple of other points to tag on there, I think first of all, when you look at the data, it's interesting. The number of active addresses for Bitcoin, for example, has stayed relatively consistent since really the Three Arrows Capital collapse, so even through the FTX issue. And what does that tell you? It tells you that engagement overall has stayed fairly consistent once the period when leverage was taken out of the system. So what our partners are seeing, and this is really one of the great benefits of having this around us they're seeing that the remaining customers and the new customers that continue to come into the space are gravitating towards highly compliant, regulated marketplaces. You heard this from China, for example, in his conversation in December. And so when this market ultimately begins to grow from its stabilization period today, we believe we're set to be -- among the winners in this space. We're investing for the long term.

Gautam Sawant:

Can you please walk us through the growth dynamics in the data and access segment? Organic growth came in at 12% in 2022 above your medium term 7% to 10% guidance. But on your 2023 outlook, you kept it in the range. Can you expand on what some of the new product sale opportunities are? And if there is a growth deceleration or maybe some of the factors that drove the elevated growth in 2022, is that why you stick to the medium-term range?

Operator:

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

Ed Tilly:

Thanks, Alex. I'll start. So, we are seeing institutional flow certainly in the zero DTE. But I think most importantly is it's not the expense of more traditional and historical third Friday, that's the good news. That base remains very, very constant. So any new movement into the dailies similar to retail looks to be accretive or new flow and new strategies. And it is very much based on the moves that we see over the last year or so, substantial and meaningful moves in the S&P 500 on a daily basis today, yesterday, basically every day this week is a perfect example. As far as education, it's -- you really make the products available for institutions, and institutions talk to other practitioners on the success or not of new strategies. So our focus has been on wallet size and having products for everyone to access the zero DTE. In particular, we called out the 1/10 size SPX and XSP and watching that growth. I would point to that as being more retail. And the SPX volume and growth that are coming from retail platforms are still small orders and still a mix between single leg and multi-leg strategy. So you hear the theme repeated here defined outcome investing tends to be much more sustainable, and that's what we're teaching. Institutions, I think, will catch on and add to that traditional third Friday and simply just gain more exposures on short dated.

Dan Fannon:

Brian, I want to come back to expenses, and I know you just gave a lot of color on the growth and what the initiatives are. I was hoping you could put some numbers around the ROI or the incremental revenue growth you're expecting from those investments. But also to maybe avoid some of the confusion going forward, how do we think about normalized expense growth? Or are you in a multiyear period where we should be thinking about growth investments plus core expense growth? So this elevated expense growth isn't just for '23, it should be over a multiyear period.

Operator:

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

Brian Schell:

So I'll try to make sure I got all those. Okay. So on the first one, on the -- similar to following up on Dan's question, the one thing I realized, and thank you for kind of asking to expand on that is the point that I didn't make as clearly as I would like to is with these investments and say, we have the -- we might see an increase in transactional activity, say, the SPX complex or the other project in this complex, what we see with that also is incremental D&A. We see the incremental non-transaction pieces because of the need for incremental access. You'll see that incremental access fees. You'll see that in incremental market data fees. Dave touched on that as far as we've seen that growth. And then by enhancing the distribution or our ability then to deliver that, we're seeing that growth of not only share of wallet, say, in the access, but also then more new clients. And I'll pass it over to Dave here in a second as we continue to round that out. So, we'll see it across the entire flywheel as far as maybe some of the underlying, but also the transaction and non-transaction side as that entire ecosystem continues to build. So -- and Dave, do you want to expand on that a little bit and then maybe talk about the EU Derivatives? And then we'll come back to -- and then maybe follow up with you and Chris on the Cboe Digital?

Chris Isaacson:

Yes, I'll take that. On Cboe Digital, as we said on the slide there, this has been Slide 11. It's a long-term growth trajectory for us. And we haven't put out guidance on exactly when we'll have breakeven there. But a lot of this is dependent upon our Derivatives growth, margin futures and as we said, onboarding the syndicate as we bring them on. So, we haven't put out exact breakeven timing, but we are very bullish on the long-term growth trajectory for that business.

Owen Lau:

Going back to Cboe Digital, I think you guys are planning to list more tokens beyond the five tokens you have. Could you please talk about what other tokens you feel comfortable to list? And what's the process and timing of getting approval so that you can -- these tokens?

Chris Isaacson:

Yes, I think Ed covered it well there. We are going to be very conservative on our listing. We do desire to list new coins as there's clarity around regulation and as we see genuine customer demand from our customers and intermediaries. But we'll make sure that there's clarity there before we start listing the coins.

Operator:

Thank you. And the next question comes from Michael Cyprys with Morgan Stanley.

Ed Tilly:

Thanks for the question, Michael. The continued momentum that we see in the interest and engagement from our broad range of customers did execute in a broad range of strategies in the -- on our Derivatives complex forms a good portion of the driver for the continued revenues growth of 7% to 9% into next year. As you say, that's total. So it does include the Data and Access Solutions as well, which is also a combating driver as part of that growth guide that we've given that as we see the growth of the utility in -- that customers are finding in deploying option strategies we see that continuing throughout the year. And really one of the catalysts there last year, of course, was the addition of the Tuesday and Thursday weekly contract expirations that opened up the opportunities that Ed talked about earlier on. I think in the quarters past, what we called out is when investors move from the binary outcome of being long or short in Delta 1 and employ option strategies that allow them to define their outcome that is an incredibly sustainable, sticky, if you will, strategy. So, we continue to teach that here in our institute. We continue to bring new products to the market through Cboe Labs, and we engage with our customers globally as the demand for particular for U.S. Derivatives. But if you follow along like we do listening to and observing what retail platform operators are saying, that Derivatives demand is global. We see that. And of course, our concentration while primarily leading into '23 is U.S.-based as Dave laid out, we see potential, obviously, in Derivatives as we broaden the scope in Europe.

Andrew Bond:

Just on fixed futures volumes. We know there seems to be a bit of a mix shift in customer hedging to SPX and as your DTE option contracts with implied volatility underperforming realized vol. Outside of changes in some of these dynamics and more unknown unknowns, what could Cboe do on the innovation front and perhaps education front to boost volume growth of VIX features?

Operator:

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

Ed Tilly:

Thanks Kyle. I think your next -- if you choose to have another career as a CFO as part of that, that would be awesome. So, I think you think about exactly the way we frame that and the way we've talked about it, right, is that we've laid out this guidance. We've laid out our plans. We have certain expectations around how these investments are going to contribute to the revenue and some of the traction we think we will gain. So, there's definitely opportunity to flex. There's obviously our natural flex that is a part of our incentive plan, our short-term incentive plan that will flex based on how we're doing relative to, I would say, these very strong growth targets that we've set aside, so we set for ourselves. So, there's definitely an inherent part of that is that we are not achieving that, we will titrate the various levers there to say, how does this pull back to make sure we get to those earnings expectations of what we're trying to deliver for shareholders and continue to measure that. And then on a go-forward basis, outside of, call it, that incentive structure as far as exceeding expectations. We're a little bit more cautious on the upside. We'll be faster to move on the downside as far as pulling that back, if we don't see the results that we're expecting, but we'd be more cautious to actually raise it as you've probably seen historically with some of that kind of expense growth going forward. So that's the way I would frame it, Kyle.

Rick Fellinger:

I was hoping you could speak to the competitive environment in SPX options. Your competitor has now announced their intention to launch daily expirations for their micro S&P futures. Do you expect us to have any direct impact on the success you've been seeing?

Operator:

And this concludes the question-and-answer session. I'd now like to turn the floor to management for any closing comments.

Operator:

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

Kenneth Hill:

Good morning and thank you for joining us for our third quarter earnings conference call. On the call today, Ed Tilly, our Chairman and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then, Brian Schell, our Executive Vice President, CFO and Treasurer, will provide an overview of our financial results for the quarter as well as an update on our 2022 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; Dave Howson, our President; and our Chief Strategy Officer, John Deters. 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 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of these factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, after this conference call. During the call this morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Ed.

Brian Schell:

Thanks, Ed. And good day to all of you. Let me remind everyone that unless specifically noted, my comments relate to 3Q 2022 as compared to 3Q 2021 and are based on our non-GAAP adjusted results. As Ed highlighted, Cboe posted an exceptionally strong third quarter. Adjusted diluted earnings per share was up 20% on a year-over-year basis to a record $1.74. The quarter was characterized by the outsized contribution from our derivatives franchise, but our data and access solutions results were strong, and cash and spot markets performed solidly for the quarter, each playing a notable role in our record net revenue results. The supportive macroenvironment also provided us the opportunity to advance many of our initiatives across geographies and asset classes, some having an immediate impact in the quarter, and others we expect to make measured progress against over the medium- and longer-term. I want to quickly touch on some of the high-level takeaways from the third quarter before delving into the segment performance. Our net revenue increase of 20% set another quarterly record at $442 million, led by the strength in our Derivatives Markets category and steady performance in Data and Access Solutions and Cash and Spot Markets. Specifically, Derivatives Markets produced 31% year-over-year organic net revenue growth in the third quarter, given the continued strength of our index business. Data and Access Solutions net revenues were up 15%, up 12% on an organic basis, driven again by strong new subscription and unit growth. And Cash and Spot Markets produced 5% net revenue growth for the quarter, up 3% on an organic basis, on the back of a strong macro backdrop and market share gains in many of our businesses. Adjusted operating expenses increased 23% to $173 million. Adjusted EBITDA of $287 million, also another quarterly high, was up 20%. And last, as noted previously, our adjusted diluted earnings per share was a record $1.74, up 20% compared to last year's quarterly result. Turning to the key drivers by segment. Our press release and the appendix of our slide deck include information detailing the key metrics for each of our business segments, so I'll just provide summary thoughts. As mentioned earlier, we saw impressive year-over-year growth in many of our segments during the quarter. Options again delivered the strongest growth, with net revenue increasing 33%. The results were driven by robust volumes, increased market share, and higher revenue per contract, or RPC, given the favorable mix shift trends. Total options ADV was up 15% as our higher-priced index options ADV increased 49% over 3Q 2021 levels. RPC moved 21% higher given a continued positive mix shift to index products, and a stronger mix of higher-priced SPX options in our index business. And lastly, we continued to benefit from another quarter of double-digit growth in market data and access and capacity fees, up 26% and 25%, respectively, as compared to 3Q 2021. North American equities net revenue increased by 13% year-over-year. Solid industry volumes, up 12% as compared to 3Q 2021, helped drive the segment uptick. NEO, which was acquired in June of this year, contributed $5.4 million in net revenue during the quarter. On the non-transaction side, access and capacity fees increased 10% as compared to 3Q 2021 and market data was up 7%. The Europe and APAC segment reported a year-over-year decline in net revenue for the third quarter of 8%. However, adjusting for a $7.1 million FX impact, given the stronger dollar during the quarter, net revenue grew by nearly 6% on a constant-currency basis, helped by a 6.4 percentage point increase in market share on a year-over-year basis, making Cboe Europe the largest stock exchange in Europe for the quarter. Third quarter net revenue decreased by 2% in the futures segment as transaction fees declined on a year-over-year basis. Volumes fell 8% during the quarter, partially offset by a 5% improvement in RPC. Non-transaction revenues continued to tick higher with access and capacity fees up 2% and market data up 12% as compared to 3Q 2021. And finally, net revenues in the FX segment were up a robust 21% as compared to 3Q 2021. Net transaction and clearing fees benefited from a 27% increase in average daily notional value and higher levels of market share, hitting a record 17.8% for the quarter. Cboe's Data and Access Solutions net revenue growth has continued its strong momentum in 3Q, posting a 15% year-over-year increase and an attractive 12% growth rate on an organic basis. As we have seen in past quarters, net revenue growth was overwhelmingly driven by additional subscriptions and units, accounting for over 60% of the market data growth and 95% of the access fee growth for the quarter, as opposed to pricing changes. More specifically, we saw robust physical and logical port usage in our options and equities businesses, driven by increased demand for trading capacity. And on the market data side, the equities top-of-book and options depth of book products continued to perform well. We anticipate trends will remain healthy in the Data and Access Solutions business into year-end as we lap more meaningful comps from the fourth quarter of last year. We are reiterating our targeted 2022 D&A organic net revenue growth rate range of 10% to 13% and remain confident in our 7% to 10% medium-term guidance range outlined at our November 2021 investor day. Turning to expenses. Total adjusted operating expenses were approximately $173 million for the quarter, up 23% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 18% or $25 million for the quarter, largely reflecting higher headcount as compared to the third quarter of last year, as well as some inflationary comp adjustments and additional incentive compensation accrual in 3Q 2022. Moving to our expense guidance. We are reducing our full year 2022 expense guidance range to $651 million to $659 million, down from our prior guidance of $659 million to $667 million. The decrease in expense guidance is a product of diligent expense management as well as some delayed hiring for open positions as a result of a competitive labor market. The favorable expense trends are more than offsetting some incremental build in our employee incentive compensation given our strong year-to-date financial performance and 4Q expectations. And while our operating expense guidance is moving lower for the year, we are not wavering in our commitment to invest in our business over the long term. As reflected in our guidance, we expect to see incremental growth in our expense base in the fourth quarter as we work to fill open positions and invest behind the revenue generating and infrastructure initiatives we outlined to start the year. While we're taking the current inflationary environment into our planning, we will continue to manage our cost base judiciously, but remain committed to investing aggressively behind high-return, high-conviction, high-growth investments. This includes the completion of our integration activities as well as the organic expansion of our derivatives, data and access solutions, and digital networks. We look forward to sharing more about our 2023 guidance at our fourth quarter earnings call. Now turning to a summary of full-year guidance on the next slide. I want to call out some updates given the year-to-date strength and confidence we have in the current operating environment. As noted previously, we continue to anticipate D&A organic net revenue growth in 2022 will be in the 10% to 13% range and remain confident in our medium-term guidance of 7% to 10%. We continue to expect acquisitions held less than a year to contribute between 2 and 3 percentage points to total net revenue growth in 2022. Most importantly, we are increasing our overall organic net revenue growth target by 5 percentage points at the midpoint to 14% to 16%, up from our prior guidance of 9% to 11% for 2022. Lastly, I want to note that our full year guidance on depreciation and amortization and the effective tax rate on adjusted earnings under the current tax laws remain unchanged, but we are lowering our CapEx guidance range to $40 million to $43 million from our prior guidance of $47 million to $52 million. Outside of our annual guidance, interest expense for the third quarter of 2022 was $15.3 million. Moving forward, we expect interest expense to be in the range of $16 million to $17 million for 4Q 2022. The last thing I will note, as you think about your financial models moving forward is that during the third quarter we recognized an $8.3 million unrealized gain on the company's investment in 7RIDGE Fund on our net other income line. This was an investment we announced in the fourth quarter of last year, with Cboe becoming a limited partner investing in the acquisition of Trading Technologies. Moving forward, we expect that this investment will be revalued on a more regular basis in 2023. We do not expect to see any material impact in 4Q 2022 and will look to provide some updated guidance on 2023 when we roll out fiscal year 2023 guidance with 4Q 2022 results. On the capital front, our focus has been, and remains, maximizing shareholder value through the effective use of our capital. In the third quarter, we returned a total of $53 million to shareholders in the form of a $0.50 per share quarterly dividend. We remain well positioned to invest in the business, support our dividend, and opportunistically repurchase shares, with $233 million in remaining capacity on our share repurchase authorization. Our leverage ratio decreased to 1.7 times at the end of the third quarter, down from 1.9 times at June 30, as we repaid $100 million of our term loan facility. Overall, we remain committed to maintaining a flexible balance sheet and striving to put capital to work in the most value enhancing way possible for shareholders. In summary, the momentum in our business is evident in the strong third quarter results. We could not be happier with the progress we have made year-to-date and look forward to continuing to invest behind the many attractive opportunities we have to enhance shareholder value in the quarters to come. Now, I'd like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Kenneth Hill:

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.

Richard Repetto:

I guess my question is on the record volumes in the index option segment and, SPX specifically. The record volumes continued right through October. So the question, Ed, is the sustainability of the growth. Could you talk about the combination of retail and institutional liquidity? Did that help volume? And do you think this retail behavior is sustainable? And I know you've talked about how you can sort of take the SPX playbook to other products, but could you sort of delve into that a little bit too?

Operator:

And the next question comes from Gautam Sawant with Credit Suisse.

David Howson:

Yes, certainly. As you see this year, we put our guide up to 10% to 13% growth in 2022 and maintain that 7% to 10% guidance for next year. And what we certainly see is continued demand for accessing capacity to our 26 platforms around the world, with customers really positioning them to enable them to have capacity for any market move, any market condition, really not wanting to shortcut themselves in the event that capacity is required. And certainly, that demand continues also for the market data products themselves, as well as we see ourselves packaging and bundling that data from those 26 platforms. So in terms of the market environment, the demand we see continues, and specifically, the packaging and bundling of data there with Cboe One Canada added recently in the last quarter and also our ability to get to more users around the world, whether that be through the CBOE Global Cloud distribution – again, this quarter, we added European data to that proposition, really reaching people where they are and how they want to consume that data. And then finally, thinking about packaging and creating data products from that data, we've got the derivative index benchmarks, particularly coming in vogue [Technical Difficulty] taking the data, using our index calculation capabilities, and then creating products from them and then us being able to list those products back on the platform, really creating that procyclical demand for our data products coming from our venues and the data themselves. So next year, feel confident in that 7% to 10% guide.

Alex Kramm:

This is a quick follow-up to the prior question because I feel like that business, D&A businesses is very diversified and has a lot of initiatives. And you just mentioned three or four again in terms of what you're focused on. But if I zoom out, and I think about what the biggest focus area is, is there one or two specific things that you think will drive the most upside? And can you maybe talk about where you are in terms of penetration in those areas or how you would view the TAM because, again, it's a great business, it's very diversified. But, certainly, wondering if there's a couple of things that could really move the needle that we should be mostly focused on.

John Deters:

Alex, this is John Deters. Just on the question of TAM, I think Dave hit it really well in terms of the global opportunity set, but also in terms of the segments in which we play in data and access. So we really have a complete offering now as a result of the acquisitions we've made, trade data, historical, delayed, real time, analytics, and also derived data. So if you think about a TAM, we're really able to access the complete TAM, which is 20 billion plus. We've talked about this in the past.

Owen Lau:

It looks like your updated full-year adjusted operating expense guidance implies your expense will go up sequentially from Q3 to Q4. Could you please talk about your assumption in revenue for the fourth quarter? And the driver of these potential sequential increase for the expense?

Operator:

And the next question comes from Michael Cyprys with Morgan Stanley.

Edward Tilly:

In my prepared remarks, we talked about how we don't want to provide that guidance quite yet for 2023, as we finalize our budget, working with our board and finalize those plans, and really – which leads into the answer to your next set of questions about pace and how we're thinking about it. As we think about our overall trajectory and we look at – again, our goal is to drive that long term shareholder value, which we believe a key to that is driving that long term revenue growth rate, with those high conviction, high growth type of opportunities, of which we've been talking about more explicitly and raise that investment level over the last couple of years. And we're starting to [Technical Difficulty] pay off. So, we don't envision having to change that. We're continuing to assess that, make sure we understand the ROI from those specific investments spends. So that's a little bit of that time that we're still taking a look at, which will inform the level of that investment going into 2023, into 2024. So we'll take an assessment of those investments and that performance and the revenue generation. As far as the inflation impact, if you look at kind of, I'll call it, just from a pure wage standpoint, if you look at relative just to kind of a base merit poll, you look at promotions, you look at just – we did an inflation adjustment mid-year, that's probably in a range of the highs that we've seen in a long time. And that's probably 7% to 8% factored into 2022 that we've seen as far as kind of those overall wages. If you look at the entire bucket, we don't necessarily see that inflationary pressure going away as we look at the labor market. So that is something we're also baking in, as I referenced in our remarks. So the overall pace of investments, again, we'll continue to look at our opportunities and titrate that as we see fit. And as those continue to show more and more promising signs, we'll continue to invest behind that.

Kyle Voigt:

Some of your European exchange competitors have been saying that some of the market share losses are a result of more aggressively priced players in the market and calling out Cboe specifically. Just wondering if you can expand upon the pricing strategy in Europe, and how you're viewing the current trade-offs on pricing versus market share. And having that 25% market share now and that record 25%, does that increase the demand or the value of the data that you're selling into that marketplace? Is that part of the calculus at all, when you're making pricing tweaks?

Operator:

And the next question comes from Richard Fellinger with Autonomous Research.

Brian Schell:

When we look at our leverage ratio nearing 2, we've always said let's bring that back down to a level that, longer term, we feel more comfortable with, again, to create balance sheet flexibility. Our view on capital allocation just has not changed. It's been consistent for many years. And that is, obviously, it's always been our priority to make sure that, beyond providing the appropriate cash flows, to feed the business for growth is continuing to increase the dividend on an annual basis. And then we want to make sure we have appropriate balance sheet flexibility, which comes in the form of debt reduction, which you can show – it shows up more meaningfully on your P&L with a rising interest rate environment with some of our debt being floating rate, and then opportunistically buy back shares. So our focus, which we kind of hinted at in the last quarter is that we want to get that leverage ratio down, again, preparing for that longer term balance sheet flexibility. So that was the – I wouldn't necessarily call it a trade-off. That was just more of our priority as far as where we sit right now.

Edward Tilly:

That concludes our call for today. Thanks for your interest in the company. Thanks.

Ken Hill:

Good morning and thank you for joining us for our second quarter earnings conference call. On the call today, Ed Tilly, our Chairman and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then, Brian Schell, our Executive Vice President, CFO and Treasurer, will provide an overview of our financial results for the quarter as well as an update on our 2022 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; Dave Howson, our President; and our Chief Strategy Officer, John Deters. 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 Web site. 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in the forward-looking statements. Please refer to our filings with the SEC for a full discussion on the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Ed.

Brian Schell:

Thanks Ed, and good morning, everyone. Let me remind everyone that unless specifically noted, my comments relate to 2Q '22 as compared to 2Q '21 and are based on our non-GAAP adjusted results. As Ed discussed, the first half of 2022 was an exceptionally strong one for Cboe. In the second quarter, adjusted diluted earnings per share was up 21% on a year-over-year basis to $1.67. A combination of continued investment across our businesses and a favorable operating environment continued to propel revenue above last quarter’s record levels. Quickly touching on some of the noteworthy takeaways from the second quarter. Our net revenue increased 21%, setting yet another quarterly record at $424 million, led by the strength in our Derivatives Markets and Data and Access Solutions categories. I would like to note that not only did each of our revenue categories, Derivatives, DnA, and Cash post a year-over-year gain, but every segment at Cboe from Options to FX posted a year-over-year increase, speaking to the diversity and truly broad-based strength in the second quarter results. Derivatives Markets produced 30% year-over-year organic net revenue growth in the second quarter given the continued strength of our index business. Data and Access Solutions net revenues were up 20%, up 14% on an organic basis, driven again by strong new subscription and unit growth, and Cash and Spot Markets produced 7% net revenue growth for the quarter, up 3% on an organic basis, on the back of strong volumes and market share in our European cash equities business. Adjusted operating expenses increased 22% to $157 million; adjusted EBITDA of $274 million was up 17%; and last, our adjusted diluted earnings per share was $1.67, up 21% compared to last year’s quarterly results. Before getting into the segment results, I want to spend a moment walking through the accounting adjustment we made this quarter for ErisX. As Ed mentioned, since we closed the ErisX transaction on May 2, the environment has changed dramatically. Given the observable publicly-traded peer valuations, digital asset prices, and intermediary dislocations, we felt it necessary to re-assess our holding value of ErisX. As a result of our analysis, along with the work of our third-party auditors and consultants, we booked a goodwill impairment of approximately $460 million, effectively writing goodwill in ErisX to zero, and recorded a deferred tax asset of approximately $116 million. Our book carrying value at June 30, 2022 is $220 million, reflecting the sum of tangible and intangible assets of approximately $104 million, and the deferred tax asset. We believe that our adjustment reflects the reality of the digital asset market environment today, but it in no way changes our commitment to the digital asset space or what we set out to do when we announced this transaction back in October. In fact, recent events only underscore the strong need for a transparent and trusted trading, clearing and data venue for digital assets. And we believe that Cboe, along with the help of our industry partners, is best positioned to provide those solutions. Turning to the key drivers by segment. Our press release and the appendix of our slide deck include information detailing the key metrics for each of our business segments, so I'll just provide summary thoughts. As mentioned earlier, we saw impressive year-over-year growth at each of our segments during the quarter. Options delivered the strongest growth with net revenue growing by 32%, driven by higher trading volumes in both proprietary and multi-listed options, better market share, as well as higher revenue per contract in index options. Total options ADV was up 18% as our higher-priced index options ADV increased 46%. Revenue per contract moved 21% higher given a continued positive mix shift to index products, and a stronger mix of higher priced SPX options in our index business. And lastly, we continued to benefit from another quarter of double-digit growth in market data and access and capacity fees, each up 29%, respectively. North American equities net revenue increased by 4% year-over-year. Solid industry volumes up 20%, helped drive the segment uptick. On the non-transaction side, access and capacity fees increased 15% and proprietary market data was up 8%. The Europe and APAC segment reported solid growth for the quarter, with net revenue up 20%. The increase was driven by higher volumes in Europe and the inclusion of Cboe Asia Pacific revenues of $8.2 million. Net transaction fee growth was 18%. During the quarter, FX rates were a headwind for the segment, impacting reported net revenue growth by nearly $4 million or 7%. Transaction fees were led higher by Cboe Europe’s equity ADV increasing 49% year-over-year given very strong industry volume growth and a nearly 6 percentage point increase in market share. Clearing fees benefited from an increase in clearing volumes of 21%. Second quarter net revenue increased 8% in the Futures segment as both transaction and non-transaction revenues posted year-over-year gains for the quarter. Volumes and rate per contract metrics were slightly better on a year-over-year basis. On the non-transaction side, access and capacity fees were up 21% and market data grew 24% as compared to the second quarter of 2021. And finally, net revenues in the FX segment were up 20%. Net transaction and clearing fees benefited from a 22% increase in average daily notional value as well as continued favorable market share trends. As Ed noted earlier, Cboe’s Data and Access Solutions net revenue growth has continued to accelerate, posting a 20% year-over-year increase, and an attractive 14% growth rate on an organic basis. Again, this strong growth was primarily driven by additional subscriptions and units, accounting for three quarters of the year-over-year revenue increase, as opposed to pricing changes. More specifically we saw robust physical and logical port usage in our options and equities businesses driven by increased demand for trading capacity. And on the market data side, the equities top-of-book and options depth of book products continued to perform well. As we look out over the remainder of 2022, we anticipate trends will remain healthy in the Data and Access Solutions business. We are raising our targeted 2022 DnA organic net revenue growth rate to a range of 10% to 13%, up from 8% to 11%, and above the 7% to 10% medium-term guidance range we outlined at our November Investor Day. Turning to expenses, total adjusted operating expenses were approximately $157 million for the quarter, up 22% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 12% or $15 million for the quarter. Moving to our expense guidance. We are increasing our full year 2022 expense guidance range to $659 to $667 million, up from our prior guidance of $647 million to $660 million, when including the acquisitions of ErisX and NEO. The increase is almost exclusively driven by higher incentive compensation as a result of our strong financial performance through the first half of this year, coupled with a positive outlook for the second half of 2022. We have long talked about Cboe’s pay for performance culture and our adjustments today reflect the outstanding work our entire associate base has done in driving outsized growth. And while our operating expenses are moving higher with revenues, we continue to expect $23 million to $26 million of the 2022 investment spend to directly drive incremental revenue growth and that approximately $10 million is needed for infrastructure enhancements to support and scale our business for greater levels of activity in the future. Overall, our updated 2022 expense guidance reflects our commitment to invest in high conviction growth opportunities as well as to attract and retain best-in-class talent driving our strong results. Now turning to a summary of full year guidance on the next slide, I want to call out some of the positive updates to our revenue targets that are reflected in our expense updates. As noted previously, we now anticipate DnA organic net revenue growth in 2022 will be in the 10% to 13% range, up from our prior guidance of 8% to 11% and our medium-term guidance of 7% to 10%. We continue to expect acquisitions held less than a year to contribute between 2 to 3 percentage points to total net revenue growth in 2022. Lastly, but certainly not least, our overall organic net revenue growth target is moving higher to 9% to 11%, up from our prior guidance of 5% to 7% for 2022. We believe our updated revenue guidance reflects not only the strong year-to-date results we have posted, but the confidence we have in the business moving forward. We are seeing a solid contribution from all of our operating segments, strengthening the broader ecosystem here at Cboe. And our full year guidance on depreciation and amortization, CapEx, and our effective tax rate on adjusted earnings under the current tax laws, remain unchanged. Our interest expense for the second quarter of 2022 was $14.6 million. Factoring in the incremental borrowing costs related to the financing put in place for ErisX and NEO, we expect interest expense to be in the range of $16 million to $17 million for 3Q '22. On the capital front, our focus has been, and remains maximizing shareholder value through the effective use of our capital. In the second quarter, we returned a total of $67 million to shareholders, comprised of $51 million in dividend payments and $16 million in share repurchases. We remain well-positioned to invest in the business, support our dividend, and opportunistically repurchase shares with $233 million in remaining capacity on our share repurchase authorization. Our leverage ratio increased in the second quarter to 1.9x, up from 1.6x at June 30 as our debt levels increased, related to the funding of our NEO and ErisX transactions. Overall, we remain committed to maintaining a flexible balance sheet and putting capital to work in the most value enhancing way possible for shareholders. In summary, Cboe reported an excellent second quarter. Our core business performed exceptionally well, and we are excited about our numerous short, medium and long-term investments. We look forward to continuing to deliver durable growth for investors in the quarters ahead. Now I’d like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Ken Hill:

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.

Richard Repetto:

Good morning, Ed. Good morning, Brian and team. Ed, I think I'll focus on the SPX complex because you've seen such strong results there. And thanks for all the detail. I guess the question is, we've seen a pullback, it seems like retail is driving a good portion of it as well as your own innovation with the weekly contracts and volatility. But I guess, with the year-to-date run versus last year, the index options run 30% up. So I guess the question is around the resilience, and whether the retail is -- you think is going to be sticky, sticky enough going forward? Because we've seen in other products, we've seen retail retract, like we haven't seen it in index options here, I guess. So, comments on the index options. This is the question, Ed. Thanks.

Richard Repetto:

Great. Thanks, Ed.

Kenneth Worthington:

Hi, good morning. Thanks for taking the question. In terms of the European index options business, a couple of questions maybe to set the stage, what is the level of open interest that you reached during the quarter? And then as we think about the target client and the early days of the build out here, where do you think you might have the greatest success, and where are you focused? And then for management to consider this initiative successful, and for you to continue to invest here, what are you hoping to see in terms of the volume in open interest levels over, I don't know, the next year or pick your timeframe. But what is the ramp that you continue to expect to keep you engaged here? Thank you.

Kenneth Worthington:

Okay. What is the level of open interest? You keep putting growth, but is it -- are we talking small numbers, or is it big numbers? What is the contract level?

Kenneth Worthington:

Perfect. Thank you so much.

Gautam Sawant:

Good morning, and thank you for taking my questions. Can you please walk through where the strongest demand for DnA is coming from? And what is the initial feedback that you're getting from institutions in response to bundling global data and connectivity? And just to touch base a little bit further, you recently announced the partnership with Snowflake. Can you walk us through how that partnership will enhance analytics? And if you expect that to generate future expense savings by moving to the cloud from your current on-premise system?

Chris Isaacson:

Yes, thanks, Brian, and thanks for the question. Good question. So on the Snowflake part of that question, so we announced this partnership with Snowflake. This is regarding an internal data analytics platform that we built. Over the last couple of years, we'd actually mentioned on one of these calls one or two of these calls a few years ago, we've learned so much there, we started to use that and provide better insights for our customers. The results of that are -- which can be seen with the European market share and how we are providing better insights, execution and [indiscernible]. This scales that effort globally allows us to bring in all of our global businesses and provide better insights to our customers so they can trade better on all of our global markets. So excited about this partnership with Snowflake, which is separate and distinct from Cboe Global Cloud, but part of our overall global cloud strategy as we scale our platforms to meet the needs of our global business.

Gautam Sawant:

Understood. Thank you very much.

Alex Kramm:

Hey, good morning, everyone. I just wanted to touch base on the two recent acquisitions. One, I think originally you hadn't disclosed the purchase prices, but they obviously in the queue, I think. But can you; one, actually review, kind of like the revenue contribution and where that all flows. But then also given the ErisX situation, you made this comment that you're still excited about the acquisition of the opportunity set there. But now, obviously, you spent almost $500 million on this. I know it's less than 5% of your market cap or close to it. And now you're writing this whole thing down. So just wondering how we should be thinking about returns on that acquisition relative to maybe buybacks that you could have done. So I know this is fresh and new, and it's a new asset class, but it just seems like it's a -- it's somewhat material to what we've seen so far. So just wanted to make sure that as you've been very acquisitive that there's return hurdles as you approach these new opportunities. Thank you.

Chris Isaacson:

Yes. Good morning, Alex. Good question. So as Brian mentioned, our strategy is unchanged, our excitement for this asset class is unchanged. There's obviously been a fundamental repricing in this asset class. But we think that actually provides a strategic tailwind for us with trusted transparent regulated markets. Just to remind you that we have -- with ErisX, we have a great foundation to build upon with exchange clearing data and derivatives. And our roadmap includes margin futures, settled futures and that roadmap is the same now. So we're committed to this asset class, we obviously had to recognize that the asset class is fundamentally been repriced, which was what we've done, but we are committed to it and excited about the future.

John Deters:

So briefly, this is John, I want to weigh in on what we're hearing from the market because it's important. We've told the Street that we're out there talking to potential partners on this project. And what we're hearing from them is they see the demand. So we hear that from them, we trust them. These are largely intermediaries. It's an intermediary focused initiative. And those intermediaries touch, we estimate over 80% of the traditional asset volume from retail customers, so they have a good line of sight. And what you see in the data in terms of volumes is that if you take crypto currency as a whole, and you look at 2021, is a bit of an anomalous year. We're looking at going back to 50% CAGR to 2020. And that's -- that still remains a robust growth rate. So they're in this for the long haul. These partners, they're asking us questions like, where can I trade in a framework that has robust coin listing risk parameters? Where can I trade in a framework that is unconflicted, where pricing is reliable and not manufactured to create elevated spreads? They're asking where can I trade in a framework where there isn't hidden, dangerous leverage? And those are things that we're offering. So it's reasonable to think that over the medium-term, we garner our fair share of the market.

Operator:

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

Ed Tilly:

Yes, thanks. Thanks, Brian. So bottom line, we have not changed that perspective, as far as the contribution. Short answer. So with that I will turn it to Dave, as far as kind of the outlook, kind of the business strategy go-forward look.

Brian Bedell:

That sounds exciting. So is there a stronger revenue growth outlook over the long-term as a result of this strategy, given it's starting to track in better-than-expected as well?

David Howson:

Yes, as I mentioned earlier in my answer, the BIDS roll out earlier this year seems great early traction, but particularly to point to the addition of new customers in Europe, really wanted to trade US and Canada. And, in fact, as we think about the rollout BIDS again in Australia in February next year, you've seen early on boards from those superannuation funds really coming to say, hey, we want to on board now to trade what you've got, because we know you're coming to Australia, we want to be ready for that. And we see that across the slate really with the intermediaries there coming to us early on to get involved with that re-platforming we're doing in Australia in February of next year.

Brian Bedell:

That's all great color. Thanks so much.

Owen Lau:

Good morning, and thank you for taking my question. I actually have a broader base question. I guess the stock was resilient compared to the broader market in the first half of this year. For the second half, could you please talk about your outlook of the economy, and how investors should think about volatility, your organic growth in DnA, and also your international expansion, and how people can still grow in the second half of this year? Thank you.

Brian Schell:

Yes, and I would -- I want to remind folks that when we kind of came into the year, and it's a continuation of last year is the organic investments that we're making to set up the potential for this organic growth, with respect to the incremental investments we're making around, the ability to deliver DnA and data through the cloud, what we've done around enabling greater trading environment with 24/5, Tuesday, Thursday launch, the incremental marketing and branding, the Nanos launch, EU derivatives and a lot of those we've talked about. And that investment is, again, you're starting to see that payoff, both in terms of people and the marketing and the sales, and what we're doing. Specifically about, the DnA element and what you’ve asked about right is, is again, we're continuing to see that stickiness, the quality of the access, the quality of the market data that we're getting and being able to offer, again, across all asset classes, it's not just in one, obviously there's higher contribution within the derivatives franchise given the size and our placement there. But again, the confidence in continuing to deliver that growth. You'll see the forecast is slightly lower as far as the outlook than in the first half. We are going against higher comps from last year. We had great third, fourth -- third quarter and fourth quarter growth rates in DnA last year. Again, we're still confident in our continued growth. Again, the comparison is a little bit hard, but we are up for the challenge. But as far as those initiatives, right, we talked about distribution as a service, you saw the recent announcement around Morningstar and being able to leverage our existing networks. We're excited about packaging or global content, again, across geographies and asset classes. And then John had mentioned earlier, again, is that organic opportunity just within say, for example, within Australia and Japan and our recent entry there and within Canada, so those items are really continued, again, give us confidence about the growth rate as we head into the rest of this year. And then obviously, conviction around the medium to longer term growth opportunity of DnA.

Owen Lau:

Got it. Thank you very much.

Michael Cyprys:

Hey, good morning, and thanks for taking the question. So you guys have added the new Tuesday, Thursday expiries, but I was hoping you could comment on what other types of contracts you guys might be able to introduce. And then more broadly, as you look at your business and the industry, what would you say is left to convert in terms of activity from OTC to exchange traded products? And how might you size that longer term opportunities versus more near-term? Thank you.

Michael Cyprys:

Great. Thank you.

Kyle Voigt:

Hi, good morning. Maybe just a follow-up question on SPX. Just wondering now like, what percentage of that overall complex do you believe is being retail today? I always thought of that as being far more driven by institutional flow than retail. And if institutions are still the primary users there, also do you have any insights on like, which types of institutional users have driven this kind of recent surge and volumes we've seen over the last three quarters or so, whether that's equity asset managers or options, specific funds or other types of institutional users?

Operator:

Thank you. And the next question is a follow-up from Rich Repetto with Piper Sandler.

Brian Schell:

Yes, so I would -- I'm not sure I completely follow the expense math, but we can kind of take that offline to make sure as far as the percentages go. I think the thing to focus on is that at least when we are pulling in some of the acquisitions onto the revenue and expense line items, obviously some of the financial statements don't quite have the same margin. So there's going to be a little bit of a slightly higher growth rate on the expenses again just year-over-year, given that size. So again, we're managing that. And then we obviously would plan to continue to grow that top line, obviously fast in the short line, no great surprise there. But as far as picking up the expenses, we try to provide that guidance, and that visibility along the way. If you look at, for example, if you just look at excluding the acquisitions, and you look at kind of that 2Q run rate, and you analyze that 2Q run rate relative to what we forecasted at the end of the day, there's really not a significant growth rate that we haven't already factored in into that projection. And again, just to make sure we're clear on that, that $12 million, as far as the increment, that's a full year, it's not just this first half of the year. Again, that's a full year perspective as far as what we've done in some of the expectations to build into that entire forecast.

Brian Schell:

Sure. Sorry, yes. So part of that growth also includes the run rate of the [indiscernible] transactions from the prior year as well, which is, I will call it making that number higher than, say a pure organic expense growth rate.

Brian Schell:

That way we can just get on the same -- the same page there. Thanks, Rich.

Gautam Sawant:

Hey, just two quick questions here. One follow-up is just on the revenue outlook for the acquisitions this year. I think you had previously talked about the 50%. I don't know if you provided an update or I missed it. Just what expectations are for the revenue contribution this year relative to expenses?

Gautam Sawant:

Okay, got it. And then just one more on the European business. As we look at the market share in cash equities there, it has a very positive trajectory. Can you please expand on some of the key factors that are helping the platform compete with some of the incumbent exchanges in that region? And then where you think the market share could potentially settle out in the future? And then also what data points is the sales team going out with to these institutions to get them to choose Cboe and route their trading volume to the platform? Thank you.

Gautam Sawant:

Yes. Got it. Thank you.

Ken Hill:

Like to thank you for your interest in our company and have a great weekend everyone.

Ken Hill:

Good morning and thank you for joining us on our first quarter earnings conference call. On the call today, Ed Tilly, our Chairman, President and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then, Brian Schell, our Executive Vice President, CFO and Treasurer, will provide an overview of our financial results for the quarter as well as an update on our 2022 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; John Deters, our Chief Strategy Officer; and Dave Howson, President of Cboe Europe and Asia Pacific. 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 Web site. 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in the forward-looking statements. Please refer to our filings with the SEC for a full discussion on the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I'd like to turn the call over to Ed.

Brian Schell:

Thanks, Ed, and good morning, everyone. Let me remind everyone that unless specifically noted, my comments relate to 1Q '22 as compared to 1Q '21 and are based on our non-GAAP adjusted results. As Ed discussed, the year is off to a very strong start, producing the second consecutive record setting quarter for Cboe. Overall, adjusted diluted earnings per share were up 13% on a year-over-year basis to $1.73 as both the transaction and non-transaction elements of our business performed well. We believe these strong results validate our investment focus as we continue to put capital to work across our ecosystem to help us enable to take full advantage of the favorable market dynamics. Quickly touching on some of the noteworthy takeaways from the first quarter. Our net revenue increased 14%, notching another quarterly record at $418 million, led by the strength in our Derivatives Markets and Data and Access Solutions categories. I would like to note the change in our income statement to reflect Cash and Spot Markets, Data and Access Solutions, and Derivatives Markets categories we laid out at the November Investor Day. The update reflects how we think about the business, in addition to our segments, and how we will be reporting our results moving forward. You can find more details in our 10Q. Noting a couple highlights for our updated categories in the first quarter; Derivatives Markets produced 18% year-over-year organic net revenue growth in the first quarter given the strength of our index business, Data and Access Solutions net revenues were also up 18%, up 12% on an organic basis, helped by strong new subscription and unit growth, and Cash and Spot Markets produced 5% net revenue growth for the quarter, up 2% on an organic basis, on the back of strong volumes and market share in our European cash equities business Please note that historical quarterly values for these categories covering the 2020 and 2021 timeframes are available on our IR site. Adjusted operating expenses increased 17% to $146 million; adjusted EBITDA of $281 million was up 12%; and last, our adjusted diluted earnings per share hit a record $1.73, up 13% compared to last year's quarterly results. Turning to the key drivers by segment. Our press release and the appendix of our slide deck includes information detailing the key metrics for each of our business segments, so I'll just provide some summary thoughts. We saw impressive year-over-year growth in many of our segments during the quarter. Options delivered exceptional net revenue growth of 21%, driven by higher trading volumes in both our proprietary and multi-listed options, better market share, as well as higher revenue per contract, or RPC, in index options. Total options ADV was up 6% as our higher margin index options volumes increased 27% over 1Q '21 levels. RPC moved higher by 18% given a continued positive mix shift to index products and a stronger mix of higher priced SPX options in our index business. And lastly, we continued to benefit from another quarter of double digit growth in market data and access and capacity fees, up 26% and 22%, respectively, as compared to the first quarter of 2021. North American equities net revenue decreased by 3% year-over-year against some difficult comparisons to the first quarter of 2021. Industry volumes were lower by 12% and market share declined by 70 basis points versus the first quarter of 2021. On a sequential basis, market share improved by a full percentage point and industry ADV was up by nearly 20%. On the non-transaction side, access and capacity fees increased 11% as compared to the first quarter of 2021. The Europe and APAC segment again delivered outsized growth for the quarter, with net revenue up 37%. The increase was driven by higher volumes and the inclusion of Cboe Asia Pacific revenues of $8.4 million. Net transaction fee growth of 47% outpaced solid clearing fee growth of 10%. Transaction fees were led higher by Cboe Europe's equity ADV increasing 71% year-over-year given very strong industry volume growth and a 5 percentage point increase in market share. Clearing fees benefited from an increase in clearing volumes of 52%. First quarter revenue increased 2% in the Futures segment as transaction and non-transaction revenues posted slight gains for the quarter. Volumes and rate per contract metrics were relatively flat year-over-year. On the non-transaction side, access and capacity fees were up 2% and market data grew 25% as compared to the first quarter of 2021. And finally, revenues in the FX segment were up 16% as compared to the first quarter of 2021. Net transaction and clearing fees benefited from a 13% increase in average daily notional value traded and a slight increase in net capture rates. As noted previously, Cboe's Data and Access Solutions revenue growth started the year on strong footing with 18% total growth and 12% organic growth as compared to 1Q '21. Again, the strong growth was primarily driven by additional subscriptions and units, accounting for over 90% of the year-over-year revenue increase, as opposed to pricing changes. More specifically we saw robust physical and logical port usage in our options and equities businesses driven by increased demand for trading capacity. And on the market data side, the equities top-of-book and options depth-of-book products continued to perform well. As we look to 2022, we see tremendous potential for the Data and Access Solutions business. We are raising our targeted D&A, organic net revenue growth rate to 8% to 11% from the 7% to 10% range, slightly above the medium-term guidance delivered at our November Investor Day. Turning to expenses. Total adjusted operating expenses were approximately $146 million for the quarter, up 17% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 12% or $15 million for the quarter. Moving to our expense guidance, we are reaffirming our full year expense guidance range of $617 million to $625 million for 2022. As we have previously stated, we expect our expense base to build over the course of this year as we invest behind the many attractive initiatives at Cboe. We expect $23 million to $26 million of the 2022 investment spend to directly drive incremental revenue growth. We believe that approximately $10 million is needed for infrastructure enhancements to support and scale our business for greater levels of activity in the future. In the past, we have talked to investments in areas like D&A or our EuroCCP acquisition and integration as producing solid returns for Cboe. I would like to point out that a few of our more recent 2021 investments are already producing some very attractive returns as well. For instance, 24x5, which went live in November, has translated to year-to-date global trading hour volumes in the SPX options contract more than doubling 2021 levels, averaging over 27,000 contracts per day in the first quarter. Tuesday expirations went live last week and this Tuesday we saw over 600,000 Tuesday expiry contracts traded, a very strong start. We recognize that each of the investments we make across our ecosystem is unique, with different return profiles, payback periods and levels of complexity. In each case though, we leverage the same core attributes that make Cboe Cboe. The ability to leverage our superior technology, an unmatched global footprint, and a cohesive trading experience across asset classes. We invest consistently behind this framework so that we can harvest investments across cycles from short-term initiatives like 24x5 to longer-term endeavors like the EuroCCP acquisition, EU derivatives launch, introduction of BIDS block trading capabilities in new equities markets and other multi-year integration and technology migration activities. Looking ahead to our pending acquisitions, we expect to close the ErisX transaction very soon, subject to customary closing conditions, and anticipate a midyear closing for NEO, also subject to regulatory review and other customary closing conditions. Adjusting our prior expense framework for the updated timings, we expect the acquisitions of ErisX and NEO to add an incremental $30 million to $35 million to our 2022 guided range of $617 million to $625 million. We continue to anticipate that revenues from ErisX and NEO will offset more than half of the expenses in 2022, with an expectation that the additions are EBITDA positive on a combined basis in year two. The company plans to further refine its guidance for 2022 after the acquisitions close. Now turning to a summary of full year guidance on the next slide, given our early year performance and positive outlooks for the businesses, we are providing incrementally positive updates for many of the elements we spoke to at our Investor Day back in November. Specifically, as we have already mentioned, we now anticipate D&A organic net revenue growth will be in the 8% to 11% range, up from the previous guidance of 7% to 10%. Acquisitions held less than a year have performed well, and we are slightly increasing our guidance, calling for acquisitions held less than a year to contribute between 2 and 3 percentage points to total net revenue growth in 2022, up from our prior guidance of 1 to 3 percentage points. And our overall organic net revenue growth target remains unchanged after the first quarter at 5% to 7% for 2022, but we see potential upside to our revenue expectations given the early performance of our growth initiatives and the year-to-date macro trading environment. Depreciation and amortization is expected to be in the $40 million to $44 million range. Our CapEx guidance range is $47 million to $52 million for the full year, and we continue to anticipate our effective tax rate on adjusted earnings to be in the 27.5% to 29.5% range for 2022, under the current tax laws. Our interest expense for the first quarter of 2022 was $10.8 million. Given the incremental borrowing costs related to the financing put in place ahead of the planned acquisitions of ErisX and NEO, which includes an expanded and longer tenured revolving credit facility, we expect interest expense to be in the range of $14 million to $15 million for 2Q '22. On the capital front, our focus has been and remains maximizing shareholder value through the effective use of our capital. In the first quarter, we returned a total of $121 million to shareholders, comprised of $51 million in dividend payments and $70 million in share repurchases. We remain well positioned to invest in the business, support our dividend, and opportunistically repurchase shares with $249 million in remaining capacity on our share repurchase authorization. Our leverage ratio increased versus the prior quarter to 1.6x at March 31 as our debt levels increased with the issuance of a 10-year note in anticipation of our NEO and ErisX transactions. Overall, we remain committed to maintaining a flexible balance sheet and putting capital to work in the most value-enhancing way possible for shareholders. In summary, Cboe kicked off 2022 on very strong footing with a record quarter, and we remain confident in the many attractive initiatives we were investing in across the Cboe ecosystem. We look forward to continuing to deliver strong and sustainable results for investors in the quarters ahead. Now, I'd like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Ken Hill:

At this time, we'd be happy to take your 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.

Richard Repetto:

Good morning, Ed, Brian and Chris. So I guess my question is on the proprietary products and the VIX Futures volume. You've seen a rebound since sort of the mid quarter, first quarter slowdown. I guess that's due to the Barclays, the VXX ETF issuance issue. But I guess could you give us an update on the recovery in the VIX Futures and more broadly in the proprietary product volumes, like you talked a lot about index options and seen great growth? And can you give us a picture of what's happened there and what's in your control and what you think is volatility driven?

Brian Schell:

Yes. Thanks, Rich. As we look at that, and then he did point that out as far as the timing, as far as mid March goes with the Barclays announcement, and just again to make sure we're on the same pages that they've cited themselves that they intend to file a new automatic self-registration statement with the SEC as soon as practicable, and they remain committed to infrastructure products and business in the U.S. So we've seen that. There's no reason for us to believe that's not going to be the case. And obviously, in the interim, we've also seen new funds come into that space as well from an ETF perspective.

Richard Repetto:

Got it. That's very helpful. I was going to ask about the expense, the conservative expense guidance, but that's all. Thanks.

Richard Repetto:

I'm sure someone else will ask.

Daniel Fannon:

Thanks. Good morning. I wanted to follow up on the access and data strength in the improved guidance. So you talked about increased demand for capacity, but curious about the incremental customer, the type of customer and maybe what you're seeing on the retail side if you've really tapped into what that opportunity could be in terms of incremental demand?

Daniel Fannon:

Thank you.

Gautam Sawant:

Thank you. Good morning. Thank you for taking my question. Can you please speak to the extent that Cboe European derivatives is easing structural challenges and market fragmentation that slowed the European options volume growth? And also given the initial momentum of that business, is there upside to the €25 million revenue growth by 2024 outlook?

Dave Howson:

Thanks very much and thanks very much for a great question. Certainly in terms of the summary of the value proposition and the macro factors that are in place or were in place two years ago when our customers came to us with the idea and the opportunity of breaking into and really growing the European equity derivatives market. We looked at that fragmentation siloing across Europe. We looked at the need for a single stop shop and also that need for an on screen liquid market very much in line with what we enjoy, all of our customers enjoy in the U.S. And with the acquisition of EuroCCP, we're able to bring that all together with a single trading, single margin pool across country benchmarks and Pan European benchmarks of really giving that single access point there with increased efficiency through products designed from the ground up and those products based off indices that are based off our equities market prices. And as you heard in the prepared remarks, the European equities market share has grown 500 basis points over the last year, so really solidifying the products that trade on those venues. So what we've seen since launch last year is a continuation of that commitment from the initial round of customers with Q1 being 4x the size in terms of trading from Q4 last year. The new products we launched this week have gone well with good support. Really crucially with those new products now we get to access different national benchmarks across Europe and therefore new local customers and new local expertise. So what you're going to see really from here on out is further build out of the futures picture across the products, the price picture there, followed by the auctions, and also greater engagement as we look through to next year and the addition of single names. And really with the sort of the guidance given on the revenue there, we're looking really on a good path as we build out this product and this initiative. The size of the opportunity is still -- the window between European and U.S. markets is still there, and we're really looking forward to carrying on building this out with our customers.

Operator:

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

Ed Tilly:

Yes, there's no difference in pricing. So you won't see any mix from these products that you're seeing that's going to have any impact other than having a call, for example, a higher mix of SPX contracts in our overall mix of options. But it's not going to be -- we're going to charge incrementally more during, let's say, the global trading hour session versus regular trading hour session.

Ed Tilly:

No. We don't think it's that type of market build per se. You'll see that when we've launched other new products or new markets, for example. When we've done with European derivatives, there will be some say certain liquidity incentives in place, or when we rolled out various, call it, iBox futures, we will do that with the new products. But here it's a little bit of a different type of rollout here with the initiatives we've talked about here with SPX.

Operator:

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

Ed Tilly:

Sure, I'll start with that. And it isn't so much of a slowdown for the progress that we see this year. We got a pretty good view into our particular pipeline on the global indices work and the contracts we see on the Q there and the various initiatives that we have going. I will say if you look at, and it's kind of a silly answer, but if you look at the math of the comparisons that you see how we ramped up 2021 growth in this area, if you look at, for example, the consecutive growth rates quarter-over-quarter in '21, Q2 had a 2% growth rate over Q1. Again, I'm talking about '21 here. If you look at Q3, it actually had a 7% growth rate over 2Q. And then you look at Q4, then it had a 4% growth rate on top of that. So you've seen a continuous momentum build. We started out '21 with a run rate of or an amount of $99 million per quarter, and we exited at 112 million for the fourth quarter. So you can see that really nice ramp up. So as we see our growth, and we've been able to continue that ramp into Q1, we do have some plans in place. So just more naturally, we're just going to see a little bit more flattening out of that higher growth rate as we move into Q2, Q3 and Q4 relative to the comparison of last year. And as you look at how we continue to create the wins across the globe, this goes back to the benefits of the flywheel what we're doing in our global network. And as we build out our people, as we build out the sales force, and as we continue to build out, I'll call it, market share volumes, that continues to build off of each other going back to the long-term benefit of our flywheel of seeing how they interrelate. But if you look at the particular risk and market analytics, the biggest growth driver I mentioned earlier to a previous question was is that the growth we have had so far has been more of an increased share of wallet versus new customers. So we're really excited about bringing that offering to new geographies as we continue to add more sales capacity and capability to the different geographies that we are in.

Dave Howson:

And certainly I can chime in there a little bit more on the European opportunity. It's multifold. Again, first principles, you've got the European market share. 21% market share offers richer, more deeper, a deeper data set to look into for local customers and global customers taking the European equities data. But moreover, it's the sale of the U.S. data set, the Cboe One product sets that we've got, which provides a real opportunity into CFD providers, retail providers in Europe and the EMEA and Asia Pacific. And then when you also think about the RMA product set, Cboe Europe derivatives bases a lot of the theoretical options prices used off the Hanweck CO [ph] options prices that we get there. So we see a lot of opportunity in Europe for providing that value add pre-trade, at-trade and post-trade Risk Management and Analytic services. And then as we think further eastwards, we can look at Australia and Japan, where we see strong non-transaction revenues coming out of the core venues there with, for example, Australia's non-transaction revenue increased over 30% compared to quarter one last year.

Operator:

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

Brian Schell:

Thanks. Good question. And I will just, again, continue to reiterate that if the macro environment does stay the same, there's a lot of confidence that we will exceed that 5% to 7% organic net revenue growth rate, targeted growth rate. And what we'll see in this environment is not only due to the, I'll call it the comps, particularly with the strong first quarter last year in the various asset classes, is that you actually see a positive growth across all of our asset classes over the prior year, which is going to really contribute. And again, most strongly we saw that in the index and the options. So really the honest answer to your question is, is it kind of depends as far as the quarter, as far as the full year and how we inch that up as we continue to gain confidence. Look, we're excited about the early numbers we're seeing around 24x5. We're excited about very, very, very early Tuesday, Thursday and what we see going on there. That's encouraging. So as we continue to see that traction, if things continue to go well, could there be an inch up of guidance into Q1 next time we have this call? Certainly. And we'd have obviously a better visibility to the full year as far as the really strong traction we're seeing with those organic initiatives and then continuing views of the macro environment. And then, Dave, why don't you pick up the second part of that?

Brian Bedell:

That's great color. I appreciate it and welcome. Looking forward to hearing more comments on the firm in the future from you. Thanks, Dave.

Operator:

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

Brian Schell:

Yes, I would say it's primarily for -- I'd say it's probably a mix of both. And it's hard sometimes to disentangle the two. And I can tell you what we've seen more historically. We're continuing to look at this question, and obviously as we put together this forecast and this guidance, we knew there are some elements of that port revenue that is a bit volume driven. But we also know it's maintaining capacity for future periods that rarely do we see people pull back on the level of ports, particularly when we know that when investors and when our clients, when they're in these markets how they make money, they tend to make money in those highest volume, those highest peak, those highest volatility at a time. And not having that capacity is critical to their overall P&L. So rarely do we see them pull back on some of that. Now, there's a couple of, I'll call it, pricing dynamics where some of that volume may pull back a little bit of that. But like I said, we tend to see that as more broadly infrastructure. And the other base of, I'll call it, revenues that we're building within D&A are beyond just obviously the real time and access in the Risk and Market Analytics and the overall indices that we continue to build out, which frankly those are actually the smallest parts of our overall D&A mix. They are the highest growth from a percentage standpoint. So again, we'll see that hopefully play out over time. But back to your original question, the heart of it is, it's a little bit of both, but we see it historically has been pretty sticky.

Kyle Voigt:

Great. Thank you very much.

Unidentified Analyst:

Hi. Good morning. This is Stephanie [ph] on for Mike. I just have a follow up about the progress you've made around 24x5. Just curious if you view the next steps as moving towards 24x7? What are your thoughts around that? And what trends or data points will you be watching to give you confidence if you were to extend to 24x7?

Chris Isaacson:

Yes, absolutely. Stephanie, it's a great question. We're a customer driven company here. We as customers bring us demand for access to market. So we'll listen to that demand and then provide it. 24x5 is a great example of that, even the curb session launched this week. I will remind you, so as we look forward to closing the transaction for ErisX that already trades 24x7, I'll also mention that we're expanding our index platform from 24x5 to 24x7 this year. That's part of one of our strategic projects. There's Cathy Clay and the D&A team. So as our customers and the investing community wants more access more around the clock, we'll provide that when the demand's there.

Operator:

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

Ed Tilly:

It's a great question. Why don't we start Brian the ErisX deal effect on expenses; Chris, the ErisX likely closing before NEO in the very soon category? And then we can move on to NEO.

Chris Isaacson:

Yes. Alex, we're really excited about closing the transaction very soon. And remind you that we -- with the one transaction, we get spot trading platform, data derivatives and clearing. And as you think about the opportunities for revenue there as we scale it and work for the syndication with industry partners, spot trading, we're looking to add new coin listings as soon as we can, protected by data if we built the spot platform and there can be data that comes off of that. Margin futures, we have a margin futures application before the CFTC that's focused on FCMs. So we look forward to growing that derivatives business. And then clearing is maybe something that's not as focused on but a real key asset that we get with ErisX, as we think there may be some bilateral relationships that maybe some of those trades can be cleared over time. It's a real asset for us to grow there. So there could be clearing revenues also. So very excited about this transaction and deeply engaged also in the digital asset regulation conversation right now that's very active. We want to help lead that discussion with many others and help this new asset class grow and mature in a great way, so we can operate these markets in a trusted, regulated transparent way as we do the rest of our markets. With that, I think I'll hand it to Dave to cover NEO.

Alex Bolstein:

Great, very helpful. Thank you.

Alex Kramm:

Hi. Thanks again. Sorry for dragging out the call. Just one quick follow up on all the Data and Access questions earlier. You don't disclose I don't think retention rates like many of the other data companies in this space do. So can you maybe just give us an update of where retention is and how that's been trending? And when it comes to cancellations, maybe what customer types or products you're seeing the biggest cancellations and why? Thanks.

Alex Kramm:

And do you know where you're seeing the biggest cancels just so we have an idea? I know it seems to be very small, but just curious where is the most turnover in the book of business I guess?

Alex Kramm:

Sounds good. The color was helpful. Thank you.

Operator:

Thank you. And that was the last question. I would like to turn the floor to management for any closing comments.

Operator:

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

Ken Hill:

Good morning. Thank you for joining us for our fourth quarter earnings conference call. On the call today, Ed Tilly, our Chairman, President and CEO, will discuss our performance for the quarter and provide an update for our strategic initiatives. Then Brian Schell, our Executive Vice President, CFO and Treasurer, will provide an overview of our financial results for the quarter as well as an update on our 2022 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; and John Deters, our Chief Strategy Officer. I'd 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 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward look 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 as defined and reconciled in our earnings material. Now I'd like to turn the call over to Ed.

Brian Schell:

As Ed spoke to, fourth quarter was a very strong finish to an exciting and record-setting year at Cboe. Overall adjusted earnings per share were up 41% on a year-over-year basis and 17% sequentially, as both the transaction and nontransaction businesses turned in excellent results. Furthermore, as we look at trends through January, we have seen continued acceleration across our businesses. Quickly looking back at some of the noteworthy takeaways from the fourth quarter, our net revenue increased 27%, matching another quarterly record. Net transaction fees were up 42% and recurring non-transaction revenue was up 21%. Adjusted operating expenses increased 23%. Adjusted EBITDA of $264 million was up 28%. And last, but certainly not least, our adjusted diluted earnings per share was a record $1.70, up 41% compared to last year's quarterly results. Turning to the key drivers by segment. Our press release and the appendix of our slide deck includes information detailing the key metrics from each of our business segments. So I'll just provide summary thoughts. We saw year-over-year growth in all of our segments for the second consecutive quarter. Options delivered exceptional growth of 25%, driven by higher trading volumes in both our proprietary multi-listed options as well as higher revenue per contract, or RPC, and index options. Total auctions ADV was up 23% as we again saw double-digit increases in both index and multi-listed options. RPC moved higher by 9%, given a positive mix shift to index products and a solid increase in our index options RPC, up 5%. And lastly, we continue to benefit from another quarter of double-digit growth in recurring non-transaction revenue, particularly access and capacity fees, which were up 20% as compared to the fourth quarter of 2020. North American Equities net revenue increased 24% year-over-year as industry volumes moved slightly higher, further helped by solid growth in proprietary market data fees and access to capacity fees. Net capture meaningfully improved on a year-over-year basis, somewhat offset by a decline in market share. As we move forward, we continue to look to strike the right balance between market share and pricing, while delivering on quality market data, innovative new order types and functionality to the market. For the quarter, BIDS contributed $8.5 million in net revenue. Lastly, recurring non-transaction organic revenue increased by more than $4 million or 13%. The Europe and APAC segment delivered outsized growth in the fourth quarter of 2021, with net revenue up 46%. The increase was driven by higher volumes and the inclusion of Chi-X Asia-Pacific revenues of $8.5 million. Clearing fee growth outpaced transactions as settlement volumes were up 25%, clearing volumes up 19% and European equity market ADV was up 17%, coupled with market share growth of 230 basis points. Fourth quarter revenue increased in futures by 39%, benefiting from a 44% increase in ADV and a 5% increase in capture. We continue to see steady engagement in our futures business to start the year, with January ADV up 32% from fourth quarter levels. And finally, revenues in the FX segment increased 6% as compared to the fourth quarter of 2020 as net capture moved higher and trading volumes remained steady. During the quarter, Cboe recorded its sixth consecutive record ADV quarter at $725 million versus $135 million in fourth quarter 2020. Cboe's recurring non-transaction revenue growth accelerated from strong third quarter levels, with a year-over-year organic growth reaching 15% in the fourth quarter. Again, the strong growth was primarily driven by additional subscriptions and units as opposed to price increases. More specifically, we saw robust physical and logical port usage in our equities and options businesses driven by increased demand for trading capacity. And on the market data side, the equities top of book and options depth of book products are performing well. As we look to 2022, we see tremendous potential for the Data and Access Solutions business. We are targeting D&A organic net revenue growth to run in the 7% to 10% range for the year, in line with the medium-term guidance we delivered at our November Investor Day. We look to continue to invest strategically in the business to unlock its full potential within the Cboe ecosystem. Turning to expenses. Total adjusted operating expenses were approximately $138 million for the quarter, up 23% compared to last year. Excluding the impact of acquisitions owned less than a year, adjusted operating expenses were up 13% or $15 million for the quarter. Most of the expense variance related to the acquisitions was compensation and benefits. Moving to our expense guidance. We are introducing a full year expense guidance range of $617 million to $625 million for 2022. This guidance incorporates our run rate expenses as of December, coupled with a healthy level of investment spend in the year ahead, a reflection of our conviction in the many high-margin, high-return opportunities ahead of us. Throughout 2021, we have consistently messaged that we would be investing in our business, strengthening our global infrastructure and laying the groundwork to support future growth. We see 2022 as a year where we make many of those investments. We expect $23 million to $26 million of the 2022 investment spend to directly drive incremental revenue growth at for greater levels of activity in the future. I think it's important to spend some time illustrating how some of our recent investments have led to higher levels of revenue growth. Most recently, Cboe has invested purposely in Data and Access Solutions, European clearing and derivatives and the expansion of core product set, with initiatives like 24/5 and a planned launch of Nannos. While we are by no means finished, we are already seeing attractive returns that contribute to today's 41% year-over-year growth in EPS for the fourth quarter and record results for the full year. More specifically, in Data and Access Solutions, we delivered 21% growth and recurring non-transaction revenue for the fourth quarter and 20% growth for the full year. This growth was made possible by investing and integrating recent acquisitions to build a global distribution and sales platform. As we look to take on D&A business to the next level, we are investing in cloud capabilities, hiring senior sales talent and further building out our index franchise to help unlock the full potential of the platform and broadening our potential revenue expansion opportunities in the years ahead. EuroCCP was an investment we made a little over 1.5 years ago that is driving more meaningful revenue at Cboe. Not only has EuroCCP vastly exceeded our initial expectations, but it has also laid the groundwork for European derivatives business that is beginning to take shape. While European derivatives is still a minimal contributor today, we have seen January contract volume and open interest nearly triple from December levels. We will look to expand on that growth with plans to introduce 4 new contracts in April and weekly options later in the second quarter of this year, pending regulatory approval. Lastly, 24/5 trading on the SPX and VIX options contracts went live on November 21. As Ed highlighted, in only a short amount of time, 24/5 has delivered incremental volumes to our platform, not to mention the ancillary benefits of greater market data and access fees and an expanded customer base. We expect to continue to invest in our infrastructure to facilitate greater volumes across our platforms. We believe these initiatives exemplify our philosophy at Cboe, leverage our superior technology, further strengthen our core proprietary products, increase recurring revenue and expand our product line by geography and asset class. While not included in our formal 2022 expense guidance range of $617 million to $625 million, we believe the pending acquisitions of ARRIS X and Neo has the potential to add an incremental $36 million to $42 million of expenses in 2022, contingent on the timing of closings, which are subject to regulatory reviews and other customary closing conditions. We anticipate a potential revenue offset for more than half of the expense in 2022, with an expectation that the additions are EBITDA positive on a combined basis in year 2. The company plans to further update its guidance for 2022 after the acquisitions close, which is expected in the first half of this year. Looking forward, we see numerous opportunities to invest in ways that fuel sustainable earnings growth for years to come. Investments have delivered a double-digit return on invested capital that shareholders have received and they come to expect. Now turning to a summary of full year guidance on the next slide. We are reaffirming many of the elements you've heard us speak to at our Investor Day back in November. Specifically, we anticipate D&A organic net revenue growth will be in the 7% to 10% range. Acquisitions held less than a year are expected to add 1 to 3 percentage points to total net revenue growth this year. Inorganic net revenue growth is expected to be 5% to 7% in 2022. Depreciation and amortization is expected to be in the $40 million to $44 million range. Our CapEx guidance range is $47 million to $52 million for the full year, and we anticipate our tax rate will fall in the 27.5% to 29.5% range for 2022 under the current tax laws. Our interest expense for the fourth quarter of 2021 was $11.1 million. During the first quarter, we anticipate incremental borrowing costs as we put financing in place for the acquisitions of ARIS X and Neo, which includes an expanded and longer-tenured revolving credit facility. Given this expected activity in the debt markets, interest expense is expected to be in the range of $12 million to $12.5 million for 1Q '22. While the investment priorities have taken on a bigger role in our capital allocation strategy, as of late, we remain committed to returning excess cash to shareholders through dividends and share repurchases. In total, we returned $52 million to shareholders through dividends in the fourth quarter. We remain opportunistic around share repurchases, with $319 million in remaining repurchase authorization available. Our leverage ratio decreased slightly versus the prior quarter to 1.3 times at December 31 as our debt levels remained steady on a sequential basis. Given the anticipated funding of Neo and ARRIS X, we expect our leverage ratio to expand in the quarters ahead, but we remain committed to maintaining a flexible balance sheet over time. In summary, Cboe delivered a very strong fourth quarter to close the year, and 2021's record results give us increased confidence that if we continue to invest in the Cboe ecosystem, we can continue to deliver strong long-term results for investors. Now I'd like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Ken Hill:

Thank you. At this point, we will be happy to take your questions. [Operator Instructions] And my first question comes from Rich Repetto with Piper Sandler.

Brian Schell:

Sure. Thanks, Rich. A couple of things there. As far as the conservative kind of comments on the expense guide overall, what makes the difference, say, '21 versus '22, the '21 guide, as we look back on it is being conservative is obviously not new to the organization. We will make sure we lay out there the expectations what we think we're going to need as far as the investment to execute, particularly to deliver the top line and the bottom line results. Last year was a lot of growth, highly reliant on a lot of incremental headcount resources and some other investments along the way that, frankly, were never in doubt as far as making those high conviction investments. It just took a little longer to get them in place than what was originally anticipated. So the timing is more what drove the amount of investment that was recorded in '21 versus where that effort was and the total where we think the run rate is, and you're seeing a little bit of that bleed into '22. And so as we look at what's different or unique about '22, is it more or less conservative than '21? We're obviously going to put forth what we think is a very achievable plan as far as what we think it will take for investment. But at this point is a little bit more mixed. It still has a -- reflects incremental people to help deliver some of the initiatives that we're looking about. We could talk more and more about those. It has some incremental marketing delivered from some of the initiatives that we're talking about with respect to our growth initiatives around D&A and the derivatives. And you heard about the recent launches of what we're doing around Nannos and the additional weekly expiration. We're doing more around our tech services spend. You talked about cloud and what we're doing to support that. Again, directly back to D&A and the additional offerings over there, I mentioned a little bit around our software development capitalization is a little bit less, say, than the prior year, again adding a little bit more to that expense. And then as we look at December and you say, well, here it is conservative, sandbagging in I look at the December numbers is where we wrap up. And I roll that forward on just a pure annualized rate, that will -- when you look at that number, that's a much healthier growth rate, just looking at those to separate numbers that the gap of the incremental investment that we're laying out is pretty close to what you're seeing there. So if I move in to the second part of your question about revenue expectations -- return expectations on those incremental investments, if you look at those incremental investments, we laid out roughly that $10 million for infrastructure. Again, that's hard to tie it to a specific revenue initiative, but it's all about supporting the broader Cboe global network around -- look -- we've all read about the incremental cyber attacks that are pending and what's going on. And so can you make core investments around the basics there, continues to support around our distribution network, continued integration work that goes again across the entire network that if we're going to be running a trusted marketplace with high reliability, high uptime, working on that next development as far as staying leading edge, that requires that continuous pace of investment and spend. But the specific revenue initiatives that we tied to and specifically around D&A and then derivatives, and it's probably high level D&A, closer to 2/3 of that number, derivatives around 1/3 in the way it's placing out, is that, that D&A numbers as far as what do we look for that is we've talked about cloud, how we rolled that out last year. We talked about incremental people from a sales standpoint, making our platform more robust, making a little bit more around that marketing effort. That return, we envisioned is actually very short. It's high triple digit on that investment as far as achieving that growth rate. As far as the other initiatives around the derivatives, and we've talked about this to last year is the 24/5. Again, that's immediately already returned the investment from '21. It's already a triple-digit return. It's already matched the investment of what we're already seeing this year. European derivatives, again, this guidance hasn't changed with where we talked about that. That's more of a 2 to 3 year, where we expect to see a beneficial higher ROI. Again, approaching triple digit if we hit those revenue targets. We talked about Nanos. As we look at that launch and the incremental investment there, that should be a very high return within a 12-month time frame with that success. And then finally, we mentioned Neo and ARIS. Again, that's going to be a little bit of a -- as we look through those, those will pace back and that ROI will be a little bit longer term. But as we look at those investments, as we look to enhance those platforms, deliver those new products, again, we talked about in our release and our guidance that we expect -- that's a little bit more of a year 2 as far as that EBITDA positive, again, requires some of that initial investment upfront in this first year in 2022.

Brian Schell:

Wow. You can't help them sell that.

Ken Worthington:

We've seen a real surge in engagement from retail over the last 2 years, driven by some combination of maybe COVID commission, zero commissions, market appreciation. I'm sure there's a dozen other things. As you look at Cboe's great 2021 results, what portion of the success you had last year would you actually attribute to the retail effect? So you've got a ton of initiatives. There's a lot of things driving your good results, but really focusing on this retail effect. And given the tech mean sell-off and greater leverage of brokers like Robin Hood, how do you think about this durability of retail engagement? Is it something because options are used to not only speculate but hedge, it's going to be really durable? Or do you think there's some fragility to what we've seen?

Brian Schell:

Yes. So on the -- I think we'll break it down a little bit by asset class, because I think you see the ebbs and flows. And again, to Ed's earlier points, the opaqueness. So the percentages aren't going to be as precised as we frankly would like as well. But as far as starting with the North American equities franchise, we saw a lot of that lean stock trading, obviously, very retail focus and as strong as even the January numbers as far as overall market volumes of, call it, 12 billion shares. If you recall, January of last year was almost 16 billion ADV. And so we know that was driving mode. But as you look at those retail percentages in the U.S. equities market, you start saw trailing down as we got deeper into the year, such that the third quarter was lower in fourth quarter. I think it was significant lower than where it was in the first quarter. So it was a nice contributor, but I think it's come back to a -- I would say, more a sustainable level, but I'm not sure it's going to going to go anywhere. So was it a nice contributor? Yes, but it wasn't the majority. I would say it was a stronger contributor within the options, as Ed talked, about the various exposures looking for (inaudible) patterns. They've always been a big presence in the multi-list. And now what they're looking for, for a broader community as far as investment alternatives. So we actually are more optimistic that the percentage could grow in our derivatives complex with the retail and the retail channel. So I know we didn't give you a specific percentage. It was solid. We expect to see continued growth in it. We're going to continue to look for to growing that with our retail efforts and with the new product launches, I kind of leave it there. Chris, I don't know if you have anything to add?

Operator:

And the next question comes from Alex Kramm with UBS. Please go ahead.

Ed Tilly:

Alex, great question. I'll kick it off. And we share the excitement, weekly does appear from an institutional perspective, much more sustainable than we've seen, as you referenced, the spikes and then the ebb and flow around spikes. But the uncertainty out there that's been driving this of late for institutions now really Russia tension, oil prices, continued supply chain challenges. And then the big one, right, the expectations on rate moves, all impact a portfolio differently. And actually, the value of the components of that portfolio are influenced by all that uncertainty. We see that in both the SPX and VIX and uniquely, as we talked about the rotation in the past. What's different this time, if you look at the second derivative VIX, there's an 8% move yesterday. That is an incredible punch for a relatively inexpensive contract, both the futures level and the options associated with it. And that's not gone unrecognized. 8% move, and then you look at today and maybe there's some follow-through even pre-trade, the market was up, the market is down. That is an amazing tool relatively inexpensive that really takes advantage of these 50-plus point S&P 500 moves. And then in the same week, as you see these moves early in the week, the SPX 1 month at the money vol comes crashing down. Really incredible. So SPX looks cheap in implied volatility compared to what's been realized. So it really is an amazing opportunity in our product set that these products actually deliver. And you're seeing that engagement. It's now -- it's been month-over-month, January really keeping up with December or fourth quarter is truly amazing. Actually surpassing fourth quarter is terrific. So that's the difference, and those risk factors are out there, and there's still uncertainty. So no reason why this isn't going to continue for a bit.

Brian Bedell:

I appreciate all the granular guidance, Brian. Maybe if you could just talk a little bit about the growth path on D&A? Obviously, you did very well in '21. You're heading in with better momentum relative to that 7% to 10%. Given how we're seeing that volume environment performed pretty well in customer traction, especially in retail, back pretty well, what would you say would be some upside potential drivers to the high end of that 7% to 10% range just for this year? I know you obviously don't want to redo the guidance or anything like that, but just thinking about some -- what would continue that momentum? And then also, just a secondary question, if you could talk about any upside from revenue contribution from the European derivatives effort now that we are seeing that volume increase in January? Just sort of time line to get to that $25 million annual revenue number, I think you have for a couple of years out in euro derivative?

A – Chris Isaacson:

Yes. So we are seeing strong demand for U.S. data into Europe and APAC and then vice versa. So that's a global network coming together, and we still think we have a lot of room to sell into Europe and APAC with the existing data we have, especially as we add more data sets to the Cboe Global Cloud as we mentioned. We just currently have really North American data there, indices data and futures data, and we'll be adding more data this year, including analytics data and working with Cathy Clay. I just mentioned Europe, the EU derives is going quite well. The onboarding has gone well, and January was very encouraging to us, surpassing all of the volume from last year in a single month. So tracking very well as we build. We told you from the start this would take a bit, and it's tracking on or ahead of schedule. And the team there is doing a wonderful, under Dave and An team and Cecil with your CCP, another investment we made in the last couple of years that is paying off very well and is key to our long-term success there in Europe.

Alex Bolstein:

So I was hoping we could spend a minute on sort of like your medium-term expense growth philosophy and sort of the growth algorithm. So the 2022 guidance (inaudible) helpful. You previewed some of that at the end of the year. So the decline in margins is probably not that surprising. But how long do you expect sort of the elevated pace of incremental investments to last it essentially double what your core sort of expense growth is in 2022? So is it just a '22 thing or spillover, not asking you for '23 guidance, obviously, just yet. But just trying to understand when we should expect Cboe to return to sort of positive operating leverage on the comp?

Operator:

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

Chris Isaacson:

Yes, I'll take that question. Thanks for the question. On ARIS X, we're moving toward close working through the state and federal approvals. And as we said, we hope to close that here in the first half of this year given previous guidance. Maybe bit earlier than we expected, but working well through that with the ErisX team. Regarding new products, we -- there is a new listing process that ErisX has put together that's very well thought through, and we're looking at new products based on customer demand, understanding that we will need to add new products within the confines of those rules as we grow the business. We're very excited about ErisX, as Ed mentioned in his comments, because it gives us that spot data derivatives and clearing platform in a trusted marketplace that we think is where the market needs to go, and we want to help define that together. So very excited about ErisX going forward and close in transaction here in the first half. I want to make sure I answered all your questions. Was there another segment of your question that I missed?

Chris Isaacson:

Brian, do you want to take that one?

Unidentified Company Representative:

This is John. Just on the -- you had a question, I think, in there about how the price of Bitcoin impacts our views to the opportunity. And I just want to drive home. We've seen this before. We've been in the digital asset space going back well prior to our ErisX agreement. And we have a lot of confidence in this space. It's early innings, and we know that because we're out there talking to partners and clients as we speak. We've gotten a really good, strong early jump on those conversations, enthusiasm and the investment that's going on across the ecosystem is as strong as ever. And so we're very optimistic about the opportunity. It also highlights to Chris' point about the product set in ErisX. It highlights the value that we'll be bringing to the market in terms of derivatives products and the ability to hedge some of these price movements going forward. So we're optimistic, and we see great value in the product set.

Kyle Voigt:

Maybe a question on capital management. The second straight quarter, with no buybacks. Just wondering if we should expect those repurchases to remain paused ahead of this -- the ErisX and any deal close? And then just thinking about your capital priorities, your leverage ratio is pretty modest and it's been declining with the EBITDA growth. So I'm just trying to get a better sense of kind of how those -- how buybacks are returning to buybacks ranks versus maybe additional M&A given the current M&A environment you're currently seeing?

Operator:

And the next question comes from Michael Cyprys with Morgan Stanley. Please go ahead.

Chris Isaacson:

Great question. There's been a lot of -- this is Chris. There's been a lot of talk about this, but first on the cloud data opportunity. We have our initial customers. We launched November 1. As we mentioned during our Investor Day, we're really excited about the the number of customers that we already have. And these are largely new customers we didn't have before that need this new access method. The current data sets we have are U.S. equities and futures and indices data, as I mentioned previously, we'll be adding other data sets from Europe from other analytics data and then eventually APAC. So all of our markets around the world. The data -- they can collect this data in the U.S. and Europe as well as an APAC today over the AWS cloud. And then as we think beyond the data opportunity, the cloud is ready today for data and it's ready for non-latency-sensitive applications such as clearing and other more back-office things. But as you think about microseconds, nanoseconds and multicast and things like that, the cloud still has some room to grow and there's a lot of effort going in from cloud providers. And we are also working on things like that, but the cloud needs to be ready for what our customers are demanding. So I know there's other exchanges that are working on this, and we're evaluating it. Part of our ethos is we are customer-driven. We're client driven. So as our customers if and when they say they want us to move there, we will be ready to do so. But right now, the data -- the opportunity in the cloud is primarily around data and clearing, and we'll look at matching in due course.

Ken Hill:

Great. So this completes our call for this morning. We appreciate all the interest and questions on the call today. If you have any follow-ups, please feel free to reach out. Thank you again.

Ken Hill:

Good morning and thank you for joining us for our third quarter earnings conference call. On the call today, Ed Tilly, our Chairman, President and CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Then Brian Schell, our Executive Vice President and CFO and Treasurer, will provide an overview of the financial results for the quarter as well as an update on our 2021 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer and John Deters, our Chief Strategy 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 each slide is available on our Investor Relations portion of our website. 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 guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. During the call this morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. Now, I would like to turn the call over to Ed.

Brian Schell:

Thanks, Ed and good morning, everyone. Let me remind everyone that, unless specifically noted, my comments relate to 3Q ‘21 as compared to 3Q ‘20 and are based on our non-GAAP adjusted results. As Ed just indicated, the third quarter was incredibly strong for Cboe with robust results from both a transaction and non-transaction basis. Overall, adjusted earnings increased 31% versus the third quarter of 2020 and improved off solid second quarter 2021 metrics. As we move forward, we look for the cash, derivatives and data portions of our business to work in unison to enhance revenue opportunities and shareholder value. Now, a quick look at the third quarter. Our net revenue increased 27%, setting a new quarterly record. Net transaction fees were up 39% and recurring non-transaction revenue was up 21%. Adjusted operating expenses increased 29%. Adjusted EBITDA of $240 million was up 25%. And finally, our adjusted diluted earnings per share, was $1.45, up 31% compared to last year’s quarterly results. Turning to the key drivers by segment, our press release and the appendix of our slide deck includes information detailing the key metrics for each of our business segments. So I will just provide summary thoughts. While we saw year-over-year growth in all of our segments, our Options segment produced above average growth for the quarter of 30% driven by higher trading volumes and revenue per contract in both our proprietary and multi-listed options. Total options ADV was up 23% as we saw double-digit increases in both index and multi-listed options. Revenue per contract also moved higher by 16% given positive mix shift to index products and a strong increase in our multi-listed options RPC, up 23% and we continue to benefit from double-digit growth in recurring non-transaction revenue, particularly access and capacity fees. North American equities revenue increased 13% year-over-year as acquisition-related net transaction and clearing fees were further helped by strong proprietary market data fees and access capacity fees. This was offset somewhat by a 1% year-over-year decline in U.S. equity ADV and a 1% year-over-year decline in market share for the quarter. While market share trends have been impacted by aggressive pricing trends from some competitors, we remain focused on optimizing long-term profit in the business through the many initiatives we have introduced or plan to introduce to the market. For the quarter, MATCHNow and BIDS contributed $8.5 million in net revenue. Lastly, recurring non-transaction revenue increased by more than $5 million or 17%, with organic growth of 14%. Third quarter revenue increased in futures by 24% on the back of a 30% increase in ADV and a 6% increase in capture. Looking forward, we were pleased to see the SEC recently approved filings to list and trade shares of two new volatility shares products in inverse and long VIX futures ETF. These new listings are likely to increase the VIX trading ecosystem as the AUM builds on those products. The revenue increase in Europe and APAC primarily reflects the addition of Chi-X Asia-Pacific in July 2021, an $8.2 million contribution as well as growth in European equities and clearing. Underlying trends remained strong in the third quarter as industry average daily notional value traded, market share on Cboe European Equities and net capture, all moved higher on a year-over-year basis. And finally, revenues in the FX segment increased 8% as compared to the third quarter of 2020 as trading volumes and net capture moved higher. During the quarter, global FX market share hit an all-time high of 17%. Cboe’s recurring non-transaction revenue growth remained elevated in the third quarter, with year-over-year organic growth reaching 14%. Again, this strong growth was largely a product of additional subscriptions and units as opposed to price increases. More specifically, we saw both physical and logical port usage remained robust in our equities and options businesses driven by increased demand for trading capacity and on the market data side, the equities top of book and depth of book products continue to perform well. We are increasing our organic outlook by 1 to 2 percentage points to approximately 14%. Our total recurring non-transaction revenue growth is now expected to reach approximately 18% for 2021, up 2 to 3 percentage points versus our prior expectation. Overall, we are very pleased with the continued traction in this business as it’s an important element of Cboe’s ecosystem of products and services. Turning to expenses, total adjusted operating expenses were approximately $140 million for the quarter, up 29% compared to last year. Excluding the impact of acquisitions owned less than a year adjusted operating expenses were up 17% or $19 million for the quarter. Most of the expense variance related to the acquisitions was compensation and benefits. Moving to our expense guidance, we are tightening and raising our expense guidance range for the full year to $536 million to $541 million from $531 million to $539 million. The $4 million increase in the midpoint reflects higher incentive compensation costs, reflecting the strong year-to-date operating results we have posted as well as our plans for increased hiring during the fourth quarter and a slight uptick in our depreciation and amortization forecast. As a firm, we believe in a pay-for-performance culture and not only has our year-to-date financial performance has been strong, we have made significant progress against our longer term growth priorities, especially towards increasing access to Cboe products and services, as Ed noted previously. As you recall from our February earnings meeting, we laid out a path for revenue growth that would be preceded by higher-than-normal expense growth that would slightly compress margins in the short-term to enable longer term growth. We remain focused on investing in key initiatives with attractive returns and we look forward to meeting the current and future market demand by prudently investing organically and inorganically to meet those needs, even if it requires upfront spend. Now, turning to a summary of full year guidance on the next slide, we are raising our guidance for depreciation and amortization to $38 million to $42 million from $34 million to $38 million due to the earlier timing of various products. Our CapEx guidance range moves $8 million lower to $47 million to $52 million and we are reaffirming the higher end of our guided tax range of 27.5% to 29.5% for the full year under the current tax laws. Our interest expense for the third quarter of 2021 was $11.7 million. We expect our fourth quarter interest expense to hold steady in the $11.5 million to $12 million range. In addition to the investment priorities we outlined earlier in the call, we remain committed to returning excess cash to shareholders through dividends and share repurchases. From a capital return perspective, our strong cash flow generation enabled us to raise our quarterly dividend for the 11th straight year, growing 14% on a year-over-year basis. In total, we returned $52 million to shareholders through dividends in the third quarter. Our leverage ratio decreased slightly versus the prior quarter to 1.4x at September 30, as our debt levels remained steady on a sequential basis. Overall, our balance sheet remains unencumbered as we look to put incremental capital to use in value-enhancing ways for shareholders. Our adjusted cash and financial investments balance is elevated, reflecting the planned use of cash to fund a portion of the planned transactions we recently announced as well as a slightly higher requirement for regulatory capital purposes. In summary, Cboe delivered a very strong third quarter, and we’re even more enthusiastic about the number of high-quality growth initiatives we are bringing into our ecosystem, solutions that expand access to global markets for our customers, grow our geographic footprint and breadth of asset classes and diversify our revenue base. We look for these planned additions to fuel continued growth across the Cboe ecosystem. Now I’d like to turn it back over to Ed for some closing comments before we open it up to Q&A.

Ken Hill:

Thanks, Ed. At this point, we would be happy to take questions. [Operator Instructions]

Rich Repetto:

Good morning, Ed. Good morning, Brian and team. I guess, Ed, we take your acquisition seriously – very seriously now, so the ErisX positions and you talked about it in the prepared remarks. But I guess I wanted to get what does Eris – I know they are trading right now. I know they trade some over-the-counter products. And when do you actually expect them to trade any digital assets? And do you need regulatory sort of clarity to do that? And did it prevent you from buying back shares in the quarter?

Brian Schell:

Yes. Rich, just as a pipeline as we look at things, we are being more conservative than not as we look at kind of overall leverage, deployment of cash. So it was – like I said, it’s always a balance quarter-over-quarter of do you sit on a little bit more cash in anticipation of a transaction closing in the pipeline. So that was more of a reflection of that than anything else.

Ed Tilly:

Alright. So let me – Rich, let me take a half a step back on ErisX because I think it’s important to recognize that we didn’t just wake up a couple of months ago and think, gosh, crypto, look what’s happening, it might we need to get into this space. When we launched, if you recall, the first futures contract in 2017 and even before that, we had applications at the SEC for ETNs and ETPs. So at this space, we’ve had our eye on. We thought the ecosystem in this space would have evolved a bit quicker. So we’ve always had an eye on getting back into the space the last couple of calls, I’ve been mentioning that. Importantly, also, we were early investors in ErisX in 2018 when Don Wilson and Tom Chippas saw the opportunity to build out a regulated fair market in spot, derivatives clearing and margining. So long answer to your question, framed that way, we’ve constantly and since the launch of those future, consciously been looking for an opportunity that gets us back into the market. But John, I think importantly, the rollout, what ErisX is trading today and what we have in front of us between now and close.