Cboe tops Q3 profit estimates on strong trading volumes

Nov 3, 2023

By Sri Hari N S and Laura Matthews

(Reuters) -Exchange operator Cboe Global Markets Inc on Friday sailed past analysts’ estimates for third-quarter profit as transaction volumes surged amid spiraling volatility in the global markets across asset classes.

The company saw strong demand for its options products, as investors looked to cushion a potential hit from an uncertain economy, boosting trading volumes as they moved to manage risk .

Revenue from its options segment surged 14%, bolstered by increases in the index options business and higher revenue per contracts. CBOE’s total average daily volume in options rose 8% while revenue per contract increased 12%.

“As the uncertain macro and geopolitical environment impacted markets globally, investors and traders rely on our suite of index options and volatility products to help manage risk and generate income in an uncertain environment,” said Fredric Tomczyk, chief executive officer at Cboe Global Markets, said on an analysts call.

Tomczyk was appointed CEO after Edward Tilly resigned in September over failures to disclose personal relationships with colleagues.

Tomczyk said a priority for him will be talent development and succession planning.

The Chicago-based group saw total revenue rise 9% to $480.5 million.

On an adjusted basis, Cboe posted a profit of $2.06 per share, compared to analysts’ average estimate of $1.86, according to LSEG data.

Cboe expects organic net revenue growth to be at the high end of its target of 7% to 9% in 2023.

Volumes in S&P 500 rose 21% to give the exchange a record ADV of 2.9 million contracts in the third quarter.

Demand for options contracts opened on the same day they expire, or 0DTE (zero-days-to-expiry), grew 33% compared to last year and comprise 48% of SPX volume.

Options linked to the VIX volatility index increased 60%, as “bonds are being used less as a diversifier of equity risk” Dave Howson, global president at CBOE, told analysts.

Revenue across CBOE’s data and access business also increased 9% as the exchange’s customer based expands globally.

Cboe’s shares were up 3.7% to $168.87 following the conference call.

The result follows upbeat third-quarter results from peers CME Group, Nasdaq and Intercontinental Exchange.

Kevin Heal, senior analyst at Argus Research, said momentum should continue for Cboe and CME, “given the extreme levels of volatility we continue see in the equity and bond markets.”

He added that Nasdaq and ICE should see more consistent gains because they have “become less reliant on commissions.”

(Reporting by Sri Hari N S in Bengaluru and Laura Matthews in New York; Editing by Sriraj Kalluvila and Josie Kao)


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