Cboe Global Markets, Inc. Barclays 24th Annual Global Financial Services Conference

Okay. Yeah. Thank you. It's great to be here, and thank you for having us. I'm really pleased with how things have gone. I decided to come back to the industry and come to Cboe because I thought that to some degree, it was a transformational type opportunity, which I really love. That has proven itself to be the case, not only internally within Cboe, which is what I'll talk about, but then also just the external environment and the way that it's evolved very rapidly over the last 12 to 18 months. There's a lot going on. I'm loving being here. We spent quite a bit of time early on in my tenure, really sorting through the whole portfolio of businesses at Cboe. Cboe had been, as you mentioned, very acquisitive, had been trying to do a lot of things.

They had a certain strategy, and the strategy was really built around expanding their equities capabilities globally. The idea was that they would layer on to that data and information analytics, and then derivative products. I think a lot of the entry points and a lot of the things they tried to do were just too small scale to really contribute to growth, and lots of obstacles to the achievement of that strategy. We basically got a strategic realignment done. We exited a lot of the cash equities businesses that were quite marginal. We rationalized a bunch of other things, and that really allowed us to focus on the core. I think doing that, to me, was obvious because we have great growth opportunities in the core. We have been achieving tremendous growth.

The organization was very fractured in its attention and its allocation of resources, trying to do a lot of other things versus really paying attention to the core business and making sure that we are doing as well as we can in terms of both growth and profitability. That went really well. We are well through that process. The other thing is that in the 5 years before I got there, Cboe had also grown dramatically in terms of the size of the organization. Both through acquisition and through hiring, we had added like 900 people to the organization. In tandem with the strategic realignment, we also went through an organizational rationalization, and that has been very positive for us as an organization because it really has caused us to be very focused on the core, and then identifying new growth opportunities.

We are actually very excited about the shift in focus back to derivatives. Obviously, we have got a great FX business. We have got a great data business. We have got a growing and very successful European equities business, a stable but not growing U.S. equities business. There is a lot more we can do in derivatives, including outside of equity derivatives, per se, and that is within Rob Hocking's remit. For the moment, what we are really focused on are event and prediction markets that are oriented toward financial instruments, economic indicators, commodity prices, and then much more so in our wheelhouse where we are starting is in securities-based event contracts. Rob can talk about that, but we are bringing to market. We have already brought to market a binary yes/no contract based on the S&P 500, and now we will be bringing to market soon after regulatory approval, KPI contracts.

That is a huge market opportunity for us, we think, in terms of the total addressable market. In tandem with that, as we are thinking about product innovation, especially in the derivatives markets, is expanding our clearing capabilities. We have a clearinghouse in Europe, a clearinghouse in the U.S. That is a great way for us to be able to control our ability to innovate and our ability to bring products to market. Also the ability to provide value to clients in terms of cross-margining benefits and reducing capital and margin requirements in new products that we develop. I am very excited about that.

Sure. I think Cboe exists kind of on what I would call the higher end of retail, and I like to sort of describe it that way because I think there is a lot that is happening in retail right now, and then there is sort of the gaming platforms, and there is the sports betting and all that kind of stuff. I think where we are is- And I just want to take a second to step back and remind everybody that we have been capitalizing on this trend toward retail for six or seven years, wholly unrelated to event and prediction markets and all the things that we see happening today with offshore perpetuals and all that kind of stuff. That was really with the advent of 0DTE trading.

When we look at- and this is another distinction that I just want to highlight is, we have lots of people taking ownership of their own financial future. We have lots of people who are increasingly sophisticated and actually do understand options, including a lot of the retail broker-dealers have done a great job, not only with education, as do we, but in the development of tools that make it much more intuitive and easy for them to learn how to trade options. Having shorter duration, one-day expiring contracts, I think, also was very additive to that. So we see really strong long-term secular growth trends that we are capitalizing on, the increasing importance of the U.S. equity market and the S&P 500. The shift from mutual funds to defined outcome ETFs, which has been extraordinary, and embedded in all those are options that come into our market.

A secondary effect there. Then just this overall trend toward increased sophistication. It is still at a very nascent level, we think, in terms of where it can go over time, and Rob can talk a bit about that. But the pattern day trader rule has had a positive effect as well. It had a fairly arbitrary limitation on the amount of trading that you could do on options, depending on your net account value. That has been lifted and, as Rob can describe, there has been a step function increase in volume that we are seeing coming out of the larger retail broker-dealers that have already implemented that. But overall, I would say, incredibly positive, and I think the last thing that I will just say, so that I do not keep talking, is that when we look at the use cases, we see people doing fairly sophisticated trading activity in our products.

I just want to highlight that because I think people worry about the sustainability of it, especially when they are thinking about sports betting and gaming and event and prediction contracts that are oriented toward other things that may not be sustainable. In our case, when we are looking at what they are doing, a lot of what they are doing is what larger institutional users in our markets are doing.