Cboe Global Markets, Inc. 2026 Q3 Earnings Call

Ken, please go ahead. Good morning, and thank you for joining us for our third quarter earnings conference call.

On the call today, Craig Donohue, our CEO, will discuss our performance for the quarter and provide an update to our strategic outlook. Jill Griebenow, our Chief Financial Officer, will provide an overview of our financial results for the quarter, as well as discuss updates to our 2026 financial guidance. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Prashant Bhatia, our Head of Enterprise Strategy and Corporate Development, Heidi Fischer, our Global Head of Cash and Spot Markets, Rob Hocking, our Global Head of Derivatives, and Scott Johnston, 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 certain forward-looking statements, which represent our current judgment on what the future may hold. 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 Craig.

Good morning, and thank you for joining us to review our third quarter results. Building on our year-to-date momentum, Cboe delivered another quarter of strong net revenue and adjusted earnings growth. We also took two significant steps to strengthen the foundation of our company. At the end of September, we signed a 25-year extension of our exclusive licensing agreement with S&P Dow Jones Indices. It is our longest agreement with S&P to date and extends our collaboration through 2051. Then, in October, we received approvals to offer securities-based KPI contracts on 23 companies, creating a new avenue for innovation in financial markets. Together, these milestones provide a long runway to drive growth for years to come. I'll share some high-level comments before handing the call over to Jill for a financial update.

During the third quarter, Cboe grew net revenue 18% year-over-year to $712 million, and adjusted diluted EPS increased a robust 36% to $3.63. The strong results continued to be broad-based, driven by double-digit net revenue growth in every major category and year-over-year net revenue growth in four of our five company segments. Beginning with our derivatives business, we delivered another very strong quarter with net revenue up 22% year-over-year to $402 million. Index options led the way, with third quarter average daily volume rising 24% year-over-year to 6.1 million contracts. Multi-list activity was also solid, with volumes growing 10% year-over-year in the third quarter. Within the index complex, we saw ADV records across several products and services, including 0DTE SPX options, where 0DTE activity made up a record 65% of overall SPX activity.

Mini-SPX options, which averaged 251,000 contracts per day, and global trading hours were nearly 250,000 contracts traded per day in the third quarter. Within options, stronger retail engagement was a consistent theme across our products last quarter. In SPX 0DTE, retail volume jumped 46% year-over-year, outpacing institutional growth of 20%. Retail made up an estimated 58% of record SPX 0DTE volume, up from 53% a year ago. In XSP, total volume more than doubled as compared to the third quarter of 2025, driven largely by retail following the June repeal of the pattern day trader rule. It's not just U.S. retail. GTH volume jumped over 130%, led by the Asian trading session, which now makes up over 30% of GTH volume, up from less than 20% a year ago.

That success is a culmination of a long process of onboarding local brokers in the APAC region and extensive education and marketing efforts. We're excited to build on that momentum with our recent launch of extended early trading hours for single stock options, announced earlier this month, which will enable more international customers to trade U.S. options in their local hours. While SPX growth was very strong last quarter, VIX options volume was more muted, with ADV up just 3% year-over-year. That's a result of a very stable volatility environment, with the VIX staying in a tight 14 to 20 range and giving investors few opportunities to monetize their views. Through the early part of the fourth quarter, though, we've seen the environment change markedly.

Volatility has picked up heading into year-end amid rising bond yields and growing geopolitical uncertainty, leading to more investors turning to VIX options to hedge. VIX call volume hit its highest daily level in over two years earlier in October, surpassing any day during last year's Liberation Day sell-off when the VIX hit a high of over 50. The rapidly changing market backdrop is a good reminder of why options remain the tool of choice for most investors. Linear products like single-stock futures or perpetual futures may provide leverage and directional exposure, but losses are unbounded and positions may get liquidated quickly if market conditions turn. Options work differently. Investors are able to define their max loss upfront while keeping full exposure to the upside. When volatility rises and gap risk increases, that defined risk matters most.

It's why the vast majority of 0DTE trading happens in capped risk structures. Options are also more than a directional bet. Investors use them for income, hedging, and volatility management, making them among the most versatile instruments available. We see them as a different type of product from linear derivatives, not a substitute, and it's a big reason SPX options volume has kept growing across market cycles and volatility regimes. A landmark achievement during the quarter was the signing of a 25-year extension of our exclusive licensing agreement with S&P Dow Jones Indices, which continues our collaboration through 2051. Cementing this relationship was the longest agreement we have had in our over four-decade history with S&P. It gives customers and shareholders the certainty and continuity they expect and a long runway to invest in the franchise. Few relationships are as woven into Cboe's foundation as this one.

It began in 1983 with the launch of SPX options, an innovation that has become the global standard for how investors gain and manage equity market exposure. Under the extended agreement, we will continue to have the exclusive rights to offer trading in SPX options, and our exclusivity continues across the S&P options products we offer today, including Mini-SPX, VIX, and S&P binary options. We anticipate collaborating with S&P Dow Jones to pursue innovation beyond traditional index derivatives, including new products like exchange-traded, centrally cleared tokenized options contracts, where our exclusivity carries over. As Jill will cover, from a financial perspective, there is no change to the 2026 royalty fee terms, and we anticipate the updated terms will have a de minimis impact on 2027 net revenue growth. As we evolve and expand our derivatives business, we're excited to bring new products to market in the prediction market space.

In June, we launched our first Cboe Predicts product, binary options on the Mini-S&P 500 index. We have seen some initial interest, and we anticipate adoption in this product and future products to accelerate as our broker-dealer partners roll out dedicated user interfaces over the coming months. We expect these interfaces to offer simple illustrative graphics and point-and-click trading, making it even easier for new derivatives customers to express their views on market outcomes. Beyond binaries, we have received SEC approval to expand Cboe Predicts with our offering of company KPI event contracts. Additionally, the SEC has approved our filing to temporarily clear these innovative contracts through Cboe Clear U.S. Both applications were filed in late June, and we anticipate a November product launch. That timeline reflects significant progress across concept, regulation, clearing, and distribution.

This work is a direct result of investing in the right talent and capabilities to deliver solutions for investors. What stands out is how quickly we moved while staying true to our principles on market integrity. We built these products as securities, which provide retail and institutional investors with the transparency and investor protections they have come to expect from Cboe. Just as important as how the contracts trade is how we bring them to market. in September, we announced Robinhood as our launch partner and have seen strong interest and support from Interactive Brokers and Schwab. By working across our distribution partners and our intermediated network, we reach investors where they trade, with the protections they know. Distribution breadth is an advantage that a closed, vertically integrated system cannot match, and we believe it is why our KPI contracts are well-positioned to scale.