Cboe Global Markets 2026 Q2 Earnings Call

You may begin. Good morning, thank you for joining us for our second quarter earnings conference call.

On the call today, Craig Donohue, our CEO, will discuss our performance for the quarter and provide an update on 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 Equities 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'll be showing the slides and providing commentary on each.

A downloadable copy of the slide presentation is available on the Investor Relations portion of the website. During our remarks, we will make certain forward-looking statements which represent our current judgment for 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 today, we'll be referring to non-GAAP measures as defined and reconciled in our earnings material.

Now, I'd like to turn the call over to Craig.

Good morning, and thank you for joining us to review our second quarter results. Cboe delivered another quarter of record net revenue and strong adjusted earnings with all of our core businesses continuing to deliver exceptional performance. From this position of strength, we're turning our attention to the many opportunities for growth ahead. I'll share some high-level comments before handing the call over to Jill Griebenow for a financial update. During the second quarter, Cboe grew net revenue 25% year-over-year to a record $732 million, and adjusted diluted EPS increased a robust 45% to $3.56. The strong execution during the second quarter was again broad-based, driven by double-digit net revenue growth in every major category at Cboe, and year-over-year net revenue growth in all five of our company segments.

Beginning with our derivatives business, we delivered another record quarter with net revenue increasing to $413 million, up 30% year-over-year. Index options drove the upside, setting another quarterly record, with average daily volume increasing 32% year-over-year to 6.2 million contracts. The quarter marked several product-specific ADV records, with 5.1 million SPX options, 3.1 million SPX zero DTE options, 195,000 Mini-SPX options, and 189,000 contracts traded during Global Trading Hours. During the quarter, SPX option volumes increased 40% year-over-year on the back of elevated economic uncertainty and stronger retail engagement. As geopolitical tensions eased in April and May, investors gravitated to longer-dated options to reposition their portfolios, particularly through the use of upside calls to participate in the market rally.

In June, we saw a notable increase in retail volume following the repeal of the pattern day trader rule, which had limited how often smaller accounts could trade without triggering additional restrictions. Its removal has eliminated a friction point, making it easier for smaller retail accounts to trade products like zero DTE more frequently. The impact of the repeal was immediate, with SPX zero DTE ADV increasing 11% month-over-month in June, with the estimated retail share of that volume rising to 57% versus 53% in April and May. Stronger retail engagement is also evident in the outsized growth in our Mini-SPX contract, with ADV surging 37% from May to June and more than 80% year-over-year in Q2.

We anticipate the continued adoption of the pattern day trader rules across our broker-dealer partners in the months ahead will be a tailwind for volumes and retail investors alike. Options continue to play a critical role in today's markets, offering a distinct risk and return profile compared to linear derivative products like single-stock futures and perpetual futures. Futures give investors direct exposure to the underlying along with leverage, but introduce unbounded downside risk, deferring liquidation mechanics, and funding rate uncertainty depending on the product. We do not view options as a substitute for linear derivatives, but as a different tool entirely. Investors can define their maximum loss upfront while still participating in outsized upside. That combination of convexity and defined risk is among the reasons why the vast majority of zero DTE options trading today happens in capped-risk structures.

Beyond expressing directional views, options can also be used for income generation, portfolio hedging, and volatility management, making them among the most versatile tools available to investors. We believe these distinctions help explain why SPX 0DTE trading has sustained strong growth across different market cycles and volatility regimes. As we look to extend our traditional options business, we're building something we believe will define the next chapter of growth at Cboe, a suite of solutions in the event and prediction market space. In June, we launched Cboe Predicts, our binary options on the Mini-S&P 500 Index. The feedback reinforces something we've long believed, there is demand for simple outcome-based ways to engage with markets that have traditionally felt out of reach for many investors.

To meet that demand, we're drawing on the trusted market infrastructure and deep liquidity that have defined our options franchise for decades to develop simple, intuitive products that appeal to a broader set of investors. Over time, we expect many of these traders to build familiarity and confidence in basic risk management concepts and progress into more sophisticated strategies like options spread trading. We also see a compelling opportunity in contracts tied to company-specific performance metrics. We've taken the first step by filing with the SEC in July to list these products with an initial focus on 23 of the most actively traded U.S. companies. We see a variety of use cases that span both our institutional and retail customer bases for these products. What sets this product apart from competitors is the structure.

We firmly believe these are securities products that should be overseen by the SEC and built within a framework of transparency and investor protection, one that Cboe has helped shape for more than 50 years. That regulatory foundation is exactly why we believe we're the right operator to bring this to market. A key enabler for the expansion of our global derivatives franchise, including our event and prediction market build-out, is our continued investment in global clearing. We filed an application for temporary registration with the SEC as a covered clearing agency with full registration targeted at the end of an 18-month period, subject to regulatory approval. On the CFTC side, we became subject to Subpart C of CFTC regulations effective June 16th, which means we will be held to the same enhanced credential standards consistent with global regulatory standards that apply to systemically important clearinghouses.

Together, our SEC temporary registration application and Subpart C compliance support our treatment as a qualifying central counterparty under the U.S. Bank Capital rules, which reduces capital requirements for clearing members. Our SEC filing, if approved, will help us better innovate in options and expand our futures offerings backed by a vertically integrated stack of trading and clearing. Our clearing efforts are designed to be complementary to our longstanding partnership with OCC. We remain fully committed to the existing market structure and the OCC clearing model for existing equity options. Moving to cash and spot markets, net revenue grew 22% year-over-year with steady growth across Europe and Asia-Pacific and global FX, and record revenues in our North American equities segment. Global FX net revenue increased 17% year-over-year in the second quarter, driven by continued gains in average daily notional value and net capture.

In Europe and Asia-Pacific, net revenues increased 20% year-over-year or 18% on a constant currency basis. This was driven by 31% year-over-year growth in net transaction and clearing fees, reflecting stronger industry volumes and improved net capture even as market share eased slightly versus the prior year quarter. Cboe's North American equities business made a strong contribution as well, delivering record net revenue for the segment with net transaction and clearing fees up 37% on the back of stronger industry volumes and improved net capture rates. As we look ahead, the cash equities business is one of the most dynamic asset classes in the world today, and Cboe is at the forefront as the industry embraces innovations that are reshaping how and when markets operate.