CBOE Holdings, Inc. First Quarter Earnings Conference Call M May 5, 2011 5 2011 p. 1 p. 1 CBOE Holdings, Inc .
Agenda William J. Brodsky Strategic Review Chairman and CEO Alan Dean Financial Review Executive VP, CFO and Treasurer William J. Brodsky William J Brodsky Questions and Answers Questions and Answers Alan Dean Ed Tilly Executive Vice Chairman p. 2 p. 2 CBOE Holdings, Inc .
Forward Looking Statements This presentation may contain forward-looking statements, within the meaning of the ► Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and i involve a number of risks and uncertainties. These statements are only predictions based l b f i k d t i ti Th t t t l di ti b d on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: legislative or regulatory changes; changes in law or government policy; increasing competition; loss of our exclusive licenses; decrease in trading volumes; an inability to introduce competitive new products and services; t di l i bilit t i t d titi d t d i competitive pressures on our existing products, services and trading access fees; changes in price levels and volatility in the derivatives and equity markets; economic, political and market conditions; increases in our fixed costs and expenses; loss of existing customers; difficulty developing strategic relationships and attracting new customers; increased costs related to or the loss of intellect al propert related to, or the loss of, intellectual property; rapid technological developments; increases rapid technological de elopments increases in trading volume and order transaction traffic that we cannot accommodate; our ability to maintain our growth effectively; damage to our reputation and brand name; loss of market data revenue; detrimental changes to our fee structure; failure to effectively monitor and manage our risks; customer consolidation; and changes to the tax treatment for options trading trading. More detailed information about factors that may affect our performance may be found in ► our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2010 and other filings made from time to time with the SEC. p. 3 p. 3 CBOE Holdings, Inc .
Strategic Review William J. Brodsky Chairman and CEO p. 4 p. 4 CBOE Holdings, Inc .
Strong Top-Line & Bottom-Line Results 1Q11 Financial Results versus 1Q10 ► Operating Revenues Operating Revenues • $124.0 Million, up 23% ► Adjusted Operating Margin ¹ j p g g • 46.7%, Highest in Nine Quarters ► Net Income Allocated to Common Stockholders • $32.1 Million, up 42% ► Diluted Earnings Per Share • $0.36, up 44% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” p. 5 p. 5 CBOE Holdings, Inc .
Competitive Landscape – U.S. Options Holding Company Exchanges 1Q11 Market Share¹ 28% 28% 25% 24% 18% 3% 2% 2% ¹Excludes dividend trades p. 6 p. 6 p. 6 CBOE Holdings, Inc .
Competitive Landscape – U.S. Options Holding Company Exchanges 1Q11 Market Share¹ 28% 28% 25% 24% 18% 3% 2% 2% ¹Excludes dividend trades p. 7 p. 7 p. 7 CBOE Holdings, Inc .
Competitive Landscape – U.S. Options Holding Company Exchanges 1Q11 Market Share¹ 28% 28% 25% 24% 18% 3% 2% 2% ¹Excludes dividend trades p. 8 p. 8 p. 8 CBOE Holdings, Inc .
CBOE has Unique Strengths Leader in innovation ► Superior trading technology ► Most unique and diverse offerings ► Proprietary products outpacing industry ► growth and generating higher returns Committed to increasing high quality Committed to increasing high quality ► ► market share p. 9 CBOE Holdings, Inc .
Strong 1Q11 Financial Results Adjusted Operating Revenues (in millions) 1 Results driven by: $433 ► Higher revenue from access fees and Higher revenue from access fees and $417 $417 $402 $402 transaction fees $344 $253 • Higher volume across every product $124 $101 $101 category • Record volume reached in VIX options and 2006 2007 2008 2009 2010 1Q10 1Q11 futures Adjusted Operating Income Adj t d O ti I ► Disciplined cost control (in millions) 1 $193 $176 $156 $156 $140 $72 $58 $39 2006 2007 2008 2009 2010 1Q10 1Q11 ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” p. 10 p. 10 CBOE Holdings, Inc .
Options ADV up 11% 1Q11 vs 1Q10 Equity Options CBOE Holdings Quarterly Options ADV 2.60 2.58 2.40 (in millions) 2.26 1.87 5.29 5.04 4.55 4.23 1Q10 2Q10 3Q10 4Q10 1Q11 Index Options Index Options 3 71 3.71 1.26 1.17 1.11 0.98 0.94 1Q10 2Q10 3Q10 4Q10 1Q11 ETF Options 1.45 1.26 1.04 0.99 0.91 1Q10 2 Q2 10 3 Q10 4 Q10 1Q11 1Q10 2Q10 3Q10 4Q10 1Q11 p. 11 CBOE Holdings, Inc .
CBOE is the Home of Volatility Franchise VIX Options & Futures ADV (in thousands) 450 50 50 400 400 389 350 42 40 300 300 V ions ADV ures ADV 250 30 248 200 200 Futu Opt 20 150 17 132 100 103 103 10 10 93 50 23 5 1 5 4 2 0 0 ¹ 2005 2006 2007 2008 2009 2010 2011 YTD VIX Options VIX Futures ¹YTD through 4/30/11 p. 12 CBOE Holdings, Inc .
1Q11 Market Share Data CBOE Excl. Dividend Trades Total Industry Volume C2 2% 2% PHLX 3% 3% 3% 3% ISE 5% 5% NYSE/Amex 31% 26% 27% NYSE/Arca 14% 11% 11% NOM NOM 1% 1% 13% 13% BOX BATS 20% 22% 18% 17% 94% Source: Options Clearing Corporation and CBOE ¹Excludes Dividend Trades YTD through 3/31/11 p. 13 p. 13 CBOE Holdings, Inc .
CBOE Consistent Market Share Leader Sustained Market Share Without Sacrificing Revenue Per Contract All Classes 35% 35% 27% 27% 30% CBOE AMEX 25% 25% 20% ARCA 20% 20% PHLX 19% 18% ISE 15% 15% 13% 13% 14% BOX 10% NOM 12% 11% BATS 5% C2 C2 0% l n r y p n r v u a a a o a e a M J M M J S J N p. 14 CBOE Holdings, Inc . Source: CBOE
Differentiated Product Set CBOE Trades… CFE Futures Equity Index Options on Exchange Exchange Options Options Options Options ETFs ETFs 1Q10 vs 1Q11 8.7% 5.7% 21.4% 314% ADV Chg Percent of 51% 23% 25% 1% 1Q11 trading volume 3-month avg $0.160 $0.604 $0.207 $1.507 RPC thru 3/31/11 3/31/11 p. 15 CBOE Holdings, Inc .
C2 Achieving Steady Growth ► Averaged 162,500 contracts per day in 1Q11 and 174,600 in April ► Active market makers have nearly doubled since February ► Capture rate from CBOE linkage volume continues to increase Capture rate from CBOE linkage volume continues to increase ► Adjusting fees and incentives to improve market quality ► Targeting 1-2% market share of U.S. multiply-listed options in first full year ► Launch of SPXpm, pending SEC approval C2 Daily Volume 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 10 10 10 10 11 11 11 11 11 11 11/02/1 11/21/1 12/10/1 12/29/1 01/17/1 02/05/1 02/24/1 03/15/1 04/03/1 04/22/1 p. 16 p. 16 p. 16 CBOE Holdings, Inc .
SPXpm to Broaden Customer Reach Identical in structure to traditional SPX index option, except it ► will have a “p.m.” settlement p Provides a settlement convention found in the OTC market ► while offering benefits and safeguards of exchange trading Expect SPX and SPXpm to provide customers two deep pools ► of liquidity • SPXpm – those seeking “point-and-click” exposure • SPX – institutions conducting large complex trades via open outcry Rule filing pending SEC approval ► p. 17 p. 17 CBOE Holdings, Inc .
Leveraging Expertise in Volatility Products ► Calculating volatility values on individual equities • “ Stock VIXes ” introduced in January 2011 as volatility benchmarks include “ Stock VIXes, introduced in January 2011 as volatility benchmarks, include Apple, Amazon, Goldman Sachs, Google and IBM • Filed for SEC approval to list options on “Stock VIXes,” futures to follow ► Launching options and futures on Exchange Traded Funds • CBOE Crude Oil ETF Volatility Index (OVX) • Pending regulatory approval Pending regulatory approval Working with S&P to expand VIX methodology ► • Launched VIX Network in March au c ed et o a c p. 18 p. 18 CBOE Holdings, Inc .
Regulatory Update CBOE continues to work with regulators on behalf of options ► customers and the industry Dodd-Frank Bill continues to be foremost on agenda ► Bill introduced to delay implementation of Dodd-Frank by 18 months ► Expect Dodd-Frank will eventually result in most OTC-types of trades ► being traded on exchanges and/or centrally cleared Well positioned to benefit from OTC type opportunities Well positioned to benefit from OTC-type opportunities ► p. 19 p. 19 p. 19 CBOE Holdings, Inc .
2011 Initiatives With CBOE’s unique product mix, we are well-positioned to take ► advantage of long-term secular growth trends in the industry Key Priorities: ► • Extend the VIX product line • Build on the success of C2 Financial strength gives us flexibility to invest in growth while continuing ► to reward stockholders to reward stockholders p. 20 p. 20 p. 20 CBOE Holdings, Inc .
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