Second Quarter 2016 Earnings Presentation July 29, 2016
Agenda Strategic Review Edward Tilly Chief Executive Officer Financial Review Alan Dean Executive Vice President, CFO and Treasurer Questions and Answers Edward Tilly Alan Dean Edward Provost President and Chief Operating Officer John Deters Chief Strategy Officer and Head of Corporate Initiatives CBOE HOLDINGS 2
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 involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. There are important factors that could cause actual results, level of activity, performance or achievements to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our right to exclusively list and trade certain index options and futures products; economic, political and market conditions; compliance with legal and regulatory obligations, including our obligations under agreements with regulatory agencies; increasing price competition in our industry; decreases in trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; our dependence on third party service providers; our index providers' ability to perform under our agreements; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to accommodate trading volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems; our ability to protect our systems and communication networks from security risks, including cyber-attacks; the accuracy of our estimates and expectations; our ability to maintain access fee revenues; our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status; the ability of our compliance and risk management methods to effectively monitor and manage our risks; our ability to attract and retain skilled management and other personnel; and our ability to manage our growth and strategic acquisitions or alliances effectively. More detailed information about factors that may affect our performance may be found in our filings with the U.S. Securities and Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2015 and other filings made from time to time with the SEC. CBOE HOLDINGS 3
Strategic Review Edward Tilly CEO
Strong Second-Quarter Results Fueled by Proprietary Index Products Ongoing growth of trading in our proprietary index product, led by record trading in VIX futures Revenue up 10% in 2Q16 vs 2Q15; Total ADV for Index Complex: Index Options and VIX Futures Adjusted diluted EPS up 11% (in millions) 2.34 2Q16 ADV for index complex, up 2.03 1.95 0.26 1.74 1.63 20% vs 2Q15 0.22 0.26 0.19 0.18 2.08 ADV for multiply-listed options 1.81 1.69 1.55 1.45 traded industrywide increased 2% 2Q15 3Q15 4Q15 1Q16 2Q16 in 2Q16 vs 2Q15 Index Options Futures CBOE HOLDINGS 5
Translating our Mission and Strategic Initiatives into Long-Term Shareholder Value Our mission is to be the leader in providing innovative products that facilitate and enhance trading in a global marketplace Strategic Initiatives • Develop unique products • Form strategic alliances that leverage and complement our core business • Expand our customer base • Define and lead the options and volatility space globally CBOE HOLDINGS 6
Broadening Access to Proprietary Products More than 235,00 VIX futures contracts traded during non- U.S. hours on June 24 th in reaction to the Brexit referendum New single-day record for trading in our overnight session Surpassed previous single-day record by 67% VIX Futures ADV During Non-U.S. Trading Hours (ETH) for June 2016 Chart Title By Time Period* 250,000 35% VIX Futures ADV During ETH Brexit 5:00 PM-2:00 AM 30% 200,000 Vote 25% 2:00-7:00 AM 150,000 20% 100,000 3:30-5:00 PM 15% 50,000 10% 7:00-8:30 AM 0 5% 1-Jun-16 2-Jun-16 3-Jun-16 6-Jun-16 7-Jun-16 8-Jun-16 9-Jun-16 10-Jun-16 13-Jun-16 14-Jun-16 15-Jun-16 16-Jun-16 17-Jun-16 20-Jun-16 21-Jun-16 22-Jun-16 23-Jun-16 24-Jun-16 27-Jun-16 28-Jun-16 29-Jun-16 30-Jun-16 % of All VIX Futures *Hours In Central Time Zone CBOE HOLDINGS 7
Near Record ADV in VIX Futures for 2Q16 CBOE Volatility Index (VIX Index) is considered the world’s barometer of equity market volatility VIX futures ADV up 41% in 2Q16 vs 2Q15; up 19% vs 1Q16 VIX options ADV up 17% in 2Q16 vs 2Q15; down 8% vs 1Q16 Began overnight dissemination of VIX Index on April 15 Offers market participants the ability to view volatility when news breaks overnight CBOE HOLDINGS 8
Extending Access to Our Markets Broadened Access to VIX and SPX Options Trading and VIX Index Information Extended trading hours for VIX and SPX options in March 2015 Six-hour session begins at 2:00 a.m. CT; aligns with open of trading in London Began overnight dissemination of VIX Index on April 15 Continue to see increased trading in VIX Weeklys Total ADV Total ADV VIX Weeklys Monthly ADV for 2016 Total ADV SPX AM Settled Chart Title 60,000 10% % of all VIX Options VIX Weeklys ADV 50,000 40,000 30,000 5% 20,000 10,000 0 0% Jan Feb Mar Apr May June VIX Weeklys ADV Weeklys % of All VIX Options CBOE HOLDINGS 9
Further Developing Current Products to Grow Index Product Line S&P 500 Index (SPX) options, the most actively traded U.S. index option SPX ADV for 2Q16 up 19% vs 2Q15; down 5% vs 1Q16 SPX Weeklys ADV up 18% vs 2Q15; up 7% vs 1Q16 SPX Weeklys with Wednesday Expirations introduced in February Wednesday expirations averaged nearly 88,000 contracts per day in 2Q16, up 56% from 1Q16 Plan to add Monday-expiring Weeklys in August, pending SEC approval *Includes SPX Weeklys CBOE HOLDINGS 10
Expanding Our Global Customer Base Initiatives focused on education, business development and trading technology The fifth annual CBOE Risk Management Conference (RMC) Europe scheduled to take place Sept. 26 through 28 in County Wicklow, Ireland CBOE RMC now includes RMC U.S., RMC Europe and RMC Asia CBOE opened a London office in July, its first international business development outpost Broadened global reach of VIX futures trading with connectivity between CFE and Stellar Trading Systems CBOE HOLDINGS 11
Forming Alliances that Leverage our Strengths CBOE made a minority equity investment in Eris Exchange Holdings, LLC (Eris) in May Eris is a U.S.-based futures exchange group offering swap futures as a capital-efficient alternative to over-the-counter (OTC) swaps CBOE and Eris partnership will focus on: Developing new proprietary products and indexes across asset classes Collaborating to enhance distribution of Eris Interest Rate Swap Futures and related market data Positions CBOE to benefit from the continuing convergence of OTC and listed marketplaces by bringing new capital efficiencies and exchange-traded products to the interest rate marketplace CBOE HOLDINGS 12
Forming Alliances that Leverage our Strengths CBOE to Develop Series of Social Media-Based Strategy Benchmark Indexes CBOE entered into an exclusive licensing agreement with Social Market Analytics (SMA), a leader in providing actionable intelligence from social media sources CBOE plans to develop a series of sentiment-based strategy benchmark indexes based on SMA’s social media metrics These benchmark indexes could be used to build strategies to enhance risk-adjusted returns Expect to introduce first SMA benchmark this summer CBOE HOLDINGS 13
Solid YTD Results Reflect Companywide Commitment to Executing our Strategic Initiatives Adjusted Operating Revenue¹ Chart Title Total ADV (in thousands) (in millions) 5,259 4,829 4,713 4,658 4,660 4,537 $633 $617 $572 $512 $508 $326 $292 2011 2012 2013 2014 2015 6 mos 6 mos 2011 2012 2013 2014 2015 6 mos '16 '15 '16 Adjusted Diluted EPS¹ Adjusted Operating Margin¹ $2.40 51.6% $2.28 50.8% 50.3% 49.2% 48.4% 48.7% $2.03 $1.69 $1.59 $1.21 $1.04 2011 2012 2013 2014 2015 6 mos 6 mos '15 '16 2011 2012 2013 2014 2015 6 mos '16 ¹Adjusted to reflect the impact of certain items. See appendix for “Non - GAAP Information.” CBOE HOLDINGS 14
Financial Review Alan Dean EVP, CFO and Treasurer
2Q16 Financial Overview Adjusted Basis¹ 2Q16 2Q15 $ Change % Change (in millions, except EPS and RPC) Operating Revenues $163.3 $148.7 $14.6 10% Adjusted Operating Expenses 83.8 75.3 8.5 11% Adjusted Operating Income $79.5 $73.4 $6.1 8% -60 bps Adjusted Operating Margin % 48.7% 49.3% Adjusted Net Income Allocated to Common Stockholders $48.7 $44.6 $4.1 9% Adjusted Diluted EPS $0.60 $0.54 $0.06 11% Total ADV 4.55 4.38 4% Revenue per Contract (RPC) $0.405 $0.368 $0.037 10% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non -GAAP Information .” CBOE HOLDINGS 16
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