Second Quarter 2014 Earnings Presentation August 1, 2014
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 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. There are important factors that could cause actual results 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; increasing price competition in our industry; compliance with legal and regulatory obligations and obligations under agreements with regulatory agencies; decreases in the amount of 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 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 order transaction traffic without failure or degradation of performance of our systems; our ability to protect our systems and communication networks from security risks, including cyber-attacks; economic, political and market conditions; our ability to maintain access fee revenues; our ability to meet our compliance obligations; our ability to attract and retain skilled management and other personnel; our ability to maintain our growth effectively; our dependence on third party service providers; and the ability of our compliance and risk management methods to effectively monitor and manage our risks. 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, 2013 and other filings made from time to time with the SEC. CBOE HOLDINGS 3
Strategic Review Edward Tilly CEO
Solid Financial Performance Despite Quarter’s Low Volume Trading Environment Second quarter trading activity reflected low market volatility and investor complacency Total ADV of 4.83 MM in 2Q14 Down 14% versus 1Q14 Down 3% versus 2Q13 Increased quarterly dividend and share repurchase authorization Well positioned to benefit as market conditions improve CBOE HOLDINGS 5
Remain Focused on Core Mission and Strategic Initiatives Leverage and Develop Proprietary Products Optimize Revenue in Create value for stockholders Commoditized by generating industry-leading Products profit margins and growth rates through a diversified portfolio of risk management products Broaden Customer and services. Base Provide Highest Standards in Market Regulation and Compliance CBOE HOLDINGS 6
S&P 500 Index (SPX) Product Line SPX Weeklys - fastest growing product in SPX complex SPX ADV for 2Q14 Down 11% versus 1Q14 Down 13% versus 2Q13 SPX Weeklys ADV *includes SPX Weeklys Down 11% versus 1Q14 Up 20% versus 2Q13 CBOE HOLDINGS 7
VIX Options Trading Continues to Grow YOY Low volatility throughout 2Q14 dampened trading in SPX and VIX VIX options ADV for 2Q14 Declined 21% versus 1Q14 Increased 11% versus 2Q13 VIX futures ADV for 2Q14 Down 19% versus 1Q14 Declined 8% versus 2Q13 Focused on long-term growth trajectory CBOE HOLDINGS 8
YTD Through June Shows More Favorable Trading in Index Products SPX ADV down 3% YOY thru June SPX Weeklys ADV up 38% YOY thru June VIX Options ADV up 17% YOY thru June VIX futures ADV up 10% YOY thru June *SPX ADV includes SPX Weeklys ¹YTD through June 30, 2014 CBOE HOLDINGS 9
Focused on Growing Our Customer Base As VIX returns to historical norms, we expect to see even greater participation in VIX options and futures trading CBOE HOLDINGS 10
VIX Futures Trading Poised for Renewed Growth Communication with marketplace integral to developing new product lines Key indicators supporting our growth outlook Increased demand for VIX futures market data over last six months Shift in mix of market participants to include users that are generally more active traders Increasing number of trading permit holders Increased participation provided from 24-hour trading CBOE HOLDINGS 11
Broadening Our Customer Base Extended trading hours for VIX futures to 24X5 Phase 1 Phase 2 Phase 3 June 22, 2014 October 28, 2013 November 4, 2013 • • • Extended hours to nearly 24 Added a 45-minute trading Added another five hours to hours a day, five days a week the trading day session after current close of VIX futures • • Allows customers around the Allows European-based • world to trade VIX futures customers to access VIX Meets demand from U.S. virtually around the clock and customers for a post futures during their local to react immediately to events trading hours settlement trading period affecting global markets • Trading begins at 2:00 a.m. • Trading week begins each CT; aligns with open of Sunday at 5:00 p.m. CT and London markets ends Friday at 3:15 p.m. CT; CFE closes between 3:15 p.m. and 3:30 p.m. CT on Monday through Thursday CBOE HOLDINGS 12
Increasing Access to VIX Futures Trading Through Extended Trading Hours 10.2% of VIX futures trading took place during non-U.S. trading hours in July, our first full month of 24-hour trading June 22 extended trading hours to nearly 24X5 8.1% of VIX futures traded during non-U.S. trading hours YTD though July, up from 7.7% through June Plan to add trading hours for VIX and SPX options in 4Q14, pending regulatory approval Initial launch 2:00 am to 8:15 am CT Monday through Friday CBOE HOLDINGS 13
Expanding Volatility Suite of Products Launched Futures on Short-Term Volatility Index (VXST) on February 13 th – Options on April 10 th Low-volatility environment has posed headwinds for VXST Believe market participants will embrace the utility of VXST futures and options Launched targeted educational and social media programs CBOE HOLDINGS 14
Expanding Volatility-Related Products and Benchmarks Diversifying VIX product line across asset classes provides growth opportunity Began disseminating index values in May 2013 Plan to launch futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (VXTYN Index) later this year, pending regulatory review Introduction of options to follow We view interest-rate volatility as an exciting new frontier in the volatility marketplace CBOE HOLDINGS 15
Optimizing Revenue and Market Share in Multiply-Listed Options Focused on being among the leaders in options market share In June 2014: CBOE & C2 accounted for 30.4% of 28.4% industry volume; up versus 29.5% in March 2014 22.8% CBOE total market share of 28.4%; up versus 28.0% in March 2014 CBOE multiply-listed market share of 20.7% versus 20.8% in March 2014 Maximize market share in multiply- listed options ¹Market share stats exclude dividend trades CBOE HOLDINGS 16
CBOE RMC Attracts Most Active and Sophisticated VIX Customers Boosting awareness of CBOE’s proprietary products Third annual RMC Europe Looking For an Edge in to be held Sept. 3 rd thru 5 th Managing Risk? Program will highlight: The CBOE Risk Management Conference is Small-cap strategies that use the premier educational our Russell product line forum for users of equity derivatives and volatility products. Strategies for Short-Term VIX, VXTYN and our SPX product Join us for the 3rd Annual line CBOE RISK MANAGEMENT CONFERENCE EUROPE SEPTEMBER 3-5, 2014 The Powerscourt Hotel Powerscourt Estate, Enniskerry, Co. Wicklow, Ireland CBOE HOLDINGS 17
Continue to Further Define and Expand Options and Volatility Space Develop New Products Extend Global Customer Reach Return Value to Invest in Stockholders Strategic Maximize Growth revenue in multiply-listed Initiatives Maintain products Prudent Fiscal Management Provide Highest Standards in Market Regulation and Compliance CBOE HOLDINGS 18
Financial Review Alan Dean EVP, CFO and Treasurer
2Q14 Financial Overview Adjusted Basis¹ 2Q14 2Q13 $ Change % Change (in millions, except EPS and RPC) Operating Revenues $143.9 $150.8 -$6.9 -5% Adjusted Operating Expenses 74.2 73.6 0.6 1% Adjusted Operating Income $ 69.7 $ 77.2 -$7.5 -10% -280 bps Adjusted Operating Margin % 48.4% 51.2% Adjusted Net Income Allocated to Common Stockholders $ 42.6 $ 47.0 -$4.4 -9% Adjusted Diluted EPS $ 0.50 $ 0.54 -$0.04 -7% Total ADV 4.83 4.96 -3% Revenue per Contract $0.322 $0.334 -$0.012 -4% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non - GAAP Information.” CBOE HOLDINGS 20
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