William J. Brodsky, Chairman and CEO CBOE Holdings, Inc. 2012 Sandler O’Neill Global Exchange & Brokerage Conference June 8, 2012 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 involve a number of risks and 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 exclusive licenses to list certain index options; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes affecting the options markets; increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; increasing price competition; our ability to maintain access fee revenues; economic, political and market conditions; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to accommodate increases in 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; 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 thi d t i id d th bilit f li d i k t th d t 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, 2011 and other filings made from time to time with the SEC filings made from time to time with the SEC. p. 2 p. 2 p. 2 CBOE Holdings, Inc .
At a Glance Leading Brand and Market Position ► • L Leading U.S. options exchange di U S ti h • CBOE and VIX are industry’s leading brands • Well positioned to benefit from secular growth Leading Product Innovator ► • Exclusive index franchise differentiates CBOE • Volatility suite provides strong growth potential High Performance Trading Technology ► • Proprietary, state of the art electronic platform; built and maintained in-house • Powers CBOE, C2, CFE, CBSX and OneChicago p. 3 CBOE Holdings, Inc .
Strong Financial Performance Adjusted Operating Revenues¹ First Quarter 2012 Highlights: Operating Revenues ► • $121.4 million, down 2% • Slight decline related to industry-wide decline in trading volume YOY Adjusted Operating Margin ► • 47.5%, up 80 bps Adjusted Net Income Allocated to ► Common Stockholders Adjusted Operating Margin¹ • $33.0 Million, up 2% Adjusted Diluted EPS j ► • $0.37, up 3% • 7th consecutive quarter of adjusted EPS growth YOY g ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” p. 4 CBOE Holdings, Inc .
Mission and Strategy Develop New Products Create value for stockholders by offering a diversified Optimize Optimize portfolio of risk management Revenue and Market Share in products and services which Commoditized Products generate industry leading g y g profit margins and growth Broaden rates while maintaining the Customer Base highest standards of market g regulation Leverage Customized Trading Technology Technology p. 5 CBOE Holdings, Inc .
Leader in Product Innovation Focus on developing exclusive products that generate premium fees S&P 500 complex ► • Flagship SPX contract • SPX Weeklys • SPXpm VIX product line ► • Sector ETFs and single-stock VIX Sector ETFs and single stock VIX products New futures products on CFE ► CBOE Holdings, Inc . p. 6
SPX Drives Strong Index Volume SPX most actively traded cash index ► • 13% increase in 2011 versus 2010 • • 8% YOY increase through May 2012 8% YOY increase through May 2012 SPX Weeklys important component of SPX comple x ► • 283% increase in 2011 versus 2010 • 50% increase YOY through May 2012 ¹YTD through May 31, 2012 p. 7 CBOE Holdings, Inc .
SPXpm Gaining Traction Working closely with early adopters ► Expanded comprehensive marketing and educational program Expanded comprehensive marketing and educational program ► ► Customer feedback continues to be positive ► Open interest topped 100,000 contracts during each of last three months ► 140,000 8,000 7,000 120,000 t (OI) 6,000 me 100,000 Daily Volum Open Interes 5,000 80,000 4,000 60,000 3,000 40,000 2,000 20,000 1,000 0 0 Oct Dec Nov Jan Feb Mar Apr May Peak OI ADV SPXpm Provides Greater Efficiency, More Control and Lower Costs p. 8 CBOE Holdings, Inc .
Strong Growth in Volatility Trading Strong future growth potential ► • • VIX options up 13% through May VIX options up 13% through May 2012 YOY; up 36% in 1Q12 vs 4Q11 • VIX futures up 73% through May p g y 2012 YOY; up 74% in 1Q12 vs 4Q11 Growth fueled in part by ETPs ► tied to VIX index • AUM up 82% to $5.1 billion from $2.8 billion in Dec. 2011 Adding new VIX benchmarks and ► tradable products • Began publishing values for the g p g CBOE “VIX of VIX” Index ¹YTD through May 31, 2012 p. 9 CBOE Holdings, Inc .
CBOE Volatility Benchmark Indexes CBOE Equity Index Volatility Indexes CBOE VIX Indexes on Individual Equities • CBOE V l tilit I d CBOE Volatility Index (VIX) (VIX) • Apple (VXAPL) • CBOE DJIA Volatility Index (VXD) • Amazon (VXAZN) • CBOE Nasdaq-100 Volatility Index (VXN) • Goldman Sachs (VXGS) • CBOE S&P 100 Volatility Index (VXO) • Google (VXGOG) • IBM (VXIBM) CBOE ETF VIX Indexes • CBOE Gold ETF Volatility Index (GVZ)¹ Other CBOE Volatility-Related Indexes • CBOE Emerging Markets ETF Volatility Index (VXEEM)² • CBOE “VIX of VIX” Index (VVIX) • CBOE Brazil ETF Volatility Index (VXEWZ)³ • CBOE Tail Hedge Strategy Index (VXTH) • CBOE Crude Oil ETF Volatility Index (OVX) 4 • CBOE S&P 500 SKEW Index (SKEW) • CBOE Silver ETF Volatility Index (VXSLV) • CBOE VIX Premium Strategy Index (VPD) • CBOE China ETF Volatility Index (VXFXI) • CBOE Capped VIX Premium Strategy Index (VPN) • CBOE Gold Miners ETF Volatility Index (VXGDX) • CBOE S&P 500 Implied Correlation Indexes • CBOE Energy Sector ETF Volatility Index (VXXLE) (KCJ, ICJ, JCJ) • CBOE EuroCurrency ETF Volatility Index (EVZ) ¹Futures and options began trading in 2011 ¹Futures and options began trading in 2011 ²Futures and options began trading in January 2012 ³Futures began trading in February 2012; options launched in March 2012 4 Futures began trading in March; options began trading in April 2012 p. 10 CBOE Holdings, Inc .
Optimizing Revenue and Market Share In Commoditized Products Achieved significant market share gains: Positive customer response to VIP ► • Pays credits to firms for certain types 28.5% and levels of business at CBOE Market share in multiply-listed ► options up 3.3 percentage points to 22.4% 22.4% for May 2012 versus 19.1% in December 2011 D b 2011 Ensure optimal returns in proprietary ► products • Revised liquidity provider sliding scale to exclude proprietary products ¹Excludes dividend trades Strong Initial Response to VIP p. 11 CBOE Holdings, Inc .
Expanding User Base Focus on customer segments with FLEX Index Options ADV ► greatest potential • Users of OTC market • Institutional investors • Volatility traders OTC-type trades migrating to CBOE ► • 29% increase YOY in FLEX index products through May 2012 • 21% growth in FLEX index products i in 2011 vs 2010 2011 2010 ¹YTD through May 31, 2012 p. 12 CBOE Holdings, Inc .
Providing Enhanced CFLEX Technology Introducing new CFLEX 2.0, customized trading technology ► • Enables convenient access to FLEX options • Features Automated Improvement Mechanism (AIM) • • Began gradual roll out; expect to be fully functional by end of June Began gradual roll out; expect to be fully functional by end of June Expected to attract additional trading to the CBOE marketplace ► p. 13 CBOE Holdings, Inc .
Rollout of CBOE Command ™ Rollout of new trade engine ► technology • CFLEX 2.0 • New API New API • Servers move to New Jersey 4Q12 CBOE Command ™ Systems development y p ► embedded in value proposition Systems designed in-house ► • Provide flexibility, scalability • Cost effective p. 14 CBOE Holdings, Inc .
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