Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist the reader in understanding the results of operations, liquidity and capital resources, and critical accounting estimates and policies through the eyes of our management team. The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included in Item 8 of this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See “Risk Factors” and “Forward-Looking Statements” above.
A detailed comparison of the Company’s 2023 operating results to its 2022 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s 2023 Annual Report on Form 10-K filed February 16, 2024 at www.sec.gov.
INTRODUCTION
Management’s Discussion and Analysis of Financial Condition and Results of Operations is organized as follows:
•Executive Summary – Includes an overview of the Company’s business; a description of notable recent developments, current economic, competitive and regulatory trends relevant to our business; the Company’s current business strategy; and the Company’s primary sources of operating and non-operating revenues and expenses.
•Results of Operations – Includes an analysis of the Company’s 2024 and 2023 financial results and a discussion of any known events or trends which are likely to impact future results.
•Liquidity and Capital Resources – Includes a discussion of the Company’s future cash requirements, capital resources, and financing arrangements.
•Critical Accounting Estimates – Provides an explanation of accounting estimates which may have a significant impact on the Company’s financial results and the judgments, assumptions, and uncertainties associated with those estimates.
•Recent Accounting Pronouncements – Includes an evaluation of recent accounting pronouncements and the potential impact of their future adoption on the Company’s financial results.
EXECUTIVE SUMMARY
Overview
Cboe Global Markets, Inc., the world's leading derivatives and securities exchange network, delivers cutting-edge trading, clearing and investment solutions to people around the world. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives, and FX, across North America, Europe, and Asia Pacific. Above all, the Company is committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future.
Cboe’s subsidiaries include the largest options exchange and the third largest equities exchange operator in the U.S. In addition, the Company operates Cboe Europe, one of the largest equities exchanges by value traded in Europe, and owns Cboe Clear Europe, a leading pan-European equities and derivatives clearinghouse, BIDS Holdings, which owns a leading block-trading ATS by volume in the U.S., and provides block-trading services with Cboe market operators in Europe, Canada, Australia, and Japan, Cboe Australia, an operator of trading venues in Australia, Cboe Japan, an operator of trading venues in Japan, Cboe Clear U.S., an operator of a regulated clearinghouse, and Cboe Canada Inc., a recognized Canadian securities exchange. Cboe subsidiaries also serve collectively as a leading market globally for exchange-traded products (“ETPs”) listings and trading.
On April 25, 2024, the Company announced plans to refocus the digital asset business to leverage its core strengths in derivatives, technology, and product innovation. On May 31, 2024, the Company halted trading on the Cboe Digital spot market (“Cboe Digital spot market”). The Cboe Digital spot market is closed for all participant and trading purposes. In addition, the Company plans to transition the cash-settled margin Bitcoin and Ether futures contracts, currently available for trading on Cboe Digital Exchange, LLC's Digital Exchange ("Cboe Digital Exchange"), to CFE in the first half of 2025, pending regulatory review. The Company has brought Cboe Clear U.S. (formerly, Cboe Clear Digital) under unified leadership with the Global Head of Clearing, and expects to continue to facilitate the clearing of cash-settled margin Bitcoin and Ether futures contracts.
The Company is headquartered in Chicago with offices in Amsterdam, Belfast, Hong Kong, Kansas City, London, Manila, New York, San Francisco, Sarasota Springs, Singapore, Sydney, Tokyo, and Toronto.
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Recent Developments
Pyth Tokens Unlocking
In October 2022, the Company, through its wholly-owned subsidiary, Cboe Netherlands Services Company B.V., entered into a Data Provider Agreement with Pyth Data Association (“Pyth”) to create a data feed and begin publishing limited derived equities market data for certain symbols from one of its four U.S. equities exchanges on the Pyth Network, a decentralized financial market data distribution platform for aggregated data. In exchange, Pyth granted Cboe Netherlands Services Company B.V. 16,666,666 restricted PYTH tokens which unlock annually over a four-year period in equal tranches; the first 25% tranche of PYTH tokens unlocked in May 2024. The PYTH tokens, which are included within intangible assets, net in the consolidated balance sheets, are carried at their historical value of $0.06 per token and are reviewed each reporting period for potential impairment. In May 2024, the Company recorded $1.0 million in market data fees revenue on the consolidated statements of income, which represents the historical value of the grant of 16,666,666 restricted PYTH tokens earned for satisfying the performance obligations outlined in the Data Provider Agreement. The Company has earned additional PYTH tokens by continuing to provide data to the Pyth Network through various Pyth Reward Programs. Through December 31, 2024, the Company earned an additional 725,000 PYTH tokens via the Pyth Reward Programs. The Company recorded additional intangible assets and revenue based on the token fair value when earned.
Securities Financing Transactions
On November 25, 2024, Cboe Clear Europe announced that it received regulatory approval to clear European SFT. The service supports key regulatory initiatives such as the European Market Infrastructure Regulation, Central Securities Depository Regulation, and the Securities Financing Transactions Regulation, thereby promoting transparency, market integrity, and competition in European capital markets. As of December 31, 2024, no SFT trades had occurred on the Cboe Clear Europe platform.
Business Segments
The Company operates six reportable business segments: Options, North American Equities, Europe and Asia Pacific, Futures, Global FX, and Digital, which is reflective of how the Company's chief operating decision maker ("CODM") reviews and operates the business, as discussed in Note 1 ("Nature of Operations"). The primary measure of segment performance used by the CODM in assessing segment-level performance and the allocation of resources is operating income (loss). The Company's CODM does not assess assets or income and expenses below operating income (loss) at the segment-level as key performance metrics. The Company has aggregated all of its corporate costs, as well as other business ventures, within the Corporate Items and Eliminations totals based on the decision that those activities should not be used to evaluate the operating performance of the segments; however, operating expenses that relate to activities of a specific segment have been allocated to that segment.
Options. The Options segment includes options on market indices (“index options”), as well as on the stocks of individual corporations (“equity options”) and on ETPs such as exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”), which are “multi-listed” options and listed on a non-exclusive basis. These options are eligible to trade, as applicable, on Cboe Options, C2, BZX, EDGX, and/or other U.S. national security exchanges. Cboe Options is the Company’s primary options market and offers trading in listed options through a single system that integrates electronic trading and traditional open outcry trading on the Cboe Options trading floor in Chicago. C2 Options, BZX Options, and EDGX Options are all-electronic options exchanges, and typically operate with different market models and fee structures than Cboe Options. The Options segment also includes applicable market data fees revenues generated from the consolidated tape plans, the licensing of proprietary options market data, index licensing, routing services, and access and capacity services.
North American Equities. The North American Equities segment includes U.S. equities and ETP transaction services that occur on fully electronic exchanges owned and operated by BZX, BYX, EDGX, and EDGA, equities transactions that occur on the BIDS Trading platform in the U.S. and Canada, and Canadian equities and other transaction services that occur on or through Cboe Canada Inc.’s order books. The North American Equities segment also includes corporate listing services on Cboe Canada Inc., ETP listings on BZX, the Cboe Global Markets, Inc. common stock listing, and applicable market data fees revenues generated from the consolidated tape plans, the licensing of proprietary equities market data, routing services, and access and capacity services.
Europe and Asia Pacific. The Europe and Asia Pacific segment includes the pan-European listed equities and derivatives transaction services, ETPs, including exchange traded funds, exchange traded notes, and exchange traded commodities, and international depository receipts that are hosted on MTFs operated by Cboe Europe Equities (Cboe Europe and Cboe NL equities exchanges) and Cboe Europe Derivatives (“CEDX”). It also includes the ETP listings business on RMs and clearing activities of Cboe Clear Europe, as well as the equities transaction services of Cboe Australia and Cboe Japan, operators of trading venues in Australia and Japan, respectively, along with equities transactions that occur on the BIDS Trading platform in Australia and Japan. Cboe Europe operates lit and dark books, a periodic auctions book, a closing cross book, and two BIDS orderbooks; a Large-in-Scale (“LIS”) trading negotiation facility and - predominantly for UK and Swiss symbols - a volume-weighted average price (“VWAP”) trajectory crossing facility. Cboe NL, based in Amsterdam,
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operates similar business functionality to that offered by Cboe Europe (with exception of Trajectory Crossing), and provides for trading only in European Economic Area (“EEA”) symbols. Cboe Europe Derivatives, a pan-European derivatives platform, offers futures and options based on Cboe Europe equity indices, and single stock options. Cboe Clear Europe offers the clearing of equity and equity-like instruments for Cboe-operated and other regulated trading venues, the clearing of derivative transactions executed on CEDX, and has recently introduced a service to clear Securities Financing Transactions. This segment also includes Cboe Europe, Cboe NL, CEDX, Cboe Australia and Cboe Japan revenue generated from the licensing of proprietary market data and from access and capacity services.
Futures. The Futures segment includes transaction services provided by CFE, a fully electronic futures exchange, which includes offerings for trading of VIX futures and other futures products, the licensing of proprietary market data, as well as access and capacity services. On April 25, 2024, the Company announced plans to transition the cash-settled margin Bitcoin and Ether futures contracts, currently available for trading on the Cboe Digital Exchange, to CFE in the first half of 2025, pending regulatory review.
Global FX. The Global FX segment includes institutional FX trading services that occur on the Cboe FX fully electronic trading platform, non-deliverable forward FX transactions (“NDFs”) offered for execution on Cboe SEF, as well as revenue generated from the licensing of proprietary market data and from access and capacity services. The segment includes transaction services for U.S. government securities executed on the Cboe Fixed Income fully electronic trading platform.
Digital. The Digital segment includes a regulated futures exchange (Cboe Digital Exchange) and a regulated clearinghouse (Cboe Clear U.S.), as well as revenue generated from the licensing of proprietary market data and from access and capacity services. Prior to May 31, 2024, the Digital segment also included a U.S.-based spot digital asset trading market (“Cboe Digital spot market”). As of May 31, 2024, the Cboe Digital spot market is closed for all participant and trading purposes. In addition, the Company plans to transition the cash-settled margin Bitcoin and Ether futures contracts, currently available for trading on the Cboe Digital Exchange, to CFE in the first half of 2025, pending regulatory review. The Company expects that Digital will cease to be a distinct reportable business segment in the first quarter of 2025.
General Factors Affecting Results of Operations
In broad terms, our business performance is impacted by a number of drivers, including macroeconomic events affecting the risk and return of financial assets, investor sentiment, the regulatory environment for capital markets, geopolitical events, tax policies, central bank policies and changing technology, particularly in the financial services industry. We believe our future revenues and net income will continue to be influenced by a number of domestic and international economic trends, including:
•trading volumes on our proprietary products such as VIX options and futures and SPX options;
•trading volumes in listed equity securities, options, futures, and ETPs in North America, Europe, and Asia Pacific, clearing volumes in listed equity securities, options, futures, and ETPs in Europe and volumes in institutional FX trading;
•the demand for and pricing structure of the U.S. tape plan market data distributed by the Securities Information Processors ("SIPs"), which determines the pool size of the industry market data fees we receive based on our market share;
•consolidation and expansion of our customers and competitors in the industry;
•the demand for information about, or access to, our markets and products, which is dependent on the products we trade, our importance as a liquidity center, quality and integrity of our proprietary indices, and the quality and pricing of our data and access and capacity services;
•continuing pressure in transaction fee pricing due to intense competition in the North American, European, and Asia Pacific markets;
•significant fluctuations in foreign currency translation rates or weakened value of currencies; and
•regulatory changes and obligations relating to market structure, increased capital or margin requirements, and those which affect certain types of instruments, transactions, products, pricing structures, capital market participants or reporting or compliance requirements.
A number of significant structural, political, monetary, and global conflicts continue to confront the global economy, and instability could continue, resulting in an increased or subdued level of: inflation, market volatility, potential recession, supply chain constraints and costs, trading volumes, uncertainty, expenses, and increased costs and uncertainties related to CAT and the ability to collect on the promissory notes related to the funding of CAT, may have an adverse effect on our financial results.
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Components of Revenues
Cash and Spot Markets
Revenue aggregated into cash and spot markets includes associated transaction and clearing fees, the portion of market data fees relating to associated U.S. tape plan market data fees, associated regulatory fees, and associated other revenue from the Company’s North American Equities, Europe and Asia Pacific, Global FX, and Digital segments.
Data Vantage
Revenue aggregated into Data Vantage includes access and capacity fees, proprietary market data fees, and associated other revenue across the Company’s six segments.
Derivatives Markets
Revenue aggregated into derivatives markets includes associated transaction and clearing fees, the portion of market data fees relating to associated U.S. tape plan market data fees, associated regulatory fees, and associated other fees from the Company’s Options, Futures, Europe and Asia Pacific, and Digital segments.
Components of Cost of Revenues
Liquidity Payments
Liquidity payments are primarily correlated to the volume of securities traded on our markets. As stated above, we record the liquidity rebates paid to market participants providing liquidity, in the case of Cboe Options, C2, BZX, EDGX, Cboe Europe Equities and Derivatives, CFE, and Cboe Digital, as cost of revenue. BYX offers an inverted pricing model where we rebate liquidity takers for executing against an order resting on our book, which is also recorded as a cost of revenues. Effective November 1, 2024, EDGA transitioned from an inverted fee model to a maker-taker fee model.
Routing and Clearing
Various rules require that U.S. options and equities trade executions occur at the National Best Bid and Offer displayed by any exchange. Linkage order routing consists of the cost incurred to provide a service whereby Cboe equities and options exchanges deliver orders to other execution venues when there is a potential for obtaining a better execution price or when instructed to directly route an order to another venue by the order provider. The service affords exchange order flow providers an opportunity to obtain the best available execution price and may also result in cost benefits to those clients. Such an offering improves our competitive position and provides an opportunity to attract orders which would otherwise bypass our exchanges. We utilize third-party brokers or our broker-dealer, Cboe Trading, to facilitate such delivery. Also included within routing and clearing are the Order Management System ("OMS") and Execution Management System (“EMS”) fees incurred for U.S. Equities Off-Exchange order execution, as well as settlement costs incurred for the settlement process executed by Cboe Clear Europe and Cboe Clear U.S.
Section 31 Fees
Exchanges under the authority of the SEC (Cboe Options, C2, BZX, BYX, EDGX, and EDGA as well as CFE to the extent that CFE offers trading in security futures products) are assessed fees pursuant to the Exchange Act designed to recover the costs to the U.S. government of supervision and regulation of securities markets and securities professionals. We treat these fees as a pass-through charge to customers executing eligible listed equities and listed equity options trades. Accordingly, we recognize the amount that we are charged under Section 31 as a cost of revenues and the corresponding amount that we charge our customers as regulatory transaction fees revenue. Since the regulatory transaction fees recorded in revenues are equal to the Section 31 fees recorded in cost of revenues, there is no impact on our operating income. Cboe Trading, Cboe Europe, Cboe NL, BIDS, Cboe FX, Cboe Australia, Cboe Japan, Cboe Digital, and Cboe Canada Inc. are not U.S. national securities exchanges, and accordingly are not charged Section 31 fees.
Royalty Fees and Other Cost of Revenues
Royalty fees primarily consist of license fees paid by us for the use of underlying indices in our proprietary products usually based on contracts traded. The Company has licenses with the owners of the S&P 500 Index, S&P 100 Index and certain other S&P indices, FTSE Russell indices, the DJIA, MSCI, and certain other index products. This category also includes fees related to the dissemination of market data related to S&P indices and other products through Cboe Global Indices Feed (“CGIF”).
Other cost of revenues primarily consists of interest expense from clearing operations, electronic access permit fees and other miscellaneous costs associated with other revenue.
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Components of Operating Expenses
Compensation and Benefits
Compensation and benefits represent our largest expense category and tend to be driven by our staffing requirements, financial performance, and the general dynamics of the employment market. Stock-based compensation is a non-cash expense related to employee equity awards. Stock-based compensation can vary depending on the quantity and fair value of the award on the grant date and the related service period.
Depreciation and Amortization
Depreciation and amortization expense results from the depreciation of long-lived assets purchased, the amortization of purchased and internally developed software, and the amortization of intangible assets.
Technology Support Services
Technology support services consists primarily of costs related to the maintenance of computer equipment supporting our system architecture, circuits supporting our wide area network, support for production software, operating system license and support fees, fees paid to information vendors for displaying data and off-site system hosting fees.
Professional Fees and Outside Services
Professional fees and outside services consist primarily of consulting services, which include supplemental staff activities primarily related to systems development and maintenance, legal, regulatory and audit, and tax advisory services, as well as compensation paid to non-employee directors, including stock-based compensation and deferred compensation.
Travel and Promotional Expenses
Travel and promotional expenses primarily consist of advertising, costs for special events, sponsorship of industry conferences, options education seminars, and travel-related expenses.
Facilities Costs
Facilities costs primarily consist of expenses related to owned and leased properties including rent, maintenance, utilities, real estate taxes, and telecommunications costs.
Acquisition-Related Costs
Acquisition-related costs relate to acquisitions and other strategic opportunities. The acquisition-related costs include fees for investment banking advisors, lawyers, accountants, tax advisors, public relations firms, severance and retention costs, capitalized software and facilities, and other external costs directly related to mergers and acquisitions.
Impairment of Goodwill
Impairment of goodwill consists of charges to impair goodwill of our reporting units if the carrying value exceeds the implied fair value.
Impairment of Intangible Assets
Impairment of intangible assets consists of charges to impair intangible assets if the carrying value exceeds the fair value.
Other Expenses
Other expenses represent costs necessary to support our operations that are not already included in the above categories, including, but not limited to, changes in contingent consideration.
Non-Operating (Expenses) Income
Income and expenses incurred through activities outside of our core operations are considered non-operating and are classified as other (expenses) income. These activities primarily include interest earned on the investing of excess cash, commitment fees and interest expense related to outstanding debt facilities, income and unrealized gains and losses related to investments held in a trust for the Company’s non-qualified retirement and benefit plans, including non-employee director deferred compensation, realized gains related to lease modifications, realized gains related to the Company’s previously
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held minority investments, income earned related to the Company’s minority investments, equity earnings or losses from our investments in other business ventures, impairment of the Company’s investments, investment establishment costs associated with new business ventures, and gains and losses relating to the dissolution of the Cboe Digital syndication.
RESULTS OF OPERATIONS
The following are summaries of changes in financial performance and include certain non-GAAP financial measures. Management uses these non-GAAP measures internally in conjunction with GAAP measures to help evaluate our performance and to help make financial and operational decisions. These non-GAAP financial measures assist management in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items management believes do not reflect our underlying operations.
We believe our presentation of these measures provides investors with greater transparency into financial measures used by management and is useful to investors for period-to-period comparisons of our ongoing operating performance.
These non-GAAP financial measures are not presented in accordance with, or as an alternative to, GAAP financial measures and may be calculated differently from non-GAAP measures used by other companies, which reduces their usefulness as comparative measures. We encourage analysts, investors and other interested parties to use these non-GAAP measures as supplemental information to the GAAP financial measures included herein, including our consolidated financial statements, to enhance their analysis and understanding of our performance and in making comparisons. Please see the footnotes below for definitions, additional information, and reconciliations from the closest GAAP measure.
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Comparison of Years Ended December 31, 2024 and 2023
Overview
The following summarizes changes in financial performance for the year ended December 31, 2024, compared to the year ended December 31, 2023:
(1)These are Non-GAAP figures for which reconciliations are provided below (in millions, except percentages, earnings per share, and as noted below).
Year Ended December 31, Increase/(Decrease) Percent Change
Adjusted EBITDA margin (3) 65.2 % 64.9 % 0.3 % *
Diluted weighted average shares outstanding 105.5 106.2 (0.7) (1) %
Adjusted Diluted earnings per share (5) $ 8.61 $ 7.80 $ 0.81 10 %
________________________________________________________
* Not meaningful
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(1)EBITDA is defined as income before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before acquisition-related costs, change in contingent consideration, loss on minority investments, gain on sale of property held for sale, contra-revenue associated with the Cboe Digital syndication wind down, gain on Cboe Digital non-recourse notes and warrants wind down, impairment of intangible assets, costs related to the Cboe Digital wind down, and income from minority investment. EBITDA and adjusted EBITDA do not represent, and should not be considered as, alternatives to net income as determined in accordance with GAAP. We have presented EBITDA and adjusted EBITDA because we consider them important supplemental measures of our performance and believe that they are frequently used by analysts, investors and other interested parties in the evaluation of companies. In addition, we use adjusted EBITDA as a measure of operating performance for preparation of our forecasts and evaluating our leverage ratio for the debt to earnings covenant included in our outstanding credit facility. Other companies may calculate EBITDA and adjusted EBITDA differently than we do. EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
(3)Adjusted EBITDA margin represents adjusted EBITDA divided by revenues less cost of revenues.
(4)Adjusted earnings is defined as net income adjusted for acquisition-related costs, amortization of acquired intangible assets, gain on Cboe Digital non-recourse notes and warrants wind down, contra-revenue associated with the Cboe Digital syndication wind down, change in contingent consideration, impairment of intangible assets, income from minority investment, loss on minority investments, costs related to the Cboe Digital wind down, gain on sale of property held for sale, certain tax reserve changes, and net income or loss allocated to participating securities, net of the income tax effects of these adjustments. Adjusted earnings does not represent, and should not be considered as, an alternative to net income or loss, as determined in accordance with GAAP. We have presented adjusted earnings because we consider it an important supplemental measure of our performance and we use it as the basis for monitoring our own core operating financial performance relative to other operators of exchanges. We also believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies. We believe that investors may find this non-GAAP measure useful in evaluating our performance compared to that of peer companies in our industry. Other companies may calculate adjusted earnings differently than we do. Adjusted earnings has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
(5)Adjusted diluted earnings per share represents adjusted earnings divided by diluted weighted average shares outstanding.
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The following is a reconciliation of net income (loss) allocated to common stockholders to EBITDA and adjusted EBITDA (in millions) for the year ended December 31, 2024 and 2023, respectively:
Year Ended December 31,
Acquisition-related costs — 0.4 0.3 — — 0.1 0.5 1.3
Change in contingent consideration — (1.0) — — — — 3.1 2.1
Loss on investments — — — — — — 31.4 31.4
Gain on sale of property held for sale (1.0) — — — — — — (1.0)
Cboe Digital syndication wind down — — — — — (1.0) — (1.0)
Impairment of intangible assets — — — — — 81.0 — 81.0
Costs related to Cboe Digital wind down — — — — — 2.1 — 2.1
Year Ended December 31,
Acquisition-related costs — 0.8 0.8 — — 1.0 4.8 7.4
Loss on investments — — — — — — 1.8 1.8
Income from investment — — — — — — (2.1) (2.1)
Change in contingent consideration — (7.5) (6.9) — — — — (14.4)
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The following is a reconciliation of net income allocated to common stockholders to adjusted earnings (in millions):
Year Ended December 31,
Net income allocated to common stockholders $ 761.0 $ 757.5
Acquisition-related costs 1.3 7.4
Amortization of acquired intangible assets 88.7 116.6
Gain on Cboe Digital non-recourse notes and warrants wind down (1.4) —
Cboe Digital syndication wind down (1.0) —
Change in contingent consideration 2.1 (14.4)
Impairment of intangible assets 81.0 —
Income from investment — (2.1)
Loss on investments 31.4 1.8
Costs related to Cboe Digital wind down 2.1 —
Gain on sale of property held for sale (1.0) —
Tax effect of adjustments (52.2) (30.7)
Release of tax reserves (8.1) (6.0)
Valuation allowances 5.0 (2.7)
Deferred tax re-measurements — 1.1
Net income allocated to participating securities (0.9) (0.4)
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The following summarizes changes in certain operational and financial metrics for the year ended December 31, 2024 compared to the year ended December 31, 2023:
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The following summarizes changes in certain operational and financial metrics for the year ended December 31, 2024 compared to the year ended December 31, 2023 (continued from previous page):
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The following table includes operational and financial metrics for our Options, North American Equities, Europe and Asia Pacific, Futures, and Global FX segments. The following summarizes changes in certain operational and financial metrics for the year ended December 31, 2024 compared to the year ended December 31, 2023:
Year Ended December 31, Increase/(Decrease) PercentChange
(in millions, except percentages, trading days, and as noted below)
Options:
Average daily volume (ADV) (in millions of contracts):
Total Options revenue per contract (RPC) (2) $ 0.293 $ 0.276 $ 0.017 6 %
Total Options market share 30.8 % 33.1 % (2.3) % *
Multi-listed options market share 24.5 % 26.8 % (2.3) % *
North American Equities:
U.S. Equities:
U.S. Equities - Exchange:
ADV:
Total touched shares (in billions) (1) 1.5 1.5 — (1) %
U.S. ETPs: launches (number of launches) 235 124 111 90 %
U.S. ETPs: listings (number of listings) 871 666 205 31 %
U.S. Equities - Off-Exchange:
ADV:
Total touched shares (in millions) (1) 79.0 79.5 (0.5) (1) %
Canadian Equities:
Europe and Asia Pacific:
European Equities:
ADNV:
Matched ADNV (Euros - in billions) (7) € 9.8 € 9.4 € 0.4 4 %
Cboe Clear Europe:
European equities market share cleared (11) 37.4 % 34.9 % 2.5 % *
Australian Equities:
ADNV (AUD - in billions) $ 0.8 $ 0.7 $ 0.1 12 %
Market share - Continuous 20.7 % 18.7 % 2.0 % *
Japanese Equities:
Market share - Lit Continuous 5.2 % 4.0 % 1.2 % *
Futures:
Global FX:
ADNV ($ - in billions) $ 46.7 $ 44.7 $ 2.0 5 %
Net capture (per one million dollars traded) (16) 2.68 2.64 0.04 1 %
Average British pound/U.S. dollar exchange rate $ 1.278 $ 1.243 $ 0.035 3 %
Average Euro/U.S. dollar exchange rate $ 1.082 $ 1.081 $ 0.001 0 %
Average Euro/British pound exchange rate £ 0.847 £ 0.870 £ (0.023) (3) %
Average Japanese Yen/U.S. dollar exchange rate $ 0.007 $ 0.007 $ — 0 %
________________________________________________________
* Not meaningful
Note, the percent change listed represents the change in the unrounded metrics figures.
Note, the Digital segment is not included as results were not material for the year ended December 31, 2024 and 2023.
Note, as of January 2025, European equities market share cleared excludes market volume not cleared within the Cboe Clear Europe pan-European equities market space. Prior periods have been restated in accordance with this methodology.
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(1)Touched volume represents the total number of shares of equity securities and ETFs internally matched on our exchanges or routed to and executed on an external market center.
(2)Average revenue per contract, for options and futures represents total net transaction fees recognized for the period divided by total contracts traded during the period.
(3)Net capture per one hundred touched shares refers to transaction fees less liquidity payments and routing and clearing costs divided by the product of one-hundredth ADV of touched shares on BZX, BYX, EDGX, and EDGA and the number of trading days.
(4)Net capture per one hundred touched shares refers to transaction fees less order and execution management system (OMS/EMS) fees and clearing costs divided by the product of one-hundredth ADV of touched shares on BIDS Trading and the number of trading days for the period.
(5)Matched volume represents the total number of shares of equity securities and ETFs activity executed on our exchanges.
(6)Net capture per 10,000 touched shares refers to transaction fees divided by the product of one-ten thousandth ADV of shares for MATCHNow and Cboe Canada and the number of trading days. As of January 1, 2024, the Cboe Canada and MATCHNow entities have been amalgamated into Cboe Canada Inc.
(7)Matched ADNV represents the average daily notional value of shares or contracts executed on our exchanges.
(8)Net capture per matched notional value refers to transaction fees less liquidity payments in British pounds divided by the product of ADNV in British pounds of shares matched on Cboe Europe Equities and the number of trading days.
(9)Trades cleared refers to the total number of non-interoperable trades cleared.
(10)Fee per trade cleared refers to clearing fees divided by number of non-interoperable trades cleared.
(11)European Equities market share cleared represents Cboe Clear Europe’s client volume cleared divided by the total volume of the publicly reported European venues.
(12)Net settlement volume refers to the total number of settlements executed after netting.
(13)Net fee per settlement refers to settlement fees less direct costs incurred to settle divided by the number of settlements executed after netting.
(14)Net capture per matched notional value refers to transaction fees less liquidity payments in Australian dollars divided by the product of ADNV in Australian dollars of shares matched on Cboe Australia and the number of Australian Equities trading days.
(15)Net capture per matched notional value refers to transaction fees less liquidity payments in Japanese Yen divided by the product of ADNV in Japanese Yen of shares matched on Cboe Japan and the number of Japanese Equities trading days.
(16)Net capture per one million dollars traded refers to net transaction fees less liquidity payments, if any, divided by the Spot and SEF products of one-thousandth of ADNV traded on the Cboe FX Markets and the number of trading days, divided by two, which represents the buyer and seller that are both charged on the transaction.
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Revenues
Total revenues for the year ended December 31, 2024 increased $321.0 million, or 9%, compared to the year ended December 31, 2023 primarily due to increases across all revenue captions, driven by an increase in the Section 31 fee rate following a rate change in May 2024, an increase in transaction and clearing fees as a result of increased volumes on the Cboe U.S. equities, Cboe options, Cboe European equities, and Cboe futures exchanges, an increase in other revenue attributable to Cboe Clear Europe, and increases in access and capacity fees across segments.
The following summarizes changes in revenues for the year ended December 31, 2024 compared to the year ended December 31, 2023 (in millions, except percentages):
Year EndedDecember 31, Increase/(Decrease) Percent Change
Cash and Spot Markets
Cash and spot markets revenue increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in regulatory fees, transaction and clearing fees, and other revenue. Regulatory fees increased primarily due to a 94% increase in the Section 31 fee rate, from an average of $10.35 per million dollars of covered sales for the year ended December 31, 2023 to an average rate of $20.08 per million dollars of covered sales for the year ended December 31, 2024. Transaction and clearing fees increased primarily due to pricing changes and shifts in volumes on the Cboe U.S. equities exchanges, a 4% increase in Cboe European equities' matched ADNV, a 72% increase in Cboe Japanese equities' ADNV, and an 11% increase in Cboe Clear Europe's net settlement volume. Other revenue increased primarily due to an increase in interest income attributable to Cboe Clear Europe as a result of the changing interest rate environment, coupled with additional interest earned in accordance with the change in its investment policy. See Note 14 ("Clearing Operations") for additional information on Cboe Clear Europe's investment policy.
Data Vantage
Data Vantage revenue increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in access and capacity fees and proprietary market data fees. Access and capacity fees increased primarily due to increased logical and physical port fees in the North American Equities, Options, and Europe and Asia Pacific segments driven by increased customer demand. Proprietary market data fees increased primarily due to increases in in the Options, North American Equities, and Europe and Asia Pacific segments.
Derivatives Markets
Derivatives markets revenue increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in regulatory fees, coupled with an increase in transaction and clearing fees. Regulatory fees increased primarily due to a 94% increase in the Section 31 fee rate, from an average of $10.35 per million dollars of covered sales for the year ended December 31, 2023 to an average rate of $20.08 per million dollars of covered sales for the year ended December 31, 2024. Transaction and clearing fees increased primarily due to an 8% increase in index options ADV and a 7% increase in Futures ADV, partially offset by a 2% decrease in multi-listed options market share.
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Cost of Revenues
The following tables reconcile the disaggregated cost of revenues captions presented on the consolidated statements of income to the revenue captions presented on the consolidated statements of income for the year ended December 31, 2024 and 2023, respectively (in millions):
Cash and Spot Markets Data Vantage Derivatives Markets Total
Cash and Spot Markets Data Vantage Derivatives Markets Total
Total cost of revenues increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increased cash and spot markets cost of revenues as a result of an increase in the Section 31 fee rate, coupled with an increase in other cost of revenues as a result of an increase in interest expense related to Cboe Clear Europe and an increase in royalty fees for licensed products, partially offset by a decrease in liquidity payments on the Cboe options exchanges, driven by a decline in multi-listed options market share.
The following summarizes the changes in the disaggregated cost of revenues for the year ended December 31, 2024 compared to the year ended December 31, 2023 (in millions, except percentages):
Year EndedDecember 31, Increase/(Decrease) Percent Change
Liquidity Payments
Liquidity payments decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decline in liquidity payments on the Cboe options exchanges, as a result of a 2% decline in multi-listed options market share, partially offset by an increase in liquidity payments on the Cboe U.S. equities exchanges as a result of a shift in volumes of certain market participants.
Routing and Clearing
Routing and clearing fees decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease in routed shares on the Cboe options exchanges.
Section 31 Fees
Section 31 fees increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a 94% increase in the Section 31 fee rate, from an average rate of $10.35 per million dollars of covered sales for the year ended December 31, 2023 to an average rate of $20.08 per million dollars of covered sales for the year ended December 31, 2024.
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Royalty Fees and Other Cost of Revenues
Royalty fees and other cost of revenues increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in interest expense attributable to Cboe Clear Europe as a result of the changing interest rate environment and a change in its investment policy, coupled with an increase in trading volumes of licensed products in the Options segment. See Note 14 ("Clearing Operations") for additional information on Cboe Clear Europe's investment policy.
Revenues Less Cost of Revenues
Revenues less cost of revenues increased $154.4 million, or 8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in derivatives markets revenues less cost of revenues, driven by an increase in volumes on the Cboe options and futures exchanges, an increase in cash and spot markets revenues less cost of revenues driven by an increase in net capture on the Cboe U.S. equities exchanges and Cboe European equities exchanges, and an increase in access and capacity fees and proprietary market data across segments.
The following summarizes the components of revenues less cost of revenues for the year ended December 31, 2024, presented as a percentage of revenues less cost of revenues and compared to the year ended December 31, 2023 (in millions, except percentages):
Percentage of Revenues Less Cost of Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Cash and Spot Markets
Cash and spot markets revenues less cost of revenues increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in transaction and clearing fees less liquidity payments and routing and clearing costs (“net transaction and clearing fees”) in the North American Equities and Europe and Asia Pacific segments and an increase in net other revenue, partially offset by a decrease in industry market data fees. Net transaction and clearing fees increased primarily due to a 17% increase in Cboe U.S. equities exchanges' net capture, a 12% increase in Cboe European equities' net capture, a 4% increase in Cboe European equities' matched ADNV, a 72% increase in Cboe Japanese equities' ADNV, and a 13% increase in Cboe Clear Europe's net fee per settlement, coupled with an 11% increase in Cboe Clear Europe's net settlement volume. Net other revenue increased primarily due to an increase in interest income attributable to Cboe Clear Europe as a result of the changing interest rate environment and additional interest income due to a change in its investment policy. See Note 14 ("Clearing Operations") for additional information on Cboe Clear Europe's investment policy. Industry market data fees decreased primarily due to a decrease in U.S. tape plan revenue as a result of a 1% decline in market share on the Cboe U.S. equities exchanges.
Data Vantage
Data Vantage revenues less cost of revenues increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in access and capacity fees and proprietary market data fees. Access and capacity fees increased primarily due to increased logical and physical port fees in the North American Equities, Options, and Europe and Asia Pacific segments driven by increased customer demand. Proprietary market data fees increased primarily due to increases in the Options, North American Equities, and Europe and Asia Pacific segments.
Derivatives Markets
Derivatives markets revenues less cost of revenues increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees, driven by an 8% increase in index options ADV, a 6% increase in multi-listed options RPC, and a 7% increase in Futures ADV, partially offset by an increase in royalty fees due to an increase in trading volumes of licensed products in the Options segment.
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Operating Expenses
For the year ended December 31, 2024 compared to the year ended December 31, 2023 total operating expenses increased primarily due to the impairment of intangible assets related to the Digital segment recorded in 2024 and increases in compensation and benefits and other expenses, partially offset by a decrease in depreciation and amortization compared to the prior period.
The following summarizes changes in operating expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 (in millions, except percentages):
Year EndedDecember 31, Increase/(Decrease) Percent Change
Professional fees and outside services 94.8 92.0 2.8 3 %
Acquisition-related costs 1.3 7.4 (6.1) (82) %
Impairment of intangible assets 81.0 — 81.0 100 %
Compensation and Benefits
Compensation and benefits increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a $14.8 million increase in salaries and wages primarily due to merit and headcount increases, a $10.4 million increase in bonuses primarily due to stronger relative Company performance, a $6.8 million increase in equity compensation as a result of expense reversals related to executive departures in 2023 that did not recur in 2024, and a $6.5 million increase in benefits related to increases in payroll taxes, payroll benefits, and employer retirement contributions, partially offset by a decline in equity compensation expense as a result of a change in the retirement vesting terms for new equity awards.
Depreciation and Amortization
Depreciation and amortization decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to decline in amortization under the discounted cash flow method for the intangibles acquired in the Merger as well as a decrease in amortization as a result of the Cboe Digital impairment in the second quarter of 2024.
Technology Support Services
Technology support services costs increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in software maintenance, cloud services, market data technology support services, primary data center hosting expenses, and software licenses and subscriptions, partially offset by decreases in purchased hardware and hardware maintenance.
Professional Fees and Outside Services
Professional and outside services fees increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in contract services, legal fees, and regulatory costs, partially offset by a decrease in consulting fees.
Travel and Promotional Expenses
Travel and promotional expenses increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in marketing expenses driven by the Company’s advertising campaigns and sponsorships as well as an increase in travel expenses.
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Facilities Costs
Facilities costs decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease in real estate taxes and utilities, partially offset by an increase in office rent, service costs, and repairs and maintenance.
Acquisition-Related Costs
Acquisition-related costs decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease in general and administrative costs and retention-related compensation costs associated with prior acquisitions.
Impairment of Intangible Assets
Impairment of intangible assets increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to the impairment of intangible assets recognized in the Digital segment in the second quarter of 2024.
Other Expenses
Other expenses increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in the change in contingent consideration related to prior acquisitions, partially offset by a decrease in bad debt expense provisions.
Operating Income
As a result of the items above, operating income for the year ended December 31, 2024 was $1,098.4 million, compared to operating income of $1,057.9 million for the year ended December 31, 2023, an increase of $40.5 million.
Interest Expense
Interest expense decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to repayments on the Term Loan in 2023, which was paid off in the fourth quarter of 2023.
Interest Income
Interest income increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a one-time true-up of interest earned on available-for-sale securities recorded in 2024, coupled with higher interest rates and cash balances in 2024.
Earnings on Investments
Earnings on investments decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease of $10.3 million in the equity earnings on the Company's investment in 7Ridge Investments 3 LP ("7Ridge Fund") (which owns Trading Technologies International Inc. (“Trading Technologies”)) recorded in 2024 compared to 2023.
Other (Expense) Income, Net
Other (expense) income, net decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a $16.0 million impairment charge on the Company's minority investment in Globacap Technology Limited recorded in the second quarter of 2024, coupled with a $10.5 million impairment charge on the Company's minority investment in Eris Innovations Holdings, LLC recorded in the fourth quarter of 2024, partially offset by a $5.3 million increase in dividend income related to the Company's minority investment in Vest Group Inc. ("Vest") in 2024.
Income Before Income Tax Provision
As a result of the above, income before income tax provision for the year ended December 31, 2024 was $1,083.8 million compared to income before income tax provision of $1,047.6 million for the year ended December 31, 2023, an increase of $36.2 million.
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Income Tax Provision
For the year ended December 31, 2024, the income tax provision was $318.9 million compared to $286.2 million for the year ended December 31, 2023, an increase of $32.7 million, primarily due to an increase in income before income tax provision and Section 199 releases in 2023. The effective tax rate for the year ended December 31, 2024 was 29.4%, compared to a rate of 27.3% for the year ended December 31, 2023. The higher effective tax rate in the year ended December 31, 2024 compared to the year ended December 31, 2023 is primarily due to Section 199 releases in 2023.
Net Income
As a result of the items above, net income for the year ended December 31, 2024 was $764.9 million, or 37% of revenues less cost of revenues, compared to $761.4 million, or 40% of revenues less cost of revenues, for the year ended December 31, 2023, an increase of $3.5 million.
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Segment Operating Results
We report results from our six segments: Options, North American Equities, Europe and Asia Pacific, Futures, Global FX, and Digital. Segment performance is primarily based on operating income (loss). We have aggregated all corporate costs, as well as other business ventures, within Corporate Items and Eliminations as those activities should not be used to evaluate a segment’s operating performance. All operating expenses that relate to activities of a specific segment have been allocated to that segment. Operating expenses increased or decreased in certain segments for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to changes in the allocation of shared-service expenses.
The following summarizes our total revenues by segment (in millions, except percentages):
Note, the chart excludes Digital revenues of $(0.1) million and $(4.1) million for the years ended December 31, 2024 and 2023, respectively.
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
____________________________________________________________________
* Not meaningful
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The following summarizes our revenues less cost of revenues by segment (in millions, except percentages):
Note, the chart excludes Digital revenues less cost of revenues of $(2.0) million and $(5.3) million for the years ended December 31, 2024 and 2023, respectively.
Percentage of Total Revenues less Cost of Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
____________________________________________________________________
* Not meaningful
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Options
The following summarizes revenues less cost of revenues, operating expenses, operating income, operating margin, EBITDA and EBITDA margin for our Options segment (in millions, except percentages):
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Operating margin 69.8 % 72.8 % * * *
EBITDA margin (2) 71.7 % 75.1 % * * *
____________________________________________________________________
* Not meaningful
(1)See footnote (1) to the table under “Overview” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
Revenues less cost of revenues increased $90.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees, driven by an 8% increase in index options ADV, a 6% increase in multi-listed options RPC, and a 1% increase in index options RPC, coupled with an increase in logical and physical port fees, partially offset by an increase in royalty fees due to an increase in the trading volumes of licensed products. For the year ended December 31, 2024, operating income for the Options segment increased $27.1 million compared to the year ended December 31, 2023 primarily due to an increase in revenues less cost of revenues, partially offset by an increase in operating expenses. Operating expenses increased $63.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in compensation and benefits, driven by changes in the allocation of shared-service expenses, and travel and promotional expenses.
North American Equities
The following summarizes revenues less cost of revenues, operating expenses, operating income, operating margin, EBITDA and EBITDA margin for our North American Equities segment (in millions, except percentages):
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Operating margin 43.9 % 32.3 % * * *
EBITDA margin (2) 59.1 % 51.2 % * * *
____________________________________________________________________
* Not meaningful
(1)See footnote (1) to the table under “Overview” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
Revenues less cost of revenues increased $18.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees, driven by a 17% increase in Cboe U.S. equities exchanges' net capture, an increase in logical and physical port fees, and an increase in proprietary market data revenue, partially offset by a decrease in industry market data fees, driven by a decrease in U.S. tape plan revenue as a result of a 1% decline in market share on the Cboe U.S. equities exchanges. For the year ended December 31, 2024, operating income for the North American Equities segment increased $50.6 million compared to the year ended December 31, 2023 primarily due to a decrease in operating expenses, coupled with an increase in revenues less cost of
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revenues. Operating expenses decreased $32.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to decreases in compensation and benefits, driven by changes in the allocation of shared-service expenses, depreciation and amortization, technology support services, and professional fees and outside services, partially offset by an increase in other expenses, driven by the gain on change in contingent consideration related to Cboe Canada Inc. in 2023, which did not recur in 2024.
Europe and Asia Pacific
The following summarizes revenues less cost of revenues, operating expenses, operating income, operating margin, EBITDA and EBITDA margin for our Europe and Asia Pacific segment (in millions, except percentages):
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Operating margin 18.9 % 17.2 % * * *
EBITDA margin (2) 32.1 % 33.0 % * * *
____________________________________________________________________
* Not meaningful
(1)See footnote (1) to the table under “Overview” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
Revenues less cost of revenues increased $30.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees, driven by a 12% increase in Cboe European equities' net capture, a 4% increase in Cboe European equities' matched ADNV, a 72% increase in Cboe Japanese Equities ADNV, a 13% increase in Cboe Clear Europe's net fee per settlement, coupled with an 11% increase in Cboe Clear Europe's net settlement volume, and an increase in interest income attributable to Cboe Clear Europe. For the year ended December 31, 2024, operating income for the Europe and Asia Pacific segment increased $9.0 million compared to the year ended December 31, 2023 primarily due to an increase in revenues less cost of revenues, partially offset by an increase in operating expenses. Operating expenses increased $21.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in compensation and benefits, other expenses, technology support services, and professional fees and outside services.
Futures
The following summarizes revenues less cost of revenues, operating expenses, operating income, operating margin, EBITDA, and EBITDA margin for our Futures segment (in millions, except percentages):
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Operating margin 74.1 % 68.8 % * * *
EBITDA margin (2) 75.6 % 70.2 % * * *
____________________________________________________________________
* Not meaningful
(1)See footnote (1) to the table under “Overview” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
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Revenues less cost of revenues increased $8.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees as a result of a 7% increase in ADV. For the year ended December 31, 2024, operating income for the Futures segment increased $12.8 million compared to the year ended December 31, 2023 primarily due to an increase in revenues less cost of revenues, coupled with a decrease in operating expenses. Operating expenses decreased $4.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to decreases in compensation and benefits, driven by changes in the allocation of shared service expenses, professional fees and outside services, and technology support services.
Global FX
The following summarizes revenues less cost of revenues, operating expenses, operating income, operating margin, EBITDA and EBITDA margin for our Global FX segment (in millions, except percentages):
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Revenues less cost of revenues $ 77.6 $ 73.5 6 % 97 % 98 %
Operating margin 42.8 % 33.6 % * * *
EBITDA margin (2) 60.2 % 58.2 % * * *
____________________________________________________________________
* Not meaningful
(1)See footnote (1) to the table under “Overview” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
Revenues less cost of revenues increased $4.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees, driven by a 5% increase in ADNV. For the year ended December 31, 2024, operating income for the Global FX segment increased $8.5 million compared to the year ended December 31, 2023 primarily due to a decrease in operating expenses, coupled with an increase in revenues less cost of revenues. Operating expenses decreased $4.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease in depreciation and amortization.
Digital
The following summarizes revenues less cost of revenues, operating expenses, operating loss, operating margin, EBITDA, and EBITDA margin for our Digital segment (in millions, except percentages):
Percentage of Total Revenues
Year EndedDecember 31, PercentChange Year Ended December 31,
Revenues less cost of revenues $ (2.0) $ (5.3) 62 % *% *%
Operating margin *% *% * * *
EBITDA margin (2) *% *% * * *
____________________________________________________________________
* Not meaningful
(1)See footnote (1) to the table under “Overview” above for a reconciliation of net income to EBITDA, and management’s reasons for using such non-GAAP measures.
(2)EBITDA margin represents EBITDA divided by revenues less cost of revenues.
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Revenues less cost of revenues increased $3.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net transaction and clearing fees driven by the reversal of contra-revenue following the dissolution of the Cboe Digital syndication in the second quarter of 2024. For the year ended December 31, 2024, the operating loss for the Digital segment increased $65.7 million compared to the year ended December 31, 2023 primarily due to an increase in operating expenses, partially offset by an increase in revenues less cost of revenues. Operating expenses increased $69.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the impairment of intangible assets, partially offset by decreases in depreciation and amortization and compensation and benefits.
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LIQUIDITY AND CAPITAL RESOURCES
Below are charts that reflect elements of our capital allocation:
We expect our cash on hand at December 31, 2024 and other available resources, including cash generated from operations, to be sufficient to continue to meet our cash requirements for the foreseeable future. In the near term, we expect that our cash from operations and availability under the Revolving Credit Facility, and potentially participating in future financing transactions to obtain additional capital will meet our cash needs to fund our operations, capital expenditures, interest payments on debt, any dividends, potential strategic acquisitions, and opportunities for common stock repurchases under the previously announced program. See Note 12 ("Debt") and Note 25 ("Subsequent Events") to the consolidated financial statements for further information.
Cboe Clear Europe also has a €1.20 billion committed syndicated multicurrency revolving and swingline credit facility agreement with Cboe Clear Europe as borrower and the Company as guarantor of scheduled interest and fees on borrowings (but not the principal amount of any borrowings) (the “Facility”). The Facility is available to be drawn by Cboe Clear Europe towards (a) financing unsettled amounts in connection with the settlement of transactions in securities and other items processed through Cboe Clear Europe’s clearing system and (b) financing any other liability or liquidity requirement of Cboe Clear Europe incurred in the operation of its clearing system. Borrowings under the Facility are secured by cash, eligible bonds and eligible equity assets deposited by Cboe Clear Europe into secured accounts. As a result, should the Facility be drawn by Cboe Clear Europe it could potentially impact Cboe Clear Europe’s liquidity, and we can give no assurance that this Facility will be sufficient to meet all of such obligations or sufficiently mitigate Cboe Clear Europe’s liquidity risk to meet its payment obligations when due. Additionally, a default of the Facility may allow lenders, under certain circumstances, to accelerate any related drawn amounts and may result in the acceleration of the Company’s other outstanding debt to which a cross-acceleration or cross-default provision applies, which may limit the Company’s liquidity, business and financing activities. The Facility was amended on June 27, 2024, which extended the term of the facility through June 28, 2025. Please refer to Note 12 ("Debt") for further information.
Our long-term cash needs will depend on many factors, including an introduction of new products, enhancements of current products, capital needs of our subsidiaries, the geographic mix of our business and any potential acquisitions. We believe our cash from operations and the availability under our Revolving Credit Facility will meet any long-term needs unless a significant acquisition or acquisitions are identified, in which case we expect that we would be able to borrow the necessary funds and/or issue additional shares of our common stock to complete such acquisition(s).
Cash and cash equivalents include cash in banks and all non-restricted, highly liquid investments, including short-term repurchase agreements, with original maturities of three months or less at the time of purchase. Cash and cash equivalents as of December 31, 2024 increased $377.1 million from December 31, 2023 primarily due to the results of operations and proceeds from maturities of available-for-sale financial investments, partially offset by outflows from cash dividends, repurchases of our common stock, purchases of available-for-sale financial investments, purchases of property and equipment, and contributions to investments. See “Cash Flow” below for further discussion.
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Our cash and cash equivalents held outside of the United States in various foreign subsidiaries totaled $301.3 million and $244.3 million as of December 31, 2024 and 2023, respectively. The remaining balance was held in the United States and totaled $619.0 million and $298.9 million as of December 31, 2024 and 2023, respectively. The majority of cash held outside the United States is available for repatriation, but under current law, could subject us to additional United States income taxes, less applicable foreign tax credits.
Our financial investments include deferred compensation plan assets, as well as investments with original or acquired maturities longer than three months but that mature in less than one year from the balance sheet date, and are recorded at fair value. As of December 31, 2024, financial investments primarily consisted of U.S. Treasury securities and deferred compensation plan assets.
Cash Flow
The following table summarizes our cash flow data for the years ended December 31, 2024, 2023, and 2022 (in millions):
For the Year EndedDecember 31,
Net cash used in investing activities (141.8) (55.1) (835.1)
Net cash (used in) provided by financing activities (495.0) (656.1) 81.7
As of December 31,
Net Cash Flows Provided by Operating Activities
During the year ended December 31, 2024, net cash provided by operating activities was $335.7 million higher than net income. The variance is primarily attributable to the adjustment for depreciation and amortization of $133.0 million, the change in Section 31 fees payable of $130.1 million, the adjustment for impairment of intangible assets of $81.0 million, the change in margin deposits, clearing funds, and interoperability funds related to Cboe Clear Europe and customer bank deposits of $76.0 million, and the change in unrecognized tax benefits of $61.2 million, partially offset by changes in accounts receivable and accounts payable and accrued liabilities of $124.3 million and $36.4 million, respectively.
Net cash flows provided by operating activities were $1,100.6 million and $1,075.6 million for the years ended December 31, 2024 and 2023, respectively. The change in net cash flows provided by operating activities was primarily due to the change in Section 31 fees payable, the adjustment for impairment of intangible assets, the change in other assets, the adjustment for impairment of investments, and the change in income taxes receivable. This was partially offset by changes in margin deposits, clearing funds, and interoperability funds, accounts receivable, and the adjustments for depreciation and amortization.
Net cash provided by operating activities was $314.2 million higher than net income for the year ended December 31, 2023. The variance is primarily attributable to the change in margin deposits, clearing funds, and interoperability funds related to Cboe Clear Europe of $282.6 million and the adjustment for depreciation and amortization expense of $158.0 million, partially offset by the change in Section 31 fees payable of $95.2 million.
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Net cash provided by operating activities was $1,075.6 million and $651.1 million for the years ended December 31, 2023, and 2022, respectively. The change in net cash flows provided by operating activities was primarily due to the change in net income, the change in margin deposits, clearing funds, and interoperability funds related to Cboe Clear Europe, and the change in benefit for deferred income taxes, partially offset by the adjustment for impairment of goodwill and the change in Section 31 fees payable.
Net Cash Flows Used in Investing Activities
During the year ended December 31, 2024, net cash used in investing activities primarily consisted of purchases of available-for-sale financial investments of $115.6 million, purchases of property and equipment and leasehold improvements of $60.9 million, and contributions to investments of $40.2 million, partially offset by proceeds from maturities of available-for-sale financial investments of $67.9 million.
Net cash flows used in investing activities were $141.8 million and $55.1 million for the years ended December 31, 2024 and 2023, respectively. The variance is primarily due to the change in proceeds from maturities of available-for-sale financial investments, purchases of available-for-sale financial investments, and purchases of property and equipment and leasehold improvements, partially offset by the change in contributions to investments for the year ended December 31, 2024 compared to the year ended December 31, 2023.
During the year ended December 31, 2023, net cash used in investing activities primarily consisted of purchases of available-for-sale financial investments of $89.8 million, contributions to investments of $57.1 million, and purchases of property and equipment and leasehold improvements of $45.0 million, partially offset by proceeds from maturities of available-for-sale financial investments of $135.7 million.
During the year ended December 31, 2022, net cash used in investing activities primarily consisted of acquisitions, net of cash acquired of $708.3 million, purchases of available-for-sale financial investments of $104.7 million, and purchases of property and equipment and leasehold improvements of $59.8 million, partially offset by proceeds from maturities of available-for-sale financial investments of $51.2 million.
Net Cash Flows (Used in) Provided by Financing Activities
During the year ended December 31, 2024, net cash used in financing activities primarily consisted of cash dividends on common stock of $249.4 million and share repurchases of $204.8 million.
Net cash flows used in financing activities were $495.0 million and $656.1 million for the years ended December 31, 2024 and 2023, respectively. The variance is primarily due to the change in principal payments of the current portion of long-term debt, partially offset by the change in share repurchases.
Net cash flows used in financing activities totaled $656.1 million for the year ended December 31, 2023, and primarily consisted of principal payments of the current portion of long-term debt of $305.0 million, cash dividends on common stock of $223.5 million, and share repurchases of $83.9 million.
Net cash flows provided by financing activities totaled $81.7 million for the year ended December 31, 2022, and primarily consisted of proceeds from long-term debt issuance of $663.6 million, partially offset by principal payments of long-term debt of $220.0 million, cash dividends on common stock, share repurchases, and payments of contingent consideration related to acquisitions.
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Financial Assets
The following summarizes our financial assets excluding margin deposits, clearing funds, and interoperability funds as of December 31, 2024, 2023, and 2022 (in millions):
As of December 31,
Less deferred compensation plan assets (40.3) (36.7) (27.5)
Less cash collected for Section 31 fees (110.8) (30.5) (93.7)
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(1)Adjusted cash is a non-GAAP measure and represents cash and cash equivalents plus financial investments, minus deferred compensation plan assets and cash collected for Section 31 fees. We have presented adjusted cash because we consider it an important supplemental measure of our liquidity and believe that it is frequently used by analysts, investors, and other interested parties in the evaluation of companies.
Debt
The following summarizes our debt obligations as of December 31, 2024, 2023, and 2022 (in millions):
As of December 31,
Term Loan Agreement $ — $ — $ 305.0
Revolving Credit Agreement — — —
Cboe Clear Europe Credit Facility — — —
Less unamortized discount and debt issuance costs (9.0) (10.8) (13.0)
At December 31, 2024, we were in compliance with the covenants of our debt agreements.
In addition to the debt outstanding, as of December 31, 2024, we had an additional $400 million available through our revolving credit facility, with the ability to borrow another $200 million by increasing the commitments under the facility, subject to the agreement of the applicable lenders. Together, with adjusted cash, we had approximately $1.3 billion available to fund our operations, capital expenditures, potential acquisitions, debt repayments and any dividends, net of minimum regulatory capital requirements of $166.7 million, which are subject to potential applicable regulatory restrictions and approvals and potential associated tax costs, as of December 31, 2024.
Dividends
The Company’s expectation is to continue to pay dividends. The decision to pay a dividend, however, remains within the discretion of the Company's Board of Directors and may be affected by various factors, including our earnings, financial condition, capital requirements, level of indebtedness, and other considerations our Board of Directors deems relevant. Future debt obligations and statutory provisions, among other things, may limit or, in some cases, prohibit our ability to pay dividends.
Share Repurchase Program
In 2011, the Board of Directors approved an initial authorization for the Company to repurchase shares of its outstanding common stock of $100 million and subsequently approved additional authorizations, for a total authorization of $2.3 billion as of December 31, 2024. The program permits the Company to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation. Share repurchases are repurchased to the Company’s Treasury stock and ultimately retired or they are available to be redistributed.
Under the program, for the year ended December 31, 2024, the Company repurchased 1,148,295 shares of common stock at an average cost per share of $177.86, totaling $204.3 million. Since inception of the program through December 31,
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2024, the Company has repurchased 20,758,383 shares of common stock at an average cost per share of $78.05, totaling $1.6 billion. The Company retired 1,332,430 and 2,453,428 shares of treasury stock in the years ended December 31, 2024 and 2023, respectively. As a result of these repurchases, certain direct costs and excise taxes are incurred but do not impact our cost per share or availability. See Note 2 ("Summary of Significant Accounting Policies") for more information.
As of December 31, 2024, the Company had $679.8 million of availability remaining under its existing share repurchase authorizations.
Lease and Obligations
The Company currently leases additional office space, data centers and remote network operations center, with lease terms remaining from 2 months to 128 months as of December 31, 2024.
Total rent expense related to current and former lease obligations for the years ended December 31, 2024, 2023, and 2022 totaled $37.1 million, $34.5 million, and $30.0 million, respectively. In addition to our lease obligations, we have contractual obligations related to certain operating leases, data and telecommunications agreements, and our long-term debt outstanding.
Purchase obligations include our estimate of the minimum outstanding obligations under agreements to purchase goods or services that we believe are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed or minimum and maximum amounts to be paid; and the approximate timing of the transaction. Purchase obligations include certain licensing agreements with various licensors which contain annual minimum fee requirements as well as payments calculated using agreed upon contract rates and reported cleared volumes. Purchase obligations exclude agreements that are cancellable at any time without penalty.
We have excluded from the contractual obligations listed below $845.5 million in margin deposits, clearing funds, and interoperability funds related to Cboe Clear Europe and Cboe Clear U.S. Clearing participants of Cboe Clear Europe are required to make deposits to a clearing fund. The cash deposits made by clearing participants are recorded in the consolidated balance sheets as current assets with equal and offsetting current liabilities. See Note 14 ("Clearing Operations") to the consolidated financial statements for additional information on Cboe Clear Europe and Cboe Clear U.S. and the margin deposits, clearing funds, and interoperability funds.
Future minimum payments under these leases and agreements were as follows as of December 31, 2024:
Payments Due by Period
Contractual Obligations Total Less than1 year More than1 year
Commercial Commitments and Contractual Obligations
As of December 31, 2024, our commercial commitments and contractual obligations included operating leases, data and telecommunications agreements, equipment leases, our long-term debt outstanding, contingent considerations, software development activities and other obligations. See Note 23 ("Commitments, Contingencies, and Guarantees") to the consolidated financial statements for a discussion of commitments and contingencies, Note 12 ("Debt") for a discussion of the outstanding debt, Note 14 ("Clearing Operations") for information on Cboe Clear Europe and Cboe Digital’s clearinghouse exposure guarantees, and Note 24 ("Leases") for discussion on operating leases and equipment leases.
Guarantees
We use Wedbush and Morgan Stanley to clear our routed equities transactions for our U.S. equities exchanges. Wedbush and Morgan Stanley guarantee the trade until the trade has been submitted to and validated by the National Securities Clearing Corporation ("NSCC"), after which time NSCC provides a guarantee until the trade settles. Thus, Cboe Trading is potentially exposed to credit risk to the counterparty to an equity trade routed to another market center until the trade has been processed and validated by the NSCC on the trade date. The BIDS Trading ATS platform delivers matched trades to BofA Securities, Inc. (“BOA”), which delivers the matched trades to the NSCC. BOA guarantees the trade until one day after the trade date, after which time the NSCC provides a guarantee until the trade settles. In the case of failure to perform on the part of Wedbush or Morgan Stanley on routed transactions for our U.S. Equities exchanges, we provide the guarantee to the counterparty to the trader. In the case of failure to perform on the part of BOA on transactions for the BIDS Trading ATS platform, BIDS has obligations to the counterparties to satisfy the trades.
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OCC acts as a central counterparty on all transactions in listed equity options in our Options segment, and as such, guarantees clearance and settlement of all of our options transactions. We believe that any potential requirement for us to make payments under these guarantees is remote and accordingly, have not recorded any liability in the consolidated financial statements for these guarantees. Similarly, with respect to trades in U.S. listed equity options and futures occurring on Cboe Options, C2, BZX, EDGX, and CFE, we deliver matched trades of our customers to the OCC, which acts as a central counterparty on all transactions occurring on these exchanges and, as such, guarantees clearance and settlement of all of those matched options and futures trades. With respect to U.S. government securities transactions executed on Cboe Fixed Income, we use Mirae Asset Securities (USA) Inc. to deliver matched trades to the Fixed Income Clearing Corporation (FICC) Government Securities Division (GSD), which acts as a central counterparty on all transactions occurring on Cboe Fixed Income and, as such, guarantees clearance and settlement of all of those matched trades.
With respect to Canadian equities, we deliver matched trades of our customers to The Canadian Depository for Securities, which acts as a central counterparty on all transactions occurring on Cboe Canada Inc. and, as such, guarantees clearance and settlement of all of our matched Canadian equities trades. With respect to trades in options and futures occurring on Cboe Europe Derivatives, we deliver matched trades of our customers to Cboe Clear Europe, which acts as a central counterparty on all transactions occurring on Cboe Europe Derivatives and, as such, guarantees clearance and settlement of all of those matched options and futures trades. With respect to Australian equities and derivatives, we deliver matched trades of our customers to ASX Clear Pty Ltd and ASX Settlement Pty Ltd. ASX Clear Pty Ltd acts as a central counterparty on all transactions occurring on Cboe Australia and, as such, guarantees clearance and settlement on all of our matched trades in Australia. With respect to Japanese equities, we deliver matched trades of our customers to the Japanese Securities Clearing Corporation, which acts as a central counterparty on all transactions occurring on Cboe Japan and, as such, guarantees clearance and settlement on all of our matched trades in Japan.
With respect to trades in digital asset futures occurring on Cboe Digital Exchange, we deliver matched trades of our customers to Cboe Clear U.S., which acts as a central counterparty on all transactions occurring on Cboe Digital Exchange and, as such, guarantees clearance and settlement of all of those matched futures trades.
CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of the amounts of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. The Company bases its estimates on historical experience, observance of trends in particular areas, information available from outside sources and various other assumptions that are believed to be reasonable under the circumstances. Information from these sources form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources.
We have identified the estimates below as critical to our business operations and the understanding of our results of operations. The impact of, and any associated risks related to, these estimates on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations." For a detailed discussion on these estimates and other accounting policies, see Note 2 ("Summary of Significant Accounting Policies") to the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Goodwill and Other Intangible Assets
Description
Our acquisitions of Bats, Silexx Financial Systems, LLC (“Silexx”), Livevol, Inc. (“LiveVol”), Hanweck, FT Options, Trade Alert, BIDS Holdings, Cboe Asia Pacific, Cboe Digital, and Cboe Canada Inc. resulted in the recording of goodwill and other intangible assets, while our acquisition of Cboe Clear Europe, resulted in a bargain purchase gain and other intangible assets. In accordance with FASB Accounting Standards Codification (“ASC”) 350 – Intangibles – Goodwill and Other, we test the carrying values of goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently when events or changes in circumstances signal indicators of impairment are present.
Judgments and Uncertainties
The estimated fair values of our reporting units are based on the market approach and the income approach (using discounted estimated future cash flows). The estimated fair values of indefinite-lived intangibles are based on the cost method and income approach. The discounted estimated future cash flow analysis requires judgments about the discount rate, forecasted revenue growth rate, and operating expenses, that are inherent in these fair value estimates over the estimated remaining operating period. Additionally, the analysis contains uncertainty surrounding future events. As such, actual results may differ from these estimates and lead to a revaluation of our goodwill, indefinite-lived intangible assets, and/or our reporting units.
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Effect if Actual Results Differ from Assumptions
If updated estimates indicate that the fair value of goodwill or any indefinite-lived intangibles is less than the carrying value of the asset, an impairment charge is expected to be recorded in the consolidated statements of income in the period of the change in estimate, which could result in a material change to the consolidated financial statements.
Following the April 2024 announcement of the Cboe Digital spot market wind down and unwinding of the minority ownership structure in the holding company parent of the Cboe Digital entities, the Company performed an interim impairment test for the intangible assets recognized in the Digital reporting unit as the announcement was considered a potential indication of impairment. The Company concluded that the carrying value of the trading registrations and licenses and technology exceeded their estimated fair value, as their projected future cash flows, subsequent to the decision to wind down the business, did not support their valuation, and recorded an impairment charge of $81.0 million in the consolidated statements of income during the three months ended June 30, 2024.
As a result of the Company’s annual impairment analysis, in which the Company’s reporting units estimated fair values were substantially in excess of their carrying values, we do not consider our goodwill and indefinite-lived intangibles to have a significant risk of additional impairment at December 31, 2024.
Income Taxes
Description
The Company’s consolidated global income tax provision, deferred tax assets and liabilities, valuation allowances, and liabilities for unrecognized tax benefits are determined through the interpretation of tax laws and assumptions of future events to calculate an expectation of future tax consequences.
Judgments and Uncertainties
On an ongoing basis, the Company evaluates its tax estimates and judgments. This evaluation is based on factors including historical experience, such as the conclusions of examinations by tax authorities, changes in tax laws or rates, new examination activity, and results of any related legal processes. We use judgment in the evaluation of uncertain tax positions and the estimation of unrecognized tax benefits when determining the largest amount greater than 50% likely to be realized upon ultimate settlement with the taxing authority, assessing the likelihood of the benefit being realized upon settlement, and calculating the expected ultimate settlement amount.
Effect if Actual Results Differ from Assumptions
Significant changes in these estimates or judgments may result in an increase or decrease to our tax provision in a future period. Additionally, it is possible that the ultimate settlement may differ from the liabilities for unrecognized tax benefits currently reported if tax authorities ultimately reach a conclusion that differs from the Company’s expectation. We believe assumptions made regarding income taxes to be reasonable and do not believe any change in the judgments made by management would result in a material change to the consolidated financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 3 ("Recent Accounting Pronouncements") to the consolidated financial statements for further discussion of recently adopted and recently issued accounting pronouncements that are applicable to the Company.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a result of our operating activities, we are exposed to market risks such as foreign currency exchange rate risk, equity risk, credit risk, interest rate risk, and liquidity risk. We have implemented policies and procedures to measure, manage, monitor, and report risk exposures, which are reviewed regularly by management and our Board of Directors.
Foreign Currency Exchange Rate Risk
Our operations in Europe, Canada, and Asia Pacific are subject to increased currency translation risk as revenues and expenses are denominated in foreign currencies, primarily the Euro, British pound, Canadian dollar, Australian dollar, and Japanese Yen. We also have de minimis exposure to other foreign currencies, including the Singapore dollar, Philippine Peso, and Hong Kong dollar.
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For the year ended December 31, 2024, our exposure to foreign-denominated revenues less cost of revenues and expenses is presented by primary foreign currency in the following table (in millions, except percentages):
Euros (1) BritishPounds (1) CanadianDollars (1)
Foreign denominated % of:
Revenues less cost of revenues 5.7 % 2.9 % 1.4 %
Operating expenses 7.1 % 8.4 % 3.8 %
Impact of 10% adverse currency fluctuation on:
Revenues less cost of revenues $ 11.9 $ 6.1 $ 3.0
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(1)An average foreign exchange rate to the U.S. dollar for the period was used. See Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) for the table summarizing the changes in certain operational and financial metrics for more information.
Equity Risk
Our investment in European, Canadian, and Asia Pacific operations is exposed to volatility in currency exchange rates through translation of our net assets or equity to U.S. dollars. The assets and liabilities of our European businesses are denominated in British pounds or Euros. The assets and liabilities of our Canadian businesses are denominated in Canadian dollars. The assets and liabilities of our Asia Pacific businesses are denominated in Australian dollars, Japanese Yen, Singapore dollars, Hong Kong dollars, or Philippine Pesos. Fluctuations in currency exchange rates may create volatility in our reported results as we are required to translate foreign currency reported statements of financial condition and operational results into U.S. dollars for consolidated reporting. The translation of these non-U.S. dollar statements of financial condition into U.S. dollars for consolidated reporting results in a cumulative translation adjustment, which is recorded in accumulated other comprehensive loss, net within stockholders' equity on our consolidated balance sheets.
Our primary exposure to this equity risk as of December 31, 2024 is presented by foreign currency in the following table (in millions):
Euros (1) BritishPounds (1) CanadianDollars (1)
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(1)Converted to U.S. dollars using the foreign exchange rate of Euros per U.S. dollar, British pounds per U.S. dollar, and Canadian dollars per U.S. dollar, respectively, as of December 31, 2024.
Credit Risk
We are exposed to credit risk from third parties, including customers, counterparties, and clearing agents. These parties may default on their obligations due to bankruptcy, lack of liquidity, operational failure, or other reasons. We limit our exposure to credit risk by considering such risk when selecting the counterparties with which we make investments and execute agreements. The Company maintains cash at various regulated financial institutions and brokerage firms which, at times, may be in excess of the depository insurance limits. The Company’s management regularly monitors these institutions and believes that the potential for future loss is remote.
We do not have counterparty credit risk with respect to trades matched on our exchanges in the U.S., Canada, and Europe. With respect to listed equities, we deliver matched trades of our customers to the NSCC without taking on counterparty risk for those trades. NSCC acts as a central counterparty on all equity transactions occurring on BZX, BYX, EDGX and EDGA and, as such, guarantees clearance and settlement of all of our matched equity trades. Similarly, with respect to U.S. listed equity options and futures, we deliver matched trades of our customers to the OCC, which acts as a central counterparty on all transactions occurring on Cboe Options, C2, BZX, EDGX and CFE and, as such, guarantees clearance and settlement of all of our matched options and futures trades. With respect to U.S. government securities transactions, we deliver matched trades to FICC GSD without taking on counterparty risk for those trades. FICC GSD acts as a central counterparty on all U.S. government securities transactions occurring on Cboe Fixed Income and, as such, guarantees clearance and settlement of all of those matched trades. With respect to Canadian equities, we deliver matched trades of our customers to The Canadian Depository for Securities, which acts as a central counterparty on all transactions occurring on MATCHNow and, as such, guarantees clearance and settlement of all of our matched Canadian equities trades. The BIDS Trading ATS platform delivers matched trades to BOA, which delivers the matched trades to the NSCC. BOA guarantees the trade until the trade has been submitted to and validated by the NSCC, after which time NSCC
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provides a guarantee until the trade settles. Thus, BIDS Trading is potentially exposed to credit risk to the counterparty to an equity trade routed to another market center until the trade as been processed and validated by the NSCC on the trade date. With respect to Australian equities and derivatives, we deliver matched trades of our customers to ASX Clear Pty Ltd and ASX Settlement Pty Ltd. ASX Clear Pty Ltd acts as a central counterparty on all transactions occurring on Cboe Australia and, as such, guarantees clearance and settlement on all of our matched trades in Australia. With respect to Japanese equities, we deliver matched trades of our customers to the Japanese Securities Clearing Corporation, which acts as a central counterparty on all transactions occurring on Cboe Japan and, as such, guarantees clearance and settlement on all of our matched trades in Japan.
With respect to orders Cboe Trading routes to other markets for execution on behalf of our customers, Cboe Trading is exposed to some counterparty credit risk in the case of failure to perform on the part of our clearing firms, Morgan Stanley or Wedbush. Morgan Stanley and Wedbush guarantee trades until the trade has been submitted to and validated by NSCC, after which time NSCC provides a guarantee until the trade settles (T+1). Thus, Cboe Trading is potentially exposed to credit risk to the counterparty to a trade routed to another market center until the trade has been processed and validated by the NSCC in the event that Morgan Stanley or Wedbush fails. The BIDS Trading ATS platform is potentially exposed to counterparty credit risk on equities trades between the trade date and one day after the trade date in the event that BOA fails. We believe that any potential requirement for us to make payments under these guarantees is remote and accordingly, have not recorded any liability in the consolidated financial statements for these guarantees.
Historically, we have not incurred any liability due to a customer’s failure to satisfy its contractual obligations as counterparty to a system trade. Credit difficulties or insolvency, or the perceived possibility of credit difficulties or insolvency, of one or more larger or more visible market participants could also result in market-wide credit difficulties or other market disruptions.
We do not have counterparty credit risk with respect to institutional spot FX trades occurring on our platform because Cboe FX is not a counterparty to any FX transactions. All transactions occurring on our platform occur bilaterally between two banks or prime brokers as counterparties to the trade. While Cboe FX does not have direct counterparty risk, Cboe FX may suffer a decrease in transaction volume if a bank or prime broker experiences an event that causes other prime brokers to decrease or revoke the credit available to the prime broker experiencing the event. Therefore, Cboe FX may have risk that is related to the credit of the banks and prime brokers that trade FX on the Cboe FX platform.
We also have credit risk related to transaction fees that are billed in arrears to customers on a monthly basis. Our potential exposure to credit losses on these transactions is represented by the receivable balances in our balance sheet. Our customers are financial institutions whose ability to satisfy their contractual obligations may be impacted by volatile securities markets.
The Company is exposed to further credit and investment risk through our clearing operations. Cboe Clear Europe holds material amounts of clearing participant collateral, both cash and non-cash deposits, which are held or invested primarily to provide security of capital while minimizing credit risk as well as liquidity and market risks. Cboe Digital holds amounts of clearing participant collateral including cash and digital assets, which are held primarily to provide security of capital while minimizing credit risk as well as custody, valuation and market risks. The following is a summary of the risks associated with these deposits and how these risks are mitigated:
•Credit Risk - The credit risk is predominantly in the event a clearing participant fails to meet a financial or contractual obligation and related to custodians and settlement banks. Cboe Clear Europe attempts to mitigate this risk through minimum participant requirements for clearing participants and monitoring their financial health. To cover potential loss to Cboe Clear Europe in the event of a clearing participant default, collateral is required from clearing participants. Besides potential defaults of clearing participants, the main credit risk faced by the clearinghouse is exposure to clearing participants when a trade fails to settle. To help mitigate this risk, a fail fee is charged to discourage late settlements. This fee covers Cboe Clear Europe’s costs but also acts as a deterrent as required by applicable settlement efficiency regulation. Cboe Clear U.S. sets minimum financial requirements on custodian institutions and any clearing member that may expose the clearinghouse to credit risk. The financial strength of custodians and such clearing members are monitored routinely. Furthermore, Cboe Clear U.S. requires clearing members to post collateral (full or margined, depending on the product eligible for clearing) or other forms of financial guarantee and their trading activities are subject to pre-trade checks enforced by Cboe Digital Exchange and administered by Cboe Clear U.S. On June 5, 2023, the CFTC approved an amended order of registration for Cboe Clear U.S. (formerly, Cboe Clear Digital) to clear digital asset futures on a margined basis for futures commission merchants. The new products launched January 11, 2024. As of December 31, 2024, Cboe Digital does not expect a material loss concerning credit risk on any member participant, custodian, or settlement bank.
•Liquidity Risk - Liquidity risk is the risk Cboe Clear Europe may not be able to meet its payment obligations in the right currency, in the right place and at the right time. To help mitigate this risk, Cboe Clear Europe monitors its liquidity requirements closely and maintains funds and assets in a manner which attempt to minimize the risk of loss or delay in the access by the clearinghouse to such funds and assets. For example, holding funds with a central bank where possible or making only short-term investments serves to help reduce liquidity risks. Liquidity is
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mainly required for securities settlement. The payment and settlement obligations generally stem from the function of Cboe Clear Europe as a cash equity clearinghouse: shares are bought and sold by clearing participants on a trading platform or OTC, and netted to settle two days later. During the settlement the actual payment for and delivery of the shares take place, this process requires intraday liquidity. If counterparties, which receive shares against payment, are unable to settle, an overnight liquidity need arises. The overnight liquidity is typically very short term, and is usually limited to a few days. Cboe Clear U.S. monitors its liquidity requirements closely and maintains funds and assets in a manner which attempt to minimize the risk of loss or delay in the access by the clearinghouse to such funds and assets. For example, only allowing highly liquid USD denominated assets to be posted as collateral. Cboe Clear U.S. may not be able to meet its payment obligations in a timely manner in the event of delay in payment or default by a clearing member.
Cboe Clear Europe entered into a €1.20 billion committed syndicated multicurrency revolving and swingline credit facility that is available to be drawn by Cboe Clear Europe towards (a) financing unsettled amounts in connection with the settlement of transactions in securities and other items processed through Cboe Clear Europe’s clearing system and (b) financing any other liability or liquidity requirement of Cboe Clear Europe incurred in the operation of its clearing system, however we can give no assurance that this facility will be sufficient to meet all such obligations or sufficiently mitigate Cboe Clear Europe’s liquidity risk to meet its payment obligations when due.
•Custody Risk – Cboe Digital has no reason to believe it will incur any expense associated with potential liability in connection with storage of digital assets because it liquidated all digital assets held on behalf of customers as of September 30, 2024 and no longer holds customer digital clearing assets through accounts with third-party custodians or through self-custody.
•Valuation Risk - Cboe Digital was previously exposed to risk with respect to digital asset prices and valuations which were largely based on the supply and demand for those digital assets in financial markets; however, the Company is no longer exposed to material digital asset valuation risk due to the liquidation of digital assets held by Cboe Digital as of September 30, 2024.
•Market Risk - Cboe Clear Europe is also exposed to market risk in the event that a clearing participant defaults and the market prices of the securities in its open positions have moved adversely so the clearinghouse can only close out the participant’s obligations at a loss. To help mitigate market risk, Cboe Clear Europe collects collateral on an end of day and intraday basis from clearing participants to cover for the probable loss during normal market conditions, together with contributions to the clearing fund to cover losses if a default occurred during extreme but plausible market conditions. Adverse movements in exchange rates affecting the value of obligations and collateral are factored into the calculation of the amount of collateral to be collected. Cboe Clear U.S. is also exposed to market risk in the event that a clearing participant defaults and the market prices of its open positions have moved adversely so the clearinghouse can only close out the participant’s obligations at a loss or the clearing participant has already realized trading losses in excess of the collateral at the time of default or the combination of the two. Cboe Clear U.S. collects collateral on an end of day and intraday basis from clearing participants that are clearing margin eligible futures contracts. Cboe Clear U.S. only allows collateral in USD at this time. Cboe Clear U.S. maintains pre-funded resources to cover probable losses during normal market conditions due to default of clearing participants.
•Investment Risk – Cboe Clear Europe as of December 31, 2024 held $841.4 million of clearing member margin deposits, clearing funds, and interoperability funds which are held or invested primarily to provide security of capital while minimizing credit, market and liquidity risks. Effective August 14, 2023, Cboe Clear Europe enacted changes in its rules, and is able to invest the cash collateral received in the form of interoperability fund deposits from clearing participants in certain investments, typically securities issued by pre-approved sovereign issuers and reverse repurchase agreements with overnight maturities. When investments are made in accordance with the policy, Cboe Clear Europe receives the amount of investment earnings and pays the clearing participants those earnings minus a set basis point cost of collateral. Cboe Clear Europe is able to direct the investment of the cash interoperability fund deposits received from the clearing participants within the program parameters and receive an economic benefit from those investments. See Note 14 ("Clearing Operations") for more information. In the event that a sovereign government or reverse repurchase agreement counterparty defaults, the value we hold as collateral might not be sufficient to cover our capital requirements in the event of defaults. While Cboe Clear Europe seeks to achieve a reasonable rate of return which may generate interest income for clearing participants, Cboe Clear Europe is primarily concerned with preservation of capital and managing the risks associated with these deposits. As Cboe Clear Europe passes on interest revenues (minus costs) to the clearing members, this could include negative or reduced yield due to market conditions. While Cboe Clear Europe has policies and procedures that strive to help ensure that clearing participant collateral is protected, Cboe Clear Europe cannot absolutely assure that these measures and safeguards will be sufficient to protect margin deposits, clearing funds, and interoperability funds from a default or that we will not be materially and adversely affected in the event of a significant default.
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On a regular basis, we review and evaluate changes in the status of our counterparties’ creditworthiness. Credit losses such as those described above could adversely affect our consolidated financial position and results of operations. Any such effects to date have been minimal.
Interest Rate Risk
We have exposure to market risk for changes in interest rates relating to our cash and cash equivalents, financial investments, and indebtedness. As of December 31, 2024 and 2023, our cash and cash equivalents and financial investments were $1,030.6 million and $600.7 million, respectively, of which $301.3 million and $244.3 million is held outside of the United States in various foreign subsidiaries in 2024 and 2023, respectively. The remaining cash and cash equivalents and financial investments are denominated in U.S. dollars. We do not use our investment portfolio for trading or other speculative purposes. Due to the nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates, assuming no change in the amount or composition of our cash and cash equivalents and financial investments.
As of December 31, 2024, we had $1,441.0 million in outstanding debt, all of which relates to our Senior Notes, which bear interest at fixed interest rates. Changes in interest rates will have no impact on the interest we pay on fixed-rate obligations. We are also exposed to changes in interest rates as a result of borrowings under our Revolving Credit Agreement and the Cboe Clear Europe Credit Facility, as these facilities bear interest at fluctuating rates. As of December 31, 2024, there were no outstanding borrowings under our Revolving Credit Agreement or Cboe Clear Europe Credit Facility, respectively. See Note 12 ("Debt") to the consolidated financial statements for a discussion of debt agreements.
Liquidity Risk
We are exposed to liquidity risk under certain circumstances in relation to the cross-acceleration and cross-default provisions within the Term Loan Agreement and the Revolving Credit Agreement as a result of the Company, as guarantor, entering into the Cboe Clear Europe Credit Facility. A default of the Facility may allow lenders to accelerate any related drawn amounts and may result in the acceleration of the Company’s other outstanding debt to which a cross-acceleration or cross-default provision applies, which may limit the Company’s liquidity, business and financing activities. See Note 12 ("Debt") to the consolidated financial statements for a discussion of debt agreements.
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Cboe Global Markets, Inc. and Subsidiaries
Reports of Independent Registered Public Accounting Firm (PCAOB ID 185) 92
Consolidated Financial Statements:
Consolidated Balance Sheets 95
Consolidated Statements of Income 96
Consolidated Statements of Comprehensive Income 97
Consolidated Statements of Changes in Stockholders’ Equity 98
Consolidated Statements of Cash Flows 99
Notes to Consolidated Financial Statements 100
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Cboe Global Markets, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cboe Global Markets, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2025 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of unrecognized tax benefits
As discussed in Notes 2 and 21 to the consolidated financial statements, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the consolidated financial statements from such a position is measured based upon the largest benefit that has greater than 50% likelihood of being realized upon ultimate settlement.
We identified the evaluation of unrecognized tax benefits in certain jurisdictions as a critical audit matter. A higher degree of auditor judgment and the involvement of professionals with specialized skills and knowledge was required to evaluate the Company's estimate of tax benefits to be realized upon ultimate settlement of its tax positions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company's unrecognized tax benefits process, including a control over the estimate of tax benefits to be realized upon ultimate settlement of tax positions. We evaluated the Company's ability to estimate its unrecognized tax benefits by comparing historical unrecognized tax benefits to actual results upon the conclusion of examinations by applicable taxing authorities. In addition, we involved tax professionals with specialized skills and knowledge who assisted in:
•analyzing the Company’s tax positions, including the measurement of unrecognized tax benefits
•evaluating changes in applicable laws and regulations
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•inspecting settlements with applicable taxing authorities.
/s/ KPMG LLP
We have served as the Company’s auditor since 2020.
Kansas City, Missouri
February 21, 2025
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Cboe Global Markets, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Cboe Global Markets, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.