CBOE Holdings, Inc. Second Quarter Earnings Conference Call A August 4, 2011 t 4 2011 p. 1 p. 1 p. 1 CBOE Holdings, Inc .
Agenda William Brodsky Strategic Review Chairman and CEO Alan Dean Financial Review Executive Vice President, CFO and Treasurer William Brodsky Questions and Answers Alan Dean Edward Tilly Executive Vice Chairman p. 2 p. 2 p. 2 CBOE Holdings, Inc .
Forward Looking Statements This presentation may contain forward-looking statements, within the meaning of the ► Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and i involve a number of risks and uncertainties. These statements are only predictions based l b f i k d t i ti Th t t t l di ti b d on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: legislative or regulatory changes; changes in law or government policy; increasing competition; loss of our exclusive licenses; decrease in trading volumes; an inability to introduce competitive new products and services; t di l i bilit t i t d titi d t d i competitive pressures on our existing products, services and trading access fees; changes in price levels and volatility in the derivatives and equity markets; economic, political and market conditions; increases in our fixed costs and expenses; loss of existing customers; difficulty developing strategic relationships and attracting new customers; increased costs related to or the loss of intellect al propert related to, or the loss of, intellectual property; rapid technological developments; increases rapid technological de elopments increases in trading volume and order transaction traffic that we cannot accommodate; our ability to maintain our growth effectively; damage to our reputation and brand name; loss of market data revenue; detrimental changes to our fee structure; failure to effectively monitor and manage our risks; customer consolidation; and changes to the tax treatment for options trading trading. More detailed information about factors that may affect our performance may be found in ► our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2010 and other filings made from time to time with the SEC. p. 3 p. 3 p. 3 CBOE Holdings, Inc .
Strategic Review William Brodsky Chairman and CEO p. 4 p. 4 p. 4 CBOE Holdings, Inc .
Strong Financial Results 2Q11 vs 2Q10 Adjusted Operating Revenues 1 ► Operating Revenues (in millions) • $120.3 Million, up 7% $120.3 Million, up 7% $433 $ $417 $402 $402 $344 ► Operating Margin $244 $253 $214 • 46 9% up 980 bps 46.9%, up 980 bps • Highest level in ten quarters 2 2 2 2 2 Y Y 0 0 0 0 0 T T 0 0 0 0 1 D D 6 7 8 9 0 1 1 0 1 ► Net Income Allocated to Common ► Net Income Allocated to Common Adjusted Operating Income 1 1 Adj t d O ti I Stockholders (in millions) • $32.6 Million, up 32% $187 $176 $156 $156 $136 ► Diluted Earnings Per Share $114 $81 $68 • $0.36, up 33% 2 2 2 2 2 Y Y 0 0 0 0 0 T T 0 0 0 0 1 D D 6 7 8 9 0 1 1 0 1 ¹Adjusted to reflect the impact of certain items. See Appendix for “Non-GAAP Information.” p. 5 p. 5 p. 5 CBOE Holdings, Inc .
Options ADV Down 17% in 2Q11 Against Difficult 2Q10 Comparison Equity Options CBOE Holdings Quarterly Options ADV 2.60 2.58 2.40 (in millions) 2.26 1.94 Includes May 6 1.87 “Flash Crash” Flash Crash 5.29 5.04 4.55 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 4.40 4 23 4.23 Index Options Index Options 1.26 1.17 1.11 3.71 1.11 0.98 0.94 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 ETF Options 1.45 1 45 1 35 1.35 1.26 1.04 0.99 0.91 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 p. 6 p. 6 p. 6 CBOE Holdings, Inc .
Options Volume Trends Total Monthly Options Average Daily Volume (in millions) May 6 “Flash Crash” 6.57 5.29 5.30 5.00 4.85 4.85 4.85 4.57 4.54 4.52 4.46 4.48 4.33 4.25 4.19 4.12 3.93 3.85 3.79 3.50 Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec 2010 2011 Source: Company Data p. 7 p. 7 CBOE Holdings, Inc .
VIX Trading Continues to Hit Record Highs VIX Options & Futures ADV (in thousands) VIX futures increased 190% VIX futures increased 190% 400 ► ► in 2Q11 versus 2Q10 50 381 350 45 300 VIX options increased 34% in VIX options increased 34% in 40 ► ► p tio n s A D V u tu re s A D V 2Q11 versus 2Q10 250 248 30 200 VIX futures surpassed p ► O p 150 150 F u 20 20 100,000 contracts on June 16 17 132 100 103 93 10 VIX futures monthly ADV set ► 50 23 23 a third consecutive record in 5 5 1 1 5 4 2 0 0 July of 58,532 contracts ¹ 2005 2006 2007 2008 2009 2010 2011 YTD VIX Options VIX Futures ¹YTD through 6/30/11 p. 8 p. 8 CBOE Holdings, Inc .
2Q11 Market Share Data CBOE Excl. Dividend Trades Total Industry Volume C2 4% 4% PHLX 3% 3% ISE 2% 4% 4% NYSE/Amex 31% 25% 26% NYSE/Arca 14% 10% 10% NOM NOM 1% 1% 14% 14% BOX 20% 23% BATS 17% 18% 94% Source: Options Clearing Corporation and CBOE p. 9 p. 9 p. 9 CBOE Holdings, Inc .
Differentiated Product Set CBOE Trades… Equity Options on Index CFE Futures Options Options ETFs ETFs Options Options Exchange Exchange 2Q10 vs 2Q11 -24.9% -7.0% -11.7% 194% ADV Chg % of 2Q11 44% 30% 25% 1% Volume % of 2Q11 24% 20% 51% 5% Trans. Fees 2Q11 RPC $0.169 $0.202 $0.627 $1.477 p. 10 p. 10 CBOE Holdings, Inc .
C2 Achieving Steady Growth ► Averaged 191,200 contracts per day in 2Q11, up 18 percent from 1Q11 ► Active market makers have nearly doubled since February ► Adjusted fees and incentives on May 2 to improve market quality ► Introduced complex order functionality for all listed classes in July C2 Monthly ADV (contracts in thousands) 220 211 186 186 179 175 156 149 111 56 1 Oct-2010 Oct-2010 Nov Nov Dec Dec Jan-2011 Jan-2011 Feb Feb Mar Mar Apr Apr May May June June July July p. 11 p. 11 p. 11 p. 11 CBOE Holdings, Inc .
C2 Market Share Continues to Grow C2 Market Share - Gains in SPY, QQQQ and Penny ETF 4.0% 3.8% 3.5% 3.0% 2.5% 2.5% 2.2% 2.0% 1.9% 1.7% 1 7% 1.5% 1.5% 1.3% 1.3% 1.0% 1.0% 0.8% 0.5% 0.0% Jan Feb Mar Apr p May y Jun Jul All Penny Penny ETF SPY QQQQ p. 12 CBOE Holdings, Inc .
SPXpm to Broaden Customer Reach SEC extended its evaluation of SPXpm rule filing on June 3 ► • SEC must act by Sept 6 to • Approve or disapprove • Extend review period an additional and final 60 days SEC’s extended review focuses on PM settlement ► • PM settlement is a long established, logical settlement convention • Used in many exchange-traded products Used in many exchange traded products • SPXpm provides a potential alternative to OTC trading • Aligned with Dodd-Frank mandate to move more OTC trades onto exchanges Committed to working with the SEC to obtain approval to launch SPXpm ► p. 13 p. 13 p. 13 CBOE Holdings, Inc .
Leveraging Expertise in Volatility Products ► New Initiatives to further develop volatility • Introduced CBOE Tail Hedge Index Introduced CBOE Tail Hedge Index • Tracks performance of a portfolio based on one-month out-of-the money VIX calls • Provides investor a benchmark for VIX-based tail hedge strategies • CBOE may also use index to create a tradable product or license it to others for trading • CBOE Options Institute launched new class devoted to VIX trading CBOE Options Institute launched new class devoted to VIX trading • CFE plans to launch futures contracts on several Radar Logic 28-Day Real Estate Indexes (RPX), pending regulatory approval p. 14 p. 14 p. 14 CBOE Holdings, Inc .
Returning Capital to Stockholders Board authorized a $100 million share repurchase program ► Increased quarterly dividend by 20% to $0.12 from $0.10 I d t l di id d b 20% t $0 12 f $0 10 ► Strong commitment to returning capital to stockholders ► Confidence in long-term growth prospects for CBOE Holdings ► p. 15 CBOE Holdings, Inc .
2011 Initiatives CBOE’s unique focus on options and volatility products leaves us ► well-positioned to take advantage of long-term secular growth trends Key Priorities: ► • Build on the success of C2 • Work for approval to launch SPXpm • Expand product offerings, including VIX product line • Position CBOE to benefit from regulatory reform Position CBOE to benefit from regulatory reform Strong operating cash flow and debt-free balance sheet provide us ► financial flexibility • Invest in innovation • Reward stockholders p. 16 p. 16 p. 16 p. 16 CBOE Holdings, Inc .
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