Raymond James The 35 th Annual Institutional Investors Conference - PowerPoint PPT Presentation

Raymond James The 35 th Annual Institutional Investors Conference Edward Tilly, CEO March 4, 2014 CBOE HOLDINGS 1

Forward-Looking Statements This presentation may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our right to exclusively list and trade certain index options and futures products; increasing price competition in our industry; compliance with legal and regulatory obligations and obligations under agreements with regulatory agencies; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to accommodate trading volume and order transaction traffic without failure or degradation of performance of our systems; our ability to protect our systems and communication networks from security risks, including cyber-attacks; economic, political and market conditions; our ability to maintain access fee revenues; our ability to meet our compliance obligations; our ability to attract and retain skilled management and other personnel; our ability to maintain our growth effectively; our dependence on third party service providers; and the ability of our compliance and risk management methods to effectively monitor and manage our risks. More detailed information about factors that may affect our performance may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2013 and other filings made from time to time with the SEC. CBOE HOLDINGS 2

Banner Year in 2013 Third consecutive year of record financial performance + 210 bps + 20% + 12% ¹Adjusted to reflect the impact of certain items. See appendix for “Non - GAAP Information.” CBOE HOLDINGS 3

Strong Start to 2014 Record trading in SPX and VIX options and futures Total ADV up 4% in 2013 Total ADV up 41% YTD 2014 ¹YTD through February 21, 2014 and 2013 CBOE HOLDINGS 4

Remain Focused on Core Mission and Strategic Initiatives Leverage and Develop Proprietary Products Optimize Revenue in Create value for stockholders Commoditized by generating industry-leading Products profit margins and growth rates through a diversified portfolio of risk management products Broaden Customer and services. Base Provide Highest Standards in Market Regulation and Compliance CBOE HOLDINGS 5

Strong Growth from S&P 500 Index (SPX) Product Line Volume gains in SPX options driven primarily by growth in SPX Weeklys SPX ADV up 18% in 2013 SPX Weeklys up 98% in 2013 SPX excluding Weeklys up 5% in 2013 SPX ADV up 19% YTD 2014 *includes SPX Weeklys Continue to create new SPX products to meet customer needs LEAPS FLEX options “XSP” mini SPX SPXpm SPX Weeklys and Quarterlys ¹Through February 21, 2014 CBOE HOLDINGS 6

SPX Options Remain Index Option of Choice for Institutional Investors Investors worldwide use SPX and VIX Index products to hedge global economic risk CBOE HOLDINGS 7

SPX Weeklys Trading Attracting New SPX Customers CBOE created the Weeklys concept with the introduction of SPX Weeklys in 2005 SPX Weeklys grew 98% in 2013; 70% in 2012 and nearly tripled in 2011 SPX Weeklys up 79% YTD 2014¹ SPX Weeklys appeal to both retail investors and semi-pros SPX Weeklys versus SPY Weeklys 10 times the notional value European exercise Settle in cash ¹Through February 21, 2014 CBOE HOLDINGS 8

Broadening Our Customer Base Continue to see significant opportunities to further grow trading among likely users Likely users include: SPY options users OTC users Institutional investors Overseas investors Intensifying educational and marketing efforts in 2014 CBOE HOLDINGS 9

Early Stages of Growing VIX Domestically Strong growth despite prolonged periods of low volatility VIX options ADV up 28% in 2013 YTD 2014 ADV up 43% YOY VIX futures ADV up 67% in 2013 YTD 2014 ADV up 59% YOY Intend to grow volatility space in 2014 Enhancing investor education Broadening access to our volatility marketplace Developing new products ¹Through February 21, 2014 CBOE HOLDINGS 10

Responding to Growing Demand for Information with Investor Education Investor education goes hand in hand with new products Plans for 2014 include: Expanding Business Development staff Increasing educational offerings New options and volatility educational apps for mobile and tablet users Newly redesigned CBOE.com website Options Institute curriculum heavily weighted toward VIX futures and options and SPX trading CBOE HOLDINGS 11

Broadening Our Customer Base Extending trading hours for VIX futures Phase 2 Phase 1 Results to Date February 2014 November 4, 2013 October 28, 2013 • • • Encouraged by volume & Added another five hours to Added a 45-minute trading number of users during the trading day session after current close of extended hours VIX futures • Allows European-based • Meets demand from U.S. customers to access VIX futures during their local customers for a post trading hours settlement trading period • Trading begins at 2:00 a.m. CT; aligns with open of London markets CBOE HOLDINGS 12

Increasing Access to VIX Futures Trading Through Extended Trading Hours Just over 8% of VIX futures trading now takes place outside of regular U.S. trading hours In 2014, plan to expand extended trading hours to nearly 24X5 Plan to add trading of VIX and SPX options later in the year, subject to regulatory approval ¹Through February 21, 2014 CBOE HOLDINGS 13

Expanding Suite of Volatility Products Launched Futures on Short-Term Volatility Index (VXST) on February 13 th – Options to follow Leverage most compelling features of SPX Weeklys and volatility products Short-term VIX uses SPX options that expire in one week versus SPX monthly options Trading opportunities: Pinpoint volatility around economic releases, geopolitical events Spread between VIX and VXST Capture time value decay on shorter- term index CBOE HOLDINGS 14

Strong Track Record of Organic Growth CAGR: + 9.2% CAGR: + 18.5% ¹Adjusted to reflect the impact of certain items. See appendix for “Non - GAAP Information.” CBOE HOLDINGS 15

Enhancing Stockholder Value Strong cash flow generation and disciplined approach to managing cash Returned more than $800 million to stockholders since IPO in 2010 CAGR +19% Deploy capital opportunistically Fund growth of business Steady, consistent growth in dividend Share repurchases CBOE HOLDINGS 16

Continue to Further Define and Expand Options and Volatility Space Develop New Products Extend Global Customer Reach Return Value to Invest in Stockholders Strategic Maximize Growth revenue in multiply-listed Initiatives Maintain products Prudent Fiscal Management Provide Highest Standards in Market Regulation and Compliance CBOE HOLDINGS 17

Appendix Materials

Focused on Domestic and International Growth Opportunities Develop and expand reach of higher-margin proprietary products Near-Term Growth Longer-Term Growth Initiatives Initiatives • Introduction of VXST Weeklys • Offer futures and options on the options 10-year U.S. Treasury Note Volatility Index • Further expand VIX futures trading hours to 24X5 • Ongoing development of new • Add products to extended trading products and services hours - VIX options and SPX CBOE HOLDINGS 19

Large and Growing U.S. Options Market (ADV in thousands) 2000 – 2013 CAGR: +14% Source: OCC and CBOE ¹Through February 21, 2014 CBOE HOLDINGS 20

4Q13 Financial Overview Adjusted Basis¹ 4Q13 4Q12 $ Change % Change (in millions, except EPS and RPC) Operating Revenues $141.8 $130.1 $ 11.7 9% Adjusted Operating Expenses 69.2 65.2 4.0 6% Adjusted Operating Income $ 72.6 $ 64.9 $ 7.7 12% 130 bps Adjusted Operating Margin % 51.2% 49.9% Adjusted Net Income Allocated to Common Stockholders $ 45.6 $ 38.9 $ 6.7 17% Adjusted Diluted EPS $ 0.52 $ 0.45 $ 0.07 16% Total ADV 4.89 4.13 18% Revenue per Contract $0.316 $0.355 $0.039 -11% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non - GAAP Information.” CBOE HOLDINGS 21

2013 Financial Overview Adjusted Basis¹ 2013 2012 $ Change % Change (in millions, except EPS and RPC) Operating Revenues $572.1 $512.3 $ 59.8 12% Adjusted Operating Expenses 281.2 262.9 18.3 7% Adjusted Operating Income $290.9 $249.4 $ 41.5 17% 210 bps Adjusted Operating Margin % 50.8% 48.7% Adjusted Net Income Allocated to Common Stockholders $177.4 $147.5 $ 29.9 20% Adjusted Diluted EPS $ 2.03 $ 1.69 $ 0.34 20% Total ADV 4.71 4.54 4% Revenue per Contract $0.334 $0.315 $0.019 6% ¹Adjusted to reflect the impact of certain items. See Appendix for “Non - GAAP Information.” CBOE HOLDINGS 22