Bullish Q3 FY2025 Earnings Call

Good morning, and thank you for being here. My name is John, and I will be your conference operator today. I would like to welcome everyone to the Bullish Global Third Quarter 2025 Earnings Call. I will now hand the conference over to Michael Fedele, VP of Finance. Please go ahead.

Good morning. Welcome to our third quarter earnings call. I'm Michael Fedele, Vice President of Finance, and I'm joined on today's call by our Chief Executive Officer, Tom Farley; Chief Financial Officer, David Bonanno; and Director of Corporate Development, Liam Foley. This call will contain forward-looking statements, including those relating to our expected performance and business opportunities. These statements are not assurances of future performance. They are subject to risks and uncertainties, and our actual results could differ materially. For more details on these risks, please refer to today's earnings press release and our SEC filings, including our prospectus dated August 12, 2025. We undertake no obligation to update or revise any forward-looking statements. This call will also include a discussion of non-IFRS financial measures. A reconciliation of these measures to the most directly comparable IFRS metrics can be found in our earnings press release and presentation, which also contain additional information regarding non-IFRS financial measures and key performance indicators. I'll now turn the call over to Tom.

Thank you, Michael. Thank you all for joining our call today. I'm Tom Farley, the Chairman and CEO of Bullish. We're pleased to share that Bullish continues to win. For Q3 2025, Bullish reported record adjusted revenue of $76.5 million, record adjusted EBITDA of $28.6 million and record adjusted net income of $13.8 million. As Dave will discuss here shortly and can be seen from the provided guidance, we expect more records coming for 2025 as a whole. In the last 6 weeks, our momentum has only increased. On October 31, we fully launched our options franchise and the early results are encouraging. We also launched our U.S. exchange business and have onboarded marquee customers in the early days. We have signed up many new liquidity services customers here in Q4, including high-profile crypto projects. Our index business is gaining traction with many launches of U.S.-based ETFs and other listed products tied to our benchmarks. Our media business growth has accelerated in Q4, now registering in our weekly and monthly reports as the top crypto news site globally measured by views. I will now share some context on where Bullish sits within the broader crypto ecosystem before moving on to discuss our business successes in greater depth. For several years now, Bullish has intentionally positioned ourselves at the intersection of 3 strong ongoing trends that are driving crypto evolution. One, increasing regulatory clarity with regulations that require infrastructure businesses and their customers to operate in a compliant and responsible fashion. Two, increasing numbers of traditional finance institutions operating in crypto in meaningful ways. And three, growing tokenization of major asset classes on the back of the successful tokenization of the U.S. dollar via stablecoins. We are more convinced than ever that we are on the right path. We are squarely positioned at the center of each of these trends. We are proud of our regulatory footprint and are pleased with the ongoing institutional adoption that we are helping to drive. However, I'd like to expand on this third trend, tokenization. Tokenization refers to the process of turning traditional financial assets into crypto assets. We believe this trend will be the most transformational crypto value proposition of the next decade, and we are positioned to be leaders in this space through our liquidity services platform. In fact, the tokenization trend gave rise to our liquidity services business back in 2023. The first major asset that was successfully tokenized was the U.S. dollar in the form of stablecoins. As dollars were tokenized, stablecoin issuers turned to service providers such as Bullish for help, to help them tokenize the U.S. dollar. We saw a market need for listings, liquidity and visibility as these new tokens bridge the chasm from traditional finance to blockchain. We spent most of the years 2022, 2023 and 2024 in build mode to meet these needs, and we call the collection of these products liquidity services, before tokenization was even the hot word on everyone's lips. Today, for stablecoins, we are writing smart contracts enabling bridging from one blockchain to another. We are listing stablecoins against many other assets on a compliant and regulated global exchange. We are providing liquidity both on Bullish and on DeFi protocols, and we are marketing these stablecoins through our Consensus and CoinDesk properties. In short, with our liquidity services offering, we have built a tokenization platform, and it has become our fastest-growing business. But that is not what excites us the most. The trend of tokenizing assets other than the U.S. dollar is in the first inning. These tokenization services have the potential to continue scaling meaningfully as more and more assets and asset classes are listed on chain in the years ahead. This includes substantially every major asset class you can think of. We look at the successful tokenization of the dollar and stablecoins as a roadmap for the future tokenization of these new asset classes. And as a partner for substantially all dollar and euro-backed stablecoins, we've learned the value of developing a rich set of capabilities specifically suited to helping that asset class tokenize. We continue to evolve our services targeted at stablecoins. For example, Bullish now has direct mint/burn capabilities with nearly every stablecoin issuer and also advanced API orchestration tools that allow seamless movement between fiat and stables, powering our partners' growth. We believe that each new asset class will also require incremental asset-specific capabilities alongside our standard offering of the 3 core services every asset issuer needs to tokenize: listings, liquidity and visibility. With this additional functionality need in mind, we have submitted an application with the SEC to receive regulatory approval as a transfer agent, which will further supplement our tokenization and liquidity services strategy for U.S. securities. We look forward to sharing more of our future plans with you over the months ahead, and we look forward to taking this tokenization journey with you. Now, excitement about our liquidity service platform's potential for future tokenization growth aside, how is it doing right now? Our services continue to be sought after. We're adding new and diversified customers, and our momentum has continued into Q4. In the third quarter, we added a record number of liquidity services partners, and our active partner count is up 100% sequentially. We're on track for another strong quarter in Q4, building on the success of our existing Layer 1 blockchain relationships with market leaders such as Solana, Ripple, and TRON. We have further broadened our Layer 1 blockchain relationships that we are supporting with liquidity services, adding 4 additional blockchain ecosystems, Canton, Cardano, Midnight, and VeChain to our scope of services since we last spoke. We are also pleased to share that our collaboration with the Solana Foundation continues to develop constructively. In the first quarter of this engagement, Bullish minted more than 80% of our stablecoins on Solana. And Solana's total stablecoin value locked, that is how many dollars are tokenized on Solana, grew by more than 40% during that quarter. Shifting gears to discuss our very successful options trading launch, I'd like to first take a step back and remind everyone why we are so excited about this opportunity for Bullish. Crypto options are the most rapidly growing asset class in this space. They've grown to more than $200 billion in monthly trading volume just last month, up more than 230% from the same period last year. Furthermore, given the complex nature of options as well as the sophisticated user base, we are well positioned to carve out substantial market share in this asset class, and we expect to see that asset class grow by multiples in the coming years. Turning to the specifics of our own progress. Our exchange launched in full and without risk caps at the tail end of October. In just over 2 weeks, we've already traded well over $1 billion of volume. And as of today, we have approximately $1 billion in open interest. Our best day was yesterday, where we traded $240 million, about 4% market share by our definition. I'm really excited by the traction we've attained right out of the gate, and I expect it to become a significant contributor to our financial performance going forward. Look, I've been involved with a lot of these derivatives launches over the years, including very successful ones and a few that I would rather not discuss. This one has all the hallmarks of a big winner. Our last earnings call occurred less than 24 hours after we received our prestigious BitLicense. We indicated that the receipt of this license marked the final step in enabling U.S. onboarding for prospective Bullish exchange clientele. We also shared that it will take time for these U.S.-based customers to go live given their institutional nature and the typical lengthy onboarding process for these types of customers. But with all that said, we are pleased to share that we've already actively onboarded many new customers, including various retail brokers with millions of customers like Webull and Moomoo, institutional brokers such as Cantor Fitzgerald, a very large crypto custodian, and other institutional clients. So things are progressing more quickly than we anticipated just a couple of months ago when we last gathered. Our U.S.-based clientele value our already liquid global order book, which helped us launch without any cold start liquidity problems. We are encouraged by our early progress in the U.S. and look forward to continuing to seize market share in the months to come. Outside of the United States, we continue to make steady progress growing our exchange. During the quarter, we've added some of the largest retail brokerages in Europe, the Middle East, and Latin America and integrated various crypto-focused hedge funds or asset managers that have already started trading derivatives on our platform. Shifting to information services, our CoinDesk business continues to perform well, supported by significant accomplishments in our indices business. We are pleased to share that since our last earnings call just 2 months ago, our indices have underpinned an additional 5 of 6 total newly launched U.S.-based exchange-traded crypto products, as well as 4 additional global ETPs. During the span, we also won 6 new benchmark switches from competitors and have 2 active ETP filings for the CoinDesk 20 Index. On the CoinDesk Insights or media side, we continue to successfully capture more market share against competitors with our market-leading and accessible crypto content, and coindesk.com continues to be a highly sought-after destination for advertising. We have also successfully launched CoinDesk Research, a subscription-based vertical dedicated to delivering high-quality research and analysis. CoinDesk Research also serves as a natural extension and upsell to our liquidity services clientele. The thesis that we can land and expand is proving to be true. There are many examples of existing customers in Q3 and so far in Q4, choosing to take advantage of new Bullish company products and services in addition to their existing products and services. Overall, we continue to win, and we continue to execute on the vision that Dave and I laid out when we first joined Bullish. We're proud of our success to date, and we believe that we're just getting started. We're just getting started on a macro level because tokenization of securities and other real-world assets and the shift of financial market infrastructure has only just begun. And we're just getting started today at Bullish generally because we believe we have or are pursuing the right mix of licenses, technology, talent, and experience to be a winner in a world that is rapidly shifting on-chain. We will continue to execute with focus, discipline, and momentum as we position Bullish for sustained growth in 2026 and beyond. With that, I'll turn the call over to Dave, our CFO, my partner, to review the quarter in more detail.

Thank you, Tom, and good morning, everyone. I'll start by walking through our third quarter results and then provide additional context about our operating performance before sharing our outlook for the fourth quarter. As a reminder, reconciliations of our non-IFRS metrics can be found in the back of today's presentation as well as in our 6-K filing published earlier today. Total adjusted revenue for the third quarter was $76.5 million, up 34% sequentially and 72% year-over-year, exceeding the high end of our guidance. Third quarter SS&O revenue, which includes liquidity services and all CoinDesk-branded products, reached $49.8 million, up over 50% versus 2Q and over 300% versus the prior year's quarter. Through the first 3 quarters of this year, SS&O revenue represents 53% of total adjusted revenue year-to-date compared to 28% for the full year 2024. Adjusted operating expenses for the third quarter were $47.9 million, down 2% from 2Q 2025. Adjusted EBITDA for the third quarter was $28.6 million, up 253% sequentially and 271% year-over-year. And lastly, adjusted third quarter net income was $13.8 million. As our business continues to scale, we are pleased with our cost control and high incremental margins, which we expect to continue into the future. Turning to our current financial performance. Quarter-to-date trading volume through November 17 stands at $126 billion with an average trading spread of 1.7 basis points. Our November month-to-date trading spreads are averaging 1.8 basis points, up from the 1.6 basis points you will have seen in our October monthly metrics. We expect materially higher transaction revenue for the full fourth quarter as compared to the second and third quarters of 2025, driven by higher volatility and increased active trading customers. Turning now to our Q4 guidance. We expect SS&O revenue between $47 million and $53 million and adjusted operating expenses between $48 million and $50 million. We remain confident in the outlook for our financial performance and believe Bullish is well positioned to deliver sustained and profitable growth in the coming quarters. Thank you for joining us today. And with that, I'll turn it back to Tom for closing remarks.

Thank you very much. And as we said last time, thank you very much for your continued attention to Bullish and following along with the story. And we appreciate your time today, and we'll open it up for Q&A.

Your first question comes from Ken Worthington with JPMorgan.

I wanted to focus on liquidity services. So maybe starting, you mentioned that the number of stablecoins doubled this quarter. About how many stablecoins are you servicing? And then also, you mentioned previously that the pipeline of non-stablecoin tokens was starting to dominate that pipeline. How do the economics look for non-stablecoin tokens compared to stablecoins? And then I'll wrap the follow-up in here, too. Coinbase launched a service related to ICOs. To what extent does that compete with your non-stablecoin promotion business?

Thanks, Ken. Good to hear from you. I might have been speaking too quickly. To clarify your question, the liquidity services figures I mentioned refer to all customers using these services. We are not saying that we doubled our stablecoin customers; in fact, I think we did not double those specifically. We doubled the overall total, which includes the four Layer 1 blockchains I described, as well as stablecoin issuers. To address the main point of your question, we are still adding stablecoin customers, which aligns with our initial thesis and seems similar to your perspective that, with the GENIUS Act, we expect continued growth in stablecoin issuers. The new issuers require the same three tokenization or liquidity services products—listing, liquidity, and visibility—as everyone else. What is particularly exciting is that the product market fit for these services is proving to extend well beyond stablecoin issuers. During the quarter, we observed a balanced distribution among three broad categories: stablecoin issuers, Layer 1 blockchains, and various token crypto project issuers. This indicates a blend of interests that goes beyond just Layer 1 or stablecoins. I’ll let Dave clarify if I've misrepresented any of those figures before returning to you, Ken. Regarding the ICO platform, we are concentrating on the highest quality crypto platforms, which aligns with our goal of servicing institutional customers. They are typically less interested in smaller projects and focus on those with a market cap of at least $500 million. The competitor you mentioned operates in a different area than our focus. We are committed to enhancing our liquidity services in our core market and enjoying the growth of our total addressable market in real time.

Yes, Ken, to your question about the stablecoin liquidity service agreements. As we mentioned before, we are partnered with basically every stablecoin out there, except for USDT currently. I believe that count is about 9 or 10 total stablecoins, both euro and dollar-based partners, with regards to the opportunity to further monetize stablecoins versus non-stablecoin partners. In general, we do see the ability to use our partners' assets that are stablecoins to do other revenue-generating activities just given the broad-based utility of stablecoins throughout crypto, DeFi and otherwise. But we are also able to find other opportunities with the non-stable partners. It depends. Each one of these is a little bit bespoke with varying degrees of utility and contract sizes. We're excited about both sides of the pipeline. And both sides of the pipeline are growing, albeit right now with more emphasis on the non-stable portion given the next wave of, say, GENIUS compliance stablecoins has really yet to go live, but we expect a new wave of those to begin late fourth quarter, early first quarter, and we expect to pick up some new significant wins, which we'll talk about early next year.

Your next question comes from the line of Peter Christiansen with Citi.

Tom, David, congrats on the execution momentum here, really impressive stuff here. I want to double-click into the motivation to seek transfer agent capabilities and licensure. Obviously, there's opportunities with some of the coin indices and perhaps even bespoke products. But just curious, how do you think about the competitive landscape or setup for maybe some more commodity type of RWAs out there, single stocks? How are you seeing that competitive setup? And then as a follow-up, I was just curious if you could speak to some of the performance you saw out of the AMM during some of the heightened volatility that we've seen in recent weeks. Obviously, spreads look pretty healthy there. But just curious if there's any other operating metrics that you think are useful for us to consider.

Sure, great to hear from you, Pete. You brought up two significant topics. I'll address the first one, and Dave will handle the second. I mentioned in my prepared remarks the broader trend of tokenization, and I'd like to provide more context based on your question. When we talk about stablecoins, essentially they represent the U.S. dollar, and the challenge is how to take the U.S. dollar and put it on the blockchain for use in commerce. This process is referred to as tokenizing the U.S. dollar. There are various players in this space; some are very crypto-oriented, like Tether or Circle, while others, like Western Union, are less so. Then you have companies like PayPal that fall in between. Those who want to tokenize the dollar may have the ability to do it alone, but some firms realize they need expertise and assistance. There is a range of services and products needed to transition from non-tokenized to tokenized. For instance, do you create the smart contract to generate the tokens by yourself, or do you use a vendor? Do you handle the necessary state or federal licenses, or do you outsource that? These various tasks represent tokenization services. We decided to focus on the areas where we excel, emphasizing the active listing of tokens—not just listing them in isolation, but against various other tokens. We also look beyond spot transactions to include perpetual futures, dated futures, and options contracts, all while ensuring compliance through a regulated exchange, which gives credibility to the issuers of those assets. We focus on providing liquidity even during challenging times and ensuring these newly tokenized assets are actively traded. Additionally, we have strong visibility in the crypto space, with CoinDesk leading in traffic as the top source for crypto news and a meeting point for important institutional players. Now, regarding your question about the transfer agent aspect, we believe the U.S. securities market, encompassing single stocks and fixed income, is poised for significant developments. Our customers have guided us to expand our offerings beyond basic listings, liquidity, and visibility. I've mentioned examples such as API orchestration and the direct mint earn feature, as well as our capability to write smart contracts to bridge different layers. Acquiring a transfer agent license allows us to engage more actively with asset issuers who are tokenizing U.S. securities, providing enhanced listings, liquidity, and visibility, along with services like writing smart contracts or tracking ownership of securities. This license, under SEC guidelines, enables us to offer these additional services to securities issuers, whether their assets are tokenized or traditional. I hope this provides a clearer understanding of our direction, Pete. I know it was lengthy, but I hope it was informative.

And regarding dealer performance.

Yes, we just want to be helpful in this tokenization wave. We think it's huge, Pete. Just one more quick anecdote, Dave is going to punch me. But we went out and we started this tokenization effort really in earnest, we started building the features in 2022. We productized it in 2023. It really took off in 2024. We called it liquidity services, but it was tokenization. We went in January of 2025 this year. And if you go back, Pete, this around the time we started talking to you and you look at our deck, we talked all about tokenization, and there was kind of a big yawn. People just really weren't too excited about it. That's how much has changed in the year 2025. It's the regulatory regime here. It's also just the technologies of the Layer 1s are that much more robust. People have realized it's ready for prime time. People now realize that the benefits of tokenization are real, being able to use those tokens more easily as collateral in a more efficient manner. I'm now speaking on a regular basis to the heads of the very largest banks in the world who are preparing for this wave. And so we've seen this coming. At times, we felt a little crazy because of the looks we were getting across the table, but we've been preparing for it, and we just want to be a part of helping our customers make this leap.

Pete, regarding your question about the volatility experience, you are likely referring to the events of October 10 and the AMM performance. Overall, we are very proud of how our technology performed. Every few quarters, we have a moment to showcase the benefits of AMM liquidity compared to other club order books. During the flash crash on October 10, our order books maintained significantly more depth than other platforms, especially the offshore venues where liquidity vanished for major assets like Solana. Our spot prices experienced far fewer wicks, and our derivative systems had noticeably less liquidation than other venues. Overall, we are pleased with how the system performed, and we generated a substantial amount of trading revenue that day, which our customers appreciated. There is ongoing discussion in the broader market about how derivatives, marketing systems, and order books operate in less regulated venues compared to ours.

Just one more comment on that. I remember way back in kind of 2022, I had a launch with one of the most prominent executives at a trading firm in our industry. And he said, I suggest you, Tom, as somebody who's been around kind of clearing and derivatives your whole career, go look at how these perpetual futures markets work on these other venues. You'll be appalled. And I did exactly that. I spent a weekend doing a deep dive and came back to our team and said, we will never do that. It is wrong what happens on these markets. What we saw on October 10 is positions were liquidated for fully collateralized accounts. It's a heads, I win, tails, you lose approach from these unregulated venues. And it underscores for you why real institutions are never going to do business there. They're just not. Real institutions need to know when they're hedged, they're hedged. Their position isn't just going to evaporate in the dead of night when they have gains on it on a fully collateralized basis.

Your next question comes from the line of Dan Fannon with Jefferies.

I wanted to follow up on SS&O more broadly. There's a lot of momentum and a strong third quarter. However, when we look at the forecast for Q4, it appears flat at the midpoint. Can you discuss how this aligns with the long-term growth opportunities from a revenue standpoint and the current momentum in the business compared to the near-term revenue outlook?

Yes, thank you, Dan. It’s great to hear from you. Addressing the second part of your question first, we remain very confident in the growth outlook for subscription services and other revenue moving forward. We see our project pipeline filling up. We believe that tokenization has the potential to be a significant boost for that area. Regarding the Q4 guidance, there are several factors at play. We are experiencing broad-based growth across nearly all areas in SS&O in terms of customer wins and new contracts, as Tom noted. However, one factor offsetting that growth is seasonality. The fourth quarter is unique this year as it has no events revenue. The third quarter included revenue from our DC policy event and EDGE conferences, which will not occur in the fourth quarter. Additionally, there is some impact from significant downward price movement in the broader digital asset sector, which affects our indices business, some lending operations, and to a lesser extent, liquidity services; however, this is largely counterbalanced by our overall growth. There's also a timing aspect to consider, as many of the new contracts in the fourth quarter are signed towards the middle or end of the quarter, unlike the third quarter, which saw strong momentum from the second quarter into the early third quarter. Ultimately, when we consider all these factors, we arrive at the guidance you see today, which indicates flat to modest growth.

Great. That's very helpful. And then I was hoping you could just provide a little more commentary around the momentum post the BitLicense approval. You talked about a few onboardings. But I guess, could you expand upon those comments and talk about kind of the pipeline and how you see the kind of ramping up of that customer base as we go into, obviously, fourth quarter, but more importantly, into next year?

Yes, sure, Dan. As I said, we've had kind of more early wins and notable early wins than I think we were expecting to be able to reveal to you given that there were only 2 months or 8 weeks between our 2 earnings calls. So some really good early momentum. I would say the other thing that's positive is the pipeline has filled up very, very quickly and has many exciting names who will be known to you and have things like bank or investments in their title and have the potential to really move the needle. I guess the downside is we have seen other than a bunch of early adopters who were quick to sign an agreement, it's hard. Like it's a slog. And I think some of this goes back to FTX, frankly, because we still get questions that are pretty clearly tailored to avoiding an FTX-like situation, where the diligence is just very robust. Hey, let's go through your SOC reports. Let's go through your cyber reports. We want to see more working papers in addition to just the publicly available audit. So everything feels good and about on track, and we have some positive upside surprises in terms of the number of big customers who have already signed and have come on board as well as the size of the pipeline, but it's going to take some time.

Your next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Tom, I think we're expecting kind of CLARITY Act to get put through the Trump's desk before the end of the year and signed. Could you maybe explain to us what you're expecting that will do to your business, particularly from the liquidity services front?

Sure. It's great to hear from you, Brett. I wish this call were on Monday instead of today. Tomorrow and Friday, I'll be meeting with several U.S. Senators who are involved in the CLARITY Act and a broader market structure bill. By then, I will have a much clearer perspective. I'm glad to hear you are optimistic about the bill passing this year. I share your optimism because I see bipartisan support, which I believe will significantly benefit the crypto industry by reducing the need to obtain individual approvals from each of the 50 states. This change will be advantageous for infrastructure providers like Bullish. Additionally, providing legal certainty, similar to what we've seen with stablecoins, will attract more institutions and asset issuers into the market. It will be great for growth, and I am eager to see it happen, as it will also be beneficial for our business. I'll have more information within the next 48 hours. There's much to anticipate, and I think the Senate Agriculture Committee will propose a revised version of their bill, which will need to be negotiated with the Senate Banking Committee. Ultimately, there will be a conference process involving both the Senate and the House to ensure we create a bill that serves our country and the industry well, and we intend to be actively involved in that process over the next two days.

Awesome. And then maybe just on the U.S. momentum. It feels like that launch happened a bit sooner than we were expecting and then adoption was much faster than we were expecting. Could you maybe pinpoint why it happened so fast and how it's been so good? And kind of what you're expecting, I guess, from the U.S. business, maybe the rest of this year and into next year?

Yes, I might experience some stress while answering this. Over the past few years, we made some important decisions. One of those decisions, which I'm pleased about, relates to our investment strategy, even though it caused us quite a bit of stress. Specifically, we decided to pursue the most challenging regulatory approvals globally for spot crypto trading as an exchange. We sought out licenses in Hong Kong, from the stringent German BaFin regulator, and from New York, where obtaining a BitLicense is quite difficult. Furthermore, we aimed for a benchmark administration license in the UK and proposed a unique approach. Instead of merely requesting the ability to operate within each jurisdiction like most other crypto exchanges, we expressed our desire to create a single global order book, allowing trades across all involved regions. This approach was challenging as it required convincing regulators to permit us to operate in their jurisdictions while offering a global trading platform. Consequently, this extended our timeline by about two years compared to what it might have been had we taken a shortcut like others in the industry. The upside to this is that when we receive the BitLicense and officially launch, we will be ready to welcome the many customers who have been eager for our services. We will ensure they've been verified, hold their funds within the U.S., and enable them to trade immediately, accessing liquidity from our global customer base. This strategy has positioned us well to enter the market quickly and sets us apart from other exchanges.

Your next question comes from the line of Brian Bedell with Deutsche Bank.

Congrats on the good momentum here. Maybe just talk about another angle on the U.S. traction. Dave, you quoted some pretty good metrics for trading volume so far in 4Q. We typically think of a lot of the onboarding here as contributing to SS&O. But can you talk about the new customer momentum contributing organically to the trading volume outlook? And is that something that has the potential to grow even faster than SS&O just from the U.S. angle alone?

Yes. So thanks for the question. Our user counts across the board are continuously hitting new all-time highs. So that is definitely beneficial. This is for trading customers. That is definitely beneficial to the trading volumes. It's always difficult to disaggregate the attribution of more customers versus volatility price or our own internal pricing changes. But when you put them all together, we are certainly realizing more trading revenues and more trading volumes per unit volatility than we have in the past. It is good to see a little bit of fallback in the market. It does bring to light the diversified revenue streams we have with exceptionally strong transaction revenue that we've had so far in the first half of here in the fourth quarter. We continue to believe that over the course of 2026, the U.S. will become a major contributor to that. We're also extremely pleased with the launch of options. We expect options to be a major contributor to our transaction revenues next year. And we're pleased with the overall momentum we've seen on the exchange trading side. And a lot of that is around cross-sells, our liquidity services, our ability to trade in and out of different stablecoins and our laser focus on institutions, the products and services that they need are all paying off.

Yes. I want to emphasize that while we currently hold a single-digit market share in options, the initial results have been quite surprising. We've learned a few important things. First, our product growth has been entirely organic. We didn't have options available when we spoke two months ago. So when I mention that we achieved $240 million yesterday, that's solely organic growth. Moreover, the customer base for options is significantly different from that of our linear customers, like the spot customers. This distinction has been beneficial in attracting new users to our platform, which is exciting. More generally, we have identified a real market demand for an options exchange that enables customers to trade spot, perpetual, data futures, and options all within a single account on a liquid, compliant platform that offers portfolio margining. It seems we timed our market entry perfectly for this. I'm excited about our progress. Stay tuned.

Yes, that's great news. And then just on the incremental margins, Dave, you referenced obviously high incremental margins. Fair to say that it's higher on the trading side than the SS&O side or not necessarily the case?

Probably, I'd say that's fair to say on the SS&O side, you do have the events business, which is our only line item that features any meaningful variable costs. So in total, probably a bit more on the trading side. You'll notice incremental margins in the third quarter were actually above 100%. That was due to more advertising spend in the second quarter for an event than there was in the third quarter. If you look at the guidance and the kind of current run rate of the transaction revenues for the fourth quarter, you can pencil out not quite over 100% incremental operating margins, but definitely well north of 80%. And we continue to look forward to demonstrating the operating leverage in the business to demonstrating the benefits of the diversified revenue streams and having that begin to play through in hopefully a more volatile environment than we got in the second and third quarters of this year. Hopefully, that persists into 2026, and we look forward to posting more earnings, higher margins and demonstrating that operating leverage that we've been talking about.

The next question comes from Chris Brendler with Rosenblatt.

Congrats on the results as well. Maybe a little bit of an education for me, but I just wanted to ask about the monthly metrics on the spread side. I would have thought the options business would have been higher than spot. And so a function of it's early? Or am I just not thinking about that correctly? And then the other question would just be the negative spread in perpetual futures in October. I imagine that's volatility related. Just give me a little color there on what drove the negative spread, so much larger negative spread in October for perpetual futures.

Yes, sure. So on the options side, early days, we continue, as we do with all the products to experiment with our pricing. And as I've mentioned before, we are always solving for maximizing our total adjusted transaction revenue per unit of volatility. That's across all of the products. The products do tend to work together. And so we've seen benefits from changing prices in certain products with the volumes or maybe revenues we get out of other products. So still early days on the spreads with regards to options, but we look forward to updating you on that as we go. And that is also why we report the monthly exchange metrics so everyone can keep track in essentially real time along with us. With regards to the perpetual futures spread in October, yes, the volatility was largely the driver behind the negative spread there. Zooming out, though, we continue to make good progress on perpetual futures. We do hope that the ramping up of the options activity will filter down into perpetuals as well, and we can kind of move that into positive territory here going forward. It will be variable. It will be somewhat volatility dependent, but we're pleased with the progress, and we look forward to making more progress on perpetual futures.

Your next question comes from the line of Rayna Kumar with Oppenheimer.

This is Guru on for Rayna. With options now officially live on the platform, can you maybe just help us understand the potential capital efficiencies that you'd now be able to offer through greater cross-margining capabilities? And also going forward, given the role that tokenized assets can play here and just improving collateral management, do you see any specific near-term opportunities, perhaps just expanding your relationship with Circle beyond USDC and into USYC? Or just any other tokenized money market product, right? And if I can squeeze another one in directly in relation to the prior question. With options revenue likely becoming material in early '26, when can we actually expect perhaps revenue to turn positive?

Thank you for that question. One of the advantages we have is our single global order book paired with one matching engine. Unlike other exchanges, which often use separate matching engines for different jurisdictions or products, we streamline our operations with a single matching engine. This simplicity allows customers to perform all their derivatives and spot transactions within one account, consolidating their collateral as well. Consequently, we can implement intelligent margining by capturing the lowest possible margin from each customer without going below the required amount. For instance, if a customer has sold Bitcoin calls while holding Bitcoin as collateral, we can provide a reasonable margin. Similarly, if a customer owns a cryptocurrency that is closely correlated with another asset they've shorted, we can offer some offset. While this approach isn't simplistic and doesn't lend itself to easy explanations, effective portfolio margining is crucial for the options trading community, and it’s a key reason they have chosen us. I recalled a conversation with a former colleague about how another company recently received approval for a VAR-based margining system that took 12 years to develop, highlighting the complexity involved. Fortunately, we started with a highly efficient system, which is contributing to our early success, and it will only become more efficient as we continue to evolve it.

And regarding tokenization, money markets as collateral, et cetera, we continue to follow the customers and the customer demand. We see tokenization of a variety of different assets opening up new opportunities for us, both across liquidity services and the exchange as collateral trading pairs and otherwise. So we think with hopefully, the passage of the market infrastructure bill as well, a lot of new opportunities will come out of tokenization that touch many parts of our business. With regards to perpetual futures, we're not providing any specific guidance on transaction revenues. That's not something we've been doing. However, again, we do provide the monthly exchange data so that you can follow along at home in basically real time. And as I said earlier, we continue to see progress in that line item. We think 2026 will be a better year than 2025, which was notably better than 2024. But stay tuned and continue to watch the monthly metrics for updates on all of the transaction revenue line items.

Your next question comes from the line of Joseph Vafi with Canaccord.

Great progress. Just one quick one for me here on the spot spreads. I know there was some incremental pricing power in Q2. Maybe we just kind of drill down on that just a little bit more and some of the efforts there and what you're seeing in the spot market in Q3 and early Q4.

Thank you, Joe. We've made notable progress, as we discussed in the previous call. In the second quarter, we focused significantly on refining our pricing structure, coinciding with a low volatility environment. These factors contributed to what we expect to be unusually low spreads for that quarter. You can see that they have rebounded strongly since the lows observed in May and June. We're continuing to work towards maximizing total adjusted transaction revenue per unit of volatility and feel optimistic about our current position. However, the market is constantly evolving, as is our customer base and volatility, which means we'll keep experimenting with spreads. Our goal is not just to raise spreads but to increase adjusted transaction revenue. There are times when slightly reduced spreads could lead to greater volume, potentially compensating for the decrease in spreads. Overall, I believe our current status provides a solid foundation for the future, but it's important to remember that the market remains very dynamic, and we'll keep adjusting our strategy to optimize for total adjusted transaction revenue.

I just want to highlight, we do have to stop right at the opening bell. And I know there's a couple of other people in the queue, and we will make sure to circle back and get to you after this call and also make sure that we call on you early on the next call.

Your next question comes from the line of Bill Papanastasiou with KBW.

Just a quick one for me. Now that you've successfully secured the BitLicense and have expanded into the U.S., I'm just curious what's next? Are there any remaining geographies that you're looking to tackle and secure a Tier 1 license? Or will the focus remain on consolidating existing markets into the global order book?

Yes, that's a great question. Not really. I'll just highlight the U.K. still has not propagated any legislation around crypto trading, and that will come at some point. But no, we have the Asia band, the Europe band and now the U.S. band. There will be incremental spot licenses we will look to pick up, but it's frankly not even noteworthy enough to discuss on this call other than the U.K. But this is a continuing game of licenses. And it's not just for spot, but for derivatives and our index business as well. And so it's like we have full-time staff. This is all they do. And they'll just constantly be gathering licenses, and we'll be sharing those with you. But the big ones geographically are covered. So I just want to jump in because I know Gautam and Owen and Ed, you guys are in queue. Sincere apologies. If I were less verbose, we would have gotten through it all. If I could answer all the questions like Dave. And we'll make sure that we get to you guys early next time, and we'll also circle back over the next 24, 48 hours and have discussions with each of you individually. And finally, I just want to say thank you all again for following along with the Bullish story and look forward to 3 months from now being able to tell you about everything we've accomplished in the meantime. Much appreciated.

Ladies and gentlemen, that concludes the question-and-answer session and today's conference call. We would like to thank you all for your participation. You may now disconnect your lines. Have a pleasant day, everyone.