Cboe Global Markets, Inc. (CBOE) Q2 2025 Earnings Call Transcript

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the CBO Global Markets second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. It is now my pleasure to turn the call over to Ken Hill, Head of Investor Relations. You may begin your conference.

Good morning, and thank you for joining us for our second quarter earnings conference call. On the call today, Craig Donahue, our CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Dave Housen, our global president, will provide some comments as he hands his responsibilities to Chris Isaacson, our Chief Operating Officer, and Kathy Clay, our global head of derivatives, who will join us for Q&A. We will conclude our prepared remarks with Jill Griebenow, our Chief Financial Officer, who will provide an overview of our financial results for the quarter, as well as discuss our 2025 financial outlook. Following their comments, we will open the call to Q&A. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of our website. During our remarks, we'll make some forward-looking statements which represent our current judgment on what the future may hold. And while we believe these judgments are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks, and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, after this conference call. During the earnings call, we will be referring to non-GAAP measures as defined and reconciled in our earnings material. Now, I'd like to turn the call over to Craig.

Good morning. Thank you for joining us today to discuss our second quarter results. Having assumed the CEO role in early May, I have been impressed by the outstanding results CBO delivered while navigating an evolving macro landscape as well as a variety of corporate developments. During the second quarter, CBO grew net revenue 14% year-over-year to a record 587 million and adjusted diluted EPS by 14% to $2.46. These results were again driven by robust volumes across our derivatives franchise, both in multi-list and proprietary index option products, strong new sales growth in our SIBO data vantage business, resilient industry volumes in our cash and spot markets, and disciplined expense management. Building on a theme we've seen gain traction in recent quarters, the second quarter strength was broad-based. All three categories, derivative markets, cash and spot markets, and data vantage, produced double-digit net revenue growth on a year-over-year basis, contributing to record first-half results for the firm. Taking a closer look at the second quarter trends, our derivatives franchise delivered a record quarter with organic net revenue increasing 17% year over year. Options volumes increased on the back of heightened market volatility as investors used options to help manage risk in a quarter marked by both sharp sell-offs and even sharper rebounds. In our Our multi-list options business, net transaction and clearing fees revenue was up a robust 32% given higher industry volumes and positive pricing trends. In our proprietary products, SPX options volumes jumped 21% year-over-year to a new record average daily volume of 3.7 million contracts, while many SPX options average daily volume rose 50% to a record 108,000 contracts. Even more importantly, the second quarter demonstrated the full utility of our S&P 500 volatility toolkit, as well as the resilience of our diverse customer base. As volatility surged in April, traders gravitated to our established SPX and VIX contracts for liquidity and market depth, with SPX options setting a single-day record of 6 million contracts on April 4. Much of the increase in April came from institutional investors using index options to hedge, particularly longer-dated options, which saw the biggest increase relative to other tenors. While institutional activity was robust in April, retail traders pulled back, as evidenced by decreasing share of zero DTE volume in April. While retail investors tend to step back when volatility jumps unexpectedly as it did in April they typically re-engage once volatility moderates which is what we observed in May and June. SPX zero DTE volumes rebounded to new highs ending June with a new record monthly ADV of 2.2 million contracts. We've highlighted the resilience of SPX zero DTE trading in the past, and it's encouraging to see it reaffirmed once again last quarter. In the past year alone, we've seen the VIX index hit a high of 60 twice, and SPX intraday volatility jumped to a post-global financial crisis high. Through it all, SPX zero DTE options have continued to grow, propelled by wider adoption and new use cases. In Q2, they made up a record 57% of overall SPX options volume. Looking ahead, we remain positive about the growth potential of options as an asset class and our proprietary index options franchise. Continued uncertainty regarding monetary and trade policy is expected to support the continued use of options to dynamically manage risk. Structural factors such as increasing retail participation and international expansion should provide further tailwinds. Anecdotally, we see encouraging signs from international brokers. They continue to expand access by extending trading hours and by increasing functionality for complex and simple orders across SIBO's proprietary index product set and a greater number of symbols. These efforts are well aligned with SIBO's initiatives to deliver education and local market intelligence to a global audience. Moving to cash and spot markets, second quarter net revenue was up a strong 11 percent as our European cash equities business continued to drive robust performance for the category. Led by the strength in Europe, our Europe and Asia Pacific segment delivered the strongest year over year percentage growth of any SIBO segment for the fourth quarter in a row, achieving an impressive 30% increase. The increase was driven by a 39% year year-over-year growth in net transaction and clearing fees, resulting from strong industry volumes and solid market share gains in Europe across our portfolio of products. Higher non-transaction revenues in the segment also contributed to the growth, with revenue up 21% year-over-year. In other areas of global equities, last week we announced the decision, subject to consultation with regulators to close our Japan equities business on August 29th. This will include the SIBO Japan proprietary trading system and SIBO BIDs Japan business. This decision reflects our philosophy of directing resources to the highest potential return activities across our organization, specifically exiting the equities business and redeploying time, energy, and investment dollars to supporting Japanese customers through our derivatives and market data capabilities. We continue to see great demand from Japanese market participants for access to international markets, U.S. and European market data, and our global derivative products. To support these efforts, SIBO will maintain a presence in Japan focused on sales and client engagement. Turning to our data vantage business, net revenue for the category improved by 11% on a year-over-year basis. During the second quarter, we saw a positive contribution from all three major components of data vantage, with subscription-based data, analytics, and index products producing strong year-over-year gains. Looking more closely at the second quarter dynamics, international demand remains a key driver of new data sales with roughly 45 percent occurring outside the U.S. in the second quarter. We are looking to accelerate that growth with new hires to lead our market data sales as well as our analytics and indices businesses in the Asia Pacific region. Beyond strengthening our sales capabilities, we're leveraging new technologies and developing new products to enhance our offerings. We're accelerating the migration of our derivatives data to the cloud and actively exploring new global access points where we see growing demand. On the product front, we're leaning into the secular trend in derivatives-based ETFs while leveraging our expertise to create indices in partnership with our index providers and issuers. On access, our dedicated CORS offering, which provides superior performance and determinism, continue to perform well as we see the benefits of reallocating resources to revenue-enhancing activities. The interconnectedness and importance of the data vantage business at SIBO should not be understated. Each enhancement to our market access layer, subscription-based data sales, and even real time values from the index business provide an ecosystem benefit to SIBO in the form of better customer engagement and improved activity levels for our trading businesses. Before I conclude this portion of my remarks, I want to take a moment to sincerely thank Dave Hausen for his contributions during his time here at SIBO. While we'll miss Dave, I also could not be more pleased to elevate Chris and Kathy, both of whom are strong and proven leaders here at SIBO. SIBO is on solid footing and we are well positioned to deliver on the opportunities ahead and now I'll turn the call over to Dave to say a few words.

Thank you, Craig. I just wanted to briefly take the opportunity to express my gratitude to all of my colleagues here at SIBO and our customers that have taught me so much over the years I am proud to have been part of such transformational change over the last 12 years as part of the SIBO and BATS management team and in particular the last three years as president over which time we've expanded our global presence through establishing a one SIBO mindset the firm success has been a collective achievement as we've managed through a tremendous amount of change while laying the foundation for future success i am grateful to be able to hand things off to such capable leaders in chris and kathy as i return home to be closer to my family i have known chris and kathy for 12 and 8 years respectively they are not only both long time close partners but seasoned leaders and respected market practitioners with a track record of driving innovation in the industry. And before I hand it over to Jill for the financial update, I want to say a heartfelt thank you to the analyst and investor community. I have enjoyed engaging with you all on earnings calls and numerous conferences over the years and will truly miss our interactions. Now, I will turn the call over to Jill.

Thanks, Dave. SIBO posted another strong quarter, with adjusted diluted earnings per share of 14% on a year-over-year basis to $2.46. I will provide some high-level takeaways from this quarter's operating results before going through segment results. Net revenue increased 14% versus the second quarter of 2024 to finish at a record $587 million, with each of our categories producing healthy year-over-year growth. Specifically, derivatives markets net revenues grew 17 percent, state advantage net revenues grew 11 percent, and cash and swap markets net revenues grew 11 percent. Adjusted operating expenses of 213 million were up 8 percent on a year-over-year basis. Adjusted operating EBITDA of 387 million grew 19 percent, and adjusted operating EBITDA margin expanded by 2.3 percentage points to 65.8% versus the second quarter of 2024, reflecting strong performance across our businesses as well as disciplined expense management. Turning to the key drivers by segment, our press release in the appendix of our slide deck include information detailing the key metrics for our business segments, so I'll provide some highlights for each. The options segment delivered its fourth consecutive quarter of record net revenue with 19% year over year growth. Total options ADV was up 20%, with a 17% increase in index options volume and a 22% increase in multi-listed options volume. North American equities net revenue was roughly flat on a year-over-year basis. Access and capacity fees increased 16% as compared to the second quarter of 2024, and industry volumes supported the transaction side of the businesses. Europe and APAC produced another quarter of record net revenue, with a 30% year-over-year increase, reflecting particularly strong growth in Europe. Net transaction and clearing fees for the segment were up 39%, while non-transaction revenues were up a combined 21%. Futures net revenue decreased 14% from the second quarter of 2024, primarily due to lower volumes. And finally, our global FX segment also achieved another quarter of record net revenue. with 19% year-over-year growth, driven by a 17% increase in average daily notional value. Looking at our SIBO data vantage business, net revenues were up 11% on an organic basis in the second quarter. Net revenue growth continued to be led by strong new subscription and unit sales, which accounted for roughly three quarters of the total net revenue growth for the quarter. The remaining growth was attributable to pricing changes, which continue to play a more modest role in our data vantage growth strategy. As Craig mentioned, we remain focused on scaling our product set by leveraging our advanced technology and differentiated product offerings. We believe these additions, combined with ongoing brand investments and a sharpened focus on sales outcomes, position data vantage for sustained long-term growth. Turning to expenses, total adjusted operating expenses were $213 million for the quarter and up 8% on a year-over-year basis. Higher compensation and benefits, depreciation and amortization, and technology support services expenses were partially offset by a year-over-year decline in travel and promotional, as well as professional fees and outside services expenses. Moving to our 2025 guidance, we are lowering our full-year expense guidance range to $832 to $847 million from 837 to 852 million. This decrease reflects our year-to-date operating discipline and the impact from our decision to close our Japanese equities business partially offset by higher incentive compensation. Regarding the wind down of our Japanese equities business we expect to record an estimated pre-tax charge of approximately five million dollars in the third quarter of 2025 primarily related to non-cash impairment of indefinite lived intangible assets and technology related software. This charge is expected to be excluded from adjusted operating expenses. From an expense savings perspective, we expect the impact on adjusted operating expenses to be in the range of $2 million to $4 million in 2025. Going forward, savings are expected to be in the $10 million to $12 million range on a normalized annual basis. Partially offsetting some of the lower expense components mentioned, our updated guidance also factors in a higher bonus accrual given both our strong year-to-date revenue trends as well as our healthy expectations for the second half of the year. In addition, we anticipate some re-acceleration in marketing spend throughout the remainder of 2025. Overall, we believe our expense guidance range provides flexibility to invest in the business while also positioning us to deliver on our shareholder return objectives. Looking at our full-year guidance more broadly, we are increasing our full-year total organic net revenue growth guidance range to high single digits from mid to high single digits, given our strong first-half results. We are reaffirming our DataVantage organic net revenue growth range of mid to high single digits following solid year-to-date trends and a steady outlook for the second half of 2025. Our full-year guidance range for CapEx remains at $75 to $85 million, and we are lowering our expectation for depreciation and amortization to $53 to $57 million, dollars from 55 to 59 million dollar range. We continue to expect the effective tax rate on adjusted earnings under the current tax laws to come in at 28 and a half percent to 30 and a half percent for the full year. And while we don't provide formal guidance on interest income or interest expense, we expect that interest expense net of interest income will be approximately one million dollars in the third quarter of 2025. On the capital front, we remain pleased with the health of our financial position, exemplified by the $1.2 billion of adjusted cash on our balance sheet, an attractive debt profile, and a leverage ratio of 1.0 times. In the second quarter, we repurchased $35 million in shares, bringing year-to-date repurchases to $65 million. Alongside our share repurchase activity, we returned $66 million to shareholders in the form of a $0.63 dividend during the quarter. Looking ahead, we remain focused on effectively allocating capital while leveraging our flexible balance sheet and free cash flow profile to produce sustainable shareholder value. Lastly, I want to provide an update on our investment in the Seven Ridge Fund holding Trading Technologies. This week, Trading Technologies announced an investment transaction that is expected to result in CBO fully exiting its investment in the Seven Ridge Fund that currently owns Trading Technologies. The transaction is expected to close in the fourth quarter of 2025 after regulatory clearance. CBO expects the transaction to result in the gain recorded against the June 30, 2025 carrying value of its investment in the Seven Ridge Fund. While I cannot provide any incremental details around the potential gain until the transaction is complete, I will note that consistent with our historical treatment of minority investment gains and losses at sale, we anticipate adjusting out any future impact incurred with the exit of this investment from our non-GAAP metrics. Now, I'd like to turn it back over to Craig for some closing comments before we open it up to Q&A.

Thank you, Jill. While I have only been in the CEO role at CBO for a few months, I wanted to leave you with some of my early impressions of the company and what you can expect from me and our senior leadership team moving forward. First, I have been impressed by the power of CBO's suite of cash, data, and derivatives products, our global presence, and our market-leading technology, all underpinned by a highly capable management team and associate base. As reflected in today's results, our portfolio of businesses is performing at a very high level. At the same time, with the continued guidance and support of our board, we are an organization that remains committed to improving, adapting, and positioning ourselves to deliver more value to shareholders over time. This not only means exploring organic and inorganic investment opportunities around key capabilities, but optimizing the growth and profitability in our core businesses. We are committed to bringing a rigorous financial discipline to how we allocate capital, both dollars and people, across the firm. Our decision to close our Japanese equities business was representative of that thought process in action. Moving forward, we remain committed to continually assessing our business portfolio to produce the best long-term returns for shareholders. As I mentioned, clearly, several areas at SIBO are performing exceptionally well, from cash to data to derivatives. The second quarter was an outstanding one, and the record first-half results showcased the power of the business. Heading into the second half of the year, I am energized by the opportunities ahead.

I'd now like to turn the call back over to can for questions and answers at this point we'd be happy to take questions we ask that you please limit your question to one per person to allow time to get to everyone feel free to get back in the queue and if time permits we'll take a second question again to ask a question simply press star one on your telephone keypad and our first question comes from the line of patrick moley with piper sandler thank you please go ahead yes good morning and thanks for making the question um craig welcome really looking forward to working with you.

I was hoping, you know, you talked a little bit about it, but I was hoping you could just maybe speak to the one or two key priorities that you have in coming into the role and how that might differ from previous leadership. And then, you know, more recently, Fred, one of the things Fred had talked about was an openness to doing potentially, you know, needle moving M&A. And just given your experience with larger scale M&A, How are you thinking about the inorganic growth opportunity for SIBO going forward?

Okay, thanks, Patrick. You know, I would say coming into the role, first of all, I mean, I'm very impressed with the team and the strategy that we have had in place. And I think that strategy is producing great results for the company. I'm going to continue to work with the team to be very focused on, you know, optimizing growth in our core and leaning into the secular trends that are supporting, I think, fantastic growth dynamics in our proprietary and multi-list derivative products, as well as our data vantage businesses. You know, in terms of, you know, M&A, and even though I have obviously a strong background in that, I guess what I would say is, you know, if that's something that we'll be working on as a team over time, Anything that we choose to do is going to be something that has to be compelling from both a strategic and a financial rationale perspective. There's nothing that we need to do right now. We've got a very flexible balance sheet. But, you know, my feeling is we should look at all of our growth opportunities, focus on optimizing the core, look at things we can do to grow around and outside of our core. but we'll remain opportunistically focused on whether there are also opportunities for us to consider growing inorganically. But that's something that we'll work on over time.

And your next question comes from the line of Dan Fannin with Jeffries. Please go ahead.

Great. Good morning, Greg. Welcome back to the quarterly earnings cycle. Just to follow up on your previous comments here, just optimization, you've mentioned a few times, And obviously, you've already proactively made the changes with Japan. But where are you in just kind of the evaluation of the businesses and your footprint? And how should we think about greater optimization or more changes like you've already done in the near term?

Well, I think, you know, obviously, we've got really great dynamic growth across. I'm working with the team to look at everything that we're doing. We're doing that in a rigorous way. we're trying to make sure that the end goal is to just make sure that we're allocating all of our capital both financial and especially human capital to taking advantage of our best growth opportunities and I've been impressed with that you know people are being rigorous and thoughtful about where we can best redeploy our so that's something that we're just going to keep doing. We have a very broad business. There's been a lot of things that CBO's tried to do over the last, you know, five or six years. It's going to stay focused on that because I want to make sure that all of our resources are focused on our best growth.

Our next question comes from the line of Ben Budish with Barclays. Please go ahead.

Maybe a narrower question just on the data vantage guide for the year. When I look at the sequential step up in data vantage revenues, It looked like it was quite robust this quarter, and if the next couple of quarters look similar like maybe the last three or four quarters, it seems like the guidance might prove to be conservative. Just curious if there's anything we should be thinking about in terms of the revenue model. Is there any reason that revenues shouldn't continue to sort of step up sequentially? Could you perhaps remind us like the various components and key drivers, new unit sales pricing, things like that, as we're kind of fine-tuning our models here?

Yeah, happy to, Ben. This is Kathy. We remain confident in our full-year guidance, just recognizing that quarterly results will fluctuate, some landing above and some below the expected range, but we are on track to deliver against our full-year objectives. Regarding Q2, you may recall that last year's first half performance created a favorable comparison for Q1 and Q2 of this year. Our business has started out on strong footing. there's no denying that across all of our verticals of data and analytics and our index business, but it has been further supported by the momentum of the newer initiatives that Craig talked about, a dedicated course, for example, which is really starting to bear fruit. Looking ahead, we do believe that Data Vantage is well-positioned for sustained long-term growth, and we continue to invest in our global access and expand where we do business, And we are seeing about 45% of new recurring sales from outside of the U.S. We're really leaning into our new distribution channels like SIBO Global Cloud, where 85% of our sales are from international clients. And we're leaning into strengthening our sales execution, making sure that the derivative team and the data vantage team across the globe are really working hand in hand. Because we know that the data sales often are a precursor, a leading indicator of the derivative volumes that we might enjoy. So we're really just leaning into additional distribution capabilities, new product suites, and our technological capabilities going forward. So very confident in the full guide that we give.

Your next question comes from the line of Eli Aboud with Bank of America. Please go ahead.

Good morning. Thanks for taking the question. I wanted to drill down into the long-term growth algorithm for index options volume. When zero DTE starts to reach maturity, whenever that may be, what new themes, geographies, or products do you have the most conviction can provide that next leg of growth?

It's a good question. Zero DTE, we continue to just be confident that these volumes are quite sustainable. When we think about our expansion with retail broker-dealers, both in the U.S. and abroad, we feel that there's still a lot of surface area of opportunity here. Retail traders tend to start trading in other products, and then as their sophistication level rises, they move into the index option complex, primarily for the benefits of index options in general, the cash settlements, European exercise, potential tax treatment benefits. So we really think as we continue to partner more with our retail broker-dealer clients, and that means co-marketing agreements where we actually get a little better view into the data that comes from those partners of ours, as well as really we're in very early innings in the Asia-Pacific region where we see incredible demand for our products and our data, including we really think that this is early innings to sustain the zero-DTE complex. And if you look at really just some of the numbers in the STX options in general, You know, we hit three daily records this year, two in April, and just one recently on July 31st. So we really think the secular tailwinds for this.

Your next question comes from the line of Ashish Shabhadra with RBC Capital Markets. Please go ahead.

Thanks for taking my question. Maybe just a question on the competitive environment of single stock zero DTE and how that's evolving and what does it mean for the SPX index options going forward.

We actually see the single stock zero DTEs as not cannibalistic to the index option zero DTEs, more for the ETF zero DTE space. We really feel that the difference between single stock options, things I just talked about, cash settlement, European exercise, really they're completely different animals. And we see a lot of retail traders coming into the single stock or the ETF options and then migrating into the index option space as that level of sophistication of that trader continues to grow. and we're very optimistic as we see new entrants come into the option space, but then begin that journey of sophistication through ever-increasing new data and analytics that these retail broker platforms are providing them. It's no surprise that the retail broker-dealer platforms are investing heavily in new analytics and new functionalities to really court that act. It's a great development for us to partner with the retail broker-dealers as they really try to secure additional engagement from their actors.

Your next question comes from the line of Alex Kram with UBS. Please go ahead.

Yes. Hey, good morning, everyone. And Craig, welcome. Look forward to working with you again. It's been a while. Look, in terms of strategic priorities, one of the most important relationships that SIBO has is probably the one with S&P Global on your index relationship, which obviously is a big part of your business. I know the renewal of that is still several years out, but since you just stepped into the new role, just wondering how you view that relationship and to what degree you should have appetite to maybe change the structure a little bit longer term to make it, you know, a little bit longer term since, you know, you don't want to go through this habit of having to renew this every few years. So just wondering how you view that whole relationship and how you could change it.

Yeah, thank you for the question, Alex, and good to hear from you. You know, I would say just philosophically, I mean, I have the same view here at CBO as I did at CME, which is, you know, S&P is a really long-term and deeply valued partner. I think we've had a long and very successful relationship. We see the world the same way, and I think we have a lot of the same goals and objectives when it comes to how to successfully grow the franchise. So, you know, that's something that we'll be continuing to work on with them. I don't really have a lot to say at this point on that other than, you know, I think, you know, applying that same long-term commitment to making sure that our relationship is mutually beneficial and that we can grow together and that we bring, you know, innovation and growth to our segment of the S&P landscape is critical from their perspective as well as our So we'll continue to work on it. I mean, obviously, as much as possible, we've been together for more than 40 years. I'd like to see that continue for at least another 40 years, and we have to find the way to do that with our partners at SEC.

Your next question comes from the line of Owen Lau with Oppenheimer. Please go ahead.

Good morning, and thank you for taking my question. Could you please give us an update of thought on attacking the globalization theme? Is there anything you would do differently over the next 12 months, and how do you plan to capture this opportunity here? Thanks a lot.

Hey, good morning, Owen. This is Chris Isaacson. I think if I'm understanding your question about globalization, I think Cathy mentioned this quite a bit in answering the data vantage question. Where we see greatest opportunities globally is to continue to, through the import-export discussion, really importing flow from outside the U.S. into our markets, especially into the U.S. markets and our derivatives products. But that usually starts with data. And Kathy covered that really well with data vantage. We're seeing 45% of sales outside the U.S. and 85% of Civa Global Cloud outside the U.S. So hopefully that answers your question, Owen.

If it didn't, feel free to get back in the queue and ask again your next question comes from the line of brian bedell with dorcia bank please go ahead great thanks thanks for taking my question and welcome uh welcome back greg looking forward to uh working with you as well um maybe maybe um if i can sort of zoom out um craig and just just your perspective on you know the how the securities exchange industry has evolved and how you think it might evolve you know in the future and then what I'm really getting at is from a number of different angles your retail client engagement you know whether you see that as classically cyclical or there's a you know a much stronger structural trend there and then the movement from towards 24 7 trading and then potential adoption of tokenization and whether you think U.S. regulators, how heavy of a lift is it to bring this on and then how are you thinking about, if you're believing in that, how are you thinking about your position and what you might do to leverage these trends?

Yeah, well, thank you for the question you know I would say that I think what we're seeing and I think this has been born out now for you know the last five or six you know seven years is I don't think the retail trend is is it is sort of cyclical and I think it's a long-term trend I think there's a continued sophistication and that's a trend that I think we'll can try to keep leaning into that I mean we were living in a very dynamic environment and so when you think about you know exchange companies and then exchange companies have become quite diverse and very broad in the represent and so you know that's how we're thinking about ourselves also is making sure that we remain relevant and competitive and have the opportunity to grow you know beyond our traditional core you know, looking at digitization, tokenization, you know, events and prediction markets. These are all things that are starting to, especially with the growth of retail, kind of increasingly come into our quote-unquote traditional world. So we're looking at all of that and thinking about where our place will be in that. Exactly.

I want to make sure that we're able to compete your next question comes from the line of kyle vault with kbw please go ahead hey good morning um so craig uh i'll echo the comments of everyone else looking forward to working with you um we we're at much later stages of direct exchange consolidation at least relative to the last time you were an exchange ceo and since then many of your peer exchanges have since turned towards other non-trading businesses such as information services as a pathway for inorganic growth yes what what are your thoughts on that strategy of diversifying away from trading oriented businesses as an exchange operator and is a move towards non-transaction revenues a part of the the larger goal in terms of of inorganic growth for you or kind of how do you view that as a part of your inorganic strategy yeah no i appreciate your question.

I mean, let me just, other than and evolved, I think a very effective job at expanding beyond the tradition. And they've created a level of diversity, not only in terms of the cognizant of it, we're thinking about it in a very broad way. We have a great question comes

from the line of Michael Cypress with Morgan Stanley. Please go ahead.

Hey, good morning. Thanks for taking the question. I want to circle back to some of the commentary on the tokenization and blockchain, more of an industry, bigger picture focus question. Just given all the advancements that we're seeing in technology, the evolving regulatory backdrop, I'd just be curious your views around tokenization and blockchain. What use cases do you find to think to be most compelling? What are some of the hurdles, roadblocks, as you think about implementation across the industry that could ultimately, if resolved, overcome? How that might be overcome that may lead to broader adoption as this technology has been around for many years. So curious your views around what the big unlock might be and then what implications might this have for the industry?

Hi, Michael. Good morning. Thanks for the question. It's certainly the hot topic of the day, but as you say, tokenization, the topic has been around for a while. It does seem to be getting a lot more traction and a lot of discussion right now around actually U.S. equities and what would the application be there. I think, you know, so there were some questions earlier about 24 by 7 and greater access to the U.S. and to the extent tokenization can allow for greater access or the entry of more 24 by 7 trading, we would welcome that. However, you need to work through some of the issues that come along with tokenization, like counterparty restrictions and KYC, AML. You need to think about, you know, So these are still securities, as there's been a lot of discussions with regulators about even though it's tokenized, it still can be a security. So you need to think about what is the problems that are being solved by tokenization and whether or not they should apply to the most liquid assets like U.S. equities that already trade extremely well. But I think especially the unlock here is really about 24 by 7 and greater access from those outside the U.S. into the U.S.

Your next question comes from the line of Chris Allen with Citigroup. Please go ahead.

Yeah, morning, everyone. Welcome back. I wanted to circle back on single stock zeros and just based on our internal discussions, there's an industry push here and expectation that probably gets on sometime early next year. So I was just wondering, do you see any potential for the structure here to change to overcome some of the problems that Kathy talked about before, any specific issues that would prevent these to be launched, and then any color on just how much of an impact you see on SPX zeros during maybe on days when MAG-7 stocks announce earnings and things like that?

Yeah, it is a hot topic, just like tokenization when we think about expanding access to zero DTEs and single stocks, and the industry is kind of digesting what this means in terms of how to do basic things like how do we process corporate actions, how do we make sure that the end investor is safe for additional earnings announcement type activity. So there is definitely an appetite to expand into more expiries for single stocks, and we're all for that. We believe, again, that when we bring retail traders into products that they want to trade because they like the name or they're interested in the theme, they eventually grow in that journey of sophistication and find their way to index options. And so, you know, we compete in the multi-list space in all of these initiatives for the single stocks. We're watching very closely as the industry gets through these conversations about how do we do this in a proper way so that we have broad adoption and participation from all the market participants that would need to have access and they feel safe in this new environment. But we're there, and when they come to life, we'll list them day one. We'll be there as well.

Again, to ask a question, press star 1 on your telephone keypad. And our next question comes from the line of Eli Aboud with Bank of America.

Hi, thanks for taking the follow-up. I believe the changes to the OCC margin model become effective this fall. How material are you anticipating that event to be? And in particular, do you think the margining changes will affect the growth trajectory of zero DTE?

Great question. A hot topic really of last year about what the impact of the OCC new margin requirements were going to be. I have to commend the OCC for really taking the time and listening to industry participants. They did that really well, giving everyone a little bit more opportunity to understand what the full impact of those OCC changes would be. And the industry has had time to really think about what they need to do to minimize the impact. And so I think we're in a really good position, different position, probably from this time last year where I think the estimate was about 5% capital requirement impact down to about 1% of the new estimation. So when we talk to market participants where this was really a put out the fire issue last year, we're not hearing that. We believe market participants have adjusted and digested and are ready for the changes that are coming as follows.

One with no further questions in queue, I will now turn the call back over to the management team for closing remarks.

Great. I just want to thank everybody for joining us today. It is good to be back. I'm enjoying working with the team and looking forward to a great last half of the year. And we'll see you next time.

Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.