Cboe tops estimates, options volatility drives retail trading
13:12, 29 October 2021
Cboe Global Markets beat both top- and bottom-line analysts' estimates in the third quarter, as asset volatility drove both trading activity and demand for index data.
The Chicago-based options exchange reported earnings of $1.45 per share, up 31% year over year, for the three months ended 30 September. The number exceeded Wall Street estimates of $1.43, on $370m (£268.7m) in revenue, topping expectations of $366.9m. Revenue grew 27% from the prior year quarter.
"In the third quarter Cboe posted double-digit year-over-year earnings growth, reflecting accelerated trading in our proprietary products throughout the quarter, coupled with continued higher demand for our suite of data and access solutions,” CEO Ed Tilly said in a prepared statement. “In addition, Cboe delivered on a number of significant strategic milestones, including the successful launch of our European Derivatives platform."
Options net revenue was up 30% to $192.2m, with net transaction and clearing fees growing 42% to $44.4m, reflecting a 23% increase in total options average daily volume.
A better outlook
Cboe increased its full-year 2021 revenue guidance to a $539m midpoint, up from the previous $535m. Even with the increased revenue outlook, moving into next year, onboarding of recent acquisitions and new product launches may drag on earnings in future quarters.
The firm also increased its 2021 organic growth target for recurring non-transaction revenue to 14% from 12–13%.
The highest-profile acquisition discussed on the post-release earnings call was Eris Digital Holding (ErisX). The purchase moves Cboe into the cryptocurrency space with a full suite of products, from spot trading through data and index to clearing and futures options trading.
“As the appetite for ownership in digital assets continues to grow, today we’re at a critical inflexion point,” Tilly said on the firm’s earnings call. “Demand for digital assets is driven by the unique market structure and freedom it affords.”
The acquisition is expected to close in the first quarter of 2022, pending regulatory approval. ErisX will be rebranded as Cboe Digital. Terms of the deal were not disclosed, but Cboe noted the purchase price is not material from a financial perspective.
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Digital partnerships
Cboe is not going alone into the digital asset trading space. It has partnerships with market participants to form the Digital Advisory Committee, consisting of leaders in the industry from retail brokers to sell-side institutions – DRW, Fidelity Digital Assets, Galaxy Digital, Interactive Brokers, NYDIG, Paxos, Robinhood, Virtu Financial and Webull – will take equity stakes in the new venture.
“I’m confident with ErisX we can not only meet growing institutional and retail demand for digital trading solutions but we can push the boundaries of digital-asset innovation,” Tilly added.
ErosX currently trades five crypto coins, which Cboe Digital will seek to expand, as regulations permit.
Other ventures Cboe has in the pipeline are its expansion into European and Asian derivatives markets, as well as the launch of Nanos by Cboe, an options-trading platform for retail traders and Cboe Global Cloud, a cloud-based data streaming service over the Amazon Web Service, which launches on 1 November.
Cboe shares are trading higher, up more than 1% in late morning US trading.
Read more: Bitcoin prices drop as CBOE boosts market efficiency
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With CFDs, you never actually buy or sell the underlying asset that you’ve chosen to trade. You can still benefit if the market moves in your favour, or make a loss if it moves against you.
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