Bullish - Earnings Call - Q3 2025

Transcript

Speaker 1

Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bullish Global Q3 2025 earnings call. All lines have been placed on mute to prevent any background noise. After this 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. To withdraw your question, simply press star one again. I would now like to turn the conference over to Michael Fedele, VP of Finance. Please go ahead.

Speaker 2

Good morning. Welcome to our Q3 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 can differ materially. For more details on these risks, please refer to today's earnings press release and our SEC filings, including our perspectives 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.

Speaker 0

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 six 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 three 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 bridged the chasm from TradFi to blockchain. We spent most of the years 2022, 2023, and 2024 in build mode to meet these needs, and we called 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 layer 1 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. 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, stablecoins, as a roadmap for the future tokenization of these new asset classes. 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 partner's growth. We believe that each new asset class will also require incremental asset-specific capabilities alongside our standard offering of the three 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 Q3, 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 one blockchain relationships with market leaders such as Solana, Ripple, and Tron, we have further broadened our layer one blockchain relationships that we are supporting with liquidity services, adding four 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 the 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 two 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'd 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 BIT License.

We indicated that 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. With all that said, we are pleased to share that we've already actively onboarded many new customers, including very large 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. 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 zero-to-one or cold start liquidity problems. We are encouraged by our early progress in the U.S.

look forward to continuing to seize market share in the months to come. Outside of the U.S., 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 two months ago, our indices have underpinned an additional five of six total newly launched U.S.-based exchange-traded crypto products, as well as four additional global ETPs. During this span, we also won six new benchmark switches from competitors and have two 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. 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 Q3 results and then provide additional context about our operating performance before sharing our outlook for the Q4. As a reminder, reconciliations of our non-IFRS metrics can be found in the back of today's presentation as well as in our 6K filing published earlier today. Total adjusted revenue for the Q3 was $76.5 million, up 34% sequentially and 72% year-over-year, exceeding the high end of our guidance. Q3 SS&O revenue, which includes liquidity services and all CoinDesk-branded products, reached $49.8 million, up over 50% versus Q2 and over 300% versus the prior year's quarter. Through the first three 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 Q3 were $47.9 million, down 2% from Q2 2025.

Adjusted EBITDA for the Q3 was $28.6 million, up 253% sequentially and 271% year-over-year. Lastly, adjusted Q3 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, Q2-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 Q4 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. We appreciate your time today, and we'll open it up for Q&A. Thank you. Ladies and gentlemen, this now formally begins the question and answer session. As a reminder to everyone, if you would like to ask a question, please press * followed by the number 1 on your telephone keypad.

If you would like to withdraw your question, simply press * when again. In order to accommodate everyone, we would like to ask you to limit yourselves to one question and one follow-up. Thank you. Your first question comes from the line of Ken Worthington with JPMorgan. Please go ahead. Hi, good morning, and thanks for taking the question. I wanted to focus on liquidity services. Maybe starting, you mentioned that the number of stablecoins doubled this quarter. About how many stablecoins are you servicing? You also 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? 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? Thank you. Thanks, Ken.

Good to hear from you. I was probably doing my thing where I'm speaking too fast. Just to clarify your question, actually, the liquidity services figures high level that I quoted refer to all liquidity services customers. That is to say, we are not saying we doubled our stablecoin customers. In fact, off the top of my head, my guess is that we did not double the number of our stablecoin customers. We doubled the overall, so inclusive of, for example, the four Layer 1 blockchains that I described, as well as stablecoin issuers. Just to answer maybe the thrust of your question regardless, we continue to add stablecoin customers, which is consistent with our going-in thesis, I think not too dissimilar from your own, that with the Genius Act, we will continue to see growth in the number of stablecoin issuers.

What we're seeing is the new issuers need those three tokenization or liquidity services products as much as everyone else: the listing, liquidity, and visibility. What's perhaps even more exciting is we're proving the product-market fit for these services extends far beyond stablecoin issuers. During the quarter, we saw more of a, quite frankly, even mix among kind of three broad categories, which are stablecoin issuers, Layer 1 blockchains, and then third, just token crypto project issuers. In other words, not a Layer 1 or a stablecoin, and we're seeing more of a blend. Just to touch on, I'll let Dave kind of clarify if I butchered any of those figures and come back to you, Ken.

On the ICO platform, where we've really focused is the highest quality crypto platforms, and that's consistent with our kind of reason for being, which is servicing the institutional customers. By and large, they're less interested in the tail of crypto. They're more interested in billion-dollar, at least $500,000,000 market cap and up crypto projects. What you described at a competitor versus where we're focusing are just kind of fundamentally two different kind of fields of inquiry. We're kind of focused on sticking to our knitting, building out our liquidity services in our core market, and really enjoying the ride as our TAM expands in real time. Yeah, 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 counts as about nine or ten total stablecoins, both euros 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. 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.

We expect a new wave of those to begin late Q4, early Q1, and we expect to pick up some new significant wins, which we'll talk about early next year. Great. Thank you very much. Thanks, Ken. Your next question comes from the line of Peter Christensen with CD. Please go ahead. Thank you. Good morning, 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 CoinDesk indices and perhaps even bespoke products. 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?

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. Thank you. Sure. Good to hear from you, Pete. Two very meaty topics. I'll endeavor to answer the first, and Dave will take the second. I talked a bit in my prepared remarks about this tokenization trend fairly broadly, but I'd like to add a little more context and kind of contour given your question. When you think about stablecoins, they're really just the US dollar, and it's a question of, okay, how do I take the US dollar?

I'm going to speak in colloquial terms here for maybe people who aren't crypto heads in this all day, every day. You got the US dollar, and then how do I take this US dollar and put it on blockchain so I can use it for commerce? That is the act of tokenizing the US dollar. If you think about the types of people who do it, some are super crypto native, think Tether or Circle, and some are less crypto native. More recently, you've seen in the news Western Union, for example. Some are somewhere in the middle. Think of PayPal or others of their ilk. Now those say, "Okay, I want to take the dollar and I want to tokenize it." They can do some of those necessary tasks all on their own.

Some firms look at it and they go, "Wow, there's a whole lot of expertise here, and I can't do it on my own." You can think about, okay, how do you get from non-tokenized to tokenized? You can lay out a spectrum of products and services. For example, do you write the actual smart contract to create the tokens or not? Do you write the effectively Excel spreadsheet or Oracle database on the blockchain that tabulates which accounts own which amount of tokens? Do you go to a vendor for that? Do you go get these state-by-state licenses in the United States or the federal licenses now required under Genius? Do you rent those? Those are all sort of tokenization services, if you will.

We looked at that and we said, "We're going to stick to our knitting, and we're going to do those services that we're really good at." We said, "We're going to focus on the act of listing the token, not just listing the token standalone, but listing the token against many other tokens, listing the token not just as a spot transaction, but as a perpetual future, a dated future, an options contract, doing it on a compliant regulated exchange, thereby conferring a certain level of respect to those asset issuers." We are going to focus on the liquidity provision, making sure that even in moments of distress, there are bids and offers available for those newly tokenized tokens, if you will, use the same word twice. Finally, the visibility. We own the premier properties in crypto. There is no debate about that.

CoinDesk is number one for views in the world for a crypto news site. CoinDesk is where important institutional people and companies gather twice a year in Asia and the U.S., and we can help these stablecoins and tokens get their message out. Okay? That has been our strategy. Now your question is, "Hey, tell us about this transfer agent element." We are looking at the world and we are saying, "Boy, it feels like the next domino to drop here, or at least the next enormous domino to drop." There will be other little tests along the way. Is the U.S. securities market, whether that be single stocks or fixed income or what have you? What we have drifted into in stablecoins, our customers have pulled us into it, is we now have a more expansive offering than just the dead simple listing, liquidity, and visibility.

I gave the example of the API orchestration. I gave the example of the direct mint earn, and I gave the example of we're now writing those smart contracts ourselves to facilitate bridging from Layer 1 to Layer 1. What the transfer agent license gives you the ability to do is more actively engage with asset issuers who are tokenizing US securities to offer more robust listings, liquidity, and visibility, but also some services around the margin, such as writing the actual smart contract for them or tabulating who owns what of what security. That is the license you go for in the US under the SEC regime that gives you the freedom to be able to offer those additional services to securities issuers, whether in a tokenized or, frankly, a certificated form. That gives you a little more of the thinking behind that, Pete.

Hopefully, that narrative, it was a long one. Hopefully, it was not too boring, but gives you a sense of where we are headed. And Pete. Now, Pete, regarding. Arms dealer. Go ahead. Go ahead. No, Sam. You are playing the arms dealer side. Great. Yeah. We just want to be helpful in this tokenization wave. We think it is 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.

If you go back, Pete, this is 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 were not too excited about it. That is how much has changed in the year 2025. It is the regulatory regime here. It is also just that the technologies of the Layer 1s are that much more robust. People have realized it is 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 am now speaking on a regular basis to the heads of the very largest banks in the world who are preparing for this wave. We have 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, with regards to your question around the volatility experience, probably you're referring to mostly October 10th, the AMM performance and the performance of the exchange in totality, we're really proud and pleased with our performance and the way the technology held up. Every couple of quarters or so, we get really kind of a feature moment to advertise the difference of AMM liquidity versus what we see in other club order books. Way more depth was preserved on our order books during the flash crash on October 10th than you saw in other venues, notably other offshore venues, where liquidity just absolutely evaporated in major assets like Solana.

Our spot prices had far fewer wicks, smaller wicks, our derivative systems had far fewer liquidations than you saw in other venues. As a whole, we're really proud of the way the system held up. We had a lot of trading revenue that day, and that went noticed by our customers. I do think that there is a lot of discussion underway in the market more broadly around the way that derivatives and marketing systems and order books function in, say, less regulated venues versus our own. 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.

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." 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 10th is positions were liquidated for fully collateralized accounts. It's a heads I win, tails you lose approach from these unregulated venues. 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. Fantastic color.

Thank you both. Your next question comes from the line of Dan Fannon with Jefferies. Please go ahead. Thanks. Good morning. Wanted to follow up on SS&O more broadly. Obviously, a lot of momentum, strong third quarter. When we look at the four-Q guide, it is basically flat at the midpoint. Can you talk about that, squaring that with the kind of longer-term growth opportunity from a revenue perspective and the momentum in the business today versus kind of near-term revenue outlook? Yeah, sure. Thanks, Dan. Great to hear from you. Taking the second part of your question first, we remain very confident in the growth outlook for subscription services and other revenue looking forward. We see the pipelines filling up, new projects coming along. We believe tokenization more broadly is potentially a very large tailwind for that line item.

Specifically on the Q4 guide, there are a couple of different cross-currents there. I'd say one, we do continue to experience broad-based growth across pretty much all line items in SS&O in terms of customer wins and new contracts, as Tom has mentioned. Somewhat offsetting that growth would, one, be seasonality. The fourth quarter is the only quarter this year with zero events revenue. The third quarter did feature our DC policy event and edge conferences. There was some revenue in the third quarter from events, which will not occur again in the fourth quarter. Additionally, there's a little bit of impact from large downward price movement in the broader digital asset space, which affects partially the indices business, some of our lending business, and to a lesser extent, liquidity services, but that is largely offset by the broad-based growth.

There's a little bit of a timing element as well, whereas a lot of the new contract signings during the fourth quarter are coming middle, end of the quarter versus the third quarter, where we had extreme momentum both in the second quarter leading into the early third quarter. When you put all that in a blender, we come out with the guidance you see in front of you today, which is flat to modest growth. Great. That's very helpful. I was hoping you could just provide a little more commentary around the momentum post the BIT License 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?

Yeah, 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 two months or eight weeks between our two earnings calls. 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. It's a slog.

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." 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. It is going to take some time. Got it. Thank you. Your next question comes from the line of Fred Knoblow with Cantor Fitzgerald. Please go ahead. Thanks for taking my question.

Tom, I think we're expecting kind of Clarity Act to get put through to 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. Good to hear from you, Brett. I wish this call were Monday and not today. I'll be meeting with seven or eight of the 100 U.S. senators, including many or most of those who are actively involved in, I guess, what was called in the House, the Clarity Act, but more broadly, a market structure bill tomorrow and Friday on the Hill, Brett. I'll have a lot better sense. I loved hearing that the premise of your question was around a bill getting passed this year. You're a bit more optimistic than I am.

I am very optimistic that it will get passed because I'm seeing bipartisan support. I think it'll be very helpful for the crypto industry, largely because of preemption. In other words, not having to go to each of the 50 states to get their very particular, in some cases, approvals for operating in the crypto business. I think that in and of itself will be a boon for infrastructure providers like Bullish. I think providing the legal certainty, much like it has on the stablecoin side, will bring in many institutions and tokenization participants, asset issuers, for example. Getting that done will be great for growth, and I very much would like to see it. I think it will only be helpful for our business. I will know a lot more in the next 48 hours, Brett. Look, there's a lot to come.

I suspect the House Ag will come out with a whole new version of their proposed bill. I suspect that will have to be negotiated with, I mean, pardon me, Senate Ag. That will have to be negotiated to some extent with Senate Banking. Ultimately, there will be a conference procedure with the Senate and the House to make sure that we produce a bill that makes sense for our country and for this industry. We will be a very active participant in that, as evidenced by where I'm spending the next two days. Awesome. Maybe just on the US momentum, it feels like that launch happened a bit sooner than we were expecting, and then adoption was much faster than we were expected.

Could you maybe pinpoint why it happened so fast and how it's been so good and kind of what you're expecting, or I guess from the U.S. business, maybe the rest of this year and into next year? Yeah. I'm going to get PTSD while I give you this answer. We made a couple of fateful decisions over the last couple of years. One of them, I'm totally happy that we did it, and it's ultimately something that I can share with you as an investment thesis, frankly, but it brought us a lot of pain and heartburn. What we did, Brett, is we said, "We're going to go get the toughest regulatory approvals in the world for the provision of spot crypto trading as an exchange. All of them. We're going to get Hong Kong.

We're going to go to the frigging Germans, the BaFin, known as the toughest, most thorough regulator. We're going to go to the New Yorkers. Not only are we going to go to the New Yorkers, who are known for being very discerning about handing out BIT licenses, we're going to wait to launch in the U.S. On top of all that, we're going to go to the Brits, and we're going to get benchmark administration license.

On top of all that, we're not just going to ask them for licenses like every other crypto exchange has asked for, which is, "Hey, let me operate an exchange within your jurisdictions, and let me operate everything within the four walls of your country." We're going to go to them, and we're going to say, "We want to have one global order book where men from Hong Kong's BIT offer can interact with Gerhard's offer or offer to sell sitting in Munich, or Elaine in New York's BIT can interact with so-and-so's offer in France." That was very difficult because imagine telling a regulator, especially a particularly provincial regulator, that, "Hey, yeah, we'll onboard in your regime, and we'll hold the customer funds in your regime, but we need to be able to operate a single global order book." It took us probably two years longer than it would have, maybe you could say should have, if we had taken the shortcut approach, which is what nearly every other crypto exchange has done.

The benefit finally is accruing to us, which is when we get that BIT license and we "open for business," all it really means is these customers who have been knocking on our door for two years, we can just say, "Okay, you're cool. Come on in. We've approved you. We've done the KYC/AML. We'll hold your funds in the U.S. We'll onboard you in the U.S." The liquidity is right there. You can trade tomorrow and interact with all of our customers all around the world. That is what enabled us to kind of get into business so quickly, and the reason why it may look a little different than what you're used to from others. Awesome. Really appreciate it. Thanks, Tom. Your next question comes from the line of Brian Bedell with Deutsche Bank. Please go ahead. Great. Thanks. Good morning, folks.

Thanks for taking my questions, and congrats on the good momentum here. Maybe just to talk about another angle on the U.S. traction. Dave, you quoted some pretty good metrics for trading volume so far in Q4. 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? Is that something that has the potential to grow even faster than SS&O, just from the U.S. angle alone? Yeah. Thanks for the question. Our user counts across the board are continuously hitting new all-time highs. 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.

When you put them all together, we are certainly realizing more trading revenues, more trading volumes per unit of 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 the 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. We're pleased with the overall momentum we've seen on the exchange trading side.

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. Yeah. Just to add one element to that, options, I do not want to oversell it because we are still single-digit market share, but the early days have been a bit of a revelation. What we are realizing is a couple of things. One, it is all organic from a product perspective. Obviously, we did not have options when we gathered two months ago. When I say we did $240 million yesterday, that is all organic, of course. It is also organic to a great extent in a customer sense. The options customer base is quite different than the linear customer base, so like the spot customer base.

That's been really good in bringing new customers on to the platform, which is exciting. More broadly, we're realizing there's a real need in the market for an options exchange that allows customers in a single account to be able to trade spot and perps and data futures and options on a liquid compliant exchange with portfolio margining. It feels like we hit the market just right on this one. I'm excited. Stay tuned. Yeah. That's great news. 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.

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%. 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.

We look forward to posting more earnings, higher margins, and demonstrating that operating leverage that we have been talking about. Okay. Great. Great, Keller. Thanks very much, guys. Before taking the next question, we would like to ask you to limit yourself to one question to accommodate everyone. Thank you so much. The next question comes from the line of Chris Brendler with Rosenblatt. Please go ahead. Hey, thanks. Good morning. And congrats on the results as well. This may be 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. Is that a function of it being early, or am I just not thinking about that correctly? 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, some larger negative spread in October for perpetual futures. Thanks. Yeah, sure. On the options side, early days, we continue as we do with all the products to experiment with our pricing. 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. We have seen benefits from changing prices in certain products with the volumes or maybe revenues we get out of other products. Still early days on the spreads with regards to options, but we look forward to updating you on that as we go.

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, yeah, 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. Awesome. Great disclosure. Thanks so much. Your next question comes from the line of Reina Kumar with Oppenheimer. Please go ahead. Hi. This is Guruwan Farinah, and thanks a lot for taking our question.

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? Also, going forward, given the role that tokenized assets can play here in 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? If I can squeeze another one in directly in relation to the prior question, with options revenue likely becoming material in early 2026, when can we actually expect perps revenue to turn positive? Thank you. Thank you. Boy, a lot there. In terms of options, one of the benefits that we have, along with that one global order book, is one matching engine.

When you look across the other exchanges, both regulated and unregulated, that offer options, they tend to have different matching engines for different jurisdictions. They have a different matching engine for options than they do for perps. In one very notable case, they have a different matching engine for spot and a different matching engine for perps and a different matching engine for options. It is very difficult to then aggregate trades and positions back into a single global account. For us, we have always just focused on building simply. We have a single matching engine. We allow customers in a single account to place all of their derivatives transactions as well as their spot transactions and the corresponding collateral that arises from those spot transactions in a single global order book.

What that enables us to do is just put our thinking cap on and have smart, sensible margining where we capture from each customer the lowest possible margin we can, but no less. For example, if a customer has sold Bitcoin calls, but they hold Bitcoin collateral, you can take that account and you can provide a reasonable margin. If a customer owns a highly correlated crypto asset and they have sold short another highly correlated crypto asset, you can provide some offset, not a total offset, but some offset. This is the sort of thing, look, it's not simple and it's not made for an easy soundbite, but providing that portfolio margining is kind of the lifeblood of the options trading community. That's what they need, and that's why they've rallied to us.

I was joking with a colleague yesterday, an old colleague of mine, and he was pointing out that the old company we worked at had just been approved for a new VaR-based margining system that had been in the works for 12 years. That gives you a sense of how complex this can be. The beauty for us is we were able to start with something very efficient, which is what's leading to this early success. It will only become more efficient over time as we have a chance to evolve it. Regarding your question around tokenization, money markets as collateral, etc., 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.

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. 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. Stay tuned and continue to watch the monthly metrics for updates on all of the transaction revenue line items. Thank you. Very helpful. Your next question comes from the line of Joseph Fafi with Category. Please go ahead. Hey, guys. Good morning. Great progress.

Just one quick one for me here on 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. Yeah. Thanks, Joe. The progress there has been, yeah, I think we touched on this in the last call. The second quarter, we spent a good amount of time iterating on our pricing structure in general. It was also a particularly low volatility environment. Those two things combined to create what we hope to be anomalously low spreads during the quarter. You've clearly seen them rebound quite strongly off the lows seen in, say, May and June type timeframe. Again, we continue to optimize for total adjusted transaction revenue per unit of volatility.

We feel pretty good with where we are today, but there's always changes going on within the market, within our customer base, within volatility. We will continue to experiment with the spreads. Higher spreads are not necessarily always what we're targeting. We're targeting higher adjusted transaction revenue. There may be circumstances where slightly lower spreads lead to more volume, which more than offsets the decrease in spreads. I think where we are today represents a reasonably good baseline moving forward. Although, again, I will reiterate, it's a very dynamic situation in market, and we will continue to make changes to optimize for total adjusted transaction revenue. I just want to highlight we do have to stop right at the opening bell.

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. We can take one more. Thank you. Your next question comes from the line of Bill Papanastasiou with KBW. Please go ahead. Yeah. Good morning. Thank you for taking my question. Just a quick one for me. Now that you've successfully secured the BIT license and have expanded to 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 one license, or will the focus remain on consolidating existing markets into the global order book? Thank you. Yeah. 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. 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. This is a continuing game of licenses. It's not just for spot, but for derivatives and our index business as well. It's like we have full-time staff. This is all they do. They'll just constantly be gathering licenses, and we'll be sharing those with you. The big ones geographically are covered. 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. We will make sure that we get to you guys early next time. We will also circle back over the next 24-48 hours and have discussions with each of you individually. Finally, I just want to say thank you all again for following along with the Bullish story and look forward to three months from now being able to tell you about everything we have accomplished in the meantime. Much appreciated. Ladies and gentlemen, that concludes the question and answer session in 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.