Cboe Global Markets - Q4 2025

Transcript

Operator (participant)

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cboe Global Markets' Fourth 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 that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Ken Hill, Head of Investor Relations. Ken, please go ahead.

Ken Hill (Head of Investor Relations)

Good morning, and thank you for joining us for our fourth-quarter earnings conference call. On the call today, Craig Donohue, our CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Jill Griebenow, our Chief Financial Officer, will then provide an overview of our financial results for the quarter as well as discuss our 2026 financial outlook. Following their comments, we'll open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer; Prashant Bhatia, our Head of Enterprise Strategy and Corporate Development; and Rob Hocking, our Global Head of Derivatives. 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 call this morning, we'll 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.

Craig Donohue (CEO)

Good morning, and thank you for joining us to review our fourth quarter and full-year results. Cboe delivered record net revenue and adjusted earnings for the quarter and year, powered by continued strength across our core businesses. These results demonstrate how our products continue to resonate with a diverse group of users across regions and asset classes. We remain focused on extending this momentum as we execute on our strategic direction we laid out on our last earnings call, reducing our focus in certain areas while we redirect our time, talent, and capital to our core businesses and emerging opportunities. During the fourth quarter, Cboe grew net revenue 28% year-over-year to a record $671 million, and adjusted diluted EPS increased a robust 46% to a record $3.06.

For the full year, Cboe delivered record net revenue of $2.4 billion, up 17% year-over-year, generating adjusted diluted EPS growth of 24% to $10.67 per share. The exceptional results in the fourth quarter were underpinned by double-digit net revenue growth in every segment and record results in each category at Cboe. Specifically, strong volumes in both our multi-listed and proprietary index option products drove the strength in the derivatives category. Solid new sales growth led to gains in our Cboe Data Vantage business, and robust industry volumes propelled our Cash and Spot Markets higher. While 2025 was an impressive year, we remain focused on sustaining and amplifying our momentum by leveraging the strong secular trends across our core businesses.

Taking a closer look at the fourth quarter trends by category, our derivatives franchise delivered a record fourth quarter with net revenue increasing 38% year-over-year to cap a record year in which revenue grew 22%. In our multi-list options business, net transaction and clearing fees revenue was up a strong 41% given higher industry volumes and positive pricing trends. The multi-list option space remains an area where we believe Cboe has a right to win and will continue to enhance our position within the industry to drive greater results over time. We're encouraged by the recent innovation in the space underscored by the launch of Monday and Wednesday expirations for select multi-list names. While we are focused on educating market participants on the unique risks associated with single stock 0DTE trading, we believe these additions ultimately expand the toolkit available to investors.

This development complements our index options franchise by elevating awareness of the utility 0DTE strategies provide while allowing us to reinforce the advantages of index options, namely the larger notional size, diversified risk profile, and daily cash-settled structure as compared to single stock options. More broadly on the index options side, net transaction and clearing fees revenue was up a strong 40% as our proprietary SPX options complex set new records powered by robust growth in 0DTE options trading. SPX 0DTE ADV was up an impressive 66% year-over-year while overall SPX ADV increased 39% to a record 4.3 million contracts. 0DTE options made up over 61% of SPX volumes, up from 51% share a year ago.

We saw a similar dynamic in Mini-SPX options where 0DTE ADV was up 135% as compared to the fourth quarter of 2024, making up just over half of the Mini-SPX volume to end the year. In our proprietary options business, it's worth noting that the 10 highest average daily volume months occurred in 2025 and 2026. In fact, nine of the 10 highest SPX days on record occurred in the fourth quarter of 2025 or first quarter of 2026, pointing to the healthy momentum in the franchise today. We also saw growth in our VIX products. Volume in both VIX futures and VIX options gained 15% last quarter amidst increased market uncertainty, with two notable spikes in volatility generating robust trading opportunities. For the third year in a row, VIX options set a new record in trading volume, averaging 862,000 contracts a day in 2025.

As concerns rise over the concentration risk in U.S. equity markets, we're seeing renewed interest in small-cap stocks for those looking to diversify their equity exposure away from large-cap tech. Volume in our Russell 2000 Index options jumped 20% last quarter to reach their highest level in almost 10 years. We're excited to add Russell 2000 Index options to our Global Trading Hours session starting this month, giving investors the opportunity to trade small-cap stocks around the clock. This will capitalize on the strong demand we have seen from international investors to access U.S. markets, with total volume in our GTH session up 34% last quarter. Looking ahead, we remain bullish on the outlook for our core derivatives franchise, anchored around strong retail demand, continued international growth, and further product innovation.

Beyond these secular drivers, rising geopolitical tensions and increasing economic uncertainty should remain a tailwind for our products as investors turn to options to help better manage risk and generate income. Moving to Cash and Spot Markets, net revenue was up a strong 27% as we saw solid growth in our cash equities business in Europe and North America, as well as in our Global FX business. Led by another quarter of strength in our European transaction businesses, the Europe and Asia Pacific segment delivered a 24% year-over-year increase in net revenue. This was driven by a 33% year-over-year growth in net transaction and clearing fees, given strong industry volumes, stable market share trends, and improved net capture dynamics. Higher non-transaction revenues in the segment also contributed to the growth, with revenue up 15% year-over-year.

North American Equities made a solid contribution, with net transaction and clearing fees revenues up 18%, given strong equity volumes in each of our markets. Non-transaction fees were also up double digits as our entire cash equity ecosystem benefited from the more active trading environment. Rounding out Cash and Spot Markets, Global FX made another notable contribution, increasing net revenue 22% year-over-year in Q4. The fourth quarter results continue FX's long track record of revenue growth and caps an impressive 17% net revenue growth rate for 2025. Beyond the macro backdrop lifting activity across our Cash and Spot Markets businesses, we are unlocking incremental revenue opportunities through our Securities Financing Transactions clearing service in Europe. Launched in response to strong client demand, this service has leveraged Cboe Clear Europe's pan-European footprint to introduce central clearing to a securities lending market that has traditionally operated on a bilateral basis.

This market plays a key role in enabling asset owners to earn additional income by lending out their portfolios, enhancing returns for beneficial owners. By bringing clearing to this market, our service can provide participants with meaningful capital and risk efficiencies. The first trades were executed in March 2025, and we have seen hundreds of new contracts across 15 active European settlement locations cleared every day between borrowers and lenders, with notional outstanding loan values exceeding EUR 1 billion in January 2026. Turning now to Data Vantage, net revenue increased by 9% on a year-over-year basis, reflecting continued momentum across our platform in the fourth quarter. Notably, roughly 90% of the growth across our market data and access businesses was again driven by new unit and new sales as opposed to pricing.

This growth was underpinned by strong demand for access to our markets, a durable and growing international contribution, and favorable trends in our newer product offerings. If we look more broadly at the full-year results, net revenues increased 10% across the Data Vantage platform. Importantly, we saw each component of our Data Vantage business, market data and access, indices, and Risk and Market Analytics all trend higher on a year-over-year basis. Now I'll turn the call over to Jill to walk through the details of our financials and 2026 guidance.

Jill Griebenow (CFO)

Thanks, Craig. Cboe posted another record quarter with adjusted diluted earnings per share up 46% on a year-over-year basis to a record $3.06. I will provide some high-level takeaways from this quarter's operating results before going through the segment results. Net revenue increased 28% versus the fourth quarter of 2024 to finish at a record $671 million. We saw healthy growth in all categories, with the strongest growth coming from our Derivatives business. Specifically, Derivatives Markets net revenues grew 38%, Cash and Spot Markets net revenues grew 27%, and Data Vantage net revenues grew 9%. Adjusted operating expenses of $221 million were up 8% on a year-over-year basis. Adjusted operating EBITDA of $465 million grew 40%, and adjusted operating EBITDA margin expanded by 6.1 percentage points to 69.2%, a result of both our robust revenue results and disciplined expense management.

The fourth quarter results capped a remarkable year at Cboe, where annual net revenue grew 17% to $2.4 billion, and adjusted earnings per share of $10.67 was up 24%, both setting new annual records. Turning to the key drivers of the quarter by segment. Our press release and 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 another quarter of record net revenue, increasing 34% year-over-year. The growth was driven by a 40% increase in net transaction and clearing fees in the fourth quarter. Total options ADV was up 24%, with a 35% increase in total index options volume and a 20% increase in multi-listed options volume.

The rate per contract for our options business also increased 13% on a year-over-year basis, given a positive contribution from both our index and multi-list products. North American Equities net revenue rose 17% versus the fourth quarter of 2024, with strong industry volumes driving an 18% increase in net transaction and clearing fees. On the non-transaction side, market data fees grew 12%, and access and capacity fees increased 10%. Europe and APAC produced 24% year-over-year net revenue growth. Net transaction and clearing fees were up 33%, while non-transaction revenues were up a combined 15%. Futures net revenue increased 12% from the fourth quarter of 2024. The increase was primarily due to a 16% uptick in total ADV, given a resurgence of VIX activity during the quarter.

Finally, Global FX net revenue was up 22% on a year-over-year basis, driven by a 17% increase in average daily notional value and an 8% increase in net capture. Looking at our Cboe Data Vantage business, net revenues were up 9% year-over-year in the fourth quarter. Revenue growth was again underpinned by healthy new subscription and unit sales, representing approximately 90% of this quarter's growth, with the remainder coming from pricing changes. We remain encouraged by the success of our newer product offerings we're having, including Dedicated Cores, timestamping services, and one-minute open-close data. Regionally, we saw incremental growth in index and market data sales, fueled by new brokers coming online in the Asia-Pacific region. Overall, we remain pleased with the multiple avenues of durable growth in our Data Vantage business.

Turning to expenses, total adjusted operating expenses were $221 million for the quarter, up 8% on a year-over-year basis. This increase is reflective of higher compensation and benefits expense, which primarily resulted from our strong 2025 revenue growth, increasing our short-term incentive compensation. Before detailing our 2026 guidance, I would like to provide a brief progress update on our strategic realignment over the past quarter and explain how these actions are reflected in our 2026 expectations. During the fourth quarter, we commenced the sales process for our Cboe Australia and Cboe Canada businesses. We have seen strong initial interest from potential buyers, and we will continue working towards an outcome that delivers a positive solution for all parties.

Although we have initiated sales processes for Cboe Canada and Cboe Australia, we continue to operate those units as business as usual, and the revenue and expense contribution of each is included in our 2026 guidance. We plan to provide updates as milestones are met in the sales process and detail any subsequent financial impacts. We have also ceased operations on our corporate listings businesses while driving efficiency in our growing U.S. ETP listings business and European ETP listings business, as well as several of our smaller Risk and Market Analytics businesses. Our 2026 guidance fully incorporates the anticipated revenue and expense impacts from these actions. Finally, last year we made the decision to explore ways to reduce our cost footprint for Cboe Europe Derivatives Exchange, referred to as CEDX.

As we further assessed the business, it became clear that CEDX was unlikely to meet targeted revenue and profitability metrics, given the retail investing landscape and market structure in Europe. In January 2026, we made the decision to close CEDX. Our 2026 guidance includes the impact of our decision to wind down CEDX. The financial impact of the CEDX wind down is expected to be largely realized in 2026 and does not change the overall estimated revenue and expense impact ranges communicated on our October 31st earnings call related to our strategic realignment decisions. For full year 2026, we are introducing the following guidance. We anticipate our Data Vantage organic net revenue growth to be in the mid to high single digit range, and we expect our total organic net revenue growth to be in the mid single digit range.

We are also introducing our 2026 adjusted operating expense guidance range of $864 million-$879 million, representing 3.3% growth on the low end and 5.1% growth on the high end. Our guidance accounts for some modest inflation in our core expenses, along with the expected financial implications associated with the recently announced leadership transition, and provides room for incremental investment in emerging opportunities. A few areas where we are excited to make some near-term incremental investments include expanding our securities financing transaction capabilities, as well as new product development around emerging event prediction markets. Our full year guidance range for CapEx is $73 million-$83 million, and our depreciation and amortization is expected to be in the $56 million-$60 million range.

We expect the effective tax rate on adjusted earnings under the current tax laws to come in at 27.5%-29.5% for the full year, with the midpoint of the range 80 basis points below the 2025 rate as a result of an expected decrease in tax expense associated with uncertain tax positions. While we don't provide formal guidance on interest income or interest expense, we expect that interest income, net of interest expense, will be a $3 million-$4 million positive contributor for the first quarter of 2026. On the capital front, we continue to look for ways to effectively allocate capital and drive long-term durable shareholder returns. In the fourth quarter, we returned $76 million to shareholders in the form of a $0.72 per share dividend, bringing the total amount of dividends paid in 2025 to $284 million.

Factoring in both share repurchases and dividends, Cboe returned a total of $350 million to shareholders in 2025. We enter 2026 with a great deal of balance sheet flexibility, as evidenced by our adjusted cash position of $2.2 billion and a leverage ratio of 0.9x. We are well positioned to invest in organic or inorganic opportunities, as well as redeploy capital to shareholders as dividends or opportunistic share repurchases. Moving forward, we remain focused on optimizing our capital deployment and look forward to delivering on long-term shareholder value objectives. Now, I'd like to turn it back over to Craig for some closing comments.

Craig Donohue (CEO)

Thank you, Jill. As we move forward as an organization, we are focusing more attention on driving results in our core businesses and preparing for emerging opportunities across our industry. We believe that capitalizing on those opportunities starts with having the right group of leaders in place. As we announced last week, we are thrilled to welcome Heidi Fischer to head our Cash and Spot Markets businesses and Scott Johnston as our new COO. Both bring a wealth of industry experience in their respective fields and strengthen our management capabilities across our core businesses at Cboe. I want to take a moment to express my sincere gratitude for the many contributions that Chris Isaacson has made throughout his tenure at Cboe.

From his early days as a founding BATS employee in 2005 to his meaningful contributions as a key member of our executive team and our COO, Chris has been an integral part of Cboe's growth and identity. Chris has embodied a Cboe first mentality, and we are fortunate that he will continue to serve as an advisor through 2026. Now, I'd like to turn the call to Chris to say a few words.

Chris Isaacson (COO)

Thank you, Craig. First, I'd like to thank my Cboe colleagues for everything we've accomplished together and your trust over the past 20+ years. It's been an incredible run together. To the investor community, I'm grateful for your engagement and thoughtful interest through the years. It's been a privilege to build so many meaningful relationships with you during my time at BATS and Cboe. While leaving Cboe is certainly bittersweet for me, I'm excited for the opportunity to spend more time and be more fully present with my family. I feel there is no better time to pass the baton given the excellent momentum of the business under Craig's leadership, the recent strategic decisions we've made as an organization, and the support of a capable leadership team with long-tenured leaders as well as talented new ones coming into the organization.

Thank you again, and with that, I'll hand it back to Craig.

Craig Donohue (CEO)

We have been incredibly deliberate in our efforts to strengthen leadership across our core businesses. This transition with Chris has been thoughtfully planned, and we are excited to bring in leaders of Heidi and Scott's caliber. With the addition of Heidi, Scott, and recent key hires in strategy and corporate development, global derivatives, clearing, and Data Vantage, our management team has added an average of over 25 years of industry experience per hire. Importantly, these new hires are complemented by our efforts to elevate talent from within Cboe. Given the depth of talent now in place across each of our core businesses, along with a robust regional leadership team of proven executives, I believe we are better positioned than ever to capitalize on the numerous opportunities ahead.

2025 was a remarkable year on many fronts, and we begin 2026 with a position of real strength, supported by healthy secular tailwinds, a fortified and aligned leadership team, and a sharpened focus on each of our core businesses. With this foundation in place, we are well prepared to build on our momentum and unlock even greater value for our shareholders in the years ahead. I'll now turn the call back over to Ken for questions and answers.

Ken Hill (Head of Investor Relations)

At this point, we'd be happy to take questions. We ask that you please limit your questions 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.

Operator (participant)

At this time, if you would like to ask a question, press star, then one on your telephone keypad. To withdraw your question, simply press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Patrick Moley with Piper Sandler. Please go ahead.

Patrick Moley (Director and Senior Research Analyst)

Yes, good morning. So you guided to mid to high single digit Data Vantage revenue growth in 2026, which is consistent with what you've introduced guidance at the last few years. But more recently, you've been trending closer to high singles to low doubles, and it seems like a lot of that's been driven by momentum internationally and the new unit sales. So could you just elaborate on the decision to maintain the mid to high single digit revenue growth target? Should we interpret that as just general conservatism, or are you expecting growth to slow over the next few quarters? Thanks.

Jill Griebenow (CFO)

Hey, Patrick. Thanks for the question. So really, when we look to set the annual guidance, we look at it on a full year basis as opposed to just the quarter-to-quarter piece. We continue to see the durability in the Data Vantage business, but yeah, as we set the guidance, feel very comfortable with that mid- to high-single-digit range. But again, some good momentum is coming from new usage, the sales with about 10% coming from the pricing.

Craig Donohue (CEO)

Yeah. And I think I'd add to that, to Jill's point, just the timing of sales may vary quarter to quarter, but on an annual basis, we're pretty comfortable where we are. Just for some color around what's happening within Data Vantage, from a market data perspective, we see a lot of momentum from sales overseas. About 45% of our new data sales this quarter were from overseas clients, and that compares to about 35% a year ago. So we're seeing good momentum there. If you look at our recurring sales during the quarter, three out of our top five recurring sales came from clients in the Asia-Pacific region. So we're seeing good momentum there. Similarly, across our CGI businesses and analytics businesses, the utilization of our products in option embedded ETFs continues to be strong, and there's a lot of client demand for that.

We're really positive on the continued growth in that mid- to single-digit range.

Patrick Moley (Director and Senior Research Analyst)

Okay. Thank you.

Operator (participant)

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

Dan Fannon (Managing Director and Research Analyst)

Thanks. Good morning. Craig, I was hoping you could expand upon your comments around the single name 0DTE recent rollout and why, I guess, what gives you confidence around that not cannibalizing potentially your index business and ultimately expanding the pie, I think, is how you described it. I was hoping to get a little bit more context around that.

Craig Donohue (CEO)

Yeah, sure. Thanks, Dan. I'll start, but I'll turn it over really to Rob. I mean, I think we view it as additive to the market, but I mean, fundamentally, there's a lot of differences from the customer perspective, including from the risk aspect. There's a lot of differences between our SPX products and single name 0DTE. So we actually don't think that they will be cannibalistic. We think they'll just be additive to the market. But Rob, why don't you comment?

Rob Hocking (Global Head of Derivatives)

Yeah. Maybe I'll even, thanks, Craig. Maybe I'll even take a step back, and just, this is obviously a popular question we're getting, so maybe just give an overview of what we've seen early days in the Monday, Wednesday trading, as well as kind of to your cannibalization question. So far, I think early uptake of the Monday, Wednesday options have been good. They're largely concentrated really in two names, NVIDIA and Tesla. At this point, we have a very small dataset, obviously, but Monday, Wednesday options are ranging between 10%-30% of the total number of options that are trading in the nine names that were launched. And so of these options, a lot of them have been picked or they've all been picked up by all the different exchanges. We're pretty sure all the different retail broker platforms are offering them.

So from an access standpoint, we think we're there. On the cannibalization question with regards to SPX, really, that one, I think it helps to take a step back and, as Craig alluded to, why are people trading each of these products and how differently they actually work. SPX tends to be more smooth because it's a diversified basket. Price moves tend to be more macro-driven. They're well-telegraphed. Single names are different. They're driven by more company-specific news, which really means more gaps. Call it sharper jumps, fatter tails. And so the strategies we see today in 0DTE really better align with that smoother kind of intraday SPX price action. The retail activity we're seeing is around the open and then again in, call it, the final hour, the close, where people are trading that momentum. They're trying to collect premium decay throughout the day.

And so those strategies are really less suited to underliers whose prices, we'll call it, are more unpredictable with kind of those higher probabilities of gap moves. Now, do I think that that will keep people from trading single name 0DTE? Well, no. Investors will continue to develop new strategies, and they'll introduce kind of these shorter tenors into their portfolios. But I think that will actually have a positive effect on industry volumes overall. I don't think they'll cannibalize for the reasons that trading both are differentiated enough that one is not a good replacement for the other. But I do think it's really important to note right now for investors that they'll have to deal with some really large fundamental differences in product design between trading single names in 0DTE and trading single name SPX.

And so, for example, SPX options are cash-settled and European-style, while single name options are physically settled and American-style. So that difference brings early exercise into play with single names. And so on expiration day, SPX 0DTE positions settle into cash based on the index print. There's no overnight exposure. Your account gets debited or credited the next day. And really, with single name options, instead, you end up with actual shares of stock. So I think that's really important for investors to understand. That means there's overnight risk. It also means you have to unwind those stock positions the next day to get your capital freed up to put into new option strategies. And so if you're trying to run some of those higher turnover 0DTE strategies in single names that we've seen, those differences kind of really matter.

And so kind of these fundamental contract differences are also why Cboe is really hyper-focused on investor education. We think that's super important at this stage of the game to really ensure that investors understand the differences between these two products and they're not caught off guard with cash and/or stock moving through their accounts unexpectedly at expiration. So I know that's a long-winded answer. I think it's important to get all of those details out there because I like the introduction of Monday, Wednesday single names. I think it's good for industry volumes, but really, we don't see them replacing SPX. We rather see them additive to the system.

Dan Fannon (Managing Director and Research Analyst)

Great. Thank you.

Operator (participant)

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

Eli Abboud (Equity Research Analyst)

Good morning. Thanks for taking my question. You completed a number of introducing broker onboardings in 2024 and 2025, Robinhood, of course, but then also several APAC brokers. I was hoping you could give us any sense of the contribution of these new brokers to the strong SPX volumes in 2025. And then what does the pipeline look like for further broker adds in 2026?

Rob Hocking (Global Head of Derivatives)

Yeah, this is Rob. Thanks, Eli. Maybe I'll take that question. We don't get down to specific SPX attribution, but I can take it up one notch for you. As you mentioned, we continue to expand access to our core products. Robinhood was a great ad. We continue to see their options volume grow, which is super exciting. And I think they've been very public that they see good options growth in kind of the midterm. I think I saw somewhere in an article they're estimating 40%-45% kind of growth of options penetration. So we're excited about that. As you mentioned, on the APAC side, we continue to see strong demand from international retail brokers and institutional clients wanting to connect to our exchanges, especially for SPX options. The mega-cap tech names are also in demand and are VIX.

They've voiced that they're very anxious to really tap the large U.S. pools of liquidity that we have. Korea has been a success story for SPX options with 10, I'm sorry, seven of the 10 identified local brokers that we've seen all offering now SPX options at this point. To put that in perspective, that's compared to 0 online two years ago. So that's expanding. We see that as a really good opportunity for growth. To give another region, Taiwan saw the first local retail broker launch of SPX and VIX options in Q4, and we're expecting others to follow this year, so more growth there. The continued demand keeps coming in.

We see this volume not only showing up in some of our GTH sessions, I think you heard in Craig's remarks how that is growing at a very fast pace, but we're also seeing it actually show up in our regular trading hours sessions. We're just really encouraged by kind of that international demand coming into the U.S., and we see it as a large area of growth in the years to come.

Operator (participant)

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

Ben Budish (Director)

Hi. Good morning, and thanks for taking the question. I don't think you've talked about prediction markets yet on the call. I know there's been some press indicating that you are either thinking about or having early discussions with brokers regarding sort of yes/no options. So could you maybe give us an update of where you are in the thinking in terms of product design conversations with distribution partners, market makers, anything else that you could share? Thank you.

Rob Hocking (Global Head of Derivatives)

Yeah, absolutely. We're excited about the continued growth in the event prediction markets. We really view this as a logical extension of Cboe's existing strengths, and they provide a clear entry point for new customers and really a pathway to broader Cboe product adoption. As you've heard us mention, our current focus is on the financial and economic-style contracts. That's where we think we have the deepest expertise, where our core products already sit, and where we believe we can deliver value immediately to our end users. By staying, I would say, close to our core, we can leverage really our technology, the existing product liquidity, which I think is important, and our market structure experience while offering customers the regulatory certainty and reliability that comes with trading on our established regulated exchange. I think that's important. A few important points I think that's worth highlighting.

Our first initial offerings will be securities products. We think that's the best way to reach the broadest set of end users, and it clearly differentiates what we're doing from a lot of the non-security-based platforms already in the market. Second, these products will closely align with our SPX options ecosystem. We already see more than 200,000 SPX 0DTE contracts trade every day, many of which those trades have the same kind of defined risk or, as you mentioned, all-or-nothing payout profiles that this newer investor is looking for. And so this provides a very natural connection and something we feel we can leverage into being successful in that prediction market space.

From a regulatory standpoint, I think it's also important to mention we're encouraged by the recent comments from both Chair Atkins and Chair Selig, especially around drawing clearer lines between what's considered a security versus a CFD-regulated swap. Their remarks reinforce the idea that securities products belong on a registered securities exchange, which really puts Cboe in a very strong position in the driver's seats, so to speak, with expanding into this space and continuing the development. Now, the positive thing behind this regulatory clarity is it's giving people increased confidence. As certainty improves, participation broadens, not just among individual investors but also among retail brokerage platforms, which is important. They've been previously cautious about entering the space, and so we think the timing is good with the added regulatory clarity, kind of how this product set intertwines with our existing SPX product set.

So as far as when, I think that's always the last question we get, which is, "When do you think we'll launch?" Right now, we're targeting a second-quarter launch, assuming regulatory approval and, really most importantly, partner readiness as we need to launch these with the various partners we have in the industry, such as OCC and a lot of the retail broker platforms. As we get closer, we'll continue to provide more updates. Big picture, we're super excited about the space.

Ben Budish (Director)

All right. Thank you very much.

Operator (participant)

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

Brian Bedell (Director)

Great. Thanks. Good morning. Thanks for taking my question. Maybe just a follow-on from that and then maybe just to add a question for Jill on the revenue guidance with that. So the second-quarter launch for the just to clarify, that's for the binary options, I believe. And then I guess the follow-on question is, "When would you expect to be launching the actual more traditional prediction market contracts?" Is that just coming in the next quarter or two, or is that a longer-term development? And then I know the expenses for developing these are in the guidance. Is there any revenue assumption from these embedded in the revenue guide as well? And then, Jill, if you could just on that revenue expense guide, can you just reconfirm the part that you are including in that versus the commentary on the third-quarter call?

I think the divestitures were 3% net revenue drop on an annualized basis with a 8%-10% expense drop. Sounds like most of that's still in there because of the Canada and Australia commentary, but just wanted to confirm.

Rob Hocking (Global Head of Derivatives)

So yeah, thanks, Brian. I can start with your questions around the event contracts. Second quarter is for and I'm not going to give too much detail because we're going to make a bigger splash on this, I think, in a little while here. But it will be the all-or-none style combined with what we feel is a way to intertwine some of the spread trading that we see going on today in SPX. So that is what we're targeting for that second quarter. Once again, think our core products. Think yes or no, but even a little bit of a different twist as a differentiator on that. And then once again, in the security space, we think that's super important.

On the other contracts, as we gain traction and as we get our initial contracts up on retail broker platforms, as they build, let's call it, the GUIs that are able to support those contracts and really give the user experience what they're after, we'll look to expand that into what you referenced as the more, call it, traditional contracts, more yes/no around an event-style contract. But think of that as market adoption happens. That will be a steady rollout into the future.

Craig Donohue (CEO)

Yeah. Rob, you might comment. I mean, what Rob is describing will still be focused on financial and economic events, but I like this strategy. I like this emphasis on securities products. It capitalizes on hundreds of thousands of spread contracts that are trading every day in the market and leverages our strengths in that way.

Brian Bedell (Director)

Yeah. Just to understand, yeah, securities, do you mean single-name company securities or index securities or both?

Rob Hocking (Global Head of Derivatives)

We'll be starting with index as that's just a natural fit at the moment, but that will potentially expand into other securities as well. And then to Craig's point, real quick, I mentioned the 200,000 SPX contracts we see each day trade. Those are in very, very tight minimum increment vertical spreads. And those minimum increment vertical spreads on expiration day have effectively a binary payout, a yes/no payout. So we believe we're seeing event-style contracts existing in SPX today. And so as I talk about this all-or-none new contract combined with the spreads that we're seeing, as I mentioned, the 200,000 contract, 200,000+ contracts we see, that's where we think we can offer a very positive securities-based, in the indices to start, product offering to the market.

Jill Griebenow (CFO)

Then just to pick up on the second half of your question as it relates to the guidance impacts. So a couple of different components to your question. Let me know if I miss anything here. But the first one that I'll address is just on your question as to what we're including from the 2026 revenue guide as it relates to the new prediction and event contract opportunities that Rob has spoken to. I'll just say that there's a small contribution contemplated in the 2026 revenue guide, but we really do expect that to ramp more over time, and we'll continue to update our models as that becomes more clear.

As it relates, though, to the strategic realignment pieces and how those factor into the guidance, again, there are a few different tranches there that I tried to address in the prepared remarks, but we'll just take a couple of minutes here to further articulate and clarify those. So to your earlier point, we did communicate back in October that we expect the net impact of all of the realignment to result in about a 3% net revenue loss. So there are pieces of that that are already contemplated in the 2026 revenue guide. So those would relate to the decision to wind down the Japan equities business, corporate listings, and then some of the optimizations we've made within the Risk and Market Analytics business, as well as any revenue contemplated from the CEDX initiative. So again, those knowns are built into the 2026 guide.

The piece that still lives within the 2026 revenue guidance, though, is the contribution that's contemplated from Cboe Canada and Cboe Australia, given that those businesses are still actively owned and operated by Cboe. As the sale progresses there and if and when there's an impact on either 2026 revenue or expense contributions from those businesses, we'll recast our guidance, then communicate those impacts then to the street.

Brian Bedell (Director)

That's great. And the related expenses to what you just described is also in and out expenses in for Canada and Australia, expenses out for the other things that you've closed.

Jill Griebenow (CFO)

Correct. So the 2026 expense guidance does include what we expect expenses to relate to Canada and Australia, correct? And then there will be somewhat of a timing lag on some of the optimizations we're doing. But for the most part, we do see a bit of savings then in 2026 from the Japan piece, corporate listings, the Risk and Market Analytics optimization, as well as the CEDX winddown. So those knowns are embedded within the 2026 expense guide.

Brian Bedell (Director)

Great. Thank you so much.

Operator (participant)

Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.

Alex Blostein (Managing Director)

Hey, guys. Good morning. Thank you for the question. So a lot of the strategic initiatives that you've talked about are meant to be organic buildouts. That feels consistent. The balance sheet obviously continues to be in a really good place, so I was hoping you could refresh us on your latest thoughts around share repurchases or any other use of capital over the next kind of 12-18 months.

Jill Griebenow (CFO)

You bet. So I mean, if you look back historically, our return on capital is actually we get some of the highest returns on organic investments. So on the heels of the strategic realignment, obviously, we are pivoting away from certain areas of the business. But what that is allowing is both time and balance sheet flexibility to really invest in areas where we do see some promise. So really looking to optimize around the core, a couple of the opportunities that we've mentioned today from an organic standpoint are the focused investments that we're making to further build out our securities financing transaction line of business, as well as some of the product development and opportunities around the event prediction markets.

We really are laser-focused on continuously looking at all of our core business lines to see what further enhancements or optimizations we can make to generate that long-term revenue flow. That isn't to say, though, that share repurchases don't remain a priority. We absolutely still will look to do those, again, on an opportunistic basis. We do also have a history of paying a quarterly dividend and also have increased that annually. If you look back to August of 2025, we did announce a 14% increase to the dividend. Really, we like the flexibility that we have at the moment. We like the dry powder. We'll just continue to look to optimize the capital returns based upon the opportunities that are ahead of us.

Alex Blostein (Managing Director)

Great. Thank you.

Operator (participant)

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

Alex Kramm (Managing Director and Senior Equity Research Analyst)

Hey. Good morning, everyone. At the risk of asking Brian's question a little bit more specific on the expense side, Jill, of the 8%-10% that you talked about on the last call, can you maybe just give us the number of how much of that is now basically out of the 2026 cost guide? Thank you.

Jill Griebenow (CFO)

Good morning, Alex. No, we're not breaking it out on that discrete of a level. What I'll say, though, is there are quite a few tranches of things that are coming off and then or some organic investments that we're making, coupled with what I will say is the majority of the savings would come later on from some of the Canada/Australia pieces. But like I said, we already are starting to see the full-year benefit of the Japanese equities piece, as well as looking for a good portion of the CEDX component to come out. So it really is a balance there. You do see it reflected, though, in the guide that we came out with. So you look at the lower end of the range, the $864, higher end of the range, that $879, that suggests somewhere of a 3.3%-5.1% expense guide.

Again, we will keep you updated over the course of the year as more becomes known with the timing of the Cboe or Cboe Australia and Cboe Canada pieces. But for now, again, feel good with that range that we've communicated given some of the pieces that are in motion.

Alex Kramm (Managing Director and Senior Equity Research Analyst)

Understood. Figured I needed to ask. I'll be back with a follow-up. Thanks.

Operator (participant)

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

Ashish Sabadra (Software Analyst)

Thanks for taking my question. I was wondering if you could provide more color on the rollout of Dedicated Cores as well as talk about the new growth initiatives and new product roadmap within the Data Vantage. Thanks.

Ken Hill (Head of Investor Relations)

Yes. So in general, some of the products we've rolled out over the last year or so include Dedicated Cores. Again, that's reducing latency in terms of accessing our equity markets. We've also rolled out timestamping and 1-minute open and closed datasets. And those are more focused, the datasets around our options exchanges. We've rolled those out. We've started in the U.S., and then we took them across to markets in Europe. So those were some of the initiatives we had in place. As we look to 2026, we've got some new launches planned as well. There's an option-like dataset that we've just launched early this year. We're already seeing some strong interest in the Asia-Pac region around that dataset.

There's something that we'll put in around the middle of the year, around Cboe Clock service that has good potential as well as we've worked with clients to really understand some demand around that. We continue to innovate around new products and services that clients are really asking for. We'll continue that rollout into 2026 as well.

Ashish Sabadra (Software Analyst)

Thank you. That's great color.

Operator (participant)

Your next question comes from the line of Jeff Schmitt with William Blair. Please go ahead.

Jeff Schmitt (Research Analyst in Financial Services and Technology)

Hi. Good morning. You discussed on the last call that you're working on pricing improvements for your exchanges, whether it's market maker, incentives, more attractive rebate programs, things like that. Could you provide us with an update on what you're doing there? Is that really for the multi-listed options? Thanks.

Rob Hocking (Global Head of Derivatives)

Hi. Yeah. This is Rob. I'll take that one. And yeah, it's for the multilist space. It's an exciting space for us and really core to Cboe. As all the reports show, industry volumes continue to grow at a staggering pace. And so this is an area we're heavily focused on. But we'll say, as you point out, it's highly competitive. By early 2026 here, we'll reach 20 exchanges in the space. But that said, Cboe still controls, call it, around 22% market share in multilist and around and we're number one in overall market share. So without getting into as you mentioned, we're constantly evolving the different functionality, the different pricing schemes. And we're always actively evaluating and working through all of those pricing enhancements across our different medallions.

But I think it's important to point out that we're always very intentional about how we manage the dynamic between market share and revenue capture. So we don't see that as a static kind of trade-off. As market conditions change, we'll continuously adjust pricing and incentives to make sure we're maximizing that overall opportunity set for Cboe rather than optimizing for a single metric in a given quarter. So that's kind of an ongoing thing, and it will continue to be an ongoing thing. On the more specific things we're doing, on the market structure side, we're preparing to launch multilist trading during our limited GTH session. You've seen reports of that. That'll be pending regulatory approval later this year.

Then another one that I think is important to mention that I'm not sure we've mentioned before, we're engaging with industry participants on the potential for the options regulatory fee or ORF reform, as you hear it referenced. Now, ORF is a per-contract fee charged on option trades to help pay for market regulation and oversight. ORF is assessed on customer trades regardless of which exchange the trade is actually executed on. So the fee is used by options exchanges to fund their regulatory responsibilities. But because there are many options exchanges, as I mentioned, 20 here in the first part of 2026, ORF can be charged by multiple venues on the same cleared trade, which is why it's become really a point of focus and discussion across the industry.

Because as the number of exchanges grow, the cumulative ORF burden on customer trades increases, which is why the industry, the derivatives industry, has been actively discussing this ORF reform and aligning fees more closely with where trades actually occur to reduce friction, cost, improve overall market efficiency. And so this initiative's important to us. It's one, Cboe firmly believes and is supportive of aligning fees with where the actual trades are done. And we feel overall, if you look at our approach towards pricing, extending GTH, ORF reform, we still feel we're positioned well to remain an industry leader in multilist.

Jeff Schmitt (Research Analyst in Financial Services and Technology)

Okay. Thank you.

Operator (participant)

Your next question comes from the line of Ken Worthington with J.P. Morgan. Please go ahead.

Madeline Daleiden (Equity Research Associate)

Good morning. This is Madeline Daleiden on for Ken. Appreciate your earlier comments on single-name cannibalization risk, but may you provide some more context or help us size the capital efficiencies customers could realize when trading across the new shorter-duration equity risk management tools, whether it be single-name 0DTE, the Mag 10 Index you launched, binary options, when trading in conjunction with the legacy S&P index stacks?

Craig Donohue (CEO)

Sure. You want me to?

Rob Hocking (Global Head of Derivatives)

Yeah. You can start. Yeah.

Craig Donohue (CEO)

I mean, all these products are cleared through OCC. So as a result, there's substantial capital and margin efficiencies because of the portfolio margining that's happening within OCC. I think, again, that's kind of another sort of complementarity to the launch of these products, which is they're all held in the same pool, and therefore, they get the multilateral benefits of centralized clearing. I think that's your question, but Rob, is there something you want to add to that?

Rob Hocking (Global Head of Derivatives)

Well, and maybe to expand on that, it's just if you think equities, think 0DTE, whether single-name or index, think Mag 10, all of these, as Craig points out, are cleared at OCC.

So all of them, as we expand the product set, whether it's introducing new tenors, even introducing new products that are made up of existing products, so think Mag 10 is top 10 names relative to the single names that are already traded, all of those and that's kind of our strategy. All of those are going into the same bucket of risk at the OCC for risk offset capital efficiency. So as we expand the toolkit, that's the beauty of it, is these people's portfolios, as you add these names, you're not introducing a completely new asset class that you have to fund as a completely new vertical. You're introducing new, call it, risk characteristics, new access points, all within the existing verticals they have, which is a much more efficient way to trade.

Operator (participant)

Thank you. Your next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.

Michael Cyprys (Managing Director)

Hey. Good morning. Thanks for the question. Just hoping you could share your updated thoughts on plans around extending trading hours to 24/7 across your markets, what that path and some of the hurdles look like. I know for multi-listed, you've announced to have extended sessions, I think, for certain options contracts. Just curious how you think about overcoming any sort of hurdles around fragmenting liquidity and ensuring real price discovery, particularly in some of those overnight hours. Thanks.

Rob Hocking (Global Head of Derivatives)

Yeah, Michael. I just want to remind you, so we already trade 23 or 23.5x5 in futures, index options, and FX and have for many years. And as we've mentioned on this call already, through the prepared remarks and Q&A, the GTH volume for Global Trading Hours has really grown tremendously, 34% year-over-year. So we're seeing great growth in those markets where we already trade. In U.S. equities, we trade from 4:00 A.M. Eastern to 8:00 P.M. Eastern today. That's kind of the broadest hours of all the U.S. equity markets. Coming in late November, assuming the market infrastructure, the consolidated tapes, and DTCC are ready, the industry, including our EDGX market, would be going to 23x5 in late November, but you'll see a rule filing for that in the first half.

To your specific question about 24x7, we're already making plans. There's been a lot of talk here about event prediction markets and some about crypto as well. We certainly have capability to trade 23x5. We're taking a look at what would it mean for us to extend our clearing abilities to 24x7 as well as our trading abilities to do that. I'd say just watch the space for when we see the appropriate market demand to justify those projects. But those are definitely in the planning phase, and we look forward to bringing those to market when the customer demand is there to meet it.

Craig Donohue (CEO)

And then, Michael, real quick, if you're asking specifically about multi-listed, we're working to launch extended hours trading or that extended GTH session for Q, we'll call it Q3, pending regulatory approval.

In our filing, we would add a morning session from 7:30 A.M. to 9:25 A.M. Eastern time and then a post-close session from 4:00 P.M. to 4:15 P.M. to supplement the existing U.S. equity options hours that Craig or that's sorry, that Chris mentioned from 9:30 A.M. to 4:00 P.M. Our plan would be to start with 25 names only that represent kind of the highest market cap, most liquid names across options and underlying equities. As you highlighted, this is really in response to the surge we've seen in the equity options volumes and just the general industry push towards 24x5. Those are kind of the specifics around how we're expanding that for multilist.

Michael Cyprys (Managing Director)

So just on the multi-listed, so that goes till 4:15, just curious why not extend a bit longer? How do you think about that? What are some of the hurdles? When do you think we can get to 24x5, 24x7 within multi-listed?

Rob Hocking (Global Head of Derivatives)

No, I think it's a great question. Really, we're trying to expand the functionality slowly and deliberately to make sure market participants are prepared. And it's a smooth transition process. Right now, these windows where we're expanding account for where we see the majority of volume in our current GTH session with SPX. So we don't want to burden liquidity providers right out of the gate having to staff and provide liquidity all night over some of the lower traded hours or lower volume hours. So we feel like if we use SPX as an XSP kind of as a guide, this is where we're seeing the majority of the volumes. So let's expand 25 names there. Let's see how that works. Let's not burden liquidity providers and then hopefully expand as it makes sense.

Michael Cyprys (Managing Director)

Great. Thanks so much.

Operator (participant)

That concludes our question-and-answer session. I will now turn the call back over to Cboe Management for closing remarks.

Craig Donohue (CEO)

Thank you very much. Thank you for joining us today. I just want to take a last opportunity to thank Chris Isaacson for his many years of experience. This is his last earnings call with us, but he'll be with us for a while as an advisor. Chris, we thank you. Thank you for joining us.

Chris Isaacson (COO)

Thanks, Craig. Thank you all.

Operator (participant)

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.