Cboe Global Markets, Inc. (CBOE) Earnings Call Transcript & Summary

[Audio Gap] and Treasurer of Cboe Global Markets, Brian Schell, with us today. For those of you who don't know, Cboe is a global exchange providing trading solutions and products across multiple asset classes within North America, Europe and Asia Pacific. Brian is a 25-year veteran of the financial services industry, coming to Cboe with the Bats acquisition in 2017 after having been the CFO of Bats since he joined them in 2011. Brian has led Cboe's disciplined cost control and capital allocation, including its acquisition strategy, that has helped create the Cboe of today, which is substantially more diversified and a global trading firm than just 5 years ago. And we'll delve much deeper into that. Can you turn this mic down a little bit?

Yes.

Yes. Thank you. Just getting some feedback. Anyway, so thanks for being with us today, Brian.

Great. Thank you for having me.

Yes. Pleasure. So I'm going to start off with some questions. We can also take questions from the audience at any time just to keep the dialogue flowing, but I have plenty of questions in the meantime. Anyway, so maybe if we can start off with the macro backdrop given Cboe's one of the more volume-sensitive exchanges, at least compared to some of the ones I follow. So you started off the year with record results. And I think you said activity levels are holding up well as of April. So maybe just comment on whether that's still the case through May, and what dynamics you're seeing in the market that are driving some of the revenue durability, either on the trading side or the Data and Access fee side.

Sure. So you don't mind taking up all 45 minutes with that question. I'd be happy to. So again, as we look at where April is, and I've got my notes here because I'm going to throw out a few stats again to kind of support some of the things that we're seeing. And so if you recall, in April, we had double-digit growth across all of our asset classes, with the exception of multi-list and futures, which were high single digit. So it was positive across every single asset class. Then we look at May, and I didn't quite get the final tally on the results from -- through yesterday. But if I look through where we were, and I don't think this will change, is that all of our asset classes were also up double digit, with the exception of futures, which was flat to slightly down as far as the ADV goes. And in particular, if you look at the entire suite, though, and especially if you bring in the futures complex, you'll see that those index products are up in the 30% range. So from -- and again, these are all year-over-year numbers. Again, things that -- this is not insider information, this is stuff you can see actually on the overall volumes that are out there. So again, May is -- as a backdrop, is equally as strong as we've seen April. And as we think about some of those catalysts, what's going on in the environment, what we see is that we don't see a catalyst for a change in the environment, right? You have a lot of macro environment things that are going on. And -- but you're -- but it's been very much complemented by the things that we've done at Cboe to make sure that we've enabled the market to participate as much and in the various products that they want to, right? It's all about access that we've talked about in the past, Brian. But if you look at the various catalysts that may or may not resolve themselves in short to medium term is, obviously, is the unfortunate Russia and Ukraine conflict, war that's going on there. We have the pandemic, which at any point in time, depending on severity, changing views from one month to the next. And then importantly, which I think is also top of mind, which has created a lot more volatility in the market is, I'll call it, the interest rate environment. And whether that's the Fed and the rising rates, whether it's the inflation, whether it's economic growth, whether it's congressional potential or legislative and administrative fiscal policy changes, again, creating elements of that uncertainty. And then we're right around the corner from midterms. And you have a change in where you have a dual party as far as where that goes, does -- do any of the midterm houses, do that change? So you have all of those catalysts out there that we don't see necessarily a clear resolution for that. And how does that play in the backdrop for -- generally for volatility? Again, this is just how do we kind of put numbers around it. If you look at -- and we use 2020 as our anchor year roughly, is if you look at the 2.5 years preceding 2020, the average level of the VIX Index was 14.5. Post 2020, it's 24.5. That's a dramatic change, and that's an elevated environment. And it's not a shock. It's been kind of elevated in a, let's say, a more disciplined way as far as it's been -- whether it be gradual changes, and you'll have some fluctuations. So that's resulted in a backdrop that has been very positive to volumes. Again, and I'll mention some of the things that we've done to facilitate within that macro environment. But if you look at options, and let's focus on the derivatives part of this, is that in 2020, there were 7.4 billion contracts. And that at the time was a record. In 2021, it was 9.8 billion, right? So a 32% increase. And you had 10 days of over 50,000 -- 50 million contracts. And in '22 already, we've had multiple days of more than 60 million contracts. So it's just -- we're continuing to see that. Now the other trend that we've been talking about on our last several calls and the highlight is what we're seeing within this complex, right? We're seeing a shift to more index products, and we're seeing a shift to shorter duration. And that's being caused -- and that's been happening for a little while is -- and what we're seeing with those inflationary shocks or things that are happening is that you'll see repositioning. But when you see the Fed potentially removing the safety net of quantitative easing and that safety net is no longer there, standing on the sidelines probably comes not as much of an option it has been in the past, whether it's -- and I'm not a market strategist as far as that, but it's more about what we're seeing is we're not seeing as many people standing on the sidelines and then reengaging traditionally with options activity of expressing a view on risk, whether that be a hedge or they see some opportunities. And again, it becomes almost a call to action in a maybe more of an inflationary environment as what we're seeing as far as the reaction we're getting from them is -- so we're seeing a lot more around short-dated options. Again, not just Cboe, but I'd say across the industry, right? So if you look at in 2017, options expiring with less than 5 days was 24% of the volume. In 2021, it's 46% volume. And if you look at less than 15 days, it probably jumps to closer to 60%. So those numbers, what we're seeing is people are having a preference around those shorter-dated options, that exposure. And so we're seeing a bit more of a binary impact as far as people looking at options and that shorter-dated, it's in the money or it's not. And they may not need to reposition depending on what's going on because they're not having some of that longer-dated exposure because they're finding utility in those short-dated options and their positioning and what they're doing. So that's what we're seeing as a very, like I said, strong, I'd say, volume contributor to some of those shorter-dated options and that overall composition. And because I think what they're seeing is that there's a larger probability of a large move. And a way to obviously protect themselves is through derivatives contracts. Again, shorter-dated, taking that change. So that's the kind of thing that we're seeing. Now that's interesting. You say, "Well, that's all macro. You didn't do anything." But what we have done, and this is a theme that, Brian, you know that we've been talking about since 2021 and even going back to 2020, is how does Cboe create more access to its products broadly, right? So the products around, particularly, the proprietary is, as you know, is that we've launched our 24x5 trading and index options. So the people have more opportunity to trade in those products, both, I'll call it, off the normal session hours, which again helps facilitate that risk all times during the day. We've added incremental expirations to our weeklies, so Tuesdays and Thursdays, again, giving more opportunity to be able to manage their risk on a more frequent basis. But at the same time, we also introduced over the last 6 months long-dated options for different types of uses and putting those on exchange to help facilitate efficient capital allocation from investors. So again, we're trying to look across the spectrum, facilitate client demand. And I think that's really contributing to a lot of, I'll call it, the derivatives demand and that stickiness that we've seen and that we expect to see for a period of time. And that also has led to a very strong growth. As you know, from our first quarter results, and the non-transaction side as far as the market data and the access and the volumes. And so that has led to, again, a -- we've already upped our guidance from the first quarter of a stronger stickiness and stronger pipeline than what we had originally expected with the trends that we're seeing right now.

Okay. So our above consensus second quarter estimate is looking pretty good, right?

There's no common consensus. But you can see the volumes, as I indicated. That's where they were, is that again, they've been very strong relative to the prior years.

Yes. No, it's been -- we've been tracking it, and it does look strong across the board. There's -- I've got a lot of other questions, but while we're on that subject, you've created the organic -- since you've done this partly organically because you've created more options, no pun intended, for people to trade. Talking mostly about the index side and the institutional side. How about the retail side? Because we've seen dramatic increase in retail, multi-listed options, as you call them, over the last couple of years since -- really since COVID and the retail frenzy back a year ago. How are you seeing that tracking? And same question there on organic ability for retail traders to access the share.

Sure. So I think that it would be a -- 2 answers for 2 different asset classes. So if we briefly talk about equities, we saw that huge meme activity pop that we're not seeing today that we saw a year ago and then early -- and again, started back to 2020 when you saw that huge spike that -- where we saw retail participation in -- of the overall volumes, call it, in the 25% level. That has settled back into -- closer to that 10% to 15% level of overall volumes, albeit elevated, right? So now as you know, the ADV is -- on a normal day, is closer to 10 billion shares in the U.S. equities markets. And so it's higher than where it was, but the percentage is about where we had seen it kind of pre-pandemic, maybe a little bit higher, but not quite like with the meme days where it was just very, very high and incremental volume. So we've settled that. We've seen that settle back down. On the -- and we expect that -- there's no reason for us to believe that that's necessarily going to change. Again, that's -- a lot of that's coinciding with a lot of the retail brokers and what they did around their pricing. On the options side, we've seen that participation percentage rise to that 20%, 25% level, and we've seen that kind of stay there. We haven't seen that fall off. So again, I think that reflects a more sophisticated investor. They've obviously taken the education and the time upfront to be able to invest and use options in the first place. And so running those strategies and how to protect their portfolio or, again, express risk at any one point in time, that has stuck. And again, we've seen that with a lot of the retail platforms. So like I said, we feel good about that as well, but that's been pretty sticky and that really hasn't changed. Now the bellwether to the hypothesis and what we've seen, will that change materially with this gradual kind of downward cycle we've seen a bit in the equities valuation and then the underlying there? We will see. But so far, there hasn't been any alarm bells to say that percentage is falling.

Yes. That's great. And you've made a big education initiative there. So it's good to see that that's paying off in the volumes. Maybe switching gears to some sort of the big-picture strategy for Cboe and positioning over the last really like, I'd call it, like 2 to 3 years. I mean it's always been a repositioning story of some kind. But really in the last couple of years, you've made a series of acquisitions, I think, almost 10 if I'm counting correctly, expanding into asset classes, different capabilities, geographies. I think you're in about 2 dozen markets now from a trading perspective. Can you talk about the vision here? Is this more of an extension of how you evolve Bats way back when? Or is it more about -- is it sort of about creating the broadest global exchange that you can? Or is it more opportunistic? You see things come available and you say, "Gee, that would be good. We can bolt that on if it's in with our strategy."

Yes. It's definitely more of the former, right? I mean it's more about how we want to evolve and what we want to look like and what we think we can achieve to bring that long-term shareholder value as far as this is what Cboe is and this is what differentiates us and what we can do differently. So if you think about what that grand vision, that strategy of that -- being the leading derivatives and securities trading network globally at the end of the day. We have a lot of global clients. They're looking for that trusted trading environment. And so if you look at the organic activities and you look at the M&A we've done, it all fits within does that support our objective of being that leading global derivatives and securities trading network. And it's again reflected in -- I know, and we've talked about this in the past, is as we presented our flywheel of that ecosystem of that spot and underlying cash markets and the value and then the data that's derived from there. And then you see the derivatives, again, from the data and how that continuous loop feeds each other and how they really feed off of each other, and they work so well together as far as the derivative, the underlying and the data. And everything we've done has been to support 1 of those 3 value ladders or flywheel elements that we think is really -- makes us different and enables us to grow at a higher-than-average rate than otherwise. So that's very important to us because not only do we think we can excel within those individual markets. That global offering gives us something that we can do that others cannot. So we'll be in 7 of the top 10 markets, in largely, call it, a top 3 position. And we can bundle data, for example, and in very early stages of this. We can bundle data globally that no other provider can do in the same way that we can. And we're just starting to explore that. So again, going back to the theme of increasing access and making that more available and, I guess, given the global nature of our client base, so that's very important. And that also reflects how we thought about the digital with ErisX acquisitions that we made, right? It's all about that underlying spot capability to the derivatives capability to a market data capability. And actually, that has the benefit of then having that in-house clearing as well. So like I said, that's the broader vision of replicating that in different markets and different asset classes. Frankly, we found a lot of success. We think our technology enables us to do that. And our clients then understand it because they're used to our technology and they know how to connect, they know what to expect.

It's interesting because for decades, exchange businesses have tried to create this global platform through the cross-border merger with another giant exchange, and that's been debated out, various scenarios over a couple of decades. You've built exactly that slowly but surely, and now you're in a position -- maybe there's a lot of sub points that I can go off on but I'm -- while I'm thinking of it, the consolidated tape in Europe might be an example of an opportunity. Maybe if you can talk a little bit about that, was it too early?

Yes. So the consolidated tape, we put our position out there about it is that we are in favor of it overall. I mean there's an 11-point paper that we put out that basically -- and I won't go into all of those points. But essentially, we're a fan of it. It should be affordable. People who are -- contribute to the tape should derive revenues from it. It should have pre-trade and post-trade data available to it. And we think that -- generally, we think it can be -- and this is our general policy across all of our asset classes. It should be something that basically enhance the investment market, right? Because the end user is deriving benefit from that. And we truly think that can be the case here. We think it should be one provider instead of competing providers per se. And that's not to say it can't be distributed, which is again, I'm trying not to mix in with the recent SEC initiatives and how they're thinking about the tape and potentially pass as it goes. But we think one provider and those other elements, like I said, we're a fan and we'll see where that goes. But there, obviously, it's under debate. And like I said, we believe in transparent markets, and that consolidated tape can -- is a helpful contributor to that.

Yes. And you're the only one that has the network of markets in Europe in that range that can...

As far as -- certainly at scale, correct. There are a couple of other smaller venues that don't quite have the same market share. But yes, if you look at the entirety of it, that is correct.

Yes. Okay. Great. Maybe just talk about the investment strategy. I think you mentioned on the last earnings call, every investment has a unique profile to it in terms of a payback period or ROI, so to speak. And I think you meant this for both organic initiatives as well as acquisitions. But can you talk about how maybe over the course of the last couple of years, I know it's early for some of these, though, but how they are tracking against your expectations and the initial plan?

Sure. So my favorite ones to talk about, frankly, is the organic. And it makes sense, right, if you think about the highest ROI and why, hopefully, organizations are thinking about their capital allocation approach in a very disciplined manner, is those organic activities should be your highest opportunity and should be prioritized because it should be the lowest investment and the highest kind of the numerator. You want a high numerator and a low denominator at the end of the day. And so the few that I will mention already is that if we think about the cloud, taking data to the cloud, where we started with our U.S. data products. We've already seen a double-digit ROI on that. But we expect that to be short because we knew the demand was there. It was more putting the investment in to be able to do cloud delivery of a product that we knew people wanted. They just didn't quite have the right ability to receive the data, and the cloud enabled them to do it. And so that was a no-brainer. And that will be easily a triple-digit type of ROI in the coming years and as we expand with European data and different geographies. So we're excited about the cloud offering. 24x5, I mentioned that earlier. Again, increasing access, just like the cloud delivery does, increasing access through 24x5 as far as trading time frames. So we put up -- that investment was more of a 2021 investment, delivery late in '21. And now here that we're seeing in this environment, that has more than paid itself back within a year. It's just -- it's a -- that's why people love organic initiatives because, again, it's so close to what we do in our core. And again, it's a fairly easy decision given if it's coming from a very strong client demand and what we're seeing to be able to facilitate their investment needs. The Tuesday, Thursday, it's hard to call that there's really incremental investment there. But again, we've seen some success there as far as the incremental weeklies. And then was a big part of '21 but also again part of '22 is expansion of our DnA, right? A lot of those high-conviction investment initiatives were in support of our growth of our Data and Access Solutions services. And that comes from incremental marketing, incremental sales, some of the cloud delivery and helping to facilitate the growth of our real-time and Data and Access Solutions services, expansion of our risk management and our analytics delivery of products and how are we helping add more and more products and tools to those clients. And then thirdly is continuing to build out our index capabilities kind of across the board. So those are some, I'll call it, the shorter-term organic initiatives. If you -- to mention a couple of the acquisitions that you referred to at the beginning part of your question is if we go back to almost the earliest in time with EuroCCP, which was a couple of years ago, is that started off exactly what we thought it would. And that has been a phenomenal ROI given the success in market share and the incremental volumes that we've seen. So again, that's a dual-prong kind of delivery on ROI. And it actually was also -- which is not even factored in yet is the ability to deliver on European derivatives.

Yes. I was going to say that it doesn't even include -- your statement does not even include the European...

It does not include that. So that in and of itself has been just a huge ROI, way surpassing our 10% threshold.

So that makes the derivatives part like icing on the cake -- I mean it's more than icing on the cake. But if it were not to come to fruition, not saying it wouldn't, you would still -- it would still be good, though.

It'd still be a slam dunk, one of the strongest acquisitions we've ever done.

Interesting. While we're on that subject, just remind us of your revenue target. I think...

Yes. So that was EUR 25 million at the end of -- by -- targeting that run rate by the end of 3 years. And so we knew that was going to be a longer ramp. Again, to your comment earlier about various initiatives have very different return profiles and time. And we know that building that derivatives market from scratch, again, based on client feedback, client demand is going to take some time. And so -- and that's what we're seeing. So I would say it's "on pace." We always want success tomorrow, but we knew that it was going to be a longer slog to get this going and core to what we do. The other thing I will mention as far as some on the acquisition front is on the -- some of the investments that we made, again, a little over 2 years ago was on the -- around the Data and Access Solutions group is...

The Hanweck?

The Hanweck, FT Options, Trade Alert is that those have performed about what we expected on the revenue side. But where we've actually seen the really big lift is the momentum it has created for the business and what it has done internally to be able to enable the offering of additional products within the organization. And giving those products and some of the cost synergies taken out was an unexpected benefit. And so we've seen really strong momentum of that offering and then being able to lever that across the organization. So that's been an upside that sometimes it's hard to quantify, but there's 0 regrets to those activities and what we've done and what they've been able to do internally to build up our capabilities. I'll move to the next one, talk about BIDS. BIDS has -- I'll say, was flattish to that first year of ownership, but this second year has continued then to, I'll call it, reinvigorate. So it is starting to -- it is hitting those expectations of where we expected to be, not only on its own volumes but what it has enabled to do again across other parts of the business. So we're seeing incremental benefit in Europe from being the #1 in large and scale block trading network in all of Europe. It's now taken that #1 market share position, I think the last 2 or 3 months running. So that's -- we've seen a positive surprise. We've seen it now part of our Canadian offering with the MATCHNow acquisition we did last year. And so we're seeing it on its own and its leverage. And then our plan to launch in APAC has been, again, very, very strong. And then lastly I'll touch on here as far as performance goes is Chi-X Asia. And again, that has, at least in the first 6 to 9 months, surpassed our expectations. Again, relatively small still in the overall scheme of things, but right on track from an integration, what we want to do, market share growth, and continuing growth of the nontransaction revenue part of the business.

Interesting. So it sounds like when you do these deals, you have a -- tell me if I'm right on this, you have a sort of a level of safety in your mind like, okay, if the stretched goal doesn't work out, hey, at least what we bought is good and durable and that will pay back. And then there's -- it sounds like that's a common theme on...

Correct. I mean we -- and we tried to have a -- like I said, we set that return on investment threshold of what we expect. And again, these are still relatively small in the overall aggregate earnings numbers, but we do expect to see earnings contribution. And again, we expect to see more of that 2 to 3 years where we start to see that kind of flip to be a much more positive contributor.

Okay. Great. Maybe just talking about the overall positioning as you continue to build out this franchise. It seems like there's always things more things to do, but you do have a pretty wide set. Are there any areas in particular that you would flag as do we like to be in this particular area. We're not in there yet. Either we'll build organically or we can build it organically or we can't really build it organically, it needs to be an acquisition?

Yes. I would say there are some glaring gaps, like, oh, we just need to be there or we need to be there. I would say, given the -- and you've clearly flagged the -- our activity is that there's still a lot of attention and focus on integration at this point in time, right? So we've made a lot of investments. And I think the best thing we can do for our shareholders is let's make sure we execute on the investments that we have made. And we're just -- we're not a portfolio company, and we'll just buy it and just let it sit over here and hope it does well is -- that's what we actually think is one of our strength is integrating it from its matching engine to its system, to its offering, to the rigor around it, to the robustness, to the cyber. All those things of what it means to be trading in a trusted environment, that's what we think we do well. And so we're going to make those investments, and we're going to integrate. And so that, I would say, is going to be a big part of our focus. That doesn't mean that there couldn't be something that comes up opportunistically that makes sense for us to take a look at. But there's nothing that we feel like we need to do for us to be successful to hit our financial objectives.

Right. Yes. And people are definitely looking for that to see that play out. Obviously, any company that does a number of deals, they want to see that play out, but it sounds like it's -- everything is most pretty much on track. Just maybe another one on M&A just in terms of your debt profile. You've been pretty lean on debt relative to peers. I think the Data and Access revenue stream is approaching 30% of revenues, so that's a relatively stable base of revenue. But you've also got this very diversified range of asset classes. It's unlikely that they will turn down at any one particular time. So is there a greater comfort level of raising the debt-to-EBITDA ratio?

It depends on who you ask. So this is a wonderful conversation. And obviously, we love working with the rating agency partners. And they certainly recognize the strength -- the increasing strength of the diversification of the revenue streams, not just DnA and "nontransaction" part, but diversity of even the transaction levels themselves, which have been fairly consistent, and they've continued to actually do well and our ability to convert most of that incremental revenue to earnings. So they see the strength in our overall credit profile. So I don't think that changes our conservative nature is that if there is a use of cash that makes sense and we want to leverage the balance sheet for an opportunity we want to pursue, we will do that. I do love our single A credit rating. I think it gives us access to the capital markets, particularly in times of turmoil, say, for today because I know there's been some spread widening if you look at where the treasuries are in any one day is that there are the haves and have-nots in all likelihood. And that starts to play out in the differentiation of your credit rating. So I do think that is something that is strategically important to have but not maintained at all costs. So if there's an opportunity to leverage the balance sheet, we will, if we think it makes sense. But absent that, we'll look for a combination of, with those capital allocation decisions, of the excess cash beyond the organic initiatives. We'll look to look at a combination of share repurchase opportunity as well as delever. And like I said, I don't just want to lever up to lever up because I don't want to be the person that our leadership team is looking at and say, "Gosh, if we had a better balance sheet, we could go pursue that." So that's not going to be us. So that's kind of, again, how we're strategically approaching that.

Okay. No, that makes sense. I do want to talk about digital assets a little bit because it's a whole new area. But just before I get into that, we touched on all the regions. You didn't talk a lot about Canada, but you're going into with the NEO acquisition to build upon the MATCHNow stake. So maybe just talk about the -- what your game plan is for Canada. How significant do you think you can be...

Yes. So we really like that. We like that management team. We like the offering. We think the real -- also real gem there is also its listings franchise. It brings a lot of listing strength, not only in ETP, but also corporate listings. So we do believe that as we bring more kind of strategic visibility of what we're planning to do there -- and this is not new, but people may not have paid attention much to it is we do think there's broader like dual-listing opportunities broadly across North America, particularly with such a strong franchise and base of what they've already built. We think their -- like I said, we think the ETP, it really helps add to our global ETP franchise for what they're doing and what we've seen. And then when you add in Australia -- and you see in the other countries and what they've done as far as Australia and Canada have already approved Bitcoin ETPs at the end of the day, right? And the SEC, we're still waiting. But for those -- so we think leveraging that, again, broadly across the different exchanges that we have and the different venues that we're in, we think this gives a real boost than what we've already been successful. We think the transaction side, as we continue to bring in ultimately our matching engine technology to NEO, again, not necessarily have to be a short-term thing as we work through the rest of our integrations, but we think there's an opportunity there. And I think just being that trusted market operator there, we just think it really gives us really a stronger North American presence.

Okay. That's interesting. And dual listings, you mean things that are listed right now, let's say, in New York or Nasdaq would potentially have...

Correct. Cross-border, and they can add that U.S. or they're in Canada now and that U.S. So it can go both ways. And the one thing that we're just now starting to tap into very, very early stages is -- and I mentioned this in the earlier comments of this global data opportunity of -- is that we're going to be unique positioned to provide a North American data feed of significant market share. So those are just the things that we're just beginning to look at and how do we package, including Europe, all those things that we're very excited about.

Yes. No, that's -- it's going to be a fascinating journey to watch. I do want to make sure we have time for the digital movement here. So this is definitely a big acquisition for you, I mean not in size so much but more of like from a strategic perspective. ErisX, we're talking about. Maybe just talk about your initial priorities. You've closed it now. It's about almost a month ago, right? Talk about your initial priorities in terms of integrating that into Cboe? And then is there -- is -- just on the timing of that, is that a lengthy sort of integration and ramp-up phase? And what are the -- we could think of a lot of range of possibilities. Maybe just talk about what you're thinking of initially. And then what could be big picture longer term?

Sure. So I would not think of ErisX as what we've done in a traditional integration, right, because it is crypto-native tech at the end of the day. It's already 24/7 continuous markets. So we're excited about that. There's no need to say come in and overlay this different technology, right? It was built for a crypto trading environment. So we're very excited about that. The integration is more around can we do payroll or can we do payables or can we do some of the other things around the edges that can help alleviate them, some of those other broader functions, support functions, allowed to focus on the revenue growth of the business. So it's not an integration per se that's going to take up a lot of time. I think if you think about the priorities and what we're excited about doing is the listing of new coins and the margin application we have in with the CFTC today, right? So we've applied -- the application's on file with them of looking at how do we create -- allow for margin in a very traditional approach similar to what we do with our CFE exchange. And what does that look like? What do the risk models look like? How are we calculating that? And how do we utilize the traditional intermediaries of the FCMs, which we think is a very good market model. It's been very safe environment, and there haven't been significant distortions that haven't been able to -- have been able to be addressed by the market structure that exists today. We're not opposed to a direct-to-retail model per se, but I think there's a lot of unsolved, unanswered questions about how that would look and how does that change and how do you deal with a spiraling downward environment potentially if that happens without creating even more volatility versus the environment we have today. So not opposed. It's just we're going forward with right now the model that we know works and we think can work in a more traditional approach. So we're very excited about that.

Institutional?

Institutional, yes. Very -- more institutional-driven. We're still working with clients at a retail level. It's relatively small. It's not a massive marketing campaign. We're seeing a lot of success and retirement accounts and things of that nature that people are looking to will help facilitate that offerings that are there. So like I said, we're seeing some growth there. But again, our focus is more institutional. We see from what we've heard feedback from institutions, what we've seen from the regulatory environment, both the SEC and the CFTC is very much of a, I'll call it, a more traditional exchange model of making sure that someone is providing a trusted market. And that's where we see the puck going -- to quote Mr. Gretzky, right, is "We're going to where they think the puck is going." We think we already have it as a DCM and DCO already with the CFTC. Chairman Gensler has said that he views some of those crypto assets probably already as securities. And does some of that come "on exchange or onto an SEC-regulated environment," whether it be a broker-dealer or whatever is going to be required there to happen. And we feel very, very prepared and ready to be able to meet those needs and those requirements should the direction take us in that path. So we're very excited that ErisX brings all of those capabilities in one transaction. So -- and then I mentioned then the listing of incremental coins as we continue to expand that portion of it, whether -- probably around ERC-20 type of coins or Layer 1, that type of thing that won't be a stretch, that we're, technologists, ready to add. And I think long, long term, take a look at options, we know a little bit about derivatives and maybe additional jurisdictions.

The new options of it, like when the 1970s, the options are created, this is the next stuff. I mean just in thinking about the size of this business, I mean, could this be a $100 million revenue business within the next 3 to 5 years?

We haven't made any long-term projections, so I don't want to go on record now saying it's going to be $100 million business or a $1 billion business or whatever, at least in this time frame. We're excited that we do think that this can be a meaningful revenue contributor in the long term, absolutely.

And then just in the -- we have a question right here. I was going to say just in the concept of competition in this market, there's lots of different elements coming into it. But from an institutional level, do you feel like you've got the sort of the best recipe for -- to be the leader on the institutional trading of crypto?

We believe we have the elements to facilitate that, right? And we do think that we can get there. It won't be a short-term play. But we do believe with the infrastructure that we have in place, the knowledge of the institutions that we know want to engage and the activity, and that familiarity to that trusted environment, the contracts, the CFTC regulatory nature, again, I'm focusing a little bit more on the derivatives side of that, is where we think we will have a competitive advantage. And -- but having them be able to trade on the same platform, spot and derivatives, and the same clearing house and that derivative can be physically settled or cash-settled, we think that brings really strong competitive advantage again -- under, again, all of that licensing in that framework that we think we can be a leader in that area.

Yes. Yes. Good. Scott, did you have a question...

I just thought before you get to the end, I mean the story, there's so many great things going on and it's -- the growth is really exciting. And obviously, the market's helping with the volatility. At the quarter, you guys gave, I'd say, a positive update on expenses. So you're doing all these things, brought down the expense guidance for the acquisitions. Like can you keep this up? Can you keep up the growth and keep, I think, what you said $617 mil to $625 million for the full year? Like is that sustainable to keep expenses where they are?

Meaning for 2022, or you're talking about...

For 2022 and then thinking out to next year. I mean, I guess, you've only guided for 2022. But like there's so many companies talking up inflation this, we're going to have to take up our expenses. So I just thought maybe you could talk a little bit about that. That would be helpful for us.

Sure. So for 2022 and looking at where we were is we're still very comfortable with that expense range as far as the last set of guidance that we put together. And we have built in incremental investments that we see coming, including the wage inflation and the pressures that we've seen built into that. And we know that there is a -- that talent is coming at a premium as we continue to build things out and basically across the business, potentially in tech and quantitative, call it, talent. So we know -- and that's important for continuing to grow our business. So -- but we know that those investments are really, really important to make short term for, call it, that medium- and longer-term growth to put those products in place that we think can help us achieve those longer-term revenue growth objectives that we said. So yes, we feel very confident about where we stand and -- for '22. I've learned my lesson. I'm not going to make a projection out 2 years. I did that last time. Even though I was right, I got criticized for it. So -- but I will say that the one guidance we have about on a go-forward basis, I would not expect the same rate of growth to occur in '23. I'm just not going to give you that number. But again, we're looking at managing that, again, to continue to drive that top line and looking at -- again, it goes back to your original comment about the timing of our investments and initiatives and the profile, and they will be different and require different amounts. And we'd like to see those with the short term, medium term and longer term and so that those will all continue to come to funnel in into growth over time at Cboe. So we, again, continue to build a very robust, sustainable growth rate of revenues going into the future.

Yes. And so tagging on to that, the way you frame the guidance is great because you give us the build on expenses and then even just on the revenue guidance, it's very clear in terms of how you delineate between organic and totally reported. And sometimes I'm an instigator of the guidance and trying to get you to go out in the future...

Sometimes?

Sometimes, repeatedly. And just for the audience, I think the recurring -- I call it recurring revenue growth. I know you don't quote recurring anymore, but Data and Access fee growth, 8% to 11% this year. That's up from 7% to 10%. It seems like everything that you're putting together, the story, it sounds like that number can continue to stay strong in that range. Other exchanges are slightly lower than that in terms of their guidance, and their guidance can be over a longer time frame. Is there any conviction about trying to go over a 3- or 4-year time frame in terms of a...

Yes. I would say that right now, we do view that as a kind of -- again, I would say the initial guidance range was more medium term. This most recent elevation was for this year.

So this year. Yes.

So again, that's based on what we see around pipeline. That's based on what we're seeing of client pipeline, what we're seeing with products that we're bringing to market, how we're seeing the various demand, what we're seeing in the new markets, what we're seeing success on cloud delivery, all of those elements continuously add up. And so that as we continue to see that build, there's obviously a chance that, that number could change on a go-forward basis. But there's still a level of confidence that we have a plan in place, it's a 5-year plan, and we see no reason by what we've seen today that we're no less confident, and we continue to execute on that. And again, these incremental geographies that we're in and being able to leverage and take a look at how that data can interplay, we're very excited about what that opportunity can present to us.

Yes. No, we'll be excited to track it. I think we are a little bit over time. So why don't we close it there, and please join me in thanking Brian.

Thanks, Brian.