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

Senior research analyst at UBS, covering exchanges and business services, delighted to have next up Cboe Global Markets, with President, Dave Howson; and not that new anymore, right, CFO, Jill Griebenow.

Correct.

But yes, thanks for coming down and joining us for a quick 30-, 35-minute chat and giving us an update what's going on with Cboe.

So why don't we just jump in? Look, let's start with a very, very big-picture overview question here. So Cboe has been the best-performing exchange over the last 12 months. It's outperformed the S&P 500 by, I think, 100%. I think I checked it a week ago. I don't think it's changed much. But -- so clearly, things have gone very well. There's a lot of happening at Cboe. So when you look at the next 1 or 3 years, what should investors be really excited about? And obviously, what are you excited about?

Yes, certainly, Alex. So thanks very much for you and UBS for having us. We're excited about a number of things. And certainly, as you look over the past few years since we had our Investor Day in November 2021, we've been busily executing on that vision that we laid out there. And since then, and particularly in the last 12 months, investors who've been paying attention have been coming off the sidelines. And why is that? It's really about us executing on that vision. And that vision was really to build a global derivatives and securities network. So where are we today? Today, we've got deployments in 7 of the world's top 10 economies, we're in every market that is open to competition, and we have a global deployment covering equities, futures, options and derivatives. And that global network is now, with the exception of Canada, now all operating on a single technology platform. That gives us a great opportunity to take the investment we've made in the recent years to build out and grow that scale. And it gives Cboe an unrivaled platform that it would be almost impossible now to build or buy to replicate. And those certainly gives us an unrivaled and a unique growth trajectory from here. And so what does that look like? It looks like getting further scale in the regions that we're in, in those 7 of the world's top 10 economies. It looks like using that technology platform to really create operating leverage. Those 27 markets kick out a lot of data. And so a big part of the growth for us continues to be the Data and Access Solutions division, which no doubt we'll talk a little bit more about. And then of course, there's Cboe's core business, the Derivatives franchise. And that involves building out the existing liquidity and ecosystem, but crucially and differentially for Cboe, it includes product innovation and product development. Our experts in Cboe are world-renowned for developing new capabilities, new exposures, helping customers manage almost any market environment.

Excellent, fantastic overview. So you mentioned Derivatives here. So why don't we start there? That's clearly the core, the foundation. And I guess, we can't talk about Derivatives without talking about 0DTE. It's been probably the hot story for the last 18 months or so. So look, people have been wondering about sustainability, and -- as that business continued to grow, that type of trading continues to grow. So maybe you can talk about the different types of users you've seen and more evidence, in particular, that this is really becoming an institutional product and more adoption there. So I think that's one of the big debates, so maybe you can flesh it out.

Yes. And it's fantastic now to have about 22 months of data. We launched these in May and April back in 2022 there. With that evolution of the ecosystem, that creation of the intraday risk ecosystem that people are trading every day now, we can -- we have a variety of information to look at. We've seen a variety of market cycles across a variety of volatility regimes to give us confidence that the outcome of that trading is sustainable. Then just thinking mechanically about what options are and how options operate and people deploy them, they expire. They expire regularly. And people, [ once they ] put on positions, need to manage those positions. And so there's a churn, a recurring nature that comes with using options in general. And then looking specifically at 0DTE, the activity that we've seen there, we can drill down into the nature of the flow. And when we look at the flow itself, it's incredibly balanced. And what do I mean by balanced? It's the buying versus selling across the strikes there is incredibly balanced, which means the hedging that market makers need to do is incredibly minimal relative to the actual volume of trading. And then if we think and we look at the initiating side of those trades, we look -- we see that about 95% of the initiating trades are what we call capital risk, and that means buying calls, buying puts or buying or selling spreads, a defined outcome, so giving you the view that the activity, the initiator of those trades is deploying sustainable strategies. And of course, the rest is borne out in that data that we've seen growing across market cycles and volatility ratios. And then as we've looked over the last 22 months, we've used a consistent measurement methodology to work out what we call and define as retail versus non-retail. And as we look at Q4 of '23 versus Q4 of '22, we've seen a growth in that non-retail segment. And importantly, that non-retail segment does include protail professional users as well. And that growth has gone from 55% non-retail in Q4 of '22 up to 65%, 65%-plus in Q4 of 2023. That is really confirmatory of what we've seen in that retail has grown, but non-retail has outstripped that. It's from the leading indicators that we've seen throughout the last 22 months of data. The appetite and consumption of data is tremendous. And in particular, the open and close intraday file that we produce for customers has been eaten up by the institutional side of the market as we've seen them really deploy more strategies and activate more funds, really trading in that intraday risk that we see trading throughout the day on a day in, day out basis.

Getting away from the 0DTE for a second but staying on the, I guess, structural drivers for proprietary index options or products in general, can you talk about other opportunities you're trying to capitalize on? I think there's a lot of focus on 0DTE, but the rest of the business is growing, too. So what customers, for example, retail, regions, do you still see opportunities and to -- that you're hoping to capitalize on?

Yes. We see lots of opportunity set, really. Our objective is really to provide a toolkit, a volatility toolkit, so that customers can deploy and manage their exposures in any market environment. And we've seen that bear out in recent times as well, of course. Just look at the higher-than-expected CPI release, we saw almost record volumes of VIX options on that day as customers monetized those hedges and closed out those positions they'd put on earlier as VIX spiked up to a measure of 18 intraday there. We also saw customers rolling out those positions to later expiries. So the utility in that part of the volatility toolkit really evidenced by that particular event there, and then throughout time the usage of SPX for customers to manage their portfolios in the backdrop of macro events. And so as we look forward outside of that toolkit, that core ecosystem, we see a number of opportunities. I'll name just a few. We've added daily expiries for the Russell contract now, the Russell -- Mini-Russell 2000 contract. So really leaning into that need for that shorter duration, that greater precision and flexibility in managing exposure there, bringing together large-cap SPX and small-cap Russell exposure into one environment. We're excited about product development. We're excited about being able to bring complex OTC strategies on exchange in a listed, cleared environment. So for that, I'd point to variance futures, which has been increasingly OTC and bilateral capital-intensive activity. We're looking forward to introducing a listed, cleared variance future contract. And then also dispersion, typically a highly sophisticated, high-maintenance strategy, we launched a dispersion index, and we're looking forward to introducing a dispersing index future likely in the early part of 2025. And then we think about broadening that out, we've announced the MSCI with the -- a partnership with MSCI. They're expanding on March 18, when we expect to launch the MSCI World ACWI and USA contracts there. So again, broadening out the exposure in that single-stop shop for customers. And then thinking about access, access to that environment, really 24x5 trading is a key component there, bringing those exposures to trading participants around the world.

Since you just provided a great segue to that, why don't we dig in deeper? I mean, is that -- can you give us an update on 24x5 or global trading hour, whatever the best term to use is here, and what the progress is? Because I think it's still very early.

Yes, that's right. It was a growth initiative that we invested in in 2021, and we talked about it again in that Investor Day. And the growth has been pretty good. In Q4 of last year, SPX global trading hours, volumes went up 85%. Fixed options went up about 45%. However, if you look at the proportion of overall trading, SPX in global trading hours is still around 2% to 3% and VIX options is still around 1%. And if you're looking for a kind of a corollary to think about what that runway could look like, VIX futures is around 25% of overall trading. And certainly there, we think there's a good runway for global trading hours as we expand that access. Key things for us to think about are jurisdictional approvals for marketing our products internationally as well as access to that data. And that's where it jives very nicely with our Data and Access Solutions business, where we see international adoption of our products, really the growth there at record levels in Q4 of last year.

Excellent. Maybe just a couple more on the proprietary side, and one -- I don't know who wants to take it, but can you talk about pricing? I mean, exchanges more and more seems to be pushing pricing in those businesses where they have strong proprietary position. So do you see better opportunities near term? Is it something you're thinking about more?

When we look at the growth trajectory that we're on and the opportunity set in front of us, we don't feel the need to run -- use pricing. Pricing is not a growth strategy and certainly not a growth strategy for us. And for us, we see a great opportunity to really push that 24x5 access to gain the incremental user for us. So for us now, the key thing is that incremental user -- incremental use case. And we're certainly seeing a real diverse range of strategies deployed in the complex across a diverse range of participants, again, speaking to that versatility and the sustainability of the complex there.

All right. Last one on the proprietary side, and it's really, I guess, a near-term/cyclical question. So look, when you look at the different businesses or proprietary businesses in different environments, sometimes I think investors struggle to think what's the best environment for you. So maybe you can help us a little bit. I guess, what do you think is the best environment for the different products that you have out there? And then of course, as we think about 2024, how does that fit into, I guess, the geopolitical uncertainties and other things that all of us are thinking about?

Yes. And if I split that down really into the derivatives complex, the options market in particular and our Delta One franchise, it's kind of two different stories. On the Delta One side, when you think about the equities markets, every market open to competition, 7 of the top 10 world economies. Our focus with that single technology platform is to provide trading mechanisms that provide utility in any market environment. So think about lit books for highly volatile markets, where trading and transparency is key, but also think about low-volatility environments, where you might want to trade size without acknowledging to the market your position. We offer block trading. We offer periodic auctions. We offer lit books, dark books. We have a whole spectrum of trading across equities which can provide utility across market environments. And that's why we've seen our market shares growing and being sustainable across our equities markets. Then importantly, when you think about derivatives, and in particular options, and you see this really in the data of 4 consecutive record years for options growth, is that end investors are increasingly finding their way to options and increasingly understanding and gaining access and utility to the fact that options can describe a risk-reward profile. And that can be used in any market environment. So you can manage your risk. You can hedge your portfolio. You can generate income and deploy tactical directional strategies across market environments. So for us, options really present the opportunity, and in a very much a kind of evergreen way. The strategies deployed may change with a different environment. But actually, the utility of options bears throughout. When you think about options used for managing that uncertainty, this year is a year characterized by uncertainty, sadly, just like the last few. We've got interest rates. We've got inflation. We've got geopolitical risks abound. And we've got 4 billion people going to the polls this year, not least in the United States here. And so that uncertainty needs to be managed. And those inflection points in the macro environment, we've seen customers use SPX options, in particular, to manage their portfolio. With an uptick in prices in Q4, when those long-term yields increased, we saw customers using options to really gain exposure to the upside. So it's not just the downside. And another key misconception that we often talk to people about is that you need a downmarket or a highly volatile day for record levels. We actually saw some of our record trading levels on market up-days in Q4 and also on days in this quarter so far as well. So customers are really using it to gain upside exposure as well as managing risk to the downside.

So if I paraphrase you, it's -- you don't get up in the morning hoping for a great trading environment, you just think there's a lot of runway in any environment?

That's right. When we think about educating customers, the options is a key part of what we do. And we partner with our customers, [ crucially ], how do we access the world and the market. We partner with our retail brokerage customers, our institutional customers, to help with education of RIAs as well as the end -- for example, as well as the end users.

Good. I'm going to give you a chance to get some water and give Jill a chance to give us an update on kind of her responsibility. So I'll come back to some of the product stuff and the D&A business later. But like why don't we actually hop on to the expense and capital side for a second? So look, on the expenses, we just had the 4Q call and earnings. You gave updated cost guidance. Maybe you can just talk about how you thought through it, what the puts and takes are, depending on the environment we find ourselves in.

You bet. So I think the last couple of years have been marked by, I guess, double-digit percentage-wise expense growth, for very, very good reason, as we laid that global footprint, really put in that global infrastructure, whether it be from a people perspective, technology perspective, et cetera. But I would say the vast majority of that big investment spend is now complete, which is why, as you saw, the 2024 guidance came out there with a range of 6% to 8% as compared to the rates the prior year. So I wouldn't say that there is any one line item that is driving a more significant portion of the growth than others. Fairly equally dispersed across the board. But what we can do is we do have the ability to turn the dials, turn the levers. If we see a long-term revenue-generating opportunity, can we deploy more to invest in that for long-term growth? Absolutely. On the flip side, if we start to see things from a net revenue perspective become more muted, are there expenses that we can turn down? We can. And again, so I feel very comfortable with that 6% to 8% guide that we came out there with for '24.

I need to press you one more time on the expenses. And I actually went back last week and I looked at the absolute expense base in dollar terms, and I don't want to say I was shocked, but clearly, like you said, there were a lot of investments, both organic and inorganic. And the cost base, I think, has basically doubled or more than doubled since pre-COVID 2019. So look, this is a business that should have a lot of operating leverage. You do have very high margins already, I get it. But do you still feel, looking back now, that the absolute size of the cost base is in the right place? And shouldn't there be other efficiency that could be had? I know you're doing a little bit of a strategic review as it is. So how do you think about that dollar size of cost base now, looking back after all these acquisitions?

You bet. And I would describe it more as looking at the opportunities to unlock the value in that -- in the cost base in that foundation that we have now deployed, really looking at that as how can we unlock the potential and drive the net revenue growth, versus this being a cost-cutting measure. Again, we will continue to evaluate the environment. Not every everything will strike gold. But on the flip side, it takes investment to generate long-term growth, too. So where we sit now, I feel comfortable with the expense piece.

Okay. All right. One more for you before we move back to the product side, which obviously you're more than welcome to chime into as well. But on capital allocation, it sounds like the M&A of the last few years, there was a big pace. I think that looks to be slowing a little bit. But yes, so maybe you can give us a broader update on how you think about M&A, if I got that right, but then also share buybacks, dividend. I mean, stock, as I mentioned at the beginning, has been really strong. So I'm not sure what the appetite for buybacks is here. But yes, maybe capital allocation more broadly would be great.

You bet. So we announced during the fourth quarter earnings call that we did pay off the remaining amount on our floating rate debt during the fourth quarter. So really, that gives us even more capital to deploy here in the future. We generate a lot of free cash flow. I will say the valves that we look at from a capital allocation perspective are we have a history of paying a quarterly dividend. In the past, we've increased that during the third quarter. We'll continue to look at that. Share repurchases, obviously, we've typically been a bit heavier on those during the first quarter. But with the excess capital that we have available to us, to the extent that we sense any perceived weakness in the share price, we will absolutely get in there behind it. And then we'll continue to invest in the business. So organic growth initiatives are very, very important to us. And then I would say, finally, just a bit of dry powder for potential M&A. We've absolutely messaged that the pace of M&A will be slowing. Is it off the table altogether? Absolutely not. If there's something that we see as a very high conviction area that is very strategic to our core that can help us either more easily or quickly develop a presence in a product, presence in a geography, would we get behind that? Absolutely.

Excellent. All right. Well, coming back to the business, now that we had also exhausted the proprietary side, we do need to talk about the other businesses a little bit. So maybe we'll start with equity options, not index options but the more competitive side. So your share, I think, is down a little bit over the last few months, quarters, more competitors still coming into this market. So I guess the question is how do you feel you're positioned? And does pricing factor in? We talked about pricing earlier. But how does pricing factor in, in that business more?

Yes. Certainly, pricing is a factor in the multi-list environment. We feel really comfortable with our position. If you look at history, we're really quite well adept competing in competitive markets. When we think about the evolution of the multi-list options market in the U.S. over the last year and this coming year, there are some new entrants. Those new entrants so far have really focused on that lower-capture flow. So the share that's been gained by new entrants is really that lower-capture kind of flow that's out there. From our standpoint, we do look at pricing and we have regular dialogue with customers about the various potential pricing changes we could make each month, as is the convention in the U.S. And that dialogue continues to progress. And we really look here, as we've talked before, to optimize revenues by dialing pricing against market share as the key variables to produce that net revenue outcome, keeping a close eye, though, on market quality to ensure that we have a robust ecosystem to participate in. Aside from pricing, we also compete on functionality and capabilities. And we look to deploy new functionality and capability to differentiate ourselves in this fungible market. And then thirdly, which is really key for Cboe this year, it's about technology, differentiation on technology capability. And this year we're launching a number of new technology capabilities and new architecture around access layer. And the objective there, and the early indications of the first part of the rollout show, that we'll achieve a lower and more contained latency profile, which should lead to better outcomes for customers and presents a monetizable opportunity, a value that customers are willing to pay for as we've continued to roll that out. So economically, those access layer enhancements are good for Cboe, but they're also good for the market. And we could well see a market share shift as a result of that enhanced technology that we deploy. So technology a big factor for Cboe this year. And it's really a function of the fact that our technology resources have been released from performing those technology migrations we did last year in Australia and Japan now, with just one left in Canada for next year, freeing up a number of resources to focus back on that core technology platform, which again is deployed throughout our markets around the world. So that marginal investment there can be redeployed in a low-cost way around all of our marketplaces.

Excellent. All right. Then shifting to equities, and this is a little bit of a backward-looking question because it's about the fourth quarter, but I think a lot of people were surprised about the significant drop in net pricing. So maybe just remind us what helped there and what steps you have taken or are taking to see that improve again.

Yes. The story for Q4 is really about December. When it came to December, we made a number of pricing changes again, as is conventional in the U.S. equities marketplace as well. About those pricing changes, as usual, were aimed at gaining market share, looking to optimize revenues. What happened in December was actually that volume significantly increased. Volumes went up to 12.4 billion shares a day from a recent average of around about 11 billion. Combined with that, the proportion of retail engagement in December also significantly increased. Prior months were around about 11% or 13% of trading in sub-dollar names, which is our indicator for level of retail engagement. In December, that went up to 19%. So what we had is high volumes, a mix shift change in U.S. equities. And those pricing changes that we've made aimed at market makers were compounded by that incremental engagement from retail and the higher volumes, which then sent customers through into higher tiers, which then compressed capture. Since then, of course, as is the convention, we changed our pricing in January. That has brought capture back, importantly though, without giving up too much of that market share that we did gain in December. When we look at December, our share of the addressable market went up from a long run average of around 26% to over 27% in December. So we did get more market share, just the capture went down. So in January, a slight drop in market share, good increase in capture. February, same again, we've made more changes with a further return in capture. And looking forward in February, you'd likely expect us to make more pricing changes whereby capture is -- we would expect to come back more towards the historical levels of that plus-20 millions mark.

Fantastic. I guess, shifting regions to Europe a little bit, European equities, I think, has been a success story. You used to be very close to that business, probably still are. So you seem to be taking a lot of share. So just -- can you just give us an update what's going on there, how much room is left and, I guess, why you're winning in the marketplace?

Yes. I frequently annoy my team -- my former team back in Europe with questions. So Europe has been generally a great story with over 20% CAGR growth over the last decade. What we were able to do in Europe from the position of being the largest cash equities marketplace, we bought in the control and the full ownership of the largest cash equity clearinghouse, Cboe Clear Europe. So we have a great ecosystem to build off. The big differentiator that came through when Natan Tiefenbrun joined in 2021 is he was able to work with our data and analytics team to really look at the quality and the construction of the markets and then produce that research and evidence to our bank customers to prove that actually the order books in Europe on the Cboe Europe provided better, faster execution at a lower cost. And that produced a major shift in behavior whereby we were able to gain, over 2021 into 2022, 600 basis points of market share. So today, we're standing around about 24%, 25% market share, highly competitive market environment in Europe. We see potential runway there. But that's -- going back when you think to my earlier statements about providing trading mechanisms for every market environment, it's about focusing on capabilities and functionalities like periodic auctions, like the block trading mechanism that we've got there through BIDS, and also bringing that data together and giving it to customers. And the great thing there is that the data and the analytics we've done, and we've shared with our global customers that playbook, we're able to then take -- now we've got our technology platform in Australia and Japan -- take that playbook and take it to Australia. And it's not just us with the familiarity of that playbook, it's the global customers who responded in Europe, who can look at that same data and use that same expertise to deploy it in different environments. And that's the key point about using that scale that we've been talking about today that we've been -- we've spent into in the last couple of years to create that scale so we can now think about operating leverage and building off that platform as we go forward.

Well, I can't ask about Europe without also touching on the European derivatives, which is, I guess, still an initiative. So yes, maybe give us an update there. I think some people are really waiting to see that come to fruition. Maybe help us with the TAM, because you continue to be very excited about it.

Yes, it's a journey, not an event. And this is really about the fundamentals of the business that we're growing here. We've been talking about generating long-term shareholder value. So we can take long-term views as we think about sharpening that strategy, as we talk about, looking at everything we've gotten, what is the long-term profile? What are the secular trends that we see that we can be a part of and go along with the current? That is the adoption of options. Just look at the growth in the United States and the other regions around the world. The utility of options is profound, and we think Europe will benefit from that. Not only that, when we look back to 2009, the GDPs of the U.S. and Europe were about the same and so were the sizes of the equity options and index options market. Fast forward to 2019, the difference in the market sizes was 8x. And with the 0DTEs producing the tremendous growth in the United States as well as the general adoption of options, that gap is now 17x difference. That gap is the opportunity set that we have. But we don't just look at gaps in the market and say, hey, let's go there. We only go where our customers ask us to go. And we've got two broad constituencies, that's the U.S. macro and index funds and the alternative investment funds in the U.S. saying, "We want to deploy our capital outside the U.S. How do we do that?" But when they looked at the market in Europe, they found a highly siloed market, Europe, Germany, U.K., with capital deployed in three different silos. They found a market structure that was profoundly OTC, with large trades getting blocked through the market with a regulation that didn't need you to publish that trade until the end of the day. So you couldn't see what was going on. So the customers came to us and said, "If we had a single capital pool with a lit onscreen market, we would deploy our capital there because we could train our models." Just back to the point of a 0DTE lead indicator of data, they need to see prices onscreen to be able to engage in a marketplace. So that's our mission, to bring U.S.-style market structure to Europe in a single efficient capital pool with consistent contract construction. Where are we on that journey right now? We've got the index futures options out there. In November, we technically launched single-stock options capability. And at the end of this quarter, we'll be launching a variety of liquidity schemes to coincide with the onboarding of a variety of market participants. And that's why it's key to look at that blend of market participants from retail brokerage platforms that were part of the press release, the market makers and banks are all onboarding to the platform. And what we'll have is a holistic offering with single names and index names, which allows for a variety of strategies to be deployed and a holistic offering to be offered to retail. So think about dispersion strategies for the more institutional side of the market and think about retail brokers being able to offer their customers single names and index options. The difference, that 18% or 17% difference, is also made up by the difference in the contracts or the exposures that are traded in Europe, the CFDs, warrants, certificates and so forth. The regulators in Europe are continuing to look closely on what products are offered to retail marketing, and CFDs in Spain is likely to be outlawed or banned. And so we see that long-term progression. So we see the opportunity set to work with our customers to educate European retail investors at the same time as bringing utility for the international but particularly U.S. institutional side of the market. But it's going to be a journey. But the -- and the final thing I'll say is that because of that great infrastructure we already have in Europe, the equities exchange and the clearinghouse, we can afford to be patient, because the incremental effort to deploy our U.S. options technology in Europe was small. We have the regulatory infrastructure and people, surveillance, sales force already there in Europe. So it's a marginal incremental investment for us, allowing us to be long term -- take a long-term view there.

Okay. We'll continue watching it. Some people have been impatient on this thing, but look, things don't come overnight. Look, getting away from trading, you mentioned at the beginning around your excitement around Data and Access Solutions. So we should touch, with the few minutes that we have left, on that for sure. And this is actually a specific question on 2024. But you gave that guidance, 7% to 10% growth, which I think is basically your medium-term guidance. So I'm just curious, is it just a medium-term guidance? Or is there actually some line of sight that you would -- that informs that 7% to 10%? And I'm asking that because, covering other information services companies, usually these are subscription businesses, you have pipelines, you should really have very good visibility. And actually, some of your peers, the guidance is much tighter because it's very informed by the book of business that they see. So maybe flesh out what you're seeing, how you're thinking about that guidance in that business.

Yes, certainly. So 7% to 10% is our medium-term guide, and we've been able to hit that for the last few years. The reason for the 7% guide this year is because we think we'll be within 7% to 10% growth. And when we look at that, we do draw confidence from the fact that the largest part of Data and Access Solutions, when you look at it, is from data and access, so the raw data from our venues plus the data products that we curate from that and access to those venues. And it is subscription-based. And very rarely does anyone want to be under-provisioned for access to venues. It's a difficult discussion with your boss if volumes go up and you decided to save a couple of thousand dollars a month on canceling a particular pool. So access to the markets has been growing over time. And when we look at the growth constituency of that, it's 2/3 from new user subscriptions, only 1/3 from pricing. And then when we look at market data, everybody only is ever asking from -- for more data as we go through time. So we feel very comfortable and confident in that. But also, we see good momentum when we replatform venues. Just look at Australia, when we replatformed Australia, 11% growth last year year-over-year in Data and Access Solutions from Australia, already a very high non-transaction revenue business to start with, but increased with that uniformity of access and uniformity of the technology that we have there. Jill, I don't know if you have anything...

No, I think you've covered it quite well. It's focusing on the user base, the user count. Pricing is not our strategy to drive growth in that area. And again, we look at the data, that's what informs our guidance projections that we put out there, feel very good with the 7% to 10% that we've communicated.

Okay. I think you touched upon already, but I'll ask again. If you think about long term in that business, so not just 2024, but is there a growth algorithm that you would lay out in terms of pricing in other areas? You talked about the 2/3, 1/3. But obviously, there's product development and other things. So is there -- how do you think about the growth algorithm more broadly in that business?

Yes, we see a great opportunity really. When you think about 27 venues across asset classes globally, that raw data in itself is highly, highly appealing and attractive to customers to be able to receive in a uniform way. An underappreciated aspect of D&A is the cloud deployment we've been able to develop. And we see great growth there with nearly 80% of customers outside of the U.S. there. So we see a great, great utility there. And then there's also, as part of that growth algorithm, think about the growth internationally. Q4 was a record for growth -- the percentage of growth coming from outside of the United States, 40%-plus there coming from outside of the United States, so more distribution to more parts of the world, really leveraging that cloud capability. And then when you think about we've got all that data on net, we've got Canada to go in Q1 2025, if you think about new ways to create new insights and new products from that raw data in terms of packaging and bundling, and certainly with the evolution of new technologies, new and emerging technologies, the ability for us to generate insights from that over time should certainly be somewhat compelling for us.

I'm looking at the time, I probably have a couple more things. But I should at least ask the room if there's anything that I've missed that also anybody wants to ask as well. Consistent story. Just staying on D&A for 1 more minute, you mentioned pricing is not really a driver. And I think you were making a long-term comment, the 2/3, 1/3. For 2024, is that a good expectation to use as well?

Around about 1/3 is what we expect for this year. Thinking about the Data and Access Solutions business, we are about producing high-value, cost-effective data feeds and data products. That's our mission and our vision there. We do look at pricing regularly though, when we do adjust pricing where we find we've become materially behind our peer group or competitors. So we do review pricing. But it's not particularly there as a growth strategy, because we do see a great runway both internationally and creating more insights and pivots and permutations from the data that we already have.

And then maybe as the time is clicking down here, but coming back to the trading side for just 1 minute, on the proprietary side, when I asked you about other things that you're excited about, you mentioned the Russell, you mentioned MSCI, you mentioned variance. Maybe I forgot a couple of things. XSP didn't come up. Maybe I missed it. But is there any update there and your excitement around that?

That was purely a senior moment on my part. So XSP, we are really excited about it. It's the 1/10-sized product that we have out there. All the same benefits of SPX, just in a smaller wallet size. And that's part of our mantra in fact, and that's why it's so important to mention, so thank you for that, is that we want to bring every investment strategy to every wallet size. A key date for everyone is March 15, when we expect and hope that the SEC will approve the FINRA request for what's called protected options. And protected options will afford margin offsets between an index option and an ETF that tracks the same index. So that will really open up the capability for a myriad of new strategies and overwriting capability with that cash-settled product, which can't be called away because it's a European exercise, to be deployed versus the -- using the -- its cousin product, SPY, where the stock may well be called away from you, so really opening up a whole new range of strategies. That, coupled with the retail online brokers that are adding cash-settled index options this year, creates a really exciting development for us.

Glad I followed up on it. So look, we're out of time. Thank you very much, and enjoy the rest of the conference.

Thank you.

Thank you.