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

Thank you for standing by, and welcome to the Cboe Global Markets Second Quarter Earnings Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Ken Hill, Head of Investor Relations. You may begin.

Good morning, and thank you for joining us for our second 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 outlook; Jill Griebenow, our Chief Financial Officer, will provide an overview of our financial results for the quarter as well as discuss updates to our 2026 financial guidance. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Prashant Bhatia, our Head of Enterprise Strategy and Corporate Development; Heidi Fischer, our Global Head of Equities and spot markets; Rob Hocking, our Global Head of Derivatives; and Scott Johnston, our Chief Operating Officer. I would like to point out that this presentation will include the use of slides. We'll be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of the website. During our remarks, we will make certain forward-looking statements, which represent our current judgment for what the future may hold. 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 today, 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.

Good morning, and thank you for joining us to review our second quarter results. Cboe delivered another quarter of record net revenue and strong adjusted earnings with all of our core businesses continuing to deliver exceptional performance. From this position of strength, we're turning our attention to the many opportunities for growth ahead. I'll share some high-level comments before handing the call over to Jill for a financial update. During the second quarter, Cboe grew net revenue 25% year-over-year to a record $732 million, and adjusted diluted EPS increased a robust 45% and to $3.56. The strong execution during the second quarter was again broad-based, driven by double-digit net revenue growth in every major category at Cboe and year-over-year net revenue growth in all 5 of our company segments. Beginning with our derivatives business, we delivered another record quarter with net revenue increasing to $413 million, up 30% year-over-year. Index options drove the upside setting another quarterly record with average daily volume increasing 32% year-over-year to 6.2 million contracts. The quarter marked several product-specific ADV records with 5.1 million SPX options, 3.1 million SPX 0DTE options, 195,000 Mini SPX options and 189,000 contracts traded during global trading hours. During the quarter, SPX option volumes increased 40% year-over-year on the back of elevated economic uncertainty and stronger retail engagement. As geopolitical tensions eased in April and May, investors gravitated to longer-dated options to reposition their portfolios, particularly through the use of upside calls to participate in the market rally. . In June, we saw a notable increase in retail volume following the repeal of the Pattern Day Trader rule, which has limited how often smaller accounts could trade without triggering additional restrictions. Its removal has eliminated the friction point, making it easier for smaller retail accounts to trade products like 0DTE more frequently. The impact of the repeal was immediate with SPX 0DTE ADV, increasing 11% month-over-month in June with the estimated retail share of that volume rising to 57% versus 53% in April and May. Stronger retail engagement is also evident in the outsized growth in our Mini SPX contract with ADV surging 37% from May to June and more than 80% year-over-year in Q2. We anticipate the continued adoption of the Pattern Day Trader rules across our broker-dealer partners in the months ahead will be a tailwind for volumes and retail investors alike. Options continue to play a critical role in today's markets, offering a distinct risk and return profile compared to linear derivative products like single stock futures and perpetual futures. Futures give investors direct exposure to the underlying along with leverage, but introduce unbounded downside risk deferring liquidation mechanics, and funding rate uncertainty depending on the product. We do not view options as a substitute for linear derivatives, but as a different tool entirely. Investors can define their maximum loss upfront while still participating in outsized upside. That combination of convexity and defined risk is among the reasons why the vast majority of 0DTE options trading today happens in capped risk structures. Beyond expressing directional views, options can also be used for income generation, portfolio hedging and volatility management, making them among the most versatile tools available to investors. We believe these distinctions help explain why SPX 0DTE trading has sustained strong growth across different market cycles and volatility regimes. As we look to extend our traditional options business, we're building something we believe will define the next chapter of growth at Cboe, a suite of solutions in the event and prediction market space. In June, we launched Cboe Predicts, our binary options on the Mini S&P 500 Index. The feedback reinforces something we've long believed, there is demand for simple outcome-based ways to engage with markets that have traditionally felt out of reach for many investors. To meet that demand, we're drawing on the trusted market infrastructure and deep liquidity that have defined our options franchise for decades to develop simple, intuitive products that appeal to a broader set of investors. Over time, we expect many of these traders to build familiarity and confidence in basic risk management concepts and progress into more sophisticated strategies like options spread trading. We also see a compelling opportunity in contracts tied to company-specific performance metrics. We've taken the first step by filing with the SEC in July, to list these products with an initial focus on 23 of the most actively traded U.S. companies. That filing remains subject to regulatory approval but we see a variety of use cases that span both our institutional and retail customer bases for these products. What sets this product apart from competitors is the structure. We firmly believe these are securities products that should be overseen by the SEC and built within a framework of transparency and investor protection, one that Cboe has helped shape for more than 50 years. That regulatory foundation is exactly why we believe we're the right operator to bring this to market. A key enabler for the expansion of our global derivatives franchise including our event and prediction market build-out is our continued investment in global clearing. We filed an application for temporary registration with the SEC as a covered clearing agency with full registration targeted at the end of an 18-month period subject to regulatory approval. On the CFTC side, we became subject to Subpart C of CFTC regulations effective June 16, which means we will be held to the same enhanced credential standards consistent with global regulatory standards that apply to systemically important clearing houses. Together, our SEC temporary registration application and Subpart C compliance support our treatment as a qualifying central counterparty under the U.S. bank capital rules which reduces capital requirements for clearing members. Our SEC filing, if approved, will help us better innovate in options and expand our futures offering backed by a vertically integrated stack of trading and clearing. Our clearing efforts are designed to be complementary to our long-standing partnership with OCC. We remain fully committed to the existing market structure and the OCC clearing model for existing equity options. Moving to cash and spot markets. Net revenue grew 22% year-over-year with steady growth across Europe and Asia Pacific and Global FX, and record revenues in our North American Equity segment. Global FX net revenue increased 17% year-over-year in the second quarter driven by continued gains in average daily notional value and net capture. In Europe and Asia Pacific, net revenues increased 20% year-over-year or 18% on a constant currency basis. This was driven by 31% year-over-year growth in net transaction and clearing fees, reflecting stronger industry volumes and improved net capture even as market share eased slightly versus the prior year quarter. Cboe's North American equities business made a strong contribution as well. delivering record net revenue for the segment with net transaction and clearing fees, up 37% on the back of stronger industry volumes and improved net capture rates. As we look ahead, the cash equities business is one of the most dynamic asset classes in the world today, and Cboe is at the forefront as the industry embraces innovations that are reshaping how and when markets operate. We're excited to expand cash equities trading to a 23x5 basis planned for this December, pending industry readiness with an eye toward 24/7 over time. That shift will give investors greater flexibility to manage risk and access liquidity whenever they need it. Against that backdrop, we're supportive of the commission taking a fresh look at market structure that has evolved significantly over the past 2 decades through its proposed recision of Rule 611. Cboe is the only exchange group that operates both registered lit exchanges and an ATS. We believe this uniquely positions Cboe to be a leader in combining the best elements of the various market models that equity market participants demand. Turning now to Data Vantage. Net revenue increased 15% year-over-year. Growth was again broad-based with market data and access services, Cboe Global indices and risk and market analytics, all posting double-digit gains on strong new unit and new subscription trends. Over the past year, we've repositioned Cboe to better allocate our time, effort and resources toward our core businesses and the areas with the greatest potential for growth. That repositioning has aligned us more directly with the most powerful secular trends in our industry. The continued dominance of the U.S. equity marketplace, the growing role of retail investors globally and the secular rise in options trading. The U.S. equity market remains the bedrock of global capital with market cap surging past $75 trillion in June of this year, roughly half of all global equity value, up from just 27% two decades ago. The S&P 500 sits at the heart of that dominance. The latest figures show more than $20 trillion indexed or benchmarked to it globally more than the equity market cap of any country outside the U.S. Our proprietary index business has captured that momentum directly with Cboe's SPX options ADV growing roughly 30% annually since 2021. With U.S. household financial assets growing by 6% annually for more than the last 3 decades, Retail is playing a bigger role than ever in the markets. At Cboe, we remain focused on giving investors the access, tools and educational resources they need to participate confidently. Cboe pioneered options education and our Options Institute continues to see strong demand with class registrations up 173% quarter-over-quarter in Q2. We believe that demand for education, greater access and the utility options provide has fueled robust growth. That growth shows up clearly in the numbers U.S. options stand out as one of the fastest-growing asset classes on pace for a seventh straight record year in 2026. Daily volume through the second quarter averaged nearly 71 million contracts with a single day high above 110 million contracts recorded in the past year. Overall, Options growth has accelerated to over 20% annually since 2019 more than tripling volumes in 7 years. These trends aren't independent tailwinds and they compound and we believe Cboe is well positioned at the center of all three, positioned to turn them into long-term shareholder growth. With that, I'll turn the call over to Jill to walk through our financial highlights for the second quarter and updates to our 2026 guidance.

Thanks, Craig. Cboe delivered record net revenue in the second quarter, while adjusted diluted earnings per share rose 45% year-over-year to $3.56. Before turning to the segment results, I'll walk through a few high-level takeaways from the quarter. Net revenue increased 25% versus the second quarter of 2025, finishing out a record $732 million. We again saw strong double-digit growth in all categories, led by our derivatives business. Specifically, derivatives net revenue increased 30%, with strength across our proprietary index options and multi-list products powering the category's performance. Cash and spot markets net revenue rose 22%, fueled by strong industry volumes and data managed net revenue was up 15% on a year-over-year basis. Adjusted operating expenses came in at $217 million, up 2% year-over-year, while adjusted operating EBITDA grew 37% to $528 million. Adjusted operating EBITDA margin expanded 6.4 percentage points to 72.2% in the second quarter, reflecting both our strong revenue performance and continued expense discipline. Turning to the key drivers of the quarter by segment. Our press release in the appendix of our slide deck include information detailing the key metrics for our business segments, so I'll provide some highlights for each. Options delivered yet another record quarter, with net revenue up 30% year-over-year, driven by a 33% increase in net transaction and clearing fees. Total options ADV climbed 26%, including a 32% increase in index options volume and a 24% increase in multi-list options volume. The revenue per contract for our options business rose 6% year-over-year, a result of continued mix shift towards index options, coupled with a 3% increase in the index options rate per contract. North American Equities net revenue was up 17% versus the second quarter of 2025, as strong industry volumes drove a 37% increase in net transaction and clearing fees, with market data fees and access and capacity fees also contributing to the gain. Europe and APAC net revenue was up 20% year-over-year or 18% on a constant currency basis, with the net transaction and clearing fees up 31% and nontransaction revenues up a combined 9%. Futures net revenue was up 2% from the second quarter of 2025, primarily on higher market data fees while transaction clearing fees held steady. Global FX rounded out the segment results with net revenue up 17% year-over-year, driven by an 8% increase in average daily notional value and a 6% increase in net capture. Looking at our Cboe Data Vantage business, net revenues increased by 15% compared to the second quarter of 2025. New subscription and unit sales continued to drive revenue growth, representing approximately 84% of the quarter's growth, with the remainder coming from pricing changes. Sales trends also reflected strong international demand with 50% of the quarter sales coming from customers outside the U.S. Overall, we're very pleased with the composition of growth and trends within our Data Vantage business. On the expense side, total adjusted operating expenses came in at $217 million, up 2% year-over-year, primarily reflecting disciplined expense management against a higher bonus accrual as a result of our strong operating performance, along with increased travel and promotional expenditures. Turning now to our 2026 guidance. As we discussed on our first quarter call, in April, we signed a definitive agreement to sell Cboe Canada and Cboe Australia. We'll continue operating both entities until close, each subject to its own closing conditions and regulatory approval. Today, we're updating our assumptions to reflect an expected third quarter close for the sale of Cboe Australia. For consistency, we'll provide organic net revenue growth metrics that exclude the impact of the Cboe Australia sale and will also break out the absolute dollar impact separately for modeling purposes. Cboe Canada will remain part of our ongoing 2026 guidance until we have more clarity as to the exact timing for closing. We now expect Cboe total organic net revenue growth in 2026 to be in the mid- to high teens range, up from last quarter's low double-digit to mid-teens guidance. We estimate Cboe Australia contributed approximately $20 million in net revenue through July, factoring in the loss of future revenue, assuming a third quarter sales, we still expect total net revenue growth to finish in the mid- to high teens range for 2026. On Data Vantage, we now expect 2026 organic net revenue growth in the low-teens range, up from last quarter's low double-digit guidance. We estimate Cboe Australia contributed approximately $17 million in data Vantage net revenue through July. Factoring in the loss of future revenue, assuming a third quarter sale, we expect data managed net revenue growth to finish in the low double-digit range for 2026. Turning to expenses. Our adjusted operating expense guidance holds at $838 million to $853 million for 2026, despite several moving pieces. Our estimate reflects higher incentive compensation expenses given our strong year-to-date operating performance, increased return to office costs and incremental investment in high-growth potential areas as outlined in Craig's prepared remarks. Offsetting the higher expense piece is an $11 million reduction in our expectations for 2026, tied to the expected third quarter close of the Cboe Australia sale. I would note that while a majority of expenses associated with Cboe Australia will end at the time of the sale, we will continue providing transition support and incurring some related expense for up to 12 months following the close of the transaction, subject to operational readiness. These incremental costs are reflected in our updated guidance. Lastly, we continue to expect $40 million to $50 million in annualized expense savings from the strategic realignment actions outlined last quarter with $20 million to $25 million still expected to hit in 2026. Rounding out our 2026 guidance. Our CapEx guidance increases to $98 million to $108 million from $73 million to $83 million as we made incremental investment in our clearing infrastructure and opportunistically pulled forward hardware purchases for future service to lock in lower costs ahead of rising inflationary pressure in this space. Depreciation and amortization expenses decreased to $54 million to $58 million from $56 million to $60 million, reflecting the later in-service timing of certain accelerated purchases. We continue to expect a full year effective tax rate on adjusted earnings of 27.5% to 29.5% under current tax laws. While we don't formally guide to interest income or expense, we expect net interest income, income net of expense to contribute $8 million to $9 million positively in the third quarter, given higher cash balances. Turning to capital allocation. We continued our opportunistic share repurchase activity during the quarter, buying back $33 million of Cboe shares. Combined with a $76 million dividend payment of $0.72 per share, we returned a total of $108 million to shareholders in the second quarter. While we recognize that there was meaningful volatility in our share price during the second quarter, the most notable decline occurred in the final weeks of June, a period during which consistent with standard practice around quarter-end reporting, our ability to transact in the open market is more limited outside of our 10b5-1. Had we had greater flexibility in the open market, we would have welcomed the opportunity to be more aggressive, particularly given what we viewed as a notable discount in the stock supported by our strong cash position and continued confidence in the long-term value of the business. Thinking about capital allocation more holistically, we are mindful of upcoming capital needs, including the $650 million debt tranche maturing in the first quarter of 2027, which we currently expect to repay with cash on hand. We will continue to evaluate opportunities to repurchase shares pursuant to our share repurchase program based on our share price, our trading window and other capital deployment priorities, including this upcoming debt repayment. We continue to maintain significant balance sheet flexibility with adjusted cash of $2.3 billion and a leverage ratio of 0.7x. That strong financial position gives us the capacity to pursue organic or inorganic growth opportunities while continuing to return capital to shareholders through dividends and opportunistic share repurchases. With that, I'd like to hand it back to Craig for closing comments.

Thank you, Jill. Last quarter, I laid out the decisive steps we were taking to reposition Cboe for greater success. More recently, we rounded out our executive leadership team, adding Heidi Fischer as Global Head of Equities and Spot markets. She joined us in June and is with us today on the call. The 2Q results show that we're delivering on that strategy, continuing to sharpen our portfolio, simplify our structure and build a stronger foundation for our core businesses. As an organization, we must now take the next step and shift our focus to the growth opportunities ahead. With some of the most powerful secular trends in the industry at our back, my comments today give you a preview of some of the tangible initiatives we have underway to help drive new potential sources of revenue growth at Cboe. Our derivatives franchise remains incredibly strong setting multiple records to start 2026, a foundation will leverage as we push into the related category of event contracts. With the launch of Cboe Predicts and our filing to bring company KPI products to market, backed by clearing capabilities, we're building out at Cboe Clear U.S., we believe Cboe is best positioned to capture this opportunity set. In cash equities, we're moving toward 23x5 pending industry readiness and eventually 24/7 as market structure evolves. And in Data Vantage, we look to keep bringing new products to market to meet our customers' data and access needs. We're moving into this next phase with speed, conviction and a clear sense of where we can win. I remain genuinely excited about Cboe's future and I look forward to delivering on that opportunity in the quarters ahead.

At this point, we'll open the line for questions. To allow time for everyone, please limit yourself to one question per person. Feel free to reenter the queue, and if time permits, we'll take a second question.

[Operator Instructions] Your first question comes from the line of Ben Budish from Barclays.

Maybe just on the kind of high-level retail commentary, Craig, you talked a lot about the retail strength you've seen a lot about why options are different from perps. If you were to sort of sum it up, there's a lot of instances where perps or inappropriate replacement or can't at all do what options to? How would you sum up maybe the bits of volume where there is potential overlap, maybe like single leg calls and puts versus the more sophisticated strategies? And then how would you describe the sort of retail -- I know there's a lot of talk about retail, protel, -- as the retail trend has continued to be quite strong, how would you describe that current mix between sort of more sophisticated, less sophisticated? And any color there would be helpful.

Yes, sure. Let me -- I'll probably let Rob get into more of the detail of that, but I think it's really important to focus on because you referenced perpetual. We have a much broader ecosystem, a much broader distribution base and a much broader ultimately customer base that I think we can tap into in the equity market and in the equity derivative markets just in terms of the sheer number of accounts and market participants in the retail segment that exists on the futures side. So I think that's a key differentiator, but I'll let Rob talk about a lot of more sort of technical distinction that exist between the products.

Yes. Thanks, Craig. And thanks for the question, Ben. I think Perpetual Futures really arguably one of the more successful products that's come out of the crypto markets, but I think it's important to really look at their history to kind of better understand the use case. And so perps emerge because traders wanted really the simplicity of trading underlying digital assets, but with leverage and the ability to easily go short. And so traditional futures accomplished this, but they added friction, they added cost from having to continually roll the physicians. And Perps effectively bridge that gap between spot trading and that leveraged futures exposure. But I think it's important to recognize that perpetuals and SPX options really, and Craig mentioned it in the prepared remarks, fundamentally different investor needs. Perps offer no expiration date. So you can hold an underlying position indefinitely. This really is contrary to 0DTE contracts that expire the day you trade them. Perps do provide leverage, but it's in the form of linear exposure so that the market moves, whether it's for or more importantly, against your position gains and losses move proportionally and the amount of leverage offer really just dictates how quickly your gains and losses move. And so options, as we've mentioned, offer that complexity and really that defined risk exposure. Investors, as we've said, tailored views around direction, but really volatility market events, income generation is really in ways that simply are not able to be replicated in the futures market. And then even on the 0DTE front, over 95% of the trades we see are defined risk strategies. So with 55% of those being spreads, so whether the strategy itself is the same customer, the end result and the use case is really very different because you don't have that defined risk aspect in the futures market. So -- and let's not forget, this dynamic has really worked well for decades. Investors have had access to futures on the S&P 500. Get demand for SPX options really continue to grow because of that different risk return profile. So while you point out, there could be some overlap in the active trading communities. We really view perps as a complementary product to the options ecosystem rather than a direct substitute. And quite frankly, where it's appropriate, we may look to expand our continuous futures offering where there's demand to do so.

Your next question comes from the line of Patrick Moley from Piper Sandler.

So I wanted to ask on the company KPI event contracts that were filed with the SEC in July 23 names September launch. Could you update us on how your conversations with market participants have gone around those products? What does demand look like? Who are the end users? And then is there any revenue from those new products that you're baking into your second half guidance?

Yes. Thank you. I can kick that one off and then hand it over to Jill. We continue to view the event prediction market really is an exciting area and a natural extension of our derivatives business. At a high level, the risks that are traded through things like our excess binaries and our proposed company-specific KPI contracts really are very consistent with the kinds of products we've been bringing to the market for more than, call it, 50 years. They provide investors really, and it's important ways to express their expectations in tradable exposures. And so we were excited to get XSP has no contract out the door on June 15. We're in the early days of the launch, but encouraged with the level of engagement by the market. We currently have three different market makers providing liquidity in the product and spreads continue to narrow as really the liquidity grows. We've also been working very closely with Schwab as an anchor tenant and are extremely excited that they just reported, they'll be in offering these contracts on their platform to clients very soon. And so looking forward, you heard in Craig prepared remarks, we filed for both the company-specific KPI event contracts as well as the ability to clear those on Cboe Clear U.S. Thus far, Cboe's product franchise has really been good at providing tools to manage risk and trade at the index level, the sector level and even the individual company stock level. What the company-specific KPI contracts provide is really the ability to go even more granular to trade and manage the individual components that drive the company's stock value. So for example, I think in NVEDIA's data center revenue, I think Microsoft cloud-based revenue, today's markets consistently referenced predictions. And we think having liquid markets around investors' expectations for these metrics will further drive better insights into, call it, company performance, better ability to manage risk at that component level. So we anticipate adoption of these contracts to follow a similar path to how 0DTE developed with the market starting heavily weighted towards retail investors. As the historical data sets grow and more analysis becomes available, we believe institutions will get more involved given the correlation between these metrics and their impact on stock valuation, we believe that will help institutions better manage risk really across single name portfolios. So we continue to work really closely with the whole industry, both retail and institutional. And of course, the SEC to ensure if approved, these products are brought to market really with the same rigor investor protections afforded to investors today, which we think is very, very important. So on the company-specific side, we're targeting a second half of September, early October launch pending regulatory approval, of course. But really, big picture, the demand is there, the idea of getting more granular in how you can trade the individual components that drive valuation is there. And we're kind of excited about both the practical application for retail to trade these as they're trading in that event prediction space today as well as institutions getting involved that can really drive a healthy market quality.

And just picking up on the guidance piece. We haven't incorporated anything notable into the forward-looking guidance for 2026 related to this. I mean to Rob's comment still early days. We will definitely keep our eyes on this, come back to you in late October with our final quarter update for the year. Just want to note the dials that we've done on the total net revenue growth rate to the mid- to high teens this time around, that's more reflective of, let's call it, our existing product base set there. It doesn't incorporate anything incremental from this.

Your next question comes from the line of Brian Bedell from Deutsche Bank.

Actually, I just wanted to follow up on the company KPI question. The -- just on the SEC approval process, just your level of confidence in getting that approved by the end of the third quarter. Is there -- are they going to put any comments out for like a proposal that would be commented on in the industry? Or do you anticipate it would be directly approved? And does the CFTC need to be involved at all? Or is it just SEC? And then have you thought about pricing on these types of contracts in terms of will they be priced more like your proprietary options or closer to the multi-listed options?

Thanks, Brian. Appreciate your question. So on the first part of your question, I mean, we have been working, obviously, closely with the SEC Commission staff on this filing, well prior to actually making the filing. I can't really kind of comment on how sort of the timing will turn out, that's within or their control, but we would say that we think the process is going very well and smoothly. In terms of the other aspect of your question, it is open for comment. I believe that comment period will end next Wednesday. And so we'll continue to look at sort of industry commentary. And I would think that there's a close level of cooperation between the SEC and the CFTC. So I'm sure that that's something that is an ongoing discussion with them. But -- we've obviously done a tremendous amount of work and have a strong point of view that these are securities that are subject to the jurisdiction of the SEC. So from our perspective, it's going well, but we can never be definitive about what the actual timing of the regulatory approval would be. But -- we think it's gone very smoothly so far.

Yes. And I would add, as of right now, we haven't seen any comments submitted yet, but we're obviously watching closely. On the pricing front, we are still in that exercise right now, but I think you can think of these more closely aligned to other event prediction market contracts on the market. We think we can be very competitive. The reason I say that is the notional value of SPX contract is so big with the 100 multiplier in the index size compared to these event contracts and specifically the KPI ones where you're looking at effectively $1 yes or no contract. So to equate that, we're looking at what are the alternatives, what are the other products on the market and how can we price these to remain competitive, and we think we have the dials to do so.

Your next question comes from the line of Jeff Schmitt from William Blair.

So as you move from index-based event contracts in the company KPI contracts, what will you need to do to drive adoption there? Kind of a different animal, obviously, and demand and prediction markets is still sort of dominated by sports contracts today. So what will you do to drive adoption there?

Yes. Thanks, Jeff. That's a great question. In some regards, this is where our intermediated model, I think, is very strong. We're relying on the various retail broker platforms, think Robin Hood, Schwab, the likes tasty trade and really having them -- they're seeing the demand come in very strong from their customer base. And so we want to deliver the product. We want to deliver a seamless user experience much like trading multi-list options today, almost adding this is just another skew to our shelves and allow them to position it, allow them with very guys and user interfaces, how to position the yes-no event style contracts within their platform. The nice thing is and the encouraging thing is the demand is coming from those platforms. I would say historically, in product development at the exchange, a lot of times we develop the product and then are trying to get the platforms to launch them, then trying to get market those products to the customers, this is actually happening more in reverse. We are getting the inbound saying we have massive demand from our retail client base for these we need a solution, and we need a solution specifically on the security side, which we view as really kind of our competitive advantage to the other existing event contracts and prediction markets that are out there today.

Your next question comes from the line of Michael Cyprys from Morgan Stanley.

So quarterly earnings have become 1 of the largest recurring catalyst for both equities and options activity across the markets. So if the SEC moves to semiannual reporting, how would that affect options usage and retail engagement? And what might be some second or third order effects from that sort of potential change on liquidity, price discovery and volatility in overall market participation?