This is Craig Siegenthaler from Bank of America, and we have a crowded stage today, and we're lucky to be joined by three senior members of Cboe's leadership team. We have CEO Fred Tomczyk, CFO Jill Griebenow, and COO Chris Isaacson. Before taking the reins as CEO last year, Fred was CEO of TD Ameritrade for almost a decade, and he's also been on Cboe's board since 2019. Jill's been at Cboe since 2011 and was elevated to the CFO role last year, prior to which she was Chief Accounting Officer and also CFO of Cboe Europe. Chris has been in the COO role since 2019 and was previously Cboe's Chief Information Officer. Before that, he was a founding employee at Bats, which was acquired by Cboe in 2017. We also have Treasurer and Head of IR, Ken Hill, joining us here in the front row. So Fred and team, thank you all for joining us at the BFA Financial Services Conference. Cboe is a leading options and cash equities marketplace with a footprint across North America, Europe, and Asia. It is also the exclusive home to the SPX Options contract, which is one of America's fastest-growing financial products, with volumes having doubled in just 3 years. Cboe is also the home of the VIX contracts, too. The company celebrated its 50th anniversary late last year, and during this period, it hit several key milestones. It was the first marketplace to trade options in 1973 and was the first to create options on the S&P 500 index in 1983. So maybe we could start with a little background. Fred, how are you enjoying the day-to-day responsibilities of being CEO again? It was my understanding that despite being on the board, you were pseudo-retired. Maybe you found it a little boring. I'm curious. Well, I don't know if it was boring because I just sit on three boards, and I have a bunch of grandchildren, so they're all over in Naples right now. So this is a bit of a break from chasing a bunch of little kids around with runny noses. So actually, I'm enjoying it quite a bit. It's nice to get back into it. I see a lot of familiar faces wherever I go, whether it's at conferences like this, investment banks. So it's been quite enjoyable, actually. Great. So in terms of strategy, I was curious on what you think the biggest change is from the former leadership was until now. And from my seat, it seems like there's a lot more focus on lowering expense growth, concentrating on fewer but higher conviction themes. Maybe Jill will have something to add on this, too. Yeah, I think that's right. So when I was on the board, I mean, the strategy used to come to the board, and I would always give my constructive feedback, which was it was too broad. And so when you just say more asset classes, more geographies, and you're doing as many M&A transactions as Cboe had done over the last three or four years, that the focus of the organization needed to be, A, more focused on making some choices, what you would call high conviction themes, or areas we want to focus our scarce resources. That's the first thing. Second was to slow down all the M&A. You felt it at the board, but when you came into management, you really felt it that there was a bit of M&A fatigue. I don't mean the M&A, the deal, as much as the integration of all those assets and businesses. It was consuming a lot of technology resources. Chris led the effort. Now that I had built out this sort of global footprint, which I wouldn't call complete, but it's a good start, that it was time for the organization to take a breather, slow down the M&A, and it had grown expenses quite rapidly the last three years. It was time to moderate that and get back to an organic growth strategy with organic investments and organic growth and then technology and get back to our roots of what we do and prove out that we can make this global securities and derivatives network really work. With the technology all migrated now other than Canada, we can see now if we can push things out in different parts of the world and really leverage up the platform. Great. I have a question for Jill. Given that Cboe beats its targets almost every year and the current midpoint of your guidance assumes modest negative operating leverage, can you help us with the conservatism that's actually built into your revenue and expense targets? My own estimate's actually currently assume you beat both of them. Thank you. Fair question. I'm happy to be on this side of it, to be honest with you. But just to give some background, we did introduce the net revenue growth range of 5%-7% back in November of 2021. We did that because at the time, we did not feel we were getting fair credit from the street community for the durability of the revenue that we consistently generated year after year. So again, really wanted to target that 5%-7% growth range. On top of that, our data and analytics business has consistently returned somewhere in the area of 7%-10% net revenue growth each year. That was the guidance that we introduced early here in 2024. Continue to stand behind it, though. We do see a very strong start to the year from an index options perspective. To the extent that momentum continues over the course of the year, I'm happy to update guidance. But again, with what we introduced early in 2024, feel good with. From an expense perspective, as Fred alluded to and in your earlier question, we did have a few years that were marked with very, very high elevated growth rates, but it was really a function of the various M&A integrations that we did. With that comes increased headcount, increased technology support services. But really, what that allowed us to do is lay our footprint and foundation globally. We now have a good base in many geographies we weren't in previously. Now we are looking to really optimize and tap into that value while doing it at a 6%-8% operating expense growth rate compared to the double digits that you saw in prior years. Just a follow-up on that, is it an important goal of Cboe now to improve its operating margin and demonstrate positive operating leverage in most years, not every year? And can you also do this while not impacting your strong revenue growth? I think I'd say for 2024, we are absolutely looking to stabilize that operating margin. So again, few years marked with very high expense growth while we were laying that foundation, 2024 is really the year that we want to stabilize it and in time potentially expand that. But very importantly, continuing to invest in the business from an expense perspective to be able to consistently grow that top line. Yeah. I mean, I do think our revenue growth rate will moderate somewhat from what it's been the last couple of years because it's been quite high, but it will still grow. And we're continuing to make investments in that. But we want that operating leverage. If you get the revenue growth up in the upper single digits, it's much easier to have operating leverage than when it's down in the low single digits. And so we're trying to keep the revenue growth up, sort of stabilize that margin, and then start to slowly increase it. Great. Let's move on to capital return. Cboe has the lowest amount of financial leverage in my exchange coverage. Should we see more buybacks? Yeah, another fair question. We ended the year in 2023 with a leverage ratio of 1.2 times, which is very, very comfortable. We like the positioning of our balance sheet at the moment. What that allows us to do now that we've paid off all of our floating rate debt is effectively redeploy our capital elsewhere. So we have a history of paying a quarterly dividend. In In the past, we've increased that during the Q3. We'll definitely reevaluate that again this year. But then to your point, share repurchases are definitely on the docket. We have a history of being heavier with those during the Q1 each year. And then we'll definitely be opportunistic to the extent that we sense any weakness in the share price would absolutely get behind that. Great. Within the capital return conversation, let's talk about M&A for a moment. Chris, I know you were heavily involved with the Asia integrations, and you're now very focused on Canada. And this must be keeping you quite busy. But given this workload, do you have the capacity today to integrate more acquisitions? Yes. I mean, we definitely have the capacity to integrate the NEO acquisition that's in Canada as we bring that together. We're very pleased with the way the APAC integrations went in Australia and Japan. We're seeing pull-through of market share and non-transaction revenue as we expect. As the global platform bears it out, we unlock value there. We have capacity to invest in these organic growth initiatives while completing the final integration in Canada. We're actually quite excited about it. As Fred mentioned, getting back to our knitting, our leading-edge technology, which underpins all of our markets and all of our growth initiatives. We couldn't be more excited, frankly, than right now reinvesting a lot in technology. Yeah. Yeah. See, to me, I mean, we're very much a technology firm. We process a lot of transactions every day. And in fact, the messages into the options platform is like 70 billion a day. So it's huge, huge volumes. And so you need really good, strong, robust technology. And one of the secular trends that we see is there's no question technology is important, but also you have a number of emerging technologies being used in the business. So we want to make sure we're at the leading edge of that. Great. Let's move the conversation now onto the macroeconomic backdrop. It's shaping up to be a year of inflections. Rates were going up. Now they may be going down. Hopefully, markets go up with that, with more financial market liquidity. I mean, this sounds like the formula to encourage more retail engagement. So what are your thoughts on this evolving backdrop? And do you view it as a tailwind for your business? We see a number of what I call secular trends that are going on. There's no question there's been the rise of the retail investor and has been going on through the retail brokerage platforms like Ameritrade and Charles Schwab for 20 years. What's interesting about that is a lot more adoption of the use of options by those retail traders. Everybody comes to the conclusion they're just making single-leg bets. Our analysis would say otherwise, that over half the trading volume in the retail investor on those platforms today are making what we call multi-leg or complex trades. They're actually defining the outcome they're willing to tolerate and putting those trades on. They're using a lot of vertical spreads as an example. We definitely see that trend. That continues to go. You've got good markets. That always helps. We've got markets that have been. It was a very strong year last year. We've got a good start to this year so far. Right now, you're in a year where you've got a lot of geopolitical uncertainty on top. So now I'm going to more cyclical trends. You've got geopolitical uncertainty. You've got two wars going on. You've got the Russia-Ukraine. Russia—I'm sorry, the U.S. and China kind of standoffishness here. You've got a U.S. election. Every time the Fed has a shift pivot like we did last week, you see not the Fed so much as the CPI print, you see volumes just pop. So you're having an environment where there's good secular trends, and it should be good from a cyclical perspective. So we're quite positive on that. So back to retail engagement, if you look at the data inside the retail brokers, it arguably peaked in 2021 and arguably troughed last year. We're probably not likely going back to 2021 anytime soon, maybe not ever, but there's a lot of upside from 2023 levels. Are you looking for retail activity to broadly increase? And when you think of the strategies, the investors that use your products, are you thinking that there'll be more of a shift to offensive versus hedging strategies? It's people always go to 0DTE, but the analysis that we have is that, A, first, 0DTE started we've always had it. It was 20% prior to May of 2022 before we started introducing Tuesdays and Thursday expiries. And then since then, it's grown and where it's half of our SPX volumes today. And when you look at it today, you would have said it was mostly retail. It's actually not anymore. It's actually over, I think, 60%-65% institutional. And it's very balanced across hedging strategies, income generation, and making speculative trades. So it's actually a very robust it's very unlike the meme stock craze. You're basically seeing a pretty robust series of volumes and trades in that platform, which is good for the 0DTE product. Greg, I just might mention that we really like the mix of both retail and institutional. Even some that comes in through retail brokerage platforms is quite professional-looking with complex orders, as Fred was mentioning. I mean, we're very pleased with that. There's also some major retail brokerage platforms that are yet to offer index options, which we're quite excited about here later this year. Yeah. Yeah. We definitely see Robinhood going there. We're also seeing more of the clients that we have in the U.S. going to different parts of the world. XSP, if we can get protected options so you can actually offset the margin offset against SPY trades, all those things should help. And global trading hours are still rather small in the book relative to what we think they could be. Robinhood seems like a big one, huge user of options. Are there any other platforms to think about, or most of the other big retail platforms rolled out at this point? I think most of the rest have rolled out. Robinhood is the big one that comes to mind this year. Now, having said that, some of those platforms where you take IG and tastytrade are going to start to go more global. So there is opportunities beyond Robinhood. And with our global platform now, wherever we've gone in the world, we have big clients with us. And that's important. When you said institutional client, I think that's hedge fund market maker, but also wealthy active traders, which aren't really retail. Is that a good way to describe that pocket? It's hard to define. It depends what you mean by wealthy retail trader because a lot of them will be on the retail platforms. So if you went back to my old firm, which had the thinkorswim platform, yeah, you have a lot of what you and I might call semi-professional traders. And they're pretty good at what they do, and they use a lot of complex strategies. Got it. So you have two very large products at Cboe, SPX and VIX. How do you see the volumes in these products impacted by potentially lower volatility and lower interest rates? Not that we're there yet, but this is one of the likely economic scenarios we're looking for because normalized volatility is good, but not low volatility. Yeah. It's interesting. In the Q4, what we saw is you would have expected that to be a low trading quarter because you didn't see a lot of volatility. And the VIX was, I don't know, when it was. 15. You would have said that wouldn't be a great trading quarter, but it turned out to be a very strong trading quarter as we saw people and you particularly saw an asset manager starting to use call options as they went to the end of the year to try and improve their performance against benchmarks. So you're seeing a lot of that. You saw a lot of people use trades in VIX, particularly around convexity trades. So we saw a very strong Q4. So I mean, it used to be your theory and my theory always was you only see trading go with volatility, whether it's implied or real. But it doesn't seem that that's quite true anymore. But volatility will help. When you saw the CPI print last week, there's no question we had a pop in volumes. A lot of them was in the longer-dated options. Very interesting. From the Q4, we actually saw record SPX market days from volume on market updates. I mean, usually, people think about market down days when we see the greatest volume. But it was market updays we saw multiple SPX records. Do you have any perspective on that trend, why that happened? I think, as Fred mentioned, people are changing their positions, continuously repositioning since they have 0DTE if they need to, and also some of them probably trying to catch up with yield enhancement toward the end of the year. Yeah. All right. Let's go a little deeper on SPX with 0DTE. We know the share within SPX of 0DTE can fluctuate up or down. But what would you consider normal SPX volumes for 0DTE given that it was around 50% in January and it keeps grinding higher? Yeah. We don't have a target or anything like that. What we try to do is create a variety of products around the SPX complex that allow people to trade in any environment, in any size. So XSP is clearly designed for a retail investor. We still think there's lots of room for that to get better volume. And not SPX. I'm sorry. XSP for the retail investor. SPX is a larger contract. And we try to make sure we have products whether you want to have short-duration or long-duration positions. We're just trying to make sure there's all use cases, whatever you want to do, you can do that, whether you want to reduce risk or hedge risk, generate income, or take a speculative position. We all know Robinhood is a huge options platform. They're planning to launch index options this summer. That could mean the second half could be good for someone in your position. The Robinhood client, while being very active, the characteristics are very different than the client inside of Ameritrade or Interactive Brokers. Do you think younger active traders will gravitate towards this product too? Oh, I think so. I mean, there's no question. If you're an active trader, once you get comfortable with options, you will try to trade options a lot more. For the capital you put up and the positioning you can do, if you really want to trade, it's a much better product than just a straight equity. Great. So we've noticed that the SPX contract and with 0DTE has been able to gain market share versus a competitor product around ETF options. So I wanted your perspective on why this is happening. What are the key advantages to your product? And do you think this is sustainable? I think so. I mean, the advantages of the index is that it's cash-settled. And they're European-style, so they don't get called away. You have favorable tax advantages. There's a number of advantages to the index products as opposed to SPY, as an example. So if you really want to trade and you want to trade options on that, it's a better product from my point of view. If you're a retail trader, if it's cash-settled I made my bet. I got a time duration on it. It settles. I don't wind up with an open position or a position I got being called away on me. I think one element of the Cboe story versus other exchanges that gets misunderstood is the revenue stability and the recurring nature of options trading. So investors can pivot from offensive to hedging strategies as the market evolves. Options are expiring every day now. Traders must keep reopening positions on a regular basis. Do you think your index options business is more predictable given the migration to short contracts like 0DTE? So far, I would say absolutely, we think that's true. And you're on a very good point, which has always been my view on options versus equities, which is that options expire. And so you have a more resiliency to the trading revenue. It's more recurring in nature than an equity trade. An equity trade doesn't expire. And as we've gone to shorter-duration option trades and actually just to pick that all up, and that's one of the reasons our revenue is growing so quickly. And in the environment we're in, it's hard for me to see this year that changing just because of all what I call the secular trends, but also the cyclical trends are all kind of lining up at the right place for that type of trading. Great. I think product innovation, maybe another element of your story or your model that's misunderstood, especially with the VIX and SPX zero days. When do you plan to launch daily contracts for the VIX? And do you think this could have the same type of interest that we saw with SPX? Yeah. So I'll take that one. So obviously, we're very, very pleased with the way 0DTE has worked with SPX since we launched Tuesday, Thursday a couple of years ago. The way the VIX contract is currently constructed, launching 0DTE for VIX would be challenging. So we have a one-day VIX one-day index. The team's in the lab working on a potential one-day contract, but that's still to come. I will mention, though, that we have other products where we have launched Tuesday, Thursday. Just in January, we did that for the Russell 2000, the RUT/RUTW options. And we're seeing some nice growth even to start 2024. So this just speaks to we're constantly thinking about product innovation. If you think about Cboe, we're a markets technology company with tremendous product innovation, technology, product innovation, and being the largest securities and derivatives network. RUT RUTW is the latest. We also have a lot of other products that are in the hopper that we plan to bring out over the next couple of years. Yeah. Yeah. We just introduced Credit VIX, a dispersion index. We've got a bunch of them going on with MSCI. So we continue to innovate. Yeah. With MSCI, I'll mention there's three products we're actually launching on March 18th, ACWI, USA, and Global. What's great about it is now we'll have index options products on, obviously, large-cap SPX, small-cap Russell, and then international exposure with MSCI, really rounding out the product suite. I wanted to stick with the dispersion index. You recently launched S&P 500 Dispersion Index. I want to hear how has interest and feedback from your business partners fared for the new dispersion products? Yeah. The reception of the Dispersion Index has been fantastic. I think it's shone a light on what is a very large portion of the market and looking at what is the value of diversification in portfolio versus purely in the index. We're still in the lab, again, on making that a tradable product, working with our partners like the OCC Options Clearing Corporation, but how that tradable product would trade and settle. So more to come on that. No firm date on the launch, but very pleased with the traction and the attention the index itself is getting. I wanted to hit on one of the long-term risks. So I put one of the risks at reliance on third-party index providers like S&P Global. So how should we think about the risk of Cboe losing the S&P index in the future despite being, I know, the next renewal date is quite a long ways off. I think it's 2033. So it's not tomorrow. But how should we think about that? The way I would think about it is keep in mind we've had a partnership with S&P for over 40 years, number one. No one's been able to develop tradable products and build a complex around an index like we have with them. And the reality is we're dependent on them. They're dependent on us, which is great because we own the VIX complex that goes hand in hand with it. And I would say if you're winning and both sides are winning with revenue growth, which we are, and they have a good partnership, which we have I mean, so I talk to Dan Draper regularly. The teams talk regularly. And I think the two teams are gelling very well. So to me, partnerships rarely end when they're working. They end when they're not working. And one partner is not happy. Our relationship with S&P has been, since I've gotten into the CEO chair, been very positive. A second risk I wanted to cover was the intensifying competition in multi-listed options. There was a new exchange that just launched this quarter. We're seeing pricing pressure from some of your competitors. Maybe just review with us the revenue growth prospects in multi-listed options. Yeah. Multi-listed, it's obviously a competitive market. We think this competition makes the market better in the long term. We always try to, as Jill and Fred and I talk about quite a bit with Dave, manage market share versus net revenue in these multi-listed, highly competitive markets, which we've done. When a new market comes out, a competitive market, they tend to take market share that's, frankly, lower net revenue or sometimes even net negative. We like the competition. If you look at our history across the globe in competitive markets, we've done very well in growing market share, actually, in those highly competitive markets. Reminder that we're built on a very efficient technology platform, which allows us to compete in the most competitive markets while helping us grow in the proprietary products as well. Great. At this moment, I want to see if there's any questions in the audience. So please raise your hand, and we'll get your microphone. One in the front here. Hi. Retail is a really important part of your coalition in the U.S. Now you guys are expanding into Europe, where retail engagement has historically been very, very subdued. I guess, is the thesis there that options can be more of an institutional product? Or do you think that maybe retail in Europe could be at an inflection point? There's a little bit of both. It depends where you're going around the world. Europe is one market. Asia is another market. It does depend somewhat on that. But where we're introducing the products is likely it's always because we have a big client in that market that we also deal with in the U.S. and say, "We think this is a good opportunity." Having said that, we don't have blinders on. When you think about Europe, it has to be developed. It has to be sold. It's not going to be just put it out there, and they will come. You have to really work it. You have to educate people on how to use it. You have to work with the various market makers to bring liquidity into it. You have to work with the brokers to make sure they bring it to their clients and work with us on the options institute to actually help people. You don't want to introduce people to options that don't know what they're doing. You want them to learn how to trade options properly. And that was always the secret at Ameritrade, is you had different tiers, but you educated people on how to do it. And if you saw people doing what we would call dumb things, you would call them and say, "What are you trying to do? And can I help you here and educate you on how to do it better?" But no question, Europe, to us, is a long bet. It's not a short bet. Is it going to pay off in 2024? No, I don't. I'd be surprised. It would be a nice surprise. In the long term, we think there's an opportunity there. It has to be developed and sold into the market. Any other questions? Please raise your hand. So I think that may be it, guys. So on behalf of all of us at Bank of America, Fred, Chris, Jill, thank you very much for joining us. Appreciate it. Thank you. Thank you.