UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission file number: 001-34774

Cboe Global Markets, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-5446972
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

400 South LaSalle Street, Chicago, Illinois	60605
(Address of Principal Executive Offices)	(Zip Code)

(312) 786-5600

(Registrant’s telephone number, including area code)
​

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	CBOE	CboeBZX

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   ⌧     No   ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ☒     No   ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☒	Accelerated Filer	◻	Non-accelerated Filer	◻
Smaller Reporting Company	☐	Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ☐     No   ⌧

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

Class	July 24, 2020
Common Stock, par value $0.01 per share	108,757,883 shares

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION		7
Item 1.	Financial Statements (unaudited)	7
	Condensed Consolidated Balance Sheets—As of June 30, 2020 and December 31, 2019	7
	Condensed Consolidated Statements of Income—Three and Six Months Ended June 30, 2020 and 2019	8
	Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 30, 2020 and 2019	9
	Condensed Consolidated Statements of Changes in Stockholders’ Equity—Three and Six Months Ended June 30, 2020 and 2019	10
	Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2020 and 2019	12
	Notes to Condensed Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 4.	Controls and Procedures	70
PART II. OTHER INFORMATION		71
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults upon Senior Securities	73
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75
SIGNATURES		76

2

CERTAIN DEFINED TERMS

Throughout this document, unless otherwise specified or the context so requires:

● “Cboe,” “we,” “us,” “our” or “the Company” refers to Cboe Global Markets, Inc. and its subsidiaries.

● “ADV” means average daily volume.

● “ADNV” means average daily notional value.

● “AFM” refers to the Netherlands Authority for the Financial Markets.

● “Bats Global Markets” and “Bats” refer to our wholly-owned subsidiary Bats Global Markets, Inc., now known as Cboe Bats, LLC, and its subsidiaries.

● “BYX” refers to Cboe BYX Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “BZX” refers to Cboe BZX Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “C2” refers to Cboe C2 Exchange, Inc. a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “Cboe Chi-X Europe” refers to Cboe Chi-X Europe Limited, a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “Cboe Europe Equities” refers to the combined businesses of Cboe Europe and Cboe NL.

● “Cboe Europe” refers to Cboe Europe Limited, a wholly-owned subsidiary of Cboe Global Markets, Inc., the U.K. operator of our Multilateral Trading Facility (“MTF”), our Regulated Market (“RM”), and our Approved Publication Arrangement (“APA”) under its Recognized Investment Exchange (“RIE”) status.

● “Cboe FX” refers to Cboe FX Markets, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “Cboe NL” refers to Cboe Europe BV, a wholly-owned subsidiary of Cboe Global Markets, Inc., the Netherlands operator of our MTF, RM, and APA.

● “Cboe Options” refers to Cboe Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “Cboe SEF” refers to Cboe SEF, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “Cboe Trading” refers to Cboe Trading, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc., operated in the United States.

● “CFE” refers to Cboe Futures Exchange, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “CFTC” refers to the U.S. Commodity Futures Trading Commission.

● “EDGA” refers to Cboe EDGA Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “EDGX” refers to Cboe EDGX Exchange, Inc., a wholly-owned subsidiary of Cboe Global Markets, Inc.

● “ESMA” refers to the European Securities and Markets Authority.

● “EuroCCP” refers to European Central Counterparty N.V., a wholly-owned subsidiary of Cboe Global Markets, Inc. as of July 1, 2020.

● “Exchanges” refers to Cboe Options, C2, BZX, BYX, EDGX, and EDGA.

● “FASB” refers to the Financial Accounting Standards Board.

● “FCA” refers to the U.K. Financial Conduct Authority.

● “FINRA” refers to the Financial Industry Regulatory Authority.

● “GAAP” refers to Generally Accepted Accounting Principles in the United States.

● “Merger” refers to our acquisition of Bats Global Markets, completed on February 28, 2017.

● “OCC” refers to The Options Clearing Corporation.

● “OPRA” refers to Options Price Reporting Authority, LLC.

● “SEC” refers to the U.S. Securities and Exchange Commission.

● “SPX” refers to our S&P 500 Index exchange-traded options products.

● “TPH” refers to either a Trading Permit Holder or a Trading Privilege Holder.

● “VIX” refers to our Cboe Volatility Index exchange traded options and futures products.

3

TRADEMARK AND OTHER INFORMATION

Cboe^®, Cboe Global Markets^®, Bats^®, BYX^®, BZX^®, Cboe Options Institute^®, Cboe Vest^®, Cboe Volatility Index^®, CFE^®, EDGA^®, EDGX^®, Hybrid^®, LiveVol^®, Silexx^® and VIX^® are registered trademarks, and Cboe Futures Exchange^SM, C2^SM, f(t)options^SM, Hanweck^SM, and Trade Alert^SM are service marks of Cboe Global Markets, Inc. and its subsidiaries. Standard & Poor's^®, S&P^®, S&P 100^®, S&P 500^® and SPX^® are registered trademarks of Standard & Poor's Financial Services LLC and have been licensed for use by Cboe Exchange, Inc. Dow Jones^®, Dow Jones Industrial Average^®, DJIA^® and Dow Jones Indices are registered trademarks or service marks of Dow Jones Trademark Holdings, LLC, used under license. Russell^® and the Russell index names are registered trademarks of Frank Russell Company, used under license. FTSE^® and the FTSE indices are trademarks and service marks of FTSE International Limited, used under license. All other trademarks and service marks are the property of their respective owners.

MSCI and the MSCI index names are service marks of MSCI Inc. (“MSCI”) or its affiliates and have been licensed for use by us. Any derivative indices and any financial products based on the derivative indices (“MCSI-Based Products”) are not sponsored, guaranteed or endorsed by MSCI, its affiliates or any other party involved in, or related to, making or compiling such MSCI index. Neither MSCI, its affiliates nor any other party involved in, or related to, making or compiling any MSCI index makes any representations regarding the advisability of investing in such MSCI-Based Products; makes any warranty, express or implied; or bears any liability as to the results to be obtained by any person or any entity from the use of any such MSCI index or any data included therein. No purchaser, seller or holder of any MSCI-Based Product, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote any security without first contacting MSCI to determine whether MSCI’s permission is required.

This Quarterly Report on Form 10-Q includes market share and industry data that we obtained from industry publications and surveys, reports of governmental agencies and internal company surveys. Industry publications and surveys generally state that the information they contain has been obtained from sources believed to be reliable, but we cannot assure you that this information is accurate or complete. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on the most currently available market data. While we are not aware of any misstatements regarding industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors. We refer you to the “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and our other filings with the SEC.

4

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negative of these terms and other comparable terminology. All statements that reflect our expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements, including statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Report. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In particular, you should consider the risks and uncertainties described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and our other filings with the SEC.

While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Some factors that could cause actual results to differ include:

● the impact of the novel coronavirus (“COVID-19”) pandemic, including changes to trading behavior broadly in the market;

● the loss of our right to exclusively list and trade certain index options and futures products;

● economic, political and market conditions;

● compliance with legal and regulatory obligations;

● price competition and consolidation in our industry;

● decreases in trading volumes, market data fees or a shift in the mix of products traded on our exchanges;

● legislative or regulatory changes;

● our ability to protect our systems and communication networks from security risks, cybersecurity risks, insider threats and unauthorized disclosure of confidential information;

● increasing competition by foreign and domestic entities;

● our dependence on and exposure to risk from third parties;

● fluctuations to currency exchange rates;

● our index providers' ability to maintain the quality and integrity of their indices and to perform under our agreements;

● our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights;

● our ability to attract and retain skilled management and other personnel;

● our ability to minimize the risks, including our credit and default risks, associated with operating a European clearinghouse;

● our ability to accommodate trading volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems;

● misconduct by those who use our markets or our products;

● challenges to our use of open source software code;

● our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status;

● damage to our reputation;

● the ability of our compliance and risk management methods to effectively monitor and manage our risks;

● our ability to manage our growth and strategic acquisitions or alliances effectively;

● restrictions imposed by our debt obligations;

● our ability to maintain an investment grade credit rating;

5

● impairment of our goodwill, long-lived assets, investments or intangible assets; and

● the accuracy of our estimates and expectations.

For a detailed discussion of these and other factors that might affect our performance, see Part II, Item 1A of this Report. We do not undertake, and expressly disclaim, any duty to update any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this filing.

6

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

(in millions, except par value data and share amounts)

	June 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	210.1	$	229.3
Financial investments		176.5		71.0
Accounts receivable, net of $1.0 allowance for credit losses at June 30, 2020 and $0.7 at December 31, 2019		376.8		234.7
Income taxes receivable		—		56.8
Other current assets		17.8		15.8
Total current assets		781.2		607.6
Investments		61.3		61.2
Property and equipment, net		75.6		47.0
Property held for sale		13.0		21.1
Operating lease right of use assets		117.8		53.4
Goodwill		2,730.4		2,682.1
Intangible assets, net		1,526.2		1,589.9
Other assets, net		60.8		51.6
Total assets	$	5,366.3	$	5,113.9
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	216.0	$	171.9
Section 31 fees payable		247.5		99.0
Deferred revenue		17.3		4.5
Income taxes payable		14.9		4.0
Current portion of contingent consideration liabilities		0.8		2.2
Total current liabilities		496.5		281.6
Long-term debt		868.6		867.6
Unrecognized tax benefits		148.8		135.9
Deferred income taxes		384.9		399.7
Non-current operating lease liabilities		137.3		46.7
Contingent consideration liabilities		19.7		—
Other non-current liabilities		24.2		26.8
Total liabilities		2,080.0		1,758.3
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at June 30, 2020 and December 31, 2019		—		—
Common stock, $0.01 par value: 325,000,000 shares authorized, 125,976,027 and 108,757,176 shares issued and outstanding, respectively at June 30, 2020 and 125,701,889 and 110,656,892 shares issued and outstanding, respectively at December 31, 2019		1.2		1.2
Common stock in treasury, at cost, 17,218,851 shares at June 30, 2020 and 15,044,997 shares at December 31, 2019		(1,120.5)		(887.1)
Additional paid-in capital		2,704.5		2,691.3
Retained earnings		1,703.7		1,512.6
Accumulated other comprehensive (loss) income, net		(2.6)		37.6
Total stockholders’ equity		3,286.3		3,355.6
Total liabilities and stockholders’ equity	$	5,366.3	$	5,113.9

See accompanying notes to condensed consolidated financial statements.

7

Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(unaudited)

(in millions, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Transaction fees	$	618.3	$	426.9	$	1,279.8	$	856.2
Access and capacity fees		55.7		54.5		113.4		108.9
Market data fees		58.7		51.8		114.9		103.4
Regulatory fees		128.7		79.7		265.5		138.4
Other revenue		7.3		7.7		16.6		15.2
Total revenues		868.7		620.6		1,790.2		1,222.1
Cost of revenues:
Liquidity payments		415.6		235.8		808.0		479.5
Routing and clearing		17.7		9.2		33.7		18.4
Section 31 fees		119.0		70.3		246.4		118.5
Royalty fees		19.4		21.9		46.8		42.9
Other		0.1		0.2		0.1		0.2
Total cost of revenues		571.8		337.4		1,135.0		659.5
Revenues less cost of revenues		296.9		283.2		655.2		562.6
Operating expenses:
Compensation and benefits		54.9		52.2		108.2		100.3
Depreciation and amortization		38.0		43.7		78.5		90.9
Technology support services		12.5		11.8		24.4		23.7
Professional fees and outside services		12.3		19.2		27.2		35.4
Travel and promotional expenses		0.9		3.0		3.0		5.6
Facilities costs		4.1		3.0		8.2		5.1
Acquisition-related costs		9.4		20.8		10.2		23.1
Other expenses		3.1		4.3		7.4		7.9
Total operating expenses		135.2		158.0		267.1		292.0
Operating income		161.7		125.2		388.1		270.6
Non-operating (expenses) income:
Interest expense, net		(7.3)		(10.0)		(14.6)		(19.9)
Other income (expense), net		2.2		4.4		0.6		(4.4)
Income before income tax provision		156.6		119.6		374.1		246.3
Income tax provision		43.0		35.1		103.1		67.7
Net income		113.6		84.5		271.0		178.6
Net loss attributable to redeemable noncontrolling interest		—		3.8		—		4.0
Net income excluding redeemable noncontrolling interest		113.6		88.3		271.0		182.6
Change in redemption value of redeemable noncontrolling interest		—		(0.2)		—		(0.4)
Net income allocated to participating securities		(0.3)		(0.5)		(0.7)		(1.1)
Net income allocated to common stockholders	$	113.3	$	87.6	$	270.3	$	181.1
Basic earnings per share	$	1.04	$	0.79	$	2.46	$	1.62
Diluted earnings per share	$	1.03	$	0.78	$	2.45	$	1.62
Basic weighted average shares outstanding		109.5		111.5		109.9		111.5
Diluted weighted average shares outstanding		109.6		111.6		110.1		111.6

See accompanying notes to condensed consolidated financial statements.

8

Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

(in millions)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	113.6	$	84.5	$	271.0	$	178.6
Other comprehensive (loss) income, net of income tax:
Foreign currency translation adjustments		(3.5)		(18.1)		(41.0)		(3.4)
Unrealized holding losses on financial investments		(0.3)		—		(0.3)		—
Post-retirement benefit obligations		1.1		—		1.1		—
Comprehensive income		110.9		66.4		230.8		175.2
Comprehensive loss attributable to redeemable noncontrolling interest		—		3.8		—		4.0
Comprehensive income excluding redeemable noncontrolling interest		110.9		70.2		230.8		179.2
Change in redemption value of redeemable noncontrolling interest		—		(0.2)		—		(0.4)
Comprehensive income allocated to participating securities		(0.3)		(0.5)		(0.7)		(1.1)
Comprehensive income allocated to common stockholders, net of income tax	$	110.6	$	69.5	$	230.1	$	177.7

See accompanying notes to condensed consolidated financial statements.

9

Cboe Global Markets, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Six months ended June 30, 2020 and June 30, 2019

(unaudited)

(in millions, except per share amount)

											Accumulated
							Additional				other		Total		Redeemable
	Preferred		Common		Treasury		paid-in		Retained		comprehensive		stockholders’		Noncontrolling
	Stock		Stock		Stock		capital		earnings		income (loss), net		equity		Interest
Balance at December 31, 2019	$	—	$	1.2	$	(887.1)	$	2,691.3	$	1,512.6	$	37.6	$	3,355.6	$	—
Transition adjustment for adoption of Current Expected Credit Losses standard at January 1, 2020		—		—		—		—		(0.4)		—		(0.4)		—
Cash dividends on common stock of $0.36 per share		—		—		—		—		(40.0)		—		(40.0)		—
Stock-based compensation		—		—		—		8.3		—		—		8.3		—
Repurchases of common stock from employee stock plans		—		—		(13.9)		—		—		—		(13.9)		—
Purchase of common stock		—		—		(119.5)		—		—		—		(119.5)		—
Shares issued under employee stock purchase plan		—		—		—		0.1		—		—		0.1		—
Net income		—		—		—		—		157.4		—		157.4		—
Other comprehensive loss		—		—		—		—		—		(37.5)		(37.5)		—
Balance at March 31, 2020	$	—	$	1.2	$	(1,020.5)	$	2,699.7	$	1,629.6	$	0.1	$	3,310.1	$	—
Cash dividends on common stock of $0.36 per share		—		—		—		—		(39.5)		—		(39.5)		—
Stock-based compensation		—		—		—		4.6		—		—		4.6		—
Exercise of common stock options		—		—		—		0.2		—		—		0.2		—
Repurchases of common stock from employee stock plans		—		—		(0.2)		—		—		—		(0.2)		—
Purchase of common stock		—		—		(99.8)		—		—		—		(99.8)		—
Net income		—		—		—		—		113.6		—		113.6		—
Other comprehensive loss		—		—		—		—		—		(2.7)		(2.7)		—
Balance at June 30, 2020	$	—	$	1.2	$	(1,120.5)	$	2,704.5	$	1,703.7	$	(2.6)	$	3,286.3	$	—

10

					Accumulated
			Additional		other	Total	Redeemable
Preferred	Common	Treasury	paid-in	Retained	comprehensive	stockholders’	Noncontrolling
Stock	Stock	Stock