10-Q: Cboe Global Markets Reports Strong Q3 2025 Earnings

Cboe Global Markets reports significant revenue and net income growth for Q3 and YTD 2025, driven by derivatives and data, despite regulatory challenges and strategic divestitures.

Summary

• Total revenues for the three months ended September 30, 2025, increased by 8% to $1,141.7 million, compared to $1,055.7 million in the prior year period.
• Net income for the three months ended September 30, 2025, rose by 38% to $300.8 million, up from $218.5 million in the same period last year.
• Diluted earnings per share (EPS) for the quarter increased by 38% to $2.85, compared to $2.07 in Q3 2024.
• For the nine months ended September 30, 2025, total revenues grew by 18% to $3,510.2 million, up from $2,986.9 million in the prior year period.
• Year-to-date net income increased by 38% to $786.5 million, compared to $568.4 million for the nine months ended September 30, 2024.
• Year-to-date diluted EPS increased by 39% to $7.45, up from $5.36 in the prior year period.
• Derivatives markets revenue increased by 19% for the quarter and 20% year-to-date, primarily due to higher transaction and clearing fees from multi-listed options ADV (up 31% in Q3, 26% YTD) and index options ADV (up 15% in Q3, 16% YTD).
• Data Vantage revenue increased by 11% for both the quarter and year-to-date, driven by higher access and capacity fees and proprietary market data fees.
• The company announced its decision to wind down its Japanese equities business, suspending operations on August 29, 2025, resulting in an impairment charge of $4.5 million for the quarter and $21.6 million year-to-date.
• The 11th Circuit Court of Appeals vacated the CAT Funding Model Order on July 25, 2025, remanding the matter to the SEC for further proceedings, with a deadline for SEC action by November 29, 2025.
• The D.C. Circuit Court ruled in favor of the SEC on October 14, 2025, upholding the reduction of equity access fee caps from $0.30 to $0.10 per 100 shares, which is expected to reduce transaction fee revenue.
• The company is initiating a sales process for its Canadian and Australian equities businesses subsequent to the reporting period.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial performance with significant increases in revenue and net income, particularly in its core derivatives and data segments. However, ongoing regulatory challenges related to CAT funding and the adverse ruling on equity access fees introduce material uncertainties and potential negative impacts on future revenue. Strategic realignments, while potentially beneficial long-term, involve near-term costs and divestitures. The management changes also add a layer of transition risk.

Positives

• Strong revenue growth across key segments: Total revenues increased 8% for the quarter and 18% year-to-date.
• Significant net income and EPS growth: Net income increased 38% for both the quarter and year-to-date, with diluted EPS showing similar gains.
• Robust performance in Derivatives markets: Revenue increased 19% in Q3 and 20% YTD, driven by strong growth in multi-listed options ADV (up 31% in Q3) and index options ADV (up 15% in Q3).
• Growth in Data Vantage segment: Revenue increased 11% for both the quarter and year-to-date, indicating strong demand for proprietary market data and access services.
• Increased earnings on investments: A $45.6 million gain on the investment in 7Ridge Fund (Trading Technologies) significantly boosted non-operating income.
• Higher interest income: Increased by $2.9 million in Q3 and $13.9 million YTD due to investments in U.S. treasury bills and higher cash balances.
• Operating expenses decreased 7% year-to-date, primarily due to a non-recurring impairment charge in the Digital segment in 2024.
• Cboe Clear Europe received regulatory approval for Securities Financing Transaction (SFT) clearing in November 2024, with the first SFT processed in March 2025, expanding service offerings.

Negatives

• Cash and spot markets revenue decreased by 4% for the three months ended September 30, 2025, primarily due to a 100% decrease in Section 31 fee rates.
• Futures segment experienced a decrease in revenues less cost of revenues by 22% for the quarter and 10% year-to-date, driven by an 11% decrease in average daily volume (ADV) year-to-date.
• Impairment charges related to the wind-down of Cboe's Japanese equities business totaled $4.5 million for the quarter and $21.6 million year-to-date.
• The D.C. Circuit Court's ruling upholding reduced equity access fee caps (from $0.30 to $0.10 per 100 shares) is expected to reduce transaction fee revenue and limit the ability to incentivize liquidity and differentiate fee schedules on Cboe U.S. equity exchanges.
• The 11th Circuit Court vacated the CAT Funding Model Order, which could lead to Plan Participants incurring additional significant costs related to CAT funding or an inability to collect on promissory notes.
• North American Equities segment experienced a 40% decrease in U.S. Equities net capture year-to-date, partially offsetting overall revenue growth in the segment.

Risks

• Loss of exclusive right to list and trade certain index options and futures products.
• Adverse economic, political, and market conditions, including inflation, market volatility, and potential recession.
• Compliance with legal and regulatory obligations, including potential changes in tax regimes.
• Price competition and industry consolidation.
• Decreases in trading or clearing volumes, market data fees, or shifts in product mix.
• Security vulnerabilities and breaches to systems and communication networks.
• Inability to attract and retain skilled management and other personnel, especially given recent executive transitions and competition for technology talent.
• Dependence on and exposure to risk from third parties.
• Factors impacting the quality and integrity of proprietary and other applicable indices.
• Challenges in managing global operations, growth, and strategic acquisitions or alliances effectively.
• Increases in the cost of products and services used.
• Inability to operate without violating intellectual property rights of others and costs to protect own IP.
• Risks associated with operating clearinghouses, including credit, counterparty, investment, and default risks.
• Inability to accommodate trading and clearing volume without system failure or degradation.
• Misconduct by market users or those for whom transactions are cleared.
• Challenges to the use of open-source software code.
• Ability to meet compliance obligations while managing business interests and regulatory responsibilities.
• Loss of key customers or significant reduction in trading/clearing volumes by key customers.
• Ability to maintain BIDS Trading as an independently managed and operated trading venue.
• Damage to reputation.
• Effectiveness of compliance and risk management methods.
• Restrictions imposed by debt obligations and ability to make payments or refinance debt.
• Ability to maintain an investment-grade credit rating.
• Impairment of goodwill, long-lived assets, investments, or intangible assets.
• Accuracy of estimates and expectations.
• Litigation risks and other liabilities, particularly concerning the Consolidated Audit Trail (CAT) funding model and equity access fees.
• Potential for additional significant costs related to historical, current, and future funding of the CAT, and/or inability to collect on promissory notes related to CAT funding due to ongoing litigation and regulatory developments.
• The SEC's reduced equity access fee cap may inhibit the ability to incentivize liquidity on Cboe U.S. equity exchanges, reducing transaction fee revenue and limiting competitive differentiation.

Future Outlook

The company expects cash on hand and other available resources, including cash from operations and the Revolving Credit Facility, to be sufficient for near-term cash requirements, including operations, capital expenditures, interest payments, dividends, potential strategic acquisitions, tax adjustments, and share repurchases. Long-term cash needs will depend on new product introductions, capital needs of subsidiaries, geographic business mix, and potential acquisitions, with expectations to meet these through cash from operations and the Revolving Credit Facility, or by borrowing/issuing shares for significant acquisitions. The company expects to formally close its Japanese equities businesses subject to consultation with regulators. The outcome of the CAT Funding Model Order litigation and the impact of the reduced equity access fee caps are uncertain but could materially affect future financial results.

Management Comments

• Management evaluates estimates based upon historical experience, observation of trends, information available from outside sources, and various other assumptions believed to be reasonable under the circumstances.
• The company is committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future.
• The company plans to continue to explore potential applicable avenues to recoup historical and potential future CAT costs.
• The company and Cboe Options intend to litigate the OEMS disapproval matter vigorously.
• The company expects to fund share repurchases primarily through the use of existing cash balances.
• The company's expectation is to continue to pay dividends, though the decision remains at the Board's discretion and may be affected by various factors.

Industry Context

Cboe Global Markets operates in a highly competitive and rapidly changing financial services environment, influenced by macroeconomic events, investor sentiment, regulatory changes, geopolitical events, and technological advancements. The company's strategic refocusing, including the wind-down of its Japanese equities business and potential sales of Canadian and Australian equities, reflects an adaptation to evolving market dynamics and a sharpening of focus on core strengths. The regulatory landscape, particularly concerning the Consolidated Audit Trail (CAT) and equity access fees, continues to pose significant challenges and uncertainties for market operators, potentially impacting revenue models and competitive positioning across the industry. The shift towards centrally cleared Securities Financing Transactions (SFTs) by Cboe Clear Europe aligns with broader industry trends for enhanced risk management and efficiency in post-trade services.

Comparison to Industry Standards

• Cboe's Options segment, as the largest options exchange operator in the U.S., continues to demonstrate strong performance, with multi-listed options ADV up 31% in Q3 2025, indicating robust engagement compared to broader market trends.
• The company's U.S. equities exchanges (BZX, BYX, EDGX, and EDGA) saw a 36% increase in total touched shares in Q3 2025, suggesting competitive volume growth relative to other U.S. national securities exchanges.
• Cboe Europe Equities matched ADNV increased by 26% in Q3 2025, positioning it as one of the largest equities exchanges by value traded in Europe, outperforming some regional competitors.
• Cboe Clear Europe's trades cleared increased by 7% in Q3 2025 and 27% YTD, and its European equities market share cleared grew to 39.6% in Q3 2025, indicating a strong competitive position against other European CCPs.
• The D.C. Circuit's ruling on equity access fees, reducing the cap from $0.30 to $0.10 per 100 shares, aligns Cboe's U.S. equity exchanges with a lower fee structure that may become a new industry standard, potentially impacting profitability compared to historical benchmarks.
• The impairment of Cboe Japan's assets and the decision to wind down the business reflect challenges in competing effectively in certain Asian markets, contrasting with the company's stronger performance in North American and European derivatives and equities.

Management Changes

Corporate Governance

Legal Proceedings

• The 11th Circuit Court of Appeals vacated the SEC's CAT Funding Model Order on July 25, 2025, remanding the matter to the SEC for further proceedings, with a deadline for SEC action by November 29, 2025. This could result in Plan Participants incurring additional significant costs or being unable to collect on promissory notes related to CAT funding.
• A putative class action (Erik A. Davidson, John Restivo and National Center for Public Policy Research vs. Gary Gensler, SEC and CATLLC) was filed on April 16, 2024, challenging the constitutionality of Rule 613 and the CAT. The case is stayed until January 15, 2026, potentially delaying CAT fee assessment.
• Citadel filed a Petition for Review (PFR) of the SEC's CAT RFQ Exemptive Order on July 17, 2024. The PFR is stayed until the CAT Funding Model Order Litigation is resolved. An assessment conference is scheduled for November 5, 2025.
• The D.C. Circuit Court ruled in favor of the SEC on October 14, 2025, upholding the Final Rules concerning Regulation NMS, which reduce equity access fee caps from $0.30 to $0.10 per 100 shares. This is expected to reduce transaction fee revenue and limit the company's ability to incentivize liquidity and differentiate fee schedules.
• Cboe Options filed a Petition for Review (PFR) of the SEC's disapproval order regarding its OEMS proposal in the 7th Circuit. Oral argument is scheduled for November 4, 2025.

Stakeholder Impact

• Shareholders: Positive impact from strong net income and EPS growth, increased dividends, and ongoing share repurchase program. However, potential negative impact from regulatory changes (equity access fees, CAT litigation) and strategic divestitures could create uncertainty.
• Employees: Impacted by executive transitions and potential changes in roles due to business realignments (e.g., wind-down of Japanese equities, potential sale of Canadian/Australian equities). Compensation and benefits increased due to accrued bonuses and merit increases.
• Customers: May experience changes in fee structures due to regulatory changes (e.g., reduced equity access fee caps). New services like SFT clearing from Cboe Clear Europe could offer enhanced solutions.
• Regulators: Ongoing engagement with SEC, CFTC, FCA, DNB, FINRA, ASIC, JFSA, JSDA, OSC, and CIRO due to legal proceedings (CAT, equity access fees, OEMS) and routine reviews.
• Clearing Participants: Affected by Cboe Clear Europe's SFT clearing services and the ongoing monitoring of credit and liquidity risks within clearing operations. Potential impact from CAT funding model changes.
• Investment Partners: 7Ridge Fund (owner of Trading Technologies) transaction resulted in a significant gain for Cboe, highlighting successful investment partnerships.

Next Steps

• Formally close the Japanese equities businesses, subject to consultation with regulators.
• Continue to monitor updates to the Climate Disclosure Rules and potential impacts on consolidated financial statements.
• Explore potential avenues to recoup historical and potential future CAT costs.
• Litigate vigorously the OEMS disapproval order challenge, with oral argument scheduled for November 4, 2025.
• SEC to act on the CAT Funding Model Order by November 29, 2025, following the 11th Circuit's remand.
• Conduct an assessment conference on November 5, 2025, for Citadel's PFR of the CAT RFQ Exemptive Order.
• Initiate a sales process for the Canadian equities and Australian equities businesses.
• Pay a quarterly cash dividend of $0.72 per share on December 15, 2025, to stockholders of record on November 28, 2025.

Key Dates

Recommendation

Cboe Global Markets delivered strong financial results for Q3 and YTD 2025, driven by robust performance in its Derivatives and Data Vantage segments. The significant increase in net income and EPS, coupled with a substantial gain from an investment, indicates healthy underlying business operations. However, the D.C. Circuit's ruling upholding reduced equity access fee caps presents a clear headwind for transaction fee revenue in North American Equities, and the ongoing litigation surrounding the CAT funding model introduces considerable regulatory uncertainty and potential future costs. While the company is strategically realigning its portfolio by exiting less profitable ventures (Japan, potential sales of Canada/Australia equities), these transitions, along with significant management changes, add an element of execution risk. Given the strong core performance balanced against these material regulatory and strategic uncertainties, a 'hold' recommendation is appropriate for a seasoned investor, allowing time to assess the full impact of these developments.

Keywords

Cboe Global Markets, SEC Filing, 10-Q, Financial Results, Derivatives Trading, Options Trading, Equities Trading, Market Data, Clearinghouse, Financial Technology, Regulatory Compliance, Risk Management, Executive Changes, Strategic Divestitures, Consolidated Audit Trail, Equity Access Fees, CBOE