CBOE Holdings, Inc. Second Quarter Earnings Conference Call. CBOE Holdings, Inc.

Transcription

1 Second Quarter Earnings Conference Call A August t4 4, 2011 p. 1

2 Agenda Strategic Review Financial Review Questions and Answers William Brodsky Chairman and CEO Alan Dean Executive Vice President, CFO and Treasurer William Brodsky Alan Dean Edward Tilly Executive Vice Chairman p. 2

3 Forward Looking Statements This presentation may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. ti These statements t t are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: legislative or regulatory changes; changes in law or government policy; increasing competition; loss of our exclusive licenses; decrease in trading volumes; an inability to introduce competitive new products and services; competitive pressures on our existing products, services and trading access fees; changes in price levels and volatility in the derivatives and equity markets; economic, political and market conditions; increases in our fixed costs and expenses; loss of existing customers; difficulty developing strategic relationships and attracting new customers; increased costs related to, or the loss of, intellectual property; rapid technological developments; elopments increases in trading volume and order transaction traffic that we cannot accommodate; our ability to maintain our growth effectively; damage to our reputation and brand name; loss of market data revenue; detrimental changes to our fee structure; failure to effectively monitor and manage our risks; customer consolidation; and changes to the tax treatment for options trading. More detailed information about factors that may affect our performance may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2010 and other filings made from time to time with the SEC. p. 3

4 Strategic Review William Brodsky Chairman and CEO p. 4

5 Strong Financial Results 2Q11 vs 2Q10 Operating Revenues Adjusted Operating Revenues 1 (in millions) $120.3 Million, up 7% $417 $402 $433 Operating Margin $253 $344 $214 $ %, up 980 bps Highest level in ten quarters Net Income Allocated to Common Stockholders 2006 YTD Adjusted d Operating Income 1 (in millions) YTD11 $32.6 Million, up 32% Diluted Earnings Per Share $68 $136 $187 $156 $176 $81 $114 $0.36, up 33% YTD11 YTD ¹Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information. p. 5

6 Options ADV Down 17% in 2Q11 Against Difficult 2Q10 Comparison CBOE Holdings Quarterly Options ADV (in millions) Includes May 6 Flash Crash Equity Options Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Index Options Q10 2Q10 3Q10 4Q10 1Q11 2Q11 ETF Options Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 p. 6

7 Options Volume Trends Total Monthly Options Average Daily Volume May 6 Flash Crash (in millions) Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec Source: Company Data p. 7

8 VIX Trading Continues to Hit Record Highs VIX futures increased 190% in 2Q11 versus 2Q10 VIX options increased 34% in 2Q11 versus 2Q10 VIX futures surpassed 100,000 contracts on June 16 VIX futures monthly ADV set a third consecutive record in July of 58,532 contracts O p tions ADV VIX Options & Futures ADV (in thousands) ¹ YTD VIX Options VIX Futures F u tures ADV ¹YTD through 6/30/11 p. 8

9 2Q11 Market Share Data Total Industry Volume Excl. Dividend Trades 4% 2% 4% 4% 3% 4% 25% 31% 26% 10% 14% 17% 23% 1% 14% 10% 14% 18% 20% CBOE C2 PHLX ISE NYSE/Amex NYSE/Arca 1% NOM BOX BATS 94% Source: Options Clearing Corporation and CBOE p. 9

10 Differentiated Product Set CBOE Trades Equity Options Options on ETFs Index Options CFE Futures Exchange 2Q10 vs 2Q % -7.0% -11.7% 194% ADV Chg % of 2Q11 Volume 44% 30% 25% 1% % of 2Q11 Trans. Fees 24% 20% 51% 5% 2Q11 RPC $0.169 $0.202 $0.627 $1.477 p. 10

11 C2 Achieving Steady Growth Averaged 191,200 contracts per day in 2Q11, up 18 percent from 1Q11 Active market makers have nearly doubled since February Adjusted fees and incentives on May 2 to improve market quality Introduced complex order functionality for all listed classes in July C2 Monthly ADV (contracts in thousands) Oct-2010 Nov Dec Jan-2011 Feb Mar Apr May June July p. 11

12 C2 Market Share Continues to Grow C2 Market Share - Gains in SPY, QQQQ and Penny ETF 4.0% 3.8% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 1.9% 1.5% 1.3% 1.0% 0.8% 2.5% 2.2% 17% 1.7% 1.3% 0.0% Jan Feb Mar Apr May Jun Jul All Penny Penny ETF SPY QQQQ p. 12

13 SPXpm to Broaden Customer Reach SEC extended its evaluation of SPXpm rule filing on June 3 SEC must act by Sept 6 to Approve or disapprove Extend review period an additional and final 60 days SEC s extended review focuses on PM settlement PM settlement is a long established, logical settlement convention Used in many exchange-traded products SPXpm provides a potential alternative to OTC trading Aligned with Dodd-Frank mandate to move more OTC trades onto exchanges Committed to working with the SEC to obtain approval to launch SPXpm p. 13

14 Leveraging Expertise in Volatility Products New Initiatives to further develop volatility Introduced CBOE Tail Hedge Index Tracks performance of a portfolio based on one-month out-of-the money VIX calls Provides investor a benchmark for VIX-based tail hedge strategies CBOE may also use index to create a tradable product or license it to others for trading CBOE Options Institute launched new class devoted to VIX trading CFE plans to launch futures contracts on several Radar Logic 28-Day Real Estate Indexes (RPX), pending regulatory approval p. 14

15 Returning Capital to Stockholders Board authorized a $100 million share repurchase program Increased quarterly dividend id d by 20% to $0.12 from $0.10 Strong commitment to returning capital to stockholders Confidence in long-term growth prospects for CBOE Holdings p. 15

16 2011 Initiatives CBOE s unique focus on options and volatility products leaves us well-positioned to take advantage of long-term secular growth trends Key Priorities: Build on the success of C2 Work for approval to launch SPXpm Expand product offerings, including VIX product line Position CBOE to benefit from regulatory reform Strong operating cash flow and debt-free balance sheet provide us financial flexibility Invest in innovation Reward stockholders p. 16

17 2Q11 Financial Overview 2Q11 2Q10 $ Change % Change (in millions, except RPC and EPS) Total Operating Revenues $ $ $ 7.7 7% Total Operating Expenses (7.0) -10% Operating Income % Operating Margin Percentage 46.9% 37.1% N/A 980 bps Income Before Income Taxes % Net Income % Net Income Allocated to Common Stockholders % Diluted EPS $0.36 $0.27 $ % Total Contracts Per Day N/A -16% Rate Per Contract (RPC) $0.308 $0.281 $ % p. 17

18 2Q11 Operating Revenues Operating Revenues (in millions) 2Q Q 2010 $ CHG % CHG Key Drivers: Transaction fees $ 86.3 $ 94.1 $ (7.8) -8% Access fees Increase reflects implementation Access fees % of new trading permit program Exchange services and other fees (0.2) -4% Market data fees (0.8) -14% Regulatory fees % Other Revenue % Total Operating Revenues $ $ $ 7.7 7% Transaction fees 16% decrease in trading volume 10% increase in RPC to $0.308 Other revenue Increase in licensing fees and other miscellaneous items p. 18

19 Transaction Fees Driven by Volume and Rate Per Contract Thousands 6,000 Overall Transaction Fee per Contract (RPC) RPC down due to lower mix of index options and fee caps RPC up due to higher mix of index options and futures and lower volume discounts RPC $ ,000 $ ,000 $ ,000 $ ,000 $ ,000 $ Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 $0.200 ADV (000s) 4,636 4,306 5,346 4,594 4, ,715 4, ,350 4,555 5,310 3,725 4,262 5,081 4, RPC ($) p. 19

20 Options Trading Volume Mix RPC Increased due to Mix Shift to Higher-Margin Index Options and Futures 2Q Q 2011 Futures, 1.1% ETF, 27.3% ETF, 30.3% Index, 23.8% Equity, 48.6% Index, 25.1% Equity, 43.5% p. 20

21 2Q11 Operating Expenses Operating Expenses (in millions) 2Q Q 2010 $ CHG % CHG Employee Costs $ 24.5 $ 22.6 $ 1.9 8% Depreciation and Amortization % Data Processing (0.3) -6% Outside Services (2.9) -29% Royalty Fees (1.1) -10% Trading Volume Incentives (4.8) -66% Travel and Promotional Expenses (0.9) -28% Facilities Costs % Other Expenses (0.7) -30% Total Operating Expenses $ 63.8 $ 70.8 $ (7.0) -10% Key Drivers: Employee Costs Increase in stock-based compensation; $2.5 million continuing expense and $0.1 million of accelerated Depreciation and Amortization Reflects startup of C2 and accelerated write-off of assets Outside O t Services Lower legal and consulting fees Royalty Fees Lower volume in licensed index options Trading Volume Incentives Lower volume in equity and ETF options and change in incentive program p. 21

22 2Q11 Core Operating Expenses Down 12% Excluding Impact of Stock Grants (in thousands) 2Q11 2Q10 $ CHG % CHG Total loperating Expenses $ 63,838 $ 70, $ (6,954) -10% Less: Depreciation and amortization 8,996 7,301 1,695 23% Accelerated stock-based compensation expense NM Volume-based expenses: - Royalty fees 10,373 11,519 (1,146) 146) -10% Trading volume incentives 2,515 7,339 (4,824) -66% Core Operating Expenses (non-gaap): $ 41,841 $ 44,633 $ (2,792) -6% Less: Continuing stock-based compensation expense (3,106) (636) (2,470) NM Core Operating Expenses Excluding Continuing Stock- Based Compensation (non-gaap) $ 38,735 $ 43,997 $ (5,262) -12% Detail of Core Operating Expenses Excluding Continuing Stock-Based Compensation (non-gaap) Employee costs (excluding stock-based compensation expense) $ 21,285 $ 22,004 $ (719) -3% Data processing 4,905 5,155 (250) -5% Outside services 7,190 10,041 (2,851) -28% Travel and promotional expenses 2,368 3,209 (841) -26% Facilities costs 1,400 1, % Other expenses 1,587 2,273 (686) -30% Total $ 38,735 $ 43,997 $ (5,262) -12% NM = not meaningful p. 22

23 Volume-based Expenses Volume-based expenses: (in thousands) 2Q11 2Q10 $ CHG % CHG Royalty fees $ 10,373 $ 11,519 $ (1,146) -10% Trading volume incentives 2,515 7,339 (4,824) -66% Total $ 12,888 $ 18,858 $ (5,970) -32% Royalty fees declined due to lower trading volume in licensed index products Trading volume incentives down due to lower trading volume and changes in incentive program Equity options down 25% in 2Q11 versus 2Q10 ETF options down 7% in 2Q11 versus 2Q10 p. 23

24 Well Positioned to Deliver Higher Margins Quarterly Adjusted Operating Income and Margin¹ ($ in millions) $ % 48.0% $50.0 $40.0 $30.00 $20.0 $10.0 $0.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 ¹Adjusted to reflect the impact of certain items. See Appendix for Non-GAAP Information. Operating Income Margin 46.0% 44.0% 42.0% 40.0% 0% p % 36.0% 34.0% 32.0% 30.0%

25 Guidance Summary for Full Year 2011 Revenue impact of 1/2/11 fee changes expected to be +$3 to +$5 million Fee changes expected to increase RPC by $0.003 to $0.004 in 2011 Access fees in a range of $65 to $68 million Excludes access fees for SPXpm on C2 Core expenses adjusted to a range of $170 to $173 million from a range of $173 to $177 million Includes continuing stock-based compensation expense in a range of $ to $12.7 million Accelerated stock-based compensation expense of $453,000 (excluded from adjusted earnings) Depreciation and amortization expense of $35 to $37 million Capital expenditures of $30 to $35 million Effective tax rate in a range of 41.7% to 42.0% p. 25

26 Strong Debt-Free Balance Sheet As of As of As of ($ in thousands) Dec. 31, 2010 Mar. 31, 2011 June 30, 2011 Balance Sheet Data Cash¹ $ 53,789 $115,689 $106,545 Total Assets $254,112 $320,820 $319,422 Total Liabilities $ 78,238 $117,856 $ 92,128 Total Stockholders Equity $175,874 $202,964 $227,294 Other Data Working Capital¹ $ 61,118 $ 93,479 $116,629 Capital Expenditures² $ 23,556 $ 7,134 $ 18,334 No existing debt 1. Current assets minus current liabilities. 2. Does not include new investments in affiliates or the disposition of interests in affiliates. p. 26

27 Strong Cash Flow and Return of Capital Generated $14.3 million in operating cash flow for second quarter and $92.6 million year-to-date 63% increase in 2Q11 compared with 2Q10 30% increase year-to-date 2011 versus 2010 Cash from operations expected to fund ongoing growth initiatives Focused on short-term earnings performance while driving long- term stockholder value p. 27

28 Questions & Answers p. 28

29 Appendix Materials p. 29

30 Annual Financial Highlights Options ADV (mm) RPC Transaction Fees ($mm) Exchange-traded funds $0.309 $344 Indexes Equitie s $0.282 $0.288 $0.288 $ $ % $273 24% 25% 23% % 20% 24% $ % 24% $145 16% 23% 25% 51% 56% 53% 51% 58% 59% $315 $ Adjusted Operating Revenues ($mm)¹ Adjusted Operating Expenses ($mm)¹ Adjusted Pre-Tax Earnings ($mm)¹ $253 $344 $417 $402 $433 $180 $185 $208 $229 $246 $257 $140 $193 $155 $175 $201 $72 $ ¹Adjusted to reflect the impact of certain items. See Non-GAAP Information p. 30

31 Historical Transaction Fee Drivers For the Year Ended December 31, (in thousands, except rate per contract) CAGR/ Avg. 6 Mos Ended June 30, Mos Ended June 30, 2010 Average Daily Volume Equities 1,556 1,996 2,387 2,519 2,273 10% 2,267 2,489 Indexes , ,071 14% 1,143 1,187 ETF s ,304 1,100 1,097 22% 1,306 1,249 Total Options 2,688 3,763 4,717 4,503 4,440 13% 4,716 4,925 Futures % Total 2,690 3,767 4,722 4,508 4,457 14% 4,762 4,938 Rate Per Contract Equities $ $ $ $ $ $ $ $ Indexes ETF s Total Options $ $ $ $ $ $ $ $ Futures $ $ $ $ $ $ $ $ Total $ $ $ $ $ $ $0.296 $ Total Transaction Fees $190,224 $272,716 $ 343,779 $ 314,506 $ 330,264 15% $ 176,179 $177,493 p. 31

32 CBOE Rolling 3-Month RPC CBOE Rolling Three-Month Average Transaction Fee Per Contract 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.170 $0.164 $0.160 $0.163 $0.168 $0.169 Indexes Exchange-traded funds Total options average Futures Total average transaction fee per contract $0.286 $0.282 $0.285 $0.293 $0.301 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.177 $0.180 $0.184 $0.172 $0.163 $0.162 $0.170 $0.180 $0.182 $0.180 $0.179 $0.177 Indexes Exchange-traded funds Total options average Futures Total average transaction fee per contract $0.286 $0.294 $0.300 $0.286 $0.279 $0.281 $0.293 $0.301 $0.306 $0.302 $0.300 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.179 $0.188 $0.195 $0.188 $0.183 $0.188 $0.187 $0.181 $0.171 $0.168 $0.172 $0.172 Indexes Exchange-traded funds Total options average Futures Total average transaction fee per contract $0.288 $0.288 $0.292 $0.283 $0.274 $0.273 $0.273 $0.272 $0.266 $0.268 $0.277 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Equities $0.174 $0.183 $0.187 $0.187 $0.182 $0.176 $0.174 $0.179 $0.175 $0.178 $0.171 $0.169 Indexes Exchange-traded funds Total options average Futures Total average transaction fee per contract $0.279 $0.286 $0.292 $0.293 $0.287 $0.279 $0.276 $0.282 $0.289 $0.299 $0.298 $0.291 p. 32

33 Quarterly Core Operating Expenses ($ in thousands) 2Q 2011 % rev 1Q 2011 % rev 4Q 2010 % rev 3Q 2010 % rev 2Q 2010 % rev Total Operating Expenses $63,838 53% $66,507 54% $65,537 62% $71,082 67% $70,792 63% Less: Depreciation and Amortization 8,996 8% 8,696 7% 8,190 8% 7,099 7% 7,301 6% Accelerated stock-based compensation ,004 2% 10,965 10% Volume-based Expense: Royalty Fees 10,373 9% 11,146 9% 9,710 9% 9,226 9% 11,519 10% Trading Volume Incentives 2,515 2% 5,759 5% 5,665 5% 4,594 4% 7,339 7% Non-Operating Items: Exercise Right Appeal Settlement Core Operating Expenses (non-gaap)¹: $41,841 35% $40,566 33% $39,968 38% $39,198 37% $44,633 40% Less: Continuing stock-based compensation (3,106) -3% (3,073) -3% (3,233) -3% (3,963) -4% (636) -1% Core Operating Expenses excluding continuing stock-based compensation (non-gaap)¹: $38,735 32% $37,493 30% $36,735 35% $35,235 33% $43,997 39% Expense Detail: Employee Costs $21,285 18% $22,323 18% $20,586 19% $19,715 19% $22,004 20% Data Processing 4,905 4% 4,428 4% 4,960 5% 4,304 4% 5,155 5% Outside Services 7,190 6% 6,579 5% 6,788 6% 6,293 6% 10,041 9% Travel and Promotion Expenses 2,368 2% 1,685 1% 1,672 2% 2,702 3% 3,209 3% Facilities Costs 1,400 1% 1,492 1% 1,662 2% 1,440 1% 1,315 1% Other Expenses 1,587 1% 986 1% 1,067 1% 781 1% 2, % Number of Full Time Employees ¹Please see our disclaimer regarding Non-GAAP financial measures. p. 33

34 2011 Calculation of Projected Weighted Average Shares Shares Days Outstanding 1Q 2011 (pre-vesting) Total Days Weighted Avg Shares 2Q 2011 (vested qtr) Days Outstanding Total Days Weighted Avg Unrestricted common stock 51,786,717, ,786,717, 51,786,717, ,786,717, Class A-2 common stock (converts to unresticted 6/13/11) 38,297, ,297,994 38,297, ,297,994 Vesting of participating securities (restricted stock) on 5/17/11 22, ,947 Vesting of participating securities (restricted stock) on 6/15/11 413, ,106 Total weighted average shares - basic and diluted 90,084,711 90,084,711 90,520,527 90,163,764 Participating securities as of quarter end 2,195, ,195,621 2,193, ,193,521 Vesting of participating securities on 5/17/11 (22,641) (10,947) Vesting of participating securities on 6/15/11 (542,550) (89,431) Weighted average shares including participating securities 92,280,332 92,148,857 92,256,906 Percentage of net income allocated to participating securities 2.379% 2.269% Shares 3Q and 4Q 2011 (post-vesting) Full-Year 2011 Days Total Days Total Outstanding Days Weighted Avg Shares Outstanding Days Weighted Avg Unrestricted common stock 90,084, ,084,711 90,084, ,084,711 Vesting of participating securities (restricted stock) on 5/17/11 22, ,641 22, ,143 Vesting of participating securities (restricted stock) on 6/15/11 413, , , ,560 Total weighted average shares - basic and diluted 90,520,527 90,520,527 90,324,414 Participating securities as of 6/30/11 2,193, ,193,521 2,195, ,195,621 Vesting of participating securities (restricted stock) on 5/17/11 (22,641) (22,641) (22,641) (14,143) Vesting of participating securities (restricted stock) on 6/15/11 (542,550) (542,550) (542,550) (295,801) Weighted average shares including participating securities 92,148,857 92,505,892 Percentage of net income allocated to participating securities 1.767% 2.038% p. 34

35 Quarterly Financial Highlights Options ADV (mm) RPC Transaction Fees ($mm) Equitie s Indexes Exchange-traded funds % 23% % 23% % $0.308 $83 $0.300 $0.306 $0.293 $0.281 $0.285 $94 $73 $80 $90 $86 20% 18% 24% 19% 22% 24% 24% 54% 59% 57% 53% 53% 49% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Adjusted Operating Revenue ($mm)¹ Adjusted Operating Expenses ($mm)¹ Adjusted Pre-Tax Earnings ($mm)¹ $101 $113 $106 $113 $124 $120 $62 $71 $66 $46 $42 $64 $64 $39 $49 $58 $56 $60 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 ¹Adjusted to reflect the impact of certain items. See Non-GAAP Information. p. 35

36 GAAP to Non-GAAP Reconciliation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures For the Three Months Ended March 31 and June 30, 2011 (in thousands, ex cept per share amounts) Reported (GAAP) Three months ended March 31, 2011 Items Impacting Results Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Reported (GAAP) Three months ended June 30, 2011 Items Impacting Results Accelerated stock-based compensation After Considering Items (non- GAAP) Total Operating Revenues $ 124,042 $ 124,042 $ 120,290 $ 120,290 Total Operating Expenses 66,507 (340) 66,167 63,838 (113) 63,725 Operating Income 57, ,875 56, ,565 Operating Margin 46.4% 46.7% 46.9% 47.0% Total Other Income /(Expense) (643) 459 (184) (162) (162) Income Before Income Taxes 56, ,691 56, ,403 Income Tax Provision 24, ,358 22, ,935 Net Income $ 32,871 $ 197 $ 265 $ 33,333 $ 33,401 $ 67 $ 33,468 Net Income Allocated to Participating Securities (782) (5) (6) (793) (792) (2) (794) Net Income Allocated to Common Stockholders $ 32,089 $ 192 $ 259 $ 32,540 $ 32,609 $ 65 $ 32,674 Diluted Net Income per Share Allocated to Common Stockholders $ 0.36 $ 0.00 $ 0.00 $ 0.36 $ 0.36 $ 0.00 $ 0.36 NOTE: May not foot due to rounding p. 36

37 GAAP to Non-GAAP Reconciliation (in thousands, ex cept per share amounts) Three months ended September 30, 2010 Three months ended December 31, 2010 Items Impacting Results Items Impacting Results Reported (GAAP) Accelerated stock-based compensation After Considering Items (non- GAAP) Reported (GAAP) Recognition of prior-period revenue Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Total Operating Revenues $ 106,015 $ - $ 106,015 $ 117,391 $ (4,406) $ 112,985 Total Operating Expenses 71,082 (10,965) 60,117 65,537 (2,004) 63,533 Operating Income 34,933 10,965 45,898 51,854 (4,406) 2,004 49,452 Operating Margin 33.0% 43.3% 44.2% 43.8% Total Other Income /(Expense) (235) (235) (1,898) 1,620 (278) Income Before Income Taxes 34,698 10,965 45,663 49,956 (4,406) 2,004 1,620 49,174 Income Tax Provision 14,244 4,461 18,705 18,579 (1,638) ,288 Net Income $ 20,454 $ 6,504 $ 26,958 $ 31,377 $ (2,768) $ 1,259 $ 1,018 $ 30,886 Net income allocated to Participating Securities $ (434) $ (138) $ (572) $ (690) $ 61 $ (28) $ (22) $ (679) Net Income Allocated to Common Stockholders $ 20,020 $ 6,366 $ 26,386 $ 30,687 $ (2,707) $ 1,231 $ 995 $ 30,206 Diluted Net Income Per Share Allocated to Common Stockholders $ 0.20 $ 0.06 $ 0.26 $ 0.31 $ (0.03) $ 0.01 $ 0.01 $ 0.31 Diluted Net Income Per Share for all Stockholders $ 0.20 $ 0.06 $ 0.26 $ 0.32 $ (0.03) $ 0.01 $ 0.01 $ 0.32 (in thousands, ex cept per share amounts) Year ended December 31, 2010 Year ended December 31, 2009 Reported (GAAP) Recognition of prior-period revenue Items Impacting Results Accelerated stock-based compensation Impairment charge After Considering Items (non- GAAP) Reported (GAAP) Items Impacting Results Recognition of deferred access fee revenue Exercise right appeal settlement After Considering Items (non- GAAP) Total Operating Revenues $ 437,104 $ (4,406) $ 432,698 $ 426,082 $ (24,086) $ 401,996 Total Operating Expenses 269,763 (12,968) 256, ,498 (2,086) 246,412 Operating Income 167,341 (4,406) 406) 12, , ,584 (24,086) 2, , Operating Margin 38.3% 40.7% 41.7% 38.7% Total Other Income /(Expense) (2,718) 1,620 (1,098) (355) (355) Income Before Income Taxes 164,623 (4,406) 12,968 1, , ,229 (24,086) 2, ,229 Income Tax Provision 65,227 (1,746) 5, ,261 70,778 (9,619) ,992 Net Income $ 99,396 $ (2,660) $ 7,830 $ 978 $ 105,544 $ 106,451 $ (14,467) $ 1,253 $ 93,237 Net income allocated to Participating Securities $ (1,229) $ 33 $ (97) $ (12) $ (1,305) $ - $ - $ - $ - Net Income Allocated to Common Stockholders $ 98,167 $ (2,627) $ 7,733 $ 966 $ 104,239 $ 106,451 $ (14,467) $ 1,253 $ 93,237 Diluted Net Income Per Share Allocated to Common Stockholders $ 1.03 $ (0.03) $ 0.08 $ 0.01 $ 1.09 $ 1.17 ($0.16) $0.01 $ 1.03 Diluted Net Income Per Share for all Stockholders $ 1.04 $ (0.03) $ 0.08 $ 0.01 $ 1.10 $ 1.17 ($0.16) $0.01 $ 1.03 NOTE: May not foot due to rounding p. 37

38 Non-GAAP Information In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-gaap measures of operating performance. The non-gaap measures provided in this presentation include core operating expenses, adjusted revenue, adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted net income allocated to common stockholders and adjusted diluted earnings per share. Management believes that t the non-gaap financial i measures presented in this presentation, including adjusted net income and core operating expenses, provide useful and comparative information to assess trends in our core operations and a means to evaluate period-to-period comparisons. Non-GAAP financial measures disclosed by management, including adjusted diluted EPS, are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non- GAAP financial i measures used by other companies. Core operating expenses is the company s operating expenses after excluding (i) volume-based expenses, (ii) depreciation and amortization expense, (iii) accelerated stock-based compensation expense and (iv) other unusual or one-time expenses. p. 38

39 400 South LaSalle Street Chicago, IL Debbie Koopman Director, Investor Relations com p. 39