CBOE GLOBAL MARKETS, INC.
2023 FORM 10-K
| PART I |
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| Item 1. | | Business | 8 |
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| Item 1A. | | Risk Factors | 35 |
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| Item 1B. | | Unresolved Staff Comments | 60 |
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| Item 1C. | | Cybersecurity | 60 |
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| Item 2. | | Properties | 62 |
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| Item 3. | | Legal Proceedings | 63 |
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| Item 4. | | Mine Safety Disclosures | 63 |
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| PART II |
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| Item 5. | | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 64 |
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| Item 6. | | Selected Financial Data | N/A |
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| Item 7. | | Management's Discussion and Analysis of Financial Condition and Results of Operations | 67 |
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| Item 7A. | | Quantitative and Qualitative Disclosures about Market Risk | 100 |
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| Item 8. | | Financial Statements and Supplementary Data | 106 |
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| Item 9. | | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 164 |
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| Item 9A. | | Controls and Procedures | 164 |
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| Item 9B. | | Other Information | 164 |
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| Item 9C. | | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 164 |
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| PART III |
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| Item 10. | | Directors, Executive Officers and Corporate Governance | 165 |
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| Item 11. | | Executive Compensation | 165 |
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| Item 12. | | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 165 |
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| Item 13. | | Certain Relationships and Related Transactions, and Director Independence | 165 |
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| Item 14. | | Principal Accountant Fees and Services | 165 |
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| PART IV |
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| Item 15. | | Exhibits, Financial Statement Schedules | 166 |
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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. |
| ● | “ATS” refers to an alternative trading system. |
| ● | “Bats Global Markets” and “Bats” refer to our wholly-owned subsidiary Bats Global Markets, Inc., now known as Cboe Bats, LLC, and its subsidiaries. |
| ● | “BIDS Trading” refers to BIDS Trading, L.P., a wholly-owned subsidiary of Cboe Global Markets, Inc. The ATS operated by BIDS Trading is not a registered national securities exchange or a facility thereof. |
| ● | “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 Asia Pacific” refers to Cboe Asia Pacific Holdings Limited (formerly known as Chi-X Asia Pacific Holdings Limited), a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe Australia” refers to Cboe Australia Pty Ltd. (formerly known as Chi-X Australia Pty. Ltd.), a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe Canada” refers to the former Aequitas Innovations, Inc. and Neo Exchange Inc. (commonly referred to as “NEO Exchange”), which were wholly-owned subsidiaries of Cboe Global Markets, Inc. |
| ● | “Cboe Canada Inc.” is a wholly-owned subsidiary of Cboe Global Markets, Inc. and a recognized Canadian securities exchange. As of January 1, 2024, the Cboe Canada and MATCHNow entities have been amalgamated into Cboe Canada Inc. |
| ● | “Cboe Chi-X Europe” refers to Cboe Chi-X Europe Limited, a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe Clear Digital” refers to Cboe Clear Digital, LLC (formerly known as Eris Clearing, LLC), a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe Clear Europe” refers to Cboe Clear Europe N.V. (formerly known as European Central Counterparty N.V., formerly defined as “EuroCCP”), a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe Digital” refers to Cboe Digital Intermediate Holdings, LLC (formerly known as Eris Digital Holdings, LLC) and its subsidiaries. Prior to rebranding under the Cboe Digital name, Eris Digital Holdings, LLC and its subsidiaries operated under the “ErisX” name. |
| ● | “Cboe Europe Equities and Derivatives” 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 UK 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 Fixed Income” refers to Cboe Fixed Income Markets, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe FX” refers to Cboe FX Markets, LLC, a wholly-owned subsidiary of Cboe Global Markets, Inc. |
| ● | “Cboe Japan” refers to Cboe Japan Ltd. (formerly known as Chi-X Japan Ltd.), 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. |
| ● | “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. |
| ● | “CSD Br” refers to CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., a Brazilian trade repository. |
| ● | “CIRO” refers to the Canadian Investment Regulatory Organization. |
| ● | “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. |
| ● | “Exchanges” refers to Cboe Options, C2, BZX, BYX, EDGX, and EDGA. |
| ● | “FASB” refers to the Financial Accounting Standards Board. |
| ● | “FCA” refers to the UK Financial Conduct Authority. |
| ● | “FINRA” refers to the Financial Industry Regulatory Authority. |
| ● | “GAAP” refers to Generally Accepted Accounting Principles in the United States. |
| ● | “MATCHNow” refers to the former TriAct Canada Marketplace LP, a wholly-owned subsidiary of Cboe Global Markets, Inc., which was the operator of a Canadian ATS (known as “MATCHNow”). |
| ● | “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 futures” or “VIX options” refers, as applicable, to our Cboe Volatility Index exchange traded options and futures products. |
TRADEMARK AND OTHER INFORMATION
Cboe®, Cboe Global Markets®, Cboe Clear®, Cboe LIS®, Bats®, BIDS Trading®, BYX®, BZX®, Cboe Volatility Index®, CFE®, EDGA®, EDGX®, ErisX®, EuroCCP®, Hybrid®, LiveVol®, MATCHNow®, NANO®, Options Institute®, Silexx®, VIX®, and XSP® are registered trademarks, and Cboe Futures Exchange SM, Cboe BIDS Europe SM, Cboe Digital SM, C2 SM, f(t)options SM, Hanweck SM, Nanos by Cboe SM, The Exchange for the World Stage SM, Trade Alert SM, and VIX1DSM 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 and DSPXSM is a service mark 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 Annual Report on Form 10-K 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. Please refer to the “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and our other filings with the SEC.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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 "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 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 this Annual Report and 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 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 or clearing volumes, market data fees or a shift in the mix of products traded on our exchanges; |
| ● | legislative or regulatory changes or changes in tax regimes; |
| ● | our ability to protect our systems and communication networks from security vulnerabilities and breaches; |
| ● | our ability to attract and retain skilled management and other personnel; |
| ● | increasing competition by foreign and domestic entities; |
| ● | our dependence on and exposure to risk from third parties; |
| ● | global expansion of operations; |
| ● | factors that impact the quality and integrity of our and other applicable indices; |
| ● | our ability to manage our growth and strategic acquisitions or alliances effectively; |
| ● | 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 minimize the risks, including our credit, counterparty, investment, and default risks, associated with operating a European clearinghouse; |
| ● | our ability to accommodate trading and clearing 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 or for whom we clear transactions; |
| ● | 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; |
| ● | our ability to maintain BIDS Trading as an independently managed and operated trading venue, separate from and not integrated with our registered national securities exchanges; |
| ● | damage to our reputation; |
| ● | the ability of our compliance and risk management methods to effectively monitor and manage our risks; |
| ● | restrictions imposed by our debt obligations and our ability to make payments on or refinance our debt obligations; |
| ● | our ability to maintain an investment grade credit rating; |
| ● | impairment of our goodwill, long-lived assets, investments or intangible assets; |
| ● | the impacts of pandemics; |
| ● | the accuracy of our estimates and expectations; |
| ● | litigation risks and other liabilities; and |
| ● | operating a digital asset business, and clearinghouse, including the expected benefits of our Cboe Digital acquisition, cybercrime, changes in digital asset regulation, losses due to digital asset custody, and fluctuations in digital asset prices. |
For a detailed discussion of these and other factors that might affect our performance, see Part I, 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.
