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Operator
Conference Call Moderator
Good morning and welcome to the CBOE Global Markets third quarter 2023 earnings call. Please note that this call is being recorded. All participants are in listen-only mode at this time. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. Thank you. I'd now like to turn the call over to Ken Hill, Vice President of Investor Relations. Please go ahead, sir.
Ken Hill
Vice President and Treasurer, Investor Relations
Good morning. Thank you for joining us for our third quarter earnings conference call. On the call today, Fred Tomczyk, our CEO, and Dave Howson, our global president, will discuss our performance for the quarter and provide an update of our strategic initiatives. Then, Joe Greveno, our Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, provide an overview of our financial results for the quarter, as well as discuss our 2023 financial outlook. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be Chris Isaacson, our Chief Operating Officer, and our Chief Strategy Officer, John Deeters. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the investor relations portion of our website. During our remarks, we'll make some forward-looking statements which represent our current judgment on what the future may hold. And while we believe these judgments are reasonable, these forward-looking statements are not guaranteed of future performance and involve certain assumptions, risks, and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in the forward-looking statements. Please refer to our filings with the SEC for full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings material. Now, I'd like to turn the call over to Fred.
Fred Tomczyk
CEO
Thanks, Ken. And thanks, everyone, for joining the call this morning. Having taken the helm at CBOE six weeks ago, I've been impressed with the strength of the CBOE team and their focus on our clients. which has resulted in another strong quarter for the company. For today's call, I will highlight our overall results and share my priorities as CBOE's new CEO. I will then hand it over to our global president, Dave Howsam, to walk through the progress we've made against our strategic priorities. I am pleased to report record third quarter adjusted earnings for CBOE. During the quarter, we grew net revenue by 9% year over year, to $481 million and adjusted earnings per share by 18% to $2.06. These results were driven by record activity across our derivatives business, the continued growth of our data and access solutions business, lower third quarter operating expenses, and a lower corporate tax rate. Our derivatives franchise delivered another record quarter as total organic net revenue increased 15%. As the uncertain macro and geopolitical environment impacted markets globally, investors and traders relied on our suite of index options and volatility products to help manage risk and generate income in an uncertain environment. We believe our Derivatives business remains incredibly resilient, supported by a growing customer base and an options product that is becoming increasingly recurring in nature as investors shift to shorter duration expirations and more frequently positioned around changing market environments. During the quarter, organic net revenue in our data and access solutions business increased 9%. Net revenue in our cash and spot markets business decreased by 6% during the quarter, reflecting the muted volumes we saw across global equity markets. These solid results were made possible by the continued execution of our strategy to build the world's largest derivatives and securities network and position CBO for a strong finish to the year. Though as a CBO board member for the last four years, I've been very close to the business and supported the team as CBO expanded and evolved into the leading global derivatives and securities network that it is today. The company has a solid foundation, a global ambition, and a strong management team that I'm honored to lead. In my new role, I am primarily focused on three key priorities that I believe will further strengthen CBO and enhance shareholder value. First, sharpening our strategic focus. Second, effective allocation of our capital. And three, developing talent and management succession. While I wholeheartedly support CBO's strategic direction, I see opportunity to refine this strategy to provide a clear focus on the core elements of our business that drive revenue and earnings growth. I believe a sharpened strategy will enhance the margin profile of our business and increase shareholder value over the long return. I will also focus on ensuring our capital allocation plan is delivering the kind of returns our shareholders expect from CBOE. I'm intent on increasing the efficiency of our investments that we make across the business to generate durable revenue growth. Finally, talent development and succession planning, which is always an important component of any CEO's duties and responsibilities, will be a priority for me. I'll now turn the call over to Dave Housen to talk through how we are driving results within our strategy. Thanks, Fred.
Dave Howson
Global President
As Brent noted, our strategy yielded solid results during the third quarter as we continued to advance our top strategic growth priorities, derivatives, data and access solutions, and digital. Before moving to the record results for our derivatives and DNA businesses, let me provide an update on our digital segment. We are working with our customers and the CSDC on final preparations planned launch of margin futures in the first quarter of 2024, subject to regulatory approval. With this launch, SIBO Digital will be the first US regulated crypto native exchange and clearinghouse to offer spot and leverage derivatives on a single platform. We look forward to bringing this unique product to market. Turning to derivatives and data and access solutions, Last month, we made important leadership changes to further support our global growth strategy. Cathy Clay, who previously led our data and access solutions business, was appointed to global head of derivatives, a new role for the organization as we reorganized the team for the next chapter of global growth. Furthermore, we tapped our strong bench of talent to promote Adam and Zerillo to global head of data and access solutions. By aligning our organizational structure to the global nature of the business, we anticipate harnessing the full strength of Ceiba, increasing efficiency and collaboration across business lines and regions, while enabling us to better deliver world-class products and services in a globally consistent manner to our clients. Turning to derivatives on slide 8. It was another record quarter for the business as traders and investors turned to our flagship S&P 500 and VIX index products to help navigate the uncertain macro environment. SPX volume surged 21% to a record ADV of 2.9 million contracts in the third quarter, while our mini SPX contract, XSP, jumped 82% year over year. Within SPX, the fastest growing segment continued to be the zero data expiry options, gaining 33% year over year. Investors use these for hedging, income generation, expressing views on market direction, and more. The diversity of use cases is why we expect to continue to see strong and sustained volume in zero DTE options, regardless of what the market is doing or where the VIX is trading. These options have opened up a whole new risk premium for investors to capture, namely intraday risk. And as uncertainty increases regarding the longer-term macro picture, interest in capturing shorter-term trends and dislocations have led to a higher share going to zero DTE options, now comprising around 48% of all SPX volumes in the third quarter. However, it's important to note that while zero DTE options are making up a bigger part of the pie, the pie itself is growing as well. Other expiries are also seeing higher volume, including our standard monthly SPX options contract that expires on the third Friday of every month. We believe that bonds are being used less as a diversifier of equity risk, and investors are increasingly turning to options to help hedge their portfolios. That hedging demand helps explain why VIX option volumes have been so strong, with ADV surging 60% year over year, even as overall VIX levels stay muted. Investors use VIX options primarily to protect against potential black swan events, which typically happen when volatility levels are low, or in other words, when least expected. We believe the appeal of buying VIX call options is to potentially capture that convex move if the VIX triples or quadruples, something that is harder to do when the VIX index was in the mid-20s last year versus the mid-teens this year. With macro and geopolitical risks rising across the world, we're seeing strong global demand for our products. With SPX and VIX options ADV during global trading hours increasing 95% and 10% respectively year over year. As markets change, our derivatives product suite remains well positioned for customers in any market environment. Our VIX and SPX products anchor a remarkable toolkit that allows customers to choose the right product, size, and expiry to meet their needs, be it risk management or income generation. Complementing the burgeoning activity hosted by our derivatives business, SIBO is continuously working to expand its suite of data products to enhance the overall trading ecosystem. In collaboration with S&P Dow Jones Indices, SIBO's product innovation art, SIBO Labs, recently launched several new benchmark indices for market participants. We were incredibly excited to bring to market the SIBO S&P 500 Dispersion Index, known by ticker DSPX. as well as our four new credit volatility indices. The market perception has been extremely favorable as each of these indices is designed to provide investors with key information to help them better manage their strategies and portfolios, potentially fueling further growth in our tradable products. On the innovation front in Europe, we are excited about the upcoming launch of single stock options on the SIBO European Derivatives Exchange beginning next week. The commitments secured from leading market participants ahead of the launch highlight the opportunity to materially advance the European options market for clients. As we plan to introduce liquidity provider and market maker programs in the first quarter of next year, subject to regulatory approvals, we anticipate volumes on the platform to grow. We see the launch of single stock options as a key milestone for our European derivatives initiative and our broader ambition of creating the leading market price to manage risk around the globe. Moving to slide 10, our data and access solutions business posted record results during the third quarter, with net revenue increasing 8.7% on an organic basis. The durable year-over-year growth was fueled by an expanding global customer base and an evolving portfolio of market data solutions. Through our bundled data offerings and cloud strategy, we can package high-quality data from across markets and deliver it to customers globally in a consistent and cost-effective manner, extending the addressable market for this business. We continue to see solid customer adoption SIBO Global Cloud, a real-time data streaming service that provides simple, effective access to SIBO's robust suite of market data. Nearly 80% of customers utilizing this service are located outside of the Americas, reflecting our expanding global footprint. Additionally, through our cross-region sales efforts, many customers are subscribing to multiple data products offered via SIBO Global Cloud, given the simple, efficient access to high quality data this service affords. As we look across our global network on slide 11, we continue to build on a solid foundation of our global cash equities business where we have a strong presence in seven of the top ten global equity markets serving a diverse customer base. While overall performance in our cash and spot markets reflected the muted volumes we saw across global equity markets during the quarter, we are upbeat about the long-term potential. In Asia Pacific, SIBO Australian market share grew to 17.9% in the third quarter, up from 16.7% in the previous year as momentum continued to build post our technology migration. Later this month, we expect to complete the technology migration of SIBO Japan to our world-class technology stack and launch SIBO Bids Japan, subject to regulatory approval. further extending our unique block trading network to this important market. We are grateful to our customers for their partnership and look forward to providing them with the best-in-class trading experience that our global customers have come to rely on at SIBO. In Europe, the SIBO Europe equities business reported market share of 23.2%, while SIBO Biz Europe experienced another strong quarter and remained the largest block trading venue in Europe. CBOE Clear Europe market share grew to 33.8% in the third quarter, up from 33.2% in the prior year quarter. In North America, Canadian equities market share rose to 15.2%, up from 12.2% in the third quarter of 2022. While US equities market share fell to 12.7% compared to 13.3% in the prior year period, SIBO's addressable market share, which excludes closing auctions and off-exchange volume, remained stable. Lastly, our global FX business had another record quarter. Net revenues were up 6% year-over-year in the third quarter as the business expanded spot market share to a record 20.2%, up from 17.8% a year ago. Our NDF offering, which trades on SIBO Ceph, our swap execution facility, continued to see strong results with volumes increasing 19% year-over-year with ADV of $1.1 billion. These record results were driven by new client growth and increased utilization of our platforms by existing clients. In summary, SIBO delivered another outstanding quarter. and we see strong momentum as we head into the final months of the year and into 2024. With our strong foundation of derivatives, cash, and spot markets, coupled with our data and access solutions, we will continue to harness the power of our market to deliver innovative products and services to our customers. As we sharpen our strategy and focus, we see even more opportunity for SIBO to maximize its global potential and drive further value for our shareholders. With that, I will turn the call over to Jill.
Joe Greveno
Executive Vice President, Chief Financial Officer, and Chief Accounting Officer
Thanks Dave. As Fred and Dave highlighted, CFO posted a record third quarter with adjusted diluted earnings per share of 18% on a year-over-year basis to $2.06. I want to provide some high-level takeaways from the record quarter before delving into an assessment of the segment results. Our third quarter net revenue increased 9% to finish at $481 million. The growth was again driven by the strength in our derivatives market categories and the solid results from our data and access solutions business. Specifically, derivatives markets produced 15% year-over-year organic net revenue growth in the third quarter as traders and investors found increase in utility in our toolkit of proprietary products. Data and access solutions net revenues increased 9% on an organic basis during the quarter. We are pleased with the revenue growth acceleration we have seen through 2023 and remain excited by the continued momentum into year end. Cash and spot markets net revenues decreased 6% during the quarter on an organic basis, as the trading environment remained muted across the globe. Adjusted operating expenses increased a modest 4% to $180 million, with the year-over-year growth tempered by a $10 million benefit from executive changes made during the quarter. An adjusted EBITDA of $321 million grew a solid 12% versus third quarter of 2022. Turning to the key drivers by segment, our press release in the appendix of our slide deck includes information detailing the key metrics from our business segments. So I'll provide some highlights for each. The options segment, again, provided the highest growth of any segment for the quarter. Net revenues grew a robust 14%, led by a strong contribution from our index business and favorable revenue per contract trends, given the mixed shift to index options. Total options ADV was up 8%, as our higher price options ADV increased 28% over third quarter 2022 levels. Revenue per contract moved 12% higher, given a continued positive contribution of higher capture index products. and market data and access and capacity fees were up 19% and 5% respectively as compared to third quarter 2022. North American equities net revenue was down 2% on a year-over-year basis in the third quarter. While access and capacity fees increased 6% and proprietary market data was up 4%, U.S. industry volumes remained a headwind for the segment. Net transaction fees were down 11% given softer industry volumes and market share in our U.S. businesses. And while our U.S. on-exchange market share has trended lower on an absolute basis, our share remains stable when adjusting for the increase in off-exchange market volume and auction activity during the third quarter. The Europe and APAC segment reported a 2% year-over-year increase in net revenue, as stronger non-transaction revenues and favorable foreign exchange trends were tempered by volume headwinds. Market data, access and capacity, and other which includes the positive impact of interest income during the quarter, were up a combined 18% on a year-over-year basis. This outperformance was tempered by softer industry volumes in Europe, down 13% versus the third quarter of 22. In the future segment, third quarter net revenue was up 14% as net transaction fees, access and capacity fees, and market data revenue each produced double-digit year-over-year revenue growth for the quarter. Activity in the complex accelerated as volumes increased 12% on a year-over-year basis. On the non-transaction side, access and capacity fees continued to perform well, up 14% versus the third quarter of last year, and market data revenues increased by 16%. And finally, net revenue in the FX segment notched another quarterly gain, growing by 6%, making it the 10th consecutive quarter of year-over-year net revenue gains for this segment. Net transaction fees revenue was up 5% as average daily notional value increased by 8%, and market share hit another record at 20.2% for the quarter. Turning now to CBO's data and access solutions business, net revenues were up a strong 8.7% on an organic basis. Net revenue growth continued to be driven by additional subscriptions and units. accounting for two-thirds of the organic market data growth and just over half of the organic access and capacity fee growth in the third quarter. The uptick in pricing for access and capacity fees was driven by the first pricing increase we have passed through in over five years for physical connectivity to our multi-exchange network. Last quarter, we spoke to selectively increasing pricing to support innovation and keep pace with the utility we provide the market. We intend to continue to lead with new user and unit growth as we provide exceptional value to our customers. But we'll remain mindful of competitor pricing and our need to support continued innovation for our products. We are pleased with the overall acceleration and organic net revenue trends for the segment and believe the momentum positions as well to hit our full year and medium term guidance range of 7 to 10%. More specifically, we expect to see continued strength from Proprietary data sales, benefiting from the sustained growth across our derivatives complex. In Australia, we continue to see a solid uptick in data sales and access since the migration. We expect that momentum to continue. And finally, we anticipate a continued focus on our sales effort to distribute our content globally, adding to the enhanced distribution capabilities that SIBO Global Cloud presents. Turning to expenses, total adjusted operating expenses were approximately $180 million for the quarter, up 4% compared to last year. The modest increase was a product of higher technology support services and professional and outside services fees to support some of our key growth initiatives, and an increased travel and promotional spend given higher ongoing corporate marketing expenses. These higher year-over-year changes were partially offset by a 6% year-over-year decline in compensation and benefits given a $10 million benefit from executive changes. As we have historically done, we did not adjust for the impact of executive departures, but we would not expect the impact to be a recurring element in MISTIBO expense base. Moving to our expense guidance, we are lowering our full year 2023 expense guidance range by $12 million to $754 to $762 million from $766 to $774. The three basic components of full-year expense build are outlined on slide 18 of our earnings presentation. Expenses from 2022 acquisitions, core expense growth, and growth investments. Looking at the details of our three expense categories, the incremental 2023 expenses from our 2022 acquisitions remains at $30 to $31 million following our reduction in expenses earlier in the year. The largest change in our overall expense forecast comes in the core expense category, now calling for growth of $51 to $55 million, versus our prior expectation of $59 million to $64 million. The reduction is a product of the strong expense management trends we have seen this year, as highlighted in our third quarter results, and modest growth expectations moving forward. In addition, we have recalibrated our CAT-related costs, given our updated expectations. Overall, we expect core expenses to grow by 8% in 2023. Moving on to growth generating investments, we anticipate that the investments we are making in the business to help drive incremental revenue to our bottom line will be in the range of $21 to $24 million. Our new range is roughly $3 to $4 million lower than our prior range, but we remain committed to investing in high return areas like DNA expansion, a more aggressive marketing campaign, and targeted product and services R&D efforts across our ecosystem. Looking at our full year guidance more broadly on the next slide, we are making some positive refinements to our forward outlook across our businesses. At a high level, we are reaffirming our organic total net revenue growth range of seven to nine percent for 2023 and expect to finish at the high end of the range for the year. As a reminder, this remains above our medium term guidance of five to seven percent introduced at our investor day nearly two years ago, a function of the durable innovation we have seen across the entire ecosystem at CBOE. As mentioned earlier, we are reaffirming our DNA organic net revenue growth rate of 7% to 10% for 2023, in line with our medium-term expectations. Given the company's positive marks on its investment in the Seven Ridge Fund, which owns trading technologies, we are again increasing our expected benefit from the other income lines. Our new guidance range of $38 to $44 million is $4 million above our prior range of $34 to $40 million. Our full year guidance on depreciation and amortization remains at $40 to $44 million, and we expect the effective tax rate on adjusted earnings under the current tax laws to come in at 27.5 to 29.5%, down from our prior guidance of 28.5 to 30.5% in 2023. Outside of our annual guidance, net interest expense for the third quarter of 2023 was $12 million. For fourth quarter, we expect net interest expense to be in the range of 11 to 12 million. On the capital front, our focus remains maximizing long-term shareholder value through effective capital management. In the third quarter, we returned a total of $58.5 million to shareholders in the form of a 55 cent per share quarterly dividend. In addition, Last week, we announced an increase in our share repurchase authorization, adding $250 million to bring our total capacity to $390 million available for share repurchases. We remain well-positioned to invest in our business, support our dividend, and opportunistically repurchase shares given our continued strong free cash flow generation. Turning to our balance sheet, we paid down $90 million on our turn-load facility that matures in December of this year during the quarter. Our third quarter leverage ratio declined slightly to 1.3 times from 1.4 times in the prior quarter as a result of the debt pay down. Since the end of the third quarter, we have paid down the remaining $75 million on our term loan facility. Overall, we remain comfortable with our debt profile, having locked in low, medium to longer term fixed rates, averaging below 3% on our outstanding debt. Moving forward, we will continue to put capital to work in value-enhancing ways across our ecosystem, while looking to strike the right balance between investing in future growth and driving margin efficiency. Before I turn the call over to Fred for some closing remarks, I want to congratulate Ken Hill, who was recently promoted to Treasurer and Vice President, Investor Relations. Since joining CBO in 2021, Ken has made an incredible impact with our Investor Relations program. and I'm delighted for him to expand his leadership with the treasurer role. Now, I'd like to turn it back over to Fred for some closing comments before we open it up to Q&A.
Fred Tomczyk
CEO
Thanks, Jill. In summary, I want to thank the entire SIBO team for the warm welcome and the incredible achievements over the last quarter. SIBO's success this year and over the last 50 years is a testament to the enduring strength and resiliency of the team. continue to rise to any occasion and deliver results. I'm very excited about the future of SIBO global markets.
Ken Hill
Vice President and Treasurer, Investor Relations
At this point, we'd be happy to take questions. We ask that you please limit your questions to one per person to allow time to get to everyone. Feel free to get back in the queue, and if time permits, we'll take a second question.
Operator
Conference Call Moderator
As a reminder, if you would like to ask a question, please press star 1. Our first question comes from Patrick Moore with Piper Sandler. Your line is open.
Patrick Moore
Yes, good morning. Thanks for taking my question. Fred, I just wanted to dig into the three key priorities you laid out in your prepared remarks. I was hoping you could maybe elaborate on the comments you made about refining the strategic vision. What areas are you focused on? Where do you see the most opportunity for improving efficiencies? And what impact would you expect this to have on your overall expense growth going forward? Thanks.
Fred Tomczyk
CEO
Thanks, Patrick. So obviously I've been following the strategy from the board level, and I'm providing my input and comments to the management team through the process. I generally agree with the direction, so clearly as a board member I have my input to that. However, I have been clear that I consider the current strategy is too broad. When you just say new asset classes, new geographies, As I used to say to my predecessor, anything fits in there. And so I think a good strategy provides a greater direction and focus to an organization. So that's the first point. Second, all good strategy starts with a good organic strategy. So we're definitely going to focus on that to make sure we have a good, solid, organic strategy. And then the inorganic parts of that strategy will complement that organic strategy but not be the main game, so to speak. I also believe that any good strategy has to be built by the management team, with everybody providing their input along the way, and it has to be reviewed and approved by the board. To me, what's important is the first step is to have a common frame of reference, and what I mean by that is we all agree on what the trends are in the business, where the world's going, splitting between what I call secular and cyclical trends, and you always line up your strategies to go with the secular trends short-term for cyclical trends. Also, they're good competitive analysis and then a good SWOT analysis of what SIBO is really good at and what it can bring to different parts of the world. From that, we'll follow your key strategic themes, why they're important, and then your various actions will follow on over the next two to three years, split between organic and inorganic. And when I talk about efficiencies, obviously I clearly recognize that the EBITDA margins have been falling the last three or four years. I'm okay with even our margins falling slightly as long as it's for a good reason. But I think we want to sort of stabilize that trend and start to turn it in the future looking forward. Does that answer your question?
Patrick Moore
Yes, it does. I'll hop back in the queue. Thanks.
Operator
Conference Call Moderator
Our next question comes from Dan Fannin with Jefferies. Your line is open.
Dan Fannin
Thanks. Good morning. I wanted to follow up on that, and maybe if you could talk about capital allocation going forward. The authorization last week and the message we heard this morning sounds similar in terms of how you guys have allocated capital previously, but should, given the organic and sharpening focus of the business, should we think about buybacks as more of a focus here in the near term?
Fred Tomczyk
CEO
I would lay it out this way. I would say we'll have discipline, number one. First and foremost, we think the best use of our capital is to invest in organic initiatives. We've seen some good returns from some of those initiatives, and so that will continue to be a focus. Secondly, obviously, we have a dividend. We consider that as something we just have to do almost like an Third, I think right now, and as you can see from Jill's comments, we've been paying down our floating rate debt given the rise of interest rates, and we're happy that we've got that back down to essentially zero. And then we will look at share repurchases on an opportunistic basis from this point forward. And then lastly, M&A, I think you should expect you'll see less M&A going forward and a more focused M&A strategy. I'm a much bigger fan of what I call deliberate M&A transactions. But right now, we're going to focus on making sure our strategy is tight, we're all on the same page, and making sure our organic growth strategy is what we want it to be. Thank you.
Operator
Conference Call Moderator
Our next question comes from Chris Allen with Citi. Your line is open.
Chris Allen
Yeah, morning, everyone. I wanted to follow up on basically the last two questions, just in terms of stabilizing EBITDA margins and potential room for improvement there. Any color, just in terms of specific opportunities that you see, and any color on a timeframe to expect some room for improvement there?
Fred Tomczyk
CEO
Well, I'm six weeks in, so I think you can ask me that question maybe next quarter. I suffice it to say that it's certainly an area of focus for me to try to stabilize those margins and find ways to improve them going forward, which I think the management team will do where we get good operating leverage in the business. But at this point, six weeks in, I don't have anything specific.
Operator
Conference Call Moderator
Our next question comes from Ben Budish with Barclays. Your line is open.
Ben Budish
Hi. Good morning, and thanks for taking the question. To be original, I'm going to continue to follow up on those first three questions. Maybe you talked about narrowing the strategic focus going forward. To what extent does that perhaps refer to divestitures as well? It sounds like maybe there was a little bit of disagreement with your predecessor about the breadth of the M&A strategy. So are you talking about being more focused going forward or revisiting the existing portfolio? How are you thinking about balancing those two things? Thank you.
Fred Tomczyk
CEO
I wouldn't say there was much of a disagreement between Ed and I as much as I didn't think that the strategy provided enough focus to the organization and focusing where we allocate our capital in terms of M&A. But I don't think there was a difference of opinion on strategies, so to speak. It's much more about narrowing it. I don't know what else to add there.
Dave Howson
Global President
We've got some exciting new events coming up with launches in our digital business of margin futures in the new year with new product launches to come there. And we've got the Asia Pacific replatforming that's going to happen later this year to get us onto a common technology platform. And what we saw with the Australian migration was that increasing data and access and capacity there. So as we get these new acquisitions onto that common world-class technology platform, we there's some great opportunity to see that longer-term growth come from some of those more recent acquisitions. This is John.
John Deeters
Chief Strategy Officer
I think really integration is the focus today at Fred's point for past acquisitions. And we do see as a consequence of the way we approach integration, deep integration, that our return on invested capital for the tranches of deals that we've pursued improves over time. I mean,
Fred Tomczyk
CEO
On divestitures, at this point, I don't have anything specific in my mind with respect to divestitures. That's something every management team considers over time. But right now, I would answer no. Obviously, we want to see how our digital business does. The world's changed since we bought that asset. And as we launch out managed futures or margin futures, we want to see how that starts to take. It's clearly an asset class that doesn't have the trajectory it used to have. but we still think there's demand for the market for that particular asset class. And we do believe, given all that's gone on, that our strategy is right in terms of me turning that asset class into putting in place trusted markets where everybody has an appetite for it.
Ben Budish
Got it. Thanks for all the incremental color. Thank you.
Operator
Conference Call Moderator
Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.
Craig Siegenthaler
Good morning, everyone, and thanks for taking my question. And also wanted to wish both Fred and Tana congrats on the new roles. Just starting with index options volume, the long-term trajectory here is obviously very robust, but there has been a deceleration over the near term. So, you know, I wanted to see what you attribute the slowing to in your view. And then also, do you think the zero-day contribution, which is now in the high 40% range, is close to secular equilibrium? Or do you think zero-day mix could move higher? Thank you, guys.
Dave Howson
Global President
Thanks very much for the question there. Certainly, we've had a great Q3 with a number of records coming through for Q3 itself. SPX volume 2.9 million contracts there, up significantly over the prior year. VIX options up 60%. versus the prior year. And then as we think about momentum, we think about October as we've begun with some records there. And in fact, 2023 has seen nine of the top ten SPX states and six of those have been in October. So good momentum coming through there. Really driven in SPX there by three factors. One would be the pick-up in hedging as investors have re-risked throughout the year. The second would be those investors kept catching up with performance through SPX core buying there. And then thirdly, of course, the zero DTE complex that you mentioned. Forty-eight percent, as you quote there, of the SPX volume coming from zero days to expiry. We've seen an increase in the proportion there of institutional engagement as more funds and more strategies have been set up to trade. this incredibly balanced ecosystem where hedging, income generation, tactical strategy, and systematic trading have all come to light. And so in terms of the sustainability there, we see that really persisting. And why do we think that? We think that because it's continued over the last 18 months through different market cycles and different volatility regimes. And so as we look forward, We really think about the continued uncertainty in the marketplace. We kind of think about the Fed. We think about inflation. We think about geopolitical issues there and really options and our volatility toolkit really being the place to come to manage your risk. And then when you think about options themselves, it's a real durable recurring income stream. Options expire every day. every week, every month, every year, and investors will continue to reposition and re-engage around that uncertainty that is really forecast for the rest of next year.
Fred Tomczyk
CEO
Just to add on to that, I haven't seen index options slow down. They continue to rise. Equity volumes are off, as they are around the globe, but index options continue to grow, and into October, it continues to grow.
Chris Isaacson
Chief Operating Officer
I would just mention also that on our global trading hours, in the script you heard us talking
Operator
Conference Call Moderator
Our next question comes from Alex Cram with UBS. Your line is open.
Fred
Yes. Hey, good morning, everyone, and Fred, good to be talking again. It's been a few years, but good to have you again. In terms of the topic du jour, and maybe this is a continuation from Ben's question earlier, as it comes to divestitures, maybe getting more specific, the one area that you didn't highlight was the European derivative expansion. Now, we've been at this for a while now, and I know there's some new milestones coming here early next year. But just wondering if you look at an initiative like that where when we talk to clients, we hear limited appetite. Just wondering if maybe your patience with a project like that may be more limited than what's been done before. And then maybe for Jill on the same topic, can you just remind us how much the drag is of the European derivatives business today in terms of expenses?
Fred Tomczyk
CEO
Thank you. Maybe I'll start and I'll turn it over to Dave for a second. But we just launched European derivatives, so it's a little early to make a judgment on it. Contrary to what I think, there's two different ways of And if you talk to our clients, our bigger clients, they continue to tell me anyway that there's a lot of demand for liquidity moving into the U.S., so that's one point. And second point, obviously it's very early with respect to the multi-list European option expansion here, so I wouldn't prejudge it at this point, but I'll ask Dave who has a better perspective on that.
Dave Howson
Global President
Yeah, thanks, Fred, and thanks, Alex, for the question here. When we think about European derivatives, and we've always signaled this, it's going to be a journey and not an event in time. When you're launching a brand new exchange, a brand new clearinghouse, and a brand new product, or indeed just one of those at a time, they all need time to gain critical mass. And we're really looking forward to the launch of single stock options in a couple of weeks, whereby we've got some strong support from industry participants. And when you look at the growth so far, it was the second best quarter for us in Q3 for index options and futures in Europe with some new participants, new futures and options market makers and some new non-bank FCMs. So traction continuing to build there. And then when we look at the value proposition, that white space to move into for the European derivatives market, it's significantly still there. Ten years ago, Europe and the U.S. have market sizes around about the same. Now it's eight to ten times different in those market sizes. Clearly a number of factors there, but we see room to grow and expand the European market by bringing that U.S. market structure to bear. And with regards to the project itself and the build cost and the build effort going forward, it's purely incremental. We already have the largest pan-European equity exchange in Europe. We already have the largest cash equity exchange clearinghouse in Europe and the staff to run them. So by leveraging our global technology platform and reusing the functionality from the U.S., it was a marginal incremental effort for us there. And so for us, it's not a significant burden that concerns us while we really look to take advantage of this real gap in the market that we think over time we can move into. We can move into it with great product development. with our customers there. So certainly we remain convicted and committed to this process.
Fred
Very good. Thanks for the color.
Operator
Conference Call Moderator
Our next question comes from Owen Lau with Oppenheimer. Your line is open.
Owen Lau
Good morning, and thank you for taking my question. So there has been speculation about the future ownership of SIBO recently. And Fred, you also mentioned succession planning in your prepared remarks. Could you please elaborate that point a little bit more? Thank you.
Fred Tomczyk
CEO
Can you repeat the second part of your question there for me for a second, Owen?
Owen Lau
Sorry, you mentioned the succession planning in your previous remark. Could you please just elaborate that point a little bit more? Thank you.
Fred Tomczyk
CEO
Maybe I'll start with the second one first. I always remember the first time I became a CEO when I was pretty young, my board was very clear to me that my job priority one on my first day in the job was to plan for my own succession. And so clearly that's going to be a focus here in terms of making sure we have the talent in the organization that we need, and that we have the leadership and the place to set up for an ordinary succession. In my experience, when you surround yourself with really good people, and I've got a good team around me here, basically business becomes easier. When you're fighting and you don't have good people and good leaders, But you should assume that I'm going to continue to work on developing the talent and the team around me as they grow into their jobs and hopefully bigger jobs. And when the time comes for me to step down when someone's ready, I'll be the first one to say I'll hand it over to my successor. With respect to SIBO ownership, I would emphasize these rumors have come and gone over the years. Having said that, I don't think SIBO is more for sale today than it was two months ago or three months ago. We're just continuing. The most important thing for us is to keep our heads down and stay focused on running our business, and we'll deal with anything that comes at us in due course.
Owen Lau
Thanks a lot.
Operator
Conference Call Moderator
Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.
Alex Blostein
Hey, good morning, everybody. Thanks for the question. I was hoping we could spend a couple of minutes and just dig into some of the expense trends you highlighted both for the year and maybe get your early thoughts into 24. The specific area I was hoping to kind of double-clin into the consolidated audit trail. I know it's been a pretty big drag on expenses for you guys this year. So just curious how you see that evolving. There's obviously things that have come out of the SEC that could make this better for SIBO and others next year and beyond. So maybe, again, help us frame the CAT sort of cost drag this year, how you're thinking about it for next year, and any early thoughts for 24 expenses. Thanks.
Joe Greveno
Executive Vice President, Chief Financial Officer, and Chief Accounting Officer
You bet. So I can still agree, but I'll take this one. As you alluded to, there has been, I guess, some noise with the CAT this year. I will say as we've taken a look and firmed up our guidance as we head into the fourth quarter, you do notice that we have that CAAT cost built into our core expenses and that's really a function of the funding model being recently approved coupled with the fact that the CAAT is now in its final build stage. So we're just again getting that into our core expense base and Really looking to see that moderate. As it relates to 2024, too early to comment on that. We will share our full year projections with you in February of next year. But again, for 2023, as we communicated today, we did trim our expense guidance and then our core expense growth looking to come in at about an 8% growth over 2022.
Operator
Conference Call Moderator
Our next question comes from Brian Vidal with Deutsche Bank. Your line is open.
spk04
Great. Thanks very much. Thanks for taking my question. Welcome, Fred. Great to hear your voice again, and congrats to Ken as well. My question may be focused on Europe, actually, just in terms of, I guess, a two-part question, you know, just a bigger picture there. How important is the development of the consolidated tape to the overall European strategy? And then weaving in the derivatives part of that, I guess, do you view that as a separate, completely separate strategy for your overall European business? And then are you still looking for I think you were trying to get to a $25 million annualized revenue run rate, I think exiting 2025. I just wanted to see if that's still the plan on the derivatives.
Dave Howson
Global President
Thanks very much for the question there. Yeah, we've been huge proponents over the last decade of the benefits that a consolidated tape would bring Europe, clearly hugely beneficial for the U.S. marketplace. So that single pane of glass for the globe, into the equity markets and indeed the fixed income markets in Europe is something we've really been pushing for. Reasoned developments show a reasonably good structure coming through there for the consolidated tape which we are very interested in and may even think about whether or not we would want to be the provider of that consolidated tape. Not likely to see an actual tape come through though until about 2026 given the way the legislative process So really important, really, for the overall capital markets in Europe. And as the pan-European exchange, the pan-European clearinghouse, we really fit the capital markets union model very, very, very well there. It does dovetail with the derivatives market in many ways when you think about our approach being a pan-European approach. Once again, there's a single stock shop there. enabling us to offer greater capital efficiency, a transparent on-board model there, with CivoClear Europe having the ability to access all of the CSDs around Europe and provide a cleaner and more capital-efficient post-trade solution. And then when we think about the prognosis for the business and how we're going, you mentioned that guide there, we've got single-stock options coming in a couple of weeks, And as that begins to gain traction, we'll be able to take a look at how that's building and consider the revenue profile and growth profile as that comes to bear.
spk04
Okay, great. Thank you very much.
Operator
Conference Call Moderator
Our next question comes from Kyle Voigt with KBW. Your line is open.
Kyle Voigt
Hi, good morning. Maybe just a question on pricing. You noted the ability to raise price in areas where you're clearly providing incremental value, which recently was the case in the access solutions business. But kind of porting that thinking over to the transaction side of the business, you're clearly providing significantly more value in SPX and zero DTE specifically, given the volume growth we've seen this year. I guess under the contract with S&P, can you remind us how much flexibility you have to make pricing changes across that SPX complex? And is this something that you would be considering heading into 2024? Thanks a lot.
Dave Howson
Global President
Excellent question there. If I give you a little walk around the arc of pricing, we've got in Q3, 59% came from organic subscriptions and unit growth there. And so when we think generally about pricing across the data franchise, we're really focusing on distribution, a really great opportunity, particularly over in Asia Pacific and in EMEA, to sell our data products there. We saw 39% of the growth in Q3 coming from outside America, so we see a good runway there. So focus predominantly on distribution and broadening access. We've got those consistent pipes to deliver our data over the cloud revenue there. Again, 78% or nearly 80% of that revenue coming internationally. So good runway there. Surprising a tool that we could use when we look across the schema, but really it's about that runway of new users. When we're talking about the competitive markets that we run from a transactional basis, that's really looking to maximize the revenue per contract, the market share, and the market quality there. And that's a skill that the teams have honed down to a fine art. And then when we come to the proprietary products there, the answer is yes, we can adjust the pricing of the trading of SPX options as we need to. But when you think, look back to my earlier answer, of that momentum we're seeing, that growth, at the moment it's continuing to broaden that adoption. And as Chris mentioned, fabulous opportunity there out in global trading hours as we again look to that international capability and also think about those retail brokers coming through into next year. So pricing is right priced at the moment. It's a cost-effective place to build liquidity, manage risk, in that complex is something that, in general, we will look, though, to see where we can enhance some value in certain pockets there, but broadly, again, it's about expanding that access and distribution.
John Deeters
Chief Strategy Officer
Kyle, this is John. Just to be clear, we don't have any constraints on any of our partnership relationships, even beyond S&P, in terms of being able to respond to the market environment with the correct pricing approach.
Owen Lau
Very clear. Thank you.
Operator
Conference Call Moderator
Our next question comes from Andrew Bond with Rosenblatt Securities. Your line is open.
Andrew Bond
Hey, good morning. Just wanted to get your thoughts on the SEC's latest market structure proposal that looks to ban volume-based pricing tiers of exchanges. If you walk through maybe why providing the tiers is important for liquidity provisioning and how this would impact competition, not just with other exchanges, but off-exchange markets and, you know, the broker internalization.
Dave Howson
Global President
Thanks very much for the question there. The rule proposal that looks to focus on rebate tiers, not rebates alone, but rebate tiers for that agency flow. As a general principle there, we don't support government-imposed price controls, in particular in highly competitive markets, as you mentioned. We think it would diminish a tool that is currently really used to help us drive competition between the trading venues. And so that utility there is really important. for us to be able to have that and could even result in higher costs to the end users as those costs will likely end up being passed back up the food chain. So for us, we really like to focus on competing on a level playing field. Some of the prior proposals coming in the back end of last year focused on leveling that playing field and this one, this potential proposal here looks to go somewhat against that. So we'll be engaging. with common letters and with the SEC and the industry participants to make sure that we have a do-no-harm approach and actually think about the holistic market structure first, because what's better for end investors is better for the market, and we look to enjoy competing within those constraints.
Andrew Bond
Great. Thanks.
Operator
Conference Call Moderator
Our next question comes from Michael Cypress with Morgan Stanley. Your line is open.
Michael Cypress
Hi, good morning. Thanks for taking the question. I wanted to ask on the index options suite with the SPX dailies, you now have expiry going out 30 days, but maybe you can just remind us on the SPX expiries, what do you have beyond 30 days and to what extent might there be any sort of innovation opportunities to fill out more maturities, to allow more precise hedging with longer duration and potentially expand the user base even more? I guess in another way, Why not have dailies going out 365 days instead of just 30 days?
Dave Howson
Global President
Yeah, great question, great thought. Our CBO Labs team are continually thinking about how we can innovate around our volatility toolkit there. You saw the dispersion index. You saw the credit VIX indices come out there as well. But purely on SPX, we've got five weeks of SPX weekly expiries going out now for customers to be able to utilize those. As regards strikes and expires, we always manage that fine balance between liquidity provision and to be able to manage the number of strikes and number of series that the market has to manage and digest and really conscious about adding value where it comes through. And in terms of longer dated, I would mention that SIBO was the pioneer of the leaps options, those longer dated options going out multiple years there. utility for some of the, say, insurers and other asset managers out there and other buy-size funds to really gain some real value there. So we've got a broad range of strikes and exposures now, and really we'll be customer-led. We want to give our end customers and investors what they need and also what the liquidity providers are able to support in a reliable and consistent manner. So think about ways in which more may come through there.
Chris Isaacson
Chief Operating Officer
Mike, I just mentioned that we had a Tuesday-Thursdays about a year and a half ago. But we added the fifth week of dailies, or Tuesdays, Thursdays, just in the last few months. That was based on customer demand. So as Dave said, as customers demand more and we think we have appropriate liquidity provision, we'll continue to add strikes if the market wants it.
Chris Allen
Great. Thank you.
Operator
Conference Call Moderator
Our final question is a follow-up from Owen Lau with Oppenheimer. Your line is open.
Owen Lau
Hey, thank you for taking my follow-up. So Coinbase recently launched their crypto futures trading together with their spot trading. Could you please talk about how Siebel Digital will compete in this space and the value proposition? And I guess more importantly, given the low trading volume for the industry, how do you think about the investments in this space longer term? Thanks a lot.
Dave Howson
Global President
Thanks, Owen. As we've been talking about, we're really excited about the launch of our Margin Futures product in early 2024. Great engagement from customers and FCMs as we build out that project. Following that, we do have further derivatives products in the pipeline. The thing that's unique about SIBO Digital once we have that launch is that the spot and the margin futures will be on the same technology platform underneath the same regulatory umbrella. So over the same APIs, over the same connections, you can trade both the spot and those physically and cash settled, all cash settled margin futures all on the same platform there. So real unique value being added there. And then when we think about the prognosis for the future, we think about the hopeful approval of those spot ETH and spot Bitcoin ETS, which we will know more about in the new year. At SIBO, we're supporting eight issuers of those ETS with five surveillance sharing agreements in place. And so when they've come to market, not only do we get to list those products and have the training, but actually the ecosystem that we have there with that US-based regulated exchange in Clearinghouse to support those authorized participants and market makers who will be supporting and needing to manage their exposure in those products. that. And then when you look at the regulatory direction, although it may have slowed a little, it's certainly coming in SIBO's direction where we run a transparent, regulated, customer-first, intermediary-driven model.
Owen Lau
Got it. Thanks a lot.
Operator
Conference Call Moderator
There are no further questions at this time. I will now turn the call back to the management team for any closing remarks.
Fred Tomczyk
CEO
Okay. Thank you. And thanks, everyone, for joining us this morning. I wish you all a good weekend and I look forward to seeing you all in the future in person as I start to get out from the office. Take care.
Operator
Conference Call Moderator
This concludes today's conference call. Thank you for joining us.
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