CBOE earning exceed estimates as free climb, expenses fall
CBOE Holdings Inc., the U.S. options market that went public a year ago, reported second-quarter earnings that beat the average analyst projection as higher access fees boosted revenue and expenses dropped.
Earnings were 36 cents a share, exceeding the 32-cent average estimate of analysts surveyed by Bloomberg, the Chicago- based company said today in a statement. Sales climbed 6.8 percent to $120.3 million. CBOE lowered its 2011 expense forecast to a range of $170 million to $173 million from a previous estimate for $173 million to $177 million, including stock-based compensation.
Policymakers overhauling the derivatives market and the combination of NYSE Euronext and Deutsche Boerse AG, scheduled to close by the beginning of next year, are threatening more competition for the options exchange. CBOE shares have fallen 23 percent since Feb. 28 as speculation subsided that it would be bought as part of a wave of exchange consolidation. The company said this week it can buy back up to $100 million of its stock and raised its quarterly dividend to 12 cents a share.
“While somewhat lighter than the first quarter, volumes remain strong, backed by accelerating growth on” CBOE's new C2 options platform and CFE futures exchange, Daniel Fannon, an analyst with Jefferies & Co. in San Francisco, wrote in a note last month. For C2, “Although the uptake has been relatively slow, we anticipate it will accelerate once S&P 500 options become available for trading.”
Share Performance
The shares climbed 1.6 percent to $22.88 yesterday in New York. While they have lost 23 percent since the end of February, the Bloomberg World Exchange Index is down 0.5 percent.
CBOE is the exclusive venue for options based on the Standard & Poor's 500 Index and the so-called VIX gauge of volatility. It opened its C2 platform last year.
Trading of VIX futures exceeded 100,000 for the first time on June 16. The four-week average daily volume was 56,475 at the end of the last quarter, an almost fivefold gain from a year earlier. Open interest rose to 93,611 outstanding contracts at the end of the quarter, up from 75,447 a year earlier.
Increasing use of options by asset managers may help boost U.S. equity derivatives volume about 8 percent to 4.2 billion contracts this year for a ninth straight annual record, research firm Tabb Group LLC said in a report last month.
Access Fees
CBOE's revenue from access fees increased more than sevenfold to $17 million last quarter because the company started charging monthly fees for permit holders in July 2010 after it demutualized, trading seats for shares.
Operating expenses dropped 9.9 percent to $63.8 million last quarter. The options exchange plans to post lower expenses for the full year as it cuts discretionary spending “in light of the current economic uncertainty,” according to today's release.
NYSE Euronext reported earlier this week quarterly profit declined 16 percent, sending the shares down to their lowest level since Jan. 11. Nasdaq OMX Group Inc. said posted on July 27 earnings that beat estimates as acquisitions and listings services helped boost revenue.