CBOE Q1 net income up 251% on 2006

Source: Chicago Board Options Exchange

The Chicago Board Options Exchange (CBOE) announced that its unaudited pre-tax profit for the three-month period ending March 31, 2007 was $30.3 million compared to pre-tax profit of $8.3 million during the same period a year ago.

Net income for the first quarter was $17.6 million compared to $5.0 million during the first quarter in 2006. CBOE's average daily volume for the first three months of 2007 was 3.4 million contracts, compared to 2.5 million contracts during the first quarter of 2006.

"CBOE's volume growth, driven by new products, continues to outpace the options industry overall," said CBOE Chairman and CEO William J. Brodsky. "In addition to increased volume, the benefits of CBOE's recent transition to a for-profit business model are also reflected in the bottom line."

During the first quarter of 2007, CBOE recorded revenues of $77.8 million on volume of 205.2 million contracts. During the same quarter last year, CBOE recorded revenues of $59.2 million on volume of 154.1 million contracts. The $18.6 million increase (31% over 2006) occurred because of increased trading volumes that are reflected in a $17.5 million increase in transaction fees. Retained earnings at the end of March 2007 totaled $179.4 million compared to $162 million at the start of the year.

Expenses totaled $47.6 million compared to $50.8 million one year ago. Significant decreases in employee costs, severance costs, depreciation and amortization were realized, while travel and promotional expenses and other expenses increased. Employee costs decreased overall as a result of decreased staffing levels this year compared to last year.

Working capital (current assets minus current liabilities) increased by $15.2 million to $109.3 million while cash and investments increased by $26.4 million to $128.5 million during the first quarter of 2007. These increases are attributable to revenue exceeding cash expenses, less capital expenditures, because of high volume during the quarter.

  • On March 5, 2007, the CBOE Stock Exchange (CBSX), the newest U.S. stock exchange, launched with five stocks and Exchange Traded Funds (ETF). By the end of March, CBSX had 282 securities listed for trading, and expects to list a total of 2800 of the most actively traded New York Stock Exchange, NASDAQ Stock Market, and American Stock Exchange listed securities, ETFs and other listed securities.
  • March 2007 was the busiest month ever at CBOE, with total volume of 83 million contracts, breaking the previous record, established last May, of 70.5 million contracts. Average daily volume for the month was a record-breaking 3.8 million contracts, an increase of 58% over March 2006. A record was set for volume in equity options, with 40.3 million contracts trading, as well as for Index options volume, with 42.6 million contracts.
  • CBOE extended it's lead as the largest U.S. options exchange, with market share of 33.7%, an increase in market share for the quarter of nearly two percentage points compared to the same period a year-ago.
  • Volume growth during the quarter was fueled by an increase in market volatility producing significant gains in Index and Exchange Traded Fund (ETF) option products traded at CBOE. Index and ETF option volume was up 63%, led by trading in CBOE Volatility Index (VIX) options, up 533%; iShares Trust Russell 2000 Index Fund (IWM) options, up 174%; and S&P 500 Index (SPX) options, up 71%, compared to the first quarter of 2006.
  • On March 14, CBOE announced that it has developed and plans to launch Credit Default Options based on credit events, during the second quarter of 2007, pending regulatory approval. On April 5, CBOE also filed to trade Credit Default Basket Options. CBOE's Credit Default Options offer the opportunity to hedge or trade the risk of adverse credit events such as bankruptcy and failure to pay.
  • CBOE memberships, or seats, continued to increase in value during the first quarter of 2007, with a record high price for the quarter of $2,270,000 paid on March 12thh. During the first quarter, 24 seats changed hands, ranging in price from $1,800,000 to $2,270,000. The last seat purchased during the quarter was on March 16, 2007 at a price of $2,100,000.
  • On February 12, CBOE filed an S-4 Registration Statement with the Securities and Exchange Commission (SEC) which details the terms of CBOE's proposal to convert from a mutually owned membership organization to a for-profit, shareholder company.


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