Exchange operator Cboe's quarterly profit climbs as hedging activity surges
By Prakhar Srivastava and Laura Matthews
(Reuters) -Exchange operator Cboe Global Markets reported a rise in fourth-quarter adjusted profit on Friday, driven by increased options trading as investors sought to hedge against risks from economic and geopolitical uncertainties.
Cboe's options trading segment revenue grew 3% in the quarter, compared with last year, while futures revenue fell 7%.
Heightened concerns about interest-rate cuts, a potential trade war and geopolitical tensions kept investors on edge despite a strong market rally, driving demand for hedging.
"With our diverse suite of products, we are well situated to help market participants navigate the elevated uncertainty we're witnessing across the market and geopolitical environment," said Fredric Tomczyk, chief executive officer at Cboe, on a call with analysts.
Tomczyk said the "markedly different tone" from the new administration in Washington, with deregulation and tax cuts, was fostering bullish sentiment.
However, he cautioned that significant geopolitical uncertainty remains, which along with recent tariffs and a record number of executive orders is injecting volatility into the market.
Shares in Cboe were up around 2.4% at $211.91 at 1623 GMT.
Average daily volumes in S&P 500 index options increased 7%, while those of options linked to the VIX Volatility Index, Wall Street's "fear gauge", rose 12% from a year earlier.
Average daily volumes in total company options increased to 15.7 million contracts in the reported quarter from 14.9 million a year earlier.
Demand for options contracts opened on the same day they expire, or 0DTE (zero-days-to-expiry), rose 6%.
On an adjusted basis, the exchange operator's net income allocated to common shareholders totaled $221.2 million, or $2.10 per share. Analysts on average were expecting earnings of $2.11 per share, according to data compiled by LSEG.
Cboe's fourth-quarter net revenue rose 5% to $524.5 million, also broadly in line with expectations for $525.88 million.
Revenue from North America equities rose 10% to $94.9 million.
SUCCESSION
Tomczyk said he and the board engaged a search firm late last year to assist with finding his successor, with both internal and external candidates being considered.
Tomczyk became CEO in September 2023 when Edward Tilly resigned after failing to disclose personal relationships with colleagues, bringing his decade of leadership of the company to an abrupt end.
Once a new CEO is appointed Tomczyk plans to remain a director on the board, he said.
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