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Earnings

Exchange operator Cboe tops profit views as retail supports

(Reuters) - Exchange operator Cboe Global Markets Inc CBOE.Z on Friday reported better-than-expected results, lifted by the wave of new retail investors during the COVID-19 pandemic and by the company's recent acquisition of European clearinghouse EuroCCP.

FILE PHOTO: Chicago Board Options Exchange (CBOE) Global Markets sign hangs at its headquarters building in Chicago, Illinois, U.S., September 19, 2018. REUTERS/Michael Hirtzer

Not including onetime items like M&A costs, Cboe earned $1.11 per share, 5 cents above analysts’ consensus forecast, according to Refinitiv IBES data.

The health crisis has hammered economies worldwide, causing market volatility that has sent trading volumes soaring, generally benefiting exchanges.

The shift to working from home during the pandemic also helped accelerate the trend of rising retail participation in the markets that began months earlier as retail brokerages slashed transaction commissions to zero.

“The new retail came in, in a very, very big way, led the rally, led new subscriptions, new subscribers, all electronic platforms - every boat rises with the new retail,” Cboe Chief Executive Officer Ed Tilly said on a call with analysts.

Cboe has launched new products aimed at winning more retail market share, including a “retail priority order” in equities that has led to record volumes on one of its four stock exchanges, he said.

On the derivatives side, Cboe introduced “mini VIX futures,” which are contracts on the company’s proprietary volatility gauge that are a tenth the size of a regular VIX contract.

A big chunk of Cboe’s profit beat came from the revenue generated by EuroCPP, Jefferies analyst Daniel Fannon said in a note to clients.

Cboe acquired EuroCPP in July. The company sees it as a launching point for new products in Europe, where volumes have been elevated by the ongoing Brexit negotiations, Tilly said.

Chicago-based Cboe’s quarterly net income rose to $109.6 million, or $1.01 per share, from $105.5 million, or 94 cents per share, a year earlier.

Total revenue rose 17% to $792.7 million.

Reporting by Niket Nishant in Bengaluru; Editing by Shailesh Kuber and Jonathan Oatis

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