The Chicago Board Options Exchange (CBOE) has reported net income for the fourth quarter of 2007 of $24.3 million, a 76% increase compared with $13.8 million in the fourth quarter of 2006.
Total revenues for the quarter were up 43% to $93.0 million, from $64.9 million in last year’s fourth quarter.
For the year ended 31 December 2007, CBOE’s net income nearly doubled, climbing to $83.2 million, from $42.1 million in 2006. Total revenues grew 37% to a record $352.3 million for the full-year 2007, compared with $258.0 million in the prior year.
“As we begin the 35th anniversary year of the creation of CBOE and the entire options industry, we are pleased to report that our business has never been stronger. After successfully transitioning to a for-profit operation in 2006, CBOE continued to post new records in trading volume, total revenues and earnings in 2007. CBOE’s growth in 2007 was fueled in part by product innovations, such as VIX Options and Futures, and by the broad appeal of the CBOE Hybrid Trading System. It was a remarkable year that leaves CBOE well positioned to further leverage our multi-asset trading platform and to solidify our leadership position in the options industry,” says William J. Brodsky, chairman and CEO, CBOE .
The growth in total revenues for the quarter and the year was primarily driven by higher transaction fees, fueled by robust trading volume. For the fourth quarter of 2007, transaction fees rose 54% to $72.0 million from $46.7 million in last year’s fourth quarter. Total contracts traded for the quarter were up 47% to 258.5 million from 176.1 million in last year’s fourth quarter.
CBOE’s average daily volume of options contracts traded was 4.0 million contracts for the final quarter of 2007, a 45% increase compared with last year’s comparable average of 2.8 million contracts.
Transaction fees for the year were up $84.7 million, or 45%, compared with full-year 2006. The record trading volume reached in 2007 exceeded 2006’s volume by 40%. The average daily volume of contracts traded for the year also increased 40% to 3.8 million contracts compared with 2.7 million in 2006. Additionally, the transaction fee per contract increased to $0.287 for the year, up from $0.276 in 2006.
During the fourth quarter, CBOE continued to focus on maintaining strong expense controls, evidenced by its operating margin expansion. CBOE’s operating margin, representing income before taxes divided by total revenues, increased to 39.0% for the quarter compared with 36.5% for the same period last year. For the full-year 2007, CBOE’s operating margin increased to 39.7%, nearly 12 percentage points higher than the comparable prior year period, demonstrating the flexibility of the company’s operating model and its ability to gain economies of scale.
Working capital increased by $23.9 million to $174.0 million while cash and investments increased by $29.4 million to $185.7 million during the fourth quarter of 2007. These increases are attributable the growth in revenues net of cash expenses and capital expenditures.