The Chicago Board Options Exchange (CBOE) today announced financial results for the three months and nine months ended September 30, 2009. Total Exchange revenues for the third quarter of 2009 decreased by 17 percent to $98.4 million from $117.9 million in third-quarter 2008. Quarterly net income was $19.2 million, a decrease of 48 percent from $36.7 million for the same period in 2008. Third-quarter 2009 results reflect a challenging market recovery, making comparisons difficult with record results reported in last years third quarter, when extraordinary market events resulted in record options trading volume.
The financial results that CBOE reported in the third quarter were not unexpected, given the challenging economic environment in which we have been operating, says William J. Brodsky, CBOE Chairman and CEO. In spite of these challenges, the Exchange remains focused on long-term strategic goals including regulatory reform advocacy, new product and trading platform innovation, and educational programs that foster the use of options as effective risk management tools in varying economic conditions.
Revenue impacted by lower trading volume and shift in trading mix CBOEs revenue decline in the third quarter was due largely to lower transaction fees than the same period one year ago, resulting from a 16-percent decrease in trading volume and an eight-percent decrease in the average transaction fee per contract. Third-quarter 2009 options trading volume at CBOE totaled 286.9 million contracts (average daily volume of 4.48 million contracts), compared to 341.8 million contracts (average daily volume of 5.34 million contracts) during the record-setting third-quarter 2008.
Total average transaction fee per contract was $0.265 for the quarter, down from $0.288 in third-quarter 2008. This decrease reflects a shift in the volume mix during the quarter, with a lower percentage of CBOEs total volume coming from higher-margin product categories. In addition, the decrease takes into account the impact of CBOE fee waivers for some transactions in response to competitive fee changes within the options industry.
Expenses Third-quarter expenses rose 11 percent to $65.6 million from $59.3 million in the third quarter of 2008, primarily due to increases in trading volume incentives, employee costs, and outside services, partially offset by a decrease in royalty fees.
Operating margin CBOEs operating margin for the quarter, representing income before taxes as a percentage of total revenues, decreased to 33.3 percent from 49.7 percent for the third quarter of 2008, driven by the combination of a lower revenue base and higher expenses.
Revenues Through the first nine months of 2009, total revenues totaled $306.3 million, down four percent from $319.8 million during the same period in 2008. Net Income through September 2009 was $71.5 million, a 23-percent decrease from $92.7 million a year ago.
Total CBOE options trading volume through September 2009 was down five percent to 856.9 million contracts compared with 899.6 million contracts traded in the first nine months of 2008. Average options contracts traded per day dropped to 4.56 million from 4.76 million, down four percent from the first nine months of 2008. The average total transaction fee per contract was $0.276 through September 2009, down three percent from $0.286 for the nine months ended September 30, 2008.
Operating margin CBOEs operating margin fell to 39.4 percent for January through September 2009, compared with 48.5 percent for the same period in 2008.
Strong debt-free balance sheet At the end of September 2009, CBOE had $348.9 million of available cash and cash equivalents on its balance sheet and no outstanding debt.
Working capital current assets minus current liabilities as of September 30, 2009 was $339.3 million, an increase of $69.0 million from December 31, 2008.
D.C.