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CBOE Holdings (CBOE) Gains as September Volume Increase


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CBOE Holdings, Inc.’s (CBOE - Analyst Report) gained about 0.8% in the last trading session as the company announced that its average daily volume (ADV) for September inched up 3% year over year to 5.1 million contracts. Sequentially, the metric surged 25%. The month of September had 21 trading days.

Total contracts for Sep 2016 was 107.4 million, up 3% year over year. Of this, options contracts increased 2% to 101.1 million, while futures contracts jumped 20% to 6.3 million. Of average daily volume, Options ADV was 4.8 million and Futures ADV was 0.3 million. After witnessing lower volumes over the last few months, CBOE Holdings reported improvement in its volume for the month of September.

The company now expects revenue per contract (RPC) to be in line with the figure reported for the two-months ended Aug 31, 2016. Notably, the company reported a 10.1% year-over-year increase in revenue per contract to 40.5 cents in the second quarter of 2016. Revenue per contract for the two-months ended Aug 31 was 37.4 cents. While Options average revenue per contract was 30.3 cents, for Futures the same was $1.754.

Recently, securities exchanges CME Group Inc. (CME - Analyst Report) and Intercontinental Exchange, Inc. (ICE - Analyst Report) also reported its September volumes. While CME Group’s average daily volume increased 6% to 15 million contracts per day, Intercontinental Exchange, Inc.’s (ICE - Analyst Report) average daily volume increased 26.8% to 5.2 million contracts.

CBOE Holdings has been facing intense competition due to increased market consolidation that tends to reduce market share and leverage of the business. This includes both product and price competition, which is continuously increasing due to the creation of new execution and listing venues in the U.S. As a result, CBOE Holdings’ market share has been declining over the last few years and the trend is unlikely to reverse in the upcoming period. Year to date, CBOE Holdings market share slipped to 27.4% from 27.7% in the year-ago period.

Nonetheless, CBOE Holdings is the first and largest global options exchange in the U.S. Since its inception, the company has been a trendsetter in volatility trading. Currently, it publishes data on more than two dozen volatility-related benchmarks and strategies including indexes that track broad-based indexes, various forms of ETFs, individual equities and others. Notably, the exclusively patented 20-year old S&P 500 VIX Index is the most important product in the company’s portfolio and accounts for most of the transaction fees and over 50% of annual revenues. The exchange has also been strengthening its position in the futures business. Over the past years, CFE has significantly expanded its operations with an strong business model contributing significantly to its growth. Last month, the company announced its decision to acquire Bats Global Markets (BATS - Snapshot Report) for $3.2 billion in a cash-stock deal to address the increasing demand for index–based investing market.

Zacks Rank

CBOE Holdings carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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