Cboe Global Markets

The stable outlook on Cboe reflects S&P Global Ratings' assumption that leverage will remain below 1.75x on a sustained basis. We expect the new liquidity tools at EuroCCP will provide the clearinghouse with sufficient liquidity resources in a stress scenario, whereby the largest two clearing members would default jointly. We also expect that the switch to a value-at-risk-based margining model by the end of this year (provided it gets regulatory approval) will not weaken financial safeguards at EuroCCP overall. We could lower the rating if: The concentration in the flagship products increases; Leverage exceeds 1.75x following a series of acquisitions or aggressive financial policies; or The concentration at EuroCCP increases from already high levels or financial safeguards at EuroCCP unexpectedly

...Cboe Global Markets has a leading position among options exchanges in the U.S. It has a 99% market share in index equity options and a 36.1% market share overall year to date through July (including single-name equity options). The company is more dependent than peers on volatile trading revenue. Transaction-related revenue represented about 63% of total revenue for Cboe in 2019--far above the levels for Nasdaq and ICE. Cboe operates with low leverage. We project debt to EBITDA will be about 1.2x by the end of 2020. It is home to three of the most widely recognized products traded and used globally: VIX futures, VIX options, and S&P 500 options. VIX futures and options and S&P 500 options represented 61% of total net transaction fees in the first two quarters of 2020. Despite recent improvements, EuroCCP exhibits weaker financial safeguards overall than most clearinghouses we rate. Netherlands-based EuroCCP, acquired in July 2020, is more concentrated than most other clearinghouses, and...

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