Correspondence 0001558370-23-015715 from Cboe Global Markets, Inc. (CBOE) (CIK 0001374310) (CBOE)
Cboe Global Markets, Inc. (CBOE) (CIK 0001374310)
Date: Sept. 13, 2023 · CIK: 0001374310 · Accession: 0001558370-23-015715
AI Filing Summary & Sentiment
File numbers found in text: 001-34774
Referenced dates: August 30, 2023
Letter
United States Securities and Exchange Commission Division of Corporation Finance Office of Finance Response Dated August 16, 2023 File No. 001-34774
Dear Ms. Mateo and Ms. Angelini:
On behalf of Cboe Global Markets, Inc. (the “Company”), this letter is submitted in response to the comments contained in the letter dated August 30, 2023 regarding the Company’s response dated August 16, 2023 relating to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”). Each of your comments is set forth below, followed by the Company’s response.
Response Dated August 16, 2023
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 64
1.
Your response to prior comment two appears to be conclusory in nature without providing sufficient detail regarding the indirect consequences of climate-related regulation or business trends, including the specific items noted in our comment, and your assessment thereof. Please further address the following:
● More fully describe the indirect consequences of climate change and tell us how you concluded they were not material. Provide support for your assessment in relation to your principal operations, including, without limitation, your operation of trading markets and platforms.
● Your response indicates you are in the early stages of your commitment to net zero emissions by 2050 and have not incurred related costs deemed material in 2022. Provide us with additional information regarding the steps you have taken and expect to take in connection with this commitment. Include quantification of the costs incurred during the periods covered by your Form 10-K and expected to be incurred in future periods, and tell us how you assessed materiality.
● Tell us how you assessed the materiality of the potential climate-related opportunities identified in your response for purposes of disclosure.
Company Response:
As noted in the Company’s prior response, as a provider of market infrastructure and tradable products, the Company focuses on delivering trading, clearing and investment services to market participants around the world. The Company operates trading systems that facilitate transactions between buyers and sellers, introduces tradable products in multiple asset classes to meet the needs of investors, and provides index and data offerings across expansive geographies. The Company’s main sources of revenue consist of transaction and clearing fees, access and capacity fees, market data fees, and regulatory fees. As the Company operates in the financial asset trading and technology space, its workforce is overwhelmingly office based. Importantly, the vast majority of trading that occurs on the Company’s markets is
433 West Van Buren Street › Chicago, IL 60607 › cboe.com
electronic (there is one traditional open outcry trading floor in Chicago, Illinois). The Company is not involved in the manufacturing, selling, shipping, or storing of physical products. Accordingly, the Company believes it is not materially impacted by the indirect consequences of climate-related regulation or business trends.
At this time, the Company does not consider the following indirect consequences of climate-related regulation or business trends to be material to the Company for the reasons stated below. The Company is also not aware of incurring any material indirect consequences of climate-related regulation or business trends. Nevertheless, as part of the Company’s ongoing evaluation of its operations, to the extent management assesses that indirect consequences of climate-related regulation or business trends are reasonably likely to have a material impact to the Company, relevant disclosure will be provided in future periods.
● decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources; and
● increased demand for goods that result in lower emissions than competing products.
The Company is not involved in the production, transportation, manufacturing, sale, or provision of services related to goods or services that directly produce significant greenhouse gas emissions, or goods that result in lower emissions, or are related to carbon-based energy sources or traditional physical commodities, including oil, natural gas, metals, etc. The Company is also not involved in the storing of goods or commodities and does not own or lease any warehouses or storage facilities. The Company’s primary goods and services relate to financial products, such as trading of equities, derivatives, and FX, which generally do not involve the manufacture or sale of physical products, including potentially lower emission goods, or the delivery of services that directly produce significant greenhouse gas emissions. While the Company does not offer trading in oil, natural gas, metals, etc., the Company does offer trading of financial products related to digital commodities, but as noted in the following paragraph the associated financials are immaterial. For the periods covered by the Company’s 2022 10-K, over 63% of the Company’s revenues less cost of revenues (“net revenues”) were generated by the Company’s transaction and clearing-based business. This business is dependent on the ability to maintain trading and clearing volumes related to various financial products, such as trading of equities, derivatives, and FX. The Company’s transaction and clearing-based business is primarily conducted electronically, with only one open outcry physical trading floor located in Chicago, Illinois. As the Company’s transaction and clearing business does not involve goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources, the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business related to (i) decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources or (ii) increased demand for goods that result in lower emissions than competing products.
The Company also operates a U.S. based digital asset spot market, regulated futures exchange, and regulated clearinghouse, following the acquisition of Cboe Digital in May 2022. The Company acknowledges that the production and mining of certain digital assets, such as Bitcoin (which trades on Cboe Digital), have been connected by some to higher greenhouse gas emissions, the Company believes they are not material to the Company. As disclosed in the Company’s 2022 10-K, the Digital segment is not material to the Company with only $(0.4) million in net revenue in 2022, nor does the Company reasonably believe it is likely to be a material driver of earnings for the Company in the near future. As of December 31, 2022, the Company held $0.9 million, which is an immaterial amount, of Bitcoin and other digital assets on its consolidated balance sheet. Therefore, the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business related to (i) decreased demand for goods or services, such as digital assets, that potentially produce significant greenhouse gas emissions or are related to carbon-based energy sources
Page 2 of 7
or (ii) increased demand for goods, such as alternative digital assets, that result in lower emissions than competing products.
● increased competition to develop innovative new products that result in lower emissions;
The market for trade execution services, clearing and financial related products is intensely competitive in the asset classes and geographies in which the Company operates. The Company competes with a number of entities on several different fronts, including cost, quality and speed of trade execution, functionality and ease of use of trading and clearing platforms, range of products and services, technological innovation and adaptation, and company reputation. Increased competition due to several different fronts may result in a decline in the Company’s share of trading activity and a decline in the Company’s revenues from transaction and clearing fees and market data fees. However, the Company’s primary asset classes and trading and clearing platforms, including financial products, such as trading of equities, derivatives, and FX, are generally not related to emissions and the Company is not expected to be materially impacted by competition to develop innovative new products that may result in lower emissions. For more detail, the Company addressed potential competition risks in its 2022 10-K Risk Factors section.
● increased demand for generation and transmission of energy from alternative energy sources;
The Company’s primary goods and services relate to financial products, such as trading of equities, derivatives, and FX, and the Company is not involved in the production, transportation, manufacturing, sale, or provision of services related to physical goods that produce significant greenhouse gas emissions or are related to carbon-based energy sources or commodities. As such, the Company believes it has not experienced any material impact from increased demand for the generation and transmission of energy from alternative sources. The Company’s primary direct consumption of energy relates to the Company’s leased office spaces, one physical trading floor, leased data center space, a remote network operations center and third-party production and disaster recovery data centers, and such energy is in the form of utilities consisting of electricity, water, and waste. For the periods covered in the Company’s 2022 10-K, the Company’s global utilities costs have contributed less than 0.5% to the Company’s overall operating expenses, and have been relatively consistent year-over-year during that period. Additionally, from 2020 to 2022, all costs related to the Company’s third-party production and back-up data centers, which house the majority of the Company’s technology, have contributed less than 2% to the Company’s overall operating expenses, and have been relatively consistent year-over-year during that period. As such, the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business, such as its global utilities costs, related to increased demand for generation and transmission of energy from alternative energy sources.
As noted within the Company’s 2023 ESG report, the Company is in the early stages of its commitment to net zero emissions by 2050 (“net zero”). This initiative consists of procuring renewable energy where possible and purchasing Renewable Energy Certificates (“RECs”) to help address emissions. As described below in further detail, the costs incurred related to this initiative are not material, thus the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business related to increased demand for generation and transmission of energy from alternative energy sources.
● any anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions;
The Company believes that one of its competitive strengths is its strong industry reputation and it addressed potential risks to this reputation in its 2022 10-K Risk Factors section. As outlined above, the Company’s primary asset classes and trading and clearing platforms, including financial products, such as trading of equities, derivatives, and FX, do not involve the operations, production,
Page 3 of 7
transportation, manufacturing, sale, or provision of services related to goods or services that produce material greenhouse gas emission, and therefore the Company believes it is not exposed to material impacts, nor is the Company aware of suffering any material harm to its operations, related to anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions.
However, as noted above and within the Company’s 2023 ESG report, the Company’s office and technology-based operations do produce some greenhouse emissions due to utilities consumption, such as electricity, water, and waste. For the periods covered in the Company’s 2022 10-K, the Company’s global utilities costs have contributed less than 0.5% to the Company’s overall operating expenses, and have been relatively consistent year-over-year during that period. To help demonstrate the Company’s overall commitment to supporting the global transition to a low carbon future and helping eliminate greenhouse gas emissions, as noted within the Company’s 2023 ESG report, the Company joined the Net Zero Financial Service Providers Alliance (“NZFSPA”) and is in the early stages of its commitment to net zero emissions by 2050. As described below in further detail, the costs incurred related to this initiative are not material to the Company for purposes of disclosure.
● potential climate-related opportunities, such as developing ESG-related indices and products.
While not considered material to the Company’s business, financial condition, or results of operations, the Company understands it has potential climate-related opportunities, including, but not limited to, exchange-traded products, such as ESG-focused ETFs, the development of ESG-focused indices, and the development of ESG-focused derivatives products. The Company launched S&P 500® ESG Index Options in September 2020 to help meet and expand demand for ESG and sustainability-focused investment strategies. In assessing materiality, the Company considered that these products contributed less than 0.01% to the Company’s total index-options average daily volumes within the Options segment for 2020, 2021, and 2022, and have contributed less than $10,000 in total revenue as of the second quarter of 2023. In comparison, the Company’s non-ESG- related index options contributed $377.0 million, $416.1 million, and $632.5 million in transaction fees to the Company’s overall total revenues in 2020, 2021, and 2022, respectively. Additionally, due to immateriality, the Company does not separately track revenues and expenses directly related to other ESG-related indices and products. As such, these products, including other ESG-related indices and products, are not material to the Company to have required disclosure in the 2022 10-K and the Company believes it is not exposed to material impacts from such climate-related products.
As part of the Company’s long-term growth plan, in 2023 the Company is expanding its global listings business, which focuses on growth companies and asset managers that are committed to innovation with a global impact. As such, the Company may experience indirect consequences of climate-related regulation or business trends related to potential climate-related opportunities and as more climate-related companies grow and develop they may seek to broaden their investor base and access to global capital and liquidity via listing on the Company’s exchanges. However, these consequences are expected to be immaterial for 2023 as corporate listings are anticipated to contribute less than $3.5 million in total revenue for 2023 (in 2022, the Company reported $3,958.5 million in total revenues), which is not material to the Company for purposes of disclosure.
Lastly, the Company has incurred additional costs, such as employee compensation and ben
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CORRESP 1 filename1.htm September 13, 2023 Ms. Madeleine Mateo and Ms. Jennifer Angelini United States Securities and Exchange Commission Division of Corporation Finance Office of Finance 100 F Street, N.E. Washington, D.C. 20549-0405 Re: Cboe Global Markets, Inc. Form 10-K for fiscal year ended December 31, 2022 Response Dated August 16, 2023 File No. 001-34774 Dear Ms. Mateo and Ms. Angelini: On behalf of Cboe Global Markets, Inc. (the “Company”), this letter is submitted in response to the comments contained in the letter dated August 30, 2023 regarding the Company’s response dated August 16, 2023 relating to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”). Each of your comments is set forth below, followed by the Company’s response. Response Dated August 16, 2023 Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 64 1. Your response to prior comment two appears to be conclusory in nature without providing sufficient detail regarding the indirect consequences of climate-related regulation or business trends, including the specific items noted in our comment, and your assessment thereof. Please further address the following: ● More fully describe the indirect consequences of climate change and tell us how you concluded they were not material. Provide support for your assessment in relation to your principal operations, including, without limitation, your operation of trading markets and platforms. ● Your response indicates you are in the early stages of your commitment to net zero emissions by 2050 and have not incurred related costs deemed material in 2022. Provide us with additional information regarding the steps you have taken and expect to take in connection with this commitment. Include quantification of the costs incurred during the periods covered by your Form 10-K and expected to be incurred in future periods, and tell us how you assessed materiality. ● Tell us how you assessed the materiality of the potential climate-related opportunities identified in your response for purposes of disclosure. Company Response: As noted in the Company’s prior response, as a provider of market infrastructure and tradable products, the Company focuses on delivering trading, clearing and investment services to market participants around the world. The Company operates trading systems that facilitate transactions between buyers and sellers, introduces tradable products in multiple asset classes to meet the needs of investors, and provides index and data offerings across expansive geographies. The Company’s main sources of revenue consist of transaction and clearing fees, access and capacity fees, market data fees, and regulatory fees. As the Company operates in the financial asset trading and technology space, its workforce is overwhelmingly office based. Importantly, the vast majority of trading that occurs on the Company’s markets is 433 West Van Buren Street › Chicago, IL 60607 › cboe.com electronic (there is one traditional open outcry trading floor in Chicago, Illinois). The Company is not involved in the manufacturing, selling, shipping, or storing of physical products. Accordingly, the Company believes it is not materially impacted by the indirect consequences of climate-related regulation or business trends. At this time, the Company does not consider the following indirect consequences of climate-related regulation or business trends to be material to the Company for the reasons stated below. The Company is also not aware of incurring any material indirect consequences of climate-related regulation or business trends. Nevertheless, as part of the Company’s ongoing evaluation of its operations, to the extent management assesses that indirect consequences of climate-related regulation or business trends are reasonably likely to have a material impact to the Company, relevant disclosure will be provided in future periods. ● decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources; and ● increased demand for goods that result in lower emissions than competing products. The Company is not involved in the production, transportation, manufacturing, sale, or provision of services related to goods or services that directly produce significant greenhouse gas emissions, or goods that result in lower emissions, or are related to carbon-based energy sources or traditional physical commodities, including oil, natural gas, metals, etc. The Company is also not involved in the storing of goods or commodities and does not own or lease any warehouses or storage facilities. The Company’s primary goods and services relate to financial products, such as trading of equities, derivatives, and FX, which generally do not involve the manufacture or sale of physical products, including potentially lower emission goods, or the delivery of services that directly produce significant greenhouse gas emissions. While the Company does not offer trading in oil, natural gas, metals, etc., the Company does offer trading of financial products related to digital commodities, but as noted in the following paragraph the associated financials are immaterial. For the periods covered by the Company’s 2022 10-K, over 63% of the Company’s revenues less cost of revenues (“net revenues”) were generated by the Company’s transaction and clearing-based business. This business is dependent on the ability to maintain trading and clearing volumes related to various financial products, such as trading of equities, derivatives, and FX. The Company’s transaction and clearing-based business is primarily conducted electronically, with only one open outcry physical trading floor located in Chicago, Illinois. As the Company’s transaction and clearing business does not involve goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources, the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business related to (i) decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources or (ii) increased demand for goods that result in lower emissions than competing products. The Company also operates a U.S. based digital asset spot market, regulated futures exchange, and regulated clearinghouse, following the acquisition of Cboe Digital in May 2022. The Company acknowledges that the production and mining of certain digital assets, such as Bitcoin (which trades on Cboe Digital), have been connected by some to higher greenhouse gas emissions, the Company believes they are not material to the Company. As disclosed in the Company’s 2022 10-K, the Digital segment is not material to the Company with only $(0.4) million in net revenue in 2022, nor does the Company reasonably believe it is likely to be a material driver of earnings for the Company in the near future. As of December 31, 2022, the Company held $0.9 million, which is an immaterial amount, of Bitcoin and other digital assets on its consolidated balance sheet. Therefore, the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business related to (i) decreased demand for goods or services, such as digital assets, that potentially produce significant greenhouse gas emissions or are related to carbon-based energy sources Page 2 of 7 or (ii) increased demand for goods, such as alternative digital assets, that result in lower emissions than competing products. ● increased competition to develop innovative new products that result in lower emissions; The market for trade execution services, clearing and financial related products is intensely competitive in the asset classes and geographies in which the Company operates. The Company competes with a number of entities on several different fronts, including cost, quality and speed of trade execution, functionality and ease of use of trading and clearing platforms, range of products and services, technological innovation and adaptation, and company reputation. Increased competition due to several different fronts may result in a decline in the Company’s share of trading activity and a decline in the Company’s revenues from transaction and clearing fees and market data fees. However, the Company’s primary asset classes and trading and clearing platforms, including financial products, such as trading of equities, derivatives, and FX, are generally not related to emissions and the Company is not expected to be materially impacted by competition to develop innovative new products that may result in lower emissions. For more detail, the Company addressed potential competition risks in its 2022 10-K Risk Factors section. ● increased demand for generation and transmission of energy from alternative energy sources; The Company’s primary goods and services relate to financial products, such as trading of equities, derivatives, and FX, and the Company is not involved in the production, transportation, manufacturing, sale, or provision of services related to physical goods that produce significant greenhouse gas emissions or are related to carbon-based energy sources or commodities. As such, the Company believes it has not experienced any material impact from increased demand for the generation and transmission of energy from alternative sources. The Company’s primary direct consumption of energy relates to the Company’s leased office spaces, one physical trading floor, leased data center space, a remote network operations center and third-party production and disaster recovery data centers, and such energy is in the form of utilities consisting of electricity, water, and waste. For the periods covered in the Company’s 2022 10-K, the Company’s global utilities costs have contributed less than 0.5% to the Company’s overall operating expenses, and have been relatively consistent year-over-year during that period. Additionally, from 2020 to 2022, all costs related to the Company’s third-party production and back-up data centers, which house the majority of the Company’s technology, have contributed less than 2% to the Company’s overall operating expenses, and have been relatively consistent year-over-year during that period. As such, the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business, such as its global utilities costs, related to increased demand for generation and transmission of energy from alternative energy sources. As noted within the Company’s 2023 ESG report, the Company is in the early stages of its commitment to net zero emissions by 2050 (“net zero”). This initiative consists of procuring renewable energy where possible and purchasing Renewable Energy Certificates (“RECs”) to help address emissions. As described below in further detail, the costs incurred related to this initiative are not material, thus the Company believes that it is not exposed to material impacts from the potential indirect consequences of climate-related regulation or business related to increased demand for generation and transmission of energy from alternative energy sources. ● any anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions; The Company believes that one of its competitive strengths is its strong industry reputation and it addressed potential risks to this reputation in its 2022 10-K Risk Factors section. As outlined above, the Company’s primary asset classes and trading and clearing platforms, including financial products, such as trading of equities, derivatives, and FX, do not involve the operations, production, Page 3 of 7 transportation, manufacturing, sale, or provision of services related to goods or services that produce material greenhouse gas emission, and therefore the Company believes it is not exposed to material impacts, nor is the Company aware of suffering any material harm to its operations, related to anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions. However, as noted above and within the Company’s 2023 ESG report, the Company’s office and technology-based operations do produce some greenhouse emissions due to utilities consumption, such as electricity, water, and waste. For the periods covered in the Company’s 2022 10-K, the Company’s global utilities costs have contributed less than 0.5% to the Company’s overall operating expenses, and have been relatively consistent year-over-year during that period. To help demonstrate the Company’s overall commitment to supporting the global transition to a low carbon future and helping eliminate greenhouse gas emissions, as noted within the Company’s 2023 ESG report, the Company joined the Net Zero Financial Service Providers Alliance (“NZFSPA”) and is in the early stages of its commitment to net zero emissions by 2050. As described below in further detail, the costs incurred related to this initiative are not material to the Company for purposes of disclosure. ● potential climate-related opportunities, such as developing ESG-related indices and products. While not considered material to the Company’s business, financial condition, or results of operations, the Company understands it has potential climate-related opportunities, including, but not limited to, exchange-traded products, such as ESG-focused ETFs, the development of ESG-focused indices, and the development of ESG-focused derivatives products. The Company launched S&P 500® ESG Index Options in September 2020 to help meet and expand demand for ESG and sustainability-focused investment strategies. In assessing materiality, the Company considered that these products contributed less than 0.01% to the Company’s total index-options average daily volumes within the Options segment for 2020, 2021, and 2022, and have contributed less than $10,000 in total revenue as of the second quarter of 2023. In comparison, the Company’s non-ESG- related index options contributed $377.0 million, $416.1 million, and $632.5 million in transaction fees to the Company’s overall total revenues in 2020, 2021, and 2022, respectively. Additionally, due to immateriality, the Company does not separately track revenues and expenses directly related to other ESG-related indices and products. As such, these products, including other ESG-related indices and products, are not material to the Company to have required disclosure in the 2022 10-K and the Company believes it is not exposed to material impacts from such climate-related products. As part of the Company’s long-term growth plan, in 2023 the Company is expanding its global listings business, which focuses on growth companies and asset managers that are committed to innovation with a global impact. As such, the Company may experience indirect consequences of climate-related regulation or business trends related to potential climate-related opportunities and as more climate-related companies grow and develop they may seek to broaden their investor base and access to global capital and liquidity via listing on the Company’s exchanges. However, these consequences are expected to be immaterial for 2023 as corporate listings are anticipated to contribute less than $3.5 million in total revenue for 2023 (in 2022, the Company reported $3,958.5 million in total revenues), which is not material to the Company for purposes of disclosure. Lastly, the Company has incurred additional costs, such as employee compensation and ben