REVENUE RECOGNITION

9 Months Ended

Sep. 30, 2022

REVENUE RECOGNITION

REVENUE RECOGNITION

2.   REVENUE RECOGNITION

The Company’s main types of revenue contracts consist of the following, which are disaggregated from the condensed consolidated statements of income.

● Transaction and clearing fees - Transaction fees represent fees charged by the Company for meeting the point-in-time performance obligation of executing a trade on its markets. These fees can be variable based on trade volume tiered discounts; however, as all tiered discounts are calculated monthly, the actual discount is recorded on a monthly basis. Transaction fees are recognized across all segments. Clearing fees, which include settlement fees, represent fees charged by the Company for meeting the point-in-time performance obligation for transactions cleared and settled by EuroCCP and Cboe Clear Digital, LLC (formerly Eris Clearing), the derivatives clearing organization for Cboe Digital. Clearing fees can be variable based on trade volume tiered discounts; however, as all tiered discounts are calculated monthly, the actual discount is recorded on a monthly basis. Clearing fees are recognized in the Europe and Asia Pacific and Digital segments. Transaction and clearing fees, as well as any tiered volume discounts, are calculated and billed monthly in accordance with the Company’s published fee schedules.

● Access and capacity fees - Access and capacity fees represent fees assessed for the opportunity to trade, including fees for trading-related functionality across all segments, terminal and other equipment rights, maintenance services, trading floor space and telecommunications services. Facilities, systems services and other fees are generally monthly fee-based. These fees are billed monthly in accordance with the Company’s published fee schedules and recognized on a monthly basis when the performance obligations are met. All access and capacity fees associated with the trading floor are recognized over time in the Options segment, as the performance obligations are met.

● Market data fees - Market data fees represent the fees received by the Company from the U.S. tape plans and fees charged to customers for proprietary market data. Fees from the U.S. tape plans are collected monthly based on published fee schedules and distributed quarterly to the Exchanges based on a known formula. A contract for proprietary market data is entered into and charged on a monthly basis in accordance with the Company’s published fee schedules as the service is provided. Proprietary market data also includes revenue from various licensing agreements, which was classified as other revenue prior to January 1, 2022. Both types of market data are satisfied over time, and revenue is recognized on a monthly basis as the customer receives and consumes the benefit as the Company provides the data to meet its performance obligation. U.S. tape plan market data is recognized in the North American Equities and Options segments. Proprietary market data fees are recognized across all segments.

● Regulatory fees - There are two types of regulatory fees that the Company recognizes. The first type represents fees collected by the Company to cover the Section 31 fees charged to the Exchanges by the SEC for meeting the point-in-time performance obligation of executing a trade on its markets. The fees charged to customers are based on the fee set by the SEC per notional value of U.S. Equities exchange transactions and per round turn of Options transactions executed on the Company’s U.S. securities markets. These fees are calculated and billed monthly and are recognized in the North American Equities and Options segments. As the Exchanges are responsible for the ultimate payment to the SEC, the Exchanges are considered the principal in these transactions. Regulatory fees also include the options regulatory fee (“ORF”) which supports the Company’s regulatory oversight function in the Options segment, along with other miscellaneous regulatory fees, and neither can be used for non-regulatory purposes. The ORF and miscellaneous fees are recognized when the performance obligation is fulfilled.

● Other revenue - Other revenue primarily includes interest income from clearing operations, all fees related to the trade reporting facility operated in the Europe and Asia Pacific segment, listing fees, and revenue associated with advertisements through the Company’s websites.

All revenue recognized in the condensed consolidated statements of income is considered to be revenue from contracts with customers, with the exception of interest income from clearing operations. The following table depicts the disaggregated revenue contract types listed above within each respective financial statement caption in the condensed consolidated statements of income (in millions):

	Cash		Data and
	and Spot		Access		Derivatives
	Markets		Solutions		Markets		Total
Three Months Ended September 30, 2022
Transaction and clearing fees	$	315.5	$	—	$	400.0	$	715.5
Access and capacity fees		—		81.8		—		81.8
Market data fees		19.9		43.1		8.0		71.0
Regulatory fees		90.4		—		24.5		114.9
Other revenue		8.4		1.2		0.7		10.3
	$	434.2	$	126.1	$	433.2	$	993.5
	Cash		Data and
	and Spot		Access		Derivatives
	Markets		Solutions		Markets		Total
Three Months Ended September 30, 2021
Transaction and clearing fees	$	301.2	$	—	$	331.7	$	632.9
Access and capacity fees		—		72.8		—		72.8
Market data fees		21.1		33.4		7.5		62.0
Regulatory fees		25.3		—		9.3		34.6
Other revenue		9.7		4.1		0.7		14.5
	$	357.3	$	110.3	$	349.2	$	816.8

	Cash		Data and
	and Spot		Access		Derivatives
	Markets		Solutions		Markets		Total
Nine Months Ended September 30, 2022
Transaction and clearing fees	$	1,070.2	$	—	$	1,150.2	$	2,220.4
Access and capacity fees		—		241.5		—		241.5
Market data fees		62.1		123.7		24.7		210.5
Regulatory fees		191.0		—		53.3		244.3
Other revenue		31.3		3.7		2.1		37.1
	$	1,354.6	$	368.9	$	1,230.3	$	2,953.8
	Cash		Data and
	and Spot		Access		Derivatives
	Markets		Solutions		Markets		Total
Nine Months Ended September 30, 2021
Transaction and clearing fees	$	1,042.8	$	—	$	971.5	$	2,014.3
Access and capacity fees		—		206.3		—		206.3
Market data fees		71.9		94.0		22.7		188.6
Regulatory fees		133.8		—		39.2		173.0
Other revenue		30.4		13.6		2.2		46.2
	$	1,278.9	$	313.9	$	1,035.6	$	2,628.4

The following table depicts the disaggregation of revenue according to segment (in millions):

			North		Europe								Corporate
			American		and Asia				Global				Items and
	Options		Equities		Pacific		Futures		FX		Digital		Eliminations		Total
Three Months Ended September 30, 2022
Transaction and clearing fees	$	377.7	$	264.6	$	35.9	$	22.3	$	14.9	$	0.1	$	—	$	715.5
Access and capacity fees		38.6		27.8		8.1		5.0		2.3		—		—		81.8
Market data fees		26.4		34.0		8.4		1.9		0.3		—		—		71.0
Regulatory fees		24.4		90.4		—		0.1		—		—		—		114.9
Other revenue		1.8		1.9		6.5		—		0.1		—		—		10.3
	$	468.9	$	418.7	$	58.9	$	29.3	$	17.6	$	0.1	$	—	$	993.5
Timing of revenue recognition
Services transferred at a point in time	$	403.9	$	356.9	$	42.4	$	22.4	$	15.0	$	0.1	$	—	$	840.7
Services transferred over time		65.0		61.8		16.5		6.9		2.6		—		—		152.8
	$	468.9	$	418.7	$	58.9	$	29.3	$	17.6	$	0.1	$	—	$	993.5
Three Months Ended September 30, 2021
Transaction and clearing fees	$	308.4	$	253.2	$	36.2	$	23.2	$	11.9	$	—	$	—	$	632.9
Access and capacity fees		31.0		25.2		9.4		4.9		2.3		—		—		72.8
Market data fees		20.9		31.8		7.3		1.7		0.3		—		—		62.0
Regulatory fees		9.3		25.3		—		—		—		—		—		34.6
Other revenue		4.7		0.8		9.0		—		—		—		—		14.5
	$	374.3	$	336.3	$	61.9	$	29.8	$	14.5	$	—	$	—	$	816.8
Timing of revenue recognition
Services transferred at a point in time	$	322.4	$	279.3	$	45.2	$	23.2	$	11.9	$	—	$	—	$	682.0
Services transferred over time		51.9		57.0		16.7		6.6		2.6		—		—		134.8
	$	374.3	$	336.3	$	61.9	$	29.8	$	14.5	$	—	$	—	$	816.8

			North		Europe								Corporate
			American		and Asia				Global				Items and
	Options		Equities		Pacific		Futures		FX		Digital		Eliminations		Total
Nine Months Ended September 30, 2022
Transaction and clearing fees	$	1,079.0	$	899.9	$	126.6	$	71.1	$	43.6	$	0.2	$	—	$	2,220.4
Access and capacity fees		112.7		81.1		26.1		14.7		6.9		—		—		241.5
Market data fees		79.4		99.4		24.8		6.0		0.9		—		—		210.5
Regulatory fees		53.0		191.0		—		0.3		—		—		—		244.3
Other revenue		5.6		3.8		27.4		—		0.3		—		—		37.1
	$	1,329.7	$	1,275.2	$	204.9	$	92.1	$	51.7	$	0.2	$	—	$	2,953.8
Timing of revenue recognition
Services transferred at a point in time	$	1,137.6	$	1,094.7	$	154.0	$	71.4	$	43.9	$	0.2	$	—	$	2,501.8
Services transferred over time		192.1		180.5		50.9		20.7		7.8		—		—		452.0
	$	1,329.7	$	1,275.2	$	204.9	$	92.1	$	51.7	$	0.2	$	—	$	2,953.8
Nine Months Ended September 30, 2021
Transaction and clearing fees	$	900.3	$	903.0	$	104.2	$	71.0	$	35.8	$	—	$	—	$	2,014.3
Access and capacity fees		90.0		72.4		23.7		13.6		6.6		—		—		206.3
Market data fees		62.4		104.1		16.4		5.0		0.7		—		—		188.6
Regulatory fees		39.1		133.8		—		0.1		—		—		—		173.0
Other revenue		14.9		2.5		28.5		—		—		—		0.3		46.2
	$	1,106.7	$	1,215.8	$	172.8	$	89.7	$	43.1	$	—	$	0.3	$	2,628.4
Timing of revenue recognition
Services transferred at a point in time	$	954.3	$	1,039.3	$	132.7	$	71.1	$	35.8	$	—	$	0.3	$	2,233.5
Services transferred over time		152.4		176.5		40.1		18.6		7.3		—		—		394.9
	$	1,106.7	$	1,215.8	$	172.8	$	89.7	$	43.1	$	—	$	0.3	$	2,628.4

Contract liabilities as of September 30, 2022 primarily represent prepayments of transaction fees and certain access and capacity and market data fees to the Exchanges. The revenue recognized from contract liabilities and the remaining balance is shown below (in millions):

	Balance at December 31, 2021		Cash Additions		Revenue Recognized		Balance at September 30, 2022
Liquidity provider sliding scale (1)	$	—	$	7.2	$	(5.4)	$	1.8
Other, net		15.3		12.9		(14.3)		13.9
Total deferred revenue	$	15.3	$	20.1	$	(19.7)	$	15.7

(1) Liquidity providers are eligible to participate in the sliding scale program, which involves prepayment of transaction fees, and to receive reduced fees based on the achievement of certain volume thresholds within a calendar month. These transaction fees are amortized and recorded ratably as the transactions occur over the period.