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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included in Item 8 of this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See "Risk Factors" and "Forward-Looking Statements" above.

Overview

CBOE Holdings, Inc. is the holding company for Chicago Board Options Exchange, Incorporated, CBOE Futures Exchange, LLC, C2 Options Exchange, Incorporated and other subsidiaries.

The Company's principal business is operating markets that offer for trading options on various market indexes (index options), mostly on an exclusive basis, and futures contracts, as well as on non-exclusive "multiply-listed" options, such as options on the stocks of individual corporations (equity options) and options on other exchange-traded products (ETP options), such as exchange-traded funds (ETF options) and exchange-traded notes (ETN options). The Company operates three stand-alone exchanges, but reports the results of its operations in one reporting segment.

CBOE is our primary options market and offers trading in listed options through a single system that integrates electronic trading and traditional open outcry trading on our trading floor in Chicago. This integration of electronic trading and traditional open outcry trading into a single exchange is known as our Hybrid trading model. CFE, our all-electronic futures exchange, offers trading of futures on the VIX Index and other products. C2 is our all-electronic exchange that also offers trading for listed options, and may operate with a different market model and fee structure than CBOE. All of our exchanges operate on our proprietary technology platform known as CBOE Command.

Business Highlights

•Transaction fees accounted for 71.9%, 70.9% and 69.4% of total operating revenues for the years ended December 31, 2015, 2014 and 2013, respectively.
•Index options and futures contracts accounted for 82.9%, 81.8% and 78.8% of our transaction fees for the years ended December 31, 2015, 2014 and 2013, respectively.
•Our share of total U.S. exchange-traded options contracts for the year ended December 31, 2015 was 27.1%, down from 29.9% and 27.9% in 2014 and 2013, respectively.
•Operating expenses were 49.6%, 49.2% and 50.0%, of total operating revenues for the years ended December 31, 2015, 2014 and 2013, respectively.
•Compensation and benefits, representing our largest expense category, were 16.7%, 19.7% and 20.6%, of total operating revenues for the years ended December 31, 2015, 2014 and 2013, respectively.
•In December 2014, we entered into an agreement with the Financial Industry Regulatory Authority ("FINRA") to provide a majority of regulatory services to the CBOE and C2 options markets. As a result of this agreement, we experienced a shift in expenses from compensation and benefits to professional fees and outside services.
•On August 7, 2015, we acquired the market data services and trading analytics platform of Livevol, Inc. ("Livevol"), which included Livevol Core, Livevol Pro and Livevol X trading analytics platforms, as well as Livevol Enterprise and other market data solutions products.

Business Strategy

We believe that the derivatives industry, especially the listed options and futures industry, has significant growth potential, including through new participants and products. We expect to further expand our business and increase our revenues and profitability by pursuing the following growth strategies:

•We intend to continue our efforts to expand the use of our products domestically and internationally. At the core of that effort is extended trading hours in our exclusive index options and futures products and investor education.
•We intend to continue developing innovative proprietary products that meet the needs of the derivatives industry and complement our core products, both through strategic relationships and internal development.
•We have designed our fee schedule to provide economic benefits to market participants that concentrate their overall trading activity at our exchanges.
•We intend to continue to enhance our trading platform by continuing to invest in hardening and augmenting the functionality and capacity of our trading systems and by developing the next generation of trading technology, CBOE Vector.
•We evaluate strategic opportunities that leverage and complement our core business and that we believe will enhance stockholder value.

Components of Operating Revenues

Transaction Fees

The primary and largest source of operating revenues is transaction fees. Transaction fees are a function of many variables with the main three being: (1) exchange fee rates; (2) trading volume mix (products traded); and (3) transaction mix between order type. Because transaction fees are assessed on a per contract basis, transaction fee revenue is highly correlated to the volume of contracts traded on the Company's exchanges. While exchange fee rates are established by the Company, trading volume and transaction mix are influenced by a number of factors, including price competition, price volatility in the underlying securities and national and international economic and political conditions.

Revenue is recorded as transactions occur on a trade-date basis. The main products we trade are equity, index and ETP options and futures contracts.

•Equity options reflect trading in options contracts on the stocks of individual companies.
•Index options reflect trading in index options contracts on market indexes.
•ETP options include ETF options that are options on baskets of stocks designed to generally track an index, but which trade like individual stocks, and ETN options that are options on senior, unsecured, unsubordinated debt securities issued by an underwriting bank.
•Futures contracts are standardized, transferable, exchange-traded contracts that require delivery of a commodity, bond, currency, stock index or other benchmark interests at a specified price and on a specified future date, which are settled in cash.

Access Fees

Access fees represent fees assessed to Trading Permit and Privilege Holders for the opportunity to trade, including fees for trading-related functionality, on CBOE, C2 and CFE. The CBOE program contains a tier-based market-maker appointment system with different trading permits based on trading function and, in the case of market-makers, the assessment of a surcharge for certain CBOE proprietary products. Beginning in mid-2013, CBOE implemented sliding scales for all Market-Maker and Floor Broker Trading Permits held by affiliated Trading Permit Holders and TPH Organizations that are used in any options classes other than certain proprietary indexes. The number of trading permits made available is limited.

Exchange Services and Other Fees

To facilitate trading, the Company offers technology services, terminal and other equipment rentals, maintenance services, trading floor space and telecommunications services. Trading floor and equipment rentals are generally on a month-to-month basis. Facilities, systems services and other fees are generally monthly fee-based, although certain services are influenced by trading volume or other defined metrics, while others are based solely on demand. Also included in this category are the market data services and trading analytics platforms of Livevol which we acquired in August 2015.

Market Data Fees

Market data fees represent income derived from the sale of our transaction information through the Options Price Reporting Authority ("OPRA") and primarily through our subsidiary, Market Data Express, LLC ("MDX"). Through MDX, we sell historical options data, as well as real-time data for certain proprietary products and indexes. It also provides market data through CBOE Streaming Markets, a high-availability, low latency streaming data feed. OPRA is a limited liability company consisting of representatives of the member exchanges, including CBOE and C2, authorized by the SEC to provide consolidated options information. OPRA gathers market data from various options exchanges, including CBOE and C2, and, in turn, disseminates this data to third parties who pay fees to OPRA to access the data. Revenue generated by OPRA from the dissemination of market data is shared among OPRA members according to the number of total cleared options transactions by each of the member exchanges as calculated each quarter. OPRA is not consolidated with the Company.

Regulatory Fees

Regulatory fees are charged to Trading Permit Holders in support of our regulatory responsibilities as self-regulatory organizations under the Exchange Act. Regulatory fees include an Options Regulatory Fee under which fees are based on industry-wide customer volume of Trading Permit Holders and designated examining authority fees for certain Trading Permit Holders. This source of revenue could decline in the future if the number of customer contracts executed by Trading Permit Holders declines and rates are not increased or are decreased or if our costs to perform our regulatory responsibilities stabilize or decrease.

The SEC requires that the revenues derived from certain of the fees from our regulatory functions, some of which are included in this revenue category, and regulatory fines must be used for regulatory purposes. Expenses related to our regulatory functions are included in our operating expenses, mainly in compensation and benefits in 2014 and professional fees and outside services in 2015.

In December 2014, we entered into an agreement with the FINRA to provide certain regulatory services to the CBOE and C2 options markets. Additionally, CBOE entered into a separate agreement with FINRA, under which it assigned to FINRA the responsibility to perform regulatory services for the Options Regulatory Surveillance Authority ("ORSA"). FINRA began performing the services on January 1, 2015.

Other Revenue

The following sub-categories are the sources of revenue within this category:

•Revenue generated through various licensing agreements;
•Revenue derived from fines assessed for rule violations;
•Revenue generated through our order routing cancel fee (in 2015, we waived order routing cancel fees) and position transfer fee;
•Revenue associated with advertisements through our corporate web site, www.cboe.com;
•Revenue generated from courses and seminars offered through CBOE's Options Institute;
•Revenue generated through regulatory service agreements with other options exchanges (in 2015, we no longer generated revenue from these regulatory service agreements);
•Rental of commercial space in the lobby of our building; and
•Other sources of revenue.

Components of Operating Expenses

Most of our expenses do not vary directly with changes in our trading volume except royalty fees and order routing.

Compensation and Benefits

Compensation and benefits are our most significant expense and include salaries and benefits, stock-based compensation, incentive compensation, severance and employer taxes. Salaries and benefits represent our largest expense category and tend to be driven by both our staffing requirements and the general dynamics of the employment market. Stock-based compensation is a non-cash expense related to equity awards. Stock-based compensation can vary depending on the quantity and fair value of the award on the date of grant and the related service period.

Depreciation and Amortization

Depreciation and amortization expense results from the depreciation of long-lived assets purchased and the amortization of purchased and internally developed software.

Technology Support Services

Technology support services expense consists primarily of costs related to the maintenance of computer equipment supporting our system architecture, circuits supporting our wide area network, support for production software, fees paid to information vendors for displaying data and off-site system hosting fees.

Professional Fees and Outside Services

Professional fees and outside services consist primarily of consulting services, which include: the supplementation of staff for activities primarily related to systems development and maintenance, legal, regulatory and audit and tax advisory services.

Royalty Fees

Royalty fees primarily consist of license fees paid for the use of underlying indexes in our proprietary products usually based on contracts traded. The Company has licenses with the owners of the S&P 500 Index, S&P 100 Index and certain other S&P indexes, the DJIA, the NASDAQ 100, MSCI and the FTSE Russell indexes. This category also includes fees related to the dissemination of market data related to S&P indexes and in prior years, certain fees paid to market participants for order flow that they directed or caused to be directed to our exchanges.

Order Routing

Order routing consists of market linkage expenses incurred to send certain orders to other exchanges. If a competing exchange quotes a better price, we route the customer's order to that exchange and pay certain of the associated costs. Regardless of whether the transaction is traded at our options exchanges, the order flow potential enhances our overall market position and participation and provides cost savings to customers.

Travel and Promotional Expenses

Travel and promotional expenses primarily consist of advertising, costs for special events, sponsorship of industry conferences, options education seminars and travel related expenses.

Facilities Costs

Facilities costs primarily consist of expenses related to owned and leased properties including rent, maintenance, utilities, real estate taxes and telecommunications costs.

Other Expenses

Other expenses represent costs necessary to support our operations but are not included in the above categories.

Other Income/(Expense)

Income and expenses incurred through activities outside of our core operations are considered non-operating and are classified as other income/(expense). These activities primarily include interest earned on the investing of excess cash, dividend income and equity earnings or losses from our investments in other business ventures.

Critical Accounting Policies and Estimates

The preparation of the Company's consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. The Company bases its estimates on historical experience, observance of trends in particular areas, information available from outside sources and various other assumptions that are believed to be reasonable under the circumstances. Information from these sources form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions or conditions.

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact of, and any associated risks related to, these policies on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations." For a detailed discussion on the

application of these and other accounting policies, see Note 1 to our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

•Transaction fees revenue is considered earned upon the execution of the trade recognized on a trade-date basis and presented net of applicable volume discounts. In the event liquidity providers prepay transaction fees, revenue is recognized based on the attainment of volume thresholds resulting in the amortization of the prepayment over the calendar year.
•Access fee revenue is recognized during the period access is granted and assurance of collectability is provided.
•Exchange services and other fees revenue is recognized during the period the service is provided.
•Market data fees from OPRA are allocated based upon the share of total options transactions cleared for each of the OPRA members and is received quarterly. Revenue from our market data services is recognized in the period the data is provided.
•Regulatory fees are recognized primarily on a trade-date basis.

Income Taxes

Deferred income taxes arise from temporary differences between the tax basis and book basis of assets and liabilities. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the book and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to be reversed. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. The Company files tax returns for federal, state and local income tax purposes. A valuation allowance is recognized if it is anticipated that some or all of a deferred tax asset may not be realized.

If the Company considers that a tax position is "more-likely-than-not" to be sustained upon audit, based solely on the technical merits of the position, it recognizes the tax benefit. The Company measures the tax benefit by determining the largest amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. These assessments can be complex and require specific analysis to determine the impact of the position, as such the Company often obtains assistance from external advisors. The Company considers the information and arrives at the percentage to apply as a possible uncertain portion related to the position. To the extent that the Company's estimates change or the final tax outcome of these matters is different than the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made. Uncertain tax positions are classified as current only when the Company expects to pay cash within the next twelve months. Interest and penalties, if any, are recorded within the provision for income taxes in the Company's consolidated statements of income and are classified on the consolidated balance sheets with the related liability for unrecognized tax benefits.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the ASU provides guidance on accounting for certain revenue-related costs including when to capitalize costs associated with obtaining and fulfilling a contract. ASU 2014-09 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The FASB deferred the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. Early adoption of the standard is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows.

In September 2015, the FASB issued ASU-2015-16, Business Combinations. This standard simplifies the accounting for adjustments made to provisional amounts recognized in a business combination. First, it requires that the acquirer recognize

adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer also should record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments should be applied prospectively to adjustments to provisional amounts that are identified after December 15, 2015 and that are within the measurement period. Upon transition, an entity would be required to disclose the nature of, and reason for, the change in accounting principle. An entity would provide that disclosure in the first annual period of adoption and in the interim periods within the first annual period. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows.

In November 2015, the FASB issued ASU-2015-17, Income Taxes- Balance Sheet Classification of Deferred Taxes. This standard affects only entities that present a classified statement of financial position. Deferred tax liabilities and assets will be classified as noncurrent in a classified statement of financial position and the current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount remains the same. Notably, ASU No. 2015-17 aligns the presentation of deferred income tax assets and liabilities with International Accounting Standard 1, Presentation of Financial Statements, which requires deferred tax assets and liabilities to be classified as noncurrent in a classified statement of financial position. For public business entities, ASU No. 2015-17 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. For all other entities, ASU No. 2015-17 is effective for annual periods beginning after December 15, 2017, and interim periods in annual periods beginning after December 15, 2018. Entities are required to apply the proposed amendments prospectively to all deferred income tax liabilities and assets or retrospectively to all periods presented. We decided to early adopt this standard on a retrospective basis for the period ended December 31, 2015 and the adoption did not have a material effect on our consolidated balance sheet.

Results of Operations

Year ended December 31, 2015 compared to the year ended December 31, 2014

Consolidated Results

The following summarizes financial performance for the year ended December 31, 2015 compared to 2014.

20152014Inc./(Dec.)Percent Change
(in millions, except per share amounts)
Total operating revenues$634.5$617.2$17.32.8%
Total operating expenses314.6303.411.23.7%
Operating income319.9313.86.11.9%
Total other income/(expense)4.1(4.1)8.2199.8%
Income before income taxes324.0309.714.34.6%
Income tax provision119.0120.0(1.0)(0.8)%
Net income$205.0$189.7$15.38.1%
Net income allocated to common stockholders$204.1$188.4$15.78.4%
Operating income percentage50.4%50.8%
Net income percentage32.3%30.7%
Diluted—net income per share allocated to common stockholders$2.46$2.21
•The increase in total operating revenues was primarily driven by higher transaction fees, exchange services and other fees and other revenue, partially offset by lower access fees and regulatory fees.
•The increase in total operating expenses was primarily driven by higher depreciation and amortization, technology support services, professional fees and outside services and royalty fees, partially offset by lower compensation and benefits.
•The increase in total other income/(expense) was primarily driven by the dividend declared by OCC in December 2015. The prior year included an impairment charge related to our investment in IPXI Holdings, LLC ("IPXI").

Operating Revenues

Total operating revenues for the year ended December 31, 2015 increased $17.3 million, or 2.8%, to $634.5 million from $617.2 million in the prior year. The following summarizes changes in total operating revenues for the year ended December 31, 2015 compared to 2014.

20152014Inc./(Dec.)Percent Change
(in millions)
Transaction fees$456.0$437.8$18.24.2%
Access fees53.359.3(6.0)(10.2)%
Exchange services and other fees42.238.04.211.0%
Market data fees30.030.4(0.4)(1.4)%
Regulatory fees33.537.1(3.6)(9.7)%
Other revenue19.514.64.934.0%
Total operating revenues$634.5$617.2$17.32.8%

Transaction Fees

Transaction fees increased 4.2% to $456.0 million for the year ended December 31, 2015, representing 71.9% of total operating revenues, compared with $437.8 million for the prior year period, or 70.9% of total operating revenues. This increase was largely driven by a 17.6% increase in the average revenue per contract, partially offset by an 11.4% decrease in trading volume. The increase in average revenue per contract resulted primarily from a shift in volume mix of products traded, fee changes implemented in 2015 and lower volume discounts and incentives. As a percent of total trading volume, index options and futures contracts, which generate our highest options and overall average revenue per contract, respectively, accounted for 39.2% of trading volume for the year ended December 31, 2015, up from 34.5% during the same period in 2014.

Average revenue per contract, discussed in more detail below, is impacted by our fee structure, which includes volume based incentive programs, mix of products traded, the account type (customer, firm, market-maker, etc.) and the manner in which a trade is executed. The implementation of fee changes, which may increase or decrease our average revenue per contract, is primarily to ensure that we are competitive in the options marketplace and to ultimately improve and continue to drive order flow to our exchanges. We cannot predict the trading patterns of exchange participants, which may be based on factors outside our control, but we can attempt to price our products at levels that are competitive in our market.

Trading volume is impacted by many factors, including: macroeconomic events, market volatility, regulatory actions or considerations, availability of capital, competition and pricing.

The following summarizes transaction fees by product category for 2015 compared to 2014.

20152014Inc./(Dec.)Percent Change
(in millions)
Equities$36.4$37.2$(0.8)(2.1)%
Indexes290.3276.014.35.2%
Exchange-traded products41.842.4(0.6)(1.5)%
Total options transaction fees368.5355.612.93.6%
Futures87.582.25.36.5%
Total transaction fees$456.0$437.8$18.24.2%

Trading Volume

Our average daily trading volume ("ADV") was 4.66 million contracts in 2015, down 11.4% compared with 5.26 million for 2014. Total trading days in 2015 and 2014 were two hundred fifty-two.

The following summarizes changes in total trading volume and ADV by product category for 2015 compared to 2014.

20152014Volume Percent ChangeADV Percent Change
VolumeADVVolumeADV
(in millions)
Equities393.01.56488.61.94(19.6)%(19.6)%
Indexes408.31.62406.51.610.4%0.4%
Exchange-traded products321.01.27379.71.51(15.5)%(15.5)%
Total options contracts1,122.34.451,274.85.06(12.0)%(12.0)%
Futures contracts51.70.2150.60.202.1%2.1%
Total contracts1,174.04.661,325.45.26(11.4)%(11.4)%

The following provides the percentage of volume by product category for the years ended December 31, 2015 and 2014.

20152014
Equities33.5%36.9%
Indexes34.8%30.7%
Exchange-traded products27.3%28.6%
Futures4.4%3.8%
Total100.0%100.0%

Average revenue per contract

The average revenue per contract was $0.388 in 2015, an increase of 17.6% compared with $0.330 in 2014. Average revenue per contract represents transaction fees divided by total contracts.

The following summarizes average revenue per contract by product category for 2015 compared to 2014.

20152014Percent Change
Equities$0.093$0.07622.4%
Indexes0.7110.6794.7%
Exchange-traded products0.1300.11216.1%
Total options average revenue per contract0.3280.27917.6%
Futures1.6941.6234.4%
Total average revenue per contract$0.388$0.33017.6%

Factors contributing to the change in total average revenue per contract for the year ended December 31, 2015 compared to the same period in 2014 included:

•Product mix—We experienced a shift in overall product mix. As a percentage of total volume, equities decreased to 33.5% from 36.9%, indexes increased to 34.8% from 30.7% and futures increased to 4.4% from 3.8%. Equities represent our lowest average revenue per contract, while index options and futures generate our highest options average revenue per contract and our highest total average revenue per contract, respectively.
•Rate structure— Our rate structure includes sliding scales, volume discounts, volume incentive programs and caps on fees as part of our effort to increase liquidity and market share in multiply-listed options. The increase in average revenue per contract across all product categories was primarily a result of fee changes implemented in 2015 and lower volume discounts and incentives.

Access Fees

Access fees for the year ended December 31, 2015 decreased to $53.3 million from $59.3 million in the comparable prior year period. The decrease in access fees was primarily due to a reduction in the number of trading permits.

Exchange Services and Other Fees

Exchange services and other fees for the year ended December 31, 2015 increased 11.0% to $42.2 million from $38.0 million in the comparable period in the prior year. The increase was primarily a result of higher fees for technology services and revenue generated from Livevol, which was acquired on August 7, 2015.

In 2016, we expect exchange services and other fees to be higher as a result of the recognition of a full year of revenue generated by Livevol.

Market Data Fees

Market data fees decreased 1.4% to $30.0 million for the year ended December 31, 2015 from $30.4 million in the prior year. For the years ended December 31, 2015 and 2014, income derived from our market data services totaled $16.0 million and $15.4 million, respectively, and OPRA income totaled $14.0 million and $15.0 million, respectively. Revenue generated from our market data services, which provide current and historical options and futures data, increased $0.6 million, resulting primarily from an increase in subscribers and fees for certain market data services. Income derived from OPRA is allocated based on each exchange's share of total cleared options transactions. The Company's share of total cleared options transactions for the period ended December 31, 2015 decreased to 23.3% from 24.9% for the same period in 2014 and total distributable OPRA income decreased compared to the prior year period resulting in lower revenue for the period ended December 31, 2015 compared to the same period in 2014.

Regulatory Fees

Regulatory fees decreased 9.7% for the year ended 2015 to $33.5 million from $37.1 million in the same period in the prior year. The decrease in regulatory fees was primarily the result of lower options regulatory fees and a decrease in regulatory fees received for other regulatory services.

Regulatory fees are primarily generated by the options regulatory fee that we charge on all Trading Permit Holder customer volume industry-wide, which decreased compared to the prior period and a decrease in regulatory fees received for other regulatory services, primarily related to CBOE Stock Exchange, LLC ("CBSX"), which ceased trading operations on April 30, 2014.

Under the rules of each of our options exchanges, as required by the SEC, any revenue derived from regulatory fees and fines cannot be used for non-regulatory purposes.

Other Revenue

Other revenue increased $4.9 million for the year ended 2015 to $19.5 million from $14.6 million in the same period in the prior year. The increase in other revenue was primarily due to higher regulatory fines assessed for disciplinary actions and the recognition of revenue to adjust for incorrect coding of transactions by an exchange participant related to prior periods.

Concentration of Revenue

All contracts traded on our exchanges must be cleared through clearing members of OCC. At December 31, 2015, there were one hundred thirteen Trading Permit Holders that are clearing members of OCC. Two clearing members accounted for 45% of transaction and other fees collected through OCC in 2015. The next largest clearing member accounted for approximately 12% of transaction and other fees collected through OCC. No one Trading Permit Holder using the clearing services of the top two clearing member firms represented more than 27% of transaction and other fees collected through OCC, for the respective clearing member, in 2015. Should a clearing member withdraw from CBOE, we believe the Trading Permit Holder portion of that clearing member's trading activity would likely transfer to another clearing member.

The two largest clearing members mentioned above clear the majority of the market-maker sides of transactions at CBOE, C2 and at all of the U.S. options exchanges. If either of these clearing members were to withdraw from the business of market-maker clearing and market-makers were unable to transfer to another clearing member, this could create significant disruption to the U.S. options markets, including ours.

Operating Expenses

Total operating expenses increased $11.2 million, or 3.7%, to $314.6 million for the year ended 2015 from $303.4 million in the year ago period, resulting from higher depreciation and amortization, technology support services, professional fees and outside services and royalty fees, partially offset by lower compensation and benefits. Expenses increased to 49.6% of total operating revenues in the year ended 2015 compared with 49.2% in the same period in 2014.

The following summarizes changes in operating expenses for the year ended December 31, 2015 compared to 2014.

20152014Inc./(Dec.)Percent Change
(in millions)
Compensation and benefits$105.9$121.7$(15.8)(13.0)%
Depreciation and amortization46.339.96.415.9%
Technology support services20.719.21.57.7%
Professional fees and outside services50.132.018.156.6%
Royalty fees70.666.14.56.8%
Order routing2.34.1(1.8)(43.8)%
Travel and promotional expenses8.99.0(0.1)(0.7)%
Facilities costs5.05.7(0.7)(12.6)%
Other expenses4.85.7(0.9)(14.3)%
Total operating expenses$314.6$303.4$11.23.7%

Compensation and Benefits

For the year ended December 31, 2015, compensation and benefits were $105.9 million, or 16.7% of total operating revenues, compared with $121.7 million, or 19.7% of total operating revenues, in the same period in 2014. This represented a decrease of $15.8 million, or 13.0%, which primarily resulted from lower stock-based compensation, a reduction in headcount and lower severance expense. The reduction in headcount and severance was primarily due to the transition of certain regulatory functions to FINRA which occurred in December 2014. The twelve months ended December 31, 2014 included $2.5 million of accelerated stock-based compensation expense for certain executives due to provisions contained in their employment arrangements.

Depreciation and Amortization

Depreciation and amortization increased by $6.4 million to $46.3 million for the year ended December 31, 2015 compared with $39.9 million for the same period in 2014. The increase in depreciation and amortization primarily resulted from capital spending to harden and enhance our trading platform and operations and the acceleration of depreciation for certain assets that have a shorter than expected useful life.

Professional Fees and Outside Services

Expenses related to professional fees and outside services increased to $50.1 million for the year ended December 31, 2015 from $32.0 million in the prior-year period, an increase of $18.1 million, which primarily resulted from higher contract services related to the transition of certain regulatory services for CBOE and C2 to FINRA which occurred in December 2014.

Royalty Fees

Royalty fees for the year ended December 31, 2015 were $70.6 million compared with $66.1 million for the prior year period, an increase of $4.5 million, which primarily resulted from higher trading volume in licensed products.

Operating Income

As a result of the items above, operating income in 2015 was $319.9 million compared to $313.8 million in 2014, an increase of $6.1 million.

Other Income/(Expense)

Other income/(expense) reflected income of $4.1 million for the year ended December 31, 2015 compared with a loss of $4.1 million for the same period in the prior year. The income in 2015 primarily included the Company's share of equity earnings of Signal Trading Systems, LLC ("Signal") and the $3.4 million of dividend income declared by the OCC in December 2015. In 2014, the expense primarily included the Company's share of the operating losses of Signal and the impairment of our investment in IPXI, which totaled $3.0 million.

Income before Income Taxes

As a result of the items above, income before income taxes in 2015 was $324.0 million compared to $309.7 million in 2014, an increase of $14.3 million.

Income Tax Provision

For the year ended December 31, 2015, the income tax provision was $119.0 million compared with $120.0 million for the same period in 2014. The effective tax rate was 36.7% and 38.7% for the years ended December 31, 2015 and 2014, respectively. The lower effective tax rate was primarily due to the recognition of a tax benefit associated with the release and expiration of uncertain tax positions.

Net Income

As a result of the items above, net income allocated to common stockholders in 2015 was $204.1 million compared to $188.4 million in 2014, an increase of $15.7 million. Basic and diluted net income per share allocated to common stockholders were $2.46 and $2.21 for the years ended December 31, 2015 and 2014, respectively.

Year ended December 31, 2014 compared to the year ended December 31, 2013

Consolidated Results

The following summarizes changes in financial performance for the year ended December 31, 2014 compared to 2013.

20142013Inc./(Dec.)Percent Change
(in millions, except per share amounts)
Total operating revenues$617.2$572.1$45.17.9%
Total operating expenses303.4286.217.26.0%
Operating income313.8285.927.99.8%
Total other expense(4.1)(2.2)1.990.2%
Income before income taxes309.7283.726.09.1%
Income tax provision120.0107.712.311.4%
Net income$189.7$176.0$13.77.8%
Net income allocated to common stockholders$188.4$173.9$14.58.4%
Operating income percentage50.8%50.0%
Net income percentage30.7%30.8%
Diluted—net income per share allocated to common stockholders$2.21$1.99
•The increase in total operating revenues was primarily driven by higher transaction fees and market data fees. The increase in transaction fees was primarily driven by an 11.6% increase in total volume in 2014.
•The increase in total operating expenses was primarily driven by higher compensation and benefits, depreciation and amortization, technology support services and royalty fees, partially offset by lower professional fees and outside services.
•The increase in total other expense was primarily driven by an impairment charge of $3.0 million related to our investment in IPXI, partially offset by a reduction in equity losses in other investments.

Operating Revenues

Total operating revenues for the year ended December 31, 2014 increased $45.1 million, or 7.9%, to $617.2 million from $572.1 million in the prior year. The following summarizes changes in total operating revenues for the year ended December 31, 2014 compared to 2013.

20142013Inc./(Dec.)Percent Change
(in millions)
Transaction fees$437.8$397.2$40.610.2%
Access fees59.361.0(1.7)(2.8)%
Exchange services and other fees38.037.30.72.1%
Market data fees30.424.95.522.2%
Regulatory fees37.136.70.41.2%
Other revenue14.615.0(0.4)(3.1)%
Total operating revenues$617.2$572.1$45.17.9%

Transaction Fees

Transaction fees increased 10.2% to $437.8 million for the year ended December 31, 2014, representing 70.9% of total operating revenues, compared with $397.2 million for the prior year period, or 69.4% of total operating revenues. This increase was largely driven by an 11.6% increase in trading volume, partially offset by a 1.2% decrease in the average revenue per contract. The increase in trading volume was across all product categories and the decrease in average revenue per contract primarily resulted from a shift in volume mix and an increase in volume based incentives. We believe volume across our product segments increased year over year due to market volatility, increased use of our proprietary products most directly tied to volatility and success in capturing market share.

The following summarizes transaction fees by product category for 2014 compared to 2013.

20142013Inc./(Dec.)Percent Change
(in millions)
Equities$37.2$40.6$(3.4)(8.5)%
Indexes276.0249.826.210.5%
Exchange-traded products42.443.7(1.3)(3.1)%
Total options transaction fees355.6334.121.56.4%
Futures82.263.119.130.2%
Total transaction fees$437.8$397.2$40.610.2%

Trading Volume

The Company's ADV was 5.26 million contracts in 2014, up 11.6% compared with 4.71 million for 2013. The Company experienced ADV increases across all product categories. We continued to experience growth in the trading of our proprietary products, primarily SPX options, VIX options and VIX futures. For the year ended December 31, 2014 as compared to the prior year period,we experienced increases in total volume in SPX options, VIX options and VIX futures, of 7.9% and 11.5% and 26.7%, respectively. Total trading days in 2014 and 2013 were two hundred fifty-two.

The following summarizes changes in total trading volume and ADV by product category for 2014 compared to 2013.

20142013Volume Percent ChangeADV Percent Change
VolumeADVVolumeADV
(in millions)
Equities488.61.94433.81.7212.6%12.6%
Indexes406.51.61372.61.489.1%9.1%
Exchange-traded products379.71.51341.01.3511.4%11.4%
Total options contracts1,274.85.061,147.44.5511.1%11.1%
Futures contracts50.60.2040.20.1625.9%25.9%
Total contracts1,325.45.261,187.64.7111.6%11.6%

The following provides the percentage of volume by product category for the year ended December 31, 2014 and 2013.

20142013
Equities36.9%36.5%
Indexes30.7%31.4%
Exchange-traded products28.6%28.7%
Futures3.8%3.4%
Total100.0%100.0%

Average Revenue Per Contract

The average revenue per contract was $0.330 in 2014, a decrease of 1.2% compared with $0.334 in 2013. Average revenue per contract represents transaction fees divided by total contracts.

The following summarizes average revenue per contract by product category for 2014 compared to 2013.

20142013Percent Change
Equities$0.076$0.094(19.1)%
Indexes0.6790.6701.3%
Exchange-traded products0.1120.128(12.5)%
Total options revenue per contract0.2790.291(4.1)%
Futures1.6231.5703.4%
Total average revenue per contract$0.330$0.334(1.2)%

Factors contributing to the change in total average revenue per contract for the year ended December 31, 2014 compared to the same period in 2013 included:

•Product mix—We experienced a shift in overall product mix. As a percentage of total volume, equities increased to 36.9% from 36.5%, indexes decreased to 30.7% from 31.4% and futures increased to 3.8% from 3.4%. Equities represent our lowest average revenue per contract, while index options and futures generate our highest options average revenue per contract and our highest total average revenue per contract, respectively.
•Rate structure—Our rate structure includes sliding scales, volume discounts, volume incentive programs and caps on fees as part of our effort to increase liquidity and market share in multiply-listed options. Average revenue per contract on multiply-listed options (equities and exchange-traded products) decreased 19.1% and 12.5%, respectively. These decreases resulted primarily from increases in volume-based incentives for these products. Average revenue per contract on futures increased 3.4%. The increase was primarily due to fee changes implemented in 2014.

Access Fees

Access fees for the year ended December 31, 2014 decreased to $59.3 million from $61.0 million in the comparable prior year period. The decrease in access fees was primarily due to incentive programs for market-maker trading permits and floor brokers implemented in May 2013 and a reduction in the number of trading permits.

Exchange Services and Other Fees

Exchange services and other fees for the year ended December 31, 2014 increased 2.1% to $38.0 million from $37.3 million in the comparable period in the prior year. The increase was primarily due to increased demand for technology services, terminal and other equipment rentals and certain services impacted by trading volume.

Market Data Fees

Market data fees increased 22.2% to $30.4 million for the year ended December 31, 2014 from $24.9 million in the prior year. OPRA and Company market data fees for 2014 and 2013 were $15.0 million and $15.4 million and $12.9 million and $12.0 million, respectively. The Company's share of OPRA income for the period ended December 31, 2014 increased to 24.9% from 21.7% for the same period in 2013 as a result of an increase in the Company's share of total cleared options transactions. Revenue generated from the Company's market data services increased $3.4 million, resulting primarily from an increase in subscribers and rates for certain market data services.

Regulatory Fees

Regulatory fees increased 1.2% for the year ended 2014 to $37.1 million from $36.7 million in the same period in the prior year, Regulatory fees are primarily generated by the options regulatory fee that we charge on all Trading Permit Holder customer volume industry-wide which increased compared to the prior period. The higher revenue attributed to volume was partially offset by CBOE and C2 lowering their respective options regulatory fee rates as of August 1, 2014, and a decrease in regulatory fees received for other regulatory services, primarily related to CBSX, which ceased trading operations on April 30, 2014.

In December 2014, we entered into an agreement with the FINRA to provide a majority of the regulatory services to the CBOE and C2 options markets. The Company does not expect revenue generated from regulatory fees to be materially impacted by the agreement with FINRA.

Operating Expenses

Total operating expenses increased $17.2 million, or 6.0%, to $303.4 million for the year ended 2014 from $286.2 million in the year ago period, resulting from higher compensation and benefits, depreciation and amortization, technology support services and royalty fees, partially offset by lower professional fees and outside services. Expenses decreased to 49.2% of total operating revenues in the year ended 2014 compared with 50.0% in the same period in 2013.

The following summarizes changes in operating expenses for the year ended December 31, 2014 compared to 2013.

20142013Inc./(Dec.)Percent Change
(in millions)
Compensation and benefits$121.7$118.1$3.63.1%
Depreciation and amortization39.934.55.415.7%
Technology support services19.217.91.37.2%
Professional fees and outside services32.034.5(2.5)(7.2)%
Royalty fees66.156.69.516.9%
Order routing4.14.3(0.2)(6.3)%
Travel and promotional expenses9.09.8(0.8)(7.8)%
Facilities costs5.75.00.713.2%
Other expenses5.75.50.22.7%
Total operating expenses$303.4$286.2$17.26.0%

Compensation and Benefits

For the year ended December 31, 2014, compensation and benefits were $121.7 million, or 19.7% of total operating revenues, compared with $118.1 million, or 20.6% of total operating revenues, in the same period in 2013. This represents an increase of $3.6 million, or 3.1%, resulting from higher salaries of $3.6 million, driven primarily from annual pay adjustments, higher payroll taxes of $0.5 million and higher health insurance costs of $0.4 million, higher severance expense of $2.4 million, primarily due to transition of a majority of regulatory services to FINRA, and higher annual incentive compensation of $2.0 million, which is aligned with performance targets, partially offset by lower stock-based compensation expense of $5.2 million.

In December 2014, we entered into an agreement with FINRA to provide certain regulatory services to the CBOE and C2 options markets. As part of the agreement, a significant number of our regulatory staff, as well as certain systems staff supporting our regulatory functions, transitioned to FINRA resulting in a headcount reduction of over 100 employees.

Depreciation and Amortization

Depreciation and amortization increased by $5.4 million to $39.9 million for the year ended December 31, 2014 compared with $34.5 million for the same period in 2013. The increase in depreciation and amortization primarily resulted from increased capital spending to harden and enhance our trading platform and operations.

Technology Support Services

Technology support services increased $1.3 million to $19.2 million for the year ended December 31, 2014 compared with $17.9 million in the prior-year period. The increase in technology support services is primarily due to higher costs for hardware and software maintenance.

Professional Fees and Outside Services

Expenses related to professional fees and outside services decreased to $32.0 million for the year ended December 31, 2014 from $34.5 million in the prior-year period. The $2.5 million decrease is primarily due to lower costs related to litigation, partially offset by higher costs for contract programmers. The Company received insurance reimbursement for legal expenses of $1.5 million in 2013.

In December 2014, we entered into an agreement with FINRA to provide certain regulatory services to the CBOE and C2 options markets. As noted above, certain staff transitioned from CBOE to FINRA. As a result of the transition, costs for former employees in regulatory and systems staff supporting our regulatory functions, will be included in professional fees and outside services in 2015.

Royalty Fees

Royalty fees expense for the year ended December 31, 2014 were $66.1 million compared with $56.6 million for the prior year period, an increase of $9.5 million. The increase was primarily due to higher trading volume in licensed products and an increase in royalty rates as a result of the amendment the Company executed with S&P OPCO LLC (“S&P”), effective as of March 2013, relating to the Company's license to trade options and futures and create products based on certain S&P indexes and higher fees associated with dissemination of certain market data.

Operating Income

As a result of the items above, operating income in 2014 was $313.8 million compared to $285.9 million in 2013, an increase of $27.9 million.

Other Expense

Net Loss from Investment in Affiliates

Net loss from investment in affiliates was $4.2 million for the year ended December 31, 2014 compared with $2.2 million for the same period in the prior year. The loss in 2014 and 2013 primarily included the Company's share of the operating loss of Signal Trading Systems, LLC and, in 2014, the impairment of our investment in IPXI which totaled $3.0 million.

Income before Income Taxes

As a result of the items above, income before income taxes in 2014 was $309.7 million compared to $283.7 million in 2013, an increase of $26.0 million.

Income Tax Provision

For the year ended December 31, 2014, the income tax provision was $120.0 million compared with $107.7 million for the same period in 2013. This increase was primarily a result of higher taxable income and a higher effective tax rate. The effective tax rate was 38.7% and 38.0% for the years ended December 31, 2014 and 2013, respectively.

Net Income

As a result of the items above, net income allocated to common stockholders in 2014 was $188.4 million compared to $173.9 million in 2013, an increase of $14.5 million. Basic and diluted net income per share allocated to common stockholders were $2.21 and $1.99 for the years ended December 31, 2014 and 2013, respectively.

Liquidity and Capital Resources

Historically, we have financed our operations, capital expenditures and other cash needs through cash generated from operations. Cash requirements principally consist of funding operating expenses, capital expenditures, actual and anticipated quarterly and special dividend payments and common stock repurchases under the announced program. We expect to use cash on hand at December 31, 2015 and funds generated from operations to continue to meet our 2016 cash requirements. From time to time, we consider the possibility of acquisitions, dispositions and strategic alliances that we believe would strengthen our business in the long-term; however, if consummated, these transactions may negatively impact our liquidity in the short-term.

Cash Flows

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Operating Activities

Net cash provided by operating activities was $245.3 million and $262.7 million for the years ended December 31, 2015 and 2014, respectively. The decrease in net cash flows provided by operating activities was primarily due to lower deferred income taxes, income tax liability and stock-based compensation, higher accounts receivable and income taxes receivable, partially offset by higher net income and higher depreciation and amortization.

Net cash provided by operating activities was $40.3 million higher than net income for the fiscal year ended December 31, 2015. The difference was mainly a result of $46.3 million in depreciation and amortization and the recognition of stock-based compensation totaling $12.2 million, partially offset by increases in accounts receivable of $4.8 million and income taxes receivable of $6.4 million.

Investing Activities

Net cash flows used in investing activities totaled $79.4 million and $52.1 million for the years ended December 31, 2015 and 2014, respectively. Expenditures for capital and other assets totaled $39.3 million and $50.2 million for the years ended December 31, 2015 and 2014, respectively, primarily representing purchases of systems hardware and development of software to harden and enhance our trading platform and operations. We also acquired a business, Livevol, which totaled $3.0 million. Additionally, investments totaled $35.4 million in 2015, which primarily reflects our our $30.0 million contribution to OCC, as part of the capital plan discussed below, and other minority investments.

Our future expenditures for capital and other assets are expected to be primarily driven by spending to harden the company's systems, as well as ongoing investments in systems hardware and software that enhance trading technology. In 2015, we announced the development of a new trading platform, called CBOE Vector. With the development of CBOE Vector, we expect capital expenditures in 2016 to be higher than 2015 and comparable with 2014 capital spending.

Financing Activities

Net cash flows used in financing activities totaled $211.5 million and $283.9 million for the years ended December 31, 2015 and 2014, respectively. The $72.4 million decrease in net cash flows used in financing activities resulted primarily from a a special dividend paid in 2014 totaling $43.8 million and lower repurchases of common stock in 2015.

For the year ended December 31, 2015, net cash flows used in financing activities consisted of $132.2 million in common stock purchases under the Company's share repurchase program, $73.4 million for the payment of quarterly dividends, $3.2 million for other share repurchases, which consisted of common stock surrendered to satisfy employees' tax obligations upon the vesting of restricted stock and the payment of outstanding debt in conjunction with the acquisition of Livevol totaling $4.0 million.

Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Operating Activities

Net cash provided by operating activities was $262.7 million and $224.4 million for the years ended December 31, 2014 and 2013, respectively. The increase in net cash flows provided by operating activities was primarily due to higher net income and comparable balances year over year in deferred taxes and income tax receivable.

Net cash provided by operating activities was $72.9 million higher than net income for the fiscal year ended December 31, 2014. The difference was mainly a result of $39.9 million in depreciation and amortization, the recognition of stock-based compensation totaling $15.6 million and an increase in income tax liability of $10.8 million, partially offset by an increase in accounts receivable of $8.5 million.

Investing Activities

Net cash flows used in investing activities totaled $52.1 million and $31.2 million for the years ended December 31, 2014 and 2013, respectively. Expenditures for capital and other assets totaled $50.2 million and $28.7 million for the years ended December 31, 2014 and 2013, respectively, primarily representing purchases of systems hardware and development of software to harden and enhance out trading platform and operations. The Company made an investment in Signal Trading Systems, LLC for $2.0 million in 2014.

Financing Activities

Net cash flows used in financing activities totaled $283.9 million and $107.4 million for the years ended December 31, 2014 and 2013, respectively. The $176.5 million increase in net cash flows used in financing activities resulted primarily from higher quarterly dividends, the payment of a special dividend in 2014 and repurchases of common stock.

For the year ended December 31, 2014, net cash flows used in financing activities consisted of $168.3 million in common stock purchases under the Company's share repurchase program, $67.0 million for the payment of quarterly dividends, $43.8 million for the payment of a special dividend and $8.3 million for other shares purchases, which consisted of common stock surrendered to satisfy employees' tax obligations upon the vesting of restricted stock.

Dividends

The Company’s expectation is to continue to pay dividends. The decision to pay a dividend, however, remains within the discretion of our board of directors and may be affected by various factors, including our earnings, financial condition, capital requirements, level of indebtedness and other considerations our board of directors deems relevant. Future debt obligations and statutory provisions, among other things, may limit, or in some cases prohibit, our ability to pay dividends.

Share Repurchase Program

In 2011, the board of directors approved an initial authorization for the Company to repurchase shares of its outstanding common stock of $100 million and approved additional authorizations of $100 million in each of 2012, 2013, 2014 and 2015 for total authorizations of $500 million. The program permits the Company to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation.

For the twelve months ended December 31, 2015, the Company purchased 2,144,545 shares of common stock at an average cost per share of $61.63, totaling $132.2 million in purchases under the program.

Since inception of the program, the Company purchased 9,999,615 shares of common stock at an average cost per share of $44.25, totaling $442.5 million in purchases under the program.

As of December 31, 2015, the company had $57.5 million of availability remaining under its existing share repurchase authorizations.

OCC Capital Plan

In December 2014, OCC announced a newly-formed capital plan. The OCC capital plan was designed to strengthen OCC's capital base and facilitate its compliance with proposed SEC regulations for Systemically Important Financial Market Utilities ("SIFMUs") as well as international standards applicable to financial market infrastructures. On February 26, 2015, the SEC issued a notice of no objection to OCC's advance notice filing regarding the capital plan, and OCC and OCC’s existing exchange stockholders, which include CBOE, subsequently executed agreements effecting the capital plan. Under the plan, each of OCC's existing exchange stockholders agreed to contribute its pro-rata share, based on ownership percentage, of $150 million in equity capital, which would increase OCC's shareholders' equity, and to provide its pro rata share in replenishment capital, up to a maximum of $40 million per exchange stockholder, if certain capital thresholds are breached. OCC also adopted policies under the plan with respect to fees, customer refunds, and stockholder dividends, which envision an annual dividend payment to the exchange stockholders equal to the portion of OCC’s after-tax income that exceeds OCC’s capital requirements after payment of refunds to OCC’s clearing members (with such customer refunds generally to constitute 50% of the portion of OCC’s pre-tax income that exceeds OCC’s capital requirements). On March 3, 2015, in accordance with the plan, CBOE contributed $30 million to OCC. On March 6, 2015, OCC informed CBOE that the SEC, acting though delegated authority, had approved OCC's proposed rule filing for the capital plan. The SEC approval order was stayed on March 13, 2015 automatically as a result of the initiation of petitions to review the order. On September 10, 2015, the SEC issued orders that discontinued the automatic stay of the approval order and granted the petitions for the SEC to review the approval order. On September 15, 2015, the petitioners filed motions to reinstitute the automatic stay. On February 11, 2016, based on a de novo review of the entire record, the SEC approved the proposed rule change implementing OCC's capital plan and dismissed the petitions for review and the petitioners' motions. CBOE's contribution has been recorded under Investments in the balance sheet at December 31, 2015. On December 17, 2015, OCC declared a dividend in accordance with the policies adopted under the new capital plan. The Company’s portion of the dividend, payable following issuance of OCC’s financial statements for 2015, is $3.4 million and is recorded under Investment income in the Company’s consolidated statement of income.

Off-Balance Sheet Arrangements

We currently do not have any relationships with unconsolidated entities or financial partnerships, often referred to as structured finance or special purpose entities, that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Lease and Contractual Obligations

The Company currently leases additional office space, a data center and remote network operations center, with lease terms remaining from 7 months to 115 months as of December 31, 2015. In December 2014, we entered into an agreement with FINRA to provide certain regulatory services to the CBOE and C2 options markets. The agreement included the assignment of the office space CBOE leased for regulatory operations.

Total rent expense related to current and former lease obligations for the years ended December 31, 2015, 2014 and 2013 totaled $4.1 million, $3.8 million and $3.0 million, respectively. Future minimum payments under our operating leases and contractual obligations were as follows at December 31, 2015 (in thousands):

Total(1)Less than 1 year1 - 3 years3 - 5 yearsMore than 5 years
Operating leases$6,441$3,210$1,707$409$1,115
Contractual obligations (2)232,36132,11165,28953,93281,029
Other liabilities (3)3,3792,0001,379——
Total$242,181$37,321$68,375$54,341$82,144

(1) Gross unrecognized income tax liabilities, excluding interest and penalties, of $31.9 million are not included in the table due to uncertainty about the date of their settlement.

(2) Contractual obligations means an agreement to purchase goods or services that is enforceable and legally binding

and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable

price provisions; and the approximate timing of the transaction.

(3) Other liabilities represent contingent consideration of $3.3 million related to the acquisition of Livevol.

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