Item 1. Business

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, including our majority ownership in CBOE Vest Financial Group Inc. ("CBOE Vest").

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 CBOE, CFE and C2 as stand-alone exchanges, but reports the results of its operations in a single 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 of 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.

The following chart illustrates annual contract volume across the different categories of products traded at the Company for the periods indicated:

	Annual Contract Volume
	2016			2015			2014			2013			2012
Equities	364,373,339			392,982,051			488,580,906			433,777,204			494,289,301
Indexes	433,256,044			408,281,695			406,454,861			372,647,443			304,339,908
Exchange-traded products	326,740,299			320,997,251			379,742,163			341,023,209			311,792,122
Total Options Volume	1,124,369,682			1,122,260,997			1,274,777,930			1,147,447,856			1,110,421,331
Futures	60,176,526			51,671,188			50,615,435			40,193,447			23,892,931
Total Contract Volume	1,184,546,208			1,173,932,185			1,325,393,365			1,187,641,303			1,134,314,262

Our operating revenues are primarily driven by transaction fee revenues, which are generated on the contracts traded on our exchanges. In 2016, approximately 70.5% of our operating revenues were generated by transaction fee revenues.

Our principal executive offices are located at 400 South LaSalle Street, Chicago, Illinois 60605, and our telephone number is (312) 786-5600.

Our web site is www.cboe.com. Information contained on or linked through our web site is not incorporated by reference into this Annual Report on Form 10-K.

History

CBOE was founded in 1973 as a non-stock corporation owned by its members. CBOE was the first organized marketplace for the trading of standardized, exchange-traded options on equity securities. In 2004, CFE began operations as a futures exchange. CBOE Holdings was incorporated in the State of Delaware on August 15, 2006. In June 2010, CBOE demutualized, CBOE, CFE and C2 became wholly-owned subsidiaries of CBOE Holdings and CBOE Holdings completed its initial public offering. In October 2010, C2, the Company's all-electronic options exchange, initiated operations.

Pending Merger

CBOE Holdings and Bats Global Markets, Inc. (“Bats”) entered into an Agreement and Plan of Merger, dated as of September 25, 2016 (the “Merger Agreement”), providing, among other things, that, upon the terms and subject to the conditions set forth in the Merger Agreement, a wholly-owned subsidiary of CBOE Holdings will merge with and into Bats, with Bats surviving as a wholly-owned subsidiary of CBOE Holdings (the “Merger”). The Merger Agreement also provides that, immediately following the effective time of the Merger, Bats, as the surviving corporation from the Merger, will merge

with and into CBOE V, LLC (“Merger LLC”), a wholly-owned subsidiary of CBOE Holdings, Inc. (the “Subsequent Merger”), with Merger LLC surviving the Subsequent Merger as a wholly-owned subsidiary of CBOE Holdings.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of voting common stock of Bats, par value $0.01 per share (“Bats Voting Common Stock”), and each share of non-voting common stock of Bats, par value $0.01 per share (“Bats Non-Voting Common Stock” and, together with the Bats Voting Common Stock, “Bats Common Stock”), issued and outstanding immediately prior to the Effective Time (other than shares held by CBOE Holdings, Bats or any of their respective subsidiaries, shares held by any holder of Bats Common Stock who is entitled to demand and properly demands appraisal of such shares under Delaware law and unvested restricted shares of Bats Common Stock granted under any Bats equity incentive plan) will convert into, at the election of the holder of such share, subject to proration and adjustment, either (i) 0.3201 of a share of common stock of CBOE Holdings, par value $0.01 per share (“CBOE Holdings Common Stock”), and $10.00 in cash (the “Mixed Consideration”), (ii) an amount of cash, without interest (the “Cash Consideration”), equal to the sum (rounded to two decimal places) of (a) $10.00 and (b) the product obtained by multiplying 0.3201 by the volume-weighted average price (rounded to four decimal places) of shares of CBOE Holdings Common Stock on the NASDAQ Stock Market LLC for the ten consecutive trading days ending on the second full trading day prior to the Effective Time (the “Closing VWAP”), or (iii) a number of shares of CBOE Holdings Common Stock (the “Stock Consideration”) equal to the sum of (a) 0.3201 and (b) the quotient (rounded to four decimal places) obtained by dividing $10.00 by the Closing VWAP. Holders of Bats Common Stock who do not make an election will receive the Mixed Consideration. The consideration to be paid to holders of Bats Common Stock electing to receive the Cash Consideration or the Stock Consideration in connection with the Merger is subject to automatic adjustment, as applicable, to ensure that the total amount of cash paid and the total number of shares of CBOE Holdings Common Stock issued in the Merger is the same as what would be paid and issued if all holders of Bats Common Stock were to receive the Mixed Consideration at the Effective Time.

The completion of the Merger is subject to certain conditions, including, among others, (i) adoption by Bats stockholders of the Merger Agreement, (ii) approval by CBOE Holdings stockholders of the issuance of CBOE Holdings common stock in connection with the Merger, (iii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR") and the receipt of all other regulatory approvals the failure to obtain which would make any of the transactions contemplated by the Merger Agreement illegal, including, without limitation, approval from the SEC, the Financial Industry Regulatory Authority ("FINRA") and the U.K. Financial Conduct Authority and (iv) other customary closing conditions. Early termination of the waiting period under the HSR was granted on November 18, 2016. CBOE Holdings and Bats received regulatory approvals by the SEC on December 19, 2016 and December 16, 2016, respectively, and FINRA granted approval on January 6, 2017. On January 17, 2017, Bats stockholders adopted the Merger Agreement and CBOE Holdings stockholders approved the issuance of CBOE Holdings common stock pursuant to the Merger Agreement. CBOE Holdings received regulatory approvals from the Dutch Central Bank and the United Kingdom's ("U.K.") Financial Conduct Authority (“FCA”) on February 2, 2017 and February 9, 2017, respectively. The Merger is expected to close on February 28, 2017.

Industry

Our primary business of offering exchange-traded options and futures contracts on financial instruments is part of the large global derivatives industry. Derivatives are financial contracts whose value is derived from an underlying asset or reference value. While derivatives exist on a wide range of underlying assets and references, we currently focus on offering derivatives products on individual stocks, indexes, exchange-traded funds, exchange-traded notes and various benchmarks related to trading and investment strategies. The global derivatives industry includes both exchanges and a large over-the-counter market. The most common types of derivatives are options, futures and swap contracts. These products allow for various types of risk to be isolated and transferred.

Options and Futures

Options represent a contract giving the buyer the right, but not the obligation, to buy or sell a specified quantity of an underlying security or index at a specific price for a specific period of time. Options provide investors a means for hedging, speculation and income generation, while at the same time providing leverage with respect to the underlying asset. Most options traded on U.S. securities exchanges and over-the-counter are on individual equities, market indexes and ETPs.

A futures contract is an agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future. Futures are standardized, transferable, exchange-traded contracts that are settled by the delivery of the underlying asset or in cash by reference to the underlying asset or reference at a specified price and on a specified future date. Futures on CFE are settled in cash. Options on futures may also be listed for trading on futures exchanges.

Trading

In the listed options market, there are currently options contracts covering approximately 3,700 underlying stocks, indexes and ETPs, among other products. The presence of dedicated liquidity providers, including market-makers, is a key feature of the options market. Market-makers collectively provide continuous bids and offers for all listed options series.

Trends

Mix of Transaction Fees

Our proprietary products are those in which we have a property right or for which we have an exclusive license, and contribute almost all of our transaction fee revenues for index options and all of our transaction fee revenues for futures. Listed options on equities and ETPs currently may be listed on all options exchanges, while trading in our proprietary products is currently limited to our exchanges. Thus, our proprietary products are able to support a higher revenue per contract than multiply-listed products.

Over the past five years, our transaction fees generated by our futures and index options increased from approximately 57.5% of total transaction fees in 2011 to approximately 88.2% in 2016. This increase is primarily due to increased trading volume and fees generated by our proprietary VIX options and futures and SPX options. More recently, average daily volume ("ADV") for our proprietary VIX options and futures and SPX options is up 8% from 2015, led by trading in VIX futures, which is up 16% from 2015.

Price Competition

The number of U.S. options exchanges that we compete with has more than doubled over the past eleven years, from five exchanges to fifteen, in large part due to existing exchange holding companies opening new exchanges that offer different markets and pricing models on existing technology. As the listed options business provides transaction processors with a new source of revenue for scalable systems, and offers greater margins than the equity trading business, we expect that our competitors, or new entrants into the exchange business, may continue to open new options exchanges.

The options exchanges that we compete with set fees and rebates to attract multiply-listed options business to their exchanges, which has reduced the net revenue per contract that we generate from multiply-listed options. Liquidity providers are attracted to markets primarily through the incentives for customer order flow, from which they can attempt to generate trading profits. Liquidity providers are also attracted by low transaction fees and credits to post liquidity. Order flow, particularly customer order flow, is the primary driver of multiply-listed options exchange volumes and in the past several years, the competition for this business has increased significantly, due in part to the role of firms known as consolidators, who operate both order execution and market making businesses, and collect customer order flow from originating brokers which they then route and execute as a service to that customer. These consolidators base their routing decisions, among other things, on best execution, technology, liquidity, service, pricing and other factors, including in some cases their ability to internalize order flow for potential trading profits. Some exchanges have structured their options businesses in partnership with established market participants, such as consolidators, and other order flow providers, while others offer specific payments for order flow, in addition to any economic incentives received from market-makers and other participants.

Regulatory Oversight

We are subject to regulation by the SEC and the CFTC and market participants may be subject to regulation by the SEC, the CFTC, the Board of Governors of the Federal Reserve, the U.S. Department of the Treasury and/or foreign regulators. Laws and regulations regarding our business and the business of market participants are frequently modified or changed. See "Regulatory Environment and Compliance" for more information on significant areas of regulation of us. As the number of legislative actions have increased, such as the implementation of Basel III, Dodd-Frank and the Collins Amendment to Dodd-Frank, some market participants have adjusted their businesses.

Competitive Strengths

We have established ourselves as a global leader and innovator in the options industry. We believe we are well positioned to further enhance our leadership position through several key competitive strengths:

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Innovative Products and Services. We have worked closely and collaboratively with market participants to introduce new products and services to meet the evolving needs of the derivatives industry, and plan to continue these efforts. Products we have developed include index options, options and futures on the VIX Index and other volatility indexes, short duration options, including Weeklys, FLexible EXchange Options ("FLEX options") and options strategy benchmark indexes.

We also connect with a growing customer base through trading and educational resources, including the world-renowned CBOE Options Institute, and we recently became the first U.S. options exchange to trade options during non-U.S. trading hours.

•	Strategic Relationships and Partnerships. We have entered into licensing agreements with index providers under which we have rights to create volatility indexes and offer options and futures products on their indexes. We have also formed partnerships with key providers to develop new products and services. See "Strategic Relationships" and "Strategic Partnerships."

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Leading Brand, Reputation and Market Position. CBOE, the largest U.S. options exchange, based on both contract volume and notional value, and one of the largest options exchanges in the world, is an options market leader. As the creator of listed options and other significant products in the listed options industry, including the VIX Index and VIX futures and options, CBOE is a leading brand name in the options and volatility space.

Growth Strategy

We believe that the listed options and futures industry, especially with respect to volatility trading, has significant growth potential, including through new participants and products. Our mission is to be the leader in providing innovative products that facilitate and enhance trading in a global marketplace. We expect to further expand our business and increase our revenues and profitability by pursuing the following growth strategies:

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Expand Customer Base. We intend to continue our efforts to expand the use of our products domestically and internationally, by intensifying our business development efforts to target new retail investors and institutional investors, including pensions and endowments, and to inform them about how to trade our products, especially our proprietary products. We also intend to continue to offer investor education and wide educational resources for both retail and institutional customers through the CBOE Options Institute and through our comprehensive website, including through the annual CBOE Risk Management Conferences, now held in the U.S., Europe and Asia. Further, offering extended trading hours in our exclusive products is at the core of our international expansion effort. In addition to extended trading hours for VIX futures and SPX and VIX options, in 2016 we began overnight dissemination of values for the VIX Index. We opened an office in London and engaged a full-time consultant in Hong Kong in 2016 to further support our expanding international business development efforts.

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Develop Innovative Products that Leverage and Complement Core Products. We intend to license and create proprietary intellectual property to develop proprietary products that meet the needs of the derivatives industry, through both strategic relationships and internally developed products, while continuing to diversify our product line across asset classes. In 2016, we continued to leverage partnerships with index providers to extend our product offering with products such as SPX Weeklys with Monday and Wednesday expirations and Flex Options with Asian and Cliquet style settlements. In addition, we launched new products on certain Frank Russell Company and FTSE International Limited (together, "FTSE Russell") indexes that are solely listed for trading on CBOE in the U.S.

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Offer Compelling Economic Model. We have designed our fee schedule to provide benefits to market participants that concentrate their overall trading activity on CBOE, which we believe encourages market participants to increase their business with us. In our proprietary products, we offer discounts and incentives to certain participants based on relative volume and the use of selected strategies. In multiply-listed products, we offer incentive programs to attract customer order flow to help our market participants manage both the fixed and transaction-based costs of trading on CBOE. We regularly review the fee schedules for all of our exchanges to provide an industry-leading economic offering.

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Continue to Enhance Our Trading Systems. We recognize that the opportunity to participate in the growth of the derivatives market will be driven in great part by the trading functionality and systems capabilities that an exchange offers to market participants. We intend to use our strong in-house development capabilities and continued investment to further enhance and develop the functionality and capacity of our trading systems. In 2015, we began in-house custom development of our next generation of trading technology, CBOE Vector, a new platform designed with the end-user in mind, using the latest hardware and software technology in order to provide enhanced agility, speed, connectivity and risk controls. However, the launch of CBOE Vector on CFE is suspended due to the pending Merger.

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Evaluate Strategic Opportunities that Leverage and Complement Core Business. We evaluate strategic opportunities that we believe will enhance stockholder value. We specifically look for strategic opportunities beyond our current businesses that will capitalize on our core competencies and diversify our sources of revenue. We continue to form new alliances with various partners that leverage our strengths and enable us to diversify our

product and business lines across new regions and asset classes. In 2016, we made a majority investment in CBOE Vest, an investment manager focused on Target Outcome Investment strategies, and made a minority equity investment in Eris Exchange Holdings, LLC (“Eris”), a U.S. - based futures exchange group offering swap futures as a capital-efficient alternative to over-the-counter swaps.

In addition, we believe the recently announced Merger squarely fits into our growth strategy outlined above to develop unique products, expand our customer base and leverage alliances that complement our core business. Specifically, we believe that the Merger has the potential to significantly expand and diversify our product line across new asset classes, such as U.S. and European equities, ETF trading and global Foreign Currencies ("FX") products, broaden our reach with Bats’ market-leading European presence and increase our non-transactional revenue stream, while enabling us to streamline the combined company’s technology and enhance our strong growth and margin profile.

Products

Our exchanges provide a marketplace for the trading of options and futures contracts that meet criteria established in the rules of the respective exchange. The options contracts listed for trading include options on indexes, equities and ETPs. In addition, we provide a marketplace for trading futures contracts through CFE.

Types of Products

•	Index Options. We offer trading in options on several different broad-based market indexes, including the VIX Index, a proprietary index that we developed and that has become a widely recognized measure of equity market volatility. The index options we list include some of the most widely recognized measures of the U.S. equities market, as discussed below.

•	Equity Options. We offer trading in options on the stocks of over 3,100 corporations. The stocks underlying our individual equity options are listed on equity stock exchanges.

•	Options on ETPs. We offer trading in options on over 600 ETFs and ETNs based on various domestic and foreign market indexes, as well as on volatility, commodities, currencies and fixed income instruments.

•	Futures. We provide a marketplace for trading four futures products through CFE. CFE has focused on the trading of futures using the CBOE-created VIX methodology, but also provides trading in S&P 500 Variance futures.

Increased Flexibility

Over the past few years, we have expanded our offerings, and experienced increases in our existing offerings, that allow for customers to trade options on a number of different time horizons, allowing them to pinpoint their preferred timing. In addition to standard option terms, we also offer options with weekly, end of month and end of quarter expirations. Our Weeklys product in particular has seen rapid growth, especially in SPX, and in 2016 we added Monday and Wednesday expiring SPX Weeklys. We believe that the flexibility provided by these offerings allows us to meet the differing needs of our customers and increase trading volume.

Proprietary Products

The Company has developed several of its own proprietary indexes and index methodologies. These include volatility indexes based on various broad-based market indexes (such as the S&P 500, the S&P 100, the Russell 2000 and the DJIA), volatility indexes based on ETFs and individual stocks, the CBOE S&P 500 Implied Correlation Index, the CBOE S&P 500 Smile Index and a series of options strategy benchmarks, including BuyWrite, PutWrite and Collar indexes based on the S&P 500, Russell 2000 and BuyWrite indexes based on other broad-based market indexes. In addition to any transaction fee revenue generated on products created based on these indexes, we have licensed others to use some of these indexes to create products and have entered into agreements whereby we have granted others the rights to sub-license certain indexes. The Company generates revenue from both the calculation and dissemination of index values and from the licensing of our proprietary indexes.

These proprietary products are built both through our in-house research and development staff and our strategic relationships and license agreements with index providers. The following is a discussion of our strategic relationships and additional detail on our most frequently traded products, including SPX options and VIX options and futures.

Strategic Relationships

The Company has long-term business relationships with several providers of market indexes. We license their indexes as the basis for indexes, index options and other products. In some instances, these licenses provide us with the exclusive right to list certain products based on these indexes. Of particular note are the following:

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S&P 500 and S&P 100 Indexes. We have the exclusive right to offer options contracts on the S&P 500 Index and the S&P 100 Index as a result of a licensing arrangement with S&P OPCO LLC ("S&P"). Our license with S&P is through December 31, 2033, with an exclusive license to trade options on the S&P 500 Index through December 31, 2032. We are also authorized to use the S&P 500 Index and S&P 100 Index for the creation of CBOE volatility indexes, such as the VIX Index, and tradable products on those volatility indexes.

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FTSE Russell Indexes. Under our license agreement with FTSE Russell, CBOE has the exclusive right in the U.S. to offer options on more than two dozen FTSE Russell indexes, including the Russell 2000, FTSE GEIS (Global Equity Index Series), FTSE China 50, the Russell 1000, the Russell 1000 Value and the Russell 1000 Growth Indexes. We offer options on the Russell 2000 Index, Russell 1000, Russell 1000 Value and Russell 1000 Growth Indexes and in 2016 we launched trading options on the FTSE 100, FTSE China 50 and FTSE Emerging Indexes.

•	MSCI. We have the exclusive right in the U.S. to offer options on six of MSCI's indexes, including the MSCI EAFE and the MSCI Emerging Markets Indexes, as a result of a licensing arrangement with MSCI Inc. We offer options on the MSCI EAFE and the MSCI Emerging Markets Indexes and in 2016 we broadened distribution of data on these indexes through CBOE’s Market Data Express, LLC ("MDX") service.

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Dow Jones Industrial Average ("DJIA"). We have the exclusive right during standard U.S. trading hours to offer options contracts on the DJIA and certain other Dow Jones indexes through December 31, 2017 as a result of a licensing arrangement with S&P Dow Jones Indices, LLC. We are also authorized to use these indexes to create CBOE volatility indexes and trade options, futures and other products on these indexes.

SPX Options

The S&P 500 Index is an index comprised of 500 large-cap U.S. listed companies. It is one of the most commonly followed indexes, and is considered a bellwether for the U. S. economy. The options we offer on the S&P 500 Index are exclusive to CBOE and contribute substantially to our volumes and transaction fees. Because of its status as a bellwether, SPX is traded in a number of different trading strategies by customers with different goals, including pension funds hedging their equity exposure by buying put options, asset managers seeking enhanced returns by selling covered call options and hedge funds using risk-managed strategies to capture so-called “risk premia” embedded in option prices.

Over the past six years we have seen a significant increase in the number of SPX Weeklys contracts traded, one of our fastest growing products. As a percentage of total SPX contracts traded, the percentage of SPX Weeklys has increased from 2.2% in 2010 to 37.8% in 2016. We believe that traders are using this product to fine tune the timing of hedging strategies and maximize the risk premium in strategies that involve the sale of options, such as covered call writing.

Volatility Trading

CBOE pioneered the volatility trading space, with its introduction of the CBOE Volatility Index (the "VIX Index") in 1993. We introduced futures on the VIX Index in 2004 and options in 2006. The VIX Index is based on real-time prices of options on the S&P 500 Index and is designed to reflect investors' consensus view of future 30-day expected stock market volatility. Since we started offering these products, we have seen trading from a number of different customer segments utilizing a number of different trading strategies, including hedging extreme stock market declines, also known as “tail risk” hedging, and risk-managed strategies that seek to capture the relative price changes of expected volatility at different times in the future. We also offer VIX Weeklys options and futures to provide investors with opportunities and tools to trade volatility over a shorter-term.

While the trading volumes in options and futures on the VIX Index have increased over the past five years, trading volumes in these products are especially sensitive to market volatility, with increases in volume generally occurring along with spikes in volatility. While we believe that there will be continued intrinsic growth in our volatility products, significant changes in the levels of market volatility may significantly impact volumes in these products.

In addition to the VIX Index, we offer other products based on the VIX methodology, including futures on CBOE Russell 2000 Volatility Index and the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index. CFE also lists futures on realized variance. While volumes in our non-VIX futures volatility products are not material to us, we continue to explore opportunities to expand our volatility product offerings, with respect to both new indexes and new asset classes.

FTSE Russell

The London Stock Exchange Group's ("LSEG") leading global index franchises, FTSE Russell indexes, represent a diverse group of domestic and global equities with international appeal: the Russell indexes include widely followed

benchmarks of U.S.-based stocks while the FTSE indexes focus primarily on global and emerging markets equity benchmarks that are widely used in the U.S. market. FTSE Russell indexes are among the largest and most widely used by investors in the U.S., and U.S. ETFs tracking FTSE Russell indexes comprise some of the most actively traded globally.

The options we offer on the FTSE Russell indexes, currently include the Russell 2000, Russell 1000, Russell 1000 Value, Russell 1000 Growth, FTSE Emerging, FTSE 100 and FTSE China 50 Indexes, and are exclusive to us. In 2016 we launched options on the FTSE Emerging, FTSE 100 and FTSE China 50 Indexes, enabling investors to target emerging U.K. and Chinese equity markets, respectively.

Strategic Partnerships

The Company also acquires interests in and forms partnerships with key providers to develop new products and services that are expected to capitalize on our core competencies and diversify our sources of revenue. Of particular note are the following:

•	CBOE Vest. In 2016, we made a majority investment in CBOE Vest, an investment manager focused on Target Outcome Investment strategies. CBOE Vest launched in 2016 three new mutual funds, CBOE Vest S&P 500 Buffer Protect Strategy Fund, CBOE Vest Defined Distribution Strategy Fund and CBOE Vest S&P 500 Enhanced Growth Strategy Fund.

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American Financial Exchange. Environmental Financial Products, LLC and CBOE launched in 2015 the American Financial Exchange ("AFX"), an electronic marketplace for small and mid-sized banks to lend and borrow short-term funds. CBOE operates the web-accessible, electronic trade matching engine and also supports surveillance and membership services. In 2016, AFX launched a 30-day unsecured loan product and a new transaction-based interest rate benchmark, Ameribor.

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Eris. In 2016, we made a minority equity investment in Eris, a U.S.-based futures exchange group offering swap futures as a capital-efficient alternative to over-the-counter ("OTC") swaps. CBOE and Eris plan to develop new product solutions and indexes across asset classes that are expected to address the impact of international regulatory reforms, including Basel III, European swap clearing and trading mandates, and margin for un-cleared swaps. The companies also plan to collaborate to enhance distribution of Eris Interest Rate Swap Futures and related market data.

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Curve Global. We have a minority investment in CurveGlobal, a new interest rate derivatives venture of the LSEG and a number of major dealer banks. CurveGlobal, launched in 2016, offers trading in Short Term Interest Rate futures in Euribor and Short Sterling and Long Term Interest Rate futures in Bund, Bobl, Schatz and Gilts. The launch of CurveGlobal caters to banks and other market participants looking for more capital efficient ways to trade and hedge these products.

•	Social Market Analytics. We entered into an exclusive licensing agreement in 2016 with Social Market Analytics (“SMA”) to develop a series of sentiment-based strategy benchmark indexes. We launched in August 2016, the CBOE-SMA Large Cap Index, a sentiment-based strategy benchmark index that measures short-term market momentum based on SMA’s social media metrics.

Options Exchanges' Market Participants

As discussed in more detail below, our options exchanges are designed to provide reliable, orderly, liquid and efficient marketplaces for the trading of options by market participants. Our options exchanges operate quote-driven auction markets that involve a number of different market participants.

Trading Permit Holders

Purchasing a monthly trading permit for the respective exchange conveys "Trading Permit Holder" status on that exchange to the permit holder.

A Trading Permit Holder on one of our options exchanges is allowed to enter orders, and quotes if it is a market-maker, into the trading system for that exchange. Trading Permit Holder entities can execute trades for their own accounts, for clearing firm accounts, for the accounts of other permit holders or for the accounts of customers.

Applicants for Trading Permit Holder Status

Applicants for Trading Permit Holder status must have adequate financial resources and credit to assume the responsibilities and privileges of a Trading Permit Holder. All Trading Permit Holders must abide by the rules and regulations of the applicable exchange, the provisions of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations issued by the SEC.

Trading Permits and Participant Roles

The following types of trading permits entitle the holders to conduct business on the exchanges during the regular trading hours session in the applicable participant roles described below:

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Market-Maker Trading Permit. A market-maker trading permit entitles the holder to act as a market-maker who engages in trading our products either for its own account or for the account of his or her firm, but does not act as an agent representing orders for customers. Market-makers have quoting obligations in their appointed product classes. They are granted margin relief and must have a relationship with a clearing firm that will hold and guarantee their positions. The majority of trading permits in use on CBOE and C2 are used for market-making. There are additional classes of market-makers, namely Lead Market-Maker ("LMM") and Designated Primary Market-Maker ("DPM") that receive incentives for market-makers to provide competitive quotes. In addition, TPHs routing orders to CBOE may designate a Preferred Market-Maker.

•	Floor Broker Trading Permit. A floor broker trading permit entitles the holder, known as a floor broker, to act as an individual who represents orders on the CBOE trading floor as an agent. Floor brokers generally do not trade for their own account, although they may represent their firms' proprietary account.

•	Electronic Access Permit ("EAP"). An EAP is a trading permit used by TPHs that need a separate access permit for a specific business function and is the most general type of access permit. EAP holders may be registered for one of the following: clearing TPHs; TPHs approved to transact business with the public; proprietary TPHs; and order service firms.

In addition, separate extended trading hours permits, market-maker trading permits and EAPs, generally entitle the holders to conduct business on CBOE during the extended trading hours session.

CFE Market Participants

Parties are required to apply and be approved as CFE TPHs and obtain a CFE trading permit in order to have trading privileges on CFE. TPHs on CFE are allowed to enter orders into CFE's trading system and can execute trades for their own accounts or for the accounts of customers.

Under its rules, CFE has the authority to establish market-maker programs and appoint one or more DPMs, LMMs or market-makers. CFE does not currently have a DPM, LMM or market-maker program in VIX futures with standard monthly expirations. CFE does have a DPM or LMM program for VIX futures with weekly expirations and CFE's other products.

Market Model

Algorithms

The matching algorithms used on our exchanges are the means by which trades are allocated to market participants. Our technology and the rules of our exchanges provide for a variety of different algorithms for matching buyers and sellers. We have the ability to apply different matching algorithms to different products in order to meet the needs of particular market segments. The setting of the matching algorithm affects the share of each trade that a market participant receives and is central to the opportunity and profit potential of market participants.

•	CBOE utilizes various matching algorithms in different listed options classes, with different combinations of customer priority, participation rights and pro-rata, modified pro-rata or price-time depending on the product.

•	C2's matching algorithm is pro-rata for all options classes.

•	CFE utilizes either a price-time priority algorithm or a price-time priority algorithm with participation rights for all futures.

Details on our technological capabilities, as well as key systems offerings available to customers, are described in "Technology."

Pricing

Each of our exchanges establishes a fee schedule that, among other things, sets the transaction fee for buying or selling options or futures contracts on the exchange and the connectivity and access fees for participating as a TPH on the exchange. In our proprietary products, we assess transaction fees on all participants, with the amount of the fee based on the market participant's role and the origin of the underlying order, and subject to discounts based on relative volume or trading strategies. In multiply-listed products, CBOE utilizes a pricing model in which transaction fees are charged to most professionals, including market-makers, but are not charged for most customer orders. Additionally, CBOE offers incentive programs to attract customer order flow, including certain payments for order flow and our volume incentive program ("VIP"), which pays credits to permit holders for executing certain types and levels of qualifying customer business at the exchange.

CFE utilizes a pricing model in which transaction fees vary depending on the type of market participant on whose behalf a trade is made and on whether the trade is executed through CFE’s central limit order book, or is a block trade. CFE also offers Day Trade and New Foreign Trader Incentive Programs that provide rebates on trades that qualify for the respective programs.

Each of the exchanges also currently charges a fee for trading permits that allow access to our exchanges. CBOE has a sliding scale for all market-maker trading permits used by affiliated TPHs and TPH organizations that satisfy certain requirements in our multiply-listed options classes.

Competition

CBOE is the single largest options exchange in the U.S. based on both total contract volume and notional value of contracts traded. The market share for all options traded on U.S. exchanges over the past five years for CBOE and C2, combined, has ranged from 27.1% to 29.9% annually. For 2016, our market share was 27.7%.

In our proprietary products, we compete against futures exchanges and swap execution facilities that offer similar products, as well as against financial market participants that offer similar over-the-counter derivatives. We also compete against certain multiply-listed options products, such as options on SPY, which offer some of the market exposure of our proprietary products such as options on SPX.

The multiply-listed options industry is extremely competitive and the competition has intensified. We expect this trend to continue. We compete with a number of entities on several different fronts, including the price, quality and speed of our trade execution, the functionality and ease of use of our trading platform, the range of our products and services, our technological innovation and adaption and our reputation. We compete in various ways with the thirteen other U.S. options exchanges.

The options exchanges frequently introduce new pricing models in order to attract additional trades to their exchanges. These pricing models include traditional pricing, maker-taker, and ownership benefits. See "Trends - Price Competition."

Our competitive challenge is to persuade broker-dealers to route options orders to our exchanges rather than to our competitors and to convince liquidity providers to concentrate their market-making activity on our exchanges. This is particularly true with respect to options on equities and ETPs. We compete through a variety of methods, including:

•	Offering a fee schedule that both attracts order flow and provides incentives to liquidity providers;

•	Providing advanced technology that offers broad functionality, low latency, fast execution, ease of use, scalability, reliability and security;

•	Offering participants access to a broad array of products and services, including proprietary products;

•	Offering market participants an efficient, transparent and liquid marketplace for trading options using our electronic trading system, CBOE Command, in either a hybrid (CBOE) or fully electronic (C2, CFE) market model;

•	Offering customers a deep, liquid market with opportunities for price improvement;

•	Facilitating payment for order flow through the administration of marketing fees;

•	Offering market participants potential participation rights for order flow that they direct or cause to be directed to our exchanges;

•	Maintaining close relationships and open communication channels with market participants; and

•	Providing brokers and their customers with a comprehensive source of information on options as well as extensive options education.

Technology

CBOE Command

CBOE Command, our in-house developed Java application with an infrastructure designed for high performance and low latency, supports trading on all of our exchanges. The platform supports trading nearly 24 hours, 5 days a week on CFE and supports an early morning trading session for SPX and VIX options on CBOE. The technology supports different products, different market models and multiple matching algorithms, as well as a fully integrated complex order book and several auction mechanisms. As mentioned above, CBOE is a hybrid exchange, combining features of screen-based and floor-based trading, while C2 and CFE are fully electronic.

CBOE Command supports both a quote-driven options market model where liquidity providers have quoting obligations and an order-driven market model for our futures exchange. CBOE and C2 market-makers, DPMs and LMMs typically stream hundreds of millions of quotes into CBOE Command each day. CBOE Command provides a number of risk controls geared towards both customers using our markets as well as liquidity providers quoting large numbers of options.

CBOE Command allows for a quick introduction of different types of derivative and securities products, including options, futures, options on futures and stock products. CBOE also offers CFLEX, our hybrid platform for trading FLEX options built on the CBOE Command platform.

CBOE Vector

In 2015, we began in-house custom development of CBOE Vector, our next generation of trading technology. This new platform is designed to provide streamlined access to a comprehensive array of options and volatility products and to the deeply liquid markets in which they trade.

The advanced architecture of the platform was designed to deliver best-in-class functionality, low latency, ease of use, improved connectivity and trading efficiency. The platform is engineered to provide greatly increased transaction speeds while handling constantly increasing message traffic and industry demand for additional functionality, such as risk controls. However, the launch of CBOE Vector on CFE is suspended due to the pending Merger.

Hybrid Trading Model

All CBOE products trade with an electronic and open-outcry component where both are integrated to function as a single market. Our Hybrid trading model is supported by state-of-the-art technology, including the CBOE Command trading platform. For our a.m.-settled SPX options, certain of the electronic trading features are differently configured to better suit the needs of customers in those products.

In general, CBOE market-makers stream their own individual quotes into the CBOE trading engine and, if on the floor, engage in open outcry transactions in their trading crowd. Our Hybrid trading model allows CBOE to offer the best of both electronic and open outcry trading models.

Market Data

Market data is sent to the Options Price Reporting Authority ("OPRA") and CBOE Streaming Markets ("CSM"), described below. Our exchanges generate valuable information regarding the prices of our products and the trading activity in our exchanges. For options, market data relating to price and size of market quotations and the price and size of trades is collected and consolidated by OPRA. OPRA disseminates the information for a fee to vendors who redistribute the data to brokers, investors and other persons or entities that use our markets or that monitor general market conditions. After costs are deducted, the fees collected are distributed among OPRA's exchange participants based on their cleared transactions pursuant to the OPRA Plan. As of December 2016, our market data was available on approximately 137,000 terminals worldwide. See "Regulatory Environment and Compliance" for further information on OPRA.

Our subsidiary, MDX sells historical options data and real-time data index values. It also provides market data and market depth through CSM, a proprietary streaming data feed. In January 2017, MDX historical data subscriptions were transitioned to the CBOE Livevol Data Shop.

CBOE Livevol

In 2015, we acquired Livevol, Inc., which we subsequently renamed CBOE Livevol, Inc. ("CBOE Livevol"). CBOE Livevol provides equity and index options technology for professional and retail traders, which includes options strategy backtesting, trade analysis and volatility modeling technologies and historical data.

Disaster Recovery

We operate and maintain geographically diverse disaster recovery facilities for CBOE, C2 and CFE. We expect that the disaster recovery facilities can be up and running in a short period and work with our market participants to ensure that the marketplace can be quickly reopened. We continue to work to improve both the availability of our systems and our disaster recovery facilities, including through simulation testing.

Clearing System

The Options Clearing Corporation ("OCC") acts as the issuer, counterparty and guarantor for all options contracts traded on our options exchanges and other U.S. options exchanges. OCC fulfills these same functions for futures products traded on CFE. Upon execution of an options or futures trade, we transmit to OCC a record of all trading activity for clearing and settlement purposes.

Regulatory Environment and Compliance

The following discussion covers the more significant areas of regulation of us by the SEC and the CFTC.

Recent Developments

Laws and regulations regarding our business are frequently modified or changed, including in response to adverse financial conditions, to address perceived problems, new products, competition or at the request of market participants. The following is a summary of certain recent regulatory developments that may impact our business.

CFTC Core Principles

Dodd-Frank amended the core principles with which designated contract markets ("DCMs") like CFE must comply under the Commodity Exchange Act. As a result, CFE implemented a number of new rules, policies and procedures in relation to the new requirements. However, one aspect with respect to the amended core principles applicable to DCMs that remains pending relates to amended Core Principle 9. Core Principle 9 requires each DCM to provide a competitive, open and efficient market and mechanism for executing transactions that protects the price discovery process of trading in the DCM’s centralized market. CFTC regulations to implement Core Principle 9 remain pending and may address the extent to which a DCM may permit block trades and exchanges of derivatives for related positions in its products to occur through the DCM outside of the DCM’s centralized market. CFE cannot predict or estimate the extent to which these regulations may affect CFE or its operations.

Automated Trading

In November 2015, the CFTC issued a rulemaking proposal relating to automated trading on DCMs referred to as Regulation Automated Trading ("Regulation AT"). In November 2016, the CFTC issued a supplemental rulemaking proposal which included modifications to the original proposal. The rulemaking proposal proposes risk control and other requirements for (a) certain market participants that are defined as “AT Persons,” (b) executing futures commission merchants ("FCMs") and (c) DCMs.

Regulation AT is intended to reduce potential risks arising from electronic trading activity by requiring the implementation of risk controls such as maximum order message and maximum order size parameters, and the establishment of standards for the development, testing and monitoring of automated trading systems, among other requirements. Automated Trading Persons ("AT Persons") and executing FCMs would be required to submit annual certifications to DCMs attesting to their compliance with Regulation AT, and DCMs would be required to establish programs for the periodic review and evaluation of compliance with Regulation AT by AT Persons and executing FCMs. Regulation AT also proposes to require the registration of proprietary traders with direct electronic access to a DCM that have average daily trading volume of 20,000 contracts across all products and DCMs over a 6 month period and to require that these AT Persons become members of a registered futures association. In addition, Regulation AT is intended to foster transparency around DCM market-maker and trading incentive programs.

Although CFE may require additional resources to comply with the proposal if it were to be adopted by the CFTC, CFE does not expect that the proposal will have a material impact on CFE or its operations.

Systems Safeguards

In September 2016, the CFTC issued a final rule to amend its system safeguards rules for DCMs by enhancing and clarifying existing provisions relating to system safeguards, risk analysis and oversight, and cybersecurity testing, and adding new provisions concerning certain aspects of cybersecurity testing. The rule clarified the existing system safeguards rules for DCMs by specifying and defining the types of cybersecurity testing required to fulfill system safeguards testing obligations,

including vulnerability testing, penetration testing, controls testing, security incident response plan testing, and enterprise technology risk assessment. The rule also clarified the categories of risk analysis and oversight that statutorily-required programs of system safeguards-related risk analysis and oversight must address; system safeguards-related books and records obligations; the scope of system safeguards testing; internal reporting and review of testing results; and remediation of vulnerabilities and deficiencies. The provisions of the final rule have various compliance dates, most of which are one year from September 19, 2016, the effective date of the rule. Although CFE may require additional resources to comply with the final rule, CFE does not expect the rule to result in significant changes to its operations.

Compliance

Securities Industry-CBOE and C2

Federal securities laws have established a two-tiered system for the regulation of securities exchanges and market participants. The first tier consists of the SEC, which has primary responsibility for enforcing federal securities laws. The second tier consists of self-regulatory organizations ("SROs"), which are non-governmental entities that must register with and are regulated by the SEC. CBOE and C2 are SROs, each registered under Section 6 of the Exchange Act as a "national securities exchange" and are subject to oversight by the SEC.

SROs are an essential component of the regulatory scheme of the Exchange Act for providing fair and orderly markets and protecting investors. To be registered as a national securities exchange, an exchange must successfully undergo an application and review process with the SEC prior to beginning operations. Among other things, the SEC must determine that the SRO has the ability to comply with the Exchange Act and to enforce compliance by its members and persons associated with its members with the provisions of the Exchange Act, the rules and regulations thereunder and the rules of the exchange.

In general, an exchange SRO is responsible for operating its trading platforms consistent with its rules, and regulating its members, known as TPHs at CBOE and C2, through the adoption and enforcement of rules governing the business conduct of its members. The rules of the exchange must also assure fair representation of its members in the selection of its directors and administration of its affairs and, among other things, provide that one or more directors be representative of issuers or investors and not be associated with a member of the exchange or with a broker or dealer. Additionally, the rules of the exchange must be adequate to ensure fair dealing and to protect investors and may not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.

As registered national securities exchanges, virtually all facets of our CBOE and C2 exchange operations are subject to the SEC's oversight, as prescribed by the Exchange Act. The Exchange Act and the rules thereunder impose on us many regulatory and operational responsibilities, including the day-to-day responsibilities for market operations and broker-dealer oversight. Furthermore, as SROs, CBOE and C2 are potentially subject to regulatory or legal action by the SEC or other interested parties. The SEC also has broad enforcement powers to censure, fine, issue cease-and-desist orders, prohibit us from engaging in some of our businesses, suspend or revoke our designation as a registered securities exchange or to remove or censure any of our officers or directors who violate applicable laws or regulations.

As part of its regulatory oversight, the SEC conducts periodic reviews and inspections of exchanges, and CBOE and C2 have been subject to such routine reviews and inspections. To the extent such reviews and inspections result in regulatory or other changes, we may be required to modify the manner in which we conduct our business, which may adversely affect our business. We collect certain fees derived from our regulatory function and fines in connection with our disciplinary proceedings. Under the rules of each of our options exchanges, as required by the SEC, any revenue derived from the regulatory fees and fines cannot be used for non-regulatory purposes.

CBOE and C2 are also subject to the record keeping requirements of Section 17 of the Exchange Act, including the requirement pursuant to Section 17(b) of the Exchange Act to make certain records available to the SEC for examination.

Section 19 of the Exchange Act also provides that we must submit to the SEC proposed changes to any of CBOE's or C2's rules, including revisions of their certificates of incorporation and bylaws. The SEC will typically publish the proposal for public comment, following which the SEC may approve or disapprove the proposal, as it deems appropriate. The SEC's action is designed to ensure that CBOE's and C2's rules and procedures are consistent with the Exchange Act and the rules and regulations under the Exchange Act. Certain categories of rule changes, like fee changes, can be effective on filing, but the SEC retains the ability to suspend or reject such filings within a prescribed period of time.

In November 2015, the compliance date for Regulation Systems Compliance and Integrity (“Reg SCI”), SEC began rulemaking under the Exchange Act . Reg SCI requires “SCI Entities,” which includes SROs, like CBOE and C2, to comply with security and capacity requirements with respect to their systems and accompanying compliance procedures. As part of complying with Reg SCI, CBOE and C2 established written policies and procedures reasonably designed to provide for a resilient market in the event of a disruption. This includes, for example, each exchange ensuring that it has adequate disaster

recovery facilities that are geographically diverse from the exchange’s systems and that facilitate the ability to resume trading within specified timeframes when certain critical and non-critical SCI systems are rendered inoperable. It also requires timely and substantial notification to be made to the SEC in the event an exchange experiences certain system interruptions or interference. The SEC has also established various working groups of exchanges to focus on improving market resiliency, including regarding regulatory halts, trade nullification and additional market protections. As adopted, Reg SCI and the other SEC mandated working group initiatives are very complex, and, as such, compliance with rules may require significant resources.

Consent Order

On June 11, 2013, CBOE and C2 entered into a Consent Order with the SEC, under which CBOE and C2 were censured, ordered to cease and desist from violating certain sections of the Exchange Act, paid a fine of $6 million and agreed to complete certain undertakings. These undertakings included conducting a review of our regulatory programs, enterprise risk management and business influences on regulation, reviewing business practices to ensure compliance with the rules of the exchanges and implementing training programs for employees. We have certified to the completion of these undertakings. The Consent Order also requires on-going certifications by the Company's Chief Executive Officer and Chief Regulatory Officer until 2019.

CBOE Holdings

Certain aspects of CBOE Holdings are also subject to SEC oversight, including certain ownership and voting restrictions on its stockholders. The focus of the SEC's regulation of CBOE Holdings is to assure fair representation of Trading Permit Holders in the selection of CBOE and C2 directors, public participation in the governance of CBOE and C2 and that CBOE and C2 can satisfy their regulatory responsibilities under the Exchange Act. Furthermore, the SEC requires that CBOE Holdings give due regard to the preservation of the independence of the self-regulatory function of CBOE and C2 and to CBOE Holdings' obligations to investors and the general public. The SEC also requires that CBOE Holdings not take any actions that would interfere with the effectuation of any decisions by the board of directors of CBOE or C2 relating to their regulatory functions or the structure of the market that it regulates or that would interfere with the ability of the exchanges to carry out their responsibilities under the Exchange Act. To the extent that CBOE Holdings' business activities involve or relate to CBOE and C2, the officers and directors of CBOE Holdings may be deemed to be officers and directors of the exchanges for purposes of and subject to oversight under the federal securities laws. Accordingly, the SEC may exercise direct supervision and disciplinary authority over certain CBOE Holdings' activities and those activities may be subject to SEC approval and, in some cases, public notice and comment.

Futures Industry-CFE

The operations of CFE are subject to regulation by the CFTC under the Commodity Exchange Act. The Commodity Exchange Act generally requires that futures trading in the U.S. be conducted on a commodity exchange designated as a contract market by the CFTC under the Act. The Commodity Exchange Act and CFTC regulations establish criteria for an exchange to be designated as a contract market on which futures and futures options contracts may be traded. Designation as a contract market for the trading of a specified futures contract is non-exclusive. This means that the CFTC may designate additional exchanges as contract markets for trading the same or similar contracts.

CFE is a designated contract market that is subject to the oversight of the CFTC and to a variety of ongoing regulatory and reporting responsibilities under the Commodity Exchange Act. As a designated contract market, CFE is required to comply with the applicable core principles and regulations under the Commodity Exchange Act. CFE has surveillance and regulatory operations and procedures to monitor and enforce compliance by Trading Privilege Holders with CFE rules. If CFE fails to comply with applicable laws, rules or regulations, CFE may be subject to censure, fines, cease-and-desist orders, suspension of its business, removal of personnel or other sanctions, including revocation of CFE’s designation as a contract market.

Regulatory Responsibilities

Our exchanges are responsible for assessing the compliance of their TPHs with the respective exchange's rules and the applicable rules of the SEC and CFTC. The main activities that the exchanges, as applicable, are required to provide to measure compliance with these rules include:

•	surveillance designed to detect violations of exchange trading rules;

•	surveillance designed to detect violations of other SEC and CFTC rules;

•	the further investigation of matters deemed to be problematic;

•	the investigation of complaints about possible rule violations brought by customers, TPHs or other SROs; and

•	the examination of TPHs for compliance with rules such as those related to net capital, books and records, market access and other matters related to the TPHs' exchange business functions.

In order to ensure market integrity, we regulate and monitor our TPHs' trading activities by using both our employees and third parties under regulatory services agreements. See "Regulatory Agreements" below. Providing effective regulation is important for attracting and retaining the confidence and participation of market-makers, broker-dealers and institutional and retail investors.

We expend considerable time, financial resources and effort to ensure that the exchanges' rules and regulations conform to regulatory best practices within the securities and futures exchange industries and within the regulatory regime overseen by the SEC and CFTC, our primary regulators. In order to support our efforts and those of our market participants to comply with applicable law and our exchange rules, we developed a regulatory program to monitor market activity on our exchanges and entered into the regulatory services agreements described below.

CBOE, C2 and CFE are participants in the Intermarket Surveillance Group ("ISG"). ISG is an international information-sharing cooperative governed by a written agreement that provides for a comprehensive surveillance sharing arrangement. In addition to the agreement for confidential information sharing, the ISG provides a framework for the coordination of regulatory efforts among exchanges trading securities, commodity futures and related products to address potential intermarket manipulations and trading abuses.

As part of the self-regulatory process, formal disciplinary matters are reviewed by our Business Conduct Committee, which includes both market participants and public representatives.

We collect certain fees derived from our regulatory function and fines in connection with our disciplinary proceedings. Under the rules of each of CBOE and C2, as required by the SEC, any revenue derived from the regulatory fees and fines cannot be used for non-regulatory purposes.

Regulatory Agreements

CBOE, C2 and CFE have entered into agreements, some of which are pursuant to Section 17(d) of the Exchange Act, under which third parties have agreed to perform regulatory services to our markets. As discussed below, in certain instances, the third party has assumed the regulatory responsibility under Rule 17d-2, while in others, we retain the regulatory responsibility for the activities.

Regulatory Services Agreement with FINRA

On December 19, 2014, CBOE and C2 entered into an agreement with the Financial Industry Regulatory Authority ("FINRA") under which FINRA agreed to start providing regulatory services to CBOE and C2 on January 1, 2015. Under the agreement, FINRA performs the majority of the regulatory services for CBOE and C2. CBOE and C2 remain responsible for the regulation of their marketplaces, and retain the authority for bringing disciplinary actions against their TPHs.

Regulatory Services Agreement with NFA

The National Futures Association ("NFA") performs many regulatory functions for CFE pursuant to a Regulatory Services Agreement with CFE. CFE retains overall responsibility for the regulation of its marketplace. CFE also remains responsible for bringing disciplinary actions against TPHs. CFE is also a party to cooperative and regulatory information sharing agreements with other SROs and is a member of the ISG, described above.

Rule 17d-2 Agreements

Section 17(d) of the Exchange Act and the related Exchange Act rules permit SROs to allocate certain regulatory responsibilities to avoid duplicative oversight and regulation. Under Exchange Act Rule 17d-1, the SEC designates one SRO to be the Designated Examining Authority ("DEA") for each broker-dealer that is a member of more than one SRO. The DEA is responsible for the regulatory oversight of the financial responsibility aspects of that broker-dealer. We are the DEA for many of our members.

Exchange Act Rule 17d-2 permits SROs to enter into agreements, commonly called Rule 17d-2 agreements, which are approved by the SEC and concern the enforcement of rules applicable to all of those SROs and relating to members those SROs have in common. We have entered into Rule 17d-2 agreements under which FINRA is allocated responsibility for enforcing certain federal securities laws and CBOE and C2 rules that are common with FINRA rules. We have entered into other Rule 17d-2 agreements that allocate responsibility to each SRO, which may include CBOE and C2, for ensuring that their allocated common members comply with rules governing options sales practices, expiring exercise declarations, options position limits and large options position reporting and position adjustments.

ORSA Plan

The SEC approved a national market system ("NMS") plan named the Options Regulatory Surveillance Authority Plan ("ORSA Plan") with the purpose of permitting the U.S. securities options exchanges to act jointly in the administration, operation and maintenance of a regulatory system for the surveillance, investigation and detection of the unlawful use of undisclosed, material information in trading in one or more of their markets. Through the sharing of the costs of these regulatory activities and the sharing of the regulatory information generated under the ORSA Plan, the ORSA Plan is intended to enhance the effectiveness and efficiency with which the exchanges regulate their respective markets and the national market system for options and to avoid duplication of certain regulatory efforts. The ORSA policy committee had delegated the operation of the surveillance and investigative facility contemplated by the ORSA Plan to CBOE. The exchanges also entered into a Regulatory Services Agreement with CBOE, as service provider, pursuant to which CBOE performed certain regulatory and surveillance functions under the ORSA Plan and used its automated insider trading surveillance system to perform these functions on behalf of the exchanges. In 2015, the ORSA policy committee delegated the operation of the ORSA Plan facility to FINRA, and FINRA is the service provider under the Regulatory Services Agreement.

National Market System Plans

In addition to the ORSA Plan described above, CBOE and C2 are member participants of several other NMS plans, including the plans that are described below.

OPRA, CTA, CQ Plan and NASDAQ Unlisted Trading Privileges Plan

Like all U.S. options exchanges, CBOE and C2 are member exchanges in OPRA, a limited liability company. The OPRA limited liability company agreement sets forth a system for reporting options information that is administered by the member exchanges through OPRA, consisting of representatives of the member exchanges. OPRA is the designated securities information processor for market information that is generated through the trading of exchange-listed securities options in the U.S., and it disseminates certain core trading information, such as last sale reports and quotations. We also participate in the Consolidated Tape Association ("CTA"), the Consolidated Quotation Plan ("CQ Plan"), and the NASDAQ Unlisted Trading Privileges Plan, which perform analogous services for the U.S. equities market. NYSE Technologies, formerly the Securities Industry Automation Corporation, acts as the "processor" for OPRA, CTA and the CQ Plan. NASDAQ acts as the processor for the NASDAQ Unlisted Trading Privileges Plan.

Options Intermarket Linkage Plan

We are a party to the Options Order Protection and Locked/Crossed Market Plan, known as the Options Intermarket Linkage Plan, which is designed to prevent trade-throughs and facilitate the routing of orders between exchanges in furtherance of a national market system. The principal purposes of the plan are to promote price protection and to assure that brokers may execute investors' orders at the best market price, the "National Best Bid and Offer" ("NBBO"). The plan requires price protection of an exchange's best displayed bid or offer when the bid or offer is at the NBBO. Under the plan, direct exchange-to-exchange access through broker-dealers is used to transmit intermarket sweep orders similar to sweep orders that are available in the stock market under Regulation NMS. Undisplayed bids and offers and bids and offers at prices that are inferior to an exchange's best bid or offer do not receive protection under this plan.

Options Listing Procedures Plan and Symbology Plan

We are a party to the Options Listing Procedures Plan, which sets forth the procedures that the options exchanges must follow to list new options. We are also a party to the National Market System Plan for the selection and reservation of securities symbols.

Consolidated Audit Trail ("CAT")

In 2012, the SEC directed the SROs through a new regulation, to submit a plan to create, implement and maintain a consolidated audit trail ("CAT"), which would serve as a comprehensive audit trail of orders that will allow regulators to efficiently and accurately track all activity in Regulation NMS securities in the U.S. market. The regulation requires, among other things, that, upon implementation of a plan, data be reported to a central repository the following day by each exchange and broker-dealer. On November 15, 2016, the SEC approved a plan to implement CAT. There is a phased implementation over the next three years. We expect to begin reporting to the CAT in November 2017. The exchanges have incurred costs and the exchanges and their participants and may also incur additional significant costs related to the implementation of the CAT requirements.

Intellectual Property

We own or have rights to a number of intellectual property assets, including trademarks, service marks, domain names, trade names, copyrights, trade secrets and patents. While the majority of our intellectual property is protected under U.S. law, we have many intellectual property assets protected by laws in Europe, Asia and other parts of the world. We license some intellectual property assets to other entities. We attempt to protect our intellectual property rights, while respecting the legitimate intellectual property rights of others.

Employees

As of December 31, 2016, we employed 553 individuals. Of these employees, 258 were involved in systems development or operations and 121 were involved in direct support of trading operations. The remaining 174 employees provide financial, regulation, human resources, compliance, legal, planning and research, administrative and managerial support.

We have eight building engineers that are covered by a collective bargaining agreement, which expires on May 31, 2018, with the International Union of Operating Engineers Local 399, AFL-CIO. Management believes that we have strong relationships with our employees, and we have never experienced a work stoppage.

Executive Officers of CBOE Holdings

Set forth below is information regarding our executive officers and certain other key employees:

Name	Age			Position
Edward T. Tilly	53			Chief Executive Officer
Edward L. Provost	64			President and Chief Operating Officer
Alan J. Dean	62			Executive Vice President, Chief Financial Officer and Treasurer
Joanne Moffic-Silver	64			Executive Vice President, General Counsel and Corporate Secretary
Gerald T. O'Connell	65			Executive Vice President and Chief Information Officer
David S. Reynolds	63			Vice President and Chief Accounting Officer

Edward T. Tilly. Mr. Tilly is our Chief Executive Officer. He has served in that capacity since May 2013. Prior to becoming CEO, Mr. Tilly served as President and Chief Operating Officer from November 2011, and Executive Vice Chairman from August 2006 until November 2011. He was a member of CBOE from 1989 until 2006, and served as Member Vice Chairman from 2004 through July 2006. Mr. Tilly serves on the board of directors of the OCC. He holds a B.A. degree in Economics from Northwestern University.

Edward L. Provost. Mr. Provost became our President and Chief Operating Officer in May 2013. Prior to that, Mr. Provost served as Executive Vice President and Chief Business Development Officer. He served as the head of our Business Development Division since 2000 and has been employed at the Company since 1975. He holds a B.B.A. in Finance from Loyola University of Chicago and an M.B.A. from the University of Chicago Graduate School of Business.

Alan J. Dean. Mr. Dean is our Executive Vice President, Chief Financial Officer and Treasurer. He has served in that capacity since 1988 and has been employed at the Company in the financial area since 1979. He is a certified public accountant, and he holds a B.S. degree in Accounting from Western Illinois University and an M.B.A. from Northwestern University's Kellogg Graduate School of Management.

Joanne Moffic-Silver. Ms. Moffic-Silver is our Executive Vice President, General Counsel and Corporate Secretary. She has served in that capacity since 1997 and has been employed as an attorney at the Company since 1980. She is currently a member of the executive committee of the board of advisors of Northwestern University School of Law, a member of the Anti-Defamation League's Chicago/Upper Midwest Region Board, a member of the board of a not-for-profit education organization and a member of the Chicago Network. Ms. Moffic-Silver received her B.A. degree from the University of Wisconsin-Madison (Phi Beta Kappa). Ms. Moffic-Silver received her J.D. degree with honors from Northwestern University Pritzker School of Law.

Gerald T. O'Connell. Mr. O'Connell is our Executive Vice President and Chief Information Officer. He has served in that capacity since 1993 and has been employed at the Company since 1984. He holds a B.S. degree in Mathematics from Lewis University and a J.D. degree from John Marshall Law School.

David S. Reynolds. Mr. Reynolds is our Vice President and Chief Accounting Officer. He has served in that capacity since May 2009. Prior to that, Mr. Reynolds was with Hudson Highland Group, Inc., where he served in various roles including vice president, controller and chief accounting officer. From February 2005 to February 2007, Mr. Reynolds was vice president, controller and chief accounting officer of Bally Total Fitness Corporation. Prior to that, he spent twenty-two years in various

financial roles at Comdisco, Inc., rising to senior vice president and controller. Mr. Reynolds began his career at Ernst & Young. Mr. Reynolds is a certified public accountant and a certified cash manager. He is a graduate of Lehigh University where he obtained an M.B.A. and a B.S. in Finance.

Available Information

Our website is www.cboe.com. The Company files annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. The Company makes available, free of charge, on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. The Company's reports filed with, or furnished to, the SEC are also available on the SEC's website at www.sec.gov.

In addition, we have posted on our website the charters for our (i) Audit Committee, (ii) Compensation Committee, and (iii) Nominating and Governance Committee, as well as our Code of Business Conduct and Ethics and Corporate Governance Guidelines. We will provide a copy of these documents without charge to stockholders upon written request to Investor Relations, CBOE Holdings Inc., 400 South LaSalle Street, Chicago, Illinois 60605. Our website and information included in or linked to our website are not part of this Form 10-K.