Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk.

The Company applied FASB Accounting Standards Codification (“ASC”) 820— Fair Value Measurement, which provides guidance for using fair value to measure assets and liabilities by defining fair value and establishing the framework for measuring fair value. ASC 820 applies to financial and nonfinancial instruments that are measured and reported on a fair value basis. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair value hierarchy requires the use of observable market data when available and consists of the following levels:

The Company has included a tabular disclosure for financial assets and liabilities that are measured at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in millions):


	March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities (1)	$	49.5	$	49.5	$	—	$	—
Marketable securities (1):
Mutual funds		14.2		14.2		—		—
Money market funds		16.5		16.5		—		—
Digital assets - safeguarded assets		42.0		42.0		—		—
Total assets	$	122.2	$	122.2	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	34.2	$	—	$	—	$	34.2
Digital assets - safeguarded liabilities		42.0		42.0		—		—
Cboe Digital restricted common units liability (2)		15.6		—		—		15.6
Cboe Digital warrant liability (2)		5.9		—		—		5.9
Total liabilities	$	97.7	$	42.0	$	—	$	55.7


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities (1)	$	64.2	$	64.2	$	—	$	—
Marketable securities (1):
Mutual funds		15.3		15.3		—		—
Money market funds		12.2		12.2		—		—
Digital assets - safeguarded assets		22.9		22.9		—		—
Total assets	$	114.6	$	114.6	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	39.1	$	—	$	—	$	39.1
Digital assets - safeguarded liabilities		22.9		22.9		—		—
Cboe Digital restricted common units liability (2)		15.5		—		—		15.5
Cboe Digital warrant liability (2)		5.9		—		—		5.9
Total liabilities	$	83.4	$	22.9	$	—	$	60.5

(1)	These amounts are reflected within financial investments in the condensed consolidated balance sheets.

(2)	These amounts are reflected within other non-current liabilities in the condensed consolidated balance sheets.

The following is a description of the Company’s valuation methodologies used for instruments measured at fair value on a recurring basis:

Financial Investments

Financial investments consist of highly liquid U.S. Treasury securities, and marketable securities held in a trust for the Company’s non-qualified retirement and benefit plans, also referred to as deferred compensation plan assets. The deferred compensation plan assets have an equal and offsetting deferred compensation plan liability based on the value of the deferred compensation plan assets. These securities are valued by obtaining feeds from a number of live data sources, including active market makers and inter dealer brokers and therefore categorized as Level 1. No material adjustments were made to the carrying value of financial investments for the period ended March 31, 2023. See Note 15 (“Employee Benefit Plans”) for more information.

Digital Assets – Safeguarded Assets and Liabilities

Digital assets – safeguarded assets and liabilities consist of Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and USD Coin. The Company has determined the principal marketplace for digital assets to be the spot market of Cboe Digital Exchange,

LLC (“Cboe Digital Exchange”). The Company valued digital assets – safeguarded assets, and digital assets – safeguarded liabilities by using the closing prices at 4:00pm Central Standard Time on Cboe Digital Exchange’s spot market (“Cboe Digital spot market”) as of March 31, 2023. These inputs are categorized in the fair value hierarchy as Level 1 as the marketplace is considered active. See Note 12 (“Clearing Operations”) for additional details regarding digital assets held.

Contingent Consideration Liabilities

In connection with the acquisitions of Hanweck Associates, LLC (“Hanweck”), Cboe Asia Pacific, and Cboe Canada, as well as the acquisition of assets of FT Providers, LLC (“FT Options”), the Company entered into contingent consideration arrangements with the sellers. The total fair value of the liabilities at March 31, 2023 was $34.2 million. That value is based on the Company’s estimate of the likelihood that certain performance targets in the respective acquisition agreements are expected to be accomplished. See Note 3 (“Acquisitions”) for more information on the adjustment to contingent consideration liabilities during the three months ended March 31, 2023. In connection with the contingent consideration arrangements, the Company paid a total of $4.9 million in contingent consideration to the sellers of Hanweck, FT Options, and Cboe Asia Pacific during the three months ended March 31, 2023. Because the fair value measurements relating to the contingent consideration liabilities are subject to management judgment, measurement uncertainty is inherent in the valuation of the contingent consideration liabilities as of the reporting date. Based on the recorded balance of the liabilities, any measurement uncertainty related to this Level 3 measurement is immaterial as of March 31, 2023.

Cboe Digital Syndication Liabilities

On November 18, 2022, Cboe Digital Holdings Inc. (“Cboe Digital Holdings”) entered into minority interest purchase agreements with certain digital asset industry participants, pursuant to which Cboe Digital Holdings agreed to issue Restricted Common Units in Cboe Digital. Cboe Digital Holdings also entered into a Warrant Agreement to issue Common Units of Cboe Digital in the future. Certain Cboe Digital investor members paid for the Restricted Common Units through the issuance of promissory notes, which are nonrecourse in nature and are accounted for as in-substance stock options. Expense associated with the Restricted Common Units is recognized as contra-revenue ratably over a five-year period. The Company uses a Black Scholes option pricing model to estimate the fair value of the in-substance stock option created by the Restricted Common Units and promissory notes as well as the fair value of the Warrant. Contra-revenue will be recognized while the performance conditions of the Warrant remain probable in conformance with the requirements in ASC 606 – Revenue from Contracts with Customers. Further adjustments will be recognized in each reporting period until performance is complete relating to changes in the fair value of the option and Warrant liabilities in accordance with ASC 718 – Compensation – Stock Compensation. Based on the recorded balance of the liabilities, any measurement uncertainty related to this Level 3 measurement is immaterial as of March 31, 2023. See Note 17 (“Stock-Based Compensation”) for more information.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets, such as goodwill and intangible assets, are measured at fair value on a non-recurring basis. For goodwill, the process involves using a market approach and income approach (using discounted estimated cash flows) to determine the fair value of each reporting unit on a stand-alone basis. That fair value is compared to the carrying value of the reporting unit, including its recorded goodwill. In connection with the annual impairment evaluation of goodwill and indefinite lived intangibles, impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying value of the reporting unit. See “Digital Assets Held” below and Note 1 (“Organization and Basis of Presentation”) for discussion of valuation considerations specific to digital assets held. For the other intangible assets, the process also involves using a discounted cash flow method to determine the fair value of each intangible asset. Impairment is considered to have occurred if the fair value of the intangible asset is lower than its carrying value. These measurements are considered Level 3 and these assets are recognized at fair value if they are deemed to be impaired.

The Company performed impairment testing during the quarter ended June 30, 2022, as there were market events that indicated it was more likely than not that Cboe Digital’s assets were impaired, resulting in the recognition of an impairment charge to goodwill related to Cboe Digital. Subsequently, the Company concluded that the indicators of impairment observed during the quarter ended June 30, 2022, continued to be relevant and recorded additional goodwill impairment in the condensed consolidated statements of income for the three months ended September 30, 2022. The Company determined there were no further impairment indicators for the period ended March 31, 2023. See Note 8 (“Goodwill, Intangible Assets, Net, and Digital Assets Held”) for more information on the impairment.

Equity investments without readily determinable fair values that are valued using the measurement alternative are measured at fair value on a non-recurring basis. No observable transactions or impairments impacted the measurements of the investments accounted for as other equity investments. See Note 4 (“Investments”) for more information.

Fair Value of Assets and Liabilities

The following tables present the Company’s fair value hierarchy for certain assets and liabilities held by the Company as of March 31, 2023 and December 31, 2022 (in millions):


	March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities (1)	$	49.5	$	49.5	$	—	$	—
Deferred compensation plan assets (1)		30.7		30.7		—		—
Digital assets - safeguarded assets		42.0		42.0		—		—
Digital assets held (2)		0.1		0.1		—		—
Total assets	$	122.3	$	122.3	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	34.2	$	—	$	—	$	34.2
Deferred compensation plan liabilities (3)		30.7		30.7		—		—
Digital assets - safeguarded liabilities		42.0		42.0		—		—
Cboe Digital restricted common units liability (3)		15.6		—		—		15.6
Cboe Digital warrant liability (3)		5.9		—		—		5.9
Debt		1,595.7		—		1,595.7		—
Total liabilities	$	1,724.1	$	72.7	$	1,595.7	$	55.7


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury securities (1)	$	64.2	$	64.2	$	—	$	—
Deferred compensation plan assets (1)		27.5		27.5		—		—
Digital assets - safeguarded assets		22.9		22.9		—		—
Digital assets held (2)		0.9		0.9		—		—
Total assets	$	115.5	$	115.5	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	39.1	$	—	$	—	$	39.1
Deferred compensation plan liabilities (3)		27.5		27.5		—		—
Digital assets - safeguarded liabilities		22.9		22.9		—		—
Cboe Digital restricted common units liability (3)		15.5		—		—		15.5
Cboe Digital warrant liability (3)		5.9		—		—		5.9
Debt		1,573.9		—		1,573.9		—
Total liabilities	$	1,684.8	$	50.4	$	1,573.9	$	60.5

(1)	These amounts are reflected within financial investments in the condensed consolidated balance sheets.

(2)	These amounts are reflected within intangible assets, net in the condensed consolidated balance sheets.

(3)	These amounts are reflected within other non-current liabilities in the condensed consolidated balance sheets.

Certain financial assets and liabilities, including cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and Section 31 fees payable, and notes receivable are not measured at fair value on a recurring basis, but the carrying values approximate fair value due to their liquid or short-term nature.

Debt

The debt balance consists of fixed rate Senior Notes and a floating rate Term Loan Agreement. The fair values of the Senior Notes are classified as Level 2 under the fair value hierarchy and are estimated using prevailing market quotes. The fair value of the Term Loan Agreement was determined by utilizing a discounted cash flow analysis and is considered a Level 2 measurement.

At March 31, 2023 and December 31, 2022, the fair values of the Company’s debt obligations were as follows (in millions):


	Fair Value
	March 31, 2023		December 31, 2022
Term Loan Agreement	$	306.1	$	306.3
3.650% Senior Notes		627.7		623.6
1.625% Senior Notes		401.8		390.7
3.000% Senior Notes		260.1		253.3

Digital Assets Held

Digital assets held, which are included within intangible assets, net in the condensed consolidated balance sheets, are valued following a review of exchange prices for each specific digital asset throughout the period ended March 31, 2023. The Company will impair to the lowest observable value during the period for each digital asset type in accordance with Cboe Digital’s policy, which states that the Company values digital assets held by using the closing prices at 4:00pm Central Standard Time on Cboe Digital Exchange’s spot market, which the Company determined is the principal marketplace for digital assets. As part of Cboe Digital’s pricing policy, the closing price on Cboe Digital’s spot market is compared to three other exchanges (Coinbase, Bitstamp, and Kraken) to assess for reasonableness. These inputs are categorized in the fair value hierarchy as Level 1 as the marketplace is considered active.

Information on Level 3 Financial Liabilities

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities during the three months ended March 31, 2023 (in millions):


	Level 3 Financial Liabilities for the Three Months Ended March 31, 2023
	Balance at		Realized (Gains)								Foreign		Balances at
	Beginning of		Losses during								Currency		End of
	Period		Period		Adjustments		Additions		Settlements		Translation		Period
Liabilities
Contingent consideration liabilities	$	39.1	$	—	$	—	$	—	$	(4.9)	$	—	$	34.2
Cboe Digital restricted common units liability		15.5		—		0.1		—		—		—		15.6
Cboe Digital warrant liability		5.9		—		—		—		—		—		5.9
Total liabilities	$	60.5	$	—	$	0.1	$	—	$	(4.9)	$	—	$	55.7