Intercontinental Exchange (ICE)

The Intercontinental Exchange (ICE) is a derivatives and over-the-counter (OTC) marketplace offering a wide variety of securities. The ICE network is made up of 13 standardised exchanges and seven clearinghouses located in North America, Europe and Asia. The premier exchanges of the network are ICE Futures Europe, ICE Futures U.S., ICE Futures Canada and ICE Futures Singapore.[1]

ICE is an international hub for active speculation and hedging enterprises, with partnerships spanning the futures, options and equities markets. Since its inception in the late 1990s, ICE has been on the forefront of creating new electronic trading technologies and infrastructure. Headquartered in Atlanta, Georgia, its business operations generate annual revenues upwards of US$5.9 billion. In addition, ICE employs more than 4,900 people to conduct and maintain the operations.[2]

The History Of The Intercontinental Exchange (ICE)

The origins of ICE can be traced back to 1997 and a US$1 acquisition of a struggling tech startup company by Jeffrey Sprecher. A veteran of the energies industry, Sprecher and a small team of information systems specialists focussed on the development of web-based trading technologies to service the needs of investors around the globe.

The primary goal of ICE's early incarnation was twofold: to address challenges related to the buying/selling of various forms of energy and hedging risk associated with natural gas price fluctuations. As a way of accomplishing this objective, they adopted an electronic format utilising internet connectivity. After three years of research and development, the official launch of ICE was in May 2000.

Since then, ICE has grown exponentially through practicing an aggressive business model based upon sectoral consolidation. Subsequently, a series of acquisitions and new innovations have boosted the corporate profile within the financial industry.

The following are some of the key events that highlight the evolution of ICE over the course of its history[4]:

Year Event
2001 Acquisition of London International Petroleum Exchange (IPE)
2002 Launch of an industry-first series of OTC energies contracts
2005 ICE IPO, listed for public trade on the New York Stock Exchange (NYSE)
2005 Launch of standardised electronic energies futures contracts
2007 Acquisition of the New York Board of Trade (NYBOT), renamed ICE Futures U.S.
2008 Acquisition of Creditex, initiates credit default swap offerings in U.S. and Europe
2010 Acquisition of the Climate Exchange
2012 Acquisition of NYSE Euronext
2014 Expands into Asia with the Singapore Exchange
2014 Expands into Asia with the Singapore Exchange
2016 Launches ICE Data Services
2017 Acquisition of the Canadian Energy Exchange and clearing house[5]

One significant factor contributing to ICE's rise to global prominence has come as a result of consistent investiture in the United Kingdom. Although it's an internet-based venue designed exclusively for remote electronic trade, ICE employs more than 1,000 people in the U.K. to facilitate its operations. A string of capital allocations spanning 15 years and totalling more than £4 billion illustrate ICE's commitment to developing its business in the U.K. The payoff has been robust, as revenues generated by U.K. branches alone measure in the neighborhood of US$1.4 billion annually.

Many of ICE's purchases and near misses have come amid ongoing competition with the Chicago Mercantile Exchange (CME). This includes a failed 2007 attempt at purchasing the Chicago Board of Trade (CBOT). ICE lost the bidding war to the CME, which eventually annexed the CBOT to its operational structure. The aggressive corporate mantra and philosophy of ICE CEO Jeffrey Sprecher have been credited with attempts to purchase the London Stock Exchange Group (LSE) and offers to merge with the CME itself.[7]

Asset Classes And Leading Contracts

Trade is conducted on the ICE network in an exclusively digital capacity. Market participants in geographical locales around the globe access the market via internet connectivity on a daily basis. The following asset classes are included in publicly traded listings:

  • Energies: ICE offers more than 1,000 energies futures and options contracts including North Sea Brent crude oil, West Texas Intermediate crude oil, Platts Dubai and Henry Hub natural gas contracts.[8]
  • Agricultural: Since the 2007 purchase of the NYBOT, ICE has been a global leader in the provision of agricultural derivatives. Among the offerings are futures and options contracts based on coffee, cocoa, cotton and sugar.[9]
  • Financials: A considerable portion of ICE's core business is enabling the hedging of financial risk by institutional and retail traders alike. The most frequently traded products include assorted long and short-term interest rate products.[10]
  • Environmental: ICE is the world's leading carbon emissions derivatives exchange. Futures/options contracts facing European and North American emissions are offered to satisfy environmental regulatory requirements.[11]
  • Forex: More than 60 forex derivatives contracts are listed, facing global major pairs, crosses and emerging market currencies. The featured forex contract is the ICE U.S. Dollar Index, which is a benchmark for the international value of the U.S. dollar.[12]

In addition to these five asset classes, ICE offers a broad array of metals, equity indices and fixed income futures/options contracts. One area of finance relatively unique to ICE is the global OTC credit default swaps (CDS) trade. ICE Clear Credit was formed in 2009 and serves as the world's first CDS clearinghouse. It's regulated by the Commodity Futures Trading Commission and the Securities and Exchange Commission.[13]

As of July 2018, the following are the leading derivatives products traded on ICE and their corresponding average daily traded volume[10]:

Contract Average Daily Volume (ADV)
North Sea Brent Crude Futures 1,130,375
Sterling (Interest Rate) 704,246
Euribor (Interest Rate) 557,587
North American Natural Gas Futures 443,425
Gasoil 251,586
Gilts (Interest Rate) 170,103
Cocoa 85,852
Sugar 85,237
FTSE Index Futures 77,612
MSCI Index Futures 71,289

Corporate Status

As of 2017, ICE ranks as the third-largest derivatives exchange in the world behind the CME and the NSE India. [14]

Listed on the NYSE, the Intercontinental Exchange Inc. (ticker symbol 'ICE') is a publicly held company, with a market capitalisation of US$41.4 billion as of June 2018. ICE ranks 472nd on the Forbes Global 2000 and is highly regarded in several sub-categories of that study[2]:

Forbes Top 2000 Category Rank
Sales 1,579
Profit 320
Assets 382
Market Value 320

ICE gained the designation of being a Fortune 500 company for the year 2018, earning a rank #477. Boasting a five-year annual earnings per share (EPS) of 23.0%, ICE is a preeminent growth stock of the financial services industry.[15]

Summary

ICE is a global leader in the provision of derivatives products including traditional futures/options contracts and more unconventional instruments such as credit default swaps. Through offering borderless digital market access to speculators and hedgers the world over, it has become a premier venue for international trade.

Since the early 2000s, ICE has exhibited explosive growth by following a hawkish corporate strategy of innovation and acquisitions. Purchases of the NYBOT and NYSE Euronext have positioned ICE to remain a globally prominent financial institution for years to come.

Russell Shor

Senior Market Specialist

Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation of Technical Analysts. He is a full member of the Society of Technical Analysts in the United Kingdom and combined with his over 20 years of financial markets experience provides resources of a high standard and quality. Russell analyses the financial markets from both a fundamental and technical view and emphasises prudent risk management and good reward-to-risk ratios when trading.

References

1

Retrieved 20 Jul 2018 https://www.theice.com/trade

2

Retrieved 21 Jul 2018 https://www.forbes.com/companies/intercontinentalexchange/

4

Retrieved 22 Jul 2018 https://www.reuters.com/article/us-ice-nyse-ice/timeline-growth-of-the-intercontinentalexchange-idUSBRE8BJ15J20121220

5

Retrieved 22 Jul 2018 https://www.theice.com/publicdocs/ICE_at_a_glance.pdf

7

Retrieved 22 Jul 2018 https://www.ft.com/content/ca567ba6-3008-11e7-9555-23ef563ecf9a

8

Retrieved 23 Jul 2018 https://www.theice.com/energy

9

Retrieved 23 Jul 2018 https://www.theice.com/agriculture

10

Retrieved 23 Jul 2018 https://www.theice.com/marketdata/reports/176

11

Retrieved 23 Jul 2018 https://www.theice.com/energy/environmental

12

Retrieved 23 Jul 2018 https://www.theice.com/forex

13

Retrieved 23 Jul 2018 https://www.theice.com/clear-credit

14

Retrieved 22 Jul 2018 https://www.fia.org/articles/infographic-2017-volume-highlights

15

Retrieved 22 Jul 2018 https://fortune.com/company/intercontinental-exchange/fortune500/

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