IntercontinentalExchange Inc.

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IntercontinentalExchange
Founded 2000
Headquarters Atlanta
Key People Jeffrey Sprecher, Chairman, CEO; Charles Vice, President, COO; David Goone, Senior Vice President, Chief Strategic Officer; Scott Hill, CFO
Products Futures and OTC markets for energy and agricultural commodities, currency, equity index products; credit derivatives; market data; clearing services
Web site www.theice.com

Atlanta-based IntercontinentalExchange (NYSE: ICE) is an operator of global exchanges, clearing houses and over-the-counter markets, offering futures and OTC markets on a single electronic trading platform. Its markets include agricultural, credit, currency, emissions, energy and equity index offerings. ICE conducts its energy futures markets, including its oil benchmark contracts, through its London-based futures exchange, ICE Futures Europe. Its global agricultural commodity, foreign exchange and equity index futures markets are conducted through ICE Futures U.S. and ICE Futures Canada. ICE’s OTC energy markets offer over 15,200 unique contracts with swaps, spreads, basis, options and differentials on products. ICE also offers brokerage, processing and clearing services for credit derivatives. ICE operates five global clearing houses: ICE Clear U.S., ICE Clear Canada, ICE Clear Europe, ICE Trust and The Clearing Corporation (TCC).

Beyond its Atlanta headquarters, ICE has offices in Calgary, Chicago, Houston, London, New York, Singapore and Winnipeg.

Contents

Company Overview

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The ICE Trading Platform, which serves market participants in more than 55 countries, provides trade execution to participants via direct connections, telecom hubs, the Internet and a number of front-end providers. ICE offers a three-millisecond transaction time in its futures markets, and its platform is scalable and flexible, allowing new products and functions to be added without market disruption.

ICE’s business lines, Futures, OTC and Market Data, provide trading execution, clearing, and risk management services for a wide range of products. The exchange lists hundreds of physical and derivative products, including crude- and refined oil-based products such as heating oil and jet fuel; other energy products like natural gas and electric power; and a suite of soft commodities contracts that include cocoa, coffee, cotton, frozen concentrated orange juice and sugar.

ICE also offers a range of futures and options products based on the Russell Indexes, the benchmark ICE U.S. Dollar Index and currency pairs. As of September 2008, ICE became the exclusive trading venue for Russell index futures contracts, including the Russell 2000 and 1000.

ICE began offering credit derivatives services in August of 2008 with its purchase of Creditex, a leading brokerage firm specializing in credit default swaps (CDS). ICE leveraged its purchase of The Clearing Corporation in March 2009 to create clearing services in both North America and Europe for credit default swaps (CDS) through its ICE Trust and ICE Clear Europe clearing houses.

Other ICE services include:

  • ICE Data, which compiles and repackages trading data derived from trade activity into information products that are sold to a customer base extending beyond its main trading community.
  • ICE Clear, which provides risk management, capital efficiency and maximum financial safeguards to participants in ICE's futures and OTC markets. The clearing platform supports all aspects of trade registration and contract settlement, while guaranteeing traded contracts registered for clearing. In addition to clearing contracts that are executed on the ICE platform, ICE accepts automated submission of off-exchange trades for clearing.
  • ICE eConfirm, which provides a fast, accurate and legally binding alternative to manual, paper confirmations that confirms trades within seconds or minutes.
  • YellowJacket, a peer-to-peer negotiation application designed to meet the advanced needs of OTC trades and brokers.

Annual Volume and Financials

In 2008, volume for all ICE contracts increased 30% to a record 484 million contracts. ICE Futures Europe achieved its 11th consecutive year of record volume with contract growth 10% over 2007. ICE Futures U.S. set its sixth consecutive year of record volume growth, increasing 51% over 2007. And in 2008 ICE’s OTC transaction and clearing fees rose 61% over 2007 to a record $342 million.

Record operating performance in 2008 drove record financial performance, with revenues growing 42% to a record $813 million, consolidated operating income increased 40% to $494 million, operating margin was 61%, new income grew 25% to $301 million and diluted earnings per share increased 23% to $4.17.

Annual Reports

Corporate Governance

The following individuals are members of ICE's board of directors:

History

Chairman and Chief Executive Officer Jeffrey Sprecher acquired ICE's predecessor company, the Continental Power Exchange (CPEX) in 1997 and began developing the ICE platform with a small team of developers, using the internet to create a globally distributed, high-speed, high-capacity platform.

Upon gaining support for a transparent and accessible energy market place, ICE was officially established in May 2000, with founding shareholders representing some of the world’s largest energy market participants. The company’s mission was to transform OTC trading by providing an open, around-the-clock electronic energy exchange.[1]

Acquisitions

  • January 2007: ICE acquired the New York Board of Trade. While the acquired futures contracts were moved to trade only on the ICE electronic platform, the option products continue to be traded both electronically and via its traditional open outcry mode. On Sept. 3, 2007, the exchange was renamed ICE Futures U.S.
  • March 2007: ICE launched a takeover bid of $191.49 a share, or $10.12 billion, for the Chicago Board of Trade (CBOT). The offer surprised executives at both the CBOT and Chicago Mercantile Exchange (CME), who had been working to close an $8 billion merger. [2] CME, however, raised its bid three times and closed on its acquisition of the CBOT on July 12, 2007.[3]
  • July 2007: ICE acquired and integrated ChemConnect's markets to its over the counter business, adding a marketplace for natural gas liquids (NGL’s), propane and other chemicals.
  • October 2007: ICE acquired Chatham Energy, an OTC energy brokerage firm specializing in structuring and facilitating transactions in the energy options markets.
  • October 2008: ICE announced its agreement to acquire The Clearing Corporation (TCC or CCorp). Following its Creditex acquisition, ICE advanced its global credit default swap (CDS) clearing initiative through an agreement to acquire TCC as a joint global clearing solution, as well as MOU’s with nine major dealers to support its CDS clearing initiative.[7]
  • March 2009: ICE announced that its acquisition of TCC was complete and that it launched clearing services for CDS under ICE Trust using TCC’s technology and risk management frameworks. By January of 2010, cumulative gross notional value cleared by its CDS clearing houses surpassed $5 trillion.[8]

Product Milestones

  • In October 2007, ICE Futures U.S. announced that it would begin offering 11 electronically traded foreign exchange ICE Currency Pairs 22 hours per day, beginning on Nov. 9, 2007. Listing of the foreign exchange futures contracts were set to occur in phases.
  • On Feb. 27, 2008 ICE and Natural Gas Exchange Inc. (NGX) energy exchange and clearinghouse said they would offer clearing and settlement services for physical OTC natural gas contracts beginning March 3, 2008. Physical clearing on select U.S. trading hubs would be available as part of a previously announced alliance between ICE and NGX.[10]
  • ICE and globalCOAL, an electronic marketplace for thermal coal, announced on Apr. 2, 2008 a cooperation agreement to develop and launch two new coal futures contracts at ICE Futures Europe. The contracts consist of financially settled NEWC coal futures to be launched mid-2008, and physically settled ARA coal futures to be launched later in the year.[12]
  • August 2008, ICE completed its purchase of Creditex Group, Inc., which added brokerage and processing services for credit derivatives to ICE’s product offering.
  • On September 19, 2008 futures based on Russell Investments’ U.S. equity indexes, including the Russell 1000® Index and Russell 2000® Index futures, transitioned to exclusive trading on ICE Futures U.S.
  • November 3, 2009, ICE launched ICE Clear Europe, the first major clearing house in the U.K. in over 100 years. The clearing house was designed to clear ICE’s futures and OTC energy contracts. As of August 2009, it also houses a separate guaranty fund and risk pool for cleared European CDS index contracts.
  • January 2009, ICE began the rollout of a suite of new cleared OTC energy contracts. Through August 2009, ICE had launched over 100 new power, oil, natural gas and NGL contracts.
  • March 2009, U.S. authorities approved ICE’s acquisition of Clearing Corp., advancing an effort to create a clearinghouse for the $27 trillion credit default swap (CDS) market.[2] On March 10, ICE began clearing CDS through its North American CDS clearinghouse, ICE Trust.
  • July 2009, the U.K. Financial Services Authority (FSA) completed its regulatory review of ICE Clear Europe's CDS clearing operations, risk management and governance . ICE introduced clearing for European credit default swaps (CDS) through ICE Clear Europe on July 29.
  • December 14, 2009, ICE Trust U.S. began clearing credit default swap contracts for buy-side market participants after receiving U.S. regulatory approval.[13]

Company Highlights

  • In April 2005, the entire ICE portfolio of energy futures became fully electronic with the closure of the IPE’s open outcry trading floor.
  • On November 16, 2005 ICE became a publicly traded company, listing on the NYSE.
  • In January 2007, ICE was named as the 2007 Energy Exchange of the Year by votes cast for the annual Energy Business Awards.[14]Among the factors considered by the magazine were strengths in innovation, infrastructure, systems and organization, client service and risk management.
  • On Sept. 25, 2007, ICE was added to the S&P 500 Index.
  • In January 2008, ICE's primary trade matching engine for all OTC and futures products migrated permanently from Atlanta to the company's Chicago data center location. The new hosting facility includes expanded co-location capabilities and provides the physical space, electric power, and bandwidth necessary to accommodate continued growth in ICE's messaging traffic, trading volume and customer base. The Atlanta-based data center will become the disaster recovery site for the ICE trade matching engine.[15]
  • In May 2008, ICE was granted approval to launch its wholly-owned, Europe-based clearing house, ICE Clear Europe. ICE Clear Europe will provide secure clearing services for ICE’s futures and cleared over-the counter energy contracts.[17]
  • In November of 2008, ICE successfully launched London’s first major clearing house in more than a century. All ICE Futures Europe and ICE OTC trading positions were fully transferred from LCH.Clearnet to ICE Clear Europe, ICE's wholly-owned Europe-base clearing house as of Nov. 3.
  • On March 9, 2009, ICE began operation of ICE Trust.[18], a central counterparty clearing house for North American credit default swaps (CDS). ICE Trust addresses the operational and risk management needs of the credit derivatives market, as well as calls by regulators and policy makers for systemic risk reduction. ICE began European CDS index clearing through ICE Clear Europe on July 29, 2009.
  • On October 29, 2009 ICE announced that ICE Clear Europe and ICE Trust were awarded Best Innovation by a Clearing House, Europe, Middle East and Africa and Best Innovation by a Clearing House, Americas respectively by FOW, a global derivatives publication.[19]

Futures and Options Products

Agricultural

Agricultural contracts traded include ICE Western Barley, ICE Canola, ICE U.S. Coffee "C" Arabica, which is the world's largest coffee futures contract, ICE Cotton No. 2, ICE Cocoa, ICE Feed Wheat, ICE Frozen Concentrated Orange Juice, ICE Sugar No. 11, and ICE Sugar No. 16.

When ICE acquired what is now ICE Futures U.S., the exchange did not have an electronic trading platform and all futures and options transactions occurred via openoutcry. trading. In December 2007, the ICE Futures U.S. Board approved transitioning to fully electronic trading for futures and within weeks, almost all of the exchange’s contracts were made available for electronic trading on the ICE platform. Today, all futures trading on ICE Futures U.S. is conducted electronically, with open-outcry trading available only for select options-on-futures markets.

Fossil Fuels and Power

Nearly half of the world's global crude futures by volume of commodity traded is transacted on the ICE exchange.

In addition to ICE Brent Crude Oil futures and options, ICE energy contracts include ICE Rotterdam & Richards Bay Coal, ICE Emissions, ICE Gas Oil, ICE Heating Oil Futures, ICE Middle East Sour Crude Oil, ICE Unleaded Gasoline, ICE U.K. Electricity Futures, ICE U.K. Natural Gas, and ICE West Texas Intermediate Light Sweet Crude Oil.

The ICE ECX EUA and CER futures contracts are the result of a cooperative relationship between ICE Futures Europe and the Chicago Climate Exchange, Inc. and its subsidiary, the European Climate Exchange. ICE Futures Europe shares in the execution revenue derived from theses contracts.

Financial

Financial contracts traded include the ICE Reuters Jefferies CRB Index (which began Feb. 1, 2008)[20] ICE Russell 1000 and Russell 2000 Futures and the ICE U.S. Dollar Index Futures.

In October of 2008, it was announced that ICE Futures U.S. would launch a suite of million-currency-unit foreign exchange (FX) futures contracts on Nov. 6, 2008. The new futures contracts, known as ICE Millions and first announced on Sept. 24, combine the benefits of futures and OTC products, bringing additional transactional efficiencies and risk management tools to the FX marketplace. ICE Millions are 10 times the notional value of the existing suite of ICE FX futures and options contracts. ICE Futures U.S. also lists the ICE U.S. Dollar Index futures, which would remain the existing notional size of $1000 times the index value.[21]

OTC Markets

Energy

The ICE OTC markets include Credit Default Swaps, Financial Gas, Financial Power, Olefins and Aromatics, Oil and Refined Products, Natural Gas Liquids, Physical Gas and Physical Power. ICE offers over 800 contracts in its OTC energy markets, with over 250 contracts available for clearing.

Under an arrangement with TSX Group, Inc., cleared and bilateral markets for North American physical natural gas and Canadian electricity operated by NGX and ICE are offered together on ICE's trading platform. In turn, NGX serves as the clearinghouse for these products. NGX also uses the ICE Clear system to electronically accept for clearing off-exchange transactions in financial gas and other energy products.

Credit

In addition to OTC energy contracts, ICE offers execution, processing and clearing services for OTC credit derivatives through its Creditex, ICE Link and ICE Trust/ICE Clear Europe businesses.

Clearing Services

Clearing for ICE trades is handled by ICE Clear U.S., ICE Clear Europe, ICE Clear Canada, ICE Trust and The Clearing Corporation (TCC).

News

  • On Feb. 4, 2009, ICE announced that it had been named Derivates Exchange of the Year for 2008 by Risk magazine. The 2008 award marked the third year since 2005 that ICE had received the award.[22]
  • ICE said that on Jan. 8, 2008 its ICE Futures subsidiary posted a new high in exchange-wide electronic trading volume for a single day. The exchange reported record electronic volume of 234,120 contracts on Tuesday. The new record surpassed the previous electronic volume record set on June 13, 2007.[23]
  • On Jan. 10, 2008 ICE Futures U.S. set a new daily electronic trading volume record. Electronic futures volume on Jan. 10, 2008 totaled 247,040 contracts. ICE Sugar No. 11 futures also reached a new daily electronic volume record of 177,271 contracts. Electronic trading at ICE Futures U.S. represented 89 percent of total futures volume. Also on Jan. 10, open interest in the Sugar No. 11 futures contract surpassed the one-million contract mark for the first time, with 1.021 million open contracts. Open interest in ICE Cotton futures also set a new all-time high at 261,151 contracts.[24]
  • On Jan. 17, 2008 ICE set new daily electronic and exchange-wide trading volume records. Electronic futures volume on Jan. 17 totaled 363,441 contracts, surpassing by 33 percent the previous record of 273,670 contracts set on Jan. 16, 2008.[25]ICE Sugar No. 11 futures established a new daily electronic volume record of 306,728 contracts.[26]
  • On Jan. 18, 2008 ICE said that due to market conditions impacting the price of ICE's common stock, Chairman and Chief Executive Officer Jeffrey Sprecher would cancel a previously announced, pre-arranged stock trading plan established in November 2007 and scheduled to commence in January 2008. The plan was adopted pursuant to guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934 and disclosed by ICE in a press release dated Dec. 24, 2007.[27]The exchange said Sprecher did not make any trades under the plan, which would have accounted for approximately 10 percent of his combined holdings of stock, restricted stock and stock options and was intended to diversify his personal investment portfolio, implement certain tax planning measures, and pay income taxes incurred in connection with the awards.[28]
  • On Feb. 13, 2008 ICE set a new daily volume record in its ICE Gas Oil futures contract. Gas Oil futures volume reached 200,908, surpassing by 8 percent the previous record of 186,124 contracts established on Nov. 6, 2007.[29]
  • On Apr. 2, 2008, ICE reported announced that March average daily volume(ADV) in futures exceeded one million contracts for the first time in exchange history, and OTC commissions more than doubled. In the first quarter of 2008, ICE achieved record ADV and record average daily commissions.[30]
  • On May 29, 2008, ICE announced that in cooperation with the U.S. Commodity Futures Trading Commission (CFTC) and the U.K. Financial Services Authority (FSA), it has facilitated the development of a cross-border program to provide enhancements to its energy market data reporting, including the large trader reports already in place on its West Texas Intermediate (WTI) crude oil futures contract. The expanded information sharing agreement, initiated by ICE and detailed below, will be subject to the existing memorandum of understanding (MOU) between the FSA and the CFTC. As a result of these proactive enhancements, ICE Futures Europe hopes to provide greater transparency in its markets.[31]
  • On June 3, ICE reported that average daily volume for all ICE Futures contracts reached 872,555 in May 2008 compared to 724,991 in May 2007. In May 2008, ICE's average daily commissions were $1,193,325, an increase of 68 percent compared to $711,074 in May 2007. Average daily commissions reflect daily trading activity in ICE's global OTC energy markets.[32]
  • On June 17, 2008 and May 29, 2008, the CFTC announced further enhancements to the level of information that ICE has supplied since 2006 on its West Texas Intermediate (WTI) Crude Oil contract. The initiatives placed ICE Futures Europe under the same regulations as those applicable to U.S.-based exchanges.[33]

ICE Stock Quote Information

ICE's web site contains detailed information about ICE's stock price.

Key People

References

  1. ↑ "ICE Futures U.S. Board Approves Transition to Fully Electronic Trading for Futures". Reuters.com. Retrieved on December 27, 2007.
  2. ↑ Chilling Effect? ICE Makes CBOT Merger Offer. redOrbit. Retrieved on September 4, 2008.
  3. ↑ CBOT Holders Choose To Merge With CME. Forbes.com. Retrieved on September 03, 2008.
  4. ↑ Press Release. WCE. Retrieved on December 31, 2007.
  5. ↑ Press Release. IntercontinentalExchange. Retrieved on January 31, 2007.
  6. ↑ Press Release. ICE. Retrieved on June 3, 2008.
  7. ↑ ICE in takeover of Clearing Corporation. Financical Times. Retrieved on November 7, 2008.
  8. ↑ Press Release. ICE. Retrieved on January 25, 2010.
  9. ↑ Press Release. ICE. Retrieved on February 27, 2008.
  10. ↑ Press Release. ICE. Retrieved on February 27, 2008.
  11. ↑ Press Release. IntercontinentalExchange. Retrieved on March 24, 2008.
  12. ↑ Press Release. IntercontinentalExchange. Retrieved on April 3, 2008.
  13. ↑ ICE press release. InterContinental Exchange. Retrieved on December 14, 2009.
  14. ↑ Press Release. ICE. Retrieved on January 25, 2008.
  15. ↑ "ICE makes some moves to Chicago”. charlotte.bizjournals.com/. Retrieved on November 27, 2007.
  16. ↑ Press Release. ICE. Retrieved on March 5, 2008.
  17. ↑ ICE Clear Europe. IntercontinentalExchange. Retrieved on September 03, 2008.
  18. ↑ Press Release. {{{org}}}. Retrieved on {{{date}}}.
  19. ↑ ICE Clearing Houses Recognized as Most Innovative; ICE Clear Europe and ICE Trust Receive FOW Awards for Innovation 2009. ICE. Retrieved on October 29, 2009.
  20. ↑ "ICE Futures U.S. to List CRB Index on the Screen”. Reuters. Retrieved on January 28, 2008.
  21. ↑ Press Release. ICE. Retrieved on October 7, 2008.
  22. ↑ Press Release. IntercontinentalExchange. Retrieved on February 4, 2009.
  23. ↑ Press Release. IntercontinentalExchange. Retrieved on January 9, 2008.
  24. ↑ Press Release. IntercontinentalExchange. Retrieved on January 11, 2008.
  25. ↑ Press Release. IntercontinentalExchange. Retrieved on January 18, 2008.
  26. ↑ Press Release. IntercontinentalExchange. Retrieved on January 18, 2008.
  27. ↑ Press Release. IntercontinentalExchange. Retrieved on January 18, 2008.
  28. ↑ Press Release. IntercontinentalExchange. Retrieved on January 18, 2008.
  29. ↑ Press Release. IntercontinentalExchange. Retrieved on February 14, 2008.
  30. ↑ Press Release. ICE. Retrieved on April 3, 2008.
  31. ↑ Press Release. ICE. Retrieved on June 3, 2008.
  32. ↑ Press Release. ICE. Retrieved on June 3, 2008.
  33. ↑ 2nd UPDATE:CFTC:Seeks ICE Europe WTI Front Mo Contract Limits. Dow Jones Newswires and Morningstar. Retrieved on June 19, 2008.

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