The UK Department of Energy & Climate Change recently
revealed that it has selected the UK arm of
IntercontinentalExchange Inc.
(
ICE
) -- ICE Futures Europe -- to carry out the aviation allowances,
formalities and auctions for Phase III of the EU Emissions Trading
Scheme (EU ETS) on behalf of the UK Government. Subject to the
approval of the European Union, the Phase III and aviation auction
for UK is scheduled to start in November this year.
The authorities found IntercontinentalExchangeis best suited for
both compliance and price risk management for Phase III of the EU
ETSand expects it to deliver the auction services efficiently.
IntercontinentalExchange possesses compelling fundamental strength
compared to its peers, and the recent decision of the UK
authorities further demonstrates the fact. Moreover, the recent
contract is in sync with the company's long-term strategy of
gaining a significant foothold in the booming emission
market.
Since 2005, the emissions trading volumes have been rising
steadily. ICE Emissions futures and options products registered an
annual volume equal to 7,570 million tons of CO2 in 2011, a 23%
hike over the last year. The average daily volume for March 2012
was 33,625, 0.8% more than a year ago. Open Interest for ICE
Emissions products as of April 20, 2012 were equal to 1.2 million
contracts.
In 2001, IntercontinentalExchange acquired the IPE, or ICE
Futures Europe, that currently accounts for approximately 50% of
the world's crude oil and refined futures traded each day in the
European markets. It serves as the Recognized Auction Platform and
Recognized Investment Exchange for the Financial Services Authority
as well as its products enlisted in the European Climate Exchange
(ECX).
CME Group Inc.
(
CME
), which competes with IntercontinentalExchange, recently acquired
GreenX Holdings LLC, the second largest carbon exchange globally.
The company is also venturing into the OTC market and its portfolio
margining of over-the-counter (OTC) interest rate swap (
IRS
) positions and Eurodollar and Treasury Futures for house accounts
is slated to launch on May 7, 2012.
We retain our long-term Neutral recommendation on
IntercontinentalExchange. The quantitative Zacks #3 Rank
(short-term Hold rating) for the company indicates no clear
directional pressure on the stock over the near term.
CME GROUP INC (
CME
): Free Stock Analysis Report
INTERCONTINENTL (
ICE
): Free Stock Analysis Report
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