We are upgrading our recommendation on ICE to Outperform based on
its solid third-quarter earnings that outpaced the Zacks Consensus
Estimate, thanks to revenue growth across segments. Incremental
cash flow boosts efficiencies, making way for strategic
acquisitions and divestments, product novelty and global expansion.
It also allowed the resumption of share buyback. The successful
integration of NYSE, timely achievement of cost synergies and
steady debt reduction also strengthen ratings. Though top line
shored up primarily due to NYSE acquisition, it signaled absence of
comparable growth parameters. Meanwhile, lower volumes and higher
expenses continued to drag margins. Stiff competition, challenging
regulations and volatile industry trends raise concerns. Yet, a
strong product portfolio, disciplined investment and improved
industry dynamics will likely enable ICE to deliver enhanced
shareholder value in the long run.
Post the acquisition of NYSE Euronext Inc. in Nov 2013 for about
$11 billion, a new holding company - IntercontinentalExchange Group
Inc. (ICE Group) - was formed to affect the cash and stock merger
between IntercontinentalExchange Inc. and NYSE. ICE Group funded
the transaction by 67% in shares and 33% in cash, which was raised
through cash and credit facilities. After the acquisition, NYSE now
owns 36% in IntercontinentalExchange, while four members of the
former will be part of ICE's board.
In Jun 2014, the company was rebranded as Intercontinental
Exchange Inc. (ICE). However, both IntercontinentalExchange and
NYSE businesses will continue to operate under their respective
ICE has dual headquarters in Atlanta and New York and operates
through 17 globally regulated exchanges, with a total of 4,232
employees at the end of 2013. Established in 2000 and headquartered
in Atlanta, Georgia, IntercontinentalExchange Inc. owns and
operates an Internet-based global electronic marketplace for
trading in futures, and over-the-counter (OTC) commodities and
derivative financial products. The company is an electronic futures
and OTC marketplace for trading in a broad array of energy, soft
agricultural and agricultural commodities, credit default swaps
(CDS) and financial products.
The transatlantic exchange operates leading regulated exchanges,
trading platforms and clearing houses serving the global markets
for agricultural, credit, currency, emissions, energy and equity
index markets. Through its subsidiaries, the company serves
professional traders, financial institutions, institutional and
individual investors, corporations, manufacturers, commodity
producers and refiners, and governmental bodies. In 2005,
IntercontinentalExchange completed its initial public offering on
the New York Stock Exchange and became a member of the Russell 1000
and the S&P 500 indexes.
Headquartered in New York and consummated in Apr 2007, NYSE
Euronext Inc. was formed with the merger of NYSE Group Inc., a
Delaware corporation and Euronext N.V., a company organized under
the laws of the Netherlands. The company offers a broad and growing
array of products and services in cash equities, futures, options,
swaps, exchange-traded fund (ETF) products, bonds, market data and
commercial technology solutions, all designed to meet the evolving
needs of issuers, investors, financial institutions and market
Following the acquisition of NYSE, ICE generates revenues from
four primary sources:
Transaction and Clearing Fees (accounted for 78% of 2013 total
Market Data Fees (12%)
Listing Fees (2%)
Other Revenue (8%)
Through its Futures operations, ICE offers trading in
standardized derivative contracts on its regulated exchanges
through ICE Futures U.S., ICE Futures Europe and ICE Futures
Canada, NYSE Liffe, NYSE Liffe U.S. and ICE Endex.
The OTC operation provides trading in over-the-counter or
off-exchange, energy-related products, and derivative contracts,
including contracts that provide for the physical delivery of an
underlying commodity or for financial settlement based on the price
of an underlying commodity. ICE's OTC markets include ICE OTC
Energy, Creditex and ArcaEdge.
ICE's Cash exchanges offer trading within ETFs, equity and
interest rate indices as well as equity options. These markets
include New York Stock Exchange, NYSE Arca, NYSE MKT, NYSE Euronext
Exchanges, EnterNext, NYSE Alternext, NYSE Arca Europe, NYSE Amex
Options, NYSE Arca Options and NYSE Bonds.
ICE also offers central Clearing facilities through ICE Clear
Europe, ICE Clear U.S., ICE Clear Canada, ICE Clear Credit and The
Clearing Corp. In Jul 2013, NYSE Liffe's both trading and clearing
operations were successfully merged into ICE Clear Europe, which is
the U.K.'s first clearinghouse.
Intercontinental Exchange Inc. (ICE): Read the Full
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