IntercontinentalExchange
Encyclopedia
IntercontinentalExchange, Inc., known as ICE, is an American
financial company that operates Internet-based marketplaces
which trade futures
and over-the-counter
(OTC) energy
and commodity
contracts as well as derivative
financial products. While the company's original focus was energy products (crude and refined oil, natural gas
, power
, and emissions
), recent acquisitions have expanded its activity into the "soft" commodities (sugar
, cotton
and coffee
), foreign exchange
and equity index futures.
In 2011, ICE and Nasdaq
joined forces to bid against Deutsche Borse
after the latter announced a $9.5 billion deal to merge with NYSE Euronext. The two U.S. bidders ultimately withdrew after their bid encountered regulatory antitrust
resistance.
ICE is organized into three business lines:
Contracts sold through ICE Futures U.S. are processed through a subsidiary
, ICE Clear U.S. (ICEUS). In May 2008, ICE launched its own Clearing House, ICE Clear, with divisions for Europe, US, Canada & Trust (ICEU),
Headquartered in Atlanta, ICE also has offices in Calgary
, Chicago
, Houston, London
, New York
and Singapore
, with regional telecommunications hubs in Chicago, New York, London and Singapore.
and lower costs than manual trading.
In June 2001, ICE expanded its business into futures trading by acquiring the International Petroleum Exchange
(IPE), now ICE Futures Europe, which operated Europe's leading open-outcry energy futures exchange. Since 2003, ICE has partnered with the Chicago Climate Exchange
(CCX) to host its electronic marketplaces. In April 2005, the entire ICE portfolio of energy futures became fully electronic. In April 2010 ICE bought CCX's owner Climate Exchange PLC for 395 million pounds ($622 million). Climate Exchange PLC also owns the European Climate Exchange
(ECX).
ICE became a publicly traded company on November 16, 2005, and was added to the Russell 1000 Index on June 30, 2006. The company expanded rapidly in 2007, acquiring the New York Board of Trade
(NYBOT), ChemConnect (a chemical commodity market), and the Winnipeg Commodity Exchange
. In March 2007 ICE made an unsuccessful $9.9 billion bid for the Chicago Board of Trade
, which was instead acquired by the Chicago Mercantile Exchange
.
In January 2008, ICE partnered with TSX Group
's Natural Gas Exchange, expanding their offering to clearing and settlement services for physical OTC natural gas contracts.
On March 4, 2009, ICE announced that ICE US Trust, LLC (ICE Trust), a New York limited liability trust company, received regulatory approval from the Board of Governors of the Federal Reserve System
to become a member of the Federal Reserve System and to serve as a clearing house
and central counterparty for credit default swap
(CDS) transactions, initially for North American CDS indexes and later adding liquid single-name swaps. Now known as ICE Clear Credit LLC it is subject to direct regulation and supervision by the CFTC and the SEC.
In December, 2010, The New York Times fielded a substantial examination of the Trust and its members, saying in part "the details of their meetings, even their identities, have been strictly confidential. Drawn from giants like JPMorgan Chase, Goldman Sachs
and Morgan Stanley
, the bankers form a powerful committee that helps oversee trading in derivatives ... [and also] share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance," a system with "costly implications" for customers and smaller banks. "The marketplace as it functions now 'adds up to higher costs to all Americans,' said Gary Gensler
, the chairman of the Commodity Futures Trading Commission
, which regulates most derivatives. More oversight of the banks in this market is needed, he said." In the same month, ICE said it was "well positioned" to establish a swap execution facility (SEF), having met with Commissioner Gensler or his staff four times in the past year to discuss SEF registration. An SEF or multiple SEFs will be the derivatives-trading platform(s) newly required under Dodd-Frank financial-markets reform. Other firms said to be looking at becoming SEFs were Bloomberg LP, Thomson TradeWeb
, Parity Energy , and MarketAxess. In a call with investors on November 1, CEO Sprecher had discussed the company's position in and preparation across its numerous markets, including the prospects for SEFs.
In February, 2011, in the wake of an announced merger of NYSE Euronext with Deutsche Borse, speculation developed that ICE and Nasdaq could mount a counter-bid of their own for NYSE Euronext. ICE was thought to be looking to acquire the American exchange's derivatives business, Nasdaq its cash equities business. As of the time of the speculation, "NYSE Euronext’s market value was $9.75 billion. Nasdaq was valued at $5.78 billion, while ICE was valued at $9.45 billion." Late in the month, Nasdaq was reported to be considering asking either ICE or the Chicago Merc
(CME) to join in what would be probably be an $11-12 billion counterbid for NYSE. On April 1, ICE and Nasdaq made an $11.3 billion offer which was rejected April 10 by NYSE. Another week later, ICE and Nasdaq sweetened their offer, including a $.17 increase per share to $42.67 and a $350 million breakup fee if the deal were to encounter regulatory trouble. The two said the offer was a $2 billion (21%) premium over the Deutsche offer and that they had fully committed financing of $3.8 billion from lenders to finance the deal. The Justice Department
, also in April, "initiated an antitrust review of the proposal, which would have brought nearly all U.S. stock listings under a merged Nasdaq-NYSE." In May, saying it "became clear that we would not be successful in securing regulatory approval," the Nasdaq and ICE withdrew their bid.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
financial company that operates Internet-based marketplaces
Exchange (organized market)
An exchange is a highly organized market where tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought.-Description:...
which trade futures
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
and over-the-counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
(OTC) energy
Energy
In physics, energy is an indirectly observed quantity. It is often understood as the ability a physical system has to do work on other physical systems...
and commodity
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
contracts as well as derivative
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
financial products. While the company's original focus was energy products (crude and refined oil, natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, power
Electrical power industry
The electric power industry provides the production and delivery of electric energy, often known as power, or electricity, in sufficient quantities to areas that need electricity through a grid connection. The grid distributes electrical energy to customers...
, and emissions
Emissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
), recent acquisitions have expanded its activity into the "soft" commodities (sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
and coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
), foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
and equity index futures.
In 2011, ICE and Nasdaq
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
joined forces to bid against Deutsche Borse
Deutsche Börse
Deutsche Börse AG is a marketplace organizer for the trading of shares and other securities. It also is a transaction services provider. It gives companies and investors access to global capital markets. It is a joint stock company and was founded in 1993. The headquarters are in Frankfurt,...
after the latter announced a $9.5 billion deal to merge with NYSE Euronext. The two U.S. bidders ultimately withdrew after their bid encountered regulatory antitrust
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....
resistance.
ICE is organized into three business lines:
- ICE Markets — futures, optionsOption (finance)In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
, and OTC markets. Energy futures are traded via ICE Futures Europe; soft commodity futures/options are handled by ICE Futures U.S. - ICE Services — electronic trade confirmations and education.
- ICE Data — electronic delivery of market data, including real-time trades, historical prices and daily indices.
Contracts sold through ICE Futures U.S. are processed through a subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
, ICE Clear U.S. (ICEUS). In May 2008, ICE launched its own Clearing House, ICE Clear, with divisions for Europe, US, Canada & Trust (ICEU),
Headquartered in Atlanta, ICE also has offices in Calgary
Calgary
Calgary is a city in the Province of Alberta, Canada. It is located in the south of the province, in an area of foothills and prairie, approximately east of the front ranges of the Canadian Rockies...
, Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
, Houston, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, New York
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
and Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, with regional telecommunications hubs in Chicago, New York, London and Singapore.
Company history
In the late 1990s, Jeffrey Sprecher, ICE's founder, chairman, and Chief Executive Officer, acquired Continental Power Exchange, Inc. with the objective of developing an Internet-based platform to provide a more transparent and efficient market structure for OTC energy commodity trading. In May 2000, IntercontinentalExchange (ICE) was established, with its founding shareholders representing some of the world's largest energy traders. The company's stated mission was to transform OTC trading by providing an open, accessible, multi-dealer, around-the-clock electronic energy exchange. The new exchange offered the trading community better price transparency, more efficiency, greater liquidityMarket liquidity
In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value...
and lower costs than manual trading.
In June 2001, ICE expanded its business into futures trading by acquiring the International Petroleum Exchange
International Petroleum Exchange
The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...
(IPE), now ICE Futures Europe, which operated Europe's leading open-outcry energy futures exchange. Since 2003, ICE has partnered with the Chicago Climate Exchange
Chicago Climate Exchange
The now defunct Chicago Climate Exchange was North America’s only voluntary, legally binding greenhouse gas reduction and trading system for emission sources and offset projects in North America and Brazil....
(CCX) to host its electronic marketplaces. In April 2005, the entire ICE portfolio of energy futures became fully electronic. In April 2010 ICE bought CCX's owner Climate Exchange PLC for 395 million pounds ($622 million). Climate Exchange PLC also owns the European Climate Exchange
European Climate Exchange
The European Climate Exchange manages the product development and marketing for ECX Carbon Financial Instruments , listed and admitted for trading on the ICE Futures Europe electronic platform. It is no longer a subsidiary of the Chicago Climate Exchange but rather a sister company...
(ECX).
ICE became a publicly traded company on November 16, 2005, and was added to the Russell 1000 Index on June 30, 2006. The company expanded rapidly in 2007, acquiring the New York Board of Trade
New York Board of Trade
The New York Board of Trade , renamed ICE Futures US in September of 2007, is a wholly owned subsidiary of IntercontinentalExchange . It is a physical commodity futures exchange located in New York City. It originated in 1870 as the New York Cotton Exchange...
(NYBOT), ChemConnect (a chemical commodity market), and the Winnipeg Commodity Exchange
Winnipeg Commodity Exchange
The Winnipeg Commodity Exchange is the former name of a derivatives market based in Winnipeg, Manitoba, Canada now known as ICE Futures Canada. Futures and options contracts are electronically traded in western barley and canola ....
. In March 2007 ICE made an unsuccessful $9.9 billion bid for the Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...
, which was instead acquired by the Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
.
In January 2008, ICE partnered with TSX Group
TSX Group
The TMX Group Inc. owns and operates stock exchanges, the Toronto Stock Exchange , and the TSX Venture Exchange , formerly known as the Canadian Venture Exchange , the Montreal Exchange, the Natural Gas Exchange and the Boston Options Exchange...
's Natural Gas Exchange, expanding their offering to clearing and settlement services for physical OTC natural gas contracts.
On March 4, 2009, ICE announced that ICE US Trust, LLC (ICE Trust), a New York limited liability trust company, received regulatory approval from the Board of Governors of the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
to become a member of the Federal Reserve System and to serve as a clearing house
Clearing house (finance)
A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...
and central counterparty for credit default swap
Credit default swap
A credit default swap is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default...
(CDS) transactions, initially for North American CDS indexes and later adding liquid single-name swaps. Now known as ICE Clear Credit LLC it is subject to direct regulation and supervision by the CFTC and the SEC.
In December, 2010, The New York Times fielded a substantial examination of the Trust and its members, saying in part "the details of their meetings, even their identities, have been strictly confidential. Drawn from giants like JPMorgan Chase, Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
and Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
, the bankers form a powerful committee that helps oversee trading in derivatives ... [and also] share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance," a system with "costly implications" for customers and smaller banks. "The marketplace as it functions now 'adds up to higher costs to all Americans,' said Gary Gensler
Gary Gensler
Gary Gensler is the chairman of the U.S. Commodity Futures Trading Commission under President Barack Obama.Gensler was Undersecretary of the Treasury and Assistant Secretary of the Treasury in the United States. Barack Obama selected him to lead the Commodity Futures Trading Commission, which has...
, the chairman of the Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
, which regulates most derivatives. More oversight of the banks in this market is needed, he said." In the same month, ICE said it was "well positioned" to establish a swap execution facility (SEF), having met with Commissioner Gensler or his staff four times in the past year to discuss SEF registration. An SEF or multiple SEFs will be the derivatives-trading platform(s) newly required under Dodd-Frank financial-markets reform. Other firms said to be looking at becoming SEFs were Bloomberg LP, Thomson TradeWeb
Thomson Financial
Thomson Financial was an arm of The Thomson Corporation, which was one of the world's leading information companies, focused on providing integrated information solutions to business and professional customers...
, Parity Energy , and MarketAxess. In a call with investors on November 1, CEO Sprecher had discussed the company's position in and preparation across its numerous markets, including the prospects for SEFs.
In February, 2011, in the wake of an announced merger of NYSE Euronext with Deutsche Borse, speculation developed that ICE and Nasdaq could mount a counter-bid of their own for NYSE Euronext. ICE was thought to be looking to acquire the American exchange's derivatives business, Nasdaq its cash equities business. As of the time of the speculation, "NYSE Euronext’s market value was $9.75 billion. Nasdaq was valued at $5.78 billion, while ICE was valued at $9.45 billion." Late in the month, Nasdaq was reported to be considering asking either ICE or the Chicago Merc
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
(CME) to join in what would be probably be an $11-12 billion counterbid for NYSE. On April 1, ICE and Nasdaq made an $11.3 billion offer which was rejected April 10 by NYSE. Another week later, ICE and Nasdaq sweetened their offer, including a $.17 increase per share to $42.67 and a $350 million breakup fee if the deal were to encounter regulatory trouble. The two said the offer was a $2 billion (21%) premium over the Deutsche offer and that they had fully committed financing of $3.8 billion from lenders to finance the deal. The Justice Department
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
, also in April, "initiated an antitrust review of the proposal, which would have brought nearly all U.S. stock listings under a merged Nasdaq-NYSE." In May, saying it "became clear that we would not be successful in securing regulatory approval," the Nasdaq and ICE withdrew their bid.
Commodities traded on the exchange
- Coal
- Crude and Refined products
- Emissions
- Natural Gas
- Power
- Cocoa
- Coffee C
- Cotton No. 2
- FCOJ A
- Orange juice concentrate
- Sugar No. 11
- Russell Indices
- US Dollar Index
- Iron Ore Swaps
External links
- Official ICE site
- Davis, Philip, "The Global Oil Scam: 50 Times Bigger than Madoff", Seeking Alpha, November 11, 2009.