In this post “What Is Intercontinental Exchange (ICE)?”, we’ll look at the operation of the intercontinental exchange, international exchange acquisitions, and also some exchange data services.
ICE is an American corporation created in 2000 to buy and also run worldwide exchanges and clearinghouses.
What Is The ICE?
Intercontinental Exchange (ICE), established in 2000 by Jeffrey C. Sprecher, is a major owner and operator of financial and commodities exchanges. Mr. Sprecher is also part of the NYSE board (NYSE). ICE was founded by big international corporations including Total, Goldman Sachs, and Deutsche Bank.
Then ICE began by trading in firms that dealt with energy goods including crude oil, natural gas, and pollution, but rapidly diversified. ICE aimed to improve trading conditions by increasing pricing transparency, efficiency, liquidity, and lowering expenses.
Since ICE’s creation in 2000, the trade and stock world has known it. By 2010, it had even cleared over $10 trillion in CDOs.
ICE’s acquisition strategy is one of the key reasons for its rapid growth. Hence even in its expansion plan, the corporation has said that acquiring significant other companies and exchanges is the way to progress. In 2001, ICE bought the London-based International Petroleum Exchange (IPE). ICE went public in 2005 and rapidly joined the Russell 1000 Index. Ever since the organization has completed over 15 successful M&A transactions.
In 2018, ICE declared the creation of a cryptocurrency trading and Bitcoin futures business. The new firm, Bakkt, focuses on cryptocurrency and provides a broad range of services. Bakkt customers may purchase, sell, trade, and swap crypto tokens using a dedicated digital wallet. Bakkt raised an astounding US$182.5 million in its inaugural investment round, thanks to ICE’s established position in the stock markets and business. Boston Consulting Group, Microsoft, and Pantera Capital are major investors.
Bakkt stated in 2021 that it will go public after a successful merger with VPC Impact Acquisition Holdings. The new business will be named Bakkt Holdings, Inc. and ICE will own a 65 percent economic stake in it.
The Intercontinental Exchange (ICE) is an American Fortune 500 business founded in 2000. It owns and runs 12 regulated exchanges and marketplaces for financial and commodities markets.
On the other hand, OTC energy, credit, and equities markets are regulated by the U.S. Securities and Exchange Commission (SEC).
ICE Clear U.S., ICE Clear Europe, ICE Clear Singapore, ICE Clear Credit, ICE Clear Netherlands, and ICE NGX are the six central clearinghouses owned and operated by ICE.
Atlanta, New York, London, Chicago, Bedford, Houston, Winnipeg, Amsterdam, Calgary, Washington, D.C., San Francisco, Tel Aviv, Rome, Hyderabad, Singapore, and Melbourne are among the cities where ICE maintains offices.
More on Intercontinental Exchange (ICE)
The Intercontinental Exchange (ICE) is a firm based in the United States that owns and runs financial and commodities markets. It was formed in Atlanta, Georgia, in May of 2000. Futures exchanges, cash exchanges, central clearinghouses, and market services for off-exchange trade are all part of ICE’s activities. However, in the United States, Europe, and Singapore, ICE runs futures markets. The New York Stock Exchange (NYSE), NYSE ARCA, NYSE National, NYSE AMEX Options, NYSE ARCA Options, and NYSE Chicago are its cash exchanges. ICE Clear U.S., ICE Clear Europe, ICE Clear Singapore, ICE Clear Credit, ICE Clear Netherlands, and ICE NGX are ICE’s six central clearinghouses.
Points to Note
• The Intercontinental Exchange (ICE) is a firm based in the United States that owns and runs financial and commodities exchanges.
• ICE was created in 2000 and went public on November 16, 2005; on June 30, 2006, it was included in the Russell 1000 Index. The company’s major concentration when it was created was on energy products; nevertheless, the company’s operations have expanded to encompass other commodities, foreign currency exchanges, and stock index futures via different acquisitions.
On November 16, 2005, ICE became a publicly listed corporation, and on June 30, 2006, it was included in the Russell 1000 Index.
Understanding the Intercontinental Exchange
Jeffrey C. Sprecher, a power plant developer, launched ICE in May 2000 to offer a more open and effective OTC energy commodities trading platform. Contrast this with traditional trading and the new platform offers more transparency and reduced expenses.
BP, Total, Shell, Deutsche Bank, and Societe Generale all backed Sprecher.
The company’s initial concentration was on energy, especially crude and refined oil, natural gas, electricity, and emissions. The company’s business expanded to encompass commodities including sugar, cotton, and coffee, as well as international currency exchanges and stock index futures.
He founded ICE Clear Credit as a clearinghouse for credit default swaps during the 2007–08 financial crisis. ICE Clear Credit also acted as the Federal Reserve’s OTC derivatives clearinghouse, helping to minimize market risk. ICE pioneered clearing in OTC energy and credit derivatives markets. By 2010, ICE’s subsidiary, ICE Clear Credit, had cleared over $10 trillion in credit default swaps.
ICE has grown by acquiring other exchanges. Among its biggest purchases since 2010, the International Petroleum Exchange (IPE), now ICE Futures Europe;
European Climate Exchange (ECX) in 2010, NYSE Euronext (NYSE Euronext) in 2013, Interactive Data Corporation (IDC) in 2015, Standard and Poor’s Securities Evaluations, Inc. in 2016, Virtu BondPoint in 2017, and the Chicago Stock Exchange (CHX) in 2018.
ICE Data Services is a new package of data services and software announced in June 2016. This includes financial firms, asset managers, and individual investors. ICE Data Services’ unique real-time data is utilized by NYSE, SuperDerivatives, Interactive Data (IDC), and other ICE clients. Customer data from worldwide exchanges and fixed income markets is provided by ICE Data Services.
ICE is the world’s third-biggest exchange group, next to HKEX and CME Group Inc., which controls the Chicago Board of Trade and the New York Mercantile Exchange. In 2019, the company’s overall market value increased by $354 billion throughout all exchange listings.
History of Intercontinental Exchange
Jeffrey Sprecher was a power plant entrepreneur who saw a need for a unified natural gas market for generators.
Sprecher bought Continental Power Exchange, Inc. in the late 1990s with the goal of creating an Internet-based platform for OTC energy commodities trading that would be more open and effective.
Sprecher created ICE in May 2000, with Goldman Sachs, Morgan Stanley, BP, Total, Shell, Deutsche Bank, and Société Générale as investors.
The new exchange improved pricing transparency, efficiency, and liquidity while also lowering trading expenses. While the company’s initial concentration was on energy goods (crude and refined oil, natural gas, electricity, and emissions), acquisitions extended the company’s activities to include soft commodities (sugar, wool, and cocoa), foreign currency, and stock index futures.
In reaction to the 2008 financial crisis in the United States, Sprecher founded ICE US Trust, currently known as ICE Clear Credit LLC, a limited-purpose bank that serves as a clearinghouse for credit default swaps. Sprecher collaborated closely with the Federal Reserve to act as the clearinghouse for over-the-counter (OTC) derivatives.
“As a risk management tool, US authorities were enthusiastic about the kind of clearinghouse for opaque over-the-counter (OTC) derivatives.” There was considerable danger of huge market disruption in the absence of a central counterparty, who would guarantee pay-outs if a trading party was unable to do so.”
The financial organizations mostly impacted by the crisis, the top nine biggest banks in the world, were the main sponsors for ICE US Trust. (Goldman Sachs, Bank of America, Citi, Credit Suisse, Deutsche Bank, JPMorgan, Merrill Lynch, Morgan Stanley, and UBS). In return for profit sharing, Sprecher’s clearinghouse cleared its worldwide credit default swaps (CDS).
The Financial Post reported on September 30, 2008, that the “$54000bn credit derivatives market faced its largest test in October 2008, when the International Swaps and Swaps Association auctioned billions of dollars worth of contracts on now-defaulted derivatives.” He characterized ICE as a “US-based electronic futures exchange” that upped the stakes on October 30, 2008, in its quest to grow in the $54000 billion dollar credit derivatives market. (2008, Weitzman)
Through its subsidiary, ICE Trust CDS, Intercontinental Exchange had cleared more than $10 trillion in credit default swaps (CDS) by 2010. (now ICE Clear Credit). Intercontinental Exchange was nominated to the Fortune Future 50 in 2017, a list of the top 50 firms best positioned to adapt and expand in a complicated environment. In June 2017, ICE was named to the Fortune 500 as the only exchange operator featured in the list.
ICE is getting closer to enabling Bitcoin futures trading, according to Bloomberg, as “its Bakkt business opens its digital-asset custody warehouse to clients today.” Bitcoin will be available for purchase on September 23, 2019. Bakkt meanwhile went public in October 2021 after merging with VPC Impact Acquisition Holdings. A purpose acquisition firm, with ICE owning around 68 percent of the merged business.
Acquisitions and Mergers
Intercontinental Exchange has a strategy of expanding via acquisitions of existing exchanges. Some have been successful, while others have failed to owe to regulators’ or others’ fears that the new business would create a monopolistic situation. The following are examples of notable purchases and attempted acquisitions:
International Petroleum Exchange, 2001 (IPE)
The International Petroleum Market (IPE), now ICE Futures Europe, was founded in London in June 2001 and managed Europe’s premier open-outcry energy futures exchange. ICE has hosted its electronic markets with the Chicago Climate Exchange (CCX) since 2003. The whole ICE portfolio of energy futures was totally computerized in April 2005. And ICE shuttered the high-profile and historic trading floor of the International Petroleum Exchange.
New York Board of Trade, 2007 (NYBOT)
On November 16, 2005, ICE became a publicly listed corporation, and on June 30, 2006, it was included in the Russell 1000 Index. In 2007, the corporation grew quickly, purchasing the New York Board of Trade (NYBOT) and ChemConnect (a chemical commodity market).
Chicago Board of Trade’s failed effort in 2007
The Chicago Board of Trade was purchased by the CME Group in March 2007 after ICE made a failed $9.9 billion proposal.
Winnipeg Commodity Exchange, 2007 (WCE)
The privately-owned 120-year-old Winnipeg Commodity Exchange, famed for its canola futures contract, was bought for $40 million by Intercontinental Exchange Inc., an “upstart Atlanta-based energy exchange.”
However, on January 1, 2008, the Winnipeg Commodity Exchange (WCE) was rebranded as ICE Futures Canada.
The Winnipeg Commodity Exchange “closed its open-outcry trading floor” in 2004, becoming “the first North American agricultural futures exchange to trade exclusively on an electronic platform,” trading through the “Chicago Board of Trade’s electronic platform, and [using] clearing services from the Kansas City Board of Trade.” Winnipeg was renamed IntercontinentalExchange.
Contracts from commodity exchanges are transferred to the IntercontinentalExchange platform.
IntercontinentalExchange kept a Winnipeg office with a “small core personnel.” in Manitoba. Its activities were hence overseen by the Manitoba Securities Commission.
Creditex in 2008
ICE stated in June 2008 that it has signed a final merger deal to purchase Creditex Group Inc. (Creditex). The overall purchase price was $625 million, including $565 million in ICE common stock and $60 million in cash. Plus a working capital adjustment is to be determined at closure. Creditex Group became a wholly-owned subsidiary of ICE and began operating under the Creditex brand once the acquisition was completed.
Natural Gas Exchange Partnership, TSX Group, 2008
In January 2008, ICE joined with the Natural Gas Exchange of the TSX Group of Canada to improve its international payment operations for physical OTC natural gas contracts.
Climate Change in 2010
Climate Exchange PLC and European Climate Exchange (ECX) were purchased by ICE in April 2010 for 395 million pounds ($622 million).
The European Climate Exchange was the earliest to provide exchange-traded emissions products.
By listing items on the ICE Futures Europe exchange market, the European Commodity Exchange (ECX) was therefore founded in 2005. The main market for carbon dioxide (CO2) emissions is ICE Futures Europe. The European Union Emission Trading Scheme however requires that ICE’s ECX products meet certain specifications.
NYSE Euronext in 2013
Following the announcement of NYSE Euronext’s merger with Deutsche Börse in February 2011, suspicion grew that ICE and Nasdaq may launch their own rebuttal for NYSE Euronext. ICE was said to be interested in buying Nasdaq’s derivatives business and ICE’s cash stocks division. “NYSE Euronext’s valuation was $9.75 billion at the time of the prediction”. “Nasdaq is worth $5.78 billion, whereas ICE is worth $9.45 billion”. Nasdaq was said to be contemplating inviting either ICE or the Chicago Mercantile Exchange (CME) to participate in an $11–12 billion buyout offer for NYSE late last month. ICE and Nasdaq made an $11.3 billion bid on April 1, but NYSE declined it on April 10.
A week later, ICE and Nasdaq upped their proposal with a $.17 per share raise to $42.67 and a $350 million dissolution charge if the acquisition ran into regulatory issues. Moreover, the offer represented a $2 billion (21 percent) premium above the Deutsche offer, and the two stated they had $3.8 billion in absolutely dedicated funding from lenders.
“An antitrust assessment of the plan, which would have combined almost all U.S. stock listings under a consolidated Nasdaq-NYSE,” the Justice Department said in April. The Nasdaq and ICE dropped their offer in May. Claiming that it “became evident that we would not be able to succeed in getting regulatory permission.”
On February 1, 2012, the European Commission prohibited the Deutsche merger, highlighting the fact that the combined business would have a near-monopoly.
ICE stated in December 2012 that it will purchase NYSE Euronext (without Nasdaq) for $8.2 billion, though subject to regulatory clearance.
Chairman and CEO Jeffrey Sprecher will remain in his role. The purchase, which occurred in 2013, was authorized by the corporate boards of both ICE and NYSE Euronext.
ICE Futures Europe was formed in 2014 when ICE separated off Euronext while preserving NYSE and LIFFE.
Trayport and subsequent divestment in 2015
GFI Group sold Trayport to ICE in December 2015 for $650 million. Trayport is an exchange software program that basically allows European utilities market brokers, swaps, clearing houses, and market players.
About 70%-80% of all European utility transactions pass via its platform.
The merger was brought in for assessment by the Competition and Markets Authority (CMA) after the purchase. It declared in October 2016 that it would force ICE to sell Trayport after determining that the combination would result in a significant reduction in competition. The ICE appealed the verdict to the Competition Appeal Tribunal (CAT), but it was upheld by the CAT. As a consequence, in October 2017, ICE sold Trayport to TMX Group in return for certain TMX Group assets and £350 million in cash. The CMA’s decision against ICE was the 1st instance the agency compelled a business to sell an asset it had previously purchased.
Standard & Poor’s Securities Evaluations for 2016 (SPSE)
Standard & Poor’s Securities Evaluations, Inc. (SPSE) and Credit Market Analysis (CMA), two assets within the S&P Global Market Intelligence business segment, were acquired from McGraw Hill Financial in March 2016. However, the majority of the agreement’s provisions were kept under wraps. But it finalized its all-cash transaction in October 2016.
TMX Atrium, 2017
ICE stated in February 2017 that it has reached a deal with TMX Group to buy TMX Atrium, an extranet, and cellular services company. The agreement’s conditions were not released, but it is scheduled to conclude within 90 days, pending regulatory clearances. The transaction’s financial effect would therefore be minimal, and it was included in ICE’s 2017 financial projections.
2017: Global Research Index Platform of BofA Merrill Lynch (BofAML)
In February 2017, ICE revealed that it has signed a formal deal to buy Bank of America Merrill Lynch’s index platform from the Global Research business. However, the BofAML indices are the world’s second most popular fixed income indices. Having almost $1 trillion in assets under management (AUM) benchmarked against ICE’s combined fixed income index business. The indexes will be renamed the ICE BofAML indices when they close. The agreement’s specifics have not been revealed, but the deal is scheduled to finalize in the later part of 2017. In 2017, the transaction’s financial effect is predicted to be minimal. ICE confirmed the completion of its purchase in October 2017. It also stated in August 2019 that it has agreed to buy a family of fixed income volatility indices, including the well-known Merrill Lynch Option Volatility Estimate (“MOVE”) family of indices.
Euroclear in 2017
ICE stated in October 2017 that it has paid EUR 275 million for a 4.7 percent share in Euroclear. One person from ICE is hence expected to join the Euroclear Board of Directors.
Euroclear is a significant supplier of post-trade solutions for cross-border operations across asset classes, comprising settlement, central securities depositories, and associated services. Nevertheless, ICE is said to have boosted its investment to 10% in early 2018.
Virtu BondPoint in 2017
ICE stated in October 2017 that it has agreed to buy Virtu BondPoint from Virtu Financial for $400 million in cash. The deal was apparently consummated on January 2, 2018, according to ICE. BondPoint is a fully computerized, integrated platform that provides extra fixed income implementation capabilities. As well as one of the most comprehensive collections of fixed income instruments.
Chicago Stock Exchange, 2018 (CHX)
ICE stated in April 2018 that it has reached a contract to buy the Chicago Stock Exchange (CHX), a full-service stock exchange that offers trading, data, and company listings. According to regulatory clearances, the deal is scheduled to conclude in the second quarter of 2018. However the transaction’s parameters were not revealed, and the financial effect on ICE’s capital return plans would be minimal.
TMC Bonds LLC in 2018
ICE stated in May 2018 that it has reached a deal to buy TMC Bonds LLC for $685 million in cash. TMC Bonds, which was founded in 2000, is a fixed-income platform that allows for private trading in a variety of asset types. Such as Municipals, Corporates, Treasuries, Agencies, and Certificates of Deposit.
The deal is planned to conclude in the second half of 2018, pending regulatory and antitrust clearances. And is not likely to have a major effect on 2018 financial performance or capital returns.
Merscorp Holdings, Inc. in 2018
Merscorp Holding, Inc., the proprietor of Mortgage Electronic Registration Systems, Inc., stated in October 2018 that ICE had purchased the remaining shares of Merscorp Holding, Inc. (MERS). Merscorp is the owner and also manager of the MERS System. This is a nationwide electronic register that maintains modifications in servicing privileges and plus ownership stakes in mortgage loans originated in the United States. Since 2016, ICE has had a majority stock stake in MERS. ICE completed the ultimate purchase of the firm by efficiently moving the MERS System infrastructure to the ICE Mahwah data center earlier this month. The transaction’s value and details were not published. Hence they will have no influence on ICE’s profits or capital return plans.
Simplifile, LC, 2019
ICE stated in May 2019 that it has decided to purchase Simplifile, LC. Simplifile basically is a network that connects agents and governments that interact with residential mortgage information.
Simplifile, situated in Provo, Utah, and free of debt, will be acquired by ICE for $335 million. The deal should be completed in the third quarter of 2019.
Simplifile, which employs over 200 people, will remain located in Provo and continue to function under the Simplifile brand.
Ellie Mae, 2020
ICE stated in August 2020 that it has reached a formal deal to purchase Ellie Mae, a cloud-based platform provider for the mortgage financing market. Ellie Mae, a portfolio business of Thoma Bravo, a major private equity investment firm, was valued at around $11 billion in the deal. Following ICE’s acquisition of a major stake in MERS in 2016, the purchase of the remaining shares in 2018, and the acquisition of Simplifile in 2019, ICE and its increasing ICE Mortgage Technology division became a premier supplier of end-to-end digital workflow alternatives for the US residential mortgage industry. Following regulatory clearance, the acquisition was completed smoothly in September 2020.
Black Knight 2022
ICE stated in May 2022 that it has reached a formal deal to buy Black Knight, Inc., a software, data, and analytics business that services the housing finance industry. The cash and equity deal values Black Knight at $85 per share or $13.1 billion in market value. After regulatory clearances, Black Knight shareholder approval, and the fulfillment of normal closing conditions, the deal is scheduled to conclude in the first half of 2023.
Operations
So in a variety of markets, ICE offers exchange trading and clearing services. The following are its key goods:
Exchange-traded futures and options
Agriculture, Financials, Crude Oil and Refined, Electricity, Natural Gas/Liquids, UK Natural Gas, BtcNice digital options exchange, Other
Over-the-counter instruments (ICE OTC)
Crude Oil and Refined, Natural Gas, Electricity
The company is split into the following subsidiaries:
• Markets
ICE Futures U.S., ICE Futures Europe – one of the world’s largest energy futures and
options exchanges, ICE Futures Singapore, ICE Endex, ICE OTC Energy, ICE Swap Trade & Creditex, ICE Bonds
• Clearing
ICE Clear U.S., ICE Clear Europe, ICE NGX, ICE Clear Singapore, ICE Clear Netherlands, ICE Clear Credit
Data Services by ICE
The extended ICE Data Services, which included exchange data, valuations, insights, and other tools utilized by the New York Stock Exchange (NYSE), SuperDerivatives, and Interactive Data, was hence launched in June 2016. (IDC).
In 2003, ICE established its ICE Data subsidiary in response to the growing need for exchange data as markets grew more automated. However, ICE continuously invests in its data services to meet the changing demands of its customers. Demands are being driven by regulatory change, market segmentation, passive investment, and indexation. As well as the rising need for data capacity, confidentiality, and unbiased valuations. International economy institutions, investment firms, commercial hedging businesses, insurance companies, corporate issuers, and private investors are among their clients.