Author Paul Holmes
It’s been a busy week or so for Intercontinental Exchange, a leading operator of global regulated futures exchanges, clearing houses and over-the-counter (OTC) markets. Last week they announced an affirmative date for all options on futures listed on ICE Futures U.S. trading exclusively on the ICE electronic trading system – the process will begin on trade date October 22, 2012. While the contracts will no longer trade through open outcry, ICE Futures U.S. will continue to support access to the electronic platform for Exchange-member brokers and proprietary traders from the floor facility.
As ICE witnessed options functionality on the ICE platform increase, the share of electronically-executed options at ICE Futures U.S. accelerated. In April 2011, electronic execution accounted for approximately 10% of options volume, compared to more than 75% currently.
ICE Futures U.S. introduced electronic trading of options on March 28, 2008, and has continued to implement additional options-trading capabilities. Today, ICE’s electronic trading platform supports the full range of options strategies, including combination trades, hedged option transactions, user-defined-spreads (UDS) and request for quotes (RFQ).
Ben Jackson, President of ICE Futures U.S:
“The rapid adoption of electronic trading by options market participants is strong validation of the capabilities ICE has built into its electronic trading platform. Market participants have migrated to electronic trading for options as a result of the functionality, transparency and efficiency of the platform. At the same time, we are pleased to continue to offer the floor facility as a venue for access to these markets to support customer business. We appreciate the input of our market participants and regulators in this process.”
Second quarter and half year results
As previously highlighted ICE is a leading operator of regulated global exchanges, clearing houses and over-the-counter (OTC) markets, for agricultural, credit, currency, emissions, energy and equity index contract, they have just reported their financial results for the second quarter of 2012. Consolidated revenues increased 8% compared to the second quarter of 2011 to $351 million. Consolidated net income attributable to ICE was $143 million, up 18% versus the second quarter of 2011. Diluted earnings per share (EPS) increased 19% from the prior second quarter to $1.95.
ICE Futures Europe hosts trade in half of the world’s crude and refined oil futures. ICE Futures U.S. and ICE Futures Canada list agricultural, currencies and Russell Index markets. ICE is also a leading operator of central clearing services for the futures and over-the-counter markets, with five regulated clearing houses across North America and Europe. ICE serves customers in more than 70 countries.
ICE Chairman and CEO Jeffrey C. Sprecher:
“By continuing to execute across our business amid challenging economic conditions, ICE once again delivered double digit earnings growth for the quarter. We continue to lead in providing solutions for clients to comply with new requirements under financial reform and believe that proactively serving the needs of our customers will continue to distinguish our performance.”
ICE SVP and CFO Scott Hill added:
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“Our company’s focus on both growth and efficiency drives our industry-leading results, even as we invest prudently for the future. We continue to work closely with customers and regulators to ensure the integrity of our markets while expanding on key strategic initiatives in clearing, execution and other opportunities to serve markets globally.”
Second Quarter 2012 Results
Second quarter 2012 consolidated revenues were $351 million, up 8% from the prior second quarter. Consolidated transaction and clearing revenues increased 6% to $307 million. The increase in transaction and clearing revenues was driven primarily by strong trading volumes in ICE’s energy futures markets.
Second quarter transaction and clearing revenues in ICE’s futures segment grew 14% to $169 million. Average daily volume (ADV) in ICE’s futures segment was a record 1.6 million contracts, up 11% from the prior-year second quarter.
Transaction and clearing revenues in ICE’s global OTC segment was $137 million, down 2% compared to the prior second quarter. Average daily commissions (ADC) for ICE’s OTC energy business increased 3% to $1.6 million. Revenues from ICE’s credit default swap (CDS) trade execution and clearing business totalled $36 million in the second quarter of 2012, including $15 million from CDS clearing.
Consolidated market data revenues in the second quarter increased 21% over the prior second quarter to a record $37 million. Consolidated other revenues were $7 million.
Consolidated operating expenses were $136 million in the second quarter of 2012, up 1% compared to the year-ago quarter. Consolidated operating income grew 13% to $215 million in the quarter. Operating margin improved to 61% in the second quarter of 2012, up 2 points from the prior second quarter.
The effective tax rate for the second quarter of 2012 was 30% compared to 32% in the previous second quarter.
First Half 2012 Results
Consolidated revenues in the first half of 2012 grew 9% to $716 million. Futures volumes in the first six months of the year increased 4% to 199 million contracts, driving futures transaction and clearing revenue of $329 million, up 7% from the first half of 2011. ADV in the first half of the year was 1.6 million contracts, up 4% from the first six months of 2011.
Global OTC segment transaction and clearing revenues were $300 million in the first half of the year, up 7% from the first half of 2011. ADC in ICE’s OTC energy markets were $1.8 million in the first half of 2012, up 12% from the same period of 2011. Consolidated market data revenues increased 22% to $74 million and consolidated operating margin was 62% for the first half of 2012.
Cash flows from operations were $366 million in the first half of 2012, up 14% year-over-year. Capital expenditures during the first half of 2012 were $16 million and capitalised software development costs totalled $17 million.
Unrestricted cash was $1.1 billion as of June 30, 2012. At the end of the second quarter, ICE had $863 million in outstanding debt.