Bloomberg News

Intercontinental Exchange Profit Rises on Energy Trading

August 01, 2012

Intercontinental Exchange Inc. (ICE:US), the second-largest U.S. futures market, reported second-quarter profit rose 18 percent as trading records in crude oil and heating oil boosted revenue.

Net income climbed to $143.2 million, or $1.95 a share, from $121.4 million, or $1.64, a year earlier, the Atlanta-based company said in a statement. That exceeded analyst estimates of $1.93 per share, according to a survey (ICE:US) conducted by Bloomberg.

Trading at the company’s ICE Futures Europe exchange set a second-quarter record and helped volume jump 11 percent across all three of its exchanges for the three months ended in June. Monthly volume records were set during the quarter in its Brent oil contract, the grade of crude that sets prices outside the U.S., and in heating oil, according to the company.

The futures industry has suffered two high-profile breaches of investor confidence within the last year, as the bankruptcies of MF Global Holdings Ltd. and Peregrine Financial Group Inc. led to the loss of about $1.8 billion in customer money held at the firms.

Jeff Sprecher, Intercontinental’s chief executive officer, said the lost customer trust could help his company as investors shift to clearinghouses and exchanges to manage risks rather than futures brokerages.

‘Best Interest’

“We’ll be able to provide more services and charge for them,” he said on a conference call with analysts. “This trend is in our company’s best interest.”

Intercontinental competitor CME Group Inc. last month proposed a plan to house all excess customer funds at clearinghouses or other depositories. Terrence Duffy, CME Group’s executive chairman, testified to Congress that the plan “will be controversial and perhaps have disruptive consequences.”

Sprecher said today that it’s ultimately up to investors to choose safe places to keep their money.

“There will be protections in the marketplace, but there won’t be an implicit guarantee,” he said.

Daily commissions for energy over-the-counter transactions rose 3 percent to $1.58 million in the quarter, compared with the year-earlier period, the company said last month. Trading at the company’s U.S. exchange rose 6 percent while at its Canadian exchange 10.5 percent more contracts changed hands than in the similar period a year ago, the company said July 3.

Cash Level

Revenue rose to $351 million in the quarter from $325 million.

The company reported $1.1 billion in cash and cash equivalents (ICE:US) as of June 30. That’s up from $968.4 million at the end of the first quarter, according to data compiled by Bloomberg. Scott Hill, chief financial officer, declined to specify any plans on how the company will use that cash when asked on the conference call.

“We constantly look at the best way to deploy our capital,” he said. The company could issue a dividend, though simply because it can do that doesn’t mean it will, he said.

“It’s a lot of cash,” Rich Repetto, an analyst at Sandler O’Neill & Partners LP, said on the conference call.

Intercontinental fell (ICE:US) 2.5 percent to $128.77 as of 10:34 a.m. in New York. Through yesterday, the shares have advanced (ICE:US) 6.4 percent in the past year.

CME Group (CME:US), the world’s largest futures market, said last week that its second-quarter profit fell 17 percent as interest rates near zero reduced trading in the company’s biggest contract. Excluding some expenses, CME Group earned 89 cents per share, exceeding the average estimate of 83 cents in a Bloomberg survey of analysts. Daily futures and options volume in the quarter dropped 9 percent to average 12.4 million contracts, the company said last month.

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • ICE
    (Intercontinental Exchange Inc)
    • $206.59 USD
    • 3.45
    • 1.67%
  • CME
    (CME Group Inc/IL)
    • $82.31 USD
    • 1.11
    • 1.35%
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