IntercontinentalExchange Inc.ICE

Morningstar Rating

Stock Research and Analysis

by Michael Wong, CPA

IntercontinentalExchange was founded in 2000 by a group of global energy and financial service firms to create a more transparent venue for over-the-counter energy trading. Since then, the company has grown from its OTC roots into one of the leading global derivative exchanges. Read more

Bulls Say

ICE's product offering is increasingly diversified, so its aggregate revenue is less likely to be affected by any particular commodity going out of favor.

Having its own clearinghouse in Europe could increase ICE's competitive position via control of its margin requirements and allow the company to extract revenue from a larger portion of the value chain.

The company's recent exclusive license for Russell Index futures will increase its equity derivative exposure.

Potential regulatory changes, such as cap and trade or requiring OTC derivatives to be cleared or traded on exchanges, could increase ICE's product lines. Read more

Bears Say

Stabilization of commodity prices could significantly reduce trading volume.

Government inquiry into the relationship between exchanges and their clearinghouses could result in legislation that separates them, eroding one of the primary contributors to derivative exchange moats.

Operating leverage causes a greater decrease in net income for any decrease in revenue.

Potential speculative limits on commodity derivatives could decrease trading volume in ICE's main products. Read more

Strategy

ICE seeks to offer a leading global integrated electronic platform for side-by-side trading of energy, agricultural, and financial futures and OTC derivatives. The company seeks to diversify and strengthen its product offerings through acquisitions and internally developed capabilities, especially in the OTC market. Read more

Management

Jeffrey Sprecher is chairman and CEO. He has been CEO since the company was founded in 2000. Before that, Sprecher was the owner of Continental Power Exchange, the predecessor company of ICE, and was president of Western Power Group for 14 years. We believe the company's stewardship is good and give it a B. Read more

Profile

IntercontinentalExchange is one of the largest derivative exchange groups and over-the-counter markets in the world, with products in energy, soft commodities, and financial products. Read more

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