What happened with ICE today?
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Uses news and trading volume to explain the day’s move and how it relates to the market.
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Intercontinental Exchange (ICE) runs exchanges where investors and businesses trade securities and manage price risk, including through Brent crude oil futures and NYSE stock markets. Its exchange business supplies most of its revenue. Participants pay to trade and clear contracts; in clearing, ICE stands between the two sides as buyer to every seller and seller to every buyer. Companies and ETFs also pay to list on the NYSE, while market participants subscribe to exchange data and connectivity.
ICE also sells financial institutions bond pricing, reference data and analytics used to make investment decisions and meet compliance needs. These services, along with data delivery and connectivity through ICE Global Network, earn largely recurring subscription revenue rather than fees tied to individual trades.
A separate business supplies software to U.S. residential mortgage lenders and servicers. Encompass helps lenders gather and verify loan information, while MSP supports loan administration through repayment or default. Customers pay subscriptions, with additional fees tied to loans processed; ICE also earns transaction fees from its mortgage network and digital closing services. This makes part of the business dependent on mortgage origination and closing volumes, while servicing software earns largely recurring revenue.
ICE depends on continued trading and clearing activity and customers renewing data and software subscriptions, rather than on one dominant customer. Regulation also shapes what it can charge and where customers can clear: U.S. equity and options market-data and certain connectivity fees face SEC review, and EU rules require some euro-denominated interest-rate derivatives activity to be cleared at an EU clearing house.
The risk section is the longest, dullest part of the filing. This keeps only what can really hurt you: where it hits, how hard, when it plays out.
Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
ICE’s results depend on trading and hedging activity, mortgage workflows and recurring demand for financial data, where Bloomberg and LSEG are additional competitors to watch.
CME competes with ICE for customers trading energy, agricultural and financial derivatives, handling settlement of those trades and buying related market data. Watch CME’s energy futures and options activity for a read on the trading and risk-management business ICE also serves.
Nasdaq challenges ICE’s NYSE for U.S. corporate and ETF listings, stock and options trades, and market-data subscriptions bought by investment firms and investors. Its listing business and data sales are worth watching alongside trading, since ICE also earns revenue beyond transaction fees.
Cboe competes with ICE’s NYSE venues for stock and options trades, ETF listings and revenue from selling exchange data to market participants. Watch its equities and options activity and U.S. consolidated market-data fees for clues about the businesses where the two overlap.
S&P Global competes with ICE for institutional investment customers buying financial data, benchmarks and analytics. Watch its data and analytics business rather than treating all its results as a guide to ICE’s largely recurring bond-pricing and reference-data revenue.
Tradeweb competes with ICE’s bond platforms to help institutional investors and dealers execute fixed-income trades electronically. Watch its rates and credit trading activity, rather than total platform activity, for the closest view of the business competing with ICE’s bond execution services.
MarketAxess competes with ICE’s BondPoint, TMC Bonds and Creditex to execute electronic credit trades for institutional investors and broker-dealers, and also sells competing fixed-income data. Watch its transaction commissions and data-product revenue separately: they show the two distinct businesses challenging ICE.
MSCI competes with ICE for institutional investors buying investment indexes, portfolio analytics and risk data. Its Index and Analytics businesses are the ones to watch for demand for tools investors use to build portfolios and measure risk, rather than taking all MSCI revenue as a guide to ICE’s data business.
MSCI, Inc. earningsMSCI
MSCI’s Index and Analytics businesses will show whether institutional investors are still buying portfolio and risk tools that compete with ICE’s offerings.
Focus on revenue and growth in MSCI’s Index and Analytics businesses, not its company-wide results. Growth in both would show institutional customers still buying tools to build portfolios and measure risk, supporting demand for services ICE also offers. If both slow, demand for those tools looks weaker; that alone does not settle how ICE’s bond-pricing data business is doing.
CME Group Inc. earningsCME
CME Group’s energy futures and options activity will show whether customers are still trading and hedging in markets that compete with ICE’s energy contracts.
Watch CME Group’s energy futures and options activity. Rising activity means customers are trading and hedging energy risk more actively, pointing to stronger demand in the trading and clearing business ICE shares; falling activity points to less customer use of that shared business.
EIA Crude Oil Stocks Change (Oct/16)
The EIA’s weekly figures track U.S. crude oil and fuel stocks, which can shift trading in ICE’s crude and refined-oil contracts and the transaction and clearing fees ICE earns on them.
Stocks rising more than expected signal looser supply and may weigh on oil and fuel prices; stocks falling more than expected signal tighter supply and may lift them. Either shift can change trading in ICE’s crude and refined-oil contracts and the fees ICE earns.
Nasdaq, Inc. earningsNDAQ
Nasdaq’s listing and data businesses will show whether issuers and market participants still buy services that compete with ICE’s NYSE listings and data sales.
Read Nasdaq’s listing business and data sales separately. Growth in both means issuers continue choosing its venue and customers keep buying exchange data, showing that ICE’s NYSE listings and data businesses face active competition. Weakness in listings or data would suggest less pressure in that respective business, but would not show how trading volumes are changing.
S&P Global Inc. earningsSPGI
S&P Global’s data and analytics business will show whether institutions keep buying financial information and analysis that compete with ICE’s fixed-income data.
Focus on S&P Global’s data and analytics business; its total revenue is not a proxy for ICE’s bond-pricing and reference-data revenue. Growth there would show institutions still paying for financial information and analysis, indicating firm demand in a market where ICE competes. A slowdown would point to weaker customer spending, but cannot by itself establish ICE’s own results.
Fed Interest Rate Decision
The Fed’s policy rate shapes U.S. borrowing costs, which can change mortgage demand for ICE Mortgage Technology’s origination and data services and the interest ICE earns on certain clearing-margin deposits.
Expected4.0%Last release4.0%
If it comes in above expectations
If the policy rate is above the estimate, higher borrowing costs may further dampen mortgage lending and reduce ICE Mortgage Technology’s transaction-based origination revenue and related data demand; ICE may also earn more interest on certain clearing-margin deposits.
If it comes in below expectations
If the policy rate is below the estimate, cheaper borrowing may support mortgage lending and increase ICE Mortgage Technology’s transaction-based origination revenue and related data demand; ICE may also earn less interest on certain clearing-margin deposits.
Intercontinental Exchange Inc. earningsThis company
ICE’s report will show whether revenue from trading and mortgages is growing alongside recurring income from data, listings and software subscriptions.
Compare transaction-based revenue in Exchanges and Mortgage Technology with recurring revenue, including fixed-income data and mortgage software subscriptions. Growth in both shows demand across ICE’s businesses. If transaction revenue weakens while recurring revenue grows, subscriptions are cushioning slower trading or mortgage activity. If both weaken, pressure extends beyond transaction volumes.
Tradeweb Markets Inc. earningsTW
Tradeweb’s rates and credit trading activity will show whether investors and dealers are using electronic bond markets more or less, where its platforms compete with ICE’s.
Watch Tradeweb’s rates and credit trading activity, rather than total platform activity alone. Rising activity means investors and dealers are executing more bond trades electronically, pointing to stronger demand in the service that competes with ICE’s electronic bond execution. Falling activity points to less use of that shared service.
