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Volatility in the Global Derivatives Market Is Positive for ICE

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Futures and options

Intercontinental Exchange (ICE) reported a 3% rise in its futures and options exchange revenue totaling $369 million in 1Q15. Global derivatives formed 54% of its total net revenue in the first quarter. The quarter witnessed a fall in volatility and volumes in the broader market. Volumes fell by 7%, while open interest rose 4% from the beginning of the year. The rise in the future and options exchange revenue was primarily due to record volume in Brent and other oil products. For the company, Brent revenue grew 51% YoY (year-over-year) to a record $74 million.

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The open interest for Brent was up by 15% from the end of 2014, while it was up 49% from March 2014. The commodity continues to expand its lead as the global benchmark for pricing crude and refined oil products. The growth in Brent’s volumes is mainly due to the ongoing shift of Brent and commodity indexes and longer-term secular trends.

Natural gas and the interest rate

Intercontinental Exchange’s natural gas revenue rose by 4% to $58 million—compared to 1Q14. This was mainly due to strong growth in its European gas market. It partially offset muted North American natural gas volatility. However, interest rate revenue fell by 30% to $56 million mainly due to continued low interest rate policies in Europe. The company’s revenue captured across all of the categories—energy and financials—improved YoY and provided a solid foundation for revenue growth across a diverse set of product offerings.

Intercontinental Exchange generated net income of $1 billion over the last 12 months compared to its peers:

  • NASDAQ OMX Group (NDAQ) – $0.41 billion
  • CME Group (CME) – $1.12 billion
  • CBOE Holdings (CBOE) – $0.19 billion

Together, these companies form 2.09% of the Financial Select Sector SPDR Fund (XLF).

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