IntercontinentalExchange Sees High Trade Volumes in December

January 7th, 2016 by Trefis Team
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Intercontinental Exchange

IntercontinentalExchange Group (NYSE:ICE) recently reported its volume figures for the fourth quarter of 2015 as well as the month of December. In October, the exchange operator experienced a slight decline (2% year on year) in daily volumes, while November saw ICE making steady gains for all asset classes combined, with an increase of 13% year on year (y-o-y) in daily volumes. [1] This rise continued in December with a 17% increase in average daily volumes on a year-on-year basis. Below we discuss these results in more detail.

We have a $235 price estimate for ICE, which is about 10% lower than the market price. ICE’s stock price has fluctuated between $205 and $265 this year.

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Financial Derivative Volumes Experience A Surge

Continuing the impressive streak of 55% annual growth from November, financial derivatives trading increased by 30% y-o-y in December 2015 to 2.1 million contracts per day. This substantial growth was supported by high volatility experienced in the European short-term interest rate markets, causing average daily volumes (ADVs) for short-term interest rate contracts to rise by 56% y-o-y. [2] However, trade volumes for foreign exchange derivatives and credit derivatives failed to recover in December and experienced an 11% decline to 47,000 contracts per day.

On the other hand, New York Stock Exchange (NYSE), a subsidiary of ICE, saw mixed results in terms of volumes, despite successfully maintaining its lead in capital raising from IPOs. [3] The daily volume of equity options traded on NYSE declined by 15% y-o-y to 2.7 million contracts in December and 17% y-o-y in Q4’15. Correspondingly, NYSE’s market share declined by 260 basis points in December, and 180 basis points in the fourth quarter. Cash products traded on NYSE also stagnated in December, growing marginally by 2% y-o-y to 1.78 million. NYSE’s market share in the cash equity segment remained about constant at 24.3% in the fourth quarter due to intense competition from NASDAQ OMX, BATS Global and CME Group.

Volatility In Oil Helps Commodity Derivative Volumes Grow

After a 5% y-o-y increase in October 2015, commodity derivative trade volumes declined by 7% y-o-y in November to 2.8 million contracts per day. However, owing to developments in Iran, the lifting of the oil export ban in the U.S. and OPEC’s decision to maintain high production levels for oil, volatility in oil prices heightened in December. This resulted in a 44% annual rise in daily volumes for gasoil contracts. Moreover, the newly launched ICE Futures Singapore set a daily volume record in mini brent crude futures of 14,188 contracts, which further helped oil product derivatives grow by 13% in December 2015. ((ICE Futures Singapore sets daily volume record in mini brent crude, ICE Press Release, December 2015))

Agricultural commodities and metals also experienced an increase of 19% y-o-y to 249,000 contracts per day in December. Sugar derivatives saw 25% y-o-y growth in ADVs in December and 52% in the fourth quarter. The company plans to introduce containerized white sugar future contracts from Q1’16, subject to approvals, to further aid growth in this segment. [4] In the fourth quarter, daily trade volumes for agricultural and metal derivative contracts increased by 30% to 329,000 contracts per day compared to the prior year period. [2] Overall, December was a good month for commodity derivatives as total commodity ADVs rose by 8% on a year-on-year basis, with almost all products registering positive growth.

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Notes:
  1. Intercontinental Exchange Reports ICE and NYSE Volume for November 2015, ICE Press Release, December 2015 [↩]
  2. Intercontinental Exchange Reports ICE and NYSE Volume for December 2015, ICE Press Release, January 2016 [↩] [↩]
  3. NYSE leads in global capital raising for the 5th consecutive year, ICE Press Release, December 2015 [↩]
  4. ICE Futures Europe to Introduce a Containerised White Sugar Futures Contract in 2016, ICE Press Release, November 2015 [↩]