IntercontinentalExchange: Growth Momentum In Volumes Continues In January

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Intercontinental Exchange

IntercontinentalExchange Group (NYSE:ICE) recently released its volume figures for the month of January. Continuing its momentum from last year, ICE reported a 15% year-on-year (y-o-y) increase in total futures and options volumes to 5.3 million contracts in January. Interest rate contracts, along with sugar contracts, saw the greatest gain in volumes at 30% and 40% y-o-y, respectively. [1] Below we discuss these results in more detail.

We have a $235 price estimate for ICE, which is in line with the current market price.

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Sustained Growth In Financial Derivatives

Average daily volumes (ADVs) of short term interest rate contracts rose 30% y-o-y to 1.8 million contracts in January. This was in line with the trend seen in November and December 2015, when volumes rose 87% and 56%, respectively. [2] This growth spree in interest rate contracts can be attributed to the uncertainty around central banks’ interest rate policies in the U.S. and Europe. Similarly, equity index volumes increased 30% y-o-y to 481,000 contracts per day. In contrast, foreign exchange (FX) and credit derivatives failed to recover in January, experiencing a 23% annual decline. Overall, total financial derivative volumes were up 26%y-o-y to 2.5 million contracts per day in January.

New York Stock Exchange (NYSE), a subsidiary of ICE, saw higher volumes for both cash equities and equity options. The significant gains in NYSE’s market share of equity options (+80 basis points to 20.3%) resulted in a corresponding gain in volumes of 19% y-o-y to 3.5 million contracts per day. Similarly, cash equities witnessed a 28% hike in volumes to 2.3 billion shares traded per day, primarily due to the turmoil in the financial markets since the beginning of 2016. We expect financial derivatives to see high volumes in the coming  months on the back of uncertain global economic conditions.

Agricultural Derivatives Lead The Growth In Commodity Derivatives  

Energy products continued their uptrend in January, making steady gains in volumes owing to heightened volatility in oil prices. Average daily volumes for all energy products combined rose 5% y-o-y to 3.1 million contracts per day in January. Within energy, gasoil derivatives saw the biggest gain at 15% y-o-y to 308,000 contracts. [1] However, this growth in gasoil derivatives was much smaller compared to 44% in December. On the other hand, natural gas and power derivatives fell 17% y-o-y and 5% y-o-y to 1 million and 114,000 contracts per day, respectively.

Agricultural commodities and metals traded on ICE’s platform surged 40% y-o-y to 465,000 contracts per day. Sugar derivatives continued to see growth and rose 42% y-o-y in January. Moreover, ICE Futures U.S. achieved a daily volume record in cocoa derivatives and ICE Futures Canada in canola derivatives. [3] Supported by advancement in agricultural products, total commodity volumes increased 8.7% y-o-y to 3.6 million contracts per day in January.

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Notes:
  1. Intercontinental Exchange Reports ICE and NYSE Volume for January 2016, ICE Press Release, February 2015 [] []
  2. Intercontinental Exchange Reports ICE and NYSE Volume for December 2015, ICE Press Release, January 2016 []
  3. ICE Futures U.S. achieves daily volume record for cocoa options and futures, ICE Press Release, January 2016 []