What To Watch For In ICE’s Q1 Earnings

IntercontinentalExchange‘s (NYSE:ICE) performance in 2016 was strong, but we expect the exchange’s momentum to slow a bit when it reports its first quarter earnings on May 3rd. The exchange’s cash equity and equity options trading volumes  fell significantly in Q1 2017 compared to the same quarter last year. This was primarily because of a tough year-on-year comparison due to the volatility seen in the global economy at the beginning of 2016 resulting from uncertainty around oil prices, a slowdown in China and slow GDP growth in the U.S. at the time. Energy derivatives saw just 1% growth. With not much volatility in oil prices and OPEC’s stance on capping production, trading activity in this asset class has been fairly muted. Interest rate derivatives had the highest trading volumes, and grew by 21% during the quarter, driven by the Fed’s interest rate hikes in December 2016 and March 2017. However, this growth is likely to offset only a part of the overall decline in trading commissions for the exchange.  

The demand for data-driven insights and analytics-driven recommendations has increased substantially in the last couple of years. We believe the company’s acquisitions of SuperDerivatives , IDC and Trayport have helped it expand its market reach, add technology platforms and increase risk management, new data and valuation services. As the competition for trading has intensified, the exchange’s move in strengthening its data services segment seems like a good move to offset the losses from decline in trading commissions .

Please refer to the full Trefis analysis for Intercontinental Exchange.

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