What To Watch For In ICE’s Q3 Earnings
We expect IntercontinentalExchange‘s (NYSE:ICE) performance in Q3 to remain subdued, similar to the previous two quarters, when it reports earnings on November 2. The declines in the exchange’s cash equity and equity options trading volumes continued in the second quarter. This was primarily because of a decline in subsidiary NYSE’s market share and an overall decline in U.S. equity trading volumes. NASDAQ’s strong position in equity options, following the acquisition of ISE, also acted as a hindrance to ICE’s expansion in the market. However, the exchange did see impressive growth in derivative trading volumes. In Q3, commodity volumes rose by 11% and financial derivatives grew by 22%. Among commodities, energy derivatives saw the most growth at 14% year on year. The market saw increased volatility in oil prices due OPEC’s decision to cap production, and consequently trading activity in this asset class gained momentum. Due to the rate hike in March and June, interest rate derivative volumes registered 36% growth in trading volumes. This growth is likely to offset some of the overall declines in trading commissions for the exchange.
The demand for data-driven insights and analytics-driven recommendations has increased substantially in the last few years. 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 to strengthen its data services segment is a sensible one to help offset the losses from declines in trading commissions.
Currently, we have a price estimate of $69 for Intercontinental Exchange, which is slightly ahead of the current market price.
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Please refer to the full Trefis analysis for Intercontinental Exchange.
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