We are a leading global operator of regulated futures exchange and over-the-counter, or OTC, markets and derivatives clearing houses. We operate electronic futures and OTC marketplaces for trading a broad array of energy and agricultural commodities, credit default swaps, or CDS, currencies and equity index products. We offer an integrated electronic trading platform for side-by-side trading of products in both futures and OTC markets, together with clearing, post-trade and market data services. Through our widely-distributed electronic marketplace, we bring together buyers and sellers of derivative and physical commodities and financial contracts and offer a range of services to support our participants’ risk management needs.
We conduct our regulated energy futures markets through our wholly-owned subsidiary, ICE Futures Europe, which is based in the United Kingdom, or U.K. ICE Futures Europe is the largest energy futures exchange outside of the United States, or U.S., as measured by 2009 traded contract volume according to the Futures Industry Association. We conduct our regulated U.S. futures markets through our wholly-owned subsidiary, ICE Futures U.S. We conduct our regulated Canadian futures markets through our wholly-owned subsidiary, ICE Futures Canada. ICE Futures Europe clears its business through ICE Clear Europe, ICE Futures U.S. clears its business through ICE Clear U.S. and ICE Futures Canada clears its business through ICE Clear Canada. We completed our acquisition of ICE Futures U.S. in January 2007 and our acquisition of ICE Futures Canada in August 2007. The launch of ICE Clear Europe occurred in November 2008, completing our strategic plan to offer clearing services through wholly-owned clearing businesses in North America and Europe.
We conduct our OTC business directly through IntercontinentalExchange pursuant to the Commodity Exchange Act as an Exempt Commercial Market and through Creditex Group Inc., or Creditex, an interdealer broker for CDS. We completed our acquisition of Creditex in August 2008. Creditex is a market leader and innovator in the execution and processing of CDS with markets spanning the United States, Europe and Asia. In March 2009, we completed our acquisition of The Clearing Corporation, or TCC, as part of our strategy to offer clearing in the CDS market and launched ICE Trust U.S. LLC, or ICE Trust. ICE Trust began clearing North American CDS in March 2009, while ICE Clear Europe began clearing European CDS in July 2009.
We operate diverse global markets that promote price transparency and offer participants the opportunity to hedge and trade a variety of energy and agricultural commodities, CDS and financial derivatives. Our core products include contracts based on crude and refined oil products, natural gas, power, coal, emissions, sugar, cotton, coffee, cocoa, canola, orange juice, CDS, foreign exchange and equity index products. Our derivative and physical marketplaces provide participants with a means for managing risks associated with price volatility and asset allocation, and also provides for physical procurement of select commodity products. The majority of our contract volume is financially or cash settled, meaning that settlement is made through cash payments based upon the difference between the contract price and the value of the underlying commodity at contract expiry rather than through physical delivery of the commodity itself.
All futures and options contracts and many of our OTC swap contracts are cleared through one of our central counterparty clearing houses. We also offer execution services for OTC swap contracts that can be traded on a bilateral basis, meaning that customers enter into the swap contract directly with counterparties under International Swaps and Derivatives Association agreements. Our customer base includes corporations, manufacturers, utilities, commodity producers and refiners, professional traders, financial institutions, institutional and individual investors and governmental bodies. Except for a small amount of matched principal transactions by Creditex, we do not take any trading positions in any contracts in our markets.
We operate our U.S., U.K. and Canadian exchanges, as well as our OTC markets, primarily on our electronic platform, except for the CDS business, in which trading is conducted both electronically on Creditex’s proprietary “RealTime” trading platform, and through voice brokerage operations for CDS and natural gas options. ICE Futures U.S. continues to offer options on futures contracts through its open-outcry trading floor based in New York City, complementing our electronic futures and options offerings. In addition to trade execution, our electronic platform offers a comprehensive suite of trading-related services, including pre- and post-trade risk management tools, electronic trade confirmation and clearing services. Through our electronic platform, we facilitate straight-through processing of trades, with the goal of providing seamless integration of front-, back- and mid-office trading and risk management capabilities for our customer base.
We operate and manage our business on the basis of three segments: our futures segment, our global OTC segment and our market data segment.
In May 2000, IntercontinentalExchange was established, with our founding shareholders representing some of the world’s largest energy companies and global financial institutions. Our mission was to transform the OTC energy markets by providing an open, accessible, around-the-clock electronic energy marketplace to a previously fragmented and opaque market. We offered the energy community improved price transparency, efficiency, liquidity and lower costs than through traditional methods of trading, such as voice brokered or open outcry markets. Working together with participants in the energy markets, we developed the leading electronic marketplace for energy commodities, along with the leading electronic trade confirmation platform.
In June 2001, we expanded our business into the futures markets by acquiring the IPE, which was formed in 1980 and is now known as ICE Futures Europe. Europe’s leading regulated energy futures exchange, ICE Futures Europe’s markets today account for approximately 50% of the world’s crude and refined oil futures traded each day.
ICE Data was launched in 2002 to meet the demand for increased market data in the OTC energy markets, and is today one of the leading providers of futures and OTC data globally. In 2003, we partnered with the Chicago Climate Exchange, or CCX, to host its OTC emissions markets in the U.S., and in 2004, we partnered with the European Climate Exchange, or ECX, which is a sister company to CCX, to host European emissions futures trading and today we offer the leading European emissions futures contracts with ECX.
In November 2005, we completed our initial public offering on the New York Stock Exchange under the ticker symbol “ICE” and have since become a member of the Russell 1000 and the S&P 500 indexes. In January 2007, we acquired NYBOT, now known as ICE Futures U.S., which was originally formed in 1870. Today, ICE Futures U.S.’s futures contracts for agricultural commodities such as sugar and coffee are listed on our electronic trading platform. In June 2007, we entered into an exclusive licensing agreement with the Russell Investment Group, or Russell, to list the U.S. Russell Index futures complex. Also in 2007, we acquired the exclusive right to key OTC natural gas indexes, including widely-used OTC natural gas price indexes, called NGI indexes, and Natural Gas Exchange, Inc., or NGX, indexes.
In July 2007, we acquired and integrated ChemConnect’s OTC natural gas liquids and chemicals markets. In August 2007, we acquired the Winnipeg Commodity Exchange, now known as ICE Futures Canada, which was formed in 1887 and today is the leading canola market in the world. In October 2007, we acquired Chatham Energy, or Chatham, an OTC energy options broker, and in February 2008, we acquired YellowJacket Software, Inc., or YellowJacket, a peer-to-peer negotiation tool for the OTC options markets.
In August 2008, we completed our acquisition of Creditex, an interdealer broker and electronic market for the execution and processing of credit derivatives. In March 2009, we acquired TCC, a Commodity Futures Trading Commission, or CFTC, regulated clearing house, as part of our initiative to form ICE Trust. TCC primarily clears U.S. futures and OTC emissions contracts listed by CCX, and its CDS risk model is used by ICE Trust for CDS clearing. ICE Trust was established in March 2009 as a standalone clearing house for clearing credit derivatives. ICE Trust is currently subject to direct regulation and supervision by the Federal Reserve and the New York State Banking Department. Subject to compliance with certain conditions, ICE Trust operates under an exemption from the Securities and Exchange Commission, or SEC, and the U.S. Department of Treasury. ICE Clear Europe expanded its business to clearing European CDS in July 2009. Today, we employ over 830 professionals across the United States, Europe, Canada and Asia.
In our futures business, we operate three regulated futures exchanges in the United States, the United Kingdom and Canada. ICE Futures Europe operates as a Recognized Investment Exchange in the United Kingdom, where it is regulated by the U.K. Financial Services Authority, or FSA. ICE Futures Europe was founded in 1980 as a traditional open-outcry auction market, and today operates exclusively as an electronic exchange. Trades in our energy futures markets may only be executed in the name of exchange members for the members’ own account or their customers’ account. Our members and their customers include many of the world’s largest energy companies and leading financial institutions.
ICE Futures U.S. is a leading global futures and options exchange for trading in a broad array of agricultural commodities, including sugar, coffee, cotton, cocoa and frozen concentrated orange juice, or FCOJ. ICE Futures U.S. also lists futures and options contracts for a variety of financial products, including futures and options contracts based on the Russell Indexes and the U.S. Dollar Index, or USDX. ICE Futures U.S. operates as a Designated Contract Market and is regulated by the CFTC. Until February 2, 2007, ICE Futures U.S. operated as an open-outcry exchange and provided only floor-based markets. On that date, ICE Futures U.S. listed its core agricultural commodity markets on our electronic platform, and has subsequently introduced the Russell Indexes, currency pairs and USDX futures and options contracts electronically. Options markets continue to be available for trading on the floor of the exchange.
ICE Futures Canada is Canada’s leading commodity futures and options exchange and North America’s first fully electronic commodity futures exchange. Based in Winnipeg, Manitoba, ICE Futures Canada offers futures and options contracts on canola and western barley. For over a century ICE Futures Canada and its predecessor companies have operated futures markets that bring together agricultural industry participants, traders, and investors to engage in price discovery, price risk transfer and price dissemination for the markets. ICE Futures Canada is a recognized commodity futures exchange under the provisions of The Commodity Futures Act (Manitoba), or the CFA, and is regulated by the Manitoba Securities Commission, or MSC.
ICE Clear Europe clears and settles contracts for ICE Futures Europe and is regulated by the FSA as a Recognized Clearing House. In January 2010, the CFTC granted ICE Clear Europe registration as a U.S. Derivatives Clearing Organization. ICE Futures U.S. owns its clearing house, ICE Clear U.S., which clears and settles contracts traded on, or subject to the rules of, ICE Futures U.S. ICE Clear U.S. is a Derivatives Clearing Organization and is regulated by the CFTC. ICE Futures Canada owns its clearing house, ICE Clear Canada, which clears and settles contracts traded on, or subject to the rules of, ICE Futures Canada. ICE Clear Canada is a recognized clearing house under the provisions of the CFA and is regulated by the MSC.
In our OTC business, we operate global over-the-counter markets through our electronic platform and through brokered markets for energy and CDS. We offer trading in thousands of contracts, primarily covering a broad range of energy-related products and contract types. These contracts include derivative contracts as well as contracts that provide for physical delivery of the underlying commodity, principally relating to natural gas, power, natural gas liquids, chemicals and crude and refined oil products. We offer a wide range of derivative contracts in our OTC markets due to the availability of various combinations of commodities, product types, delivery “hub” locations and terms or settlement dates for a given contract. In 2007 and 2008, we acquired Creditex, YellowJacket, ChemConnect and Chatham, and as a result, have expanded our markets to include CDS, natural gas liquids, chemicals and natural gas options contracts. Our OTC market participants include many of the world’s largest energy companies, leading financial institutions and proprietary trading firms, as well as natural gas distribution companies and utilities. Participants in our OTC energy markets must qualify as eligible contract participants or eligible commercial entities under the Commodity Exchange Act. In our credit derivatives business, we offer both electronic and voice brokered markets for CDS through our leading credit platform and through brokerage offices in New York, London and Singapore. Through our clearing houses, we offer clearing services for OTC swaps in energy, certain agricultural commodities and CDS.
Our Growth Strategy
The record consolidated revenues and trading volume we achieved in 2009 reflect our focus on the implementation and execution of our long-term growth strategy. We have expanded our core business organically, developed innovative new products for global markets, and provided trading-related services to a broader and more diverse participant base. In addition, we have completed a number of strategic acquisitions and alliances to leverage our core strengths and grow our business. We seek to advance our leadership position in the commodity derivatives markets by focusing our efforts on the following key strategies for growth:
• attract new market participants;
• offer additional markets and services across futures and OTC markets;
• leverage our extensive clearing and risk management capabilities;
• continue to enhance our technology infrastructure and increase connectivity; and
• pursue select strategic opportunities.
As of December 31, 2009, we had a total of 826 employees, with 253 employees at our headquarters in Atlanta, 316 in New York, 155 in London and a total of 102 employees across our Winnipeg, Houston, Chicago, Singapore and Calgary offices.