What Is Intercontinental Exchange (ICE) and How Does It Work?

What Is the Intercontinental Exchange (ICE)?

The Intercontinental Exchange (ICE) is an American company known for operating global financial markets and exchanges. Founded in 2000, it focuses primarily on transforming energy commodity trading. Since its launch, ICE has expanded through acquisitions in sectors like commodities, securities, and data services. It formed ICE Clear Credit to mitigate systemic risk in the markets in response to the financial crisis. ICE is a major global player in the exchange market and is primarily known as the owner of the New York Stock Exchange (NYSE).

A Closer Look at the Intercontinental Exchange (ICE) Operations

In May 2000, Jeffrey C. Sprecher founded ICE to create a more transparent and efficient platform for OTC energy commodity trading. Compared with manual trading, the new platform provided greater price transparency, efficiency, liquidity, and had lower costs.

Initially, the company focused on energy products like crude and refined oil, natural gas, power, and emissions. Through various acquisitions, the company's activities broadened to include other commodities—such as sugar, cotton, and coffee—in addition to foreign cash exchanges and equity index futures.

ICE's Role in Financial Crisis Management and Innovation

After the 2007–08 Financial Crisis, Sprecher established ICE Clear Credit to act as a clearing house for credit default swaps and OTC derivatives, offering essential risk management services. In March 2009, ICE Clear Credit was created and approved by the Federal Reserve as a bank and two years later, was designated as a clearing house and regulated by the CFTC and SEC. ICE was the first to offer clearing services in the OTC energy and credit derivatives markets. By Q1 2022, ICE cleared over $16.4 trillion in credit default swaps, a 9.7% year-over-year increase.

Expansion Through Strategic Acquisitions

Since 2000, ICE has mainly grown by acquiring other exchanges. Its first acquisition was the International Petroleum Exchange (IPE), now ICE Futures Europe, in 2001. In the following decade, the company expanded by acquiring the New York Board of Trade (NYBOT) in 2005, Winnipeg Commodity Exchange, which is now ICE Futures Canada in 2007, Creditex Group in 2008, and Climate Exchange in 2010. Several more acquisitions occurred the next ten years: NYSE Euronext in 2013, Interactive Data Corporation (IDC) in 2015, Standard & Poor's Securities Evaluations, Inc.in 2016, Virtu BondPoint in 2017, Chicago Stock Exchange (CHX) in 2018, and Simplifile, LC in 2019. ICE's most recent expansion has continued with the acquisitions of Ellie Mae in 2020 and Black Knight in 2022.

Leveraging Data Services for Market Leadership

In June 2016, ICE launched a new suite of data services and software, called ICE Data Services. The proprietary real-time data, valuations, analytics, reference data, evaluated pricing, and connectivity solutions employed by ICE Data Services are used by NYSE, SuperDerivatives, Interactive Data (IDC), and other ICE customers, including financial institutions, asset managers, and individual investors. ICE Data Services also provides its customers with unique data from global exchanges and fixed income markets.

According the 2021 FIA report, ICE is the fourth-largest exchange group in the world, behind CME Group, Brazil's B3, and the National Stock Exchange of India, ranked at the top spot. As of July 2022, the company has a market capitalization of $53.88 billion.