Jeff Sprecher, chief executive of the US exchanges operator, acknowledged the fragmented, regulated world of equities trading was not “ever going to be wildly profitable”, but added the value of the NYSE lay in its listings franchise and data business.
“I don’t know why we would get rid of that. I think our shareholders want to participate in the earnings growth of those businesses,” he said on an analysts call.
However, he added that “we hold ourselves to growing earnings. If that business is a drag on us and then we can’t use it to grow earnings, then it’s completely insignificant. And unlike a lot of people in the exchange space, you’ve seen us shed businesses.”
The comments came as ICE revenues soared from $1.6bn in 2013 to $3bn in 2014, boosted by a full year’s ownership of NYSE and the London-based Liffe derivatives exchange, purchased together in late 2013. Net income in the same period rose from $270m to just over $1bn.
A fraction of the revenue came from NYSE, which generated $188m in trading revenue, up 6 per cent, and $367m in listings revenue, up 9 per cent, as the New York exchange attracted top offerings such as Alibaba of China.
ICE became one of the world’s biggest exchange groups by focusing on energy futures trading but has pushed into clearing of over-the-counter derivatives as new rules overhaul the market.
Regulators want clearing houses to risk-manage more OTC derivatives. Risk managers stand between two parties in a deal, ensuring the trade is completed in the event of a default.
Clearing house operators are eyeing the new rules as an opportunity to offer their biggest customers — mainly big banks and asset managers — huge savings in trading costs. Offsetting the collateral and margin investors use in the futures and over-the-counter derivatives deals could save customers millions of dollars a day.
ICE is the largest clearer of credit default swaps. While the new rules have been in place for nearly two years in the US, persistent delays have plagued their implementation in Europe.
Mr Sprecher said consequently many European customers — required to clear their trades for the first time — were moving across the Atlantic.
ICE estimated 40 per cent of the $7tn gross notional outstandings clearing last year came from Europe through its US operations, and ICE has opened its US clearing house from 3am eastern time to meet the demand.