On Friday, the operator of regulated future exchanges – IntercontinentalExchange Inc. (ICE) announced its plan to launch 35 fresh cleared derivative energy products. With the announcement of these contracts, the company will now be offering over 800 energy contracts through ICE Futures Europe.
Accordingly, the energy contracts include global crude oil and refined petroleum products coupled with North American power and natural gas liquids. Alongside, ICE plans to introduce environmental, freight and iron ore derivative contracts as well as RBOB gasoline on ICE Futures Europe.
All the new futures and options contracts will begin trading on Apr 29, 2013, subject to regulatory approval, and would be cleared through ICE Clear Europe. The company remains aware of the changing market needs and attempts to evolve through its hedging strategies, product modification and innovation, in turn supporting volumes and top-line growth in the long run.
ICE has been growing through product novelty and expansion in the global emerging markets over the past few quarters. Strong trading volumes in ICE’s crude oil and energy futures and over-the-counter (OTC) markets, new product introduction along with increase in clearing revenues drove the top- and bottom-line in the previous years. The strengthening of this portfolio is further expected to drive growth in the future.
Additionally, the launch of contracts by ICE in the rapidly expanding energy sphere further boosts the company’s competitive leverage in the derivatives and OTC areas, where the presence of arch-rivals, CME Group Inc. (CME) and CBOE Holdings Inc. (CBOE), provide a challenging operating environment. Particularly, ICE’s latest launch of futures includes three renewable fuel credits under environmental futures in North America, a product suite that CME Group also plans to commence next month.
Overall, we believe that based on the current volatile macro environment, ICE has a strong revenue-generating product portfolio, high earnings visibility, consistent cash generation, disciplined investment and limited balance-sheet risk. The prospective acquisition of NYSE Euronext Inc. (NYX) will further drive strong earnings potential in the long run.
While ICE, NYSE and CME Group carry a Zacks Rank #3 (Hold), CBOE carries a Zacks Rank #2 (Buy).
CBOE HOLDINGS (CBOE): Free Stock Analysis Report
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