Our history

Part 1: How ICE Began

You started Intercontinental Exchange (ICE) in 1997 by buying a technology start-up for $1 that was aimed at providing transparent pricing for electric power companies. What was your vision?

I wanted to create a transparent market where market prices would be highly accessible to anyone in any location and build the technology solution to distribute those prices.

In the three years following the purchase, I worked alongside Chuck Vice, who is now President & COO at ICE, and a small team of technologists to build web-based technology that would make us a borderless company that served all interested buyers and sellers of energy. Simultaneously, we were building an understanding of the needs of transacting in the electric utility markets - specifically buying and selling power as a way of balancing the electric power grid and hedging natural gas prices as an input.

I think part of the reason we have continued to grow is that we put ourselves in the mindset of our customers in terms of understanding their business and their needs. I started the company because I wanted to become a customer; having spent a number of years developing power plants, I saw the need for a level playing field as a commercial participant. We've looked at all of our markets from the perspectives of our customers since day one.

What was the groundwork required during the three years between 1997 and 2000 to develop and launch ICE in May 2000?

For the first three years, the company, which consisted of myself and eight colleagues, worked on the original version of the ICE trading platform and Chuck and I went on the road to talk with potential customers. We met with over 100 companies in those first few years — mostly companies in the oil, natural gas and power business. At the time, the market was undergoing a lot of change following energy deregulation and more competition in the wholesale natural gas and power markets. As a result, market participants wanted a level playing field to compete with incumbents and were looking for new market models.

While electronic trading was not the norm then, these companies were looking for the transparency and neutrality of an exchange-style trading model. To support their transition to electronic trading, we designed the technology around their workflow, which led to a lot of innovative features in the platform. These included pre-trade credit limits, counterparty credit filters, electronic trade confirmation and other features that are commonplace today, but these were relatively new concepts then.

When we launched the company with our completed trading platform in May 2000, we gave it the name Intercontinental Exchange (ICE) to reflect our ability to cross borders and to serve global markets using our innovative, web-based, technology platform. The result of that decision is that today more than 70 countries transact in ICE's markets, and we've efficiently scaled our exchange and clearing infrastructure across the UK, Netherlands, Singapore, Canada and the US.

After starting out as an over-the-counter (OTC) trading platform, how did ICE move into futures exchanges and clearing?

We saw an opportunity to leverage our technology expertise and to gain access to clearing in 2001 when the International Petroleum Exchange of London (IPE) was looking to evolve from floor trading to electronic trading. At the time, the IPE was a regional exchange that offered oil futures contracts and had less than 25% of global oil futures market share. Virtually all the volume traded on the IPE was transacted through the trading floor, which was located near St. Katharine's docks, across from the Tower of London. At the same time, the owners of the IPE, which were largely companies in the energy industry, were watching developments at the London International Financial Futures & Options Exchange (LIFFE) and seeing how rapidly technology was changing their markets. This created an increased urgency and understanding of the technology requirements to becoming a global market in the Internet age.

When we completed the acquisition of IPE, now known as ICE Futures Europe, we quickly got to work on two pivotal work streams, led by many of team members who are still there today — including David Peniket, who was Head of Finance at IPE and is now President & COO of ICE Futures Europe. The first project was developing new cleared swap products, which we began rolling out in 2002, and long before the broader recognition of the importance of clearing. The second was building out the electronic futures and options markets on the ICE trading platform, which dramatically expanded the former IPE's share of traded oil futures volume and transitioned it from a regional to a global exchange.

In February 2005, against many warnings of failure, we successfully transitioned the IPE crude and refined oil markets, which included Brent and Gasoil futures, to electronic trading. David and his team have led enormous progress in making the ICE Brent contract a leading global benchmark for the oil industry. I don't think anyone could have predicted how successful it's been; ICE Futures Europe has reported 18 consecutive record years of trading activity. Equally important, the exchange has served as a key market for the development of innovative, new products and provided the opportunity to create the first new clearing house in London for over a century.

Part 2: ICE's Expansion Into Clearing

How did ICE's expansion to futures impact the direction of the company?

Acquiring the International Petroleum Exchange (IPE) was significant for ICE because the exchange had a core set of energy benchmark products upon which we were able build as the need for cleared energy contracts grew. We quickly responded to the rising demand for standardized, cleared, transparent markets, and London's role as a global market center for energy trading increased as a result.

We expanded the exchange's product across the oil, natural gas, power, coal and emissions markets, growing from a handful of products in 2001. And in our cleared OTC energy markets, we eventually grew to 100 contracts, up from two cleared OTC contracts in 2002. But we were eventually limited in new product development opportunities due to competing interests of the horizontal clearing model, so we knew it was time to build our own clearing house in London.

How did you build a clearing house? And why did you start in London?

In 2006, when we had been publicly listed for about a year, we had the opportunity to use our technology to move the New York Board of Trade (NYBOT) to electronic markets in the same way the former IPE had transitioned a year earlier. We acquired the NYBOT for $1 billion in a stock and cash transaction. It was a smaller exchange with 44 million contracts traded in 2006 (which grew to 365 million contracts in 2015), but these were important global contracts - sugar, cotton, coffee and the U.S. Dollar Index for example - and they had strong potential outside of the confines of a floor.

In addition the NYBOT had its own clearing house, which is today ICE Clear U.S. This clearing house provided us with fairly complete and modern, web based clearing technology. We closed on the NYBOT transaction in January 2007 and got to work on the electronic transition, which happened quickly based on pent up demand. Later that spring, we announced our plans to build the first new clearing house in London for over a century. London was the obvious choice given the location of our global energy markets, along with the need for additional clearing solutions.

This was one of a handful of inflection points for the company. We were getting deeper into data, having launched our data services a few years earlier. The transition to electronic trading was well underway. And we were looking at a number of acquisitions. But most often, our requirements came back to having a flexible clearing solution and was evident we needed to build our own clearing house to achieve this.

There was skepticism that it could be done and, for the next year, we worked to overcome that and build what is now the leading futures clearing house in London, and the first new clearing house in the City in over a century. It was launched during the financial crisis in 2008, just as the importance of central clearing was becoming even more evident.

ICE Clear Europe, under Paul Swann's leadership, clears thousands of products and has brought increased sophistication to risk management systems, as well as capital efficiencies for market participants through the real-time valuation of portfolios. We have continued to innovate new solutions at ICE Clear Europe. Shortly after launch, we moved quickly to build and launch a clearing model for European Credit Default Swaps (CDS), which has a separate risk framework, guaranty fund and governance.

Today, ICE operates six clearing houses across the globe. Most recently, in December 2014, we acquired a majority stake in ICE Clear Netherlands providing us with clearing infrastructure in continental Europe.

How much did you invest in and what have the results looked like?

Over the last 15 years, ICE has invested over £4 billion in our UK operations. We have grown from less than 100 to approximately 1,000 employees today. And this investment has accompanied growth in UK revenues which are up 10-fold over the same period to about $1.4 billion in 2015, which equates to an approximate annual growth rate of 30% per annum.

Acquiring the IPE in 2001 set the stage for the initiatives we've undertaken internationally, both by growing organically, as well as acquiring strategic assets. We've focused on mission critical market infrastructure — often infrastructure that's underutilized or underappreciated — and repurposed the technology, products or services to meet broader customer needs. So our acquisitions have made it possible to offer more robust, diverse solutions around the world.

Part 3: ICE's Ongoing Evolution to Serve Markets

There have been many inflection points for the company, including the launch of ICE Clear Europe, which took place during the global financial crisis in 2008. How did that impact the path that ICE was on in terms of overall strategy and performance?

We started out with a mission to provide transparent, efficient markets to help customers manage risk, and that set of capabilities positioned us well during the financial crisis. The need for risk management increased during this volatile, uncertain time, which validated our investment in clearing. During the financial crisis, we started to see bilateral trading moving to a centrally cleared model where positions are collateralized and monitored daily; that transition is still happening today.

To address the evolving needs we saw in the market during and in the years following the financial crisis, we approached the opportunities with a mix of buying and building. We like building our own solutions, especially when that involves new technology, but we'll buy when we need to speed our time to market to serve customers. A good example of that is the acquisition of the New York Board of Trade in 2007 where we gained our first clearing services and technology, which we then leveraged to build ICE Clear Europe. We subsequently acquired The Clearing Corp, which had a solid risk model for clearing credit default swaps (CDS) but needed a governance and operational framework, to get CDS clearing off the ground quickly.

We've grown every year since we went public in 2005, including during the financial crisis. Our ability to achieve such growth is directly tied to staying connected to our customers. Throughout all our lines of business — whether it's innovating around clearing, exchanges, data, technology or listings — we're focused on identifying the problems our customers are facing and creating solutions for those situations.

What prompted the announcement in 2012 of ICE's acquisition of what was then NYSE Euronext?

There were a couple factors to the NYSE Euronext deal. The first was the attractiveness of Liffe, which enabled us to add European interest rates to our product portfolio and transform ICE Futures Europe and ICE Clear Europe into a multi-asset derivatives exchange and clearing house.

The second factor was the understanding that the NYSE has a lot of great core assets; it's the leading exchange when it comes to global corporate listings, ETF listings, and equity trading. On top of that, the NYSE is a world-respected brand with a tremendous network of listed companies and an unmatched value proposition. We experienced it firsthand with our own IPO on the NYSE in 2005. Standing on that podium, we got to experience that milestone and see the power of the capital markets in driving growth — it's incredible. So we knew in 2012 that NYSE had an exceptional set of core assets, but we also knew it could be even stronger.

We've successfully integrated 15+ acquisitions since 2001, and we were able to apply our learnings from those experiences pretty much across the board with the NYSE's operations. We spun out Euronext in a highly successful IPO, and created a strong, independent competitor in European equity markets. We migrated the Liffe products to our trading and clearing systems, strengthening the distribution and functionality of those markets and we've subsequently launched many new products there.

We've continued to strengthen the NYSE business with measurable results — not just in the strong revenue growth and right-sizing the expense base, but in leadership in capital raising and consistent increases in equity market liquidity. We've approached NYSE the same way we approach our other businesses — by listening to our customers and solving their needs.

NYSE President Tom Farley stays remarkably connected to our listed community and our trading customers and, as a result, we're doing a lot of work right now to better meet their needs. Perhaps most importantly, we're driving innovation and technology enhancements, advocating for less complex markets and leading by example. ICE's technology expertise is playing a key role in how we run the NYSE. For example, our new trading platform, NYSE Pillar, when fully implemented, will enable market participants to connect to all our equities and options markets using a single user interface.

How has the NYSE expanded or changed ICE's broader business strategy?

When we bought the NYSE, we immediately took a leadership role in strengthening the structure of the equities markets. The US equity markets, despite their global leadership for capital-raising, have become too complex, in my view. So, we quickly moved to reduce order types, invested in streamlining our trading platforms, and reorganized the business around highly accountable, customer responsive teams.

Today, we are working with the industry to advocate for investors and listed companies and promoting policies that safeguard a transparent securities marketplace. We've hosted panels across our listed companies and key industry stakeholders, drafted whitepapers, and advocated in front of regulators in an effort to reduce the complexity of U.S. equities markets. Importantly, we prioritize price discovery over speed by continuing to evolve our unique and proven designated market maker (DMM) model. Our market model offers lower volatility and tighter spreads, thanks to the DMM obligations and the support our model offers listed companies.

In terms of how that's changed our business strategy, I think it was a natural expansion that took our leadership in the derivatives space and broadened it into the securities space. In the time that we've owned it, the NYSE has increased market share from 22% to 24.5% of average daily trading volume. We've ensured that the business priorities are listings-centric, because strong markets are just one component of our capital raising platform. Today, the NYSE is home to 2400 listed companies, which employ over 40 million employees.

You now operate a network of 11 exchanges and 6 clearing houses, and you've recently become a leader in market data. How does the growing data business fit in?

Our data services provide transparency, information, analysis, and connectivity, all of which is consumed by market participants to manage risk across markets and instruments. Lynn Martin, Head of ICE Data Services, would be the first to tell you that our data business, just like our exchange and clearing businesses, is a result of customer demand. Our customers rely on data, trading and risk management platforms across their workflow and, when well-coordinated, they create a strong value proposition.

While Interactive Data, SuperDerivativesTM, ICE, and NYSE data are each solid data businesses in their own right, we believe they'll be much more valuable to our customers and to our shareholders on a combined basis. Our customers' needs are not limited to exchange-traded data. The broader market for fixed income is vast, and Interactive Data's services are centered on the changes taking place in this over-the-counter market.

The secular trends driving data include the standardization of products for electronic trading and clearing, and the need to trade with algorithms and quantitatively-driven programs. The regulatory requirements for independent valuation have also raise the demand for data. Finally, the trend toward indexation and passive investing, as seen in our strong ETP market performance at NYSE Arca, is driving more data consumption. We believe that data and connectivity are deeply linked to the markets they serve, and we're investing in these today so we can lead in service and innovation for our listed companies as their needs grow.

Lynn and her team are continually finding ways to combine data, technology and connectivity to offer customers a complete, consolidated view of the markets they're in and to help them meet increased reporting and independent valuation requirements. A couple of core areas of focus right now include our index services, continuous evaluated pricing for fixed income products and developing accurate ways to measure liquidity in fixed income markets. We've already made headway in these areas with the recent launch of the ICE U.S. Treasury Series, which are being used by BlackRock as the benchmarks for four of their Treasury ETF products.

We're also combining our diverse suite of connectivity solutions, which includes SFTI and 7ticks. And we are integrating data feeds into our desktop and tool solutions to deliver increased data to customers more comprehensively and efficiently.

And, finally, what's on the horizon for ICE?

We'll continue to expand to meet constantly changing dynamics in the global marketplace. Regulation, technology, and market dynamics are changing at a rapid pace, and we intend to lead within this evolutionary process. We've been willing to change and adapt quickly; we've moved from a 100% bilateral energy trading platform to a diverse operator of data and listings, commodity and financial markets, and clearing and technology infrastructure in just 15 years.

The pace of change continues to accelerate, not just in our industry - but across all sectors. We're excited to see what the next 15 years bring, how the companies that we work with evolve and how we can help them manage risk, raise capital and grow.

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Our history

An interview with Jeff Sprecher

Part 1: How ICE Began

Part 2: ICE's Expansion Into Clearing

Part 3: ICE's Ongoing Evolution to Serve Markets