Intercontinental Exchange (or “ICE”) owns and operates 12 regulated financial exchanges and 6 clearing houses globally. The founder and current CEO, Jeff Sprecher, saw an opportunity to trade energy digitally and acquired a failing start-up to do so in 1997. After shoring up the technology to trade energy, ICE officially launched in 2000 with the backing of large financial and energy institutions. The company quickly thereafter expanded to offering energy derivatives, data services and clearing by acquiring more exchange assets.
Thanks for reading and the suggestion. The next issue coming out on Monday will be on Five Below $FIVE, but I will look into CBOE if it warrants doing the research on it.
Good post. I can attest as someone who has traded and cleared on ICE, they have some captive customers who cannot trade or clear at other venues, and are very good at squeezing a lot of extra revenue out of said customers.
Good high level analysis. Do you have any thoughts on how their mortgage biz and fixed income biz will evolve and compete? I have seen they acquired bond trading platforms and serve mainly muni's. Why would buyside transact on their properties instead of MKTX & TW for muni's? Seems like their main proposition is the bundling of fixed income services. Further on the ETF side of things, whilst they have been signing up AP's how come they are facilitating so little volume? MKTX & TW already offer Portfolio Trading.
I think the evolution of the mortgage and fixed income business will likely be steady as you go for the assets acquired and then additional revenue streams from the transaction data collected. While I can't answer your MKTX and TW for muni's question, but I'd be interested to learn if you have an insights. Thanks for the questions!
I think their mortgage biz is very interesting and quite nascent. Some transcripts i've read suggest Ellie Mae touches >30% of mortgages originated in US whilst their other assets like MERS touch > 80% of mortgages. Whilst it seems they have penetrated the market well, I just cannot see them winning over the larger originators (read: banks) who use some of the more complex solutions like BKI for regulatory reasons. I'd also argue that their signposted ambitions in mortgage space are priced in currently based on one of my old models
Sorry - I didn't specify, banks make up significant % of mortgages originated by $ volume. That said, ICE could be interesting if you believe that mortgage origination will increasingly move away from banks (which I believe it has) and ICE can aggregate their mortgage data to "clear" mortgage originations like DTCC. I believe Sprecher has spoken about this before.
This was very helpful. Thank you!
We also think ICE is a high quality company and we’ve written two short write-ups on it.
https://specialsituationinvesting.substack.com/archive
and
https://specialsituationinvesting.substack.com/archive
Can you do CBOE next?
Thanks for reading and the suggestion. The next issue coming out on Monday will be on Five Below $FIVE, but I will look into CBOE if it warrants doing the research on it.
Good post. I can attest as someone who has traded and cleared on ICE, they have some captive customers who cannot trade or clear at other venues, and are very good at squeezing a lot of extra revenue out of said customers.
Good to hear your perspective. Thanks for reading!
Good high level analysis. Do you have any thoughts on how their mortgage biz and fixed income biz will evolve and compete? I have seen they acquired bond trading platforms and serve mainly muni's. Why would buyside transact on their properties instead of MKTX & TW for muni's? Seems like their main proposition is the bundling of fixed income services. Further on the ETF side of things, whilst they have been signing up AP's how come they are facilitating so little volume? MKTX & TW already offer Portfolio Trading.
I think the evolution of the mortgage and fixed income business will likely be steady as you go for the assets acquired and then additional revenue streams from the transaction data collected. While I can't answer your MKTX and TW for muni's question, but I'd be interested to learn if you have an insights. Thanks for the questions!
I think their mortgage biz is very interesting and quite nascent. Some transcripts i've read suggest Ellie Mae touches >30% of mortgages originated in US whilst their other assets like MERS touch > 80% of mortgages. Whilst it seems they have penetrated the market well, I just cannot see them winning over the larger originators (read: banks) who use some of the more complex solutions like BKI for regulatory reasons. I'd also argue that their signposted ambitions in mortgage space are priced in currently based on one of my old models
Sorry - I didn't specify, banks make up significant % of mortgages originated by $ volume. That said, ICE could be interesting if you believe that mortgage origination will increasingly move away from banks (which I believe it has) and ICE can aggregate their mortgage data to "clear" mortgage originations like DTCC. I believe Sprecher has spoken about this before.