ICE Beats on Record Futures Trading

IntercontinentalExchange, Inc. (ICE - Snapshot Report) reported its third quarter results yesterday.

The company swung to a GAAP net income of $86.9 million or $1.18 per share from a net income of $75 million or $1.04 in the year-ago period. Results came in 3 cents ahead of the Zacks Consensus Estimate of $1.15.

The quarterly results benefited from position limitations on speculators, sweeping regulatory reforms, lower expenses and record futures trading. The upside was also attributable to growth in the company’s core businesses, significant progress from new initiatives and stronger margins.

The company could benefit as more over-the-counter contracts are exchange-traded and cleared, but could suffer if U.S. regulators impose new commodity-market position limits.

Net revenues increased 27.2% year over year to $256.3 million. The growth was primarily attributable to 34% increase in consolidated transaction and clearing fee revenues in the quarter driven primarily by new products, strong trading volumes in ICE's futures and OTC energy segments, continued growth since the launch of ICE Clear Europe in November 2008 and the addition of OTC credit derivatives execution, processing and clearing services.

Average daily futures volume increased 24% whereas, average daily commissions in ICE's OTC energy business jumped 12% in the quarter boosting total transaction and clearing fees by 34%.

Total operating expenses increased 41.3% year over year to $116.3 million mainly due to a $27 million rise in expenses relating to ICE's credit derivatives execution, processing and clearing initiatives, including compensation expenses and amortization of intangibles. Expenses included amortization expense for Russell license agreement totaling $6.5 million, compared to $0.7 million in the prior-year quarter.

At the end of Sept 30, 2009, ICE had 821 employees and expects to increase its headcount by 1% to 2%.

The transatlantic exchange, which operates across over 50 countries, is headquartered in Atlanta, with offices in New York, London, Chicago, Winnipeg, Calgary, Houston and Singapore. The company operates leading regulated exchanges, trading platforms and clearing houses serving the global markets for agricultural, credit, currency, emissions, energy and equity index markets.

ICE’s rival CME Group Inc. (CME - Analyst Report) reported third-quarter earnings of $3.35 per share earlier last week, beating the consensus forecast by 5 cents.