Intercontinental Exchange / 2014 Annual Report
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Intercontinental Exchange / 2014 Annual Report “Our team at Intercontinental Exchange delivered double-digit earnings growth and successfully executed an ambitious range of operational and strategic objectives.” Dear Fellow Shareholders: on or ahead of schedule, with over half Administration to administer a growing of our $550 million expense synergy range of price benchmarks. Our team I’m pleased to report to you on the record target realized in the first full year developed a robust mechanism to results we achieved in 2014; extending after completing the NYSE transaction. administer LIBOR, as well as the ISDAfix our track record of record revenue and We seamlessly integrated our futures rates and, in 2015, the LBMA Gold Price. adjusted earnings in each of our nine years exchanges across multiple asset classes The acquisition of SuperDerivatives as a public company. In a year marked by and accelerated the realization of expands our risk management and ongoing regulatory uncertainty and muted expense synergies. At the same time we pricing capabilities across a wide range of volatility in certain of our asset classes, our were able to complete four acquisitions financial products including interest rate team at Intercontinental Exchange (ICE) that expanded our operations in Asia swaps, while strengthening our range delivered double-digit earnings growth and and Europe and deepened our core of data products and desktop delivery successfully executed an ambitious range risk management, data and listings capabilities. of operational and strategic objectives. capabilities. Importantly, we continued to anticipate our ICE has always been a globally diverse customers’ evolving needs and diversify our During the year, our team worked quickly company, and in 2014 we continued to business to drive innovation and long-term to streamline and enhance our acquired expand our footprint to invest in regions growth. businesses. With the successful IPO of where our customers are increasingly Euronext and divestiture of certain NYSE operating. Through ICE Futures Singapore, For 2014, consolidated revenues, less Technologies operations, we turned our ICE Clear Singapore, the Holland transaction based expenses, were a focus to areas of opportunity that support Clearing House, and our long-established record $3.1 billion. Adjusted income our growth objectives. We launched infrastructure in the U.S., U.K., Continental attributable to ICE from continuing new interest rate and equity derivatives Europe, Brazil and Canada, we have the operations increased to $1.1 billion and products to expand our leading financial flexibility to serve global markets as operating cash flow more than doubled to product complex. Leveraging our license evolving financial reform continues to $1.5 billion. Adjusted diluted earnings per of Eris’s credit default swap (CDS) and influence our customers’ preferences on share from continuing operations grew interest rate swap products, we began where they do business. 15% over the prior year to $9.63. With the working with the industry to develop a $1.9 billion we raised in the Euronext IPO, suite of swap futures contracts. 2014 marked the fourth consecutive year we were able to return nearly $1 billion that the New York Stock Exchange led in to shareholders via dividends and share We continued to innovate by introducing global listings with 129 IPOs raising $70 buybacks, reduce our net debt by $2 billion nearly 120 new products across our billion. These included 32 technology IPOs, and invest more than $500 million in global exchanges, clearing houses and the successful execution of the largest strategic acquisitions. post-trade operations. We also expanded IPO in history -- Alibaba (NYSE: BABA), our data services operations, including the largest REIT, and the largest MLP We met key NYSE integration milestones the development of ICE Benchmark partnership. We recognize the vital role of Net Revenue(1) Operating Income Diluted EPS from Continuing Ops (in millions) (in millions) $1,150 $1,327 $1,363 $1,598 $3,092 $652 $793 $827 $993 $1,703 $5.35 $6.90 $7.52 $8.38 $9.63 2010 2011 2012 2013 2014 2010 2011 2012 2013(2) 2014(2) 2010 2011 2012 2013(2) 2014(2) Futures & Options Contract Volume Performance Summary 2014 2013 Change (in millions) (in millions, except per share data and percentages) Net Revenue(1) $3,092 $1,598 93% Operating Income $1,448 $790 83% Adj Operating Income(2) $1,703 $993 72% Income Attributable to ICE from Continuing Operations $970 $304 219% Adj Income Attributable to ICE from Continuing Operations(2) $1,104 $663 67% Dilute EPS from Continuing Operations $8.46 $3.84 120% Adj Diluted EPS from Continuing Operations(2) $9.63 $8.38 15% 616 749 785 813 1,303 Diluted Weighted Average Shares Outstanding 115 79 46% 2010 2011 2012 2013 2014 Operating Cash Flow $1,463 $714 105% (1) Net revenue represents total revenues, less transaction-based expenses. (2) These are non-GAAP figures. Please refer to page 66 of the 10-K for a reconciliation to the GAAP figures. a well-functioning U.S. market structure indicator of the Brent contract’s increasing implemented, we are ready to serve our for issuers and investors alike and are role as the global oil benchmark. customers with a comprehensive range of providing leadership in advocating for During 2014, we worked closely with the new products along the short, medium and changes that will simplify markets. We energy industry to manage the transition long end of the forward rates curve. We are in the midst of a once in a generation to a new Low Sulphur Gasoil contract, are focused on providing capital efficient opportunity to improve these markets and which represents the global benchmark solutions across futures, swaps and swap have demonstrated a willingness to take for diesel fuel. In addition, daily volume futures, including those based on the unilateral steps to reduce complexity and in our European natural gas markets, newly licensed Eris products. improve investor confidence in the U.S. including on ICE Endex, grew 89% driven equity markets. by the demand for clearing, transparency Equity Derivatives and FX and improved access on the ICE With the integration of Liffe’s markets Benchmark Products Across all technology platform. into ICE, three key equity index complexes Major Asset Classes are now traded on the ICE platform: Interest Rates and CDS MSCI®, FTSE® and Russell® Index futures Energy Even before the global financial crisis and options. In addition, we offer the As the leading global energy exchange, began to unfold in 2007, the challenges in benchmark ICE U.S. Dollar Index® (USDX), ICE’s range of products continued to grow the CDS market were apparent to us and which is the longstanding bellwether for to meet customer demand for clearing. created an opportunity to use our swaps the performance of the U.S. dollar, as well In 2014, we introduced over 100 new clearing expertise to develop a solution as nearly 60 currency contracts. With this energy contracts across oil, natural gas to reduce risk in these markets. By 2009, combined offering, our customers have the and power, bringing our total listed energy we had established the leading global tools to gain and hedge exposure across product complex to more than 1,000 CDS clearing operation. Six years later, emerging and developed markets for contracts. To put this in perspective, we we have cleared more than $61 trillion in equities and FX. Following the transition to listed only 100 energy contracts in 2007. gross notional value. We offer the broadest the ICE platform in 2014, MSCI index daily In 2014, contract volume in ICE’s Brent range of cleared instruments available in volume grew 59%, as demand for exposure futures and options contracts reached the market including index, single name to emerging geographies increased. Our their 18th consecutive year of record and sovereign CDS. Amid regulatory suite of products benefit from offering the trading activity. And open interest in Brent uncertainty in Europe, European buyside broadest equity derivatives complex on a also reached record levels, surpassing participants are increasingly relying on single, global platform. Nymex WTI’s open interest for the first our U.S. clearing house, ICE Clear Credit, time in the contract’s 27-year history. The demonstrating the geographic flexibility Agriculture and Metals widely-referenced S&P GSCI® index again that we offer market participants. We became a leading market for soft raised its weighting for Brent and in 2015, commodity contracts including sugar, ICE Brent for the first time outweighs the As the European interest rate markets cocoa, cotton and coffee, with our WTI weighting in the index. This is another recover and financial reform is acquisition of the New York Board of Trade “2015 will be a year of executing on the opportunities that market evolution is creating by capitalizing on our leading global network to drive continued innovation to better serve our customers.” in 2007. With the integration of Liffe, we are now the global hub data available. Our network of multi-asset class clearing houses for soft commodities futures and options on a common trading achieves the vital objectives of our customers -- protection of platform, broadening our customer base and our range of relevant capital, transparency and capital efficiency. In an increasingly products for market participants. For example, in conjunction with capital-constrained world, market participants require a robust customers, we developed our euro-denominated cocoa contract risk-management platform capable of providing capital efficiencies that will trade alongside our dollar and pound denominated cocoa and the tools necessary to effectively hedge risk, even in the most contracts. And we are in the early stages of building on the former volatile of markets. Liffe metals complex in the U.S. and in Singapore.