CME CME Group Inc

Earlier this week, IntercontinentalExchange Inc. (ICE) announced its plan to launch 33 new over-the-counter (OTC) cleared energy products. The company will now be offering over 635 OTC energy contracts, along with the products announced, comprising more than 545 new cleared OTC contracts since the launch of ICE Clear Europe in November 2008.

Accordingly, the energy contracts include global crude oil and refined petroleum products coupled with North American power and natural gas liquids. All the new forward and options contracts will begin trading on December 5, 2011, subject to regulatory approval.

Alongside, the company’s recently announced ICE Brent NX (New Expiry) Crude Futures and Options contracts are also expected to begin trading on December 5, this year.

In an effort to support its market holding, ICE has scheduled to launch cleared OTC energy contracts. The company is aware of changing market needs, and attempts to evolve through its hedging strategies, product modification and innovation, in turn supporting volumes and the top-line growth in the long run.

So far, ICE has launched about 109 OTC cleared energy contracts in the second half of 2011. Besides, ICE launched 68 global OTC cleared natural gas products in May.

The company even launched 15 global OTC cleared oil products in April this year, while in February 2011, ICE had also initiated the trading of 21 new gas oil contracts and three new contracts in US thermal coal futures through ICE Clear Europe. Following its business plans announced earlier, ICE launched more than 100 OTC products through 2011, which are expected to propel growth in the long term.

The launch of contracts by ICE in the rapidly expanding energy space further boosts the company’s competitive leverage in the derivatives and OTC areas, where rivals CME Group Inc. (CME) and CBOE Holdings Inc. (CBOE) provide a challenging operating environment.

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 OTC markets, new product introduction along with increase in credit default swap (CDS) clearing revenues also drove the top- and bottom-line during the second quarter of 2011. The strengthening of this portfolio is further expected to drive growth in future.

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. These factors are expected to drive strong earnings potential in the long run. Hence, ICE carries a Zacks #2 Rank #2, implying a short-term Buy rating, while the long-term stance remains Neutral.

 
CBOE HOLDINGS (CBOE): Free Stock Analysis Report
 
CME GROUP INC (CME): Free Stock Analysis Report
 
INTERCONTINENTL (ICE): Free Stock Analysis Report
 
Zacks Investment Research