Long before derivatives reform was on the regulatory agenda, the Intercontinental Exchange in Atlanta was well on the way to achieving what regulators hope to accomplish with new rules—an unprecedented level of transparency in derivatives pricing and a modicum of stability in the credit default swap market. Futures and options trading volume on ICE was up 27% during the first nine months of this year compared with the same period in 2009, and 422 brokers had already cleared about $13 trillion in notional value of CDSs through its clearing house, ICE Trust, since March 2009, the exchange reported in November. In addition, ICE Trust has expanded its product range from index CDSs to single-name CDSs and CDSs on sovereign debt. By succeeding in the high-cost derivatives business, ICE has demonstrated that "the skills and capabilities of exchanges and clearing houses leave them relatively well positioned to compete for the business for the first time," says Ed Ditmire, managing director for diversified capital markets research at Macquarie Securities Group in New York.
NYSE Euronext, the first exchange to receive this new award, saw its stock price rise 32% from February 8 to November 2. This is largely due to major investments the exchange has made in derivatives trading since the merger of NYSE and Euronext in August 2007, when the former was regarded as a technological laggard, says Macquarie's Ditmire. Derivatives now account for 43% of the exchange's operating income, which totaled $645 million for the nine months through September 30, up from $593 million during the same period in 2009. Its equity options exchanges accounted for 26% of total consolidated US equity options trading for the quarter ended September 30, up from 20% in the same period in 2009. Now the exchange just won't stop innovating. In a joint venture with the Depository Trust & Clearing Corporation, it plans to start evaluating the risks that its clearing members are taking in cash bonds and derivatives. Next, its futures exchange, NYSE Liffe US, plans to move the trading of all existing MSCI-linked stock index futures in the US onto its platform by June 17, 2011.