IntercontinentalExchange (ICE), an electronic energy marketplace and soft commodity exchange, has announced its plans to build on its existing U.S. clearing operations with the formation of a wholly-owned European clearing house. The clearing house will be based in London and is part of ICE's strategic plan to offer clearing services through wholly-owned clearing businesses in the U.S. and the U.K. These clearing houses will complement ICE's futures and OTC execution business while meeting the risk management and regulatory requirements of a global marketplace.
The European clearing house, to be known as ICE Clear Europesm, will partner with ICE's U.S clearing house to serve ICE's global customer base across the commodities and financial products marketplace, including futures and over-the-counter (OTC) markets. ICE Clear Europe is preparing an application to the U.K.'s Financial Services Authority (FSA) to become a Recognised Clearing House. The final application is expected to be submitted by July 2007. Assuming that the information provided is satisfactory and the timeline is met, regulatory approval is anticipated in early 2008.
In conjunction with its January 2007 acquisition of the New York Board of Trade (NYBOT), ICE acquired the New York Clearing Corp (NYCC). NYCC will be renamed "ICE Clear US" effective June 1, 2007 and will continue to operate as a registered Derivatives Clearing Organization under the oversight of the U.S. Commodity Futures Trading Commission (CFTC).
ICE expects to transition its energy futures and OTC derivatives business to its own clearing operations at the end of the second quarter of 2008, through the transfer of positions to ICE Clear Europe. Currently, ICE's energy futures and OTC derivatives businesses are cleared through LCH.Clearnet Ltd.
"We believe that through collaboration with futures and OTC market participants, we are uniquely positioned to execute on a best-in-class clearing solution, and one that addresses the risk management requirements of ICE's diverse and global business," says Jeffrey C. Sprecher, ICE Chairman and CEO. "Earlier this year, we began actively planning and executing on our strategy with a team of technology and clearing experts assembled from both inside and outside our organization in the U.S. and Europe. Our highest priority as we expand our clearing platform is to ensure the integrity of the financial framework that underlies these vital operations."
Sprecher continues, "At the same time, we believe continued innovation and competition in clearing will offer meaningful benefits to the broader trading community. Gaining greater control over this core capability will allow us to introduce more services to the OTC markets for brokers and dealers. And finally, this flexibility will allow us to increase our speed-to-market for new cleared products and to expand our products further into the physical commodity markets."