The Creditex acquisition looks like third-time lucky for ICE, which has been keen to follow the same horizontal growth strategy being successfully pursued by other exchange groups over the past few years.
Vertically, it has already this month received permission to expand into European clearing, with
the FSA approving the operations of ICE Clear Europe
Horizontally, it was keen to expand beyond the energy markets that are its core business, and the Creditex buy gives them some positive news in this regard. Over the past few years ICE failed in its attempt to buy CBOT
(acquired by CME instead) and FX trading platform EBS (bought by ICAP in 2006).
But it has added geographic scope in energy/commodities with the
Winnipeg deal, and further electronic assets in this market with
Chatham and Yellow Jacket.
For Creditex co-founder, CEO and chairman Sunil Hirani,
TA Associates and other Creditex shareholders, it seems a good time to sell. Some of the clearing problems associated with the credit derivatives market
look like being addressed, and volumes were still growing strongly throughout 2007.
At ISDA's annual meeting in Vienna in April, results of the year-end OTC derivatives market survey were announced. They show that credit default swaps (CDS), including single-name CDS, baskets and portfolios of credit and index trades, remained by far the
fastest growing class. The notional amount outstanding of CDS increased 37 percent over the second half of last year--to $62.2 trillion from $45.5 trillion at mid-year--and was up 81 percent for all of 2007, from $34.5 trillion at year-end 2006.
But with the market feeling pretty fragile in 2008, there's no certainty that this strong growth will continue.