Despite an uncertain regulatory environment as the Commodity Futures Trading Commission (CFTC) continues to finalize trading rules under the Dodd-Frank Wall Street Reform Act, two trading exchange powerhouses posted impressive earnings.

IntercontinentalExchange (ICE), operator of regulated global exchanges, clearing houses and over-the-counter (OTC) markets, said 2Q2011 consolidated revenues increased 10% to $325 million, while consolidated net income attributable to ICE was $121 million, up 19% versus the second quarter of 2010. Diluted earnings per share (EPS) increased 21% to $1.64.

CME Group, a global derivatives marketplace through its CME, CBOT, NYMEX and COMEX units, reported that second quarter revenues increased 3% to a record $838 million and operating income increased 4% to $534 million from a year ago. Second quarter net income attributable to CME Group was $294 million, up 8% compared with 2Q2010, while diluted EPS were $4.38, up 7% compared with the same period last year.

Both ICE and CME Group are monitoring the CFTC’s rulemaking process. The one-year anniversary of President Obama signing into law the landmark Dodd-Frank legislation, which lays the groundwork for the biggest overhaul of the financial regulatory system since the 1930s, just passed late last month (see Daily GPI, July 22, 2010). Congress gave the agency a one-year statutory deadline — until July 16, 2011 — to issue many of the final rules to implement Title VII of the sweeping act, but the Commission has just begun the phase of voting out final rules. “This was a very ambitious agenda. The agency has worked very hard to try to achieve this…but it really was not realistic,” Sharon Brown-Hruska, former CFTC commissioner, who now is vice president in the securities and finance practice at NERA Economic Consulting in Washington, DC, said recently (see Daily GPI, July 26).

Because time was running out, the agency last month agreed to postpone compliance until the end of the year for those Dodd-Frank provisions that are “self-effectuating,” and it did not require final rules to take effect on July 16 (see Daily GPI, June 15). The CFTC’s action provided temporary relief under Dodd-Frank for derivative transactions primarily involving financial commodities, energy commodities and excluded metals. It also extended to Dodd-Frank provisions that do not require rulemaking but reference “swap,” “swap dealer,” “major swap participant” or “eligible contract participant,” which the CFTC has not yet defined.

“ICE’s second quarter results in an uncertain economic and regulatory environment demonstrate our strong position in global energy, agricultural and financial markets,” said ICE CEO Jeffrey C. Sprecher. “Our continued progress in clearing, new product development and technology has produced a diverse and innovative business model that effectively serves the ongoing risk-management needs of our customers around the world.”

ICE CFO Scott Hill added: “We continue to deliver consistently strong financial results, extending our multi-year track record of double-digit top- and bottom-line growth. ICE remains focused on delivering consistent growth and long-term customer and shareholder value by executing our strategic plan, investing prudently and managing expense in a disciplined manner.”

CME Group Chairman Terry Duffy and CEO Craig Donohue said their business continues to grow despite changing market dynamics. “CME Group delivered record revenue during the second quarter, driven by strong performance across interest rates, metals and agricultural commodities,” Duffy said. “Volume accelerated during the period and we reached record open interest of more than 100 million contracts in June. These results show that CME Group is uniquely positioned to provide the solutions customers need in today’s challenging economic and geopolitical environment, and the company will continue to take a leadership role in contributing to the resolution of legislative and regulatory issues so important to markets worldwide.”

Going forward, Donohue said the company intends to “successfully execute our global growth strategy by ensuring that we have the products, technology, clearing capabilities and global distribution systems to benefit from the opportunities created by changing market dynamics.”

ICE said average daily volume (ADV) in its futures segment was 1.5 million contracts, up 5% from the prior-year second quarter, while CME posted daily ADV of 13.5 million contracts, in line with the second quarter of 2010, which included May 2010 record monthly average daily volume of 16.8 million contracts.

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