All right. Hello again. Let's continue here. I'm Alex Kramm, Senior Research Analyst at UBS, covering the U.S. exchanges and business services companies. Excited to have Intercontinental Exchange ICE here up next. Ben Jackson, President, and Warren Gardiner, CFO. Let's just jump in to keep it simple. But thanks again for coming. This has been great. I like to start at a very high level, typically, to get the audience on the same page. So, look, I followed ICE for basically 20 years or so, and it's become a much more diversified company over that time. You got three segments, a lot of different macro drivers: volatility, commodity prices, interest rates, AI now, given where we are.
So when U.S. managers think about the outlook for the company over the next few years, why do you think ICE is positioned for attractive growth against all those things that I just mentioned?
Thanks, Alex. Thanks for the introduction, and thanks for everybody that's here and listening online as well. You know, I'll start with a quick story that happened actually today. In the first group meeting we had this morning, we had an investor that was in the meeting and kicked things off and said, "You know, I really love what you guys have done for us. We've been an investor since 2006, and every single year since we've been an investor, you've been able to grow earnings per share consistently, no matter what the market was doing, whether it was up, whether it was down, whether it was navigating through a crisis.
You guys have managed through that and been able to grow the business by being such a globally diverse company, and we appreciate that. So I think that's a good way to start for people that don't know our company well, 'cause that's a really interesting statistic, and it's kind of a guidepost by which we, as managers, manage ICE and Intercontinental Exchange. We do that by you mentioned the three segments of our business. We've built a diverse business over the years that helps us weather any type of market environment and continue to grow earnings per share. We, you know, operate our businesses seamlessly across the company. We leverage technology.
We start. In the forefront of our minds is how do we leverage technology to take and apply and find analog marketplaces, analog business processes, and how can we apply technology to bring it to a more modern digital reality? And you mentioned AI, and with AI over the last several years, we've pushed the gas pedal to the floor. We leverage AI across the company, both internally as well as in the external solutions that we're driving for our clients each and every day to help them lower their costs, find new ways to grow, provide new solutions to them. So it's important in front of mind and everything that we do. And when you summarize that, we're a business that is compounding growth every single year. We have a high amount of recurring revenue in our business.
We're a stable, growing company, and we're weathering all kinds of marketplaces, and that's really the guidepost that we manage the whole organization.
All right. Well, then over the next 26 minutes, let's try to unpack those, more on a segment basis, so look, like, let's just dive in and start with your biggest franchise, which is energy trading still. Growth has been very strong, 20% plus in the last three years, and people have somewhat worried about that things will have to significantly slow here or even go negative in the near term. So how do you see the outlook for that energy trading business from here?
Great question. So there's a lot of secular growth drivers in and around the energy space, globally. So first, you have a major energy transition that's going on. So the world moving to cleaner sources of fuel. And we've built our business by building the most diverse set of products for people to manage their exposure to risk across the energy spectrum and across this energy transition. They've done that deliberately for over a decade. That enables clients, as they're going through this energy transition, to manage from the movements from coal to oil to natural gas to power, and also putting a price on carbon. That is a bumpy transition. It's gonna take a long period of time, and we see that as risks that are gonna need to be managed for a long, long period of time.
You also have growth and energy demand, and we're a beneficiary of growth and energy demand in areas like AI, with data center demand. Data center operators consuming more and more power to support AI models. We're a natural beneficiary of that as we provide the global natural gas markets as well as power markets, in the U.S. and around the world. You know, for power, when you think about power, in particular in the United States, if you're building a new data center and you're building it here in Scottsdale, Arizona, you're worried about the price of power here in this area. You're worried about natural gas prices here. And we've built our basis markets in the U.S. with that in mind, with the commercial customers in mind, to help them manage that risk. So that's another important trend that we see.
Then the third is really the liberalization of energy moving around the world more freely. Natural gas, for example, used to be locked into a pipeline. Now it's been liberalized with LNG. It can move around the world freely. The U.S. is one of the largest providers of LNG exports around the world, primarily going to Europe. Those exports are expected to double in just the next three years. A lot of secular trends there underneath the hood. The main metric and the proof point of where we see the growth opportunity in the metrics we look at is a thing called open interest. Open interest is when a buyer and seller are trading a futures contract. It settles into the future at a future date.
The more of those buyers and sellers that are in there with contracts that haven't settled, the larger your open interest pool is. The larger your open interest pool is, we believe, is the number one metric for the health of a market. Open interest in our marketplaces have continued to grow. They continue to hit records in a number of different areas. Just as an example, across our energy business alone, it's up over 10% in futures. Our oil markets are up almost 20% year- over- year in futures. Our Brent contract's up almost 30%, year- over- year in futures. Our TTF contract, which is the benchmark for global natural gas, is up 40% year- over- year. So great signs and, and proof points for our ability to grow.
Good. I will have to ask a quick backward-looking question on what you just talked about, 'cause in August and September, which seems like an eternity ago now, but growth did, in fact, slow a little bit. And, you know, you saw it in the stock, and people freaked out a little bit. And then in October and November, things seem to have been quite better again. But maybe you can just tell us what you saw in those two, maybe not so great months, and what has kinda normalized, just to understand, like, how this can shift so shorter term a little bit more.
Sure. So, volume did slow a little bit in those windows. Didn't surprise us. August doesn't surprise us 'cause that August tends to be a slow month to begin with. We have a large amount of commercial customers in our portfolio. A number of them are based in Europe. Trading volumes just tend to go a little slower each and every August. The main metrics that we continue to look at, though, is that open interest metric that I just mentioned. And open interest hung in the entire time. It actually grew, and we were hitting records in different products in the months of September that continued into October and into November. So from an underlying perspective, the market was very healthy. As things got more volatile, trading started to pick up. Trading volume started to pick up. But all along, market participation was increasing.
Market data subscriptions were increasing, and open interest pool was also increasing.
Good. All right, then, staying on the exchange side of the business for now, but rounding it out a bit, while energy's the biggest business and there are a few other businesses, like Rates is pretty sizable. AGS is decent, and you still have a cash equities and options business, right, under the NYSE. So actually, if I look at those businesses in aggregate, they've also grown 6%-7% CAGR, pretty respectable over the last five years. Energy was, by the way, 14%, so that's still leading the charge. Anything we should be paying more attention to that could surprise us to the up or down side, maybe in businesses that people may not be paying attention to as much?
Yeah. I'd go back to one thing that people should pay attention to, is just the diversification of the energy business overall. And this energy transition across that energy spectrum is gonna take a long period of time. There's been underinvestment in the traditional fossil fuel sources. There's an energy demand is increasing. It's taking longer to get sustainable types of projects up and off the ground. They're not predictable in terms of their ability to produce. So, we see that as definitely an area and just getting educated around the breadth of the offering that we have there is number one. Number two, the second one I would just highlight in particular is our rates business. Our interest rate business is primarily in Europe and the UK, interest rates. So Sonia is our UK benchmark, and then Euribor is our European benchmark.
Going back to that open interest statistic, in Sonia, our U.K. benchmark for U.K. rates, open interest in that contract's up 75% year- over- year. So you continue to see, with the political environment that's going on in the U.K., the uncertain direction of rates, we've seen incredible growth in open interest in that contract in particular. Euribor, coming off of a strong year- last- year, has seen similar. So it's up 20% year- over- year in terms of open interest, which I think is a good sign. You know, as the direction of rates is really uncertain as well in continental Europe, that'll be an interesting development in that market as well.
Okay. Last question on the exchange segment, and maybe I'll give you a break if you want it, Ben, and shift to Warren because it's just about pricing in the segment. And I think it is probably budget period for you right now, Warren, and maybe Ben as well. But so maybe can you just help us? You've been more active on the pricing side over the last couple of years. How do we think about it into 2026?
Warren just grinds on me to make sure that I'm getting the numbers he needs.
That's right. That's right. So, no, it's true. We're going through the budget process right now, but nothing I'm obviously gonna disclose in terms of where things will be coming out of the budget.
It's not like it's the event. You know, we're wrapping it up. You know what I mean? So we gotta get there at the end of the day. But I think, look, I think at the end of the day, the framework you've seen us use across ICE over the last several years will apply broadly speaking. And that, what has that been? That's been we've been able to kinda look at across our business and look for areas where we've added value and priced to that value. And so it's not the same area every single year. It's not the same level every single year, particularly in the exchange side that we do that. But we do have, you know, levers that we pull and pockets that we are able to kind of go after and from that perspective.
I think as we move into next year and years beyond, that'll be a similar approach. So on the futures side, you know, we have over the last several years made some headline price changes to various contracts across our commodities business, our rates business, and things of that nature. Not necessarily the same amount each year, or the same products each year, but again, picking our spots and really looking at where we've created some value across the platform, and wanting to get compensated for that value. So I think ultimately it'll be a similar approach. We'll also have opportunities across our data that is our data business. That's an area too on the exchange side we recently did announce some price changes that'll be going into effect next year.
So, again, a lot of levers to pull there, and we try to really pick our spots and make sure that there are spots that we feel like we've added value for our customers at the end of the day.
Okay. Very good. All right. Moving on, briefly to the fixed business, which is, you know, fixed income and data solutions, I think it stands for. Anyways, 80% of that segment is recurring revenues, and this year, over the last few quarters, it accelerated pretty nicely. So maybe, Ben, you can talk about what's driven that and why you think that growth is sustainable or maybe even accelerated into 2026.
Fixed Income Data Services.
Well, that's yeah. Sorry.
But,
I'll put myself up for that.
I think one of the things that's underappreciated in the business that we as a team have built in our fixed income and data offering is the comprehensive nature of it. That if you're an asset manager or a trader in the fixed income marketplace, we've become a one-stop shop for what you need to help manage risk and trade in the markets, create indices, etc. And underpinning that business is our pricing and reference data business. It's a significant part of the business. And for those of you that aren't familiar with the fixed income markets, for our pricing and reference data, it's very difficult to price a fixed income instrument 'cause they don't trade very often. Municipal bonds trade, you know, 1% trade every day. And we, as you know, data providers, need to be able to provide reference data and pricing.
We do it on millions of instruments, and we have to do it every day and many of them on a real-time basis. But because they don't trade, you have to have very complex algorithms that have been built up over decades that have looked at all kinds of scenarios of what's happened in the marketplace, what, where did correlations break down, where did they hold up, and use that historical data set to continue to train your models 'cause they're real-time living organic things that as new events come up, what's the impact gonna be to price? So we've, you know, had a great business in that space, continue to have a great business in that space, and see a lot of growth potential. On the index side of the business, so we work with asset managers around the world that wanna create new indices.
We help them manufacture those indices, and then they go out and get assets under management under that. Or we have our own proprietary indices that asset managers can utilize, from our that's our IP, but they can utilize to go out and gather assets under management, with the clients that they service. We also have a great electronic execution business. So in the execution business and electronic execution of both municipal bonds and corporate bonds, we have a great business that's been growing strong there. We have a data and network technology business that includes a Consolidated Feeds business. It includes a data center business that we continue to invest in, our own proprietary data centers where the demand for power for things like AI and also access to our exchanges continues to go up.
We have our ICE Global Network connecting to hundreds and hundreds of sources of data around the world and allowing clients to consume that in a very secure way. So we have a number of different solutions there, all of which are interplay and kinda create a flywheel effect across each other and an opportunity to cross-sell these solutions where clients aren't using, you know, all of the comprehensive suite.
I would just add to that, too, Alex, and Ben mentioned it at the end there, the data net for the data network technology business. In our IGN business and data center business within that, that's actually been the real driver of the inflection in growth you've seen over the last couple of quarters. And so we had been more in the mid-single-digit range for that data network, network technology business last year. First half of this year, we were about 7%, and then in the third quarter, we were into the double digits. And so, and that has been driven by that business because the desktop business, the feeds business within that line had been, you know, high single-digit, low double digits for quite a long time now.
And so the really the pickup and the overall growth of this has been driven by that data center business. It's a great business from my perspective because we get some really good visibility into it. We see a lot of the forward demand coming in. And so as Ben mentioned, we're gonna continue to invest in that business because we do continue to see the demand on the customer side for greater, bigger pipes for more capacity to consume data, to trade more. And certainly with artificial intelligence coming in more and more as part of people thinking about that as incorporating that into some of their trading strategies, they're thinking about, you know, having those bigger pipes to utilize the, you know, those strategies with. So that's been an important part for our growth.
And so.
So to continue.
Alex, it's an area where I mentioned upfront that our fixed income segment is an area that's leveraging AI. So it's an area that we have been and continue to leverage AI to help expand the breadth of the coverage that we have, the speed with which we can produce data, the speed with which we can backtest indices. We're seeing a real efficiency pickup in being able to do more with the same resources there.
That's somewhat of a segue to my next question, which is actually the lengthiest question I wrote down, and it relates specifically to the PRD business 'cause that's an area where we got the most kinda AI disruption questions from people when that was a theme, for the last few months. So, you know, you've talked when you get that question at length about the stickiness of that business and the historical data and how everybody needs that. But then I think when I look at this business, I also worry or think that there may be customers who are maybe not as sticky and they don't rely on the historical data. So maybe you can talk about, both the positives, but maybe also the potential negatives there.
And I'm asking specifically because what I see in covering the info services space, there are some vendors who have very broad data offerings and they're increasingly bundling with, with firms like us, and some of those have done a lot to improve their kinda fixed income data businesses. So just wondering if maybe the competitive dynamic could shift a little bit as, you know, some other vendors that historically may not have been as good are now catching up and they're also bundling that with other things that unfortunately your set is a little bit, your, your product set is a little bit narrow. I told you it was a long question, so.
That was a lot in that question.
Yes. Sorry. Let me start on the quality of the offering. So we focus first and foremost on the quality of the data offering that we provide to our clients and having accurate marks and accurate reference data, accurate a pricing as possible. You can't break apart the ability to create as accurate of marks as possible in the fixed income space apart from having the historical data set because in order to have accurate marks, you have to have a tremendous amount of historical data built up over time that has seen how instruments have behaved, as I mentioned before, how correlations have broken down, how correlations have held up. And all that historical data is our own proprietary information. And more importantly than just the prices is how did we come to that price?
The algorithm underneath that is a living thing. As I said, it changes over time, and we have all that intellectual property around how that algorithm has changed over time, and an example I used in one of the meetings we had earlier when a similar question to this came up is that we saw back in 2019, we saw a couple customers leave us for a lower quality offering, a lower priced offering, and when COVID hit, a new event that the market hadn't seen, they saw the correlations broke down in different ways, and customers came back to us en masse for the quality of the data sets that we provided because they saw that the correlation analysis that we did with all the different backtesting that we did over time was much more accurate and much more succinct.
So that's on the first part of the question. The second part of the question, I, you know, unpacked all the different components that are in our fixed income and data services business. I would argue we have an equal amount of breadth in some areas, more depth than the competitive landscape that's out there. And if we needed to pull triggers, for growth, for bundling and those types of things, we could do that. So we have that optionality to do it.
Okay. Fair enough. Shifting gears then again to the mortgage technology business, you know, growth has obviously been a little bit less favorable here over the last few years, both in the recurring and the transactional side. So maybe you can talk about what of that is cyclical, what other factors have maybe been at play here, and really what it takes for the business to get back to your target growth rate, which is around high single digits.
Yeah. So let me start with that, Alex. But I think it's largely cyclical, in terms of what we've seen. I mean, this is, we're in the third year of one of the most challenging period for mortgages at an industry level from an origination perspective in the last three decades. And so, you know, from that perspective, it certainly has been a challenge for the business. But I think when we look forward to the opportunity for us, you know, we are sitting in a moment in time here where our rates have started to come down. You've seen a little bit of improvement in the mortgage market over the last year or so. It was a little bit better than last year. Last year was better than the year before.
We're starting to gradually improve. We're at a point now where rates, you know, if we were to see where there's probably four million or so loans that are sort of eligible to be refinanced or should be incentive to refinance or in the money to be refinanced at the moment. That's generally we categorize that as sort of 75 basis points below, you know, where their actual mortgages were in terms of where the current rate is. There certainly is a fair amount of loans that are today just at this current rate that are being refinanced and can be refinanced. If you were to have a 50 basis point change to that, downward, you'd have somewhere around eight million loans that are in the money to be refinanced.
So we are kinda in this moment where it feels like the market's getting better, and we're starting to see some of that improvement. It's just been a little bit gradual on that front. It's been cyclical for us. I think this is the nature of the mortgage market. It's always been like this. You know, I think one thing that we do have, a lot of benefit from our peers in the space would be that it is part of a much broader platform in ICE where we do have a significant amount of free cash flow and cash flow to invest in the business and really put ourselves in a better position than we would otherwise be. And so I think from that perspective, we continue to focus on those things that we really can control.
While cognizant, of course, of what's going on from a macro perspective, really more focused on making the investments that we wanna make. I'll turn it over to Ben on this, but investments we wanna make and focusing again on the things that we can actually control.
Yeah. And of the things we can control is, you know, first and foremost, we've been focused very heavily on the integration of the businesses that we've acquired. And we've been public about it that we're ahead of schedule on our synergy cases on the execution of the integration of these businesses, not only within ICE, but integrating the platforms across the ecosystem so that our clients can get the most benefit from the efficiencies of being on one platform. So we've been focused heavily on execution. In my assessment, we've done very well on the proofs in the pudding in terms of being able to have tremendous sales success as we're ahead of our revenue synergy target of where we thought we would be at this point in time on our five-year targets. We're ahead of that.
And a lot of it's doing due to cross-selling our solution set and that comprehensive offering to our clients. So cross-selling our loan origination system to clients that were already on MSP, which is our servicing system, or vice versa. We've had a lot of success doing that, and we've, you know, signed on some really marquee names like JPMorgan Chase, which is front of mind, M&T Bank and other, you know, great financial institution. Citizens Bank is another one that we've brought onto the platform. Fifth Third Bank, United Wholesale Mortgage, obviously one of the biggest non-bank originators is coming onto our servicing platform. Lennar, one of the big home builders, was already on Encompass, is now implementing MSP.
So we've had a lot of success, and we have a number of clients not only in the implementation process. We have clients that are going live, and we have a strong funnel behind that.
Perfect segue, I think, to my next question, which was actually in maybe there's not much to add, but it was about the excitement around larger clients. I think a lot of us, after JPMorgan in particular, thought there was going to be a lot, a lot, and you just mentioned a few other names, but I think there was still the sense that, wow, this is gonna be a lot very quickly. On the flip side, however, and again, this is just a perception, maybe there's been unfortunately a couple of well-documented kind of losses, due to unfortunate circumstances, so maybe you can just balance the two of them, like, as you just mentioned already, in terms of the pipeline, how do we get comfortable that, we're gonna start seeing some of these larger deals and, and maybe minimize any, any, any other, potential losses, from.
Sure.
From the operator perspective, in particular as we head into the next couple of years?
Yeah. On the latter part of that question, we haven't really lost a client to a competitor. I mean, we've been very strong in terms of retention of our client base and, you know, don't see that as an issue. M&A has been one of the areas that we have seen some impact, but that's something we can't control. You know, nobody can wave a magic wand over a transaction that two institutions wanna do and say, "Don't do that." So that's something we can't control.
I continue to focus on what are the things that we as a company can control, and that's harnessing the technology, driving efficiency for our clients, leveraging AI to automate as many parts of the loan origination process as possible, things like doing automation around compliance checks as a loan's being originated, looking at income checks as income verifications come in, did it meet the qualifications criteria of the loan that this client applied for, credit checks as those are maturing. Then we've also, leveraging AI, have also built a bridge, an electronic conduit for the first time between our loan origination system and our servicing system that takes a ton of inefficiency out of the process that a servicer has in moving loans from loan origination into servicing.
We're moving not only the data, but the document payload over there and then auditing that package to make sure that all of the requirements that the servicer has are being met. And then on the servicing, servicing side, we're also leveraging AI for modernizing our tech stack. One of the data points I shared in an earlier meeting today is that we've been modernizing our MSP servicing system that we just acquired two years ago. And the pace at which we're able to move that platform off the mainframe is going two times faster than an acquisition we just did, call it eight years ago, of IDC, that's a fundamental part of our, of our fixed income and data services business.
We're seeing leveraging AI and leveraging things like GitHub Copilot, and other tools in that space helping us to dramatically increase our speed to bring those solutions to market, as well as new solutions that are helping to automate areas in customer service like call prediction, call summarization, call routing, and intelligent chatbots.
Yeah. Good. Not sure if this is already the last question, but let me, given the time, but let's shift gears completely, and maybe talk about your recent investment in Polymarket, and how you think that could impact ICE in the future. I think there's multiple dimensions here. You're getting closer to retail traders, which historically was not your end market. You're experimenting with new technologies and contract types. And then you have this data relationship, which probably is a little bit more near term. So yeah, maybe talk about that or what else there is and what you think this investment could really mean for ICE in the longer term.
Sure. So it's a minority investment that we made. We've established a relationship with Shane, the founder over the last few years. And the elements that made us wanna invest in this is that there's some interesting dynamics that we think are unique to that platform that may have applicability to the broader ICE space. But also, as we've looked, you know, around corners throughout the years and looked for new innovations that are coming up, we've tried to be on the forefront of these innovations as they take place. Whether or not these will be all applicable to the institutions, probably not, but they're interesting developments regardless. So the first one is non-intermediated settlement of transactions and trades. So, there's not really a clearinghouse function in the settlement of those matched trades on that platform.
That's one interesting technology development that we're staying close to. The second is that it's really a social media network. There's hundreds of thousands of people just like us in this room, but are around, spread around the world that are creating event contracts on the fly. So they're creating things from political events to settlement of geopolitical events to supply chain disruptions and what's the impact of that to economic indicators. All kinds of contracts can be created on a real-time basis between parties. And then once it's created, the rest of the community can go ahead and create a marketplace around it. Well, today, if all the exchanges, not just us, but all the exchanges, when we're working with our regulators, it can take weeks, if not months, to get a new contract off the ground. So that's an interesting development.
We'll see how the regulators think about that and the applicability into marketplaces like ours. And then you mentioned the data agreements. I'll touch on that quickly. This is all around creating sentiment indicators. So that all of that event contract data and marketplace data is setting odds on events happening. We have a data agreement with Polymarket to create sentiment indicators that we think are applicable to the capital markets. And we've already done this in partnership with companies like Reddit and Dow Jones. And the development of these marketplaces around event contracts and the probability of it happening, we think is another one that will be interesting for the capital markets. And we've unleashed our fixed income and data services business to help make that a reality.
Very good. I see that we're out of time, so we'll keep the CFO expense questions for next time. But thank you for the insightful comments, Ben. And thanks for, yeah, thanks for doing that today.
Thank you, everybody. Thank you, Alex.