AGM 2016

May 13, 2016

Good morning, everybody. I'm Jeff Sprecher and I'm the Chairman and Chief Executive Officer of ICE. And it's my pleasure to welcome you here to our 2016 Annual Meeting. And I'm going to call the meeting to order. Before we get started, I want to note that the meeting is being webcast, as I mentioned. And in order to comply with legal requirements, the voting process in this annual meeting is rather formal. And as a result, I'm going to be reading from a script for the formal part of the meeting. I'll make note that the script was written by Andrew Sertakowski, who happened to write himself a big part in the script. And also Andrew is much younger than I am and he likes very small fonts. So it reminds me that when my wife and I married, the officiant came to the altar and had forgotten her reading glass. And notwithstanding, it was a very successful event, a very happy marriage and very legal. So we're going to have the same outcome today regardless of the size of the fund. After we announced the voting results, I want to give a brief report on the business. The directors and I, together with the company's officers and representatives of Ernst and Young, will be available to answer questions in the room after the meeting. I'd now like to introduce to you the other directors and the executive officers of ICE who are here with us today. And when I introduce you, if you would stand up, it would be very kind of you. So Charles Crisp, who's a Director Jean Marc Fonari, who's a Director Lord Hague of Richmond, who's a Director Fred Hatfield is a Director Doctor. Terence Martell is a Director Sir Colin McCarthy is a Director for Bob Reed, the Director Fred Salerno is a Director Judy Spreiser is a Director and Vince Teasey is a Director. And then from my management team, Chuck Vice, our President and Chief Operating Officer Scott Hill, our Chief Financial Officer David Goon, our Chief Strategic Officer Tom Farley, who is the President of the New York Stock Exchange Jonathan Short is our General Counsel Kelly Lefkorder is our Senior Vice President of Corporate Communication, Marketing and Investor Relations Doug Foley is our Senior Vice President of Human Resources and Administration. Andrew Sverdakowski is the author of the script, and he's the Senior Vice President and Associate General Counsel. Kevin McClure is here, he's our Chief Risk Officer. Dean Mathison is our Chief Accounting Officer. David Underwood is our Chief Audit Officer. And also in attendance are Carol Lloyd, Ken Marshall and Greg Spouti of Ernst and Young LLP. Thank you all for being here. I'd now like to appoint Andrew Sertakowski as the Secretary of the meeting and he'll record the proceedings. Sid Rodrieg of Broadridge, Sid here, sorry, he makes an annual appearance here, has been appointed as the Inspector of Elections for this meeting to, among other things, ascertain the number of shares of ICE's common stock outstanding and the voting power of each to determine the shares represented at the meeting, the validity of the proxies in the ballots, count all the votes in the ballots, certify the number of shares represented at the meeting and vote for each of the proposals. The Inspector of Elections has taken and signed an oath to faithfully execute his duties with strict impartiality and according to the best ability. Andrew Sertakowski will now say a few words about our 2016 annual meeting procedures. Thank you, Jeff. To conduct this meeting in an orderly fashion, we respectfully direct your attention to the rules of conduct you received when you entered the meeting. Any stockholder or proxy holder wishing to address the meeting should, at the appropriate time, wait to be acknowledged by the Chairman. We thank you in advance for helping us conduct the 2016 meeting in an orderly fashion. So thank you, Andrew. And we're now going to proceed with the formal business of the meeting. The record date, stockholder list, affidavit of distribution, proxy vote report and oath of Inspector of Elections will be available for inspection throughout the meeting at the registration table that's outside. In addition, copies of the notice of annual meeting and proxy statement relating to this meeting are available at that registration table. Only stockholders of record as of March 15, 2016 are entitled to vote at the meeting. The only securities that can be voted are shares of ICE's common stock, which will vote together as a single class on the matters that are presented to the stockholders. The voting requirements for each of these items and are on the agenda that's described in the proxy statement. I'd now like to ask Mr. Certikovsky to read the forward looking statement disclosure and the voting share. The matters discussed at this meeting may include forward looking statements that represent ICE's expectations or beliefs. These statements involve substantial risks and uncertainties that may be beyond our control. Our actual results could differ materially from those projected in these forward looking statements. Additional information concerning factors that could cause actual results to be materially different is contained in the Risk Factors section of our annual report on Form 10 ks and elsewhere in the SEC's filings with the SEC. We encourage you to read those materials. Each of you should have received or registered at the front door and when you came in and indicated on the sign in sheet whether you plan to vote in person here at the meeting. If you already voted by proxy, you don't need to vote in person at the meeting unless you wish to change your vote. The sign in sheet indicates that no stockholders intend to vote in person at the meeting. Nevertheless, if anyone would like to vote in person, Mr. Rod Reedy can give you a blank proxy card to use as a ballot. Would anyone like to vote in person? No. Okay. Based on that, there are no shares to be voted at person at the annual meeting, and I have the following information regarding the number of shares to be voted today. As of the record date of March 15, 2016, there were 119,034,250 shares of ICE's common stock outstanding and entitled to vote at the annual meeting. Such shares constitute all of their shares of ICE's capital stock entitled to vote at this meeting and the record holders of such shares entitled to one vote for each share held as of the record date. The presence in person or by proxy of the majority of shares of Hyster's common stock outstanding and entitled to vote at the meeting are required for quorum. Represented at the meeting by proxy are with regard to each of the proposals at least 105,310,383 shares, which is at least 80% of the total number of shares outstanding and entitled to vote. The proxies may be voted by Scott Hill, Jonathan Short, RME. Based on this information, a quorum is present and we can now proceed with the business of the meeting as set forth in the notice of the annual meeting and proxy statement. Thank you, Andrew. The notice of annual meeting and proxy statement notes 4 items of business that will be voted on by the stockholders. It is now 8 37 am on May 13, and I'm formally going to declare the polls open for voting on the proposals as described in the proxy statement. The Board of Directors recommends that you vote for each of the proposals except for the shareholder proposal regarding the preparation of the sustainability report, which the Board of Directors recommends that you vote against if properly presented. The first item on the agenda is the election of Charles Crisp, Jean Marc Feneri, Lord Hague of Richmond, Brett Hatfield, Brett Salerno, Jeff Sprecher, Judith Spreiser and Vincent Tisi to serve as Directors of Intercontinental Exchange. If elected, they will serve a 1 year term that will expire at the 2017 Annual Meeting of Stockholders or until his or her earlier resignation or removal. You can find more information about each of the director nominees in the proxy statement and the Board has recommended that you vote for each of these nominees. Is there any discussion in the room regarding the director nominees? Great. The polls are now open for voting on the first item and which is the election of directors. The shares represented thereby shall be voted in accordance therewith with respect to the election of directors. That's a complicated ugly sentence. I guess we got that one right. Jonathan is our General Counsel, who by the way, so he's probably responsible for that sentence. We'll now proceed to the next item on the agenda. The second item on the agenda is the advisory vote on our executive compensation as set forth in the proxy statement. The Board recommends that you vote for the advisory resolutions approving the compensation of our executive officers, which provides as follows: resolve the holders of common stock approve on an advisory basis the compensation of our named executive officers as disclosed in the proxy statement pursuant to Item 402 of Regulation SK, including the compensation discussion and analysis, the compensation tables and the related disclosure. Are there any questions regarding the advisory vote on compensation? The management team, you should stay seated. Great. Thank you. The polls are open for voting on the second item on the agenda, the advisory resolution approving the compensation of executive officers. Jonathan? As proxy representing shares of the meeting, I hereby vote the shares that I represent through proxy and authorize the delivery of a ballot and corresponding proxies to the Inspector of Elections, so that the shares represented thereby shall be voted in accordance therewith with respect to the advisory vote on executive compensation. Thank you. The 3rd item on our agenda is the ratification of the appointment of Ernst and Young as independent registered public accounting firm for fiscal year 2016. As set forth in the proxy statement, the Audit Committee of our Board of Directors has appointed Ernst and Young as our independent registered public accounting firm for the fiscal year ending December 31, 2016. The Audit Committee and the Board recommend that you ratify this appointment. As mentioned earlier, representatives of Ernst and Young are here with us today to respond to questions related to the ratification of their appointment. Any questions regarding the appointment of Ernst and Young as the independent registered accounting firm? Great. The polls are open for voting on this 3rd item on the agenda, the ratification of the appointment of Ernst and Young as independent registered public accounting firm for fiscal year 2016. As proxy representing shares of the meeting, I hereby vote the shares that I represent through proxy and authorize the delivery of a ballot and corresponding proxies to the Inspector of Elections so that the shares represented thereby shall be voted in accordance therewith with respect to the ratification of Ernst and Young. Great. And the 4th and final item on our agenda is a vote on the stockholder proposal regarding the preparation of the sustainability report, if properly presented. The proposal reads as follows: Resolved, shareholders request InterContinental Exchange, Inc. Issue a sustainability report describing the company's present policies, performance and improvement targets related to key environmental, social and governance, in other words, ESG, risks and opportunities. The report should be available on the company's website by November 1, 2016, prepared at a reasonable cost and omitting proprietary information. As required by the Securities and Exchange Commission, the proponent of the stockholder proponent or its representative will present the stockholder proposal and we're going to allow for this presentation. Is there a representative of Calvert Investment Management in the room today? Great. Thank you. So I'm going to turn the meeting over to Stu Dallheim, did I say that right? Yes, you did. Thank you. Who's a representative with Calvert Investment Management. Great. Thank you. Members of the Board, management, fellow shareholders, I'm here to move item number 4 on Calvert's request for sustainability report. As ESG issues have increasingly become an important element in investment decision making, more and more companies around the world are producing sustainability reports. 80% of the S and P 500 produced a report in 2015, up from 20% less than a decade ago. Companies are issuing these reports because investors find value in ESG information. There is investor demand for this information. The reporting process also helps companies measure and manage important risks, important issues for the companies and their stakeholders. Other capital market participants are also taking action, including, as many of you here know, the World Federation of Exchanges. The WSE has issued guidance for its members on ESG disclosure standards. A number of the largest exchanges have actively communicated with their issuers about the value of ESG disclosure. We have appreciated that ICE has been a member of the WFE Sustainability Disclosure Working Group and the Sustainable Stock Exchange Initiative. However, we would like to see more active participation from the company. There is a clear leadership opportunity here to help encourage ESG disclosure on the part of issuers, and this is perfectly consistent with ICE's core values of transparency and risk management. Disclosure can help companies on your exchange better manage challenging issues and attract long term capital. Let me close by saying I very much appreciate the frank and open dialogue I've had with Andrew, Octavia and Carol. I appreciate also the recently produced Corporate Responsibility Report. I think it is a step in the right direction and certainly something to build upon. I've shared my perspective about the recent report with your colleagues and have also encouraged greater participation in the sustainable stock exchange initiative. And I look forward to further dialogue. Thank you for your time and attention. Great. Thank you, Mr. Dahl. I appreciate your engagements and the comments Calvert and the work that you've been doing with our colleagues. I want to mention the management as you mentioned, the management team and the Board of Directors are committed to corporate responsibility and we recognize the importance of environmental, social and governance issues. And as Mr. Don had mentioned, we published their 1st sustainability report in March of this year that details many of the actions related to responsibility, governance and environmental initiatives. And we've put that report on our website if you're interested in seeing it. I'd also like to point everyone to the fact that the opinion statement of the Board of Directors in the proxy suggests that you vote against the shareholder proposal and take a look at the work that we're already doing. Are there any questions regarding the shareholder proposal? Great. Thank you. Anyone would like to vote in person, Mr. Rodri can give you a blank proxy card. Is anyone prepared to vote in person? Great. The polls are open for voting on this 4th item. And Jonathan? As a proxy representing shares of the meeting, I hereby vote the shares that I represent through proxy and authorize the delivery of a ballot and corresponding proxies to the Inspector of Elections so that the shares represented thereby shall be voted in accordance therewith with respect to the stockholder proposal. Thank you. So that concludes the actual voting on proposals on our agenda and it's 8:45 am according to my clock on May 13, 2016. And so the polls on these matters are now officially closed. We're going to announce the results. Mr. Certikowski, do you have totals that you can give us? So before reading the book totals, I would like to state that we have a sworn affidavit of distribution from Broadridge Financial Solutions. The affidavit states that Broadridge caused the mailing of the information relating to the annual meeting on March 29, 2016. The information was delivered to the stockholders of record as of the close of business on March 15, 2015 I'm sorry, 2016. The voting results are as follows. Each director nominee received more votes cast for such nominees election than votes cast against such nominees election. And therefore, Charlie Crist, Jean Marc Feneri, Lord Haegel Richmond, Fred Hatfield, Fred Salerno, Jeffrey Spector, Judy Streisor and Vince Ocicier are elected as Directors of the company. Also, 95,857,922 shares were voted in favor of a second item on the agenda, which is the affirmative vote of the majority of votes cast for or against the advisory resolution on executive compensation, so the advisory resolution on executive compensation is approved. Also 104,162,536 shares were voted in favor of the 3rd item on the agenda, which is the affirmative vote of the majority of votes cast for or against the proposal to ratify the appointment of Ernst and Young as independent registered public accounting firm for the fiscal year ending December 31, 2016, so the appointment of Ernst and Young is ratified. And 26,133,553 shares were voting in favor of the 4th item on the agenda, which is not the affirmative vote of the majority of votes cast for or against the stockholder proposal regarding the preparation of a sustainability report, though the stockholder proposal is not approved. The final vote results will be filed with the SEC on the current report on Form 8 ks in the next few days. The certificate and report of the Inspector of Elections, which contains the vote totals, will be filed with the minutes of this meeting. Thank you, Andy. I'd now like to ask if we can adjourn the formal port of the meeting. I move that the meeting be adjourned. I second the motion. All in favor, say aye, please. Aye. Okay. Why do you do what we have here? Any opposed? Say no, please. So the annual stockholders meeting is now adjourned and that give you a quick report on the progress of ICE over the last year. And then I'm going to open the floor to questions. Thank you, and then I'm going to open the floor to questions. While this meeting is fairly procedural, I want to ensure our stockholders that you understand that our focus is on creating shareholder value by serving our customers and we have built that into our culture at ICE. It's the foundation from which we make decisions around governance and strategic initiatives. As a result of this focus, 2015 was our 10th consecutive year of delivering record revenues and record earnings, meaning that each and every year as a public company, we've delivered growth, including through the financial crisis and the subsequent recovery. On a compounded annual growth rate that equates to earnings growth of 20% per year over that 10 year period. Our 2015 consolidated revenues, less transaction based expenses were $3,300,000,000 which is up 8% over the prior year. Adjusted earnings per share from continuing operations rose 26% over 2014. We also generated operating cash flow of $1,300,000,000 and returned nearly $1,000,000,000 to our shareholders through dividends and share buybacks. And we invested in the next leg of our company's growth. In December, we completed 2 acquisitions, Interaction Data and Trayport, and these transactions are enabling us to offer new services that support the evolving needs of our customers in the global financial markets. Our performance was driven by our diversification across markets, clearing and data. The New York Stock Exchange trading and listings revenue increased at a healthy rate, making it the best year in the Exchange's history. We also delivered growth and data services, DDS clearing and our global commodities futures complex. We reached a number of milestones in 2015, including our 19th consecutive year of record volume across our benchmark Brent crude oil futures and options markets, Revenues for data service and CDS clearing reached record levels. The New York Stock Exchange led all exchanges in global proceeds raised for the 5th consecutive year. Amid all this growth, we continue to drive expense savings in NYSE's trading and listings business with our synergies on track while we enhance operations with this very cash generative business. Last week, we also reported on our Q1 of 2016 results, which again featured record revenues and adjusted earnings. As this is the 1st full quarter, including our recent acquisitions, our year over year figures reflect comparisons against adjusted pro form a Q1 2015 results. The Q1 2016 adjusted earnings per share grew 19% on first quarter revenues of $1,200,000,000 up 5% over the Q1 of the year before. We generated $600,000,000 in operating cash flow. We paid $100,000,000 in dividends and we significantly reduced our leverage in the Q1. We expanded our adjusted operating margins by 5 points and we lowered our full year expense guidance based on strong synergy achievements. In our earnings call remarks, we also laid out a number of areas of growth for 2016 ranging from our data business to our commodities and equity markets to our listings businesses. I'm pleased to say that after 10 years as a public company, InterContinental Exchange remains the growth leader in the global exchange sector. We are expanding into global data and other markets. Our commitment to growing each of our businesses by working with our customers and continuously evolving is to meet their rapidly evolving needs. I would like to conclude these remarks by recognizing the InterContinental Exchange Board of Directors for their dedication and the hard work throughout the year. This is a Board that we place a lot of demands on. They're very engaged, very deliberate and shareholder focused, and their efforts have produced strong results and an excellent track record of corporate governance. I also want to take a moment to recognize 3 directors who are retiring from our Board at this meeting, and they have served our company exceedingly well, and that's Sir Bob Reid, Sir Colin McCarthy and Doctor. Terry Martell. We benefited from Sir Colin's firsthand experience in overseeing markets and his thoughtfulness in approaching regulatory reform implementation. Doctor. Martel is a distinguished professor of finance at Baruch and I'd also say that he's a continuous student of markets and this has helped support our evolution into a much larger company. And Sir Bob's service has been invaluable and tireless. I first met Sir Bob in 2,001 when we were working to acquire the International Petroleum Exchange, where he was the Chairman. Though ICE was only a 1 year old company at the time, he shared our vision for globalizing markets and that has forever changed the path of this company and he's put an indelible mark on the energy markets around the world and we recognize and thank him for that. And finally, but certainly not least, I want to thank our shareholders for your continued confidence in us. We appreciate the dialogue that we have and we strive to earn your continued support by delivering best in class results. I'm going to open the floor up to questions to shareholders, but in doing so, I would ask that you reference the rules of conduct. This question and answer session is being webcast. So if you'd like to ask a question in public, please step forward to the microphone in the center and introduce yourself and speak clearly because people are listening via webcast and want to hear you. The Board of Directors and the management team and I will also mingle through the audience following the adjournment of this meeting and will allow those in the room to ask more private questions of us if you'd like. I'll now open the microphone if anybody would like to ask a public question, please. Frank, could you introduce yourself as well? Fran Blum, Brazil, many commodities, many problems in government. How does this now affect ICE? That's a very good question because we look at it through that exact same lens. It's a resource rich economy, which tends to cater to the kinds of services we provide for investors and traders, but yet it's very difficult for people to navigate. We bought a 12.5% interest in SITIP, which is an over the counter clearing and registration platform for loans and fixed income instruments. And we actually have a Board of seat on that company that Dave Boone, our Chief Strategy Officer, fits on. We recently, through that board agreed to merge that company into BMF Vovespa, that which is the large stock exchange in Brazil. And assuming that that deal goes ahead, which is subject to regulatory approval, we're going to be receiving a lot of cash out of that deal and we'll be sent effectively by virtue of that transaction reducing our footprint in Brazil. And so then we'll reevaluate how we operate with that new company and how we want to think about approaching Brazil. But we'll have a slightly different footprint in about we expect 9 months to a year before we really have full knowledge of whether or not that regulatory approvals will be given. Yes. Thank you. Any other questions? Please. James Rothenberg, I'm the Managing Member of Complex Enterprises LLC, and I hold the proxy for that company. Within the 2 minute limitation, I have a series of questions. But since I'll try and take up as little of your time as possible. First, I want to congratulate you for the deal that you did not make for the reasons that you gave forward. Often the best deal that you make is the one that you don't make. So you and your Board of Directors and management team deserve great deal of credit for not proceeding. Last year, I talked about intentional interference with systems, a new subject and a related subject is natural interference. So what I'm thinking about is a solar flare, which has been predicted to come. It literally wipes out all communications in the world. And the question is, do you just declare force majeure and stop or do you use something more? Is there some alternative system? And that is a segue into a very extensive discussion in your 10 ks about procedures for interruptions. And my question there is, have you shared that with FSOC? Because FSOC has made it clear that they've taken the burden off the banks and placed it directly on the exchanges and the clearing agencies. And you also shared your plan with Congress. The third is a follow-up to the prior question, and that is China. The growth inside of China, the most dynamic economy in the world, are there plans to expand into the Shanghai or other internal exchanges as opposed to Shanghai? Thank you. Sure. Well, starting with interruptions, as the world has become more digital and certainly trading, clearing and data dissemination is increasingly digital, the standards of care that we place on ourselves and that government places on us are increasing. ICE in the United States is considered one of the systemically important companies under FSOC and has a direct relationship with senior members of government, whose real interest in care is the continued efficacy of our platforms, both the technology issues, as you point out, and also cybersecurity issues. In other words, a third party actor trying to do something nefarious on those. And so we take it very seriously. We have a lot of backup plans and strategic plans, some of which are public and some of which are not public for security purposes. But I will tell you that is something that we take quite seriously. We do annually now drills with the management and employee team that are quite serious and role play a number of scenarios to make sure that our procedures are something that we're all familiar with and are workable. But other than that, I don't want to give you any specific details because much of which is confidential, but I will tell you it's a high priority to me and our regulators. China is a difficult country to crack in financial services and we thought long and hard about how we would gain from the growth of China and ultimately concluded that we should launch a new exchange in clearinghouse in Singapore. And the reason we did that is that we were a beneficiary that a lot of Chinese companies that are forced to hedge, particularly those that are using energy and commodities, met us in London. In other words, the Chinese came to us. And we sat in London, which benefits from a time zone that can sort of unite the West and the East and the Queen's Law, which is understood around the world and a very good regulatory regime that's respected around the world. And so the Chinese were comfortable meeting us there. But as China continues to grow, we felt that we had to get to Asia and we chose Singapore. The reason that we chose Singapore, which is obviously not China or Hong Kong, was that our clearinghouses exist in a bankruptcy regime and they're really there to protect people from bankruptcy. And when times are good, you can put a clearinghouse anywhere, but when times are bad and there's great stress, you need a rule of law that people that are holding risk will understand and appreciate. And we felt that Singapore was really the most developed in terms of its bankruptcy regime. So while we're not directly in China, we do see a lot of Chinese capital that finds its way now into Singapore. And it gets us at least one step closer and in the same time zone as much of Mainland China. Over time, we hope that we can continue to move closer and then ultimately into China. But at this moment in time, the laws that really govern trading and the access for Western companies doesn't really isn't really conducive for us to be there right now. So thank you. Those are an interesting question. Anybody else? Well, great. Well, thank you all. As I mentioned, we're going to conclude the meeting, shut off the webcast, but we'll stay behind to say hello to everybody and answer any questions you'd like to have in private. Again, we appreciate your support. Thank you very much.