AGM 2014

May 16, 2014

Thanks for your attendance. I'm Jeff Sprecher. I'm the Chairman. I'm the Chief Executive Officer of ICE. And it's my pleasure to welcome you to our 14 Annual Meeting and I'm going to now call the meeting to order. Before we get started, let me note that this meeting is being webcast, which is what's going on over here. Also to comply with legal requirements, the voting process for the annual meeting is rather formal. And as a result, I'll be reading from this script as you can tell for the formal portion of the meeting. After the announcement of the voting results, I'm going to give a brief report on the company's business and the other directors and I together with the company's officers and the representative Ernst and Youngs will be available to answer questions from people in the room after the meeting. Again, for those that haven't been with us before, I'd like to meet all of our shareholders and people that have come here today. So after the meeting, I'll stay and I'm going to introduce our Board and management team, and they'll stay as well. And so if you have any specific questions or want to some of the names behind the faces, we're happy to mingle afterwards. So now let me introduce our other directors and the officers of ICE who are here with us today. I'd like my colleagues to stand up just so people can see who you are. So starting with our directors Charles Crisp is here. Jean Marc Fanari is here from Paris. Fred Hatfield is here. Sylvain Hetes has flown in from London. Jean Michael Hessels has flown in from Amsterdam. Doctor. Terry Martel is here. He just came down from New York, so that's a big deal. Sir Colin McCarthy is also here from London. Jim McNulty is here. Sir Bob Reid has also come from London. Fred Salerno, our Lead Independent Director by the way. Bob Scott. Judy Spreiser is the Director. Vincent Tisi. And I'd now like to and that's our Director and Director nominees. I'd now like to introduce my colleagues in management. Chuck Vice is here, who's our President and Chief Operating Officer. He's been my partner in building the business from its inception actually. Duncan Niederauer is here. He's President of ICE and he's the CEO of New York Stock Exchange. Scott Hill is here. He's our Chief Financial Officer and he's my cohort on my our earnings calls if you ever listen to those. David Goon is here. He's our Chief Strategic Officer. Tom Farley is here. He's the Chief Operating Officer now at the New York Stock Exchange. Jonathan Short is here. He's our General Counsel. He's the lawyer in the room. If you act up, he'll be the ones that read the rules. Kelly Loeffler is here. She's Senior Vice President. She's in charge of Corporate Communications, Marketing and Investor Relations, often somebody you'll talk to if you call our office about our stock. Doug Foley is here. He's our Senior Vice President of HR and Administration. Andrew Certikowski is a Senior Vice President. He's an Associate General Counsel. He handles many of our SEC and shareholder related matters. So in the course of a year, you may also talk to him. Also in attendance here are our colleagues from Ernst and Young, who are going to vote on their continuing role today. Carol Lloyd is here. So Carol, there she is. Ken Marshall, Russ Carruthers and John Marra. That's Ernst and Young. So anyway, I'd now like to appoint Andrew Sertakowski, who's right here, Rodrigue, I can see there he is, is with Broadridge and he's been appointed as the Inspector of Elections for this meeting to ascertain the number of shares of ICE's common stock outstanding and to ascertain the voting power of each. He's going to determine the shares that are represented at the meeting and the validity of the proxies and ballots. He's going to count all votes and ballots and he's going to certify the number of shares represented at the meeting and vote for each of our proposals. The Inspector of Election has taken and signed an oath to faithfully execute his duties with respect to his impartiality and according to the best of his ability. So the record date of our stockholder list, affidavit of distribution, proxy vote report and our oath of Inspector of Elections will be available for inspection throughout the meeting at the registration table, which is upfront. In addition, copies of the notice of annual meeting and proxy statement relating to this meeting are also available at the registration table upfront. Only stockholders of record as of March 18, 2014 are entitled to vote today at this meeting. Only the securities that can be voted will be ICE's common stock, which will vote together as a single class on the matters presented to stockholders that were in our proxy statement. I'd now like to ask Mr. Certikowski to read our forward looking statement disclosure. I see we've given him a microphone. Yes, that's moving up the chair. The matters discussed at this meeting may include certain 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 differ materially are contained in the section captioned Risk Factors in our Annual Report on Form 10 ks and elsewhere in NYSE's filings with the Securities and Exchange Commission. We encourage you to read those filings. Great. Thank you, Andrew. Based on the fact that there are no shares voting in person at annual meeting, I have the following information with regard to the number of shares that are going to be voted today. As of the record date of March 18, 2014, there were 115,000,000 94,956 shares of ICE's common stock outstanding and entitled to vote at this meeting. Such shares constitute all the shares of ICE's capital stock entitled to vote at the meeting and record holders of such shares are entitled to one vote for each share held on the record date. The presence in person or by proxy of a majority of the shares of ICE's common stock outstanding and entitled to vote at this meeting are required for a quorum. Represented at the meeting by proxy with respect to each of the proposals are at least 95,400,000 shares, which is at least 82% of the total number of shares outstanding and entitled to vote. These proxies will be voted on by Scott Hill, right, by Jonathan Short and by Andrew Certikowski. Based on this information, a quorum is present and we can proceed with the business of the meeting as we set forth in the notice of annual meeting and proxy statement. The notice of annual meeting and proxy statement notes 4 items of business to be voted on by the stockholders. It's now 8:36 a. M. On May 16 and I'm going to formally declare the polls open for voting. That's Eastern Time by the way for those on the web. On the proposals as described in the proxy statement. The Board of Directors recommends that you vote for each of these proposals. The first item on the agenda is the election of the 14 directors that are specified in the proxy statement. If elected, they will serve a 1 year term and they will expire at the 2015 Annual Meeting of Stockholders or until his or her earlier resignation or removal. You can find more information about each of these director nominees in the proxy statement and the Board has recommended that you vote for each of the nominees. So I'm going to entertain a motion at this time with the following resolution to be adopted by stockholders. Resolved that Charles Crisp, Jean Marc Fonari, Fred Hatfield, Sylvain Jeffes, Jean Michael Hessels, Terence Martell, Sir Colin McCarthy, James McNulty, Sir Robert Reid, Frederick Salerno, Robert Scott, Jeffrey Sprecher, Judith Spreiser and Vincent Teasey are hereby elected as Directors of InterContinental Exchange Group Inc. To serve a 1 year term expiring 2015 at the Annual Meeting of Stockholders. Is there any discussion regarding any of these director nominees? Great. Is there a motion to approve this resolution? As Thank you guys. It's a bit like a high school play, isn't it? Not well rehearsed. Yes, not very well rehearsed. Since no stockholders are voting in person, I now declare the polls is closed to the election of directors and we're going to proceed to the next proposal. 2nd 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 resolution approving the compensation of our executive officers. At this time, I'll entertain a motion that the following resolution be adopted by our stockholders. Resolved, that the advisory resolution to approve the executive compensation for ICE's named executive officers as specified in the proxy statement is hereby approved. Are there any questions regarding the advisory vote on compensation? Great. Is there a motion to approve this resolution? I'll mention to those on the web that my two colleagues have read parts without microphones. But you didn't miss anything. Since no stockholders are voting in person, I now declare the polls closed as to the second proposal. The 3rd item on our agenda is the ratification and appointment of Ernst and Young as independent registered public accounting firm for fiscal year 2014 and as set forth in the proxy statement, the audit committee of our Board of Directors has appointed Ernst and Young as our independent registered accounting firm for fiscal year ending December 31, 2014. The audit committee and the Board has recommended that you ratify this appointment. As mentioned earlier, the representatives of Ernst and Young are with us today sitting in the back room row here and they'll respond to any questions related to their ratification of their appointment. At this time, I'm going to entertain a motion that the following resolution be adopted by stockholders. Resolve that the appointment by the Audit Committee of the Board of Directors of the firm Ernst and Young as independent registered public accounting firm for the fiscal year ending December 31, 2014 is hereby approved and ratified. Are there any questions regarding the appointment of Ernst and Young as our independent registered public accounting firm? I see Ernst and Young sitting on their hands, so they are not going to ask about it. Can I have a motion to approve this resolution? As proxy representing shares at the meeting, I As proxy representing shares of the meeting, I second the motion to hereby note the shares that I represent the proxy and authorize delivery of And since no stockholders are voting in person, I'm going to declare the polls as being closed as to the ratification of Ernst and Young. 4th and final item on our agenda is the approval of an amendment to ICE's certificate of incorporation to change our name from InterContinental Exchange Group to InterContinental Exchange Incorporated as described in the proxy statement. The Board recommends that you vote for our name change. At this time, I will entertain a motion the following resolution be adopted by our stockholders. Resolve that the proposal to amend the amended and restated certificate of incorporation to change our name from InterContinental Exchange Group Incorporated to InterContinental Exchange Incorporated has specified in the proxy statement is hereby approved. Are there any questions with regarding this proposed name change? Is there a motion to approve this resolution? As proxy representing shares of the meeting, I still move. As proxy representing shares of the meeting, I second the motion and hereby results of the voting. And Mr. Certikowski, do you have the vote totals on these proposals? Yes. Before reading the vote totals, I'd like to state that we have a sworn affidavit of distribution from Broadridge Financial Solutions Inc. The affidavit states that Broadridge calls the mailing of the information relating to the annual meeting on March 31, 2014. The information was delivered to the stockholders of record as of the close of business on March 18, 2014. The voting results are as follows. Each director received a minimum of 75,300,000 shares voted in favor of their election, which in each case represents the majority of the shares voted for the election of proposal 2, which is the affirmative vote of the majority of votes cast for or against the advisory resolution on our executive compensation, so the executive compensation is approved. 93,994,282 shares were voted in favor of proposal 3, which is the affirmative vote of majority 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, 2014 and 95,148,260 shares were voted in favor of proposal 4, which is the affirmative vote of all outstanding shares of our common stock entitled to vote at the meeting the name change is approved. The final vote results will be filed with the SEC on a 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. Great. Thank you, Andrew. We'd now like to adjourn the formal portion of the meeting. I move that the meeting be adjourned. I second the motion. All in favor say aye please. Everyone can participate now. Thank you. Any opposed? Great. The Annual Stockholders Meeting is now adjourned and that concludes the announced item for the meeting as specified in the notice of annual meeting and proxy statement. And I now would like to report to you a little bit on the progress of ICE over the last year and then we'll adjourn the meeting and come mingle. We're already well into 2014, but I want to take a couple of minutes to review the 2013 results since this is our 2013 annual meeting. It was a record year across virtually all key metrics in our country. We achieved record revenues, record trading volume and record adjusted earnings for the 8th consecutive year and we've grown every single year since we went public on the New York Stock Exchange in year 2,005. In 2013, ICE's consolidated revenues less our transaction based expenses were $1,700,000,000 which was an increase of 23% compared to 2012. Our adjusted net income, which excludes certain items which are not reflective of our core business performance, rose 16% for the year. Our performance was driven by our global commodity futures markets as well as demand for trading and risk management, which continues to increase. We achieved record volumes across our Brent crude oil and refined oil contracts and several of our interest rate and agricultural contracts. We introduced approximately 150 new energy contracts and ICE's benchmark contract in Brent Crude Oil reported its 17th year of record volumes. Also in 2013, the New York Stock Exchange led again all exchanges in capital raising and initial public offerings, which marked the 3rd consecutive year of that type of global leadership. In 2013, the New York Stock Exchange raised $59,000,000,000 in proceeds across 157 transactions. Driving this outperformance were 30 new technology listings, which represented 54% of all U. S. Technology IPOs. What makes these overall results even more notable is that our team delivered this performance while we were executing on multiple strategic initiatives such as establishing the foundation for our long term growth. We acquired the majority stake in ICE index, which extended our European natural gas and power markets. We also seamlessly transitioned the light futures markets, including its entire interest rate complex to ICE Clear Europe. We provided leadership in financial reform solutions for our customers including building a swaps data repository, a swap execution facility and tremendously expanding our clearing solutions. And in November, we completed the acquisition of New York Stock Exchange Euronext, NYSE Euronext and announced that our acquisition of the Singapore Mercantile Exchange was going to go ahead. As you can see, ICE accomplished a great deal in 2013 including record results, solid execution on strategic initiatives and industry leading returns to our shareholders. As we approach now the halfway point of 2014, we're on track to achieve these objectives that we established at the completion of our NYSE transaction. We demonstrated that on our Q1 earnings call and where we announced that we had double digit growth in earnings and cash flow. In the 5 months since the completion of the deal, we've achieved over 40% of our run rate synergies. And by the end of the year, we expect to have taken actions to achieve 70% or $350,000,000 in annual savings increasing the efficiency of our global operations. We delivered operating margins in the Q1 of this year up at 50% up from our pro form a 45% at the closing of the deal. And we're well positioned to complete the IPO of Euronext in the coming weeks as we continue to delever and repurchase shares of our common stock. As you can see, there's a clear roadmap for building this strong foundation of progress and we will continue to report to our shareholders on our progress. It's notable that our company was once considered an upstart and it now produces operating income that exceeds the largest exchange by market cap. We've delivered these results amid a very challenging quarter for volumes and I'm very proud of the speed and the accuracy at which we're building value in the company and with which significant upside in revenue and cost savings are yet to come. In closing, ICE is an established leader in the global exchange sector. We operate leading global network of exchanges in 6 clearinghouses and we serve 9 asset classes. Our footprint across the U. S, Canada, Brazil, the U. K, Continental Europe and Asia positions us to service customers in the regions where they want to conduct their business. Our leadership in clearing is a competitive advantage as market participants increasingly are seeking to manage risk. And we're well positioned to deliver double digit earnings growth and build on our track record of successful M and A and continuing to create long term value for our shareholders. So I'd like to recognize my colleagues on the Board of Directors today for the leadership and the hard work they did throughout this year and your efforts have really helped us produce strong results and an excellent record of corporate governance. And I want to thank all of our shareholders, those that are here today and those who are listening on the web for their continuing confidence in the company. And with that, I'd like to thank you. And at this point, I'm going to shut my binder, close the formal present part of the meeting. And sure, I'm happy I have a question from the audience I'm happy to take. Yes, that would be helpful. Thank you. Mr. Chairman, my name is John Stepek and I'm a shareholder in street name. And I've been with Mr. Niederhauser 3 years and he did very well. And I hope you continue. Thank you. My question to you, this Michael Lewis, high speed trading, how are you maneuvering around that? Are you losing business because of him? It's a very good question. First of all, even prior to the publishing of that book, we took a look at the equity markets and started to make a number of public comments that we felt the markets had moved too far towards technology to the point that they become fragmented and complicated, which introduced a lot of risk into the system. And my concern really was preventing another flash crash or major technical problem that could come due to complexity. And so what we've been doing since ICE and NYSE got together is we've been trying to look at our best practices together and take some of the techniques that we've used in ICE's markets and see if we can introduce them into the New York Stock Exchange markets. And so along that way, the first thing that we're doing is we're going to reduce the number of order types that we have in the market. There's a lot of order types that are quite technical and they're used to help interface with technology including high speed trading. We're also looking and we're going to reduce the number of order types just to make the market simpler. Think by making the market simpler, we take risk out of the system, which is what I'm trying to do. Second thing that we're doing is we've been working very, very closely with our regulator to examine how we co locate people in our facilities, how we allow them to connect to us. We've got a new technology team in that actually we've hired from high speed trading firms, so that they can help educate us as how these high speed traders are using our platform and we want to continue to evolve it so that we protect our customers and protect high speed traders themselves from the risk of runaway algorithms. So there's a it's a work in progress, if you listen to what I'm saying. But I do think that there's more we can do unilaterally. I also think our industry needs to do more to make it a safer place to do business. One of my biggest concerns is that if you actually look at the shareholding of people between age 3050, average Americans between age 3050 that are in their prime earning years that should be putting money away for their retirement and for their future savings have tended to put less and less money into the U. S. Stock markets, particularly since 2009. And I think that's sad. And I think it's important that we attract American investors to invest in corporations that are listed on our public exchanges that provides job and capital for our companies to grow and it provides an opportunity for savers to participate along with the growth of American business. And so I think we really need to continue to do some things to improve the confidence by average Americans in our markets. And that's really, in my mind, what's driving it. Let me make one last point is that this company was a company that many people here in this room started not too many years ago. And when we went public on the New York Stock Exchange in the year 2,005, it was one of the highlights of my life. It was it provided capital for this company to really grow. As I mentioned in my prepared remarks, we've become the largest revenue generator in our entire sector. And we could have never done that without access to capital. And I'm thrilled and privileged that we're listed on the New York Stock Exchange. Being a public company comes with a lot of obligations, including holding meetings like this and putting ourselves out in front of the public. But the trade off for that is the best access to capital the trade off for that is the best access to capital markets in the world that have allowed us to grow our business in partnership with people like you and our shareholders. So it's a privilege to be a public company, if not and I think it's incumbent on the New York Stock Exchange to take leadership and continue to attract investors and companies to go public. And it's in that vein that we're really focused on this high speed trading. I think there are some bad practices there. There's a lot of regulatory action going on in the background. I hope that those actions will help bring confidence back as well as whatever we can do unilaterally. But I thank you for that question because it's top priority for us right now. Great. Anyone else? Yes, please. Let me ask anyone to come back. Could you grab the mic just because we're on the web? 1st, thank you for your work. We appreciate it. Good morning. It's great. So I have a question around the situation in Ukraine. So big natural gas absorber, Obviously, their preferred provider has some social challenges, shall we say. ICE has a facility or a business entity you mentioned briefly that's in Europe that focuses on natural gas. I'd be interested to see if you have an idea or your vision for a potential way to maybe become involved as a way to make a bug over there? Yes. Sure. It's a very good question. We when we started ICE in the early 2000s, we became very quickly pretty dominant place for trading of natural gas in the United States. And I came out of the electric power industry as did Chuck Weiss, our President. And natural gas the United States became the marginal fuel for making electric power. So we were pretty well versed in the gas business. And we both had this view that the natural gas business was going to become more global quickly. And if you think about Europe and the growth of China, a lot of it was very much coal based, electric power or nuclear based in the case of parts of Europe. We just had the view that natural gas was going to become a marginal fuel for them. So we for the last decade or more have been investing around the world in natural gas business. We bought this small company, it was based in Amsterdam called Endex, And they traded a natural gas contract that's called the TTF contract. But it basically what we've been doing with Endex is trying to build a natural gas marker, in other words, a reference price for natural gas in Continental Europe. There was not an obvious there was not there has not been a reference price, a single point where you could say what the price of natural gas is in Europe. But we felt TTF was on the verge of becoming that, which is why we bought Endex. Since we've acquired the business and moved it onto our technology and put our sales force around it, we've really grown that business. And I think the events of Russia are contributing to that because I think Europe through its own actions is thinking about its own energy independence now much as the U. S. Has been thinking about our energy independence. And I think that's going to be good for this TTF contract. We also think that over time as gas becomes a more on ships. And we think that the market is going to ultimately become a global market for on ships. And we think that the market is going to ultimately become a global market for natural gas where these prices around the world will be related. It's quite interesting if you look at a map of the world and if you look at the price of natural gas on a map, what you'll see is that the United States is an extreme outlier that we have incredibly low price of natural gas relative to everyone else in the world. Markets are trying to figure out how to solve for that. The good news for us as Americans, many of us in the room as Americans are people are bringing businesses, energy businesses back to the U. S. And I think that's probably part of our growth relative to the rest of the world is this luxury we have of low cost energy right now. One last thing I would mention to you is that the trading of energy is and the movement of energy is a truly global business, and we've been working closely with the administration, the U. S. Administration and also with our U. K. Regulators over who has access to our markets because one of the political remedies that's going on right now is putting sanctions on various people and operatives coming out of some of these countries. And we want to make sure that they're not using trading markets as a way of moving capital. So we've been pretty intimately involved in looking at our customer base and making sure that we've got the right people on our platform, which is a new challenge for us, but one that's quite interesting in terms of being part of the public policy. Yes, please. Yes. I miss the New York Stock Exchange. I've been going there for the annual meetings for the last 3 years. Do you have in mind to go back there from one annual meeting or alternate between Atlanta and New York City, please, pick up in New Jersey. It's a good question. Let me just first of all, I don't know the answer to it because we haven't even we're just trying to get through this meeting. We haven't thought about yes, it's something well, now that you've put it on the now that you've put this question on the table, I suspect we'll talk about it. Let me just talk a little about the New York Stock Exchange itself, which is we have the luxury now of having the New York Stock Exchange be part of a much bigger company that has greater access to capital. And so what we've done is and you may not have seen it, but we've basically moved most of our colleagues that work in that building in the upstairs floors above the stock exchange that you see on TV. We've moved all those people out of there and to a nearby location, and we're completely rebuilding that building. We're going to gut it and really make it quite a nice modern interesting place to work. And there's a lot of excitement about that because it's a building that has been around a long time. It's obviously iconic. We want to keep it and own it. We love the iconic nature of it. But we also want it to function in a world where we're much more fast paced and we need good connectivity and good employee interaction. So we're going to make it nice. And as long as we're doing that, we're going to make the public areas quite nice. Duncan Niederauer and his colleagues had already started on an expansion of the floor, which is an area that's behind what you see on TV. I took a tour of it in about a week ago and it's beautiful. So we're going to you're going to actually see the stock exchange itself, the floor based portion of it become bigger and nicer. And we're going to put we're relocating people and we're going to put more people in that area to, again, collaborate around trading. So there's a lot going on in that building, and I suspect we're going to want to show it off when we're done. It's on TV with 47 news organizations 24 hours a day, but nonetheless, it's a pleasure to be down there. And when you're there, there's something quite special about it. So we definitely are going to want to show off what we've been able to do to it. So anyway, I'll take your comment under advisement and we'll talk to the Board. Yes. I've also been told we should pay for parking, so which is something we had not thought about as well. Any other questions? All right. Well, for those on the web, thank you for joining us. And for those in the room, I'd like to come by and say hi and mingle. And please introduce yourself to my colleagues too if you'd like to meet them. Thank you all.