Market Overview

Two Exchanges To Benefit From Reforms


While the recent financial reform bill is broadly sweeping, a few winners are likely to emerge. One of the more interesting features in the massive bill involves various derivatives. For the first time, most derivatives including foreign exchange and commodities contracts will need to be traded using third party firms. In the previous system, transactions were handled by the seller and buyer. This new requirement will be a boon for two exchanges that handle back-office clear functions and trade processing.

Analysts estimate that the Intercontinental Exchange (NYSE: ICE) could add nearly $300 to $400 million in additional revenue through 2013, by handling some of these “third party” derivative functions. In addition, CME Group (NYSE: CME) is expected to capture a good portion of that new business as well. Investors wanting to play the 800 page bill may want stick to these exchange names.


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