ICE feels regulatory freeze on NYSE, overall profits rise

By John McCrank and Abhishek Manikandan

(Reuters) - Intercontinental Exchange Inc <ICE.N> does not expect market data sales from the New York Stock Exchange to contribute to near-term revenue growth due to regulatory and legal gridlock, the company said on Thursday after posting better-than-expected quarterly profits.

NYSE-owner ICE, which also operates futures exchanges and clearing-houses, said its revenues rose 11.3% in the third quarter from a year earlier, to $1.34 billion. Nearly half of that came from ICE's data and listing segment, which includes pricing, analytics and exchange data feeds and connectivity.

Market data contains key information on quotes and orders and is the lifeblood of the electronic marketplace. For years, many brokers and electronic market makers have complained to the U.S. Securities and Exchange Commission that market data and connectivity fees charged by most exchanges for their private feeds are too high.

Last year, the SEC began demanding that stock exchanges do a better job justifying those fees, as well as temporarily suspending fee changes, which normally become effective immediately when the exchanges file them with the regulator.

Demand for, and growth of, NYSE data is driven not just by straight price increases, but by new products and services - and sometimes even price decreases to stimulate demand, ICE Chief Executive Officer Jeff Sprecher said on a post-earnings conference call with analysts.

"The exchanges actually can't even lower prices, and the exchanges can't really offer new products or bundles or do any other actions," he said. "So as we think about budgeting for next year, we're just looking at a market where it's likely frozen."

The exchanges are litigating the issue, both with the SEC and in the courts.

"So there doesn't seem to be a quick resolution unless the industry wants to come together and figure out how to allow innovation around those products, which may or may not happen," Sprecher said.

Overall data and listings revenues were up 4% to $667 million.

Market volatility in the quarter, due to uncertainty around U.S.-China trade tensions, helped drive a 20% increase in ICE's trading and clearing revenues, minus expenses, to $669 million.

Net income attributable to the company rose to $529 million, or 94 cents per share, in the quarter, from $458 million, or 79 cents per share, a year earlier.

Excluding one-time items, such as M&A costs, ICE posted a profit of $1.06 per share, 10 cents above the mean estimate of analysts, according to IBES data from Refinitiv.

(Reporting by John McCrank in New York and Abhishek Manikandan in Bengaluru; Editing by Subhranshu Sahu and Dan Grebler)