YWR: Exchange Masterclass with ICE
We love exchanges.
We own HKEX (Our China FOMO Play) and SGX.
But there is a hole in our portfolio.
One of the all time greats.
And we don’t own it.
I’ve always held off buying the shares because it is expensive, which has been a mistake.
Still, I force myself to keep following it, even if it is painful and I hate looking at the share price because I mostly missed it.
Their CEO is a thought leader in financial trading innovation and I love listening to him. Always have.
So today we have a special treat for you.
Visiting our YWR Studios in London is the great Jeffrey Sprecher.
YWR: Jeff….it’s so great having you here. I’m sorry about the rain. I just want to start by saying I think you are the greatest CEO no one ever talks about. I don’t mean that in a bad way, I just think your track record, and what you’ve done with ICE, how that business has grown and evolved from just energy, to the NYSE, to mortgages and now prediction markets, plus the consistent EPS growth over 20 years doesn’t get the attention it deserves. You are one of the all time great CEO’s.
Jeff: Erik.. thank you so much! I’m going to put you in charge of our IR. And I just want to say we love YWR and always look forward to what you are going to write each week.
Erik: OK. Let’s get into energy first because that’s where it all started when you acquired the International Petroleum Exchange in 2001. I remember there was an initial play around the potential to grow oil trading volumes by moving the trading to electronic, but I’m just amazed how much the energy volumes keep growing year after year. Can you help us get some perspective on this?
Jeff: Yes, as you say it’s really surprising. When we started this company, we didn’t know how big the energy market could grow. We thought it would grow because there was an analog to digital conversion and just giving people more information faster will make more decisions.
And we thought it would be easy to cover the entire universe of people that would hedge energy. I mean, once you have all the oil companies and some of the sovereigns that are there, maybe some airlines, like who else would ever trade it? Like, I doubt any of your readers will ever buy a barrel of WTI or Brent crude. So we kind of thought, we’ll reach 100% market share quickly. And the reality is, we keep expanding like new players and participants keep wanting to hedge energy.
And this is 20 years later after digitization. And so I was wrong thinking that we would hit a terminal value. I don’t know where it is, but I know, every year we’re surprised by the continued growth in access to people, including many people like who are taking energy pricing into decisions that you may be making about correlated asset classes and sort of the computer power that is grabbing energy prices and using that input to make some other decision. And so the distribution keeps growing.
Erik: True. But hasn’t the growth also been the rise of global gas trading, especially LNG?
Jeff: Yes, we made a big bet that gas was going to globalize. Liquefied natural gas would be put on tankers, would create a common market around the world, which is what’s happened largely also driven by Europe’s energy need and kind of exacerbated by cutting them off from Russia energy. And it continues to move east into Asia, which is growing. Part of it is population growth and just the energy dynamics of a population that is growing in certain regions faster than the West.
But also, I think a lot of these trade rebalancing deals that the US is striking where they’re trying to get equal transfer payments is, hey, we’ll take your goods, but you’ve got to take our energy, and there just seems to be a more robust intercontinental movement of energy at a moment in time when everybody’s building data centers, we’re all becoming more electronified with everything we do. Natural gas is the transition fuel away from coal and oil. And it just seems like it’s been continued limitless growth. I think our open interest in our European natural gas contract is up 46% year-over-year versus the year before and the year before and the year before where it’s been double digit, double digit, double digit. Just it’s almost hard to fathom. But it is this, I don’t know, retrenching of trade coupled with a movement of growth and infrastructure investment that continues to move East.
Erik: Let’s move on to crypto and tokenisation. The decentralisation of trading and finance (DeFi) is a hot topic and I wonder how you feel about that as the CEO of the biggest centralised trading business in the world..,
Jeff: I do think that tokenization is going to have a big impact on financial services. And I think it’s use case that will emerge and be dominant is essentially movement of capital. Because I’ve been around a long time, I actually have access to a lot of important and powerful people that are in the US and in the UK and the EU, Middle East, Asia. And the last year or so, I’ve talked to a lot of regulators and central bankers and people that run infrastructure or that manage and regulate infrastructure about tokenization, and sort of nobody at the – that’s running the legacy systems for governments want to touch it. And so as a result of that, you have all these entrepreneurs that are building tokenized systems. And now government catching up to try to organize and regulate them.
But I think those cats are – have run out of the room. I say that because I’ve suggested to some regulators that if the Fed funds wire, if the Swiss system, if the ACH systems worked outside of banking hours, then there would be no reason to have tokenized money. We already have digital money, but – and a young person today will probably never carry paper or Coinbase fiat money, but the banking system closes during banker hours. And I think what tokenization is going to do is allow 24 by 7 by 365 movement of capital. And eventually then it’s going to be figured out how to be regulated.
Erik: But then what about the risk that ICE gets disintermediated?
Jeff: Yeah. I mean, the basic tenet of trading, and we have 13 exchanges, including the New York Stock Exchange. The basic tenet of trading is that buyers are looking for sellers and sellers are looking for buyers. And so the Romans created a town square where everybody gathered. The New York Stock Exchange started underneath the buttonwood tree on the corner of Wall and Broad. People would gather in one place.
There is this concept of DeFi where everybody’s everywhere and we’ll have a browser that will search the universe and find you and that can work for kind of in certain assets. But the reality is there’s a latency in searching around the world for everything. And generally speaking, history has shown that buyers and sellers would prefer to gather in one spot so that they’re all together and that things work on a FIFO basis so that no one has a timing disadvantage. And so I think the legacy – so the New York Stock Exchange, for example, which started in 1792, has seen the invention of electricity and the smoke signal and eventually computers, big computers, small computers, handheld computers, high frequency traders, people bouncing things off the ionosphere in order to have an advantage.
And so it’s incumbent on us as the steward of the New York Stock Exchange to adopt the latest technologies so that people have access. But I still think that there’s something about gathering. It doesn’t mean new exchanges won’t be formed, but I think it’s incumbent on legacy operators like ourselves to be mindful and be at the forefront of adopting technology.
Erik: So let’s talk about your $2 billion investment in Polymarket, because this is what is so amazing about you. You run the biggest trad-fi exchange in the world, but then go invest in Polymarket. ICE is always making cool acquisitions and evolving.
Jeff: Like I said, we studied all of the tokenized and DeFi companies. We did a pretty deep dive. We have a lot of conversations in the background. We’re very fluent in who’s doing what. We felt that Polymarket was really the leader in DeFi protocols of anybody we’d seen and we wanted access to their engineers and we wanted to get educated on exactly how they were doing what they were doing and then it turns out that they were they needed to get access to the United States, regulatory access to the US. And in order to be compliant in the US, they needed to do more of what we were doing. And so, we shook hands and said, we’ll help you, you help us. And so it’s been really – and this is all about technology. This isn’t about sports betting or predictions or anything. This was about let’s get fundamental technology, knowledge transfer going on.
And the thing about – Polymarket does two things that we don’t do. One is let’s just take a sports bet. There can be a person watching a game and they can say, I think this person is going to miss the next shot and I now bet $5 on that. And so, they can post that and it can be disseminated broadly and they – and it will also be discussed in a social media setting. So everybody knows Jeff thinks this guy is going to miss the shots. And then somebody can take the other side of that. You can see the shot. Somebody gets paid and that all happens. That contract could exist for an hour. That is not unlike anything that exists on traditional exchanges. There’s no such thing as something that comes, exist for an hour and disappears.
And, in fact, the – in the US, the Commodity Futures Trading Commission requires that we give them 30 days’ notice before we list anything. I was told that over the US government shutdown, there were roughly 2 million contracts that were created because of this sports betting and prediction markets. And we have six contracts that were at the CFTC that the CFTC put a hold on and didn’t approve. And they were grades of oil and natural gas that were going to be delivered in various locations. Okay. So a regulator is dealing with that. And you have this other trend going on of short term creation before the regulator could even act on it. And so one thing that we wanted to get with Polymarket is how are you doing that, how are you disseminating that, what is your regulatory conversation look like, and can we help each other because the market wants more dynamic creation of tradable products.
The other thing, which is the more important thing is that once the shot is made and buyer and seller exchange value, money moves, and it moves via a smart contract. So there’s no human intervention and it moves via a token that represents cash, and is accepted by both parties as being worth a dollar. That is really novel. I mean, that is outside of a clearing infrastructure, outside of a banking infrastructure, value just transferred and title transferred with a bearer instrument that is unregulated and essentially represents tokenized deposits. So that’s coming, I think. It exists and I think it’s going to be institutionalized. But what it’s going to unlock is 24 by 7 by 365 capital movement.
It’ll allow you to not keep excess capital in various jurisdictions where your companies do business. Somebody like a Goldman Sachs that is almost omnipresent in every jurisdiction and has local subsidiaries, local balance sheets and what have you, their treasurer has to keep capital all around the world for the various businesses and the risks that might occur during daylight hours. You’re going to be able now to keep capital maybe in the Central Treasury and move it on demand at a moment’s notice using the Internet.
Erik: The instant movement of capital is one thing, but isn’t the rise of prediction markets fundamentally changing trading? And for ICE it seems super powerful to have an events market sitting alongside your futures and stock markets and to own all of them.
Jeff: Yeah. So one of the fascinating things that Shayne Coplan and his team built is imagine there are tens of thousands of bank contracts that exist now because you’ve got users that are saying, will somebody invade Syria, will there be a shipwreck, all kinds of things that people have an interest in that are willing to put their capital behind. And one of the things that Polymarket has done is they have an AI algorithm that is just looking over all of that content and finding something that basically a market that’s gotten hot where there’s a lot of money coming into it or a lot of conversation on social media, and it will put that market at the top of the list.
And so if you have their app or if you’re on their website, you’re constantly seeing new markets pop up to the top of the list that have a lot of attention to them. What that does is it’s hot news. Take the kind of news that you’re used to seeing on Twitter or X. And then imagine that the wisdom of crowds are speculating on the value of that news and putting it at the top. My understanding is that when the US bomb the nuclear facilities in Iran that in the war room, they had Polymarket up with the odds that the US would bomb Iran. Why would they do that? They’re not betting. They launched a mission, but it took 20 hours for those planes to get over there. And they figured that if somebody could see it or figure out that there was lots of pizzas being ordered at the Pentagon or whatever, that they would start to see activity there. And it would give them an indication that maybe somebody has figured it out or news has leaked or something.
And so what we’re seeing now, to answer your question, is hedge funds. Hedge funds have the Polymarket app up and traders are using it for hot news. We think for our kind of legacy business of oil and gas and cocoa and coffee and all kinds of basic commodities, even interest rates, that people are going to want to see, okay, there’s something hot here and I better pay attention to it that can impact the risk on the position that I either have or about to take. And we’ve got probably over 5,000 institutional customers that we think would want that. And so we’re working on how do you put this into an an institutional environment which has just been used to receiving the price of the S&P 500.
Erik: Jeff, I wanted to maybe go into the mortgage exchange you are building, which I think is under appreciated by the market and could be super valuable, but attention spans being what they are I think we will leave that for another day. Instead, I want to quickly get your view on the topic of ‘de-dollarisation’ because we are always hearing about the death of the dollar and I think you have a different view on this than what people expect. You run the biggest exchange in the world, with customers everywhere trading everything. What do you see?
Jeff: Yeah. Let me tell you something that I’ve seen from my vantage point that I – that is weird to me. For whatever reason, when we started this business, commodities around the world are traded in US dollars. The price of oil, whether it came from Russia or the North Sea or anywhere else, was always in barrels per – dollar per barrel. And most commodities, corn, soybeans and I don’t know, natural gas and you name it, most commodities are actually – physical commodities are actually traded in dollars. And as I mentioned, the distribution is getting bigger, not smaller, and it’s becoming more global, not regional. And so dollar business is making its way all over the place. But what’s more interesting to me is, we own the New York Stock Exchange and the volume of trading, particularly since COVID has asymptotically taken off.
In April, we were doing 1.3 trillion transactions a day, 1.3 trillion transactions a day on the New York Stock Exchange. Like the systems have scaled to places we never thought they could go. And then you say, well, what – why is that? Well, something has happened, there was obviously a price war over free trading commission. There have been Reddit and Facebook groups and other people that are talking about stocks. There’s a younger generation, but there was also the explosion of crypto and which is global. And so you have, let’s say, a young person in Korea wanted to buy Bitcoin, and in order to buy Bitcoin, they were maybe buying Circle’s USDC or Tether, which is a dollar proxy, right? So you had people – young people in Korea were figuring out how to take a Korean won and convert it to some dollar equivalent. And then a lot of those crypto brokers became securities brokers because these people wanted to own the Magnificent Seven.
And so you now have this kind of global equity and commodity business that is all dollar denominated, and is ubiquitous around the world. And I think about these regional exchanges around the world that are listing – trying to list commodities or securities in their local currency. And it’s like, okay, that’s kind of interesting, but your addressable market is tiny compared to how we’ve dollarized – US dollarized the business.
And I can guarantee you after hearing me, you’re going to go read an article in the next day or two or three that says, the US dollar is at risk of losing its reserve currency status. And I hear that. And now I look at our own business and it’s like really like I don’t know anybody that wants to buy oil in Korean won or in – even in euro or in pounds or – I just like what is the alternative when the velocity of commerce, including during a period when we’re pulling back on trade and having these trade conversations. The financial markets have just been dollarizing the world and I think we’re fortunate we’re headquartered in the US and our product suite is largely dollar based.
Erik: Jeff, we’ll wrap it up there, I know your time is valuable. And if you have time while you are in London take a look at acquiring the LSE, it could be a good fit. Maybe you can make London great again.
Jeff: Thank you Erik and thank you to all the YWR readers.
**Disclosure: This is a creative conversation based on the ICE presentation at Goldman Sachs conference on December 9th, 2025 and presentation at Bernstein Strategic Decisions conference on May 28, 2025