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EX-32.2 - EXHIBIT 32.2 - Intercontinental Exchange, Inc.ice2017630ex322.htm
EX-32.1 - EXHIBIT 32.1 - Intercontinental Exchange, Inc.ice2017630ex321.htm
EX-31.2 - EXHIBIT 31.2 - Intercontinental Exchange, Inc.ice2017630ex312.htm
EX-31.1 - EXHIBIT 31.1 - Intercontinental Exchange, Inc.ice2017630ex311.htm
EX-10.2 - EXHIBIT 10.2 - Intercontinental Exchange, Inc.ice2017630ex102.htm

 
 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
Form 10-Q
 
 
 
(Mark One)
 
þ
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


 
For the quarterly period ended June 30, 2017
Or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                 to
Commission File Number 001-36198
 
 
 
 
 
INTERCONTINENTAL EXCHANGE, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
46-2286804
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification Number)
5660 New Northside Drive,
Atlanta, Georgia
30328
(Zip Code)
(Address of principal executive offices)
 
(770) 857-4700
Registrant’s telephone number, including area code 
 
 
 
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
 
 
 
 
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company  ¨   
Emerging growth company  ¨   
 
 
 
 
 
(Do not check if a smaller company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.       ¨   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨   No   þ
As of August 1, 2017, the number of shares of the registrant’s Common Stock outstanding was 588,492,565 shares.
 
 
 
 
 





 
 
INTERCONTINENTAL EXCHANGE, INC.
Form 10-Q
Quarterly Period Ended June 30, 2017
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
PART I.
Financial Statements
 
Item 1
 
 
Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016
 
Consolidated Statements of Income for the six and three months ended June 30, 2017 and 2016
 
Consolidated Statements of Comprehensive Income for the six and three months ended June 30, 2017 and 2016
 
Consolidated Statements of Changes in Equity, Accumulated Other Comprehensive Loss and Redeemable Non-Controlling Interest for the six months ended June 30, 2017 and for the year ended December 31, 2016
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016
 
Item 2
Item 3
Item 4

 
 
 
PART II.
Other Information
 
Item 1
Item 1A
Item 2
Item 3
Item 4
Item 5
Item 6




PART I. Financial Statements
Item 1.    Consolidated Financial Statements (Unaudited)

Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
 
As of
 
As of
 
June 30, 2017
 
December 31, 2016
Assets:
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
398

 
$
407

Short-term investments
17

 
23

Short-term restricted cash and investments
769

 
679

Customer accounts receivable, net of allowance for doubtful accounts of $8 and $7 at June 30, 2017 and December 31, 2016, respectively
912

 
777

Margin deposits and guaranty funds
53,585

 
55,150

Prepaid expenses and other current assets
767

 
97

Total current assets
56,448

 
57,133

Property and equipment, net
1,161

 
1,129

Other non-current assets:
 
 
 
Goodwill
12,001

 
12,291

Other intangible assets, net
10,103

 
10,420

Long-term restricted cash and investments
264

 
264

Long-term investments

 
432

Other non-current assets
347

 
334

Total other non-current assets
22,715

 
23,741

Total assets
$
80,324

 
$
82,003

 
 
 
 
Liabilities and Equity:
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
415

 
$
388

Section 31 fees payable
181

 
131

Accrued salaries and benefits
140

 
230

Deferred revenue
338

 
114

Short-term debt
2,023

 
2,493

Margin deposits and guaranty funds
53,585

 
55,150

Other current liabilities
137

 
111

Total current liabilities
56,819

 
58,617

Non-current liabilities:
 
 
 
Non-current deferred tax liability, net
2,915

 
2,958

Long-term debt
3,874

 
3,871

Accrued employee benefits
407

 
430

Other non-current liabilities
376

 
337

Total non-current liabilities
7,572

 
7,596

Total liabilities
64,391

 
66,213

Commitments and contingencies


 


Redeemable non-controlling interest

 
36


2


Equity:
 
 
 
Intercontinental Exchange, Inc. shareholders’ equity:
 
 
 
Preferred stock, $0.01 par value; 100 shares authorized; no shares issued or outstanding at June 30, 2017 and December 31, 2016

 

Common stock, $0.01 par value; 1,500 shares authorized; 599 and 596 shares issued at June 30, 2017 and December 31, 2016, respectively, and 589 and 595 shares outstanding at June 30, 2017 and December 31, 2016, respectively

6

 
6

Treasury stock, at cost; 10 and 1 shares at June 30, 2017 and December 31, 2016, respectively

(590
)
 
(40
)
Additional paid-in capital
11,381

 
11,306

Retained earnings
5,468

 
4,789

Accumulated other comprehensive loss
(367
)
 
(344
)
Total Intercontinental Exchange, Inc. shareholders’ equity
15,898

 
15,717

Non-controlling interest in consolidated subsidiaries
35

 
37

Total equity
15,933

 
15,754

Total liabilities and equity
$
80,324

 
$
82,003


See accompanying notes.

3


Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
 
Six Months Ended 
 June 30,
 
Three Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Transaction and clearing, net
$
1,615

 
$
1,789

 
$
817

 
$
860

Data services
1,041

 
974

 
521

 
497

Listings
213

 
208

 
107

 
105

Other revenues
94

 
87

 
49

 
42

Total revenues
2,963

 
3,058

 
1,494

 
1,504

Transaction-based expenses:
 
 
 
 
 
 
 
Section 31 fees
183

 
196

 
92

 
98

Cash liquidity payments, routing and clearing
438

 
579

 
224

 
277

Total revenues, less transaction-based expenses
2,342

 
2,283

 
1,178

 
1,129

Operating expenses:
 
 
 
 
 
 
 
Compensation and benefits
479

 
472

 
234

 
236

Professional services
64

 
69

 
32

 
37

Acquisition-related transaction and integration costs
23

 
47

 
9

 
20

Technology and communication
195

 
184

 
97

 
92

Rent and occupancy
35

 
35

 
17

 
17

Selling, general and administrative
79

 
52

 
38

 
30

Depreciation and amortization
276

 
289

 
142

 
146

Total operating expenses
1,151

 
1,148

 
569

 
578

Operating income
1,191

 
1,135

 
609

 
551

Other income (expense):
 
 
 
 
 
 
 
Interest expense
(90
)
 
(90
)
 
(45
)
 
(44
)
Other income, net
187

 
11

 
1

 
9

Other income (expense), net
97

 
(79
)
 
(44
)
 
(35
)
Income before income tax expense
1,288

 
1,056

 
565

 
516

Income tax expense
352

 
316

 
139

 
153

Net income
$
936

 
$
740

 
$
426

 
$
363

Net income attributable to non-controlling interest
(16
)
 
(14
)
 
(8
)
 
(6
)
Net income attributable to Intercontinental Exchange, Inc.
$
920

 
$
726

 
$
418

 
$
357

Earnings per share attributable to Intercontinental Exchange, Inc. common shareholders:
 
 
 
 
 
 
 
Basic
$
1.55

 
$
1.22

 
$
0.71

 
$
0.60

Diluted
$
1.54

 
$
1.21

 
$
0.70

 
$
0.60

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
593

 
595

 
591

 
595

Diluted
597

 
598

 
595

 
599

Dividend per share
$
0.40

 
$
0.34

 
$
0.20

 
$
0.17


See accompanying notes.

4


Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
 
Six Months Ended 
 June 30,
 
Three Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
936

 
$
740

 
$
426

 
$
363

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax (expense) benefit of ($7) and $1 for the six months ended June 30, 2017 and 2016, respectively, and ($7) and ($1) for the three months ended June 30, 2017 and 2016, respectively
85

 
(199
)
 
60

 
(125
)
Change in fair value of available-for-sale securities
68

 
129

 

 
75

Reclassification of realized gain on available-for-sale investment to other income
(176
)
 

 

 

Other comprehensive income (loss)
(23
)
 
(70
)
 
60

 
(50
)
Comprehensive income
$
913

 
$
670

 
$
486

 
$
313

Comprehensive income attributable to non-controlling interest
(16
)
 
(14
)
 
(8
)
 
(6
)
Comprehensive income attributable to Intercontinental Exchange, Inc.
$
897

 
$
656

 
$
478

 
$
307


See accompanying notes.

5


Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Changes in Equity, Accumulated Other Comprehensive Loss
and Redeemable Non-Controlling Interest
(In millions)
(Unaudited)
 
Intercontinental Exchange, Inc. Shareholders' Equity
 
Non-
Controlling
Interest in
Consolidated
Subsidiaries
 
Total
Equity
 
Redeemable Non-Controlling Interest
 
Common
 Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
 
Shares
 
Value
 
Shares
 
Value
 
Balance, as of December 31, 2015
628

 
$
6

 
(34
)
 
$
(1,448
)
 
$
12,290

 
$
4,148

 
$
(188
)
 
$
32

 
$
14,840

 
$
35

Other comprehensive loss

 

 

 

 

 

 
(156
)
 

 
(156
)
 

Exercise of common stock options
1

 

 

 

 
22

 

 

 

 
22

 

Treasury shares retired in connection with stock split
(35
)
 

 
35

 
1,512

 
(1,142
)
 
(370
)
 

 

 

 

Repurchases of common stock

 

 
(1
)
 
(50
)
 

 

 

 

 
(50
)
 

Payments relating to treasury shares

 

 
(1
)
 
(54
)
 

 

 

 

 
(54
)
 

Stock-based compensation

 

 

 

 
136

 

 

 

 
136

 

Issuance of restricted stock
2

 

 

 

 

 

 

 

 

 

Adjustment to redemption value

 

 

 

 

 
(2
)
 

 

 
(2
)
 
1

Distributions of profits

 

 

 

 

 

 

 
(19
)
 
(19
)
 
(3
)
Dividends paid to shareholders

 

 

 

 

 
(409
)
 

 

 
(409
)
 

Net income attributable to non-controlling interest

 

 

 

 

 
(27
)
 

 
24

 
(3
)
 
3

Net income

 

 

 

 

 
1,449

 

 

 
1,449

 

Balance, as of December 31, 2016
596

 
6

 
(1
)
 
(40
)
 
11,306

 
4,789

 
(344
)
 
37

 
15,754

 
36

Other comprehensive loss

 

 

 

 

 

 
(23
)
 

 
(23
)
 

Exercise of common stock options

 

 

 

 
6

 

 

 

 
6

 

Repurchases of common stock

 

 
(8
)
 
(469
)
 

 

 

 

 
(469
)
 

Payments relating to treasury shares

 

 
(1
)
 
(81
)
 

 

 

 

 
(81
)
 

Stock-based compensation

 

 

 

 
78

 

 

 

 
78

 

Issuance of restricted stock
3

 

 

 

 

 

 

 

 

 

Acquisition of non-controlling interest

 

 

 

 
(9
)
 

 

 
(5
)
 
(14
)
 

Acquisition of redeemable non-controlling interest

 

 

 

 

 
(2
)
 

 

 
(2
)
 
(37
)
Distributions of profits

 

 

 

 

 

 

 
(12
)
 
(12
)
 

Dividends paid to shareholders

 

 

 

 

 
(239
)
 

 

 
(239
)
 

Net income attributable to non-controlling interest

 

 

 

 

 
(16
)
 

 
15

 
(1
)
 
1

Net income

 

 

 

 

 
936

 

 

 
936

 

Balance, as of June 30, 2017
599

 
$
6

 
(10
)
 
$
(590
)
 
$
11,381

 
$
5,468

 
$
(367
)
 
$
35

 
$
15,933

 
$


 
As of
 
As of
 
June 30, 2017
 
December 31, 2016
Accumulated other comprehensive loss was as follows:
 
 
 
Foreign currency translation adjustments
$
(260
)
 
$
(345
)
Fair value of available-for-sale securities

 
108

Comprehensive income from equity method investment
2

 
2

Employee benefit plans adjustments
(109
)
 
(109
)
Accumulated other comprehensive loss
$
(367
)
 
$
(344
)

See accompanying notes.

6



Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Six Months Ended 
 June 30,
 
2017
 
2016
Operating activities:
 
 
 
Net income
$
936

 
$
740

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
276

 
289

Stock-based compensation
68

 
60

Deferred taxes
(11
)
 
49

Cetip realized investment gain, net
(114
)
 

Other
(7
)
 
4

Changes in assets and liabilities:
 
 
 
Customer accounts receivable
(170
)
 
(157
)
Other current and non-current assets
(37
)
 
(21
)
Section 31 fees payable
51

 
79

Deferred revenue
241

 
257

Other current and non-current liabilities
(135
)
 
(197
)
Total adjustments
162

 
363

Net cash provided by operating activities
1,098

 
1,103

 
 
 
 
Investing activities:
 
 
 
Capital expenditures
(81
)
 
(96
)
Capitalized software development costs
(69
)
 
(61
)
Cash received for divestitures (net of cash paid for acquisitions)
10

 

Proceeds from sale of Cetip, net
438

 

Increase in restricted cash and investments
(89
)
 
(75
)
Other

 
(70
)
Net cash provided by (used in) investing activities
209

 
(302
)
 
 
 
 
Financing activities:
 
 
 
Repayments of commercial paper, net
(469
)
 
(781
)
Dividends to shareholders
(239
)
 
(205
)
Repurchases of common stock
(469
)
 

Payments relating to treasury shares received for restricted stock tax payments and stock option exercises
(81
)
 
(48
)
Acquisition of non-controlling interest and redeemable non-controlling interest
(55
)
 

Other
(8
)
 
3

Net cash used in financing activities
(1,321
)
 
(1,031
)
Effect of exchange rate changes on cash and cash equivalents
5

 
(7
)
Net decrease in cash and cash equivalents
(9
)
 
(237
)
Cash and cash equivalents, beginning of period
407

 
627

Cash and cash equivalents, end of period
$
398

 
$
390

 
 
 
 
Supplemental cash flow disclosure:
 
 
 
Cash paid for income taxes
$
429

 
$
275

Cash paid for interest
$
87

 
$
88


See accompanying notes.

7


Intercontinental Exchange, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1.
Description of Business
We are a leading global operator of regulated exchanges, clearing houses and listings venues, and a provider of data services for commodity and financial markets. We operate regulated marketplaces for listing, trading and clearing a broad array of derivatives contracts and securities across major asset classes, including energy and agricultural commodities, interest rates, equities, equity derivatives, exchange traded funds, credit derivatives, bonds and currencies. We offer end-to-end market data services to support the trading, investment and risk management needs of customers across virtually all asset classes.
Our exchanges include futures exchanges in the United States, or U.S., United Kingdom, or U.K., Continental Europe, Canada and Singapore, and cash equities, equity options and bond exchanges in the U.S. We also operate over-the-counter, or OTC, markets for physical energy and credit default swaps, or CDS, trade execution. To serve global derivatives markets, we operate central counterparty clearing houses in the U.S., U.K., Continental Europe, Canada and Singapore (Note 9). We offer a range of data services for global financial and commodity markets, including pricing and reference data, exchange data, analytics, feeds, desktop and connectivity solutions. Through our markets, clearing houses, listings and market data services, we provide end-to-end solutions for our customers through liquid markets, benchmark products, access to capital markets, and related services to support their ability to manage risk and raise capital.

2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by us in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2016. The accompanying unaudited consolidated financial statements reflect all adjustments that are, in our opinion, necessary for a fair presentation of results for the interim periods presented. These adjustments are of a normal recurring nature.
Preparing financial statements requires us to make certain estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from these estimates. The results of operations for the six months and three months ended June 30, 2017 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.
The accompanying unaudited consolidated financial statements include the accounts of us and our wholly-owned and controlled subsidiaries. All intercompany balances and transactions between us and our wholly-owned and controlled subsidiaries have been eliminated in the consolidation. For those consolidated subsidiaries in which our ownership is less than 100% and for which we have control over the assets and liabilities and the management of the entity, the outside stockholders’ interests are shown as non-controlling interests. In instances where outside stockholders’ hold an option to require us to repurchase the outside stockholders’ interest, these interests are shown as redeemable non-controlling interests.
Held for Sale
We classify long-lived assets or disposal groups as held for sale in the period in which all of the following criteria are met: management commits to a plan to sell; the long-lived asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such long-lived assets or disposal groups; an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; the sale is probable within one year; the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long-lived assets and disposal groups classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized until the date of sale. The fair value of a long-lived asset less any costs to sell is assessed each reporting period it remains classified as held for sale, and any change in fair value is reported as an adjustment to the carrying value of the asset, except that increases in fair value are limited to prior decreases recorded. Upon being classified as held for sale, depreciation and amortization is ceased. See Note 10 for information regarding our classification of Trayport as held for sale as of June 30, 2017.


8


New and Recently Adopted Accounting Pronouncements
The Financial Accounting Standards Board, or FASB, has issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 606. ASU 606 provides guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires us to recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt ASU 606 at the beginning of our first quarter of fiscal 2018. The new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. We are currently evaluating the overall impact this guidance will have on our consolidated financial statements, as well as the method of adoption. Based on our preliminary assessment, we expect that the adoption may accelerate the timing of recognition of a portion of original and supplemental listing fees related to our NYSE businesses, which are currently deferred over an estimated customer life of nine and five years, respectively. We are continuing our assessment, which may identify other impacts of the adoption of ASU 606.
The FASB has issued Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01. ASU 2016-01 provides updated guidance for the recognition, measurement, presentation, and disclosure of certain financial assets and liabilities, including the requirement that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for annual and interim reporting periods beginning after December 15, 2017. With the sale of our Cetip investment, we no longer have any equity investments that would be required to be measured at fair value with changes in fair value recognized in net income (Note 11).
The FASB has issued Accounting Standards Update No. 2016-02, Leases, or ASU 2016-02. ASU 2016-02 requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. A lessee should recognize in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted. We will not adopt ASU 2016-02 early, but we are currently evaluating this guidance to determine the potential impact on our consolidated financial statements.
The FASB has issued Accounting Standards Update No. 2016-18, Statement of Cash Flows: Restricted Cash, or ASU 2016-18, that will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. Entities will also have to disclose the nature of their restricted cash and restricted cash equivalent balances. ASU 2016-18 becomes effective for us in fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. We will be required to apply the guidance retrospectively when adopted, and provide the relevant disclosures in the first interim and annual periods in which we adopt the guidance. We will not adopt ASU 2016-18 early, but do expect to be impacted by the new presentation and disclosure requirements required by ASU 2016-18 due to our restricted and unrestricted cash balances.

3.
Acquisitions and Divestitures
TMX Atrium Acquisition
On May 1, 2017, we acquired 100% of TMX Atrium, a global extranet and wireless services business, from TMX Group. TMX Atrium provides low-latency access to markets and market data across 12 countries, more than 30 major trading venues, and ultra-low latency wireless connectivity to access markets and market data in the Toronto, New Jersey and Chicago metro areas. The wireless assets consists of microwave and millimeter networks that transport market data and provide private bandwidth. Our customers are increasingly seeking wireless services for use in their trading strategies. TMX Atrium is now part of ICE Data Services and is being integrated with our connectivity services, including our Secure Financial Transaction Infrastructure, or SFTI network.
National Stock Exchange Acquisition
On January 31, 2017, we acquired 100% of National Stock Exchange, Inc., now named NYSE National. The acquisition gives the NYSE Group a fourth U.S. exchange license. NYSE National is distinct from NYSE Group’s three listings exchanges because

9


NYSE National will only be a trading venue and will not be a listings market. NYSE Group’s three listings exchanges, NYSE, NYSE MKT (NYSE MKT changed its name to NYSE American in July 2017) and NYSE Arca, have unique market models designed for corporate and ETF issuers. After closing the transaction, NYSE National ceased operations on February 1, 2017. We will engage with NYSE National members, buy-side participants and retail brokerage firms before finalizing operational plans for NYSE National’s re-launch, which is expected to occur in 2018.
Purchase of Minority Interests
For consolidated subsidiaries in which our ownership is less than 100% and for which we have control over the assets, liabilities and management of the entity, the outside stockholders’ interests are shown as non-controlling interest in our consolidated financial statements. As of December 31, 2016, non-controlling interest included those related to the operating results of our CDS clearing subsidiaries in which non-ICE limited partners held a 42.5% net profit sharing interest; ICE Endex in which Gasunie held a 21% ownership interest; and ICE Clear Netherlands in which ABN AMRO Clearing Bank N.V. held a 25% ownership interest. For both ICE Endex and ICE Clear Netherlands, in addition to the non-controlling interest reported in the consolidated statements of income, we reported redeemable non-controlling interest in the consolidated balance sheets which represents the minority interest redemption fair value for each company.
During June 2017, we purchased both Gasunie’s 21% minority ownership interest in ICE Endex and ABN AMRO Clearing Bank N.V.’s 25% minority ownership interest in ICE Clear Netherlands. Subsequent to these acquisitions, we own 100% of ICE Endex and ICE Clear Netherlands and will no longer include any non-controlling interest amounts for ICE Endex and ICE Clear Netherlands in our consolidated financial statements. During April 2017, we purchased 3.2% of the net profit sharing interest in our CDS clearing subsidiaries from a non-ICE limited partner and the remaining non-ICE limited partners hold a 39.3% net profit sharing interest as of June 30, 2017.
Pending Acquisition of Global Research Divisions Index Platform from Bank of America Merrill Lynch
On June 1, 2017, we announced a definitive agreement to acquire the Global Research division’s index platform from Bank of America Merrill Lynch, or BofAML. The BofAML indices are the second largest group of fixed income indices as measured by assets under management, or AUM, globally. Upon closing, the AUM benchmarked against our combined fixed income indices will be nearly $1 trillion, and the indices will be re-branded as the ICE BofAML indices.
NYSE Governance Services Divestiture
On June 1, 2017, we sold NYSE Governance Services to Marlin Heritage, L.P. NYSE Governance Services provides governance and compliance analytics and education solutions for organizations and their boards through dynamic learning solutions. We recognized a net loss of $6 million on the sale of NYSE Governance Services, which was recorded in depreciation and amortization expenses in the consolidated statements of income for the six months and three months ended June 30, 2017 (Note 4).
Interactive Data Managed Solutions Divestiture
On March 31, 2017, we sold Interactive Data Managed Solutions, or IDMS, a unit of Interactive Data, to FactSet. IDMS is a managed solutions and portal provider for the global wealth management industry. There was no gain or loss recognized on the sale of IDMS.

4.
Goodwill and Other Intangible Assets

The following is a summary of the activity in the goodwill balance for the six months ended June 30, 2017 (in millions):
Goodwill balance at December 31, 2016
$
12,291

Acquisitions (divestitures), net
1

Foreign currency translation
43

Reclassification to held for sale
(331
)
Other activity, net
(3
)
Goodwill balance at June 30, 2017
$
12,001


10


The following is a summary of the activity in the other intangible assets balance for the six months ended June 30, 2017 (in millions):
Other intangible assets balance at December 31, 2016
$
10,420

Acquisitions (divestitures), net
5

Foreign currency translation
43

Reclassification to held for sale
(214
)
Other activity, net
(9
)
Amortization of other intangible assets
(142
)
Other intangible assets balance at June 30, 2017
$
10,103


We completed the acquisitions of TMX Atrium and NYSE National and sold NYSE Governance Services and IDMS during the six months ended June 30, 2017 (Note 3). We reclassified the net assets of Trayport, including the related goodwill and other intangible assets, to held for sale as of June 30, 2017 (Note 10). The foreign currency translation adjustments in the tables above result from a portion of our goodwill and other intangible assets being held at our U.K., Continental European and Canadian subsidiaries, some of whose functional currencies are not the U.S. dollar. The changes in other activity, net in the tables above primarily relate to adjustments to the fair value of the net tangible and identifiable intangible assets and liabilities relating to the acquisitions, with a corresponding adjustment to goodwill. We did not recognize any impairment losses on goodwill or other intangible assets during the six months and three months ended June 30, 2017 and 2016.

5.
Deferred Revenue

Deferred revenue represents cash received that is yet to be recognized as revenue. Total deferred revenue was $474 million as of June 30, 2017, including $338 million in current deferred revenue and $136 million in non-current deferred revenue. The changes in our deferred revenue during the six months ended June 30, 2017 are as follows (in millions):
 
Annual Listings Revenue
 
Original Listings Revenues
 
Other Listings Revenues
 
Data Services and Other Revenues
 
Total
Deferred revenue balance at December 31, 2016
$

 
$
66

 
$
83

 
$
88

 
$
237

Additions
366

 
12

 
39

 
256

 
673

Amortization
(184
)
 
(7
)
 
(21
)
 
(214
)
 
(426
)
Less NYSE Governance Services, IDMS and Trayport (Notes 3 and 10)

 

 

 
(10
)
 
(10
)
Deferred revenue balance at June 30, 2017
$
182

 
$
71

 
$
101

 
$
120

 
$
474


6.
Debt

Our total debt, including short-term and long-term debt, consisted of the following as of June 30, 2017 and December 31, 2016 (in millions):
 
As of 
June 30, 2017
 
As of 
 December 31, 2016
Debt:
 
 
 
Commercial Paper
$
1,173

 
$
1,642

NYSE Notes (2.00% senior unsecured notes due October 5, 2017)
850

 
851

Short-term debt
2,023

 
2,493

2018 Senior Notes (2.50% senior unsecured notes due October 15, 2018)
598

 
598

2020 Senior Notes (2.75% senior unsecured notes due December 1, 2020)
1,243

 
1,242

2023 Senior Notes (4.00% senior unsecured notes due October 15, 2023)
791

 
790

2025 Senior Notes (3.75% senior unsecured notes due December 1, 2025)
1,242

 
1,241

Long-term debt
3,874

 
3,871

Total debt
$
5,897

 
$
6,364


11


Credit Facility
We have entered into a $3.0 billion senior unsecured revolving credit facility, or the Credit Facility, with a maturity date of November 13, 2020. The Credit Facility includes an option for us to propose an increase in the aggregate amount available for borrowing by up to $1.0 billion, subject to the consent of the lenders funding the increase and certain other conditions. On November 13, 2015, we utilized this option to increase the amount of the Credit Facility to $3.4 billion. The commitments under the Credit Facility will automatically reduce to $3.2 billion on April 3, 2019. No amounts were outstanding under the Credit Facility as of June 30, 2017.
Of the $3.4 billion that is currently available for borrowing under the Credit Facility, $1.2 billion is required to back-stop the amount outstanding under our Commercial Paper Program as of June 30, 2017. The amount required to back-stop the amounts outstanding under the Commercial Paper Program will fluctuate as we increase or decrease our commercial paper borrowings. The remaining $2.2 billion available under the Credit Facility as of June 30, 2017 is available to us to use for working capital and general corporate purposes including, but not limited to, acting as a back-stop to future increases in the amounts outstanding under the Commercial Paper Program or to fund the redemption of the NYSE Notes discussed below.
Commercial Paper Program
We have entered into a U.S. dollar commercial paper program, or the Commercial Paper Program. Our Commercial Paper Program is currently backed by the borrowing capacity available under the Credit Facility, equal to the amount of the commercial paper that is issued and outstanding at any given point in time. The effective interest rate of commercial paper issuances does not materially differ from short term interest rates (such as USD LIBOR). The fluctuation of these rates due to market conditions may impact our interest expense.
Commercial paper notes of $1.2 billion with original maturities ranging from 3 to 75 days were outstanding as of June 30, 2017 under our Commercial Paper Program. As of June 30, 2017, the weighted average interest rate on the $1.2 billion outstanding under our Commercial Paper Program was 1.16% per annum, with a weighted average maturity of 21 days. We repaid $469 million of the amounts outstanding under the Commercial Paper Program during the six months ended June 30, 2017 primarily using net cash proceeds received from the sale of our investment in Cetip (Note 11) and cash flows from operations.
NYSE Notes
The $850 million, 2.00% senior unsecured fixed rate NYSE Notes are due in October 2017. We currently plan to fund the redemption of the NYSE Notes with the issuance of new senior term notes. However, if we are unable to issue new senior term notes or to do so on favorable terms, then we would fund the NYSE Notes redemption under the Commercial Paper Program or with the unused amount available under the Credit Facility, or a combination of these sources.

7.
Equity
We currently sponsor employee and director stock option and restricted stock plans. Stock options and restricted stock are granted at the discretion of the compensation committee of the board of directors. All stock options and restricted stock awards are granted at an exercise price equal to the fair value of the common stock on the date of grant. The grant date fair value is based on the closing stock price on the date of grant. The fair value of the stock options and restricted stock on the date of grant is recognized as expense over the vesting period, net of estimated forfeitures. The non-cash compensation expenses recognized in our consolidated statements of income for stock options and restricted stock were $68 million and $60 million for the six months ended June 30, 2017 and 2016, respectively, and $34 million and $31 million for the three months ended June 30, 2017 and 2016, respectively.
Stock Option Plans
The following is a summary of stock options for the six months ended June 30, 2017:
 
Number of Options
 
Weighted Average
Exercise Price per
Option
Outstanding at December 31, 2016
3,878,705

 
$
36.05

Granted
730,913

 
57.34

Exercised
(220,020
)
 
27.56

Outstanding at June 30, 2017
4,389,598

 
40.02

 



12


Details of stock options outstanding as of June 30, 2017 are as follows:
 
Number of Options
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual Life
(Years)
 
Aggregate
Intrinsic
Value
(In millions)
Vested or expected to vest
4,389,598

 
$
40.02

 
6.8
 
$
114

Exercisable
3,097,035

 
$
34.58

 
5.9
 
$
97

The total intrinsic value of stock options exercised during the six months ended June 30, 2017 and 2016 were $7 million and $10 million, respectively, and $4 million and $7 million for the three months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, there were $12 million in total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 2.0 years as the stock options vest.
We use the Black-Scholes option pricing model for purposes of valuing stock option awards. During the six months ended June 30, 2017 and 2016, we used the weighted-average assumptions in the table below to compute the value of all options for shares of common stock granted to employees:
 
Six Months Ended June 30,
Assumptions:
2017
 
2016
Risk-free interest rate
1.84
%
 
1.51
%
Expected life in years
5.0

 
5.0

Expected volatility
21
%
 
24
%
Expected dividend yield
1.40
%
 
1.36
%
Estimated weighted-average fair value of options granted per share
$
10.50

 
$
9.88

The risk-free interest rate is based on the zero-coupon U.S. Treasury yield curve in effect at the time of grant. The expected life computation is derived from historical exercise patterns and anticipated future patterns. Expected volatilities are based on historical volatility of our stock.
Restricted Stock Plans
In January 2017, we reserved a maximum of 1,534,218 restricted shares for potential issuance as performance-based restricted shares to certain of our employees. The number of shares that will ultimately be granted under this award will be based on our actual financial performance as compared to financial performance targets set by our board of directors and compensation committee for the year ending December 31, 2017, as well as our 2017 total shareholder return as compared to that of the S&P 500 Index. The maximum compensation expense to be recognized under these performance-based restricted shares is $85 million if the maximum financial performance target is met and all 1,534,218 shares vest. The compensation expense to be recognized under these performance-based restricted shares will be $42 million if the target financial performance is met, which would result in 767,109 shares vesting. We will recognize expense on an accelerated basis over the three-year vesting period based on our quarterly assessment of the probable 2017 actual financial performance as compared to the 2017 financial performance targets. As of June 30, 2017, we determined that it is probable that the financial performance level will be at target for 2017. Based on this assessment, we recorded non-cash compensation expense of $12 million and $7 million for the six months and three months ended June 30, 2017, respectively, related to these shares and the remaining $30 million in non-cash compensation expense will be recorded on an accelerated basis over the remaining vesting period, including $13 million of which will be recorded over the remainder of 2017.
The following is a summary of the non-vested restricted shares for the six months ended June 30, 2017:  
 
Number of
Restricted
Stock Shares
 
Weighted Average
Grant-Date Fair
Value per Share
Non-vested at December 31, 2016
6,435,871
 
$
45.33

Granted
3,148,277
 
57.19

Vested
(3,265,749)
 
44.51

Forfeited
(270,695)
 
51.06

Non-vested at June 30, 2017
6,047,704
 
52.25

Restricted stock shares granted in the table above include both time-based and performance-based grants. Performance-based shares have been presented to reflect the actual shares to be issued based on the achievement of past performance targets. Non-vested performance-based restricted shares granted are presented in the table above at the target number of restricted shares that would vest if the maximum performance targets are met. As of June 30, 2017, there were $205 million in total unrecognized compensation costs

13


related to the time-based restricted stock and the performance-based restricted stock. These costs are expected to be recognized over a weighted-average period of 2.0 years as the restricted stock vests. These unrecognized compensation costs assume that a target performance level will be met on the performance-based restricted shares granted in January 2016. During the six months ended June 30, 2017 and 2016, the total fair value of restricted stock vested under all restricted stock plans was $203 million and $112 million, respectively.
Stock Repurchase Program
In August 2016, our board of directors approved an aggregate of $1.0 billion for future repurchases of our common stock with no fixed expiration date, subject to applicable laws and regulations. The shares repurchased are held in treasury stock. As of June 30, 2017, the remaining board authorization permits repurchases of up to $481 million of our common stock. We expect funding for any share repurchases to come from our operating cash flow or borrowings under our debt facilities or commercial paper program. Repurchases may be made from time to time on the open market, through established trading plans, in privately-negotiated transactions or otherwise, in accordance with all applicable securities laws, rules and regulations. We have entered into a Rule 10b5-1 trading plan, as authorized by our board of directors, to govern some or all of the repurchases of our shares of common stock, and we began to repurchase shares in October 2016. We may discontinue the stock repurchases at any time and may amend or terminate the Rule 10b5-1 trading plan at any time. The approval of our board of directors for the share repurchases does not obligate us to acquire any particular amount of our common stock. In addition, our board of directors may increase or decrease the amount of capacity we have for repurchases from time to time.
During the six months ended June 30, 2017, we repurchased 7,827,513 shares of our outstanding common stock at a cost of $469 million. These repurchases were completed on the open market and under our 10b5-1 trading plan. The timing and extent of future repurchases that are not made pursuant to a Rule 10b5-1 trading plan will be at our discretion and will depend upon many conditions. Our management periodically reviews whether or not to be active in repurchasing our stock. In making a determination regarding any stock repurchases, we consider multiple factors. The factors may include: overall stock market conditions, our common stock price movements, the remaining amount authorized for repurchases by our board of directors, the potential impact of a stock repurchase program on our corporate debt ratings, our expected free cash flow and working capital needs, our current and future planned strategic growth initiatives, and other potential uses of our cash and capital resources.
Dividends
During the six months ended June 30, 2017 and 2016, we paid cash dividends per share of $0.40 and $0.34, respectively, for an aggregate payout of $239 million and $205 million, respectively. The declaration of dividends is subject to the discretion of our board of directors, and may be affected by various factors, including our future earnings, financial condition, capital requirements, levels of indebtedness, credit ratings and other considerations our board of directors deem relevant. Our board of directors has adopted a quarterly dividend declaration policy providing that the declaration of any dividends will be determined quarterly by the board or audit committee of the board of directors taking into account such factors as our evolving business model, prevailing business conditions and our financial results and capital requirements, without a predetermined annual net income payout ratio.

8.
Income Taxes
Our effective tax rate was 27% and 30% for the six months ended June 30, 2017 and 2016, respectively, and 25% and 30% for the three months ended June 30, 2017 and 2016, respectively. The effective tax rates for the six months and three months ended June 30, 2017 and 2016 were lower than the federal statutory rate primarily due to favorable foreign income tax rate differentials, partially offset by state income taxes. Favorable foreign income tax rate differentials result primarily from lower income tax rates in the U.K. and various other lower tax jurisdictions as compared to the income tax rates in the U.S. The effective tax rates for the six months and three months ended June 30, 2017 are lower than the effective tax rates for the comparable periods in 2016 primarily due to tax benefits associated with a divestiture.  
Our non-U.S. subsidiaries had $4.1 billion in cumulative undistributed earnings as of June 30, 2017. This amount represents the post-income tax earnings under U.S. GAAP adjusted for previously taxed income. The earnings from our non-U.S. subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes has been made in the accompanying consolidated financial statements. Further, a determination of the unrecognized deferred tax liability is not practicable. Any future distribution by way of dividend of these non-U.S. earnings may subject us to both U.S. federal and state income taxes, as adjusted for non-U.S. tax credits, and withholding taxes payable to various non-U.S. countries.

9.
Clearing Organizations
We operate regulated central counterparty clearing houses for the settlement and clearance of derivative contracts. The clearing houses include ICE Clear Europe, ICE Clear Credit, ICE Clear US, ICE Clear Canada, ICE Clear Netherlands and ICE Clear Singapore (referred to herein collectively as the “ICE Clearing Houses”).

14


ICE Clear Europe performs the clearing and settlement for all futures and options contracts traded through ICE Futures Europe and ICE Endex, for energy futures and options contracts trading through ICE Futures U.S., and for CDS contracts submitted for clearing in Europe.
ICE Clear Credit performs the clearing and settlement for CDS contracts submitted for clearing in North America.
ICE Clear US performs the clearing and settlement of agricultural, metals, currencies and financial futures and options contracts traded through ICE Futures U.S.
ICE Clear Canada performs the clearing and settlement for all futures and options contracts traded through ICE Futures Canada.
ICE Clear Netherlands is preparing to provide clearing services to Euronext, which are expected to commence during the second half of 2018.
ICE Clear Singapore performs the clearing and settlement for all futures and options contracts traded through ICE Futures Singapore.
Each of the ICE Clearing Houses requires all clearing members to maintain cash on deposit or pledge certain assets, which may include government obligations, non-government obligations or gold to guarantee performance of the clearing members’ open positions. Such amounts in total are known as “original margin”. The ICE Clearing Houses may make intraday original margin calls in circumstances where market conditions require additional protection. The daily profits and losses from and to the ICE Clearing Houses due to the marking-to-market of open contracts are known as “variation margin”. The ICE Clearing Houses mark all outstanding contracts to market, and therefore pay and collect variation margin, at least once daily, and in some cases multiple times throughout the day. Marking-to-market allows the ICE Clearing Houses to identify any clearing members that may be unable to satisfy the financial obligations resulting from changes in the prices of their open contracts before those financial obligations become exceptionally large and jeopardize the ability of the ICE Clearing Houses to ensure financial performance of clearing members’ open positions.
Each of the ICE Clearing Houses requires that each clearing member make deposits into a fund known as a “guaranty fund”, which is maintained by the relevant ICE Clearing House. These amounts serve to secure the obligations of a clearing member to the ICE Clearing House to which it has made the guaranty fund deposit and may be used to cover losses sustained by the respective ICE Clearing House in the event of a default of a clearing member.
The ICE Clearing Houses seek to reduce their exposure through a risk management program that includes initial and ongoing financial standards for clearing member admission and continued membership, original and variation margin requirements, and mandatory deposits to the guaranty fund. The amounts that the clearing members are required to maintain in the original margin and guaranty fund accounts are determined by standardized parameters established by the risk management departments and reviewed by the risk committees and the boards of directors of each of the ICE Clearing Houses and may fluctuate over time. As of June 30, 2017 and December 31, 2016, the ICE Clearing Houses have received or have been pledged $96.4 billion and $95.7 billion, respectively, in cash and non-cash collateral in original margin and guaranty fund deposits to cover price movements of underlying contracts for both periods. The ICE Clearing Houses also have powers of assessment that provide the ability to collect additional funds from their clearing members to cover a defaulting member’s remaining obligations up to the limits established under the respective rules of each ICE Clearing House.
Should a particular clearing member fail to deposit original margin, or fail to make a variation margin payment, when and as required, the relevant ICE Clearing House may liquidate or hedge the clearing member’s open positions and use the clearing member’s original margin and guaranty fund deposits to make up any amount owed. In the event that those deposits are not sufficient to pay the amount owed in full, the ICE Clearing Houses may utilize the respective guaranty fund deposits of their respective clearing members on a pro-rata basis for that purpose.
We have contributed $150 million, $50 million and $50 million in cash to the ICE Clear Europe, ICE Clear Credit and ICE Clear US guaranty funds, respectively, as of June 30, 2017, and such amounts are at risk and could be used in the event of a clearing member default where the amount of the defaulting clearing member’s original margin and guaranty fund deposits are insufficient. We have also contributed $4 million in cash in total to the ICE Clear Canada, ICE Clear Netherlands and ICE Clear Singapore guaranty funds. The $254 million combined contributions to the guaranty funds as of June 30, 2017 and December 31, 2016 are included in long-term restricted cash in the accompanying consolidated balance sheets.
As of June 30, 2017, our cash margin deposits and guaranty fund were as follows for the ICE Clearing Houses (in millions):

15


 
ICE Clear 
Europe
 
ICE Clear
Credit
 
ICE Clear  US
 
Other ICE Clearing Houses
 
Total
Original margin
$
20,898

 
$
21,883

 
$
5,410

 
$
90

 
$
48,281

Guaranty fund
2,625

 
2,332

 
317

 
30

 
5,304

Total
$
23,523

 
$
24,215

 
$
5,727

 
$
120

 
$
53,585

As of December 31, 2016, our cash margin deposits and guaranty fund were as follows for the ICE Clearing Houses (in millions):
 
ICE Clear 
Europe
 
ICE Clear
Credit
 
ICE Clear  US
 
Other ICE Clearing Houses
 
Total
Original margin
$
27,046

 
$
16,833

 
$
6,184

 
$
107

 
$
50,170

Guaranty fund
2,444

 
2,135

 
316

 
85

 
4,980

Total
$
29,490

 
$
18,968

 
$
6,500

 
$
192

 
$
55,150

We have recorded these cash deposits in the accompanying consolidated balance sheets as current assets with corresponding current liabilities to the clearing members of the relevant ICE Clearing House. All cash and securities are available only to meet the financial obligations of that clearing member to the relevant ICE Clearing House. ICE Clear Europe, ICE Clear Credit, ICE Clear US, ICE Clear Canada, ICE Clear Netherlands and ICE Clear Singapore are separate legal entities and are not subject to the liabilities of the other ICE Clearing Houses or the obligations of the members of the other ICE Clearing Houses. The amount of these cash deposits may fluctuate due to the types of margin collateral choices available to clearing members and the change in the amount of deposits required. As a result, these assets and corresponding liabilities may vary significantly over time.
Of the cash held by the ICE Clearing Houses, as of June 30, 2017, $30.6 billion is secured in reverse repurchase agreements with primarily overnight maturities or direct investment in government securities. ICE Clear Credit, a systemically important financial market utility as designated by the Financial Stability Oversight Council, held $19.4 billion of its U.S. dollar cash in the guaranty fund and in original margin in cash accounts at the Federal Reserve Bank of Chicago as of June 30, 2017. The remaining cash deposits at the ICE Clearing Houses are held in demand deposit accounts at large, highly rated financial institutions and directly in U.S. Treasury securities with original maturities of less than 12 months. The carrying value of these securities approximates their fair value due to the short-term nature of the instruments and repurchase agreements.
In addition to the cash deposits for original margin and the guaranty fund, the ICE Clearing Houses have also received other assets from clearing members, which include government obligations, and may include other non-cash collateral such as certain agency and corporate debt or gold to mitigate credit risk. These assets are not reflected in the accompanying consolidated balance sheets as the risks and rewards of these assets remain with the clearing members unless the ICE Clearing Houses have sold or re-pledged the assets or in the event of a clearing member default, where the clearing member is no longer entitled to redeem the assets. Any income, gain or loss accrues to the clearing member. For certain non-cash deposits, the ICE Clearing Houses may impose discount or “haircut” rates to ensure adequate collateral levels to account for fluctuations in the market value of these deposits. As of June 30, 2017 and December 31, 2016, the assets pledged by the clearing members as original margin and guaranty fund deposits for each of the ICE Clearing Houses are detailed below (in millions):
 
As of June 30, 2017
 
As of December 31, 2016
 
ICE Clear 
Europe
 
ICE Clear Credit
 
ICE  Clear  US
 
Other ICE Clearing Houses
 
ICE Clear 
Europe
 
ICE Clear Credit
 
ICE  Clear  US
 
Other ICE Clearing Houses
Original margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government securities at face value
$
26,131

 
$
4,201

 
$
11,926

 
$
19

 
$
22,961

 
$
6,013

 
$
10,542

 
$
37

Other

 

 

 

 

 

 

 
368

Total
$
26,131

 
$
4,201

 
$
11,926

 
$
19

 
$
22,961

 
$
6,013

 
$
10,542

 
$
405

Guaranty fund:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government securities at face value
$
311

 
$
44

 
$
163

 
$
3

 
$
217

 
$
178

 
$
147

 
$
40


10.
Held for Sale
On December 11, 2015, we acquired 100% of Trayport in a stock transaction. The total purchase price was $620 million, comprised of 12.6 million shares of our common stock. Trayport is a software company that licenses its technology to serve exchanges, OTC brokers and traders to facilitate electronic and hybrid trade execution primarily in the energy markets.

16


The U.K. Competition and Markets Authority, or the CMA, undertook a review of our acquisition of Trayport under the merger control laws of the U.K. In October 2016, the CMA issued its findings and ordered a divestment of Trayport to remedy what the CMA determined to be a substantial lessening of competition. In November 2016, we filed an appeal with the Competition Appeal Tribunal, or the CAT, to challenge the CMA’s decision. In March 2017, the CAT upheld the CMA decision that we should divest Trayport. Following the CAT’s judgment, we asked for leave to appeal the CAT’s decision at the U.K. Court of Appeals. In May 2017, the U.K. Court of Appeals denied our request for leave to appeal. We are now obligated to sell Trayport.
The functional currency of Trayport is the pound sterling, as this is the currency in which Trayport operates. The $620 million in Trayport net assets were recorded on our December 11, 2015 opening balance sheet at a pound sterling/U.S. dollar exchange rate of 1.5218 (£407 million). Because our consolidated financial statements are presented in U.S. dollars, we must translate the Trayport net assets into U.S. dollars at the exchange rates in effect at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against the pound sterling will affect the value of the Trayport balance sheet, with gains or losses included in the cumulative translation adjustment account, a component of equity. As a result of the decrease in the pounds sterling/U.S. dollar exchange rate to 1.3025 as of June 30, 2017, the portion of our equity attributable to the Trayport net assets in accumulated other comprehensive loss from foreign currency translation was $89 million as of June 30, 2017.
As of June 30, 2017, we have classified Trayport as held for sale and ceased depreciation and amortization of the property and equipment and other intangible assets (Note 2). Upon classification of Trayport as held for sale, we have determined that the adjusted carrying value of Trayport’s net assets as of June 30, 2017 of $610 million, which is equal to the $521 million carrying value plus the $89 million in accumulated other comprehensive loss from foreign currency translation, is lower than the estimated fair value of Trayport, less the costs to dispose of the business. We will continue to evaluate the fair value of Trayport until it is sold, including reviewing the bids received for Trayport; its operating performance; its financial projections; changes in the business and regulatory climate in which it operates; the volatility in the capital markets; and the volatility in the pound sterling/U.S. dollar exchange rate. Any changes in these factors could result in adjustments to Trayport’s fair value.
Trayport is included in our data and listings segment. The total assets held for sale as of June 30, 2017 were $578 million and were reclassified and are included in “prepaid expenses and other current assets” in our accompanying consolidated balance sheet and the total liabilities held for sale as of June 30, 2017 were $57 million and were reclassified and are included in “other current liabilities” in our accompanying consolidated balance sheet. The carrying amounts of the major classes of assets and liabilities of Trayport are as follows as of June 30, 2017 (in millions):
Assets held for sale:
 
Cash and cash equivalents
$
6

Goodwill
331

Other intangibles, net
214

Other current and non-current assets
27

Total assets held for sale (included in prepaid expenses and other current assets)
$
578

 
 
Liabilities held for sale:
 
Deferred tax liabilities, net
$
38

Other current and non-current liabilities
19

Total liabilities held for sale (included in other current liabilities)
$
57

 
 
Accumulated other comprehensive loss from foreign currency translation classified as held for sale in equity
$
89


11.
Fair Value Measurements
Our financial instruments consist primarily of cash and cash equivalents, short-term and long-term restricted cash and investments, short-term and long-term investments, customer accounts receivable, margin deposits and guaranty funds, cost and equity method investments, short-term and long-term debt and certain other short-term assets and liabilities. The fair value of our financial instruments are measured based on a three-level hierarchy:
Level 1 inputs — quoted prices for identical assets or liabilities in active markets.
Level 2 inputs — observable inputs other than Level 1 inputs such as quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are directly observable.
Level 3 inputs — unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

17


We use Level 1 inputs to determine fair value. The Level 1 assets consist of U.S. Treasury securities, equity and other securities listed in active markets, and investments in publicly traded mutual funds held for the purpose of providing future payments of the supplemental executive retirement and the supplemental executive savings plans.
Financial assets and liabilities recorded in the accompanying consolidated balance sheets as of June 30, 2017 and December 31, 2016 are classified in their entirety based on the lowest level of input that is significant to the asset or liability’s fair value measurement. Financial instruments measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 are as follows (in millions):
 
As of June 30, 2017
 
As of December 31, 2016
 
Level 1
 
Level 2 and 3
 
Total
 
Level 1
 
Level 2 and 3
 
Total
Assets at fair value:
 
 
 
 
 
 
 
 
 
 
 
Long-term investment in equity securities
$

 
$

 
$

 
$
432

 
$

 
$
432

U.S. Treasury securities
469

 

 
469

 
500

 

 
500

Mutual Funds
17

 

 
17

 
23

 

 
23

Total assets at fair value
$
486

 
$

 
$
486

 
$
955

 
$

 
$
955

As of June 30, 2017, the fair value of our $1.24 billion 2020 Senior Notes was $1.27 billion, the fair value of our $1.24 billion 2025 Senior Notes was $1.31 billion, the fair value of our $850 million NYSE Notes was $850 million, the fair value of our $791 million 2023 Senior Notes was $841 million, and the fair value of our $598 million 2018 Senior Notes was $606 million. The fair values of these fixed rate notes were estimated using quoted market prices for these instruments. The fair value of our commercial paper approximates the carrying value since the rates of interest on this short-term debt approximate market rates as of June 30, 2017. All other financial instruments are determined to approximate carrying value due to the short period of time to their maturities.
Until March 29, 2017, we held a 12% ownership interest in Cetip, S.A., or Cetip, which we classified as an available-for-sale long-term investment. Cetip was recorded at its fair value using its quoted market price. Changes in the fair value of available-for-sale securities are reflected in accumulated other comprehensive income, and include the effects of both stock price and foreign currency translation fluctuations. The unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized. Realized gains and losses, and declines in value deemed to be other-than-temporary, are recognized in earnings.
We acquired the common stock of Cetip for an aggregate consideration of $514 million in cash in July 2011. During the year ended December 31, 2013, we recognized an impairment loss on our Cetip investment of $190 million, primarily due to unfavorable foreign exchange rate changes, which was equal to the difference between the $324 million fair value as of December 31, 2013 and the original investment cost of $514 million. The $324 million fair value of the Cetip investment as of December 31, 2013 became our new cost basis. The long-term investment in equity securities as of December 31, 2016 represents our investment in Cetip, which was valued at $432 million, including a $108 million accumulated unrealized gain.
On March 29, 2017, Cetip and BM&FBOVESPA S.A. finalized a merger agreement. BM&FBOVESPA S.A., which changed its name to B3 S.A. - Brasil, Bolsa, Balcao, or B3, following the merger with Cetip, is a stock exchange and operator of registration, clearing, custodial and settlement services for equities, financial securities, indices, rates, commodities and currencies and is located in São Paulo, Brazil. The merger valued our Cetip investment at $500 million. We received the proceeds in cash and in B3 common stock.
The cash component was valued at $319 million, which was subject to Brazilian capital gains tax of $28 million that was remitted to the Brazilian tax authorities in March 2017. We received net cash proceeds in April 2017 of $286 million, which is net of a foreign exchange loss of $6 million that was incurred in April 2017. We received 29,623,756 B3 common shares valued at their quoted market price of $181 million. In April 2017, we sold the B3 common shares for net proceeds of $152 million, which is net of a capital gain tax of $26 million that was remitted to the Brazilian tax authorities and further transaction expenses of $3 million that were incurred in April 2017. We used the $438 million in net cash and stock proceeds received from the merger and sale of B3 shares to pay down amounts outstanding under our Commercial Paper Program and for share repurchases.
The $500 million fair value of our investment in Cetip included an accumulated unrealized gain of $176 million, based on the $324 million cost basis. In connection with the sale of our equity investment in Cetip, the $176 million, accumulated unrealized gain was reclassified out of accumulated other comprehensive income and was recognized in other income as a realized investment gain in the accompanying consolidated statement of income for the six months ended June 30, 2017.
As of June 30, 2017, we held $469 million in U.S. Treasury securities. Of these securities, $319 million were recorded as short-term restricted cash and investments and $150 million were recorded as long-term restricted cash and investments in the accompanying consolidated balance sheet as of June 30, 2017. We account for the U.S. Treasury securities held using the available-for-sale method.

18


Mutual funds represent equity and fixed income mutual funds held for the purpose of providing future payments for the supplemental executive savings plan and the supplemental executive retirement plan and are classified as available-for-sale securities.
We did not use Level 2 and 3 inputs to determine the fair value of assets or liabilities measured at fair value on a recurring basis as of June 30, 2017 or December 31, 2016. We measure certain assets, such as intangible assets and cost and equity method investments, at fair value on a non-recurring basis. These assets are recognized at fair value if they are deemed to be impaired. As of June 30, 2017 and December 31, 2016, none of these assets were required to be recorded at fair value since no impairment indicators were present.

12.
Condensed Consolidating Financial Statements (Unaudited)
    
In connection with our acquisition of NYSE, Intercontinental Exchange, Inc., or ICE, and NYSE Holdings LLC, or NYSE Holdings, established various guarantees to protect against structural subordination of each entity’s existing indebtedness. NYSE Holdings is our 100% owned subsidiary and fully and unconditionally guarantees, on an unsecured and unsubordinated basis, the payment of principal, premium, if any, and interest of our senior notes. Similarly, ICE fully and unconditionally guarantees, on an unsecured and unsubordinated basis, the payment of principal, premium, if any, and interest of the NYSE Notes. The ICE guarantees will remain in place until the earlier of when the NYSE Notes are paid off or mature in October 2017 and certain other actions are taken to terminate the guarantees. After all of the guarantees are terminated, we will cease including a Condensed Consolidating Financial Statements footnote in our quarterly and annual filings.

The following consolidating financial information sets forth, under the equity method of accounting, the condensed consolidating statements of income and comprehensive income, the condensed consolidating balance sheets, and the condensed consolidating statements of cash flows for (i) ICE (Parent); (ii) NYSE Holdings; (iii) the subsidiary non-guarantors; (iv) elimination entries necessary to consolidate each of ICE (Parent) and NYSE Holdings with the non-guarantor subsidiaries; and (v) on a consolidated basis. The condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements.


19


Intercontinental Exchange, Inc.
Condensed Consolidating Balance Sheets
As of June 30, 2017
(In millions)
 

ICE
 (Parent)
 
Subsidiary
Guarantor - NYSE Holdings
 
Subsidiary
Non-Guarantors
 
Consolidating
 Adjustments
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
   Cash and cash equivalents
$
1

 
$

 
$
397

 
$

 
$
398

   Intercompany receivable
2,398

 

 

 
(2,398
)
 

   Margin deposits and guaranty funds

 

 
53,585

 

 
53,585

   Notes receivable from affiliate, current

 
281

 
42

 
(323
)
 

   Other current assets
2

 

 
2,463

 

 
2,465

Total current assets
2,401

 
281

 
56,487

 
(2,721
)

56,448

Property and equipment, net

 

 
1,161

 

 
1,161

Other non-current assets:
 
 
 
 
 
 
 
 
 
   Goodwill and other intangible assets, net

 

 
22,104

 

 
22,104

   Investment in subsidiaries
24,302

 
13,912

 

 
(38,214
)
 

   Notes receivable from affiliate, non-current
620

 
6,602

 
8,405

 
(15,627
)
 

   Other non-current assets
106

 
11

 
494

 

 
611

Total other non-current assets
25,028

 
20,525

 
31,003

 
(53,841
)
 
22,715

Total assets
$
27,429

 
$
20,806

 
$
88,651

 
$
(56,562
)
 
$
80,324

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
   Short-term debt
$
1,173

 
$
850

 
$

 
$

 
$
2,023

   Margin deposits and guaranty funds

 

 
53,585

 

 
53,585

   Intercompany payable

 
1,805

 
593

 
(2,398
)
 

   Notes payable to affiliates, current
283

 
40

 

 
(323
)
 

   Other current liabilities
20

 

 
1,191

 

 
1,211

Total current liabilities
1,476

 
2,695

 
55,369

 
(2,721
)
 
56,819

Non-current liabilities:
 
 
 
 
 
 
 
 
 
   Long-term debt
3,874

 

 

 

 
3,874

   Notes payable to affiliates, non-current
6,177

 
2,228

 
7,222

 
(15,627
)
 

   Other non-current liabilities
4

 

 
3,694

 

 
3,698

Total non-current liabilities
10,055

 
2,228

 
10,916

 
(15,627
)
 
7,572

Total liabilities
11,531

 
4,923

 
66,285

 
(18,348
)
 
64,391

 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
15,898

 
15,883

 
22,331

 
(38,214
)
 
15,898

Non-controlling interest in consolidated subsidiaries

 

 
35

 

 
35

Total equity
15,898

 
15,883

 
22,366

 
(38,214
)
 
15,933

Total liabilities and equity
$
27,429

 
$
20,806

 
$
88,651

 
$
(56,562
)
 
$
80,324



















20


Intercontinental Exchange, Inc.
Condensed Consolidating Balance Sheets
As of December 31, 2016
(In millions)
 

ICE
 (Parent)
 
Subsidiary
Guarantor - NYSE Holdings
 
Subsidiary
Non-Guarantors
 
Consolidating
 Adjustments
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
   Cash and cash equivalents
$
1

 
$

 
$
406

 
$

 
$
407

   Intercompany receivable
2,340

 

 

 
(2,340
)
 

   Margin deposits and guaranty funds

 

 
55,150

 

 
55,150

   Note receivable from affiliate, current

 
281

 
23

 
(304
)
 

   Other current assets

 

 
1,576

 

 
1,576

Total current assets
2,341

 
281

 
57,155

 
(2,644
)
 
57,133

Property and equipment, net

 

 
1,129

 

 
1,129

Other non-current assets:
 
 
 
 
 
 
 
 
 
   Goodwill and other intangible assets, net

 

 
22,711

 

 
22,711

   Investment in subsidiaries
23,266

 
13,238

 

 
(36,504
)
 

   Note receivable from affiliate, non-current
620

 
5,958

 
6,373

 
(12,951
)
 

   Other non-current assets
100

 
11

 
919

 

 
1,030

Total other non-current assets
23,986

 
19,207

 
30,003

 
(49,455
)
 
23,741

Total assets
$
26,327

 
$
19,488

 
$