Benjamin R. Jackson
President at Intercontinental Exchange
Thank you, Warren and thank you all for joining us this morning. Please turn to slide eight. In the more than 20 years, ICE has been building its global energy platform, we have strategically positioned our energy business for the globalization of natural gas and the societal demand for a transition to clean energies.
Our long-term strategic direction and the value of our diverse, deep, and liquid markets contributed to record trading volumes across our energy complex in the second quarter. This was a key driver to another quarter of record energy revenues up 33% year-over-year and growing double-digits on average over the past five years.
This strong performance is a testament to customers' continued confidence in ICE as the global energy hedging venue of choice. And with open interest continuing to set records into July, up 25% year-over-year, our energy complex appears poised for continued strength.
As the world evolves, market participants are constantly adjusting and weighing the price impact of an array macroeconomic, geopolitical and regulatory forces, as well as externalities, such as climate risk and the emergence of new renewable fuel sources. In essence, the price formation process is increasingly becoming more complex, and that additional complexity is driving customer demand for more precise risk management tools.
It is also driving customers to come to a single place manage risk across oil, gas, power and environmentals because of the efficiency and deep liquid markets that we provide. Across natural gas, the evolution of a global market is accelerating. This acceleration underpinned by the rise of liquefied natural gas, market-based pricing and, more recently, Europe's renewed openness to gas imports after the elimination of Russia as a key supplier and the emergence of North America as a leading natural gas exporter.
Alongside this, as an important partner fuel, emitting about half as much carbon dioxide as coal to produce, natural gas continues the benefit of demand for cleaner fuels as countries move to reduce their carbon emissions. Additionally, the natural gas markets were historically regional-oriented, each characterized by distinct pricing and supply dynamics. All these factors underpin the emergence of three key benchmarks for natural gas across North America, Europe and Asia, with these becoming increasingly interconnected.
In Europe, our Title Transfer Facility contract, or TTF, is essential trading point for natural gas, just as Brent is the global benchmark for oil pricing. As a result, TTF is increasingly being used by global commercial participants, traders and investors, with a record number of market participants in the second quarter that had doubled since 2019. This has been accompanied by volumes and open interest increasing, with both setting new highs in the second quarter and each are growing double-digits on average over the past five years.
In Asia, our Japan Korea Marker, or JKM, reflects the spot market value of cargoes delivered into the region that represents a key demand center for LNG, underpinned by surging economic growth and increasing focus on environmental concerns. In 2023, global coal consumption reached its highest level in history, driven by continued growth in Asia. While coal continues to be replaced by natural gas and other cleaner energy sources in Europe and North America, it still accounts for 47% of primary energy consumption in Asia. In absolute terms, the coal-switching opportunity in Asia alone represents more energy than the total energy consumption in North America across all primary energy sources.
Today, the relationship between our TTF and JKM benchmarks drives global price formation. Reflecting this dynamic ICE's JKM volumes have shifted from being roughly 50% composed of the JKM TTF spread, to closer to two-thirds. This dynamic also illustrates market confidence relying on TTF as a benchmark for global gas and LNG prices as participants draw assurance from its deep liquidity, rather than relying on the Asian marker in isolation.
In North America, we began preparing for the liberalization of natural gas and its evolution beyond the Henry Hub benchmark more than a decade ago. Through close collaboration with our customers, we created ICE's electronic regional basis markets, a suite of precise risk management tools, reflecting the commercially relevant supply and demand dynamics of 70 hubs across North America. These hubs are priced at a differential to Henry Hub to reflect US regional market conditions, transportation costs and transmission capacity between locations.
Alongside this, many market participants seeking to manage exposure to US natural gas price dynamics gravitate towards ICE's Henry Hub contracts for liquidity and the linkage to our exclusive thesis markets.
As the global landscape of LNG exports, geopolitical forces and shifts to cleaner energy sources all continue to evolve. We see these dynamics underpinning the strong momentum for this business and we see these trends continuing to favor our growing global gas complex well into the future.
The importance of the evolution energy markets extends to our global environmental markets where the number of market participants has nearly doubled since 2019, setting an all-time high in the second quarter and increasing 18% year-over-year. At the same time, volumes increased 6% in the quarter, including growth across our regional greenhouse gas initiative allowances, California carbon allowances, as well as our EU and UK allowances. This strong performance has contributed to a 43% increase in environmental revenues year-to-date, including 64% growth in the second quarter.
In parallel, across our power markets, volumes increased 32% in the in the first half, including 51% growth second quarter. With AI and data center build-outs expected to drive meaningful power demand into the next decade, our platform is uniquely positioned to capture this tailwind and help market participants manage this potentially volatile growth story given that ICE is the most comprehensive platform that offers U.S. regional gas markets, alongside deep and liquid power and environmental markets.
In summary, for market participants seeking to manage their risk, ICE's global energy platform offers over 1,000 futures and options contracts across natural gas, power, environmental and oil markets, supporting the growing complexity of energy markets and uniquely positioning us to benefit from both near-term volatility and secular growth trends occurring across these markets.
Moving to our Fixed Income & Data Services business. Our quality pricing and reference data, combined with over 40 years of price history serve as the foundation for what is today one of the largest providers of fixed income indices globally.
Year-to-date, revenue in our index business is up double digits, with passive ETF assets under management benchmarked to our indices growing to a record $616 billion through the end of the second quarter, from less than $100 billion in 2017 and doubling since 2020.
In addition, we continue to see returns on past investments made enhance content and functionality of our other data and network services business. As an example, within our consolidated feeds business, investments we've made to elevate and enhance our offering have directly contributed to the double-digit revenue growth in this area year-to-date.
With content from 600 data sources, our offering gives customers access to a broad universe of low-latency financial information with full depth of market data. As firms seek more high-quality data from a range of different sources in a cost-efficient manner, our competitive and comprehensive offering stands to benefit.
While our consolidated feeds and index businesses are smaller components of our comprehensive data platform today, they're both well positioned to continue grow and capture market share, while also serving an important role in our broader enterprise sales strategy.
Turning now to our mortgage business. The secular shift towards the adoption of an electronic workflow continues, with a life of loan offering that spans from point of consumer acquisition all the way through to the secondary market, our platform is uniquely positioned to play a fundamental role. In the second quarter, we closed on 29 new Encompass clients as customers focus on modernizing their infrastructure and on workflow efficiencies.
Building on win announced last quarter such as Citizens Bank and Webster Bank, we are pleased to announce that mortgage solutions at Colorado has signed on to Encompass, expanding the MSP win we announced late last year. We have also just signed another top 15 homebuilder in the US to encompass and our DDA platform, making them the ninth homebuilder of the top 15 to join our community.
In addition, as mentioned last quarter, we've been integrating our tax, flood and closing fees data into Encompass, providing customers with more choice of service providers on our platform. In that regard, we're encouraged by the early traction in our cross-sell efforts across these offerings, executing on 200 data cross-sells to Encompass clients in the first half.
While these offerings are small components of our business today, these wins give us confidence in our ability to execute on the synergy targets that we laid out at the time of the Black Knight transaction. Along the same lines, following the first integration of Encompass to MSP by leveraging our data and document automation platform for loan onboarding, straight from origination through to servicing, we are pleased to announce that we signed JPMorgan Chase onto this service. For our traditional DDA business, we also had 12 new wins to new and existing Encompass clients in the second quarter alone.
In summary, we are pleased to see the value of our platform and solutions are providing, by our comprehensive technology platform that is resonating in the marketplace. With a touch point to nearly every market participant, we have connectivity to a customer base in need of the automation that our digital solutions provide.
As these new customers come on to our network, we have the opportunity to expand the customer relationship over time as they adopt additional solutions. Just as we've seen in our other markets, this flywheel effect gives us confidence that we can grow a business that, today, is only a fraction of the $14 billion addressable market that's in the early days of an analog to digital conversion.
With that, I'll turn the call over to Jeff.
