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As filed with the Securities and Exchange Commission on October 25, 2005
Registration No. 333-123500
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Amendment No. 5
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
IntercontinentalExchange, Inc.
(Exact name of registrant as specified in its charter)
         
Delaware   6200   58 2555 670
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
2100 RiverEdge Parkway
Suite 500
Atlanta, GA 30328
(770) 857-4700
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
Johnathan H. Short, Esq.
General Counsel
IntercontinentalExchange, Inc.
2100 RiverEdge Parkway
Suite 500
Atlanta, GA 30328
(770) 857-4700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
 
Copies to:
     
David B. Harms, Esq.
David J. Gilberg, Esq.
Catherine M. Clarkin, Esq.
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
(212) 558-4000
  William F. Gorin, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
(212) 225-2000
 
         Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
 
        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, check the following box.     o
        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
        If the delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, check the following box.     o
CALCULATION OF REGISTRATION FEE
                     
             
            Proposed Maximum   Proposed Maximum   Amount of
Title of Each Class of     Amount To Be     Offering Price   Aggregate   Registration
Securities to be Registered     Registered     Per Share   Offering Price   Fee
                     
Common Stock, par value $0.01 per share
    11,500,000(1)     $20.00(2)   $230,000,000   $27,071(3)
             
             
(1)  Includes shares which the underwriters have the option to purchase to cover over-allotments, if any.
 
(2)  Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
 
(3)  Previously paid.
 
         The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION. DATED OCTOBER 25, 2005.
10,000,000 Shares
(INTERCONTINENTALEXCHANGE LOGO)
Common Stock
 
          This is an initial public offering of common stock of IntercontinentalExchange, Inc.
          We are offering 2,500,000 of the shares to be sold in the offering. The selling shareholders are offering an additional 7,500,000 shares. We will not receive any proceeds from the sale of the shares being sold by the selling shareholders.
          Prior to this offering, there has been no public market for our common stock. We estimate that the initial public offering price per share will be between $18.00 and $20.00. Our common stock has been approved for listing on the New York Stock Exchange under the symbol “ICE”.  See “Underwriting” for a discussion of the factors to be considered in determining the initial offering price.
             Investing in our common stock involves significant risks. See “Risk Factors” beginning on page 12 to read about factors you should consider before buying shares of our common stock.
       Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
                 
    Per Share   Total
         
Initial public offering price
  $       $    
Underwriting discount
  $       $    
Proceeds, before expenses, to IntercontinentalExchange, Inc. 
  $       $    
Proceeds, before expenses, to the selling shareholders
  $       $    
          To the extent that the underwriters sell more than 10,000,000 shares of our common stock, the underwriters have the option to purchase up to an additional 1,500,000 shares from some of the selling shareholders at the initial public offering price less the underwriting discount.
 
      The underwriters expect to deliver the shares of common stock in New York, New York on                     , 2005.
 
Morgan Stanley Goldman, Sachs & Co.
 
William Blair & Company Sandler O’Neill & Partners, L.P.
SG Corporate & Investment Banking
 
Prospectus dated                     , 2005


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PROSPECTUS SUMMARY
      This summary highlights information contained elsewhere in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the section entitled “Risk Factors” and our consolidated financial statements and related notes included elsewhere in this prospectus. Unless otherwise indicated, the terms “IntercontinentalExchange”, “we”, “us”, “our”, “our company” and “our business” refer to IntercontinentalExchange, Inc. or IntercontinentalExchange, LLC, as applicable, together with our consolidated subsidiaries. Due to rounding, figures in tables may not sum exactly. Unless otherwise indicated, the term “ICE Futures” refers to our wholly-owned subsidiary, which, prior to October 25, 2005, operated as the International Petroleum Exchange, or the IPE. All futures and options contracts traded in the markets operated by ICE Futures will retain “IPE” in their contract names and specifications.  
BUSINESS
Overview
      We operate the leading electronic global futures and over-the-counter, or OTC, marketplace for trading a broad array of energy products. We are the only marketplace to offer an integrated electronic platform for side-by-side trading of energy products in both futures and OTC markets. Through our electronic trading platform, our marketplace brings together buyers and sellers of derivative and physical energy commodities contracts. Our electronic platform increases the accessibility and transparency of the energy commodities markets and enhances the speed and quality of trade execution. The open architecture of our business model — meaning our ability to offer centralized access to trading in futures and OTC contracts on a cleared or bilateral basis through multiple interfaces — allows our participants to optimize their trading operations and strategies. We conduct our OTC business directly, and our futures business through our wholly-owned subsidiary, ICE Futures. ICE Futures is the largest energy futures exchange in Europe, as measured by 2004 traded contract volumes.  
 
      During the nine months ended September 30, 2005, 75.0 million contracts were traded in our combined futures and OTC markets, up 54.5% from 48.5 million contracts traded during the nine months ended September 30, 2004. During 2004, 35.5 million contracts were traded in our futures markets and 31.0 million contracts were traded in our OTC markets, up 6.6% from 33.3 million futures contracts traded during 2003 and up 27.6% from 24.3 million OTC contracts traded during 2003. Our revenues consist primarily of transaction fees, market data fees and trading access fees. On a consolidated basis, we generated $114.6 million in revenues for the nine months ended September 30, 2005, a 43.4% increase compared to $79.9 million for the nine months ended September 30, 2004, and $25.6 million in net income for the nine months ended September 30, 2005, a 49.3% increase compared to $17.1 million for the nine months ended September 30, 2004. The financial results for the nine months ended September 30, 2005 include $4.8 million in expenses incurred relating to the closure of our open-outcry trading floor in London and a $15.0 million settlement expense related to a payment made to EBS Dealing Resources, Inc., or EBS, to settle litigation. On a consolidated basis, we generated $108.4 million in revenues for 2004, a 15.6% increase compared to $93.7 million for 2003, and $21.9 million in net income for 2004, a 64.1% increase compared to $13.4 million for 2003. We recorded consolidated net cash provided from operations of $40.2 million in 2004, a 48.2% increase compared to $27.1 million in 2003.  
Our History
      In 1997, Jeffrey C. Sprecher, our founder, chairman and chief executive officer, acquired Continental Power Exchange, Inc., our predecessor company, to develop a platform to provide a more transparent and efficient market structure for OTC energy commodities trading. In May 2000, our company was formed, and Continental Power Exchange, Inc. contributed to us all of its assets, which consisted principally of electronic trading technology, and its liabilities, in return for a minority equity interest in our company. In connection with our formation, seven leading wholesale commodities market participants acquired equity interests in our company, either directly or through affiliated entities. We refer to these leading commodities market  

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participants, or their affiliates, as the case may be, as our Initial Shareholders. Our Initial Shareholders are BP Products North America Inc. (formerly known as BP Exploration and Oil, Inc.), DB Structured Products, Inc. (formerly known as Deutsche Bank Sharps Pixley Inc.), The Goldman Sachs Group, Inc., Morgan Stanley Capital Group Inc., S T Exchange Inc. (an affiliate of Royal Dutch Shell), Société Générale Financial Corporation and Total Investments USA Inc. (an affiliate of Total S.A.). In November 2000, six leading natural gas and power companies, which we refer to as the Gas and Power Firms, acquired equity interests in our company. The Gas and Power Firms are AEP Investments, Inc. (formerly known as AEP Energy Services, Inc.), Aquila Southwest Processing, L.P., Duke Energy Trading Exchange, LLC, El Paso Merchant Energy North America Company, Reliant Energy Trading Exchange, Inc. and Mirant Americas Energy Marketing, L.P. In June 2001, we expanded our business into futures trading by acquiring the International Petroleum Exchange (which we renamed ICE Futures in October 2005), which, at the time, was operated predominantly as a floor-based, open-outcry exchange. We closed our open-outcry trading floor in London on April 7, 2005, and since that date, all of our futures trading has been conducted exclusively in our electronic markets.  
Our Business
      Our marketplace is globally accessible, promotes price discovery and offers participants the opportunity to trade a variety of energy products. Our key products include contracts based on crude or refined oil, natural gas and power. Our derivative and physical products provide participants with a means for managing risks associated with changes in the prices of these commodities, asset allocation, ensuring physical delivery of select commodity products, speculation and arbitrage. The majority of our trading volume is financially settled, meaning that settlement is made through cash payments based on the value of the underlying commodity, rather than through physical delivery of the commodity itself.
      We operate our business in two distinct markets: futures markets and OTC markets. Futures markets offer trading in standardized derivative contracts on a regulated exchange and OTC markets offer trading in over-the-counter derivative contracts, including contracts that provide for the physical delivery of an underlying commodity and contracts that provide for financial settlement based on the prices of underlying commodities. All futures and cleared OTC contracts are cleared through a central clearinghouse. We offer OTC contracts that can be traded on a bilateral basis and certain OTC contracts that can be traded on a cleared basis. Bilateral contracts are settled between counterparties, while cleared contracts are novated to a third party clearinghouse where they are marked to market and margined daily before final settlement at expiration.
      We operate our futures markets through our subsidiary, ICE Futures, a Recognized Investment Exchange based in London. As a Recognized Investment Exchange, ICE Futures is recognized, in accordance with the terms of the Financial Services and Markets Act 2000, as an investment exchange by the Financial Services Authority, the regulatory authority that governs, among other things, commodities futures exchanges in the United Kingdom. To take advantage of the increasing acceptance and adoption of electronic trading, and to maintain and enhance our competitive position, we closed our open-outcry trading floor in London on April 7, 2005. All of our futures trading is now conducted exclusively in our electronic markets. We expect to achieve cost savings of approximately $1.4 million in 2005 and between approximately $4.0 million and $5.0 million annually in 2006 and 2007 in connection with the closure, which will be offset in the near term by a charge of $4.8 million that we recorded in the second quarter of 2005. During the period following the closure of our open-outcry trading floor, average daily trading volumes initially decreased to 137,000 contracts traded in April 2005 from 151,000 contracts traded in March 2005. Beginning in May 2005, trading volumes increased and, in certain cases, reached record levels. The initial decline in April was due in part to the displacement of floor-based traders following the floor closure on April 7, 2005, some of whom later began trading electronically. In addition, new participants began trading in our electronic markets. We achieved a record monthly volume in our futures business in May 2005 with average daily trading volumes of 159,000 contracts. We subsequently achieved a record monthly average daily trading volume of 173,000 contracts in June 2005, 189,000 contracts in August 2005 and 190,000 contracts in September 2005. We also achieved daily volume records for Brent Crude futures and total futures of 231,000 and 296,000 contracts traded,

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respectively, on August 10, 2005. For a more detailed discussion of our floor closure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Reporting — Futures Business Segment.”
      We operate our OTC markets exclusively on our electronic platform. In addition to trade execution, our electronic platform offers a comprehensive suite of trading-related services, including electronic trade confirmation, integrated access to clearing services and risk management functionality. We also offer a variety of market data services for both the futures and OTC markets.
Our Competitive Strengths
      We have established ourselves as the leading electronic marketplace for combined global futures and OTC energy commodities trading by leveraging a number of key strengths, including:
Highly Liquid Global Markets and Benchmark Contracts
      We offer liquid markets in a number of the most actively traded global energy commodities products. We operate the leading market for trading in Brent crude futures, as measured by the volume of contracts traded in 2004. The IPE Brent Crude futures contract that is listed by ICE Futures is a leading benchmark for pricing crude oil produced and consumed outside of the United States. Similarly, IPE Gas Oil is a leading benchmark for the pricing of a range of traded refined oil products outside the United States. We also operate the leading market for trading in cleared OTC Henry Hub natural gas contracts, with 30.0 million contracts traded during the nine months ended September 30, 2005 and 15.9 million contracts traded during the year ended December 31, 2004, compared to 7.5 million and 5.3 million cleared OTC Henry Hub natural gas contracts traded by our nearest competitor during the same periods. The Henry Hub natural gas market is the most liquid natural gas market in North America.
Leading Electronic Energy Trading Platform
      Our electronic trading platform provides centralized and direct access to trade execution and real-time price discovery. We operate our futures and OTC markets exclusively on our electronic platform. Our electronic platform has enabled us to attract significant liquidity from traditional market participants as well as new market entrants seeking the efficiencies and ease of execution offered by electronic trading. We have developed a significant global presence with over 8,300 active screens at over 980 OTC participant firms and over 390 futures participant firms as of September 30, 2005.
Integrated Access to Futures and OTC Markets
      We attribute the growth in our business in part to our ability to offer qualified market participants integrated access to futures and OTC markets. Our integrated and electronic business model allows us to respond rapidly to our participants’ needs, changing market conditions and evolving trends in the markets for energy commodities trading. We believe that our demonstrated ability to develop and launch new products for both the futures and OTC markets provides us with several competitive advantages, including:
  •  Multi-Product Trading: We operate a globally accessible platform that offers qualified market participants a seamless interface between trading in futures products, options on those futures, and a broad range of OTC products.
 
  •  Multiple Access Options: Our participants access our marketplace through a variety of means, including through our electronic trading platform, proprietary front-end systems, independent software vendors and brokerage firms. Independent software vendors allow market participants to access multiple exchanges through a single interface, which is integrated with the participants’ risk management systems.
 
  •  Cleared OTC Contracts: We were the first marketplace in North America to introduce cleared OTC energy contracts, which we believe have attracted new participants to our OTC markets by reducing bilateral credit risk and by improving capital efficiency.

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Highly Scalable, Proven Technology Infrastructure
      Our electronic trading platform provides rapid trade execution and is, we believe, one of the world’s most flexible, efficient and secure systems for commodities trading. We have designed our platform to be highly scalable, meaning that we can expand capacity and add new products and functionality efficiently, at relatively low cost and without disruption to our markets. Our platform can also be adapted and leveraged for use in other markets, as demonstrated by the decision of the Chicago Climate Exchange to operate its emissions-trading market on our platform. We believe that our commitment to investing in technology to enhance our platform will continue to contribute to the growth and development of our business.
Transparency and Independence
      We offer market participants price transparency, meaning a complete view of the depth and liquidity of our markets, through our electronic platform. This is in contrast to the lack of transparency of traditional open-outcry exchanges and voice-brokered markets. All participant orders placed on our platform are executed in the order in which they are received, ensuring that all orders receive equal execution priority. In addition, the transparency of our platform facilitates market regulation through increased market visibility and the generation of complete records of all transactions executed in our markets.
      Our board of directors is independent from our participants and trading activity on our electronic platform, which allows our board to act impartially in making decisions affecting trading activity. In contrast, many of our competitors are governed by floor traders or other market participants. We believe that our governance structure promotes shareholder value and the operation of fair and efficient markets. We also believe that it provides us with greater flexibility to launch new products and services, and to evaluate and pursue growth opportunities while ensuring impartial treatment for our participants. In addition, we do not participate as a principal in any trading activities, which allows us to avoid potential conflicts of interest that could arise from engaging in trading activities while operating our marketplace.
Strong Value Proposition
      We believe that, by using our electronic platform, market participants can achieve price improvement over alternate means of trading. Electronic trade execution offers cost efficiencies by providing firm posted prices and reducing trade-processing errors and back office overhead, and allows us to accelerate the introduction of new products on our platform. The combination of electronic trade execution and integrated trading and market data services facilitates automation by our participants of all phases of trade execution and processing from front-office to back-office, and ranging from trading and risk management to settlement. In addition, in our futures business, eligible participants may trade directly in our markets by paying a maximum annual membership fee of approximately $11,000 per year. In contrast, on the New York Mercantile Exchange, or NYMEX, and the Chicago Board of Trade, participants are required to purchase a “seat” on the exchange before they are eligible to trade directly on or gain membership in the exchange, the cost of which is substantial (approximately $3.0 million based on October 2005 NYMEX seat sale prices). While a “seat” conveys a right of ownership and other benefits to its member, it poses a significant barrier to gaining direct access to futures exchange markets, unlike our futures markets.
Strong Management Team
      Our senior management team has on average over 19 years of experience in the energy and financial services sectors. Our founding management team includes Jeffrey C. Sprecher, our chairman and chief executive officer, Charles A. Vice, our president and chief operating officer, and Edwin D. Marcial, our chief technology officer. We enhanced our management team with additional noteworthy professionals, including Richard V. Spencer, our chief financial officer, and David S. Goone, our head of business development and sales. Our management team has successfully developed and deployed our electronic platform, integrated ICE Futures into our business, developed and launched our electronic trade confirmation system and introduced the industry’s first cleared OTC energy contracts in North America. We believe that the proven strength and

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experience of our management team will continue to provide us with a competitive advantage in executing our business strategy.
Selected Risk Factors
      We face risks in operating our business, including risks that may prevent us from achieving our business objectives or that may adversely affect our business, financial condition and operating results. You should consider these risks before investing in our company. Risks to our business include:
  •  Competition. We face intense competition from regulated exchanges, voice brokers and other electronic platforms, some of which are larger than we are and have greater financial resources, broader product offerings, more participants and longer operating histories. We also face competition from new entrants to our markets. Our business depends on our ability to compete successfully.
 
  •  Dependence on Trading Volumes, Market Liquidity and Price Volatility. Our business is primarily transaction-based, and declines in trading volumes and market liquidity will adversely affect our profitability. Trading volume is driven primarily by the degree of volatility — the magnitude and frequency of fluctuations — in prices of commodities. In particular, our revenues depend heavily on trading volumes in the markets for our IPE Brent Crude and IPE Gas Oil futures contracts and our OTC North American natural gas and power contracts, which represent a significant percentage of our revenues.
 
  •  Retention of Market Participants. As a result of the closure of our open-outcry trading floor on April 7, 2005, floor members who had previously traded on our trading floor may not continue to trade in our markets and may seek an alternate trading venue, including NYMEX. Our other participants, including participants that have begun trading electronically, may also seek an alternative trading venue. If participants trading in our markets move to an alternative trading venue, we would lose trading volume, which could negatively impact our results of operations and profitability.
 
  •  Dependence on LCH.Clearnet. We currently do not own our own clearinghouse and must rely on LCH.Clearnet to provide clearing services to trade futures and cleared OTC contracts in our markets. We cannot continue to operate our futures markets or offer cleared OTC contracts without clearing services.
 
  •  Regulation and Litigation. We are currently subject to oversight in the United States and regulation in the United Kingdom. We are also subject, from time to time, to claims that we are infringing on the intellectual property rights of others, which can result in litigation. In September 2005, our motion for summary judgment was granted by the federal district court in our litigation with our principal competitor, NYMEX. On October 13, 2005, NYMEX filed a notice of appeal. If NYMEX is successful in its appeal, and the matter is determined adversely to us after a trial, our business would be materially and adversely affected. Failure to comply with existing regulatory requirements, and possible future changes in these requirements, or unfavorable outcomes of litigation regarding intellectual property rights of others, could adversely affect our business.
      For a discussion of the significant risks associated with operating our business, our industry or investing in our common stock, you should read the section entitled “Risk Factors” beginning on page 12 of this prospectus.
Our Growth Strategy
      We seek to advance our leadership position by focusing our efforts on the following key strategies for growth:
Attract New Market Participants
      In recent years, our participant base has expanded and diversified due to the emergence of new participants in the energy commodities markets. These new participants include financial services companies,

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such as investment banks, hedge funds, proprietary trading firms and asset managers, as well as industrial businesses that are increasingly engaging in hedging, trading and risk management strategies. Many of these participants have been attracted to the energy markets in part due to the availability of electronic trading. We intend to continue to expand our participant base by targeting these and other new market participants and by offering electronic trade execution and processing capabilities that appeal to a broad range of market participants.
Increase Connectivity to Our Marketplace
      Our participants may access our electronic platform for trading in our futures markets through our own Internet-based front-end or through the front-end systems developed by any of ten independent software vendors. These represent a substantial portion of the independent software vendors that serve the commodities futures markets. Furthermore, participants in our futures markets can access our platform directly through their own proprietary interfaces or through a number of brokerage firms. Participants may access our OTC markets through our Internet-based front-end or, in the case of some of our most liquid markets, through a recognized independent software vendor. We intend to extend our initiatives in this area by continuing to establish multiple points of access with our existing and prospective market participants.
Expand Our Market Data Business
      We will continue to leverage the value of the market data derived from our trade execution, clearing and confirmation system by developing enhancements to our existing information services and creating new market data products. For example, in 2004, we introduced our Market Price Validation service, an information service that provides a means for subscribers to mark to market their month-end portfolios. We also publish daily transaction-based indices for the North American spot natural gas and power markets based on data collected from trading activity on our platform. In addition, we sell real-time and historical futures quotes and other futures market data through 44 data vendors that distribute this information, directly and through various sub-vendors, to approximately 20,100 subscribers. We believe that the database of information generated by our platform serves as the single largest repository of energy market data in North America. As a result of the breadth of our global data offerings, we believe that we are well positioned to meet the growing demand for increased availability of energy market data.
Develop New Trading Products and Services
      We continually develop and launch new products designed to meet market demand and the needs of our participants. In 2004, we launched two new electronically traded futures contracts for U.K. power, and we, together with the European Climate Exchange, launched a futures contract on our platform in April 2005 based on carbon emission allowances issued under a European Union sponsored program designed to control and reduce greenhouse gas emissions. During the past three years, we successfully launched over 30 new cleared OTC contracts, and we currently plan to introduce new products at a similar rate going forward. In particular, we believe there is an opportunity to increase electronic trading in oil contracts, since historically only a small percentage of all oil trades have been executed electronically. We also intend to continue to introduce bilateral OTC contracts in less liquid, or niche, markets to satisfy the specific needs of our participants as they arise. We may also seek to license our platform to other exchanges for the operation of their markets on our platform, as we have with the Chicago Climate Exchange.
Pursue Select Strategic Opportunities
      We intend to pursue strategic acquisitions and alliances that will enable us to supplement our internal growth, expand our trading products and related services, advance our technology and take advantage of new developments in the markets for energy commodities trading. For example, we have considered, and may consider in the future, acquiring or entering into a joint venture agreement with businesses complementary to our market data business or businesses that offer risk management or other complementary services. We may also consider establishing our own clearinghouse, or acquiring or making a strategic investment in an existing clearinghouse, to provide clearing

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services directly to participants in our futures and OTC markets. We focus on key evaluation criteria when identifying and assessing potential strategic transactions.
Our Recapitalization
      In this prospectus, we refer to the changes described below as our recapitalization. Effective immediately prior to the closing of this offering, we will amend our charter and bylaws to, among other things:
  •  create a new class of common stock, which we refer to as new common stock, to be issued to investors who purchase shares in this offering;
 
  •  create a new class of preferred stock;
 
  •  grant holders of our outstanding shares of Class A common stock, Series 1, which we refer to as our Class A1 shares, and holders of our outstanding shares of Class A common stock, Series 2, which we refer to as our Class A2 shares, the right to convert these shares into shares of new common stock at the holder’s option, subject to such terms and conditions and subject to such procedures for conversion as our board of directors may authorize;
 
  •  adopt customary anti-takeover provisions in our charter; and
 
  •  reduce the number of authorized and outstanding Class A1 and Class A2 shares by way of a reverse stock split, which is expected to be effected at a ratio of 1 for 4, which we refer to as the 1 for 4 reverse stock split.
      Unless the context otherwise requires, we refer to our Class A1 shares and our Class A2 shares, collectively, as our Class A common stock, and we refer to our Class A common stock and shares of our new common stock that will be sold in this offering, collectively, as our common stock. Any shares to be sold by the selling shareholders in this offering will be converted from the Class A2 shares held by such holders into shares of new common stock immediately prior to the closing of this offering.
      Unless otherwise specified, all information in this prospectus assumes that the recapitalization has been completed, including the 1 for 4 reverse stock split of the Class A common stock, and all share and per share data in this prospectus relating to our capital stock, stock options and restricted stock grants have been adjusted retroactively to give effect to the reverse stock split. Unless otherwise specified, all references to our common stock and our charter and bylaws refer to those items as they will be in effect at the closing of this offering.
 
      You may contact us at our principal executive offices, located at 2100 RiverEdge Parkway, Suite 500, Atlanta, Georgia 30328, or by telephone at (770) 857-4700. You may find us on the Internet at www.theice.com. Information contained on our website does not constitute a part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.

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The Offering
Common stock offered by us 2,500,000 shares
 
Common stock offered by the selling shareholders 7,500,000 shares(1)
 
Total common stock offered 10,000,000 shares(1)
 
Common stock to be outstanding after the offering 55,466,753 shares(1)(2)
 
Use of proceeds We will receive net proceeds from our sale of common stock in the offering of approximately $39.3 million (assuming a per share price equal to the midpoint of the estimated price range set forth on the cover of this prospectus). We intend to use the net proceeds for general corporate purposes, including expanding and diversifying our products and services, and for repayment in full of outstanding long-term debt, which as of September 30, 2005, amounted to $13.0 million. We will not receive any proceeds from the sale of common stock by the selling shareholders.
 
Voting rights The holders of our common stock will be entitled to one vote per share on all matters submitted to a vote of our common shareholders.
 
Dividends We do not anticipate paying any cash dividends in the foreseeable future.
 
New York Stock Exchange symbol “ICE”
 
Risk Factors Please read “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
      The number of shares of our common stock to be outstanding after this offering, as set forth above and elsewhere in this prospectus, unless otherwise specified, is based on 52,966,753 shares of our common stock outstanding as of September 30, 2005, after giving effect to the recapitalization. This number of shares of common stock to be outstanding excludes:
  •  5,250,000 shares of our common stock reserved for issuance upon the exercise of options under our 2000 Stock Option Plan, of which 4,626,109 shares were subject to outstanding options as of September 30, 2005, at a weighted average exercise price of $8.44 per share;
 
  •  1,425,424 shares of our common stock under our 2004 Restricted Stock Plan subject to outstanding grants as of September 30, 2005; and
 
  •  21,742 shares of our common stock under our 2003 Restricted Stock Deferral Plan for Outside Directors subject to outstanding grants as of September 30, 2005.
 
(1)  Does not include 1,500,000 shares of common stock that may be sold by the selling shareholders if the underwriters choose to exercise in full their option to purchase additional shares. See “Underwriting”. Unless otherwise indicated, the information contained in this prospectus assumes that the underwriters’ option to purchase additional shares is not exercised. All shares to be sold by the selling shareholders will be converted from the Class A2 shares held by such holders into shares of new common stock immediately prior to the closing of this offering. All references to common stock to be outstanding after the offering include these Class A2 shares as new common stock.
 
(2)  Includes 10,000,000 shares of new common stock, 2,862,579 Class A1 shares and 42,604,174 Class A2 shares.

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Summary Consolidated Financial Data
      The following tables summarize the consolidated financial data for our business. The following summary consolidated financial data set forth below should be read in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
      We derived the summary consolidated statement of income data and the consolidated balance sheet data set forth below for the nine months ended September 30, 2005 and 2004 and as of September 30, 2005 from our unaudited consolidated financial statements that are included elsewhere in this prospectus. We derived the summary consolidated financial data set forth below for the years ended December 31, 2004, 2003 and 2002 and as of December 31, 2004 and 2003 from our audited consolidated financial statements that are included elsewhere in this prospectus in reliance upon the report of Ernst & Young LLP, independent registered public accounting firm. Our historical results do not necessarily indicate results expected for any future period. In management’s opinion, the unaudited information has been prepared on substantially the same basis as the consolidated financial statements appearing elsewhere in this prospectus and includes all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the unaudited consolidated data.
                                           
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands, except for share and per share data)
Consolidated Statement of Income Data
                                       
Revenues(1):
                                       
 
Transaction fees, net(2)
  $ 100,780     $ 67,832     $ 90,906     $ 81,434     $ 118,794  
 
Data services fees
    8,483       7,013       9,691       7,742       5,141  
 
Trading access fees
    2,996       2,626       3,595       2,461       490  
 
Other
    2,344       2,447       4,222       2,109       1,065  
                               
Total revenues
    114,603       79,918       108,414       93,746       125,490  
                               
Operating expenses:
                                       
 
Cost of hosting
    989       1,060       1,279       1,715       3,962  
 
Compensation and benefits
    25,815       21,673       30,074       26,236       27,906  
 
Professional services
    10,161       11,144       14,523       15,138       15,876  
 
Selling, general and administrative
    11,099       9,453       13,120       12,398       12,425  
 
Floor closure costs(3)
    4,814                          
 
Settlement expense(4)
    15,000                          
 
Depreciation and amortization
    11,428       12,248       17,024       19,341       14,368  
                               
Total operating expenses
    79,306       55,578       76,020       74,828       74,537  
                               
Operating income
    35,297       24,340       32,394       18,918       50,953  
Total other income, net
    2,879       1,917       1,328       948       1,492  
                               
Income before income taxes
    38,176       26,257       33,722       19,866       52,445  
Income tax expense
    12,626       9,147       11,773       6,489       17,739  
                               
Net income(5)
  $ 25,550     $ 17,110     $ 21,949     $ 13,377     $ 34,706  
                               
Redemption adjustments to redeemable stock put(6)
    (20,659 )                 8,378       (10,730 )
Deduction for accretion of Class B redeemable common stock(7)
                      (1,768 )     (3,656 )
                               
Net income available to common shareholders
  $ 4,891     $ 17,110     $ 21,949     $ 19,987     $ 20,320  
                               
Earnings per common share(8):
                                       
 
Basic
  $ 0.09     $ 0.32     $ 0.42     $ 0.37     $ 0.37  
                               
 
Diluted
  $ 0.09     $ 0.32     $ 0.41     $ 0.37     $ 0.37  
                               
Weighted average common shares outstanding(8):
                                       
 
Basic
    52,884,917       52,864,881       52,865,108       54,328,966       54,392,602  
 
Diluted
    53,448,161       53,061,893       53,062,078       54,639,708       54,850,095  

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(1)  We generate revenues from related parties in the ordinary course of our business. For a presentation and discussion of our revenues attributable to related parties for the nine months ended September 30, 2005 and 2004 and the years ended December 31, 2004, 2003 and 2002, see our consolidated statements of income and note 12 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(2)  Our transaction fees are presented net of rebates. For a discussion of these rebates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Sources of Revenues — Transaction Fees”.
 
(3)  In April 2005, we closed our open-outcry trading floor in London to take advantage of increasing acceptance and adoption of electronic trading, and to maintain and enhance our competitive position. Costs associated with the floor closure were $4.8 million and are classified as “Floor closure costs” in the accompanying consolidated statement of income for the nine months ended September 30, 2005. Floor closure costs include lease terminations for the building where the trading floor was located, payments made to 18 employees who were terminated as a result of the closure, contract terminations, and other associated costs, including legal costs and asset impairment charges. No floor closure costs were incurred in prior periods and no additional closure costs are expected to be incurred. See note 19 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(4)  In September 2005, we settled the legal action brought by EBS related to alleged patent infringement. Under the settlement agreement, we made a payment of $15.0 million to EBS, and were released from the legal claims brought against us without admitting liability. The payment was recorded as “Settlement expense” in the accompanying consolidated statement of income for the nine months ended September 30, 2005. See note 14 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(5)  The financial results for the nine months ended September 30, 2005 include $4.8 million in expenses incurred relating to the closure of our open-outcry trading floor in London and a $15.0 million settlement expense related to the payment made to EBS to settle litigation.
 
(6)  We granted a put option to Continental Power Exchange, Inc. in connection with our formation that could require us under certain circumstances to purchase its equity interest in our business at a purchase price equal to the greater of the fair market value of the equity interest or $5.0 million. See “Certain Relationships and Related Transactions — Continental Power Exchange, Inc. Put Agreement”. We initially recorded the redeemable stock put at the minimum $5.0 million redemption threshold. We have adjusted the redeemable stock put to its redemption amount at each subsequent balance sheet date. The adjustment to the redemption amount has been recorded to retained earnings or, in the absence of positive retained earnings, additional paid-in capital. In October 2005, we entered into an agreement with Continental Power Exchange, Inc. to cancel the redeemable stock put upon the closing of this offering. See note 9 to our consolidated financial statements that are included elsewhere in this prospectus. In connection with the termination of the put option, we amended certain registration rights previously granted to Continental Power Exchange, Inc. pursuant to which we may be obligated to pay the expenses of registration, including underwriting discounts, up to a maximum of $4.5 million. See “Shares Eligible for Future Sale — Additional Shares that May be Registered”.
 
(7)  We redeemed all of our Class B redeemable common stock on November 23, 2004 at a price of $23.58 per share, for aggregate consideration of $67.5 million. Upon its issuance on June 18, 2001, we recorded our Class B redeemable common stock at its discounted present value of $60.2 million. We recorded charges to retained earnings for the accretion of this amount up to the $67.5 million redemption value of our Class B redeemable common stock over a two-year period ending in June 2003, which was the earliest potential redemption date.
 
(8)  In connection with our recapitalization, immediately prior to the completion of this offering we will amend our charter to effect a 1 for 4 reverse stock split of our common stock. All share data and per share data have been adjusted retroactively for all periods presented to give effect to the reverse stock split. For a description of our recapitalization, see “Organization and Recapitalization”. The recapitalization will have no financial impact on our consolidated statements of income or financial statement balances.

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    As of September 30,   As of December 31,
         
    2005(1)   2005   2004   2003
                 
        (in thousands)    
Consolidated Balance Sheet Data
                               
Cash and cash equivalents
  $ 60,534     $ 34,234     $ 61,199     $ 44,913  
Restricted cash and restricted short-term investments
    12,098       12,098       18,421       36,797  
Short-term investments
    11,998       11,998       5,700       12,000  
Total current assets
    112,505       86,205       100,042       105,893  
Long-term investments(2)
    26,951       26,951              
Total assets
    238,392       212,092       207,518       214,879  
Total current liabilities
    26,661       26,661       34,440       17,917  
Long-term portion of revolving credit facility
          13,000       13,000        
Redeemable stock put
          38,242       17,582       17,582  
Shareholders’ equity
    203,935       126,393       132,149       101,194  
 
(1)  As adjusted to reflect the sale of shares of our common stock in this offering at an assumed initial public offering price of $19.00 per share (the midpoint of the estimated price range set forth on the cover of this prospectus), after deducting the underwriting discount and our estimated expenses in this offering, and our repayment, out of the net proceeds of this offering, of long-term debt which, as of September 30, 2005, amounted to $13.0 million. Also as adjusted to reflect the cancellation of the redeemable stock put with Continental Power Exchange, Inc., our predecessor company, which will be effective upon the closing of this offering. The pro forma balance sheet impact of the put cancellation as of September 30, 2005 is a reduction of the redeemable stock put balance of $38.2 million, and a corresponding increase to additional paid-in-capital of $38.2 million. The value of the redeemable stock put will be adjusted to reflect any difference in the initial public offering price from the value of our common stock as of September 30, 2005. The balance sheet impact of the put cancellation as of the date of our initial public offering will be a reduction to the redeemable stock put balance of an amount equal to our initial public offering share price multiplied by the number of shares underlying the put, and a corresponding increase to additional paid-in capital. See note 9 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(2)  Represents available-for-sale investments that we intend to hold for more than one year pursuant to our cash investment policy. See note 3 to our consolidated financial statements that are included elsewhere in this prospectus.
                                         
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands)
Operating Data
                                       
Our total average daily exchange fee and commission fee revenues
  $ 527     $ 351     $ 353     $ 294     $ 460  
 
Our Trading Volume:
                                       
 
Futures volume(1)
    30,524       26,801       35,541       33,341       30,441  
Futures average daily volume(2)
    162       141       140       132       121  
OTC volume(1)
    44,431       21,703       30,961       24,260       43,982  
OTC average daily volume(2)
    235       115       123       97       175  
 
(1)  Volume is calculated based on the number of contracts traded in our markets, or the number of round turn trades. Each “round turn” represents a matched buy and sell order of one contract.
 
(2)  Represents the total volume, in contracts, for the period divided by the number of trading days during that period.

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RISK FACTORS
      The purchase of our common stock involves significant investment risks. The risks described below comprise all material risks of which we are aware. You should consider these risks carefully before making a decision to invest in our common stock. In addition, there may be risks of which we are currently unaware, or that we currently regard as immaterial based on the information available to us, that later prove to be material. These risks may adversely affect our business, financial condition and operating results. As a result, the trading price of our common stock could decline, and you could lose some or all of your investment.
Risks Relating to Our Business
We face intense competition from regulated exchanges, voice brokers and other electronic platforms, which could adversely affect our business. If we are not able to compete successfully, our business will not survive.
      The market for commodities trading facilities is highly competitive and we expect competition to intensify in the future. Our current and prospective competitors, both domestically and internationally, are numerous.
      Our principal competitor, NYMEX, is a regulated, predominantly open-outcry futures exchange that offers trading in futures products and options on those futures in the crude oil, gas and metals markets, among other commodities markets. NYMEX has also established two electronic platforms: NYMEX Access and ClearPort. NYMEX is larger than we are and has greater financial resources, a broader participant base and a longer operating history. NYMEX also operates its own clearinghouse, which may give it greater flexibility in introducing new products and clearing services than we are able to offer through our relationship with LCH.Clearnet, formerly known as the London Clearing House, a clearinghouse based in London. Unlike NYMEX, we may be limited in the number of cleared OTC contracts that we are able to offer, since we must first obtain approval from LCH.Clearnet to offer such products. Our relationship with LCH.Clearnet is also subject to termination by either party upon one year’s notice. See “— We do not own our own clearinghouse and must rely on LCH.Clearnet to provide clearing services for the trading of futures and cleared OTC contracts in our markets. We cannot continue to operate our futures and cleared OTC businesses without clearing services.”
      In November 2004, NYMEX opened an open-outcry trading floor in Dublin for trading in a contract that directly competes with our most important futures contract, the IPE Brent Crude futures contract. Similarly, on April 8, 2005, NYMEX began offering trading in a Northwest European gas oil futures contract that directly competes with the IPE Gas Oil futures contract. On September 12, 2005, NYMEX opened a new open-outcry trading floor in London, simultaneously closing its Dublin trading floor and shifting trading in Brent crude futures contracts and Northwest European gas oil futures contracts to London. Given the recent closure of our open-outcry trading floor on April 7, 2005 and the fact that we now conduct all futures trading exclusively in our electronic markets, a NYMEX trading floor may appeal to traders who prefer the open-outcry method of trading. If we lose participants to NYMEX, we would lose trading volume, which could negatively impact our results of operations and profitability. See also “— We may lose trading volume in our futures business due to our transition to electronic trading”. We also have been involved in litigation with NYMEX, in which NYMEX asserted against us claims of intellectual property infringement related to our use of and reference to NYMEX settlement prices in our cleared OTC swap contracts for Henry Hub natural gas and West Texas Intermediate crude oil. The federal district court granted our motion for summary judgment in September 2005, dismissing the claims filed against us by NYMEX. On October 13, 2005, NYMEX filed a notice of appeal. If NYMEX is successful in its appeal, and the matter is determined adversely to us, our business would be materially and adversely affected. See also “— Any infringement by us on the intellectual property rights of others could result in litigation and adversely affect our ability to continue to provide, or increase the cost of providing, our products and services” and “Regulation and Legal Proceedings — Legal Proceedings —NYMEX Claim of Infringement”.

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      In addition to NYMEX, we also currently compete with:
  •  voice brokers active in the commodities markets, including Amerex, ICAP, Prebon Yamane and Tradition (North America);
 
  •  other electronic energy trading platforms, such as NGX (a subsidiary of the Toronto Stock Exchange) and HoustonStreet;
 
  •  energy futures exchanges, such as European Energy Derivatives Exchange, or Endex (formerly known as Amsterdam Power Exchange), Nord Pool, and Powernext; and
 
  •  market data vendors, such as Bloomberg, Reuters, Argus and Platts (a division of The McGraw-Hill Companies Inc.).
      We may also face additional competition from new entrants to our markets. Competition in the market for commodities trading could increase if new electronic trading platforms or futures exchanges are established, or if existing platforms or exchanges that currently do not trade energy commodities products decide to do so. Additional competition from new entrants to our markets could negatively impact our trading volumes and profitability.
      In addition, some of the exchanges, trading systems, dealers and other companies with which we currently or in the future could compete are substantially larger than we are and have substantially greater financial, technical, marketing and other resources and more diverse revenue streams than we do. Some of these exchanges and other businesses have long standing, well established and, in some cases, dominant positions in their existing markets. They may offer a broader range of products and services than we do. In addition, our competitors may:
  •  respond more quickly to new or evolving opportunities, technologies and participant requirements;
 
  •  develop services and products similar to or that compete with ours;
 
  •  develop services and products that are preferred by our participants;
 
  •  price their products and services more competitively or respond more quickly to competitive pressures;
 
  •  take advantage of efficiencies that result from owning their own clearinghouses, including the ability to bring new cleared products to market faster and offering cross-margining opportunities across products that reduce the cost of capital for participants;
 
  •  develop and expand their network infrastructure and service offerings more efficiently;
 
  •  utilize better, more user-friendly and more reliable technology;
 
  •  consolidate and form alliances, which may create higher trading volumes, cost reductions and better pricing than we offer;
 
  •  more effectively market, promote and sell their products and services; and
 
  •  better leverage existing relationships with participants and alliance partners or exploit better recognized brand names to market and sell their services.
      Our ability to continually maintain and enhance our competitiveness and respond to threats from stronger current and potential competitors will have a direct impact on our results of operations. We cannot assure you that we will be able to compete effectively. If our markets, products and services are not competitive, our business, financial condition and operating results will be materially affected. In addition, even if new entrants or existing competitors do not significantly erode our market share, we may be required to reduce significantly the rates we charge for trade execution to remain competitive, which could have a material adverse effect on our profitability.

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Our business is primarily transaction-based, and declines in trading volumes and market liquidity would adversely affect our business and profitability.
      We earn transaction fees for transactions executed in our markets and from the provision of electronic trade confirmation services. Historically, we have also earned transaction fees under order flow agreement shortfalls. We derived 87.9%, 83.9%, 86.9% and 94.7% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively, from our transaction-based business. Of our consolidated revenues, 1.0%, 7.6% and 2.6% for the years ended December 31, 2004, 2003 and 2002, respectively, represented shortfall payments made under order flow agreements with our Initial Shareholders, the Gas and Power Firms and order flow agreements in the OTC European gas markets, all of which are no longer in effect. Even if we are able to further diversify our product and service offerings, our revenues and profitability will continue to depend primarily on our transaction-based business. Accordingly, the occurrence of any event that reduces the amount of transaction fees we receive, whether as a result of declines in trading volumes or market liquidity, reductions in commission rates or regulatory changes, will have a significant impact on our operating results and profitability. See also “— Our business depends in large part on volatility in energy commodity prices and has benefited from record-high oil prices in recent years”.
Our business depends in large part on volatility in energy commodity prices and has benefited from record-high oil prices in recent years.
      Participants in the markets for energy commodities trading pursue a range of trading strategies. While some participants trade in order to satisfy physical consumption needs, others seek to hedge contractual price risk or take speculative or arbitrage positions, seeking returns from price movements in different markets. Trading volume is driven primarily by the degree of volatility — the magnitude and frequency of fluctuations — in prices of commodities. Higher volatility increases the need to hedge contractual price risk and creates opportunities for speculative or arbitrage trading. Energy commodities markets historically have experienced significant price volatility. We cannot predict whether this pattern will continue, or for how long, or if this trend will reverse itself. Were there to be a sustained period of stability in the prices of energy commodities, we could experience lower trading volumes, slower growth or even declines in revenues as compared to recent periods.
      In addition to price volatility, we believe that the increase in global energy prices, particularly for crude oil, during the past three years has had a positive impact on the trading volume of global energy commodities, including trading volumes in our markets. As oil prices have risen to record levels, we believe that additional participants have entered the markets for energy commodities trading to address their growing risk-management needs or to take advantage of greater trading opportunities. This is particularly true in the case of increased trading due to the effects of Hurricanes Katrina and Rita, which may be temporary and unlikely to continue. If global crude oil prices decrease or return to the lower levels where they historically have been, it is possible that many market participants, particularly the newer entrants, could reduce their trading activity or leave the trading markets altogether. Global energy prices are determined by many factors, including those listed below, that are beyond our control and are unpredictable. Consequently, we cannot predict whether global energy prices will remain at their current levels, nor can we predict the impact that these prices will have on our future revenues or profitability.
      Factors that are particularly likely to affect price volatility and price levels, and thus trading volumes, include:
  •  economic, political and market conditions in the United States, Europe, the Middle East and elsewhere in the world;
 
  •  weather conditions, including hurricanes and other significant weather events that impact production, refining and distribution facilities for oil and natural gas;
 
  •  the volatility in production volume of the commodities underlying our energy products and markets;
 
  •  war and acts of terrorism;

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  •  legislative and regulatory changes;
 
  •  credit quality of market participants;
 
  •  the availability of capital;
 
  •  broad trends in industry and finance;
 
  •  the level and volatility of interest rates;
 
  •  fluctuating exchange rates and currency values; and
 
  •  concerns over inflation.
      Any one or more of these factors may reduce price volatility or price levels in the markets for energy commodities trading, which in turn could reduce trading activity in those markets, including in our markets. Moreover, any reduction in trading activity could reduce liquidity — the ability to find ready buyers and sellers at current prices — which in turn could further discourage existing and potential market participants and thus accelerate any decline in the level of trading activity in these markets. In these circumstances, the markets with the highest trading volumes, and therefore the most liquidity, would likely have a growing competitive advantage over other markets. This could put us at a greater disadvantage relative to our principal competitor, whose markets are larger and more established than ours.
      We are unable to predict whether or when these unfavorable conditions may arise in the future or, if they occur, how long or severely they will affect our trading volumes. A significant decline in our trading volumes, due to reduced volatility, lower prices or any other factor, could have a material adverse effect on our revenues, since our transaction fees would decline, and in particular on our profitability, since our revenues would decline faster than our expenses, many of which are fixed. Moreover, if these unfavorable conditions were to persist over a lengthy period of time, and our trading volumes were to decline substantially and for a long enough period, the liquidity of our markets — and the critical mass of transaction volume necessary to support viable markets — could be jeopardized.
Our revenues depend heavily upon trading volumes in the markets for IPE Brent Crude and IPE Gas Oil futures contracts and OTC North American natural gas and power contracts. A decline in volumes or in our market share in these contracts would jeopardize our ability to remain profitable and grow.
      Our revenues depend heavily on trading volumes in the markets for IPE Brent Crude futures contracts, IPE Gas Oil futures contracts and OTC North American natural gas and power contracts. Trading in IPE Brent Crude futures contracts accounted for 26.7%, 29.7%, 30.4% and 17.6% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. Trading in IPE Gas Oil futures contracts accounted for 9.2%, 11.3%, 10.6% and 6.8% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. Trading in OTC North American natural gas contracts accounted for 37.8%, 26.8%, 17.9% and 33.3% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. Trading in OTC North American power contracts accounted for 11.1%, 8.7%, 6.1% and 17.7% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. Our trading volume or market share in these markets may decline due to a number of factors, including:
  competition;
 
  the closure of our open-outcry trading floor;
 
  the relative stability of commodity prices;
 
  possible regulatory changes; and
 
  adverse publicity and government investigations.

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If our trading volume or market share in these markets declines, our revenues would likely decline, which would negatively impact our ability to remain profitable and to grow our business.
      Several of the largest and most active commercial participants in our North American natural gas and power markets terminated or substantially reduced their energy commodities trading activities beginning in mid-2002. This was due, in part, to highly publicized problems involving energy companies and significant declines in liquidity and trading volumes, increased regulatory scrutiny and enforcement actions brought against certain market participants. While some of these participants later resumed their trading activities, several new participants began trading in our markets — most notably financial institutions, hedge funds and proprietary trading firms. Competition for these new market entrants among exchanges and trading operations across a variety of markets is intense.
A decline in the production of commodities traded in our markets could reduce our liquidity and adversely affect our revenues and profitability.
      We derived 86.9%, 82.1%, 79.1% and 92.0% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively, from exchange fees and commission fees generated from trading in commodity products in our futures and OTC markets. The volume of contracts traded in the futures and OTC markets for any specific commodity tends to be a multiple of the physical production of that commodity. If the physical supply or production of any commodity declines, our participants could become less willing to trade in contracts based on that commodity. For example, the IPE Brent Crude futures contract has been subject to this risk as production of Brent crude oil peaked in 1984 and began steadily falling in subsequent years. We, in consultation with market participants, altered the mechanism for settlement of the IPE Brent Crude futures contract to a mechanism based on the Brent/ Forties/ Oseberg North Sea oil fields, known as the BFO Index, to ensure that the commodity prices on which its settlement price is based reflect a large enough pool of traders and trading activity so as to be less susceptible to manipulation. Market participants that trade in the IPE Brent Crude futures contract may determine in the future, however, that additional underlying commodity products need to be considered in the settlement of that contract or that the settlement mechanism is not credible. Exchange fees earned from trading in the IPE Brent Crude futures contract accounted for 61.7%, 58.0%, 58.0% and 57.9% of our total revenues from our futures business, net of intersegment fees, for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively, or 26.7%, 29.7%, 30.4% and 17.6% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. Any uncertainty surrounding the settlement of the IPE Brent Crude futures contract, or a decline in the physical supply or production of any other commodity, could result in a decline in trading volumes in our markets, adversely affecting our revenues and profitability.
We may lose trading volume in our futures business due to our transition to electronic trading.
      In response to the increasing acceptance and adoption of electronic trading, and to maintain and enhance our competitive position in our futures business, we closed our open-outcry trading floor and fully transferred all trading in futures contracts to our electronic platform on April 7, 2005. We cannot assure you that the market will continue to use our electronic platform to trade contracts that previously were traded both electronically and through our open-outcry trading floor, or that we will be able to maintain our recent growth in market share and liquidity in our products. During the period following the closure of our open-outcry trading floor, average daily futures trading volumes initially decreased to 137,000 contracts traded in April 2005 from 151,000 contracts traded in March 2005, but have since increased to a daily average of 183,000 contracts traded during the three months ended September 30, 2005. The initial decline in April was due in part to the displacement of floor-based traders following the floor closure on April 7, many of whom later began trading electronically along with new participants. On September 12, 2005, NYMEX established an open-outcry trading floor in London for trading in Brent crude futures contracts and Northwest European gas oil futures contracts. NYMEX’s London trading floor may attract certain traders, who may migrate their trading to NYMEX from our electronic platform. NYMEX may also offer financial incentives that we are unable to match to traders to trade on their open-outcry trading floors, as it has done in the past. Any decline

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in our trading volumes as a result of the floor closure in the short-term or long-term will negatively impact our transaction fees and, therefore, our revenues. Historically, we have derived a substantial portion of our futures business revenues from transaction fees generated from trades executed on our open-outcry trading floor. During the year ended December 31, 2004, only 6.9% of our gross transaction fees and only 4.3% of our net transaction fees in our futures business segment were derived from exchange fees generated by trades executed on our electronic platform. Declining trading volumes may also make our futures markets less liquid than those of competing markets that trade exclusively on an open-outcry trading floor or on both an open-outcry trading floor and an electronic platform. Over time, this decision may prove to be ineffective and could ultimately adversely affect our profitability and competitive position. We also incurred charges in the second quarter of 2005 of $4.8 million in connection with the closure of the open-outcry trading floor. See also “— We face intense competition from regulated exchanges, voice brokers and other electronic platforms, which could adversely affect our business. If we are not able to compete successfully, our business will not survive”.
      Furthermore, our ability to retain existing participants and attract new participants to our futures markets, and to maintain market share and liquidity in our products, may be impaired as a result of any technical problems or failures associated with our platform. See “— Our business may be harmed by computer and communications systems failures and delays” for a more detailed discussion of risks related to the operation of our electronic platform.
We do not own our own clearinghouse and must rely on LCH.Clearnet to provide clearing services for the trading of futures and cleared OTC contracts in our markets. We cannot continue to operate our futures and cleared OTC businesses without clearing services.
      We have contracted with LCH.Clearnet, to provide clearing services to us for all futures contracts traded in our markets pursuant to a contract for an indefinite term that is terminable by either party upon one year’s prior written notice, if not otherwise terminated in accordance with its terms. LCH.Clearnet also provides clearing services to participants in our OTC business that trade designated contracts eligible for clearing. These services are provided pursuant to a separate contract we have entered into with LCH.Clearnet, which continues in force unless either party gives one year’s prior written notice. Our cleared OTC contracts have become a significant component of our business, and accounted for 65.0%, 44.5%, 13.4% and 1.4% of the revenues, net of the intersegment fees, generated by our OTC business for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively.
      The interruption or cessation of these clearing services and our inability to make alternate arrangements in a timely manner could have a material adverse effect on our business, financial condition and results of operations. In particular, if our agreement with LCH.Clearnet with respect to our futures business were terminated, and we could not obtain clearing services from another source, we may be unable to operate our futures markets and would likely be required to cease operations in that segment of our business. For the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, transaction fees generated by our futures business, which are also referred to as exchange fees, accounted for 36.6%, 42.0%, 42.6% and 25.1%, respectively, of our consolidated revenues.
      If our agreement with LCH.Clearnet relating to our OTC business were terminated, we may be unable to offer clearing services in connection with trading OTC contracts in our markets for a considerable period of time. While we would still be able to offer OTC trading in bilateral contracts, our inability to offer trading in cleared contracts, assuming that no other clearing alternatives were available, could significantly impair our ability to compete, particularly in light of the launch of a competing swaps-to-futures clearing facility by one of our competitors and the ease with which other competitors can introduce new cleared OTC and futures products. For the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, transaction fees derived from trading in cleared OTC contracts accounted for 36.9%, 21.7%, 6.4% and 0.9%, respectively, of our consolidated revenues. Our principal competitor owns its own clearing facility and thus does not face the risk of losing the ability to provide clearing services to participants that we do. Moreover, because it owns its own facility, it may be able to provide clearing services more cost-effectively and can extend clearing services to new products faster than we can. For example, our ability to introduce new

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cleared OTC products is subject to review by and approval of LCH.Clearnet. In addition, all clearing fees are determined by LCH.Clearnet and may be set at prices higher than those set by our competitors or at levels prohibitive to trading. As discussed below, as an alternative approach, we may establish or acquire our own clearinghouse. However, the number of clearing facilities that are not owned by our competitors is limited, and developing our own clearing facility would be costly and time consuming. Requiring our participants to change clearing facilities may also be disruptive and costly.
      LCH.Clearnet could elect for strategic reasons to discontinue providing clearing services to us for our futures and OTC businesses at any time with appropriate notice. For example, LCH.Clearnet could decide to enter into a strategic alliance with a competing exchange or other trading facility. In addition, according to the terms of our contract with LCH.Clearnet with respect to our OTC business, our relationship may be terminated upon a change in control of either party. The commodity markets have experienced increased consolidation in recent years and may continue to do so, and strategic alliances and changes in control involving various market participants are possible. LCH.Clearnet is owned by its members, which include banks and other financial institutions whose commercial interests are broader than the clearing services business. We cannot assure you that our futures or OTC businesses would be able to obtain clearing services from an alternate provider on acceptable terms or in sufficient time to avoid or mitigate the material adverse effects described above.
If we establish our own clearinghouse, or acquire a clearinghouse or an interest in a clearinghouse, we will be exposed to risks related to the cost of establishing or operating a clearinghouse and the risk of defaults by our participants.
      In order to address the competitive disadvantages of not owning our own clearinghouse, we may in the future decide to establish a clearinghouse that would clear transactions executed in our markets. Alternatively, we might decide to purchase or acquire an interest in an existing clearinghouse for that purpose. Establishing or acquiring a clearinghouse, and subsequently operating the clearinghouse, would require substantial ongoing expenditures and would consume a significant portion of our management’s time, potentially limiting our ability to expand our business in other ways, such as through acquisitions of other companies or the development of new products and services. We cannot assure you that these clearing arrangements would be satisfactory to our participants or would not require substantial systems modifications to accommodate them. The transition to new clearing facilities could also be disruptive and costly to our participants. There are substantial risks inherent in operating a clearinghouse.
      In addition, our establishment or acquisition of a clearinghouse might not be successful and it is possible that the clearinghouse would not generate sufficient revenues to cover the expenses incurred, which would subject us to losses. Moreover, by owning our own clearinghouse, we would in any event be exposed to the credit risk of our participants, to which we are not currently subject and defaults by our participants could subject us to substantial losses. We would also be subject to additional regulation as a result of owning a clearinghouse.
Many of our current shareholders are also our participants and their interests may differ from those of other shareholders.
      Many of our Initial Shareholders and the Gas and Power Firms are both our principal shareholders and participants in our markets. Revenues from these investors accounted for 15.2%, 23.3%, 45.8% and 60.8% of our revenues generated by our OTC business, net of intersegment fees, for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. Revenues from all our shareholders that own in excess of 1% of our outstanding common stock accounted for 22.1%, 27.1%, 36.3% and 50.6% of our consolidated revenues for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. As market participants, these shareholders may have strategic interests that are different from, or that could conflict with, your interests. For example, in their capacity as participants, these investors may favor lower fees for trade execution or other concessions that would presumably reduce our revenues, and therefore, the value of your ownership interest in us. Because of their common interests as participants in our markets, these investors may vote in the same way. They, collectively, will own 68.7% of our outstanding common stock upon the closing of this offering. If these investors vote together on a given matter, they collectively may have the ability to influence the decision,

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which could involve the election of our directors, the appointment of new management and the potential outcome of any matter submitted to a vote of our shareholders, including mergers, the sale of substantially all of our assets and other extraordinary events. In addition, three of our Initial Shareholders are affiliated with Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co. and SG Americas Securities, LLC, each an underwriter for this offering.
We are currently subject to regulatory oversight. Failure to comply with existing regulatory requirements, and possible future changes in these requirements, could adversely affect our business.
      We operate our electronic platform as an “exempt commercial market” under the Commodity Exchange Act. As such, we are subject to access, reporting and record-keeping requirements of the Commodity Futures Trading Commission, or the CFTC. However, unlike a futures exchange, our OTC business is not generally regulated by the CFTC. In contrast, ICE Futures, through which we conduct our futures business, operates as a Recognized Investment Exchange in the United Kingdom. As a Recognized Investment Exchange, ICE Futures has regulatory responsibility in its own right and is subject to supervision by the Financial Services Authority pursuant to the Financial Services and Markets Act 2000. ICE Futures is required under the Financial Services and Markets Act 2000 to maintain sufficient financial resources, adequate systems and controls and effective arrangements for monitoring and disciplining its members. ICE Futures’ ability to comply with all applicable laws and rules is largely dependent on its maintenance of compliance, audit and reporting systems. We cannot assure you that these systems and procedures are fully effective. Failure to comply with our regulatory requirements could subject us to significant penalties, including termination of our ability to conduct our regulated businesses.
      Future legislative and regulatory initiatives, either in the United States, the United Kingdom or elsewhere, could affect one or more of the following aspects of our business:
  •  the manner in which we communicate and contract with our participants;
 
  •  the demand for and pricing of our products and services;
 
  •  a requirement that we maintain minimum regulatory capital on hand;
 
  •  a requirement that we exercise regulatory oversight with respect to our OTC participants, and assume responsibility for their conduct;
 
  •  a requirement that we implement systems and procedures to maintain and enforce compliance by our OTC participants;
 
  •  our financial and regulatory reporting practices;
 
  •  our record-keeping and record-retention procedures;
 
  •  the licensing of our employees; and
 
  •  the conduct of our directors, officers, employees and affiliates.
      The implementation of new regulations or unfavorable interpretations of existing regulations by courts or regulatory bodies could require us to incur significant compliance costs and impede our ability to operate, expand and enhance our electronic platform as necessary to remain competitive and expand our business. Regulatory changes inside or outside the United States or the United Kingdom could materially and adversely affect our business, financial condition and results of operations.
The OTC commodities trading industry in North America has been subject to increased regulatory scrutiny in the recent past, and we face the risk of changes to our regulatory environment in the future, which may diminish trading volumes on our electronic platform.
      Our OTC business is currently subject to only limited regulatory oversight. As an exempt commercial market, we are not subject to registration as an exchange nor to the type of ongoing comprehensive oversight to which exchanges are subject. Instead, we are required to comply with access, reporting and record-keeping requirements of the CFTC. In recent years, however, the market for OTC energy commodities trading has been the subject of increased scrutiny by regulatory and enforcement authorities due to a number of highly publicized problems involving energy commodities trading companies. This increased scrutiny has included

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investigations by the Department of Justice, the Federal Energy Regulatory Commission and the Federal Trade Commission of alleged manipulative trading practices, misstatements of financial results, and other matters. As a result of the foregoing, in 2002 several significant commercial participants in the energy trading markets ceased all trading operations. Primarily as a result of this, our trading volumes declined from 44.0 million contracts for the year ended December 31, 2002 to 24.3 million contracts for the year ended December 31, 2003. While volumes have since increased to 31.0 million contracts for the year ended December 31, 2004 and 44.4 million contracts for the nine months ended September 30, 2005, we cannot predict whether these trading volumes will remain at these levels or continue to grow in the future.
      In connection with the above referenced investigations, governmental bodies became concerned that various market participants may have used our OTC electronic platform, among other venues such as voice brokers, to conduct potentially manipulative trading activity, and, during this time, we were required to provide extensive information to the authorities in connection with their investigations. This process was costly and the resulting publicity may have discouraged other participants or potential participants from using our platform.
      Furthermore, in the wake of suggestions that manipulative trading practices by certain market participants may have contributed to unseasonably high prices in the wholesale power market in California and other western states in the summer of 2000, and in response to a number of other factors, including the collapse of Enron Corporation and recent energy shortages following Hurricanes Katrina and Rita, legislative and regulatory authorities at both the federal and state levels, as well as political and consumer groups, called for increased regulation and monitoring of the OTC commodities markets in general and the North American natural gas and power markets (currently our most important OTC markets), in particular. For example, regulators in some states publicly questioned whether some form of regulation, including price controls, should be reimposed in OTC commodities markets, particularly in states where power markets were deregulated in recent years. In addition, members of Congress have, at various times in the last several years, introduced legislation seeking to restrict OTC derivatives trading of energy contracts generally and to bring electronic trading of OTC energy derivatives within the direct scope of CFTC regulation. Separate pieces of legislation have recently been introduced in Congress that would (i) provide the CFTC with the authority to require exempt commercial markets to comply with additional regulatory requirements and to require some participants on exempt commercial markets to file reports on their positions, and (ii) place price controls on natural gas derivatives and make those derivatives tradable only on a designated contract market, which is a regulatory status we do not presently hold. If adopted, this legislation could require us and our participants to operate under heightened regulatory burdens and incur additional costs in order to comply with the additional regulations, and could deter some participants from trading on our OTC platform. In addition, the energy bill that was recently signed into law by the President on August 8, 2005, grants to the Federal Energy Regulatory Commission the power to prescribe rules related to the collection and government dissemination of information regarding the availability and price of natural gas and wholesale electric energy. On October 20, 2005, the Federal Energy Regulatory Commission issued a proposed rule designed to prevent manipulation of natural gas and power markets. The proposal clarifies the agency’s authority over market manipulation by all electricity and natural gas sellers, transmission owners and pipe lines, regardless of whether they are regulated by the Federal Energy Regulatory Commission. This proposal and possible future exercises of the Federal Energy Regulatory Commission’s rulemaking powers could adversely impact demand for our data products in the United States.
      We cannot assure you that future unanticipated events in the markets for energy commodities trading will not lead to a recurrence of regulatory scrutiny or to changes in the level of regulation to which our OTC business is subject. Increased regulation of our participants or our markets could materially adversely affect our business. The imposition of stabilizing measures such as price controls in the power or other commodities markets could substantially reduce or potentially even eliminate trading activity in affected markets. New laws and rules applicable to our business could significantly increase our regulatory compliance costs, delay or prevent us from introducing our products and services as planned and discourage some market participants from using our electronic platform. New allegations of manipulative trading by market participants could subject us to regulatory scrutiny and possibly fines or restrictions on our business, as well as adverse publicity. All of this could lead to lower trading volumes and transaction fees, higher operating costs and lower profitability or losses.

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If we are unable to keep up with rapid changes in technology and participant preferences, we may not be able to compete effectively.
      To remain competitive, we must continue to enhance and improve the responsiveness, functionality, accessibility and reliability of our electronic platform and our proprietary technology. The financial services industry is characterized by rapid technological change, change in use patterns, change in client preferences, frequent product and service introductions and the emergence of new industry standards and practices. These changes could render our existing proprietary technology uncompetitive or obsolete. Our ability to pursue our strategic objectives, including increasing trading volumes on our platform following our recent transition to an all electronic marketplace, as well as our ability to continue to grow our business, will depend, in part, on our ability to:
  •  enhance our existing services and maintain and improve the functionality and reliability of our electronic platform, in particular, reducing network downtime;
 
  •  develop or license new technologies that address the increasingly sophisticated and varied needs of our participants;
 
  •  anticipate and respond to technological advances and emerging industry practices on a cost-effective and timely basis; and
 
  •  continue to attract and retain highly skilled technology staff to maintain and develop our existing technology and to adapt to and manage emerging technologies.
      We cannot assure you that we will successfully implement new technologies or adapt our proprietary technology to our participants’ requirements or emerging industry standards in a timely and cost-effective manner. Any failure on our part to remain abreast of industry standards in technology and to be responsive to participant preferences could cause our market share to decline and negatively impact our profitability.
Our operating results are subject to significant fluctuations due to a number of factors. As a result, you will not be able to rely on our operating results in any particular period as an indication of our future performance.
      A number of factors beyond our control may contribute to substantial fluctuations in our operating results — particularly in our quarterly results. As a result of the factors described in the preceding risk factors, you will not be able to rely on our operating results in any particular period as an indication of our future performance. The energy commodities trading industry has historically been subject to variability in trading volumes due primarily to five key factors. These factors include geopolitical events, weather, real and perceived supply and demand imbalances in the underlying energy commodities, the number of trading days in a quarter and seasonality. As a result of one or more of these factors, trading volumes in our markets could decline, possibly significantly, which would adversely affect our revenues derived from transaction fees. If we fail to meet securities analysts’ expectations regarding our operating performance, the price of our common stock could decline substantially. See also “— Risks Relating to this Offering — The market price of our common stock may fluctuate significantly, and it may trade at prices below the initial public offering price”.
Our cost structure is largely fixed. If our revenues decline and we are unable to reduce our costs, our profitability will be adversely affected.
      Our cost structure is largely fixed. We base our expectations of our cost structure on historical and expected levels of demand for our products and services as well as our fixed operating infrastructure, such as computer hardware and software, hosting facilities and security and staffing levels. If demand for our products and services declines and, as a result, our revenues decline, we may not be able to adjust our cost structure on a timely basis. In that event, our profitability will be adversely affected.
Fluctuations in currency exchange rates may adversely affect our operating results.
      We currently generate a significant portion of our revenues and net income and corresponding accounts receivable and cash through sales denominated in pounds sterling, which is the functional currency of our foreign subsidiaries. Of our consolidated revenues, 38.3%, 46.1%, 47.1% and 33.7% were denominated in pounds sterling for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively, and we expect our exposure to foreign currency exchange risk to increase to the

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extent we are able to expand our futures business. We have foreign currency translation risk equal to our net investment in these subsidiaries. As of September 30, 2005, $59.3 million of our cash and cash equivalents, short-term and long-term investments and restricted cash, $6.5 million of our accounts receivable, $78.3 million of our goodwill and other intangible assets and $142.6 million of our net assets were denominated in pounds sterling.
      We also have foreign currency transaction risk related to the settlement of foreign receivables or payables incurred with respect to trades executed on our electronic platform, including for our OTC European gas and power markets, which are paid in pounds sterling, and for cash accounts of our U.K. subsidiaries held in U.S. dollars. For example, we had foreign currency transaction gains of $1.4 million for the nine months ended September 30, 2005 and foreign currency transaction losses of $1.4 million, $644,000 and $149,000 for the years ended December 31, 2004, 2003 and 2002, respectively. While we currently enter into hedging transactions to help mitigate our foreign exchange risk exposure, primarily with respect to our net investment in our U.K. subsidiaries, these hedging arrangements may not always be effective, particularly in the event of imprecise forecasts of the levels of our non-U.S. denominated assets and liabilities. Accordingly, if there is an adverse movement in exchange rates, we may suffer significant losses, which would adversely affect our operating results and financial condition.
Any infringement by us on the intellectual property rights of others could result in litigation and adversely affect our ability to continue to provide, or increase the cost of providing, our products and services.
      Patents and other intellectual property rights of third parties may have an important bearing on our ability to offer certain of our products and services. Our competitors as well as other companies and individuals may have obtained, and may be expected to obtain in the future, patent rights related to the types of products and services we offer or plan to offer. We cannot assure you that we are or will be aware of all patents that may pose a risk of infringement by our products and services. In addition, some patent applications in the United States are confidential until a patent is issued, and therefore we cannot evaluate the extent to which our products and services may be covered or asserted to be covered in pending patent applications. Thus, we cannot be sure that our products and services do not infringe on the rights of others or that others will not make claims of infringement against us. For example, in November 2002, NYMEX filed claims against us in the U.S. District Court for the Southern District of New York asserting that, among other things, we infringed copyrights NYMEX claims exist in its publicly available settlement prices that we use in connection with the clearing of certain of our OTC derivative contracts. While the court granted a motion for summary judgment in our favor in September 2005 dismissing all claims brought against us by NYMEX, NYMEX filed a notice of appeal with the court on October 13, 2005. In addition, NYMEX may pursue certain state law claims in New York state court that were dismissed from the federal court case on jurisdictional grounds. If NYMEX successfully appeals the court’s judgment and we are subsequently found to have infringed on NYMEX’s intellectual property rights after a trial, we may incur substantial monetary damages and we may be enjoined from using or referring to one or more types of NYMEX settlement prices. If we are enjoined from using or referring to NYMEX settlement prices, we could lose all or a substantial portion of our cleared trading volume in Henry Hub natural gas and West Texas Intermediate crude oil contracts and the related commission revenues. We derived 28.6% and 17.2% of our consolidated revenues for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively, from Henry Hub natural gas and West Texas Intermediate crude oil contracts cleared and settled on the basis of, or by reference to, NYMEX settlement prices. See “Regulation and Legal Proceedings — Legal Proceedings — NYMEX Claim of Infringement”. In addition, we recently settled a patent infringement litigation with EBS in exchange for a payment of $15.0 million to EBS. See “Regulation and Legal Proceedings — Legal Proceedings — EBS Claim of Infringement”.
      In general, if one or more of our products or services is found to infringe patents held by others, we may be required to stop developing or marketing the products or services, to obtain licenses to develop and market the products or services from the holders of the patents or to redesign the products or services in such a way as to avoid infringing the patents. We also could be required to pay damages if we were found to infringe patents held by others, which could materially adversely affect our business, financial condition and operating results. We cannot assess the extent to which we may be required in the future to obtain licenses with respect to

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patents held by others, whether such licenses would be available or, if available, whether we would be able to obtain such licenses on commercially reasonable terms. If we were unable to obtain such licenses, we may not be able to redesign our products or services at a reasonable cost to avoid infringement, which could materially adversely affect our business, financial condition and operating results.
Some of the proprietary technology we employ may be vulnerable to infringement by others.
      Our business is dependent on proprietary technology and other intellectual property that we own or license from third parties. Despite precautions we have taken or may take to protect our intellectual property rights, third parties could copy or otherwise obtain and use our proprietary technology without authorization. It may be difficult for us to monitor unauthorized use of our intellectual property. We cannot assure you that the steps that we have taken will prevent misappropriation of our proprietary technology or intellectual property.
      We have filed U.S. patent applications for our electronic trade confirmation service, our method to allow a participant to engage in program trading while protecting its data (referred to as ICEMaker), our method for displaying both cleared and bilateral OTC contracts in single price stream, our method for locking prices on electronic trading screens, and our method for exchanging OTC contracts and futures contracts in similar base commodities on an electronic trading platform. We have also filed patent applications in the European Patent Office and Canada for our electronic trade confirmation service and our method for displaying cleared and bilateral OTC contracts in a single price stream, as well as having made a filing under the Patent Cooperation Treaty with respect to ICEMaker. We cannot assure you that we will obtain any final patents covering these services, nor can we predict the scope of any patents issued. In addition, we cannot assure you that any patent issued will be effective to protect this intellectual property against misappropriation. Third parties in Europe or elsewhere could acquire patents covering this or other intellectual property for which we obtain patents in the United States, or equivalent intellectual property, as a result of differences in local laws affecting patentability and patent validity. Third parties in other jurisdictions might also misappropriate our intellectual property rights with impunity if intellectual property protection laws are not actively enforced in those jurisdictions. Patent infringement and/or the grant of parallel patents would erode the value of our intellectual property.
      We have secured trademark registrations for “IntercontinentalExchange” and “ICE” from the United States Patent and Trademark Office, as well as registrations for other trademarks we use in our business. We also have several U.S. and foreign applications pending for other trademarks we use in our business. We cannot assure you that any of these marks for which applications are pending will be registered.
      We may have to resort to litigation to enforce our intellectual property rights, protect our trade secrets, and determine the validity and scope of the intellectual property rights of others or defend ourselves from claims of infringement. We may not receive an adequate remedy for any infringement of our intellectual property rights, and we may incur substantial costs and diversion of resources and the attention of management as a result of litigation, even if we prevail. As a result, we may choose not to enforce our infringed intellectual property rights, depending on our strategic evaluation and judgment regarding the best use of our resources, the relative strength of our intellectual property portfolio and the recourse available to us.
Our limited operating history may make it difficult to evaluate our future prospects, may increase the risk that we will not continue to be successful and may increase the risk of your investment.
      We began operations in 2000. As a result, we have a limited operating history for you to evaluate in assessing our future prospects. In addition, while the International Petroleum Exchange (which we renamed ICE Futures in October 2005) was established in 1980, we did not begin to operate the business until we acquired the International Petroleum Exchange in June 2001 and integrated it into our business. We also did not offer trading in futures contracts or options on futures contracts exclusively in our electronic markets prior to the closure of our open-outcry trading floor on April 7, 2005. Accordingly, our historic and recent financial results may not be representative of what they may be in the future. We cannot assure you that our growth will continue at the same rate or at all, or that we will not experience declines in revenues and profitability in the future. You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage company with a limited operating history.

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We face significant challenges in implementing our strategic goals of expanding product and service offerings and attracting new market participants to our markets. If we do not meet these challenges, we may not be able to increase our revenues or remain profitable.
      We seek to expand the range of commodity products that can be traded in our markets and to ensure that trading in those new products becomes liquid within a sufficiently short period of time to support viable trading markets. We also seek to expand the number of contracts traded in our futures markets following the closure of our open-outcry trading floor. In meeting these strategic goals, however, we face a number of significant challenges, including the following:
  •  To introduce new cleared contracts, we must first obtain the approval of LCH.Clearnet, our provider of clearing services. The timing and terms of LCH.Clearnet’s approval may prevent us from bringing new cleared contracts to market as quickly and competitively as our competitors. The approval of LCH.Clearnet and the timing of its receipt will depend upon the type of product proposed, the type and extent of system modification required to establish clearing functionality for the relevant product and the integration of the new contract with our electronic platform and other challenges posed. This could result in a substantial delay between development of a cleared contract and its offering on our electronic platform.
 
  •  When we introduced new OTC products initially, we obtained order flow commitments from leading market participants, which were instrumental in the development of liquid markets for those products. However, we do not intend to obtain comparable commitments with regard to new products that we introduce, which could make successful development of new trading markets particularly uncertain.
 
  •  To expand the use of our electronic platform to additional participants and contracts, we must continue to expand capacity without disrupting functionality to satisfy evolving customer requirements.
 
  •  To introduce new trading-related services, we must develop additional systems technology that will interface successfully with the wide variety of unique internal systems used by our participants. These challenges may involve unforeseen costs and delays.
 
  •  As an early-stage company, we must continue to build significant brand recognition among commodities market participants in order to attract new participants to our markets. This will require us to increase our marketing expenditures. The cost of our marketing efforts may be greater than we expect, and we cannot assure you that these efforts will be successful.
      Even if we resolve these issues and are able to introduce new products and services, there is no assurance that they will be accepted by our participants, attract new market participants, or be competitive with those offered by other companies. If we do not succeed in these efforts on a consistent, sustained basis, we will be unable to implement our strategic objectives. This would seriously jeopardize our ability to increase and diversify our revenues, remain profitable and continue as a viable competitor in our markets.
Reductions in our commission rates resulting from competitive pressures could lower our revenues and profitability.
      We expect to experience pressure on our commission rates as a result of competition we face in our futures and OTC markets. Some of our competitors offer a broader range of products and services to a larger participant base, and enjoy higher trading volumes, than we do. Consequently, our competitors may be able and willing to offer commodity trading services at lower commission rates than we currently offer or may be able to offer. As a result of this pricing competition, we could lose both market share and revenues. We believe that any downward pressure on commission rates would likely continue and intensify as we continue to develop our business and gain recognition in our markets. A decline in commission rates could lower our revenues, which would adversely affect our profitability. In addition, our competitors may offer other financial incentives such as rebates or payments in order to induce trading in their markets, rather than ours. To date, we have not offered our participants similar incentives except as described below.
      We have offered our trade execution services to market participants without charge for trading West Texas Intermediate crude oil bullets in our OTC market in an effort to increase the liquidity of this market. This fee waiver began in November 2004 and extends through the end of 2005. We recognized $113,000,

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$240,000 and $858,000 in commission fee revenues for West Texas Intermediate crude oil bullet contracts for the years ended December 31, 2004, 2003 and 2002, respectively. Assuming trading volumes for the period would have remained unchanged if we had charged our customary fee, we would have generated commission fees for West Texas Intermediate crude oil bullets of $1.1 million during the nine months ended September 30, 2005. Similar efforts by us or our competitors in the future could have an adverse effect on our profitability.
Our business may be harmed by computer and communications systems failures and delays.
      We support and maintain many of the systems that comprise our electronic platform. Our failure to monitor or maintain these systems, or to find replacements for defective components within a system in a timely and cost-effective manner when necessary, could have a material adverse effect on our ability to conduct our business. Our systems are located primarily in Atlanta, Georgia and our backup facilities fully replicate our primary data center. Our redundant systems or disaster recovery plans may prove to be inadequate.
      Our systems, or those of our third party providers, may fail or, due to capacity constraints, may operate slowly, causing one or more of the following:
  •  unanticipated disruption in service to our participants;
 
  •  slower response time and delays in our participants’ trade execution and processing;
 
  •  failed settlement by participants to whom we provide trade confirmation or clearing services;
 
  •  incomplete or inaccurate accounting, recording or processing of trades;
 
  •  our distribution of inaccurate or untimely market data to participants who rely on this data in their trading activity; and
 
  •  financial loss.
      We could experience system failures due to power or telecommunications failures, human error on our part or on the part of our vendors or participants, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, intentional acts of vandalism or terrorism and similar events. In these instances, our disaster recovery plan may prove ineffective. If any one or more of these situations were to arise, they could result in damage to our business reputation, participant dissatisfaction with our electronic platform, prompting participants to trade elsewhere, or exposure to litigation or regulatory sanctions. As a consequence, our business, financial condition and results of operations could suffer materially.
Our systems and those of our third party service providers may be vulnerable to security risks, which could result in wrongful use of our information, or which could make our participants reluctant to use our electronic platform.
      We regard the secure transmission of confidential information on our electronic platform as a critical element of our operations. Our networks and those of our participants and our third party service providers, including LCH.Clearnet, may, however, be vulnerable to unauthorized access, computer viruses, firewall or encryption failures and other security problems. We may be required to expend significant resources to protect ourselves and our participants against the threat of security breaches or to alleviate problems caused by security breaches. Although we intend to continue to implement industry standard security measures, we cannot assure you that those measures will be sufficient to protect our business against losses or any reduced trading volume incurred in our markets as a result of any significant security breaches on our platform.
We rely on specialized management and employees.
      Our future success depends, in part, upon the continued contributions of our executive officers and key employees who we rely on for executing our business strategy and identifying new strategic initiatives. These individuals possess extensive experience in the energy commodities trading industry and financial services markets generally, and possess extensive technology skills. We rely in particular on Jeffrey C. Sprecher, our chief executive officer, Charles A. Vice, our president and chief operating officer, Richard V. Spencer, our chief financial officer, Edwin D. Marcial, our chief technology officer, and David S. Goone, our head of business

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development and sales, as well as certain other employees responsible for product development and technological development within our company. Although we have entered into employment agreements with each of the executive officers and key employees described in the previous sentence, it is possible that one or more of these persons could voluntarily terminate their employment agreements with us. Any loss or interruption of the services of our executive officers or key product development or technology personnel could result in our inability to manage our operations effectively or to execute our business strategy. We cannot assure you that we would be able to find appropriate replacements for these key personnel if the need arose. We may have to incur significant costs to replace key employees who leave, and our ability to execute our business strategy could be impaired if we cannot replace departing employees in a timely manner. Competition in our industry for persons with trading industry and technology expertise is intense.
We rely on third party providers and other suppliers for a number of services that are important to our business. An interruption or cessation of an important service or supply by any third party could have a material adverse effect on our business.
      In addition to our dependence on LCH.Clearnet as a clearing service provider, we depend on a number of suppliers, such as online service providers, hosting service and software providers, data processors, software and hardware vendors, banks, and telephone companies, for elements of our trading, clearing and other systems. For example, we rely on Atos Euronext Market Solutions Limited for the provision of a trade registration system that routes trades executed in our markets to LCH.Clearnet for clearing. Atos Euronext Market Solutions Limited and other companies within the Euronext, N.V. group of companies, are potential competitors to both our futures business and our OTC business, which may affect the continued provision of these services in the future. In addition, we rely on a large international telecommunications company for the provision of hosting services. If this company were to discontinue providing these services to us, we would likely experience significant disruption to our business until we were able to establish connectivity with another provider.
      We cannot assure you that any of these providers will be able to continue to provide these services in an efficient, cost-effective manner or that they will be able to adequately expand their services to meet our needs. An interruption in or the cessation of an important service or supply by any third party and our inability to make alternative arrangements in a timely manner, or at all, would result in lost revenues and higher costs.
      In addition, our participants may access our electronic platform through ten independent software vendors, which represent a substantial portion of the independent software vendors that serve the commodities markets. The loss of a significant number of independent software vendors providing access could make our platform less attractive to participants who prefer this form of access.
As a financial service provider, we are subject to significant litigation and liability risks.
      Many aspects of our business, and the businesses of our participants, involve substantial risks of liability. These risks include, among others, potential liability from disputes over terms of a trade, the claim that a system failure or delay caused monetary loss to a participant or that an unauthorized trade occurred. For example, dissatisfied participants that have traded on our electronic platform, or those on whose behalf our participants have traded, may make claims regarding the quality of trade execution, or alleged improperly confirmed or settled trades, abusive trading practices, security and confidentiality breaches, mismanagement or even fraud against us or our participants. In addition, because of the ease and speed with which sizable trades can be executed on our electronic platform, participants can lose substantial amounts by inadvertently entering trade orders or by entering them inaccurately. A large number of significant error trades could result in participant dissatisfaction.
      As a result, we could incur significant legal expenses defending claims against us, even those without merit. The adverse resolution of any lawsuits or claims against us could result in our obligation to pay substantial damages, and cause us reputational harm. Our participants may face similar legal challenges, and these challenges could affect their ability or willingness to trade on our electronic platform. The initiation of lawsuits or other claims against us, or against our participants with regard to their trading activities, could adversely affect our business, financial condition and results of operations, whether or not these lawsuits or

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other claims are resolved in our favor. If we violate the terms and provisions of the Commodity Exchange Act under which we operate our OTC business, or if the CFTC concludes or believes we have violated other provisions of the Commodity Exchange Act, we could also be exposed to substantial liability. See also “— We are currently subject to regulatory oversight. Failure to comply with existing regulatory requirements, and possible future changes in these requirements, could adversely affect our business”.
If we are compelled to monitor our OTC participants’ compliance with applicable standards, our operating expenses and exposure to private litigation could increase.
      While we have self regulatory status in our futures business, we currently do not assume responsibility for enforcing compliance with applicable commercial and legal standards by our participants when they trade OTC contracts in our markets. If we determined that it was necessary to undertake such a role in respect of OTC products — for example, to deter unfavorable regulatory actions, to respond to regulatory actions or simply to maintain our participants’ confidence in the integrity of our OTC markets — we would have to invest heavily in developing new compliance and surveillance systems, and our operating expenses could increase significantly. Our assumption of such a role could also increase our exposure to lawsuits from dissatisfied participants and other parties claiming that we failed to deter inappropriate or illegal conduct.
Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our financial condition and operating results.
      Our ability to comply with applicable laws and rules is largely dependent on our establishment and maintenance of compliance, audit and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. Our policies and procedures to identify, monitor and manage our risks may not be fully effective. Management of operational, legal and regulatory risk requires, among other things, policies and procedures to record properly and verify a large number of transactions and events. We cannot assure you that our policies and procedures will always be effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed.
We may acquire other businesses, products or technologies. If we do, we may be unable to integrate them with our business, or we may impair our financial performance.
      If appropriate opportunities present themselves, we may acquire businesses, products or technologies that we believe have strategic value. We may not be able to identify, negotiate or finance any future acquisition successfully. Even if we do succeed in acquiring a business, product or technology, we have limited experience, other than with respect to ICE Futures, in integrating a significant acquisition into our business. The process of integration may produce unforeseen operating difficulties and expenditures and may absorb significant attention of our management that would otherwise be available for the ongoing development of our business. If we make future acquisitions, we may issue shares of our stock that dilute shareholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangible assets with estimable useful lives, any of which could harm our business, financial condition or results of operations.
Risks Relating to this Offering
There has been no prior public market for our common stock, and we cannot assure you that an active trading market in our stock will develop or be sustained.
      Prior to this offering, there has been no public market for our common stock. We cannot assure you that an active trading market will develop or be sustained after this offering. Although our common stock has been approved for listing on the New York Stock Exchange, we do not know whether third parties will find our common stock to be attractive or whether firms will be interested in making a market in our common stock. Also, if you purchase shares of common stock in this offering, you will pay a price that was not established in public trading markets. The initial public offering price of our common stock will be determined through negotiation between us and the representatives of the underwriters and thus may not be indicative of the

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market price for our common stock after this offering. Consequently, you may not be able to resell your shares above the initial public offering price and may suffer a loss on your investment.
Through their affiliates, the lead underwriters for this offering are also selling shareholders, and therefore have interests in this offering beyond customary underwriting discounts and commissions.
      The lead underwriters for this offering, Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co., are affiliates of Morgan Stanley Capital Group Inc. and The Goldman Sachs Group, Inc., respectively, each of which is participating as a selling shareholder in this offering. In addition, SG Americas Securities, LLC, an underwriter for this offering, is an affiliate of Société Générale Financial Corporation, which is participating as a selling shareholder in this offering. We expect that Morgan Stanley Capital Group Inc. will sell 1,173,095 shares, or 14.9% of its interest in us, The Goldman Sachs Group, Inc. will sell 1,100,000 shares, or 14.6% of its interest in us, and Société Générale Financial Corporation will sell 806,515 shares, or 17.9% of its interest in us. There may be a conflict of interest between their interests as selling shareholders (i.e., to maximize the value of their investment) and their interests as underwriters (i.e., in negotiating the initial public offering price). As affiliates of participants in this offering that are seeking to realize the value of their investment in us, the lead underwriters have interests beyond customary underwriting discounts and commissions.
The trading market for our common stock could be adversely affected because legal rules will make it impracticable for Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. to make a market in our common stock.
      The significant equity ownership in our company that each of Morgan Stanley Capital Group Inc. and The Goldman Sachs Group, Inc. will hold following completion of this offering will require them to comply with SEC rules governing purchases and sales of our common stock. See “Principal and Selling Shareholders”. These rules will make it impracticable for the lead underwriters of this offering, Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. (affiliates of Morgan Stanley Capital Group Inc. and The Goldman Sachs Group, Inc., respectively), to make markets in our common stock after the completion of this offering. Although Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. will be permitted to purchase shares of our common stock in the secondary market on behalf of the underwriting syndicate in connection with covering any short position established by the syndicate and to execute unsolicited customer agency orders, they will not be able to make a market in our common stock. See “Underwriting”. Other members of the underwriting syndicate may engage in market-making activities with respect to our common stock. However, they are under no obligation to do so and may stop market-making activities at any time. Although these syndicate members may engage in market-making activities, restrictions on the ability of Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. to engage in market-making may adversely affect the trading market for our common stock.
The market price of our common stock may fluctuate significantly, and it may trade at prices below the initial public offering price.
      The market price of our common stock after this offering may fluctuate significantly from time to time as a result of many factors, including:
  •  investors’ perceptions of our prospects;
 
  •  investors’ perceptions of the prospects of the commodities markets and more broadly, the energy markets;
 
  •  differences between our actual financial and operating results and those expected by investors and analysts;
 
  •  changes in analysts’ recommendations or projections;
 
  •  fluctuations in quarterly operating results;

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  •  announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures;
 
  •  changes or trends in our industry, including trading volumes, competitive or regulatory changes or changes in the commodities markets;
 
  •  changes in valuations for exchanges and other trading facilities in general;
 
  •  adverse resolution of new or pending litigation against us;
 
  •  additions or departures of key personnel;
 
  •  changes in general economic conditions; and
 
  •  broad market fluctuations.
      In particular, announcements of potentially adverse developments, such as proposed regulatory changes, new government investigations or the commencement or threat of litigation against us or our major participants, as well as announced changes in our business plans or those of our competitors, could adversely affect the trading price of our stock, regardless of the likely outcome of those developments. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the initial public offering price.
Future sales of our shares could adversely affect the market price of our common stock.
      If our existing shareholders sell substantial amounts of our common stock in the public market following this offering, or if we issue a large number of shares of our common stock in connection with future acquisitions, the market price of our common stock could decline significantly. Sales by our existing shareholders might also make it more difficult for us to raise equity capital by selling new common stock at a time and price that we deem appropriate.
      Based on shares outstanding as of September 30, 2005, upon completion of this offering we will have 55,466,753 shares of common stock outstanding. Of these outstanding shares, the 10,000,000 shares sold in this offering will be freely tradable in the public market. The remaining 45,466,753 shares will be restricted securities as defined in the SEC’s Rule 144 and may be sold by the holders into the public market from time to time in accordance with Rule 144. Over 90% of these restricted shares will be eligible for sale under Rule 144 following expiration of the lockup agreements described below.
      We have granted Continental Power Exchange, Inc. and other designated Class A2 shareholders, including Morgan Stanley Capital Group Inc. and The Goldman Sachs Group, Inc., each an affiliate of the lead underwriters in this offering, the right to require us to register their shares of our common stock that they will receive upon conversion of their Class A2 shares from time to time following the consummation of this offering, which represents approximately 42.4 million shares. Accordingly, the number of shares subject to registration rights is substantial and the sale of these shares may have a negative impact on the market price for our common stock. These shares are subject to the lock-up agreements described below. See “Shares Eligible for Future Sale” for a discussion of the registration rights applicable to Continental Power Exchange, Inc. and those applicable to designated Class A2 shareholders.
      We and the holders of approximately 94.6% of our shares outstanding and all of our shares issuable under options and restricted stock award agreements outstanding as of September 30, 2005 — including our directors and officers — have agreed to a 180-day lockup, meaning that, for a period of 180 days following the date of this prospectus, we and they will not sell shares of our common stock. However, this lockup is subject to several exceptions, and our lead underwriters in their sole discretion may release any of the securities subject to the lockup, at any time without notice.
      After this offering, we intend to register initially 9,100,000 shares of our common stock for issuance of shares pursuant to, or upon the exercise of, options granted under, our employee stock option plans, restricted stock plans or equity incentive plan. We may increase the number of shares registered for this purpose from time to time. Once we register these shares, they will be able to be sold in the public market upon issuance.

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Delaware law and some provisions of our organizational documents and employment agreements make a takeover of our company more difficult.
      Provisions of our charter and bylaws may have the effect of delaying, deferring or preventing a change in control of our company. A change of control could be proposed in the form of a tender offer or takeover proposal that might result in a premium over the market price for our common stock. In addition, these provisions could make it more difficult to bring about a change in the composition of our board of directors, which could result in entrenchment of current management. For example, our charter and bylaws will:
  •  require that the number of directors be determined, and any vacancy or new board seat be filled, only by the board;
 
  •  not permit shareholders to act by written consent, other than for certain class votes by holders of the Class A common stock;
 
  •  not permit shareholders to call a special meeting unless at least a majority of the shareholders join in the request to call such a meeting;
 
  •  allow a meeting of shareholders to be adjourned or postponed without the vote of shareholders;
 
  •  permit the bylaws to be amended by a majority of the board without shareholder approval, and require that a bylaw amendment proposed by shareholders be approved by 66 2 / 3 % of all outstanding shares;
 
  •  require that notice of shareholder proposals be submitted between 90 and 120 days prior to the scheduled meeting; and
 
  •  authorize the issuance of undesignated preferred stock, or “blank check” preferred stock, by our board of directors without shareholder approval.
      In addition, Section 203 of the Delaware General Corporation Law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. Delaware law prohibits a publicly held corporation from engaging in a “business combination” with an “interested shareholder” for three years after the shareholder becomes an interested shareholder, unless the corporation’s board of directors and shareholders approve the business combination in a prescribed manner or the interested shareholder has acquired a designated percentage of our voting stock at the time it becomes an interested shareholder.
      Our employment agreements with our executive officers also contain change in control provisions. Under the terms of these employment agreements, all of the stock options granted to these officers after entering into the agreement will fully vest and become immediately exercisable if such officer’s employment is terminated following, or as a result of, a change in control of our company. In addition, the executive officer is entitled to receive a significant cash payment. See “Management — Employment Agreements and Benefit Plans — Termination — Termination Following a Change in Control” for a discussion of these provisions.
      These and other provisions of our organizational documents, employment agreements and Delaware law may have the effect of delaying, deferring or preventing changes of control or changes in management of our company, even if such transactions or changes would have significant benefits for our shareholders. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.
Your share ownership in our company will be immediately and substantially diluted.
      If you purchase shares of our common stock in this offering, you will experience an immediate and substantial dilution of $16.74 per share (assuming the common stock is offered at $19.00 per share, the midpoint of the estimated price range set forth on the cover of this prospectus) because the price that you pay will be substantially greater than the pro forma net tangible book value per share of such stock based on the pro forma net tangible book value per share as of September 30, 2005. This dilution is due to the fact that when our existing shareholders purchased or were otherwise issued shares of our common stock in the past, they did so at prices that were significantly lower than the price at which our common stock is being offered to the public in this offering.

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We do not expect to pay any dividends for the foreseeable future.
      We do not anticipate paying any dividends to our shareholders for the foreseeable future. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend upon our results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable law or the SEC and other factors our board deems relevant.
We will have broad discretion over the use of proceeds to us from this offering, and we may not use these funds in a manner of which you will approve.
      We will have broad discretion to use the net proceeds to us from this offering, and you will be relying on the judgment of our board of directors and management regarding the use and application of these proceeds. Although we expect to use the net proceeds for working capital and general corporate purposes, we have not allocated these net proceeds for specific purposes and cannot assure you that we will use these funds in a manner of which you will approve.

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FORWARD-LOOKING STATEMENTS
      This prospectus, including the sections entitled “Prospectus Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”, contains forward-looking statements that are based on our present beliefs and assumptions and on information currently available to us. You can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue”, or the negative of these terms or other comparable terminology. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, our discussion of the following matters:
  •  The statements in “Prospectus Summary — The Offering” and “Dividend Policy” concerning our current intention not to pay any cash dividends.
 
  •  The statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Business Environment” and “Industry Overview — Industry Trends — Increasing Adoption of Energy Commodities as an Investable Asset Class” and “— New Market Participants” concerning management’s expectations regarding the business environment in which it operates and trends in our industry.
 
  •  The statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Sources of Revenues” concerning our plans not to adjust commission rates and our belief that we will attract trading without entering into order flow agreements.
 
  •  The statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Components of Expenses” concerning management’s expectations of various costs.
 
  •  The statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Reporting — Our Futures Business Segment” concerning the benefits that we anticipate will result from the closure of our open-outcry trading floor and the complete transition of all futures trading in our markets to our electronic platform.
 
  •  The statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Future Capital Requirements” concerning our belief that cash flows will be sufficient to fund our working capital needs and capital expenditures through the end of 2006.
 
  •  The statements in “Business — Our Growth Strategy” concerning our plans and intentions to attract new market participants, increase the connectivity to our marketplace, expand our market data business, develop new products and services, and pursue select strategic acquisitions and alliances.
 
  •  The statements “Business — Our Products and Services” concerning our belief that our electronic trade confirmation service could attract new market participants.
 
  •  The statements in “Business — Technology” concerning our electronic platform and disaster recovery system technologies and our belief that we would be able to gain access on a timely basis to comparable products and services if our key technology contracts were terminated.
 
  •  The statements in “Regulation and Legal Proceedings” concerning regulation and litigation involving our company.

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USE OF PROCEEDS
      Assuming an initial offering price of $19.00 per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, we expect to receive net proceeds from our sale of shares in this offering of $39.3 million after deducting the estimated underwriting discount and offering expenses, which are payable by us. We will not receive any of the proceeds from the sale of shares of our common stock by the selling shareholders, including any proceeds from the selling shareholders’ sale of additional shares upon exercise of the underwriters’ option to purchase additional shares.
      The principal purposes of this offering are to obtain additional capital, create a public market for our common stock, facilitate our future access to public equity markets, enable us to provide incentives to our employees through equity-linked compensation programs and provide increased visibility in the market. Publicly tradable shares of our common stock may also be used as an acquisition currency. On November 23, 2004, we borrowed the entire $25.0 million available under our credit facility with Wachovia Bank, National Association to fund a portion of the $67.5 million redemption of our Class B common stock. On October 18, 2005, we entered into an amendment with Wachovia to increase the amount available under our credit facility to $50.0 million. The borrowings outstanding under the credit facility mature on November 17, 2007. We intend to use a portion of the proceeds of this offering for the repayment in full of all outstanding debt under this facility, which as of September 30, 2005, amounted to $13.0 million, bearing interest at a 30-day LIBOR locked interest rate of 4.66%. We otherwise currently do not have specific plans for the use of the net proceeds of the offering. We expect that we will use the net proceeds for general corporate purposes, including expanding and diversifying our products and services.
      We may also use a portion of the net proceeds to acquire complementary businesses, products and technologies, although we have no current agreements or commitments to do so. Pending these uses, we intend to invest the net proceeds of this offering in short-term money-market and money-market equivalent securities.
DIVIDEND POLICY
      We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business.

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CAPITALIZATION
      The following table sets forth our cash and cash equivalents, restricted cash, short-term investments and capitalization as of September 30, 2005 on an actual basis and on a pro forma as adjusted basis to reflect the sale of 2,500,000 shares of our common stock offered by us in this offering at an assumed initial public offering price of $19.00 per share, the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and our estimated offering expenses payable by us.
      The outstanding share information excludes:
  •  4,626,109 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2005 under our 2000 Stock Option Plan, 1,425,424 shares issuable pursuant to outstanding awards under the 2004 Restricted Stock Plan as of September 30, 2005 and 21,742 shares issuable pursuant to outstanding awards under the 2003 Restricted Stock Deferral Plan for Outside Directors as of September 30, 2005; and
 
  •  511,834 shares of our common stock available for future issuance under our 2000 Stock Option Plan and 2,125,000 shares available for future issuance under our 2005 Equity Incentive Plan, in each case, as of September 30, 2005.
      This table should be read in conjunction with “Selected Consolidated Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.
                   
    As of September 30, 2005
     
        As
        Adjusted
        for this
    Actual   Offering
         
    (in thousands)
Cash and cash equivalents
  $ 34,234     $ 60,534  
             
Restricted cash
  $ 12,098     $ 12,098  
             
Short-term investments(1)
  $ 11,998     $ 11,998  
             
Long-term portion of revolving credit facility
  $ 13,000     $  
             
Redeemable stock put(2)
    38,242        
             
Shareholders’ equity(3):
               
 
Preferred Stock, $0.01 par value per share, no shares authorized, issued or outstanding, actual; 25,000,000 shares authorized and no shares issued or outstanding, as adjusted for the recapitalization and this offering
           
 
Common Stock, $0.01 par value per share, no shares authorized, issued or outstanding and undesignated, actual; 194,275,000 shares authorized and 10,000,000 shares issued and outstanding, as adjusted for the recapitalization and this offering(4)
          100  
 
Class A common stock, Series 1, $0.01 par value per share, 5,725,159 shares authorized; 2,862,579 shares issued and outstanding, actual; 5,725,000 shares authorized and 2,862,579 shares issued and outstanding, as adjusted for the recapitalization and this offering
    29       29  
 
Class A common stock, Series 2, $0.01 par value per share, 75,000,000 shares authorized, 51,638,483 shares issued and 50,104,174 shares outstanding, actual; 75,000,000 shares authorized, 44,138,483 shares issued and 42,604,174 shares outstanding, as adjusted for the recapitalization and this offering
    516       441  
 
Treasury stock, at cost
    (5,541 )     (5,541 )
 
Additional paid-in capital
    40,655       118,172  
 
Deferred stock compensation
    (5,017 )     (5,017 )
 
Retained earnings
    73,711       73,711  
 
Accumulated other comprehensive income
    22,040       22,040  
             
Total shareholders’ equity
    126,393       203,935  
             
Total capitalization
  $ 177,635     $ 203,935  
             

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(1)  An additional $27.0 million is classified as long-term investments. See note 3 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(2)  In October 2005, we entered into an agreement with our predecessor company, Continental Power Exchange, Inc., to cancel the redeemable stock put effective upon the closing of this offering. The pro forma balance sheet impact of the cancellation of the redeemable stock put as of September 30, 2005 is a reduction to the redeemable stock put balance of $38.2 million, and a corresponding increase to additional paid-in capital of $38.2 million. The value of the redeemable stock put will be adjusted to reflect any difference in the initial public offering price from the value of our common stock as of September 30, 2005. The balance sheet impact of the put cancellation as of the date of our initial public offering will be a reduction to the redeemable stock put balance of an amount equal to our initial public offering share price multiplied by the number of shares underlying the put, and a corresponding increase to additional paid-in capital. See note 9 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(3)  In connection with our recapitalization, effective immediately prior to the closing of this offering, we will amend our charter and bylaws to authorize the creation of a new class of common stock and preferred stock, and effect a 1 for 4 reverse stock split of our outstanding shares of Class A common stock. For a description of our recapitalization, see “Organization and Recapitalization”. All shares to be sold by the selling shareholders will be converted from the Class A2 shares held by such holders into shares of new common stock immediately prior to the closing of this offering. All references to common as adjusted for the recapitalization and this offering include these Class A2 shares as new common stock.
 
(4)  In November 2004, we exercised the mandatory redemption option and redeemed all outstanding shares of our Class B redeemable common stock. Until the effectiveness of our recapitalization, these shares will be classified as undesignated shares of common stock.

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DILUTION
      If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of common stock upon the completion of this offering.
      The following information is presented on a pro forma basis reflecting the recapitalization and the creation of a new class of common stock, which together with our Class A common stock, we refer to as common stock. The recapitalization is described in greater detail under the heading “Organization and Recapitalization”.
      The table below illustrates per share dilution to new investors, beginning with pro forma net tangible book value per share. We determined pro forma net tangible book value per share by dividing the pro forma net tangible book value (total book value of tangible assets less total liabilities) by the pro forma number of shares of common stock outstanding as of September 30, 2005. Our pro forma net tangible book value as of September 30, 2005 equaled $86.0 million, or $1.62 per share of common stock.
      After giving effect to the sale of shares of common stock to be sold in this offering at an assumed initial public offering price of $19.00 per share, the midpoint of the estimated price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discount and offering expenses payable by us, our pro forma net tangible book value as adjusted, as of September 30, 2005, would have equaled $125.3 million, or $2.26 per share of common stock. This represents an immediate increase in pro forma net tangible book value of $0.64 per share to our existing shareholders and an immediate dilution in pro forma net tangible book value of $16.74 per share to new investors of common stock in this offering. If the initial public offering price is higher or lower, the dilution to new investors will be greater or less, respectively. The following table illustrates this per share dilution to new investors purchasing our common stock in this offering:
                   
Assumed initial public offering price per share
          $ 19.00  
 
Pro forma net tangible book value per share as of September 30, 2005
  $ 1.62          
 
Increase in pro forma net tangible book value per share attributable to this offering
    0.64          
             
Pro forma net tangible book value per share after this offering
            2.26  
             
Dilution per share to new investors
          $ 16.74  
             
      The following table summarizes, as of September 30, 2005, the differences between our existing shareholders and new investors with respect to the number of shares of common stock issued by us, the total consideration paid and the average price per share paid. The calculations with respect to shares purchased by new investors in this offering reflect an assumed initial public offering price of $19.00 per share, as specified above, after deducting the estimated underwriting discount and offering expenses payable by us.
                                         
    Shares Purchased   Total Consideration   Average
            Price Per
    Number   Percentage   Amount   Percentage   Share
                     
Existing shareholders
    45,466,753       81.97 %   $ 115,472,811       38.84 %   $ 2.54  
New investors(1)
    10,000,000       18.03       181,800,000       61.16       18.18  
                               
Total
    55,466,753       100 %   $ 297,272,811       100 %        
                               
 
(1)  If the underwriters exercise their option to purchase additional shares in full, the selling shareholders will sell an additional 1,500,000 shares, and new investors will own 20.22% of our outstanding common stock.
      The preceding tables assume no issuance of shares of common stock under our stock plans after September 30, 2005. As of September 30, 2005, 4,626,109 shares were subject to outstanding options under our 2000 Stock Option Plan at a weighted average exercise price of $8.44 per share. Also, there were 1,425,424 shares subject to outstanding awards under the 2004 Restricted Stock Plan and 21,742 shares subject to outstanding awards under the 2003 Restricted Stock Deferral Plan for Outside Directors as of September 30, 2005. To the extent that these outstanding options are exercised or restricted shares are issued, there will be further dilution to new investors.

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SELECTED CONSOLIDATED FINANCIAL DATA
      The following tables present our selected consolidated financial data as of and for the dates and periods indicated. We derived the selected consolidated financial data set forth below as of and for the nine months ended September 30, 2005 and for the nine months ended September 30, 2004 from our unaudited consolidated financial statements that are included elsewhere in this prospectus. We derived the selected consolidated financial data set forth below for the years ended December 31, 2004, 2003 and 2002 and as of December 31, 2004 and 2003 from our consolidated financial statements, which have been audited by Ernst & Young LLP, independent registered public accounting firm, and are included elsewhere in this prospectus. We derived the selected consolidated financial data set forth below as of December 31, 2002, 2001 and 2000, for the year ended December 31, 2001, for the period from May 11, 2000 through December 31, 2000 and for the period from January 1, 2000 through May 10, 2000 from our audited consolidated financial statements, which are not included in this prospectus. In management’s opinion, the unaudited information has been prepared on substantially the same basis as the consolidated financial statements appearing elsewhere in this prospectus and includes all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the unaudited consolidated data.
      The selected consolidated financial data, captioned as “Predecessor Company”, with respect to the period January 1, 2000 to May 10, 2000, reflects the financial statements of our predecessor, Continental Power Exchange, Inc. Upon our formation on May 11, 2000, Continental Power Exchange, Inc. contributed all of its assets and liabilities to us. Continental Power Exchange, Inc.’s operations prior to our formation on May 11, 2000 qualify as a predecessor entity under regulations of the SEC and have therefore been included in our consolidated financial statements. We converted from a limited liability company to a corporation on June 15, 2001.
      Effective upon the closing of this offering, we will amend our charter and bylaws to simplify our capital structure and governance procedures. We describe the transactions that are part of our planned recapitalization under the heading “Organization and Recapitalization”.
      The historical results presented below are not necessarily indicative of the results to be expected for any future period. The following selected consolidated financial data set forth below should be read in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
                                                                   
                                Predecessor
                                Company
                                 
                        Period from   Period from
    Nine Months Ended       May 11, 2000   January 1, 2000
    September 30,   Year Ended December 31,   through   through
            December 31,   May 10,
    2005   2004   2004   2003   2002   2001   2000   2000
                                 
    (in thousands, except for share and per share data)
Consolidated Statement of Income/(Loss) Data
                                                               
Revenues(1):
                                                               
 
Transaction fees, net(2)
  $ 100,780     $ 67,832     $ 90,906     $ 81,434     $ 118,794     $ 63,526     $ 2,711     $  
 
Data services fees
    8,483       7,013       9,691       7,742       5,141       2,589              
 
Trading access fees
    2,996       2,626       3,595       2,461       490       102              
 
Other
    2,344       2,447       4,222       2,109       1,065       646              
                                                 
Total revenues
    114,603       79,918       108,414       93,746       125,490       66,863       2,711        
                                                 
Operating expenses:
                                                               
 
Cost of hosting
    989       1,060       1,279       1,715       3,962       2,245       766        
 
Compensation and benefits
    25,815       21,673       30,074       26,236       27,906       15,970       2,777       193  
 
Professional services
    10,161       11,144       14,523       15,138       15,876       8,301       2,695        
 
Selling, general and administrative
    11,099       9,453       13,120       12,398       12,425       6,365       1,102       391  
 
Floor closure costs(3)
    4,814                                            
 
Settlement expense(4)
    15,000                                            
 
Depreciation and amortization(5)
    11,428       12,248       17,024       19,341       14,368       7,052       1,232       (12 )
                                                 
Total operating expenses
    79,306       55,578       76,020       74,828       74,537       39,933       8,572       572  
                                                 

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                                Predecessor
                                Company
                                 
                        Period from   Period from
    Nine Months Ended       May 11, 2000   January 1, 2000
    September 30,   Year Ended December 31,   through   through
            December 31,   May 10,
    2005   2004   2004   2003   2002   2001   2000   2000
                                 
    (in thousands, except for share and per share data)
Operating income (loss)
    35,297       24,340       32,394       18,918       50,953       26,930       (5,861 )     (572 )
Other income (expense), net
    2,879       1,917       1,328       948       1,492       (385 )     (331 )     (23 )
                                                 
Income (loss) before income taxes
    38,176       26,257       33,722       19,866       52,445       26,545       (6,192 )     (595 )
Income tax expense
    12,626       9,147       11,773       6,489       17,739       10,748              
                                                 
Net income (loss)(6)
  $ 25,550     $ 17,110     $ 21,949     $ 13,377     $ 34,706     $ 15,797     $ (6,192 )   $ (595 )
                                                 
Redemption adjustments to redeemable stock put(7)
    (20,659 )                 8,378       (10,730 )     (6,144 )     (4,086 )      
Deduction for accretion of Class B redeemable common stock(8)
                      (1,768 )     (3,656 )     (1,876 )            
                                                 
Net income (loss) available to common shareholders
  $ 4,891     $ 17,110     $ 21,949     $ 19,987     $ 20,320     $ 7,777     $ (10,278 )   $ (595 )
                                                 
Earnings per common share (pro forma and actual)(9)(10):
                                                               
 
Basic
  $ 0.09     $ 0.32     $ 0.42     $ 0.37     $ 0.37     $ 0.26                  
                                                 
 
Diluted
  $ 0.09     $ 0.32     $ 0.41     $ 0.37     $ 0.37     $ 0.26                  
                                                 
Weighted average common shares outstanding
(pro forma and actual)(9)(10):
                                                               
 
Basic
    52,884,917       52,864,881       52,865,108       54,328,966       54,392,602       29,778,672                  
 
Diluted
    53,448,161       53,061,893       53,062,078       54,639,708       54,850,095       29,873,789                  
 
  (1)  We generate revenues from related parties in the ordinary course of our business. For a presentation and discussion of our revenues attributable to related parties for the nine months ended September 30, 2005 and 2004 and for the years ended December 31, 2004, 2003 and 2002, see our consolidated statements of income and note 12 to our consolidated financial statements that are included elsewhere in this prospectus.
 
  (2)  Our transaction fees are presented net of rebates. For a discussion of these rebates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Sources of Revenues — Transaction Fees.”
 
  (3)  In April 2005, we closed our open-outcry trading floor in London to take advantage of increasing acceptance and adoption of electronic trading, and to maintain and enhance our competitive position. Costs associated with the floor closure were $4.8 million and are classified as “Floor closure costs” in the accompanying consolidated statement of income for the nine months ended September 30, 2005. Floor closure costs include lease terminations for the building where the floor was located, payments made to 18 employees who were terminated as a result of the closure, contract terminations, and other associated costs, including legal costs and asset impairment charges. No floor closure costs were incurred in prior periods and no additional closure costs are expected to be incurred. See note 19 to our consolidated financial statements that are included elsewhere in this prospectus.
 
  (4)  In September 2005, we settled the legal action brought by EBS related to alleged patent infringement. Under the settlement agreement, we made a payment of $15.0 million, and were released from the legal claims brought against us without admitting liability. The payment was recorded as “Settlement expense” in the accompanying consolidated statement of income for the nine months ended September 30, 2005. See note 14 to our consolidated financial statements that are included elsewhere in this prospectus.

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  (5)  Our chief executive officer purchased Continental Power Exchange, Inc. in October 1997, which resulted in negative goodwill of $266,000 and a writedown of property and equipment. The negative amounts of depreciation and amortization expense during the period from January 1, 2000 through May 10, 2000 primarily relate to the amortization of the negative goodwill in excess of the depreciation of property and equipment. In connection with our acquisition in June 2001 of the International Petroleum Exchange (which we renamed ICE Futures in October 2005), we amortized $1.7 million in goodwill and indefinite-lived other intangible assets during the year ended December 31, 2001. We did not record any amortization expense on these assets, in accordance with the accounting standards, subsequent to 2001.
 
  (6)  The financial results for the nine months ended September 30, 2005 include $4.8 million in expenses incurred relating to the closure of our open-outcry trading floor in London and a $15.0 million settlement expense related to the payment made to EBS to settle litigation. Excluding these charges, our consolidated net income for the nine months ended September 30, 2005 would have been $38.2 million, representing a 123.5% increase from $17.1 million for the nine months ended September 30, 2004. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measure”.
 
  (7)  We granted a put option to Continental Power Exchange, Inc. in connection with our formation that could require us under certain circumstances to purchase its equity interest in our business at a purchase price equal to the greater of the fair market value of the equity interest or $5 million. See “Certain Relationships and Related Transactions — Continental Power Exchange, Inc. Put Agreement”. We initially recorded the redeemable stock put at the minimum $5 million redemption threshold. We have adjusted the redeemable stock put to its redemption amount at each subsequent balance sheet date. The adjustment to the redemption amount has been recorded to retained earnings or, in the absence of positive retained earnings, additional paid-in capital. In October 2005, we entered into an agreement with Continental Power Exchange, Inc. to cancel the redeemable stock put upon the closing of this offering. See note 9 to our consolidated financial statements that are included elsewhere in this prospectus. In connection with the termination of the put option, we amended certain registration rights previously granted to Continental Power Exchange, Inc. pursuant to which we may be obligated to pay the expenses of registration, including underwriting discounts, up to a maximum of $4.5 million. See “Shares Eligible for Future Sale — Additional Shares that May be Registered”.
 
  (8)  We redeemed all of our Class B redeemable common stock on November 23, 2004 at a price of $23.58 per share, for aggregate consideration of $67.5 million. Upon its issuance on June 18, 2001, we recorded our Class B redeemable common stock at its discounted present value of $60.2 million. We recorded charges to retained earnings for the accretion of this amount up to the $67.5 million redemption value of our Class B redeemable common stock over a two-year period ending in June 2003, which was the earliest potential redemption date.
 
  (9)  We have presented our data for the year ended December 31, 2001 on a pro forma basis as if our conversion from a limited liability company to a corporation, which occurred on June 15, 2001, had occurred on January 1, 2001. For more details of this conversion, see the description under the heading “Organization and Recapitalization”. The share and per share data for the nine months ended September 30, 2005 and 2004 and for the years ended December 31, 2004, 2003 and 2002 are based on actual historical data.
(10)  In connection with our recapitalization, immediately prior to the completion of this offering we will amend our charter to effect a 1 for 4 reverse stock split of our common stock. All share data and per share data have been adjusted retroactively for all periods presented to give effect to the reverse stock split. For a description of our recapitalization, see “Organization and Recapitalization”. The recapitalization will have no financial impact on our consolidated statements of income or financial statement balances.

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    As of    
    September 30,   As of December 31,
         
    2005   2004   2003   2002   2001   2000
                         
    (in thousands)
Consolidated Balance Sheet Data
                                               
Cash and cash equivalents(1)
  $ 34,234     $ 61,199     $ 44,913     $ 33,627     $ 25,610     $ 9,485  
Restricted cash and restricted short-term investments(1)(2)
    12,098       18,421       36,797       8,876       8,157        
Short-term investments
    11,998       5,700       12,000       4,000              
Total current assets
    86,205       100,042       105,893       60,841       46,814       13,234  
Property and equipment, net
    18,518       19,364       25,625       32,843       18,567       9,104  
Long-term investments(3)
    26,951                                
Goodwill and other intangible assets, net
    78,602       86,075       81,448       73,950       67,727        
Total assets
    212,092       207,518       214,879       170,053       134,957       22,357  
Total current liabilities
    26,661       34,440       17,917       17,603       30,023       5,183  
Revolving credit facility — current and long-term(1)
    13,000       25,000                          
Related-party notes payable — current and long-term
                            16,201       15,540  
Obligations under capital leases — current and long-term
          482       2,130       2,656       1,306        
Class B redeemable common stock(1)
                67,500       65,732       62,076        
Redeemable stock put(4)
    38,242       17,582       17,582       25,960       15,230       9,086  
Shareholders’ and members’ equity (deficit)(2)
    126,393       132,149       101,194       50,021       19,540       (7,452 )
 
(1)  The redemption of the Class B redeemable common stock occurred in November 2004, which resulted in a $18.5 million reduction in cash and cash equivalents, a $24.0 million reduction in restricted short-term investments, a $25.0 million increase in current and long-term debt and a corresponding $67.5 million reduction in Class B redeemable common stock.
 
(2)  We early adopted FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, during 2003, which resulted in the consolidation of a variable interest entity and an increase in restricted short-term investments and a corresponding increase in additional paid-in capital of $24.0 million.
 
(3)  Represents available-for-sale investments that we intend to hold for more than one year pursuant to our cash investment policy. See note 3 to our consolidated financial statements that are included elsewhere in this prospectus.
 
(4)  In October 2005, we entered into an agreement with Continental Power Exchange, Inc. to cancel the redeemable stock put upon the closing of this offering. See note 9 to our consolidated financial statements that are included elsewhere in this prospectus.

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    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002   2001(1)
                         
    (in thousands, except for percentages)
Operating Data:
                                               
Our Market Share of Selected Key Products:
                                               
Total crude oil futures contracts traded globally(2)
    69,083       58,762       78,477       69,450       67,173       55,926  
IPE Brent Crude oil futures contracts traded
    22,287       19,291       25,458       24,013       21,493       18,395  
Our crude oil futures market share(2)
    32.3 %     32.8 %     32.4 %     34.6 %     32.0 %     32.9 %
                                     
Total cleared Henry Hub natural gas contracts traded on us and NYMEX-ClearPort
    37,533       14,052       21,241       6,869       1,170        
Our cleared Henry Hub natural gas contracts traded
    29,983       10,703       15,887       4,512       792        
Our market share — cleared Henry Hub natural gas vs. NYMEX-ClearPort(3)
    79.9 %     76.2 %     74.8 %     65.7 %     67.7 %     %
                                     
Total cleared PJM financial power contracts traded on us and NYMEX-ClearPort
    1,484       513       748       149              
Our cleared PJM financial power contracts traded
    965       321       513       6              
Our market share — cleared PJM financial power vs. NYMEX-ClearPort(4)
    65.0 %     62.4 %     68.7 %     4.0 %     %     %
                                     
 
Our Average Daily Trading Fee Revenues(5):
                                               
 
Our futures business average daily exchange fee revenues
  $ 222     $ 188     $ 179     $ 158     $ 125     $ 92  
                                     
Our bilateral OTC business average daily commission fee revenues
    81       80       80       112       330       194  
Our cleared OTC business average daily commission fee revenues
    224       83       94       24       5        
                                     
Our OTC business average daily commission fee revenues
    305       163       174       136       335       194  
                                     
Our total average daily exchange fee and commission fee revenues
  $ 527     $ 351     $ 353     $ 294     $ 460     $ 286  
                                     
 
Our Trading Volume(6):
                                               
 
Futures volume
    30,524       26,801       35,541       33,341       30,441       26,423  
Futures average daily volume
    162       141       140       132       121       104  
OTC volume
    44,431       21,703       30,961       24,260       43,982       24,875  
OTC average daily volume
    235       115       123       97       175       99  
 
(1)  Information for 2001 for our futures business reflects trading activity for the entire year, including trading activity that occurred prior to our acquisition in June 2001 of the International Petroleum Exchange (which we renamed ICE Futures in October 2005).
 
(2)  Total crude oil futures contracts traded globally and our resulting crude oil futures market share is calculated based on the number of IPE Brent Crude futures contracts traded as compared to the total IPE Brent Crude futures contracts, NYMEX Light Sweet Crude and Dublin Brent Crude futures contracts traded.
 
(3)  Our cleared Henry Hub market share versus NYMEX-ClearPort is calculated based on the number of IntercontinentalExchange cleared Henry Hub natural gas contracts traded as a percentage of the total IntercontinentalExchange cleared Henry Hub natural gas contracts and NYMEX-ClearPort Henry Hub natural gas futures contracts traded.
 
(4)  Our cleared PJM financial power market share versus NYMEX-ClearPort is calculated based on the number of IntercontinentalExchange cleared PJM financial power contracts traded as a percentage of the total IntercontinentalExchange cleared PJM financial power contracts and NYMEX-ClearPort cleared PJM financial power contracts traded. PJM refers to the Pennsylvania, New Jersey and Maryland power trading hub. The NYMEX-ClearPort cleared PJM financial power contract was launched in April 2003 and our PJM financial power contract was launched in November 2003. Data regarding the volumes of NYMEX-ClearPort cleared PJM financial power contracts traded is derived from the Futures Industry Association.
 
(5)  Represents the total commission fee and exchange fee revenues for the year divided by the number of trading days during that year.
 
(6)  Volume is calculated based on the number of contracts traded in our markets, or the number of round turn trades. Each round turn represents a matched buy and sell order of one contract. Average daily volume represents the total volume, in contracts, for the period divided by the number of trading days during that period.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
      The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those set forth under the heading “Risk Factors” and elsewhere in this prospectus. The following discussion is qualified in its entirety by, and should be read in conjunction with, the more detailed information contained in our “Selected Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus.
Overview
      We operate the leading electronic global futures and over-the-counter, or OTC, marketplace for trading a broad array of energy products. We are the only marketplace to offer an integrated electronic platform for side-by-side trading of energy products in both futures and OTC markets. Through our electronic trading platform, our marketplace brings together buyers and sellers of derivative and physical energy commodities contracts. We operate our business in two distinct markets: futures markets and OTC markets. Futures markets offer trading in standardized derivative contracts on a regulated exchange and OTC markets offer trading in over-the-counter derivative contracts, including contracts that provide for the physical delivery of an underlying commodity and financial settlement based on the prices of underlying commodities. During the nine months ended September 30, 2005, 30.5 million contracts were traded in our futures markets and 44.4 million contracts were traded in our OTC markets, up 13.9% from 26.8 million futures contracts traded during the nine months ended September 30, 2004 and up 104.7% from 21.7 million OTC contracts traded during the nine months ended September 30, 2004. During the year ended December 31, 2004, 35.5 million contracts were traded in our futures markets and 31.0 million contracts were traded in our OTC markets, up 6.6% from 33.3 million futures contracts traded during the year ended December 31, 2003 and up 27.6.% from 24.3 million OTC contracts traded during the year ended December 31, 2003.
      For financial reporting purposes, our business is comprised of two segments: our futures business segment and our OTC business segment. Our futures business segment consists of trade execution in futures contracts and options on futures contracts, which we conduct through our subsidiary, ICE Futures. Until recently, we offered futures trading both on our electronic platform and on our open-outcry trading floor. We closed our open-outcry trading floor in London on April 7, 2005. All of our futures trading is now conducted exclusively in our electronic markets. We made this decision to maintain and enhance our competitive position in our futures markets, and to take advantage of the increasing acceptance and adoption of electronic trading. Our OTC business segment consists of trade execution in OTC energy contracts conducted exclusively on our electronic platform and the provision of trading-related services, including OTC electronic trade confirmation and OTC risk management functionality. As part of both our futures and OTC business segments, we also offer a variety of market data services.
      We have experienced rapid growth in our revenues, net income and operating cash flow since trading commenced on our electronic platform in August 2000. Our consolidated revenues grew to $108.4 million for the year ended December 31, 2004 from $2.7 million for the combined year ended December 31, 2000. Our consolidated net income increased to $21.9 million for the year ended December 31, 2004 from a net loss of $6.8 million for the combined year ended December 31, 2000. Our consolidated net cash flows from operating activities grew to $40.2 million in net cash provided by operating activities for the year ended December 31, 2004 from $2.9 million in net cash used in operating activities for the combined year ended December 31, 2000. On a consolidated basis, we generated $114.6 million in revenues for the nine months ended September 30, 2005, a 43.4% increase compared to $79.9 million for the nine months ended September 30, 2004, and $25.6 million in net income for the nine months ended September 30, 2005, a 49.3% increase compared to $17.1 million for the nine months ended September 30, 2004. The financial results for the nine months ended September 30, 2005 include $4.8 million in expenses incurred relating to the closure of our open-outcry trading floor in London and a $15.0 million settlement expense related to the payment to EBS to settle litigation.

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Corporate Structure and Ownership
      In 1997, Jeffrey C. Sprecher, our founder, chairman and chief executive officer, acquired Continental Power Exchange, Inc., our predecessor company, to develop a platform to provide a more transparent and efficient market structure for OTC energy commodities trading. In May 2000, our company was formed, and Continental Power Exchange, Inc. contributed all of its assets to us, which consisted principally of electronic trading technology, and its liabilities, in return for a minority equity interest in our company. In connection with our formation, seven leading wholesale commodities market participants, either directly or through affiliates, acquired equity interests in our company and entered into order flow agreements with us. We refer to these leading commodities market participants (or their affiliates as the case may be) as our Initial Shareholders. In November 2000, six leading natural gas and power companies, which we refer to as the Gas and Power Firms, acquired equity interests in our business, entered into order flow agreements with us and made a $30.0 million cash payment to us. The following firms are our Initial Shareholders: BP Products North America Inc. (formerly known as BP Exploration and Oil, Inc.), DB Structured Products, Inc. (formerly known as Deutsche Bank Sharps Pixley Inc.), The Goldman Sachs Group, Inc., Morgan Stanley Capital Group Inc., S T Exchange Inc. (an affiliate of Royal Dutch Shell), Société Générale Financial Corporation and Total Investments USA Inc. (an affiliate of Total S.A.). The Gas and Power Firms that are currently shareholders are affiliated with the following firms: American Electric Power Company, Duke Energy, El Paso Energy Partners and Mirant. Two additional Gas and Power Firms, Aquila and Reliant, are no longer shareholders. The order flow agreements committed the Initial Shareholders and the Gas and Power Firms to execute minimum annual volumes of transactions on our electronic platform. These order flow agreements expired between 2002 and 2003. See “— Sources of Revenues — Transaction Fees” and “Certain Relationships and Related Transactions”.
      On June 18, 2001, we expanded our marketplace to include futures trading by acquiring IPE Holdings Plc, the owner of the International Petroleum Exchange (which we renamed ICE Futures in October 2005), in a share-for-share exchange. At that time, the International Petroleum Exchange was operated predominantly as a floor-based open-outcry exchange. In connection with this acquisition, we converted from a limited liability company, IntercontinentalExchange, LLC, to our present corporate form by merging into IntercontinentalExchange, Inc., a Delaware corporation and the surviving entity of the merger. In connection with the acquisition, we issued 2,862,579 Class A1 shares and 2,862,579 Class B redeemable shares to the former shareholders of the International Petroleum Exchange in return for their shares in the company. The Class B redeemable shares were subject to redemption at $23.58 per share under certain circumstances related to the IPE’s benchmark contracts being traded exclusively on our electronic platform for a period of time. In November 2004, we amended our charter to permit early redemption of the Class B redeemable shares at $23.58 per share, and redeemed all 2,862,579 Class B redeemable shares for an aggregate redemption price of $67.5 million.
      Effective immediately prior to the closing of this offering, we will amend our charter to create a new class of common stock, which we refer to as new common stock, and we will grant conversion rights to our holders of Class A1 shares and Class A2 shares, which will permit them to convert their shares into shares of new common stock, subject to such terms and conditions and subject to such conversion procedures as our board may authorize. In our amended charter, we will effect a 1 for 4 reverse stock split to reduce the number of outstanding Class A1 shares and Class A2 shares. For a detailed discussion of our recapitalization, please refer to “Organization and Recapitalization” elsewhere in this prospectus.
Our Business Environment
      Trading activity in global derivatives markets has risen in the past decade as the number of available trading products and venues has increased. This, in turn, has enabled a growing number and range of market participants to access these markets. As energy markets began to deregulate in the early 1990’s, new derivative products were developed to satisfy the increasing demand for energy risk management tools and investment strategies. The range of derivative energy products has expanded to include instruments such as futures, forwards, swaps, differentials, spreads and options. Volume growth in both our futures markets and our OTC

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markets has been driven by steadily increasing demand for these contracts and our ability to provide liquidity in the markets for these products.
      Our business is primarily transaction-based, and changes in trading volumes have a direct impact on our business and profitability. Trading volumes are driven primarily by the degree of volatility in commodities prices. Higher price volatility increases the need to hedge contractual price risk and creates opportunities for arbitrage or speculative trading. In addition to price volatility, changes in global energy prices, such as those experienced in recent years in crude oil, can have a significant impact on our trading volumes. While our trading volumes and transaction fees decreased in our OTC business segment in 2003 from the levels in 2002, following a period of reduced liquidity in the OTC markets, our trading volumes and transaction fees increased in our futures business segment during the same period. Trends in our trading volumes and transaction fees have also been driven by varying levels of liquidity both in our markets and in the broader markets for energy commodities trading, which influence trading volumes across all of the markets we operate. Our trading volumes in our futures business segment may also be affected by our recent closure of our open-outcry trading floor.
      The futures markets are highly regulated and offer trading of standardized contracts. The futures markets are also more structured and mature than the institutional markets for OTC energy trading. According to the Futures Industry Association, the number of energy futures contracts traded for the year ended December 31, 2004 was 243.5 million, up from 68.7 million contracts traded for the year ended December 31, 1995, representing an average compounded growth rate of 15.1% per annum. In our futures business segment, rising demand for, among other things, risk management instruments in the energy sector has driven record trading volumes for seven consecutive years.
      Unlike the futures markets, the OTC markets generally involve limited regulation and offer customization of contract terms by counterparties. While the OTC markets are maturing, contracts traded in the OTC markets generally remain less standardized than the futures markets and the markets generally have been characterized by opaqueness and fragmentation of liquidity. We have introduced a number of structural changes to OTC markets to increase both transparency and liquidity, including the introduction of our electronic platform, cleared OTC contracts and transaction-based indices.
      In our OTC business segment, we experienced rapid growth in trading volumes through the middle of 2002. Beginning in mid-2002, however, the North American OTC energy markets experienced a dramatic decline in liquidity and trading volumes following highly publicized problems involving energy companies, including widespread credit downgrades, investigations by the Department of Justice, the Federal Energy Regulatory Commission and the Federal Trade Commission, relating to alleged manipulative trading and price reporting practices, misstatements of financial results, and other matters. As a result of the foregoing, several significant market participants reduced or eliminated their energy trading operations near the end of 2002. While trading volumes in our OTC markets declined to 24.3 million contracts for the year ended December 31, 2003 from 44.0 million contracts for the year ended December 31, 2002, primarily as a result of these events, we experienced a 9.5% increase from 2002 to 2003 in trading volumes in our futures markets, partially as a result of some participants migrating their trading to the more regulated futures markets.
      As a result of these events, participants in the OTC markets became increasingly focused on managing counterparty credit risk and trading for hedging needs, rather than speculation or arbitrage. As the credit quality of trading counterparties and the overall credit environment improved during late 2003 and new risk management tools were introduced, participants began to increase their activity in the OTC markets. With the introduction of cleared OTC contracts, the market began to experience an influx of new OTC market participants. Financial services companies, such as financial institutions, hedge funds and proprietary trading firms began entering the OTC markets in increasing numbers due to the introduction of new bilateral and cleared trading products, electronically available markets, risk management tools, increased price volatility, and the availability of experienced energy traders displaced from merchant energy companies.
      We launched the industry’s first cleared OTC energy contracts in North America in March 2002, which reduced the amount of capital required to trade and the credit risk associated with bilateral OTC trading by interposing an independent clearinghouse as a counterparty to trades in these new contracts. Clearing through a central clearinghouse offers market participants the ability to cross-margin. Cross-margining means that a participant is able to have offsetting positions taken into account in determining its margin requirements,

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which could reduce the amount of margin the participant must deposit with the futures commission merchant through which it clears transactions. As a result of the introduction of OTC clearing, the addition of new participants and an improved credit environment in the markets for energy commodities trading, our OTC markets experienced steady growth during the year ended December 31, 2004 and during the nine months ended September 30, 2005, although we cannot predict whether this growth will continue in the future. Trading volumes in our OTC markets increased 27.6% to 31.0 million contracts for the year ended December 31, 2004 from 24.3 million contracts for the year ended December 31, 2003. This trend of volume growth has continued with 44.4 million contracts traded during the nine months ended September 30, 2005, a 104.7% increase as compared to 21.7 million contracts traded during the nine months ended September 30, 2004.
      We believe that the long-standing move toward electronic trade execution, together with the lower barriers to entry for new market participants and the increased adoption of energy commodities as a tradable, investable asset class, will support continued growth in our markets. As participants continue to use more sophisticated financial instruments and risk management approaches and strategies to help manage their exposure to energy commodities, we believe there remains considerable opportunity for further growth in energy derivatives trading on a global basis.
Variability in Quarterly Comparisons
      In addition to general conditions in the financial markets and in the energy markets in particular, energy trading has historically been subject to variability in trading volumes due primarily to five key factors. These factors include geopolitical events, weather, perceived supply and demand imbalances in underlying energy commodities, the number of trading days in a quarter and seasonality.
  •  Geopolitical Events: Geopolitical events tend to impact global oil prices and may impact global oil supply. Because crude oil prices often move in conjunction with changes in the perception of geopolitical risk, these events in the past have impacted trading activities in our markets due to the increased need for risk management in times of uncertainty.
 
  •  Weather: Weather events have been an important factor in energy price volatility and the supply and demand of energy commodities and, therefore, the trading activities of market participants. Unexpected or extreme weather conditions, such as low temperatures or hurricanes, and other events that cause demand increases, supply disruptions or unexpected volatility tend to result in business disruptions and expanded hedging and trading activity in our markets.
 
  •  Real and Perceived Supply and Demand Imbalances: Government agencies, such as the Energy Information Administration, regularly track energy supply data. Reporting on supply or production may impact trading volumes due to real or perceived supply and demand imbalances.
 
  •  Number of Trading Days: The variability in the number of business days in each quarter affects our revenues, and will affect quarter-to-quarter revenue comparisons, since trading generally only takes place on business days.
 
  •  Seasonality: Participants engaged in oil, natural gas and power businesses tend to experience moderate seasonal fluctuations in demand, although such seasonal impacts have been negated in periods of high volume trading.
      These and other factors could cause our revenues to fluctuate from quarter to quarter. These fluctuations may affect the reliability of quarter to quarter comparisons of our revenues and operating results when, for example, these comparisons are between quarters in different seasons. Inter-seasonal comparisons will not necessarily be indicative of our results for future periods.
Segment Reporting
      For financial reporting purposes, our business is divided into two segments: our futures business segment and our OTC business segment. For a discussion of these segments and related financial disclosure, refer to note 16 to our consolidated financial statements and related notes included elsewhere in this prospectus.

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Our Futures Business Segment
      We conduct our futures business through our subsidiary, ICE Futures. ICE Futures operates as a Recognized Investment Exchange in the United Kingdom, where it is regulated by the Financial Services Authority. The International Petroleum Exchange was founded in 1980 as a traditional open-outcry exchange by a group of leading energy and trading companies. All futures and options trades executed in our futures markets are cleared by LCH.Clearnet. Trades in our futures markets may only be executed in the name of exchange members for the members’ own account or their clients’ account. Members and their customers include many of the world’s largest energy companies and leading financial institutions. We do not risk our own capital by engaging in any trading activities or by extending credit to market participants.
      Until recently, we offered futures trading both on our electronic platform and on our open-outcry trading floor. We closed our open-outcry trading floor in London on April 7, 2005. Since that date, all of our futures trading is conducted exclusively on our electronic platform. Our decision to close our open-outcry trading floor was made to take advantage of the increasing acceptance and adoption of electronic trading and to maintain and enhance our competitive position in our futures markets. We believe that the transition of our futures markets to electronic trading has enhanced our competitive position by consolidating existing liquidity in our markets that was previously divided between the open-outcry trading floor and our platform. We believe that increased liquidity in our electronic futures markets has attracted new participants interested in trading energy derivatives. With the growing acceptance of electronic trade execution due to the advantages it offers over traditional floor trading — direct market access, improved speed and quality of trade execution, market transparency and reduced trading costs — we believe that we will be competitively positioned to extend electronic trading on our platform to products for which there is an interest to trade electronically. During the period following the closure of our open-outcry trading floor, aggregate trading volumes in our futures markets have increased from the three months ended March 31, 2005 and the comparable periods in 2004. Aggregate futures trading volumes were 11.9 million contracts for the three months ended September 30, 2005, a 31.9% increase compared to 9.0 million contracts for the three months ended September 30, 2004. Aggregate futures trading volumes were 30.5 million contracts for the nine months ended September 30, 2005, a 13.9% increase compared to 26.8 million contracts for the nine months ended September 30, 2004. Average daily volumes for the three months ended September 30, 2005 were 183,000 contracts compared to 139,000 contracts for the three months ended September 30, 2004, and 143,000 contracts for the three months ended March 31, 2005. Average daily volumes initially decreased to 137,000 contracts traded in April 2005 from 151,000 contracts traded in March 2005, 140,000 in February 2005 and 138,000 in January 2005. However, the 9.1% decrease in average daily volumes from March 2005 to April 2005 represents a lesser percentage decrease than the average decrease of 10.4% from March to April in the years 2000 through 2004. Beginning in May 2005, trading volumes increased and, in certain cases, have reached record levels. The initial decline in April was due in part to the displacement of floor-based traders following the floor closure on April 7, 2005. Many of these traders later began trading electronically along with new participants on our platform. We achieved a record monthly trading volume in our futures business in May 2005 with average daily trading volumes of 159,000 contracts. We subsequently achieved a record monthly average daily trading volume of 173,000 contracts in June 2005, 189,000 contracts in August 2005 and 190,000 contracts in September 2005. We also achieved daily volume records for Brent Crude futures and total futures of 231,000 and 296,000 contracts traded, respectively, on August 10, 2005. As discussed above, the energy markets are subject to variability in trading volumes between periods in part for reasons outside of our control. For that reason, we believe it is more meaningful to compare volumes in the current year period to the same period in the prior year.
      We expect to achieve cost savings of approximately $1.4 million in 2005 and ranging from approximately $4.0 million to $5.0 million annually in 2006 and 2007 in connection with our decision to close our open-outcry trading floor. These cost savings primarily relate to reduced compensation and benefits expenses, rent and occupancy expenses and selling, general and administrative expenses. However, in the near term, any cost savings will be offset by a charge of $4.8 million that we recorded in the quarter ended June 30, 2005 in connection with expenses we incurred as part of the closure of our open-outcry trading floor and full migration of futures trading to our electronic platform. These expenses primarily include lease termination costs, employee termination costs and property and equipment disposals relating to our open-outcry trading floor. Furthermore, because our electronic

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platform can accommodate substantially greater trading volumes, and the cost of operating our platform is largely fixed, we expect to benefit from increased operating leverage in our futures business.
      We offer market participants trading in two types of instruments in our futures markets:
  •  Futures: A futures contract is a standardized contract to buy or sell a specified quantity of an underlying asset during a particular month.
 
  •  Options: An option is a contract that conveys to the buyer the right, but not the obligation, to call (buy) or put (sell) an underlying futures contract at a price determined at the time of execution of the option.
      Our IPE Brent Crude futures contract is a benchmark contract relied upon by a broad range of market participants, including certain large oil producing nations, to price their crude oil. During the nine months ended September 30, 2005, the average daily quantity of Brent crude oil traded in our markets was 118 million barrels, with an average notional daily value of over $6.5 billion. We believe that market participants are increasingly relying on this contract for their risk management activities, as evidenced by steady increases in traded volumes over the past several years.
      The following table presents, for the periods indicated, selected statement of income data in dollars and as a percentage of revenues for our futures business segment:
                                                                                     
    Nine Months Ended September 30,   Year Ended December 31,
         
    2005   %   2004   %   2004   %   2003   %   2002   %
                                         
    (dollar amounts in thousands)
Revenues(1):
                                                                               
 
Transaction fees, net(2):
                                                                               
   
IPE Brent Crude futures
  $ 30,619       60.0 %   $ 25,752       59.7 %   $ 32,176       57.6 %   $ 28,497       58.0 %   $ 22,092       57.9 %
   
Other futures products and options
    11,352       22.2       9,963       23.1       13,323       23.9       11,463       23.3       9,445       24.8  
 
Data services fees
    5,488       10.7       4,837       11.2       6,319       11.3       6,292       12.8       5,073       13.3  
 
Intersegment fees
    1,531       3.0       135       0.3       353       0.6       79       0.2              
 
Trading access fees
    1,066       2.0       856       2.0       1,224       2.2       762       1.5       395       1.0  
 
Other
    1,087       2.1       1,572       3.7       2,465       4.4       2,080       4.2       1,140       3.0  
                                                             
Total revenues
    51,143       100.0       43,115       100.0       55,860       100.0       49,173       100.0       38,145       100.0  
                                                             
Operating expenses:
                                                                               
 
Selling, general and administrative
expenses(3)
    18,150       35.5       17,683       41.0       23,823       42.6       22,681       46.1       20,809       54.6  
 
Intersegment expenses(4)
    7,521       14.7       5,601       13.0       7,530       13.5       4,735       9.6       62       0.2  
 
Floor closure costs(5)
    4,814       9.4                                                  
 
Depreciation and amortization
    1,889       3.7       1,725       4.0       2,415       4.3       2,117       4.3       962       2.5  
                                                             
Total operating expenses
    32,374       63.3       25,009       58.0       33,768       60.5       29,533       60.1       21,833       57.2  
                                                             
Operating income
    18,769       36.7       18,106       42.0       22,092       39.5       19,640       39.9       16,312       42.8  
Other income, net
    2,484       4.9       1,756       4.1       1,927       3.4       1,133       2.3       1,002       2.6  
Income tax expense
    7,438       14.5       7,091       16.4       8,407       15.1       7,270       14.8       6,060       15.9  
                                                             
Net income(5)
  $ 13,815       27.0 %   $ 12,771       29.6 %   $ 15,612       27.9 %   $ 13,503       27.5 %   $ 11,254       29.5 %
                                                             
 
(1)  We generate revenues from related parties in the ordinary course of our business. Revenues attributable to related parties were $8.1 million and $4.8 million for the nine months ended September 30, 2005 and 2004, respectively, and $6.4 million, $5.5 million and $9.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. For a discussion of our related parties, see note 12 to our consolidated financial statements, which are included elsewhere in this prospectus.
 
(2)  Our transaction fees are presented net of rebates. For a discussion of these rebates, see “— Sources of Revenues — Transactions Fees”.

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(3)  Includes professional service fees and compensation and benefits expenses.
 
(4)  Intersegment expenses represent fees paid by our futures business segment for support provided by the OTC business segment to operate the electronic trading platform used in our futures business.
 
(5)  The financial results for the nine months ended September 30, 2005 include $4.8 million in expenses incurred relating to the closure of the open-outcry trading floor in London. Excluding these floor closure charges, our futures business net income for the nine months ended September 30, 2005 would have been $16.9 million, representing a 32.7% increase as compared to $12.8 million for the nine months ended September 30, 2004. See “— Non-GAAP Financial Measure”.
      In our futures business segment, we earn fees from both parties to each futures contract or option on futures contract that is traded, based on the volume of the commodity underlying the futures or option contract that is traded. In our futures business, we refer to these fees as exchange fees. We derived exchange fees of $42.0 million and $35.7 million for the nine months ended September 30, 2005 and 2004, respectively, representing 36.6% and 44.7%, respectively, of our consolidated revenues, and $45.5 million, $40.0 million and $31.5 million for the years ended December 31, 2004, 2003 and 2002, respectively, representing 42.0%, 42.6% and 25.1%, respectively, of our consolidated revenues. A contract is a standardized quantity of the physical commodity underlying each futures contract. For example, the IPE Brent Crude futures contract trades in a contract size of 1,000 net barrels, or 42,000 U.S. gallons of crude oil.
      The following table presents the underlying commodity size per futures and options contract traded in our futures markets as well as the relevant standard of measure for each contract:
             
Futures Contract   Size   Measure
         
IPE Brent Crude
    1,000     Barrels
IPE Gas Oil
    100     Metric Tonnes
IPE Natural Gas
    1,000     Therms per day
IPE Electricity
    1     Megawatt Hours
                 
Options Contract   Size   Measure
         
IPE Brent Crude options
    1       IPE Brent Crude futures contracts  
IPE Gas Oil options
    1       IPE Gas Oil futures contracts  
      The following table presents, for the periods indicated, trading activity in our futures markets for commodity type based on the total number of contracts traded:
                                         
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands)
Number of contracts traded:
                                       
IPE Brent Crude futures
    22,287       19,291       25,458       24,013       21,493  
IPE Gas Oil futures
    7,772       6,980       9,356       8,430       8,156  
Other(1)
    465       530       727       898       792  
                               
Total
    30,524       26,801       35,541       33,341       30,441  
                               
 
(1)  Consists primarily of IPE Natural Gas futures, IPE Brent Crude options and IPE Gas Oil options.

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      The following chart presents the futures exchange fee revenues by contract traded in our markets for the periods presented:
(CHART)
 
(1)  Presented net of $2.3 million of exchange fee rebates. For a discussion of these rebates, see “— Sources of Revenues — Transaction Fees”.
      The following table presents our average daily open interest for our futures contracts. Open interest is the number of contracts (long or short) that a member holds either for its own account or on behalf of its clients. Open interest refers to the total number of contracts that are currently open — in other words, contracts that have been traded but not yet liquidated by either an offsetting trade, exercise, expiration or assignment. The level of open interest in a contract is often considered a measure of the strength of an exchange’s competitive position in that contract. In general, the higher the level of open interest, the greater the extent it is being used as a hedging and risk management tool. Open interest is also a measure of the health of a market both in terms of the number of contracts which members and their clients continue to hold in the particular contract and by the number of contracts held for each contract month listed by our exchange.
                                         
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands)
Open Interest (in contracts):
                                       
IPE Brent Crude futures
    338       335       336       299       260  
IPE Gas Oil futures
    223       170       164       148       191  
Other(1)
    41       37       35       43       54  
                               
Total
    602       542       535       490       505  
                               
 
(1)  Consists primarily of IPE Natural Gas futures, IPE Brent Crude options and IPE Gas Oil options.

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      We charge exchange fees to ICE Futures’ 38 clearing members for contracts traded for their own account and for contracts traded on behalf of their customers or local traders. As ICE Futures’ operations are currently centered in London, we consider all revenues derived from exchange fees to be generated in the United Kingdom. We also provide market data services in our futures business segment based on trading volumes and prices in our futures markets. Some indication of the geographical dispersal of ICE Futures’ external participants can be discerned from the location of the market data terminals through which our futures data is distributed. Of the approximately 20,100 terminals, 49.4% are located in Europe, 42.4% in North America and the remaining 8.2% are located primarily in Asia.
      The revenues generated in our futures business are denominated in pounds sterling, which is the functional currency of ICE Futures and related U.K. subsidiaries. We translate these revenues and expenses into U.S. dollars using the average exchange rates for the reporting period. Gains and losses from foreign currency transactions are included in other income (expense) in our consolidated statements of income. We may experience substantial gains or losses from foreign currency transactions given the significant operations of our futures business segment. We record any translation adjustments in accumulated other comprehensive income, a separate component of shareholders’ equity.
Our OTC Business Segment
      Our OTC business segment consists primarily of the operation of global OTC commodities markets on our electronic platform. We offer market participants a wide selection of derivative contracts, as well as contracts for physical delivery of commodities, to satisfy their trading objectives, whether they relate to risk management, asset allocation, ensuring physical delivery of select commodity products, speculation or arbitrage. A substantial portion of the trading volume in our OTC business segment relates to approximately 15-20 highly liquid contracts in natural gas, power and oil. In addition, we offer trading in a wide range of complementary “niche” products that are customized to specific market requirements and preferences.
      The OTC products available for trading in our markets fall into the following general contract types:
  •  Forwards and Swaps: Forwards are individually negotiated agreements between two parties to deliver a specified quantity of an underlying asset, on a specified date, and at a specified location. Swaps are financially settled derivative contracts through which counterparties exchange or “swap” risk of two different assets with differing risk and performance profiles.
 
  •  Differentials and Spreads: Differentials, or basis swaps, are contracts that allow counterparties to “swap” delivery (or the financial equivalent of delivery) of a commodity between two different delivery points. Spreads are the simultaneous purchase and sale of forward or swap contracts for different months, different commodities or different grades of the same commodity.
 
  •  Options: Options are contracts that convey to the buyer the right, but not the obligation, to require the seller to make or take delivery of a stated quantity of a specified commodity at a specified price.
      Our most liquid and actively traded OTC markets include contracts that can be traded bilaterally or cleared at the participant’s option. In order to provide participants with access to centralized clearing and settlement, we launched the industry’s first cleared natural gas and global oil contracts in the OTC markets in North America in March 2002, followed by our first cleared OTC power contracts in November 2003. Our participants, representing many of the world’s largest energy companies and leading financial institutions, as well as hedge funds, proprietary trading firms, and natural gas and electric utilities, rely on our platform for price discovery, hedging and risk management. Unlike the futures market, the OTC market does not have an exchange membership structure.
      Revenues in our OTC business segment are generated primarily through commission fees earned from trades, and from the provision of OTC market data and electronic trade confirmation services. While we charge a monthly minimum commission fee for access to our electronic platform, we derive a substantial portion of our OTC revenues from commission fees paid by participants for each trade that they execute or clear based on the underlying commodity volume. Commission fees are payable by each counterparty to a

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trade and, for bilateral trades, are generally due within 30 days of the invoice date. We do not risk our own capital by engaging in any trading activities or by extending credit to market participants.
      In addition to our commission fees, a participant that chooses to clear a trade must pay a fee to LCH.Clearnet for the benefit of clearing and another for the services of the relevant member clearing firm, or futures commission merchant. Consistent with our futures business, we derive no direct revenues from the clearing process and participants pay the clearing fees directly to LCH.Clearnet and the futures commission merchants. However, we believe that the introduction of cleared OTC contracts has attracted new participants to our platform, which has led to increased liquidity in our markets. We believe that the increase in liquidity has led to increased trading volumes in North American natural gas and power traded in our OTC markets. Transaction or commission fees derived from trading in cleared OTC contracts represent an increasing percentage of our total OTC revenues. For the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, these transaction fees represented 65.0%, 44.5%, 13.4% and 1.4% of our total OTC revenues, respectively, net of intersegment fees. We intend to continue to support the introduction of these products in response to the requirements of our participants.
      Trading participants located in North America accounted for 88.9% of our OTC commission fee revenues for the year ended December 31, 2004, trading participants located in Europe generated 6.0% of our OTC commission fee revenues for the year ended December 31, 2004, and the remaining 5.1% represents trading participants located primarily in Asia. We derived commission fees for OTC trades executed on our electronic platform of $57.6 million, $43.5 million, $34.2 million and $84.0 million for the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively, or 50.3%, 40.2%, 36.5% and 66.9%, respectively, of our consolidated revenues. Our OTC commission rates vary by product and are based on the volume of the commodity underlying the contract that is traded.

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      The following table presents, for the periods indicated, selected statement of income (loss) data in dollars and as a percentage of revenues for our OTC business segment:
                                                                                     
    Nine Months Ended September 30,   Year Ended December 31,
         
    2005   %   2004   %   2004   %   2003   %   2002   %
                                         
    (dollar amounts in thousands)
Revenues(1):
                                                                               
 
Transaction fees, net(2):
                                                                               
   
North American natural gas
  $ 43,345       59.8 %   $ 20,133       47.3 %   $ 29,046       48.1 %   $ 16,814       34.0 %   $ 41,845       47.9 %
   
North American power
    12,710       17.5       6,627       15.6       9,462       15.7       5,739       11.6       22,255       25.5  
   
Global oil
    1,345       1.9       3,241       7.6       3,999       6.6       8,844       17.9       14,205       16.3  
   
Other commodities markets
    219       0.3       795       1.9       1,043       1.7       2,821       5.7       5,654       6.5  
   
Electronic trade confirmation
    1,190       1.6       525       1.2       789       1.3       165       0.3       39        
   
Order flow agreements shortfall
payments
                796       1.9       1,068       1.8       7,091       14.4       3,259       3.7  
 
Data services fees
    2,995       4.1       2,176       5.1       3,372       5.6       1,450       2.9       68       0.1  
 
Intersegment fees
    7,521       10.4       5,601       13.2       7,530       12.5       4,735       9.6       62       0.1  
 
Trading access fees
    1,930       2.7       1,770       4.2       2,371       3.9       1,699       3.4       95       0.1  
 
Other
    1,257       1.7       875       2.0       1,757       2.9       29       0.1       (75 )     (0.1 )
                                                             
Total revenues
    72,512       100.0       42,539       100.0       60,437       100.0       49,387       100.0       87,407       100.0  
                                                             
Operating expenses:
                                                                               
 
Selling, general, administrative and hosting expenses(3)
    29,914       41.3       25,647       60.3       35,173       58.2       32,806       66.4       39,360       45.0  
 
Intersegment expenses
    1,531       2.1       135       0.3       353       0.6       79       0.2              
 
Settlement expense(4)
    15,000       20.7                                                  
 
Depreciation and amortization
    9,539       13.2       10,523       24.7       14,609       24.2       17,224       34.9       13,406       15.3  
                                                             
Total operating expenses
    55,984       77.2       36,305       85.3       50,135       83.0       50,109       101.5       52,766       60.4  
                                                             
Operating income (loss)
    16,528       22.8       6,234       14.7       10,302       17.0       (722 )     (1.5 )     34,641       39.6  
Other income (expense), net
    395       0.5       161       0.3       (599 )     (1.0 )     (185 )     (0.4 )     490       0.6  
Income tax expense (benefit)
    5,188       7.2       2,056       4.8       3,366       5.6       (781 )     (1.6 )     11,679       13.4  
                                                             
Net income (loss)(4)
  $ 11,735       16.2 %   $ 4,339       10.2 %   $ 6,337       10.5 %   $ (126 )     (0.3 )%   $ 23,452       26.8 %
                                                             
 
(1)  We generate revenues from related parties in the ordinary course of our business. Revenues attributable to related parties were $4.6 million and $4.6 million for the nine months ended September 30, 2005 and 2004, respectively, and $6.5 million, $6.7 million and $43.6 million for the years ended December 31, 2004, 2003 and 2002, respectively. For a discussion of our related parties, see note 12 to our consolidated financial statements, which are included elsewhere in this prospectus.
 
(2)  Our transaction fees are presented net of rebates. For a discussion of these rebates, see “— Sources of Revenues — Transaction Fees”.
 
(3)  Includes professional service fees and compensation and benefits expenses.
 
(4)  The financial results for the nine months ended September 30, 2005 include a $15.0 million settlement expense related to the payment made to EBS to settle litigation. Excluding this charge, our OTC business net income for the nine months ended September 30, 2005 would have been $21.3 million, as compared to $4.3 million for the nine months ended September 30, 2004. See “— Non-GAAP Financial Measure”.

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      The following tables present, for the periods indicated, the total volume of the underlying commodity and number of contracts traded in our OTC markets, measured in the units indicated in the footnotes:
                                         
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in millions)
Total Volume:
                                       
North American natural gas(1)
    98,602       44,326       63,935       34,257       84,302  
North American power(2)
    1,630       791       1,153       575       2,230  
Global oil(3)
    646       759       926       1,667       2,439  
                                         
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands)
Number of contracts traded(4):
                                       
North American natural gas
    39,441       17,731       25,574       13,703       33,721  
North American power
    2,380       1,156       1,683       838       3,340  
Global oil
    2,600       2,709       3,580       6,636       6,563  
Other(5)
    10       107       124       3,083       358  
                               
Total
    44,431       21,703       30,961       24,260       43,982  
                               
 
(1)  Measured in million British thermal units, or MMBtu.
(2)  Measured in megawatt hours.
(3)  Measured in equivalent barrels of oil.
(4)  These OTC market volumes are converted into contracts based on the conversion ratios in the table below.
(5)  Consists of the North American emissions, North American weather, North American coal, North American natural gas liquids, European power, European gas, global precious metals and/or global base metals commodities markets.
     The following table presents the underlying commodity size for selected OTC contracts traded in our OTC markets as well as the relevant standard of measure for such contracts:
             
OTC Contract   Size   Measure
         
Financial gas
    2,500     MMBtu
Physical gas
    2,500     MMBtu
European gas
    25,000     Therms per day
East power
    800     Megawatt Hours per day
West power
    400     Megawatt Hours per day
Crude oil
    1,000     Barrels
Refined oil
    100     Barrels
Precious metals
    1,000     Ounces

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      The following chart presents the OTC commission fee revenues by commodity traded in our markets for the periods presented:
(INTERCONTINENTAL BAR CHART)
      The following table presents our average weekly open interest for our cleared OTC contracts:
                                         
    Nine Months    
    Ended   Year Ended
    September 30,   December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands)
Open Interest (in contracts):
                                       
North American gas
    943       422       533       131       39  
North American power
    699       55       71              
Global oil
    40       23       28       3        
                               
Total
    1,682       500       632       134       39  
                               
      Our participants rely on our platform for price discovery, hedging of physical commodities and risk management and comprise a broad range of participant types. At September 30, 2005, we had over 770 trading participant firms in our OTC markets. The concentration of commission fees derived in our OTC business segment from commercial users, including merchant energy companies, oil producers and utilities, decreased to 56.5% for the year ended December 31, 2004 from 79.4% for the year ended December 31, 2001 as a result of the entry of non-commercial participants into the markets for energy commodities trading. The fastest growing participant segment of our OTC commission revenues is the financial services sector, which includes financial institutions, hedge funds and proprietary trading firms. The entry of these market participants is largely the result of the availability of both electronically traded energy commodity contracts and cleared OTC contracts. See “Business — Our Participant Base”.
      We also offer trade confirmation and market data services through our electronic trade confirmation service and market data business, respectively. In April 2002, we began offering our electronic trade confirmation service for trades executed in OTC commodity markets. We do not expect fees from this service

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to be a significant source of revenues in the near term, although we believe that the availability of electronic trade confirmation attracts a broader range of market participants to our electronic platform, and increases the operational incentives for them to trade on our electronic platform. In November 2002, we launched our market data business in response to growing demand for objective, transparent and verifiable energy market data. Through our market data subsidiary, ICE Data, we generate transaction-based indices based upon data derived from actual trades executed, and trade confirmations issued, in our marketplace.
Intersegment Fees
      Our OTC business segment provides and supports the platform for electronic trading in our futures business segment. We determine the intercompany or intersegment fees to be paid by the futures business segment for using the electronic platform based on transfer pricing standards and independent documentation. Intersegment fees include charges for developing, operating, managing and supporting the platform for electronic trading in our futures business. The intersegment fees allocated to our futures business segment were $7.5 million, $7.5 million, $4.7 million and $62,000 during the nine months ended September 30, 2005, and for the years ended December 31, 2004, 2003 and 2002, respectively. These intersegment fees have no impact on our consolidated operating results. We expect the structure of these intersegment fees to remain unchanged and expect that they will continue to have no impact on our consolidated operating results.
Sources of Revenues
      Our revenues are comprised of transaction fees, data services fees, trading access fees and other revenues.
Transaction Fees
      Transaction fees, including both futures exchange fees and OTC commission fees, have accounted for, and are expected to continue to account for, a substantial portion of our revenues. Transaction fees consist of:
  •  exchange fees earned on futures transactions;
 
  •  commission fees earned on OTC transactions;
 
  •  electronic confirmation fees; and
 
  •  shortfall payments made under our order flow agreements, which applied through the end of 2004.
      Transaction fees were $100.8 million and $67.8 million for the nine months ended September 30, 2005 and 2004, respectively, and accounted for 87.9% and 84.9% of our consolidated revenues for the nine months ended September 30, 2005 and 2004, respectively. Transaction fees were $90.9 million, $81.4 million and $118.8 million for the years ended December 31, 2004, 2003 and 2002, respectively, and accounted for 83.9%, 86.9% and 94.7% of our consolidated revenues for the years ended December 31, 2004, 2003 and 2002, respectively. Transaction fees, net of intersegment fees, accounted for 84.6% and 83.1% of revenues generated by our futures business segment for the nine months ended September 30, 2005 and 2004, respectively, and accounted for 90.5% and 86.9% of revenues generated by our OTC business segment for the nine months ended September 30, 2005 and 2004, respectively. Transaction fees, net of intersegment fees, accounted for 82.0%, 81.4% and 82.7% of revenues generated by our futures business segment for the years ended December 31, 2004, 2003 and 2002, respectively, and accounted for 85.8%, 92.9% and 99.9% of revenues generated by our OTC business segment for the years ended December 31, 2004, 2003 and 2002, respectively. Transaction fees, except for shortfall payments, are recognized as revenues as services are provided. Transaction fees in our futures business segment are denominated in pounds sterling prior to translation and consolidation.
      In our futures business segment, we charge exchange fees to both the buyer and the seller in each transaction. In this segment, our exchange fees are calculated and collected by LCH.Clearnet on our behalf. Exchange fees are based on the number of contracts traded during each month multiplied by the commission rate. A change to either our commission rate or to the volume of contracts executed through our futures business directly affects the revenues of our futures business. A change in the average exchange rate of pounds sterling to the U.S. dollar also directly affects the revenues and expenses of our futures business.

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      We accept Exchange of Futures for Physical, or EFP, and Exchange of Futures for Swaps, or EFS, transactions from members and their customers. EFP and EFS are trades that occur off exchange and are then reported for registration and clearing onto our futures markets. We have also implemented block trading facilities for members and their customers through which members may bilaterally arrange large volume trades and/or certain complex strategies and then submit these transactions for registration as exchange trades. For these transactions, we charge both the clearing firms of the buyer and seller a premium to the commission rate for trades executed directly on our platform.
      Transaction fees in our futures business segment are presented net of rebates. We have granted trade rebates to local floor members to generate market liquidity. Under this arrangement, we rebate a percentage of the exchange fee for contracts bought and sold on our open-outcry trading floor on the same day for the same price. In addition, in November 2004, we implemented a two month fee rebate program when we transitioned the morning IPE Brent Crude futures session exclusively to our electronic platform. Under this program, we rebated to each member all exchange fees paid to execute trades in IPE Brent Crude futures contracts on our electronic platform during the morning session, as well as exchange fees paid to execute these contracts by certain local floor members trading on our open-outcry trading floor during our afternoon trading session. This program terminated on December 31, 2004. Trade rebates to local floor members amounted to $137,000 and $561,000 for the nine months ended September 30, 2005 and 2004, respectively, and to $625,000, $687,000 and $562,000 for the years ended December 31, 2004, 2003 and 2002, respectively. In connection with the closure of our open-outcry trading floor on April 7, 2005, we discontinued the trade rebate to local floor members. The rebate fees under the 2004 rebate program amounted to $2.3 million in the aggregate for the months of November and December 2004. While we do not currently have any plans to adjust our commission rates, we evaluate these rates on a regular basis.
      In our OTC business segment, we charge commission fees to both the buyer and the seller in each transaction executed on our platform. The commission fees are based on the underlying commodity volume of each product traded multiplied by the commission rate for that product. We also accept transactions that participants execute off-platform but wish to have processed for clearing. For these transactions, we charge both the buyer and seller, but at typically half the commission rate for on-platform execution. We calculate and collect commission fees from our customers directly, other than trades that are cleared through LCH.Clearnet, for which LCH.Clearnet performs the commission fee calculation and collection function. The transaction fees in our OTC business segment also include fees derived from our electronic trade confirmation service. We charge a standard fee across all products for each trade confirmation successfully submitted by a participant.
      Changes in the volume of contracts traded on our electronic platform and in our commission rates directly affect transaction fees in our OTC segment. Since launching our electronic platform in 2000, we have, in limited circumstances, adjusted our commission rates or waived our commissions with respect to certain products. We have, for example, waived commission fees on our West Texas Intermediate oil bullet swap contracts for the period from November 2004 through December 2005. We also reduced the commission rate charged in our global precious metal trading in June 2002 and continue to offer reduced commission rates. While we do not currently have any plans to make any adjustment to our commission rates, we continue to evaluate these rates on a regular basis.
      Transaction fees in our OTC business segment are presented net of rebates. We rebate a portion of the commission fees paid by certain market makers in the OTC market-maker program. In this program, certain participants agree to make a two-sided market ( i.e. , posting a simultaneous bid and offer) with respect to a particular contract at a specified price spread (the difference between the bid and offer). The OTC fee rebates to market makers amounted to $361,000 and $265,000 for the nine months ended September 30, 2005 and 2004, respectively, and to $436,000, $283,000 and $325,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The market-maker program also includes a monthly fee that we pay to certain participants that participate in this program. See “— Components of Expenses — Selling, General and Administrative”.
      In order to build and maintain liquidity in the products traded on our platform, we entered into order flow agreements with our Initial Shareholders upon our formation and the Gas and Power Firms in November 2000, in each case pursuant to which these parties committed collectively to provide a minimum aggregate

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amount of order flow. The commission rates for the Initial Shareholders and Gas and Power Firms under the order flow agreements were the same as the rates for all other participants on our electronic platform. If the volume traded in any period fell short of the agreed minimum, these parties were required to pay us a shortfall payment based on the additional commission revenues we would have earned had the minimum volume been met. We also entered into order flow commitments with seven companies during November 2001 to trade OTC European gas products on our electronic platform. We recognized order flow shortfall revenues of $1.1 million, $7.1 million and $3.3 million for the years ended December 31, 2004, 2003 and 2002, respectively. The order flow agreements with our Initial Shareholders and the Gas and Power Firms expired in 2002 and 2003, respectively, and the European gas order flow agreements expired in 2004. For a discussion of our order flow agreements with our Initial Shareholders and the Gas and Power Firms, please refer to “Certain Relationships and Related Transactions” and note 13 to our consolidated financial statements that are included elsewhere in this prospectus.
      We have maintained liquidity following the expiration of all of our order flow agreements. We are currently not a party to any order flow agreements and do not intend to enter into order flow agreements in the future. We believe that the willingness of our previously committed order flow providers to continue to trade at current levels will be influenced by a variety of factors, including prevailing conditions in the commodities markets. We experienced a decline in our OTC global oil commission fee revenues following the expiration of certain order flow agreements in October 2002. While this may have been caused by a combination of factors relating to order flow, sales and marketing activities, market conditions and competition, we believe that we will be able to continue to attract trading in these markets in the future without order flow agreements.
      The following table presents, for the periods indicated, the commission fees that were required to be paid under the order flow agreements and the expiration dates of these agreements.
                                 
    Year Ended December 31,    
         
    2004   2003   2002   Expiration Date
                 
    (in thousands)    
North American natural gas and power
  $     $ 6,000     $ 12,000       June 2003  
Global oil
                7,692       October 2002  
Global precious metals
                401       August 2002  
European gas
    1,075       1,303       2,691       December 2004  
                         
Total commission fees
  $ 1,075     $ 7,303     $ 22,784          
                         
Data Services Fees
      We generate data services fees in both our futures and OTC business segments. Data services fees were $8.5 million and $7.0 million for the nine months ended September 30, 2005 and 2004, respectively, and $9.7 million, $7.7 million and $5.1 million for the years ended December 31, 2004, 2003 and 2002, respectively.
      In our futures business segment, data services fees consist of terminal fees and license fees that we receive from data vendors in exchange for the provision of real-time price information generated in our futures markets. We invoice these data vendors monthly for terminal fees based on the number of terminals that carry our futures market data. Each data vendor also pays an annual license fee to us. Annual license fee revenues are deferred and amortized ratably over the period to which they relate.
      In our OTC business segment, data services fees consist of subscription fees that we receive from market participants that subscribe to our data services through ICE Data. ICE Data has an exclusive license to use our OTC market data and publishes the ICE Data End of Day report, as well as Market Price Validation curves, which are available to subscribers for a monthly subscription fee. ICE Data also markets real-time view only screen access to OTC markets and charges subscribers a fee that varies depending on the number of users and the markets accessed at each subscribing company. We invoice view only subscribers either on a monthly or annual basis. The revenues we receive from data services fees are deferred and amortized ratably over the period to which they relate.

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Trading Access Fees
      Trading access fees are revenues generated from membership and system user fees charged to our futures exchange members and from minimum monthly commission fees charged to our OTC participants. We recorded trading access fees of $3.0 million and $2.6 million for the nine months ended September 30, 2005 and 2004, respectively, and $3.6 million, $2.5 million and $490,000 for the years ended December 31, 2004, 2003 and 2002, respectively.
      In our futures business, we generate revenues from, among other things, annual membership and subscription fees and system user fees charged to ICE Futures members who access our electronic platform. We recorded annual fees related to futures exchange membership, subscription fees and system user fees of $1.1 million and $856,000 for the nine months ended September 30, 2005 and 2004, respectively, and $1.2 million, $762,000 and $395,000 for the years ended December 31, 2004, 2003 and 2002, respectively. We defer revenues derived from membership and subscription fees and amortize them ratably over the period to which they relate. We recognize revenues derived from system user fees as services are provided.
      In our OTC business segment, we charge monthly minimum commission fees to participants that are registered to trade OTC natural gas and power products on our electronic platform. For participants that are not active traders, the minimum commission fees are based on their historical trading activity and the number of users the participant firm has registered to trade on our platform. We recognize the difference between the monthly minimum commission fee for a given participant and the actual amount of commission fees generated by such participant for trading activity in that month as minimum commission trading access revenues. For the month of September 2005, of the approximately 770 participant trading firms that had trading access to our platform, 258 participants were required to pay monthly minimum commission fees. We recognized $1.9 million and $1.8 million in minimum commission trading access revenues for the nine months ended September 30, 2005 and 2004, respectively, and $2.4 million, $1.7 million and $95,000 for the years ended December 31, 2004, 2003 and 2002, respectively.
Other Revenues
      Other revenues primarily relate to revenues generated from training seminars, communication charges and equipment rentals, as well as licensing, service and technology development fees charged to the Chicago Climate Exchange. We generated other revenues of $2.3 million and $2.4 million for the nine months ended September 30, 2005 and 2004, respectively, and $4.2 million, $2.1 million and $1.1 million for the years ended December 31, 2004, 2003 and 2002, respectively. We recognize revenues generated from training seminars and communication charges and equipment rentals as services are provided. We charge equipment rentals in advance and amortize the fee over the period to which it relates. Of the other revenues, $335,000 and $936,000 during the nine months ended September 30, 2005 and 2004, respectively, and $1.3 million, $901,000, and $593,000 for the years ended December 31, 2004, 2003, and 2002, respectively, relate to revenues generated from communication charges and equipment rentals relating to the futures business floor operations. We no longer charge our futures participants for these costs subsequent to the closure of the open-outcry trading floor on April 7, 2005.
      We have been contracted to provide, design and service an electronic futures and OTC trading platform on behalf of the Chicago Climate Exchange. The Chicago Climate Exchange is a self-regulated exchange that administers a voluntary multi-sector greenhouse gas reduction and trading program for North America. We invoice the Chicago Climate Exchange for license and service fees monthly in advance of the period to which they apply. We recognize these fees as revenues as the services are provided, and we recognize technology development fees as revenues when the development work is completed and accepted by the Chicago Climate Exchange. Our arrangement with the Chicago Climate Exchange began in July 2003, and we recognized revenues of $1.3 million and $925,000 for the nine months ended September 30, 2005 and 2004, respectively, and $1.7 million and $605,000 for the years ended December 31, 2004 and 2003, respectively, pursuant to our contractual relationship. For a discussion of this arrangement, see “Certain Relationships and Related Transactions”.

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Components of Expenses
Cost of Hosting
      Cost of hosting primarily consists of hosting and participant network expenses. Cost of hosting expenses were $989,000 and $1.1 million for the nine months ended September 30, 2005 and 2004, respectively, and $1.3 million, $1.7 million and $4.0 million for the years ended December 31, 2004, 2003 and 2002, respectively. Our hosting expenses include the amounts we pay for the physical facilities, maintenance and other variable costs associated with securely housing the hardware used to operate our electronic platform, as well as our redundant disaster recovery facility. Our participant network expenses include the amounts we pay to provide participants with direct connectivity to our platform. Because our Internet-based electronic platform is highly scalable, we anticipate that the cost of hosting will remain relatively constant in the near term, even though we believe that we will continue to increase the number of participants trading on our electronic platform. Prior to 2003, we used a private network connection that did not have the scalability and cost efficiency associated with our current Internet-based platform. In addition, in early 2003, we began to maintain and support our information security system with internal resources. Prior to 2003, we outsourced our information security to a nationally recognized encryption technology company. By changing certain vendors and by transitioning our participant base to our Internet browser for access to our electronic platform, we have been able to reduce our participant network expenses while improving system performance, resulting in faster execution and increased system availability.
Compensation and Benefits
      Compensation and benefits expenses primarily consist of salaries, bonuses, payroll taxes, employer-provided medical and other benefit plan costs and recruiting costs. Compensation and benefits expenses were $25.8 million and $21.7 million for the nine months ended September 30, 2005 and 2004, respectively, and $30.1 million, $26.2 million and $27.9 million for the years ended December 31, 2004, 2003 and 2002, respectively. Substantially all of our employees are full-time employees. We capitalized and recorded as property and equipment a portion of our compensation and benefits costs for technology employees engaged in software development and the enhancement of our electronic platform. We expect that our compensation and benefits expense will remain consistent with current levels as a percentage of total revenues due to additional employees associated with the growth of our business, partially offset by a reduction in our headcount due to the closure of our open-outcry trading floor.
Professional Services
      Professional services expenses primarily consist of outside legal, accounting and other professional and consulting services expenses. Professional expenses were $10.2 million and $11.1 million for the nine months ended September 30, 2005 and 2004, respectively, and $14.5 million, $15.1 million and $15.9 million for the years ended December 31, 2004, 2003 and 2002, respectively. We capitalize and record as property and equipment a portion of the costs associated with fees for technology consultants engaged in software development and enhancements to our electronic platform. We expensed the remaining portion of these fees in the month in which they were incurred. We engaged a number of consultants in our futures business segment to facilitate ongoing technology development, maintenance and support work in connection with the migration of trading of our futures contracts to our electronic platform and the support of the legacy systems used in the operation of the exchange floor. We reduced the number of consultants in our futures business segment during 2004 following the substantial completion of development relating to futures trading on our electronic platform and due to the replacement of consultants with permanent staff over the course of 2004.
      We incurred substantial accounting and legal fees in connection with external and internal audit functions, the regulatory and disciplinary functions of our futures markets, the negotiation of new clearing agreements with LCH.Clearnet and legal fees associated with the NYMEX copyright and EBS patent infringement litigation. As a public company, we will be subject to the requirements of the Sarbanes-Oxley Act of 2002, which may require us to incur significant expenditures in the near term to establish systems and hire and train personnel to comply with these requirements. In addition, as a public company, we expect to

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incur additional costs for external advisors such as legal, accounting and auditing fees, as well as additional marketing and investor relations expenses. Even with these additional public company expenses, we anticipate that professional services expenses will decrease in the current and future periods due to the reduction in consultants at ICE Futures and the reduction in legal fees due to our settlement of the EBS case and the court’s grant of summary judgment in our favor on all claims asserted against us by NYMEX. See “Regulation and Legal Proceedings — Legal Proceedings”.
Selling, General and Administrative
      Selling, general and administrative expenses were $11.1 million and $9.5 million for the nine months ended September 30, 2005 and 2004, respectively, and $13.1 million, $12.4 million and $12.4 million for the years ended December 31, 2004, 2003 and 2002, respectively. Rent and occupancy expenses and marketing and market-maker expenses are the two major expense categories in selling, general and administrative expenses during the periods discussed herein.
      Rent and Occupancy Expenses. Rent and occupancy expenses were $2.6 million and $3.1 million for the nine months ended September 30, 2005 and 2004, respectively, and $4.1 million, $3.8 million and $3.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. We currently lease office space in Atlanta, New York, Houston, Chicago, London, Singapore and Calgary. Our rent costs consist primarily of rent expense for these properties. See “Business — Property” for a discussion on our rental properties. Our occupancy expenses primarily relate to the use of electricity, telephone lines and other miscellaneous operating costs. As a result of the closure of our open-outcry trading floor on April 7, 2005, we expect our rent and occupancy expenses will decrease in future periods.
      Marketing and Market-Maker Expenses. Marketing and market-maker expenses were $1.7 million and $1.0 million for the nine months ended September 30, 2005 and 2004, respectively, and $1.6 million, $1.2 million and $1.4 million for the years ended December 31, 2004, 2003 and 2002, respectively. Marketing expenses primarily consist of advertising, public relations and product promotion campaigns used to promote brand awareness as well as new and existing products and services. These expenses also include our participation in seminars, trade shows, conferences and other industry events. The level of marketing activity, and thus the amount of related expenses, may vary from period to period based upon management’s discretion and available opportunities.
      Market-maker expenses include fees we incur under our market-maker program. Under this program, we allow certain participants to execute trades on our platform at no charge and, beginning in 2004, paid them a monthly fee in exchange for their commitment to make markets on our platform within a specified price range for specific commodity markets. We recognized $477,000 and $497,000 in market-maker expenses for the nine months ended September 30, 2005 and 2004, respectively, and $778,000 for the year ended December 31, 2004. We began the market-maker program during 2004. Such amounts are treated as expenses as we receive no fees from these market makers. As of September 2005, we maintained market-maker programs only in OTC oil bullet swaps.
      Other. Other costs include all selling, general and administrative costs not included in separate expense categories and primarily consist of insurance expense, hardware and software support expense, telephone and communications expense, corporate insurance expense, travel expense, meals and entertainment expense, royalty payments made to eSpeed, Inc. and dues, subscriptions and registration expense. We expect our selling, general and administrative expenses to increase slightly in absolute terms in future periods in connection with the growth of our business, partially offset by lower selling, general and administrative costs associated with closure of our open-outcry trading floor. As a percentage of total revenues, our selling, general and administrative expenses may decrease in future periods due to higher revenue growth.
Floor Closure Costs
      Floor closure costs relate to the April 2005 closure of our open-outcry floor in London. We closed our open-outcry floor to take advantage of increasing acceptance and adoption of electronic trading, and to maintain and enhance our competitive position. Floor closure costs were $4.8 million for the nine months ended September 30, 2005, and include lease terminations for the building where the trading floor was located,

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payments made to 18 employees who were terminated as a result of the closure, contract terminations, and other associated costs, including legal costs and asset impairment charges. No floor closure costs were incurred in prior periods or are expected to be incurred in future periods.
Settlement Expense
      Settlement expense relates to the September 2005 settlement of the legal action brought by EBS related to alleged patent infringement. Under the settlement agreement, we made a cash payment of $15.0 million to EBS, and were released from the legal claims brought against us without admitting liability. Settlement expense was $15.0 million for the nine months ended September 30, 2005. No settlement expenses were incurred in prior periods.
Depreciation and Amortization
      Depreciation and amortization expenses were $11.4 million and $12.2 million for the nine months ended September 30, 2005 and 2004, respectively, and $17.0 million, $19.3 million and $14.4 million for the years ended December 31, 2004, 2003 and 2002, respectively. We depreciate and/or amortize costs related to our property and equipment, including computer and network equipment, software and internally developed software, office furniture and equipment and leasehold improvements. We compute depreciation expense using the straight-line method based on estimated useful lives of the assets, or in the case of leasehold improvements, the shorter of the lease term or the estimated useful life of the assets, which range from three to seven years. Gains on disposal of property and equipment are included in other income, losses on disposals of property and equipment are included in depreciation expense and maintenance and repairs are expensed as incurred. In accordance with SFAS No. 142, beginning in 2002, we ceased amortizing goodwill and intangible assets with indefinite lives. We continue to amortize intangible assets with contractual or finite useful lives, in each case over the estimated useful life of five years.
      We capitalize costs, both internal and external, direct and incremental, related to software developed or obtained for internal use in accordance with AICPA Statement of Position 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use . Costs incurred in the application development phase are capitalized and amortized over the useful life of the software, for a period not to exceed three years.
      We amortize the licensing fees we pay to eSpeed for a non-exclusive license to use its patent related to an automated futures trading system in the United States over the period to which the license fees relate. We recognized amortization expense of $1.5 million in both the nine months ended September 30, 2005 and 2004 and $2.0 million, $2.0 million and $1.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. This patent expires in February 2007.
      We anticipate that depreciation and amortization expenses will decrease in the current and future periods due to certain property and equipment purchased in prior years becoming fully depreciated, the expiration of the eSpeed patent in February 2007 and lower computer hardware costs in the future due to declining costs of technology.
Other Income (Expense)
      We had other income of $2.9 million and $1.9 million for the nine months ended September 30, 2005 and 2004, respectively, and $1.3 million, $948,000 and $1.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. Other income (expense) consists primarily of interest income and expense, as well as gains and losses on currency transactions.
      In our OTC business segment, we generate interest income from the investment of our cash and cash equivalents, short-term investments, long-term investments, restricted cash and restricted short-term investments.
      Interest expense currently consists of interest from capitalized leases and interest on outstanding indebtedness under our revolving credit facility. Prior to repayment in November 2002, we also incurred interest expense on the related-parties notes payable.

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      Other income (expense) also relates to gains and losses from foreign currency transactions, such as those resulting from the settlement of foreign receivables or payables or cash accounts held in U.S. dollars by our U.K. subsidiaries. We seek to manage our foreign exchange translation risk and exposure in part through converting our U.K. subsidiaries’ cash to investments denominated in U.S. dollars. However, because the functional currency of our U.K. subsidiaries is pounds sterling, we are subject to transaction gains and losses for the re-measurement of the U.S. dollar cash investments held by our U.K. subsidiaries due to foreign currency exchange rate fluctuations between periods.
Provision for Income Taxes
      We incurred income tax expenses of $12.6 million and $9.1 million for the nine months ended September 30, 2005 and 2004, respectively, and $11.8 million, $6.5 million and $17.7 million for the years ended December 31, 2004, 2003 and 2002, respectively. Our provision for income taxes consists of current and deferred tax provisions relating to federal, state and local taxes, as well as taxes related to foreign subsidiaries. We file a consolidated United States federal income tax return and file state income tax returns on a separate, combined or consolidated basis in accordance with relevant state laws and regulations. Our foreign subsidiaries are based in the United Kingdom and we file separate local country income tax returns and take advantage of the United Kingdom’s group relief provisions when applicable. The difference between our actual income tax rate and our effective tax rate for a given fiscal period is primarily a reflection of the tax effects of our foreign operations, general business and tax credits, state income taxes and the non-deductibility of certain expenses. We have made provisions for U.S. income taxes on all undistributed earnings of our foreign subsidiaries as such earnings are not expected to be permanently reinvested.
      On October 22, 2004, the American Jobs Creation Act of 2004, or the Jobs Act, introduced a special one-time dividends received deduction on the repatriation of certain foreign earnings in 2004 or 2005, provided certain criteria are met. The deduction would result in an approximate 5.25% federal tax rate on repatriated earnings. To qualify for the deduction, the earnings must be reinvested in the United States pursuant to a domestic reinvestment plan established by our chief executive officer and approved by our board of directors. Certain other criteria in the Jobs Act must be satisfied as well.
      As of September 30, 2005, we completed our evaluation of the repatriation provision and made the determination to repatriate $30.0 million of foreign earnings in accordance with the requirements of the Jobs Act. As a result, we recognized a tax benefit of $2.6 million, net of available foreign tax credits, in the third quarter of 2005. This was partially offset by tax expense of $2.0 million recorded in the third quarter of 2005 related to an increase to the estimate of U.S. residual taxes due on the remaining undistributed earnings of our foreign subsidiaries. We will continue to evaluate additional repatriation opportunities through the end of 2005. The range of reasonably possible amounts that we are still considering for repatriation under the Jobs Act in addition to the $30.0 million ranges from zero to $5.0 million with an aggregate potential tax benefit of up to $2.9 million.
Results of Operations
                                           
    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands, except for share and per share data)
Consolidated Statement of Income Data
                                       
Revenues:(1)
                                       
 
Transaction fees, net(2)
  $ 100,780     $ 67,832     $ 90,906     $ 81,434     $ 118,794  
 
Data services fees
    8,483       7,013       9,691       7,742       5,141  
 
Trading access fees
    2,996       2,626       3,595       2,461       490  
 
Other
    2,344       2,447       4,222       2,109       1,065  
                               
Total revenues
    114,603       79,918       108,414       93,746       125,490  
                               

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    Nine Months Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands, except for share and per share data)
Operating expenses:
                                       
 
Cost of hosting
    989       1,060       1,279       1,715       3,962  
 
Compensation and benefits
    25,815       21,673       30,074       26,236       27,906  
 
Professional services
    10,161       11,144       14,523       15,138       15,876  
 
Selling, general and administrative
    11,099       9,453       13,120       12,398       12,425  
 
Floor closure costs(3)
    4,814                          
 
Settlement expense(4)
    15,000                          
 
Depreciation and amortization
    11,428       12,248       17,024       19,341       14,368  
                               
Total operating expenses
    79,306       55,578       76,020       74,828       74,537  
                               
Operating income
    35,297       24,340       32,394       18,918       50,953  
Total other income, net
    2,879       1,917       1,328       948       1,492  
                               
Income before income taxes
    38,176       26,257       33,722       19,866       52,445  
Income tax expense
    12,626       9,147       11,773       6,489       17,739  
                               
Net income(5)
  $ 25,550     $ 17,110     $ 21,949     $ 13,377     $ 34,706  
                               
Redemption adjustments to redeemable stock put(6)
    (20,659 )                 8,378       (10,730 )
Deduction for accretion of Class B redeemable common stock(7)
                      (1,768 )     (3,656 )
                               
Net income available to common shareholders
  $ 4,891     $ 17,110     $ 21,949     $ 19,987     $ 20,320  
                               
Earnings per common share(8):
                                       
 
Basic
  $ 0.09     $ 0.32     $ 0.42     $ 0.37     $ 0.37  
                               
 
Diluted
  $ 0.09     $ 0.32     $ 0.41     $ 0.37     $ 0.37  
                               
Weighted average common shares outstanding(8):
                                       
 
Basic
    52,884,917       52,864,881       52,865,108       54,328,966       54,392,602  
 
Diluted
    53,448,161       53,061,893       53,062,078       54,639,708       54,850,095  
 
(1)  We generate revenues from related parties in the ordinary course of our business. For a presentation and discussion of our revenues attributable to related parties for the nine months ended September 30, 2005 and 2004 and the years ended December 31, 2004, 2003 and 2002, see our consolidated statements of income and note 12 to our consolidated financial statements that are included elsewhere in this prospectus.
 
 
(2)  Our transaction fees are presented net of rebates. For a discussion of these rebates, see “— Sources of Revenues — Transaction Fees”.
 
 
(3)  In April 2005, we closed our open-outcry trading floor in London to take advantage of increasing acceptance and adoption of electronic trading, and to maintain and enhance our competitive position. Costs associated with the floor closure were $4.8 million and are classified as “Floor closure costs” in the accompanying consolidated statements of income. Floor closure costs include lease terminations for the building where the floor was located, payments made to 18 employees who were terminated as a result of the closure, contract terminations, and other associated costs, including legal costs and asset impairment charges. No floor closure costs were incurred in prior periods and no additional closure costs are expected to be incurred. See note 19 to our consolidated financial statements that are included elsewhere in this prospectus.

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(4)  In September 2005, we settled the legal action brought by EBS related to alleged patent infringement. Under the settlement agreement, we made a payment to EBS of $15.0 million, and were released from the legal claims brought against us without admitting liability. The payment was recorded as “Settlement expense” in the accompanying consolidated statements of income. See note 14 to our consolidated financial statements that are included elsewhere in this prospectus.
 
 
(5)  The financial results for the nine months ended September 30, 2005 include $4.8 million in expenses incurred relating to the closure of our open-outcry trading floor in London and a $15.0 million settlement expense related to the payment made to EBS to settle litigation. Excluding these charges, our consolidated net income for the nine months ended September 30, 2005 would have been $38.2 million, representing a 123.5% increase from $17.1 million for the nine months ended September 30, 2004. See “— Non-GAAP Financial Measure”.
 
 
(6)  We granted a put option to Continental Power Exchange, Inc. in connection with our formation that could require us under certain circumstances to purchase its equity interest in our business at a purchase price equal to the greater of the fair market value of the equity interest or $5.0 million. See “Certain Relationships and Related Transactions — Continental Power Exchange, Inc. Put Agreement”. We initially recorded the redeemable stock put at the minimum $5.0 million redemption threshold. We have adjusted the redeemable stock put to its redemption amount at each subsequent balance sheet date. The adjustment to the redemption amount has been recorded to retained earnings or, in the absence of positive retained earnings, additional paid-in capital. In October 2005, we entered into an agreement with Continental Power Exchange, Inc. to cancel the redeemable stock put upon the closing of this offering. See note 9 to our consolidated financial statements that are included elsewhere in this prospectus.
 
 
(7)  We recorded our Class B redeemable common stock upon its issuance on June 18, 2001 at its discounted present value of $60.2 million. We recorded charges to retained earnings for the accretion of this amount up to the $67.5 million redemption value of our Class B redeemable common stock over a two-year period ending in June 2003, which was the earliest potential redemption date.
 
 
(8)  Earnings per common share and weighted average common shares have been adjusted retroactively for all periods presented to give effect to a 1 for 4 reverse stock split of our outstanding shares of Class A common stock that will become effective immediately prior to the closing of this offering. See “Organization and Recapitalization”.
Key Statistical Information
      The following table presents key transaction volume information, as well as other selected operating information, for the periods presented. A description of how we calculate our market share, our trading volumes and other operating measures is set forth below.
                                         
    Nine Months            
    Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands, except for percentages)
Operating Data:
                                       
Our Market Share of Selected Key Products:
                                       
Total crude oil futures contracts traded globally(1)
    69,083       58,762       78,477       69,450       67,173  
IPE Brent Crude oil futures contracts traded
    22,287       19,291       25,458       24,013       21,493  
Our crude oil futures market share(1)
    32.3 %     32.8 %     32.4 %     34.6 %     32.0 %
                               
Total cleared Henry Hub natural gas contracts traded on us and NYMEX-ClearPort
    37,533       14,052       21,241       6,869       1,170  
Our cleared Henry Hub natural gas contracts traded
    29,983       10,703       15,887       4,512       792  
Our market share — cleared Henry Hub natural gas vs. NYMEX-ClearPort(2)
    79.9 %     76.2 %     74.8 %     65.7 %     67.7 %
                               

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    Nine Months            
    Ended    
    September 30,   Year Ended December 31,
         
    2005   2004   2004   2003   2002
                     
    (in thousands, except for percentages)
Total cleared PJM financial power contracts traded on us and NYMEX-ClearPort
    1,484       513       748       149        
Our cleared PJM financial power contracts traded
    965       321       513       6        
Our market share — cleared PJM financial power vs. NYMEX-ClearPort(3)
    65.0 %     62.4 %     68.7 %     4.0 %     %
                               
 
Our Average Daily Trading Fee Revenues(4):
                                       
Our futures business average daily exchange fee revenues
  $ 222     $ 188     $ 179     $ 158     $ 125  
                               
Our bilateral OTC business average daily commission fee revenues
    81       80       80       112       330  
Our cleared OTC business average daily commission fee revenues
    224       83       94       24       5  
                               
Our OTC business average daily commission fee revenues
    305       163       174       136       335  
                               
Our total average daily exchange fee and commission fee revenues
  $ 527     $ 351     $ 353     $ 294     $ 460  
                               
 
Our Trading Volume(5):
                                       
Futures volume
    30,524       26,801       35,541       33,341       30,441  
Futures average daily volume
    162       141       140       132       121  
OTC volume
    44,431       21,703       30,961       24,260       43,982  
OTC average daily volume
    235       115       123       97       175  
 
OTC Participants Trading Commission Percentages:
                                       
Commercial companies (including merchant energy)
    49.5 %     57.6 %     56.5 %     64.1 %     81.7 %
Banks and financial institutions
    19.0 %     22.6 %     22.4 %     31.3 %     18.1 %
Hedge funds, locals and proprietary trading shops
    31.5 %     19.8 %     21.1 %     4.6 %     0.2 %
 
OTC Trading Commission fees:
                                       
Percentage of commission fees by the top 20 customers
    62.5 %     65.9 %     64.8 %     69.3 %     75.6 %
Percentage of commission fees by our shareholders
    16.7 %     27.1 %     25.1 %     40.4 %     61.2 %
 
(1)  Total crude oil futures contracts traded globally and our resulting crude oil futures market share is calculated based on the number of IPE Brent Crude futures contracts traded as compared to the total number of IPE Brent Crude futures contracts and NYMEX Light Sweet Crude and Dublin Brent Crude futures contracts traded.
 
(2)  Our cleared Henry Hub natural gas market share versus NYMEX-ClearPort is calculated based on the number of IntercontinentalExchange cleared Henry Hub natural gas contracts traded as a percentage of the total IntercontinentalExchange cleared Henry Hub natural gas contracts and NYMEX-ClearPort Henry Hub natural gas futures contracts traded.
 
(3)  Our cleared PJM financial power market share versus NYMEX-ClearPort is calculated based on the number of IntercontinentalExchange cleared PJM financial power contracts traded as a percentage of the total IntercontinentalExchange cleared PJM financial power contracts and NYMEX-ClearPort cleared PJM financial power contracts traded. PJM refers to the Pennsylvania, New Jersey and Maryland power hub. The NYMEX-ClearPort cleared PJM financial power contract was launched in April 2003 and our PJM financial power contract was launched in November 2003. Data regarding the volumes of NYMEX-ClearPort cleared PJM for annual contracts traded is derived from the Futures Industry Association.
 
(4)  Represents the total commission fee and exchange fee revenues for the year divided by the number of trading days during that year.
 
(5)  Represents the total volume, in contracts, for the period divided by the number of trading days during that period.
     For purposes of our operating data, we calculate our volumes based on the number of contracts traded in our markets, or based on the number of round turn trades. Each “round turn” represents a matched buy and sell order of one contract. Each side to a contract is matched and treated as one contract and each side is not separately calculated. The volume of contracts traded in a given market is a widely recognized indicator of the liquidity in that market, including our markets.

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Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
Overview
      Consolidated net income increased $8.4 million, or 49.3%, to $25.6 million for the nine months ended September 30, 2005 from $17.1 million for the comparable period in 2004. Net income from our futures business segment increased $1.0 million, or 8.2%, to $13.8 million for the nine months ended September 30, 2005 from $12.8 million for the comparable period in 2004, primarily due to higher transaction fees revenues, which were partially offset by $4.8 million in floor closure costs incurred in connection with the closure of our open-outcry trading floor. Net income from our OTC business segment increased $7.4 million to $11.7 million for the nine months ended September 30, 2005 from $4.3 million for the comparable period in 2004. Net income in our OTC business segment increased primarily due to significantly higher transaction fees revenues, which were substantially offset by a $15.0 million settlement expense incurred during the nine months ended September 30, 2005. Consolidated operating income, as a percentage of consolidated revenues, increased to 30.8% for the nine months ended September 30, 2005 from 30.5% for the comparable period in 2004. Consolidated net income, as a percentage of consolidated revenues, increased to 22.3% for the nine months ended September 30, 2005 from 21.4% for the comparable period in 2004.
      Our consolidated revenues increased $34.7 million, or 43.4%, to $114.6 million for the nine months ended September 30, 2005 from $79.9 million for the comparable period in 2004. This increase is primarily attributable to increased trading volumes on our electronic platform and increased non-transaction revenues, including data services fees, trading access fees and the Chicago Climate Exchange licensing, service and development fees. A significant factor driving our revenues and volume growth during this period was the continued growth in trading volumes of our cleared OTC contracts.
      Consolidated operating expenses increased to $79.3 million for the nine months ended September 30, 2005 from $55.6 million for the comparable period in 2004, representing an increase of 42.7%. This increase is primarily attributable to higher compensation expenses during the nine months ended September 30, 2005 due to an increase in our employee headcount and an increase in our discretionary bonus accrual, due to floor closure costs incurred in connection with our decision to close our open-outcry trading floor in London, and due to the litigation settlement payment made to EBS.
Revenues
Transaction Fees
      Consolidated transaction fees increased $32.9 million, or 48.6%, to $100.8 million for the nine months ended September 30, 2005 from $67.8 million for the comparable period in 2004. Transaction fees, as a percentage of consolidated revenues, increased to 87.9% for the nine months ended September 30, 2005 from 84.9% for the comparable period in 2004.
      Transaction fees generated in our futures business segment increased $6.3 million, or 17.5%, to $42.0 million for the nine months ended September 30, 2005 from $35.7 million for the comparable period in 2004, while declining as a percentage of consolidated revenues to 36.6% for the nine months ended September 30, 2005 from 44.7% for the comparable period in 2004. The increase in transaction fees was primarily due to an increase in our futures contract volumes and an increase in the pounds sterling to U.S. dollar exchange rate. Futures contract volumes increased primarily due to increased liquidity brought by new market participants due to electronic trading and due to weather-related volatility. Volumes in our futures business segment increased 13.9% to 30.5 million contracts traded during the nine months ended September 30, 2005 from 26.8 million contracts traded during the comparable period in 2004. The average exchange rate of pounds sterling to the U.S. dollar increased 0.9% to 1.8383 for the nine months ended September 30, 2005 from 1.8212 for the comparable period in 2004. Average transaction fees per trading day increased 18.1% to $222,000 per trading day for the nine months ended September 30, 2005 from $188,000 per trading day for the comparable period in 2004.
      Transaction fees generated in our OTC business segment increased $26.7 million, or 83.1%, to $58.8 million for the nine months ended September 30, 2005 from $32.1 million for the comparable period in

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2004, primarily due to increased trading volumes. Transaction fees in this segment, as a percentage of consolidated revenues, increased to 51.3% for the nine months ended September 30, 2005 from 40.2% for the comparable period in 2004. The number of transactions or trades executed in our OTC business segment increased by 120.6% to 1.6 million trades for the nine months ended September 30, 2005 from 732,434 trades for the comparable period in 2004. Average transaction fees per trading day increased 87.1% to $305,000 per trading day for the nine months ended September 30, 2005 from $163,000 per trading day for the comparable period in 2004. The increase in trades was partially offset by a 15.2% decrease in the average revenues per transaction for the nine months ended September 30, 2005 as compared to the comparable period in 2004. The decline in average revenues per transaction was due in part to an increased number of lower volume transactions, primarily as a result of newer market participants generally trading in smaller transaction sizes, and a change in the mix of contracts traded, with a larger number of contracts traded related to commodities with lower commission rates.
      Increased volumes in our OTC business segment were primarily due to increased trading activity in North American natural gas and power markets as a result of the availability of cleared OTC contracts and the continued improvement in credit quality in the merchant energy sector, as well as increased liquidity brought by new market participants and weather-related volatility. Transaction fees generated by trading in North American natural gas contracts increased $23.2 million, or 115.3%, to $43.3 million for the nine months ended September 30, 2005 from $20.1 million for the comparable period in 2004. In addition, transaction fees generated by trading in North American power contracts increased $6.1 million, or 91.8%, to $12.7 million for the nine months ended September 30, 2005 from $6.6 million for the comparable period in 2004. The continued growth in trading volumes in OTC contracts can be attributed in part to the use of cleared OTC contracts, which eliminates the need for a counterparty to post capital against each trade and also reduces requirements for entering into multiple negotiated bilateral settlement agreements to enable trading with other counterparties. We believe that the introduction of OTC cleared contracts has facilitated trading by market participants that otherwise would not have engaged in trading in energy derivatives.
      The increase in transaction fees generated by trading in OTC North American natural gas and power contracts was partially offset by a decrease in transaction fees generated by our OTC global oil contracts. Transaction fees derived from trading in global oil contracts decreased $1.9 million, or 58.5%, to $1.3 million for the nine months ended September 30, 2005 from $3.2 million for the comparable period in 2004. This decrease is primarily attributable to entrenched competition in the OTC oil market, our waiver of commission fees on our West Texas Intermediate oil bullet swap contracts for the period from November 2004 through December 2005, and, to a lesser extent, limited sales and marketing resources committed to this market relative to that in our natural gas and power markets.
      Revenues derived from electronic trade confirmation fees in our OTC business segment increased $665,000 to $1.2 million for the nine months ended September 30, 2005 from $525,000 for the comparable period in 2004. During the nine months ended September 30, 2005, 618,453 trades were matched through our electronic trade confirmation service, compared to 259,867 trades during the comparable period in 2004. Consolidated electronic trade confirmation fees, as a percentage of consolidated revenues, increased to 1.0% for the nine months ended September 30, 2005 from 0.7% for the comparable period in 2004.
      Revenues derived from order flow shortfall payments in our OTC business segment decreased $796,000 from the nine months ended September 30, 2004 to the nine months ended September 30, 2005. This decrease was due to the expiration of the European gas order flow agreements as of December 31, 2004. No order flow agreements were in effect during the nine months ended September 30, 2005. Consolidated order flow shortfall payments, as a percentage of consolidated revenues, were 1.0% for the nine months ended September 30, 2004.
Data Services Fees
      Consolidated data services fees increased $1.5 million, or 21.0%, to $8.5 million for the nine months ended September 30, 2005 from $7.0 million for the comparable period in 2004. This increase was primarily due to increased data services fees in our OTC business segment from the introduction of the Market Price Validation

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service, and due to increased fees from view only screen access and End of Day reports. Market Price Validation was launched in March 2004 and 27 companies subscribed to this service as of September 30, 2005. The number of companies that subscribe to view only screen access increased 19.3% to 210 as of September 30, 2005 from 176 as of September 30, 2004. We also continued to enroll new individual monthly subscribers for these services within existing subscriber companies. Consolidated data services fees, as a percentage of consolidated revenues, decreased to 7.4% for the nine months ended September 30, 2005 from 8.8% for the comparable period in 2004.
Trading Access Fees
      Consolidated trading access fees increased $370,000, or 14.1%, to $3.0 million for the nine months ended September 30, 2005 from $2.6 million for the comparable period in 2004. This increase was primarily due to the growth in monthly minimum commission fees received in our OTC business segment and, to a lesser extent, due to the growth in system user fees to ICE Futures members who access our electronic platform. The monthly weighted-average number of participants required to pay monthly minimum commission fees increased 14.2% to 241 for the nine months ended September 30, 2005 from 211 for the comparable period in 2004. We continued to increase both the number of participants subject to monthly minimum commission fees as well as the number of users accessing the platform at these participants. During the nine months ended September 30, 2005 and 2004, we recognized $1.9 million and $1.8 million, respectively, in monthly minimum commission fees in our OTC business segment and $1.1 million and $856,000, respectively, in membership subscriptions and system user fees in our futures business segment. Consolidated trading access fees, as a percentage of consolidated revenues, decreased to 2.6% for the nine months ended September 30, 2005 from 3.3% for the comparable period in 2004.
Other Revenues
      Consolidated other revenues decreased $103,000, or 4.2%, to $2.3 million for the nine months ended September 30, 2005 from $2.4 million for the comparable period in 2004. This decrease was primarily due to a $601,000 reduction in the communication charges and equipment rentals to ICE Futures members following the closure of our open-outcry trading floor, partially offset by a $396,000 increase in licensing, service and technology development fees charged to the Chicago Climate Exchange. Consolidated other revenues, as a percentage of consolidated revenues, decreased to 2.0% for the nine months ended September 30, 2005 from 3.1% for the comparable period in 2004.
Expenses
Cost of Hosting
      Consolidated cost of hosting expenses decreased $71,000, or 6.7%, to $989,000 for the nine months ended September 30, 2005 from $1.1 million for the comparable period in 2004. Consolidated cost of hosting expenses, as a percentage of consolidated revenues, decreased to 0.9% for the nine months ended September 30, 2005 from 1.3% for the comparable period in 2004.
Compensation and Benefits
      Consolidated compensation and benefits expenses increased $4.1 million, or 19.1%, to $25.8 million for the nine months ended September 30, 2005 from $21.7 million for the comparable period in 2004. This increase was due to an increase in our discretionary bonus accrual for the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004, and to a lesser extent, an increase in our employee headcount. During the nine months ended September 30, 2005, we had a month-end average of 199 employees, compared to a month-end average of 191 employees during the nine months ended September 30, 2004. Our discretionary bonus accrual increased primarily due to improved operating results for the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 and due to an increased number of employees receiving the bonus accrual. Consolidated compensation and benefits expenses, as a percentage of consolidated revenues, decreased to 22.5% for the nine months ended September 30, 2005 from 27.1% for the comparable period in 2004.

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Professional Services
      Consolidated professional services expenses decreased $983,000, or 8.8%, to $10.2 million for the nine months ended September 30, 2005 from $11.1 million for the comparable period in 2004. This decrease was primarily due to an aggregate decrease in legal fees related to litigation with NYMEX and EBS, the former of which was subsequently dismissed by a ruling in our favor on a motion for summary judgment and the latter of which was subsequently settled. Consolidated professional services expenses, as a percentage of consolidated revenues, decreased to 8.9% for the nine months ended September 30, 2005 from 13.9% for the comparable period in 2004.
Selling, General and Administrative
      Consolidated selling, general and administrative expenses increased $1.6 million, or 17.4%, to $11.1 million for the nine months ended September 30, 2005 from $9.5 million for the comparable period in 2004. This increase was primarily due to the market-maker program that we initiated during 2004, an increase in royalty payments made to eSpeed, and increased marketing efforts relating to our transition to exclusive electronic trading in futures and the launch of new products. Consolidated selling, general and administrative expenses, as a percentage of consolidated revenues, decreased to 9.7% for the nine months ended September 30, 2005 from 11.8% for the comparable period in 2004.
Floor Closure Costs
      Consolidated floor closure costs were $4.8 million for the nine months ended September 30, 2005, due to the closure of our open-outcry trading floor in London in April 2005. Consolidated floor closure costs, as a percentage of consolidated revenues, were 4.2% for the nine months ended September 30, 2005. We did not have floor closure costs in the comparable period in 2004.
Settlement Expense
      Consolidated settlement expense was $15.0 million for the nine months ended September 30, 2005, due to the payment made to settle litigation with EBS. Consolidated settlement expense, as a percentage of consolidated revenues, was 13.1% for the nine months ended September 30, 2005. We did not have settlement expenses in the comparable period in 2004. See “Regulation and Legal Proceedings — Legal Proceedings”.
Depreciation and Amortization
      Consolidated depreciation and amortization expenses decreased $820,000, or 6.7%, to $11.4 million for the nine months ended September 30, 2005 from $12.2 million for the comparable period in 2004. This decrease was primarily due to certain property and equipment purchased in 2001 with estimated useful lives of three years becoming fully depreciated over the course of 2004. Consolidated depreciation and amortization expenses, as a percentage of consolidated revenues, decreased to 10.0% for the nine months ended September 30, 2005 from 15.3% for the comparable period in 2004.
Other Income (Expense)
      Consolidated other income increased $962,000, or 50.2%, to $2.9 million for the nine months ended September 30, 2005 from $1.9 million for the comparable period in 2004. This increase primarily related to foreign currency transaction gains, partially offset by an increase of $436,000 in interest expense related to outstanding balances under the Wachovia revolving credit agreement.
      We recognized net foreign currency transaction gains of $1.4 million during the nine months ended September 30, 2005 as compared to net foreign currency transaction losses of $73,000 during the nine months ended September 30, 2004. The foreign currency transaction gains and losses primarily related to the revaluation of the U.S. dollar cash balances held by our foreign subsidiaries due to the increase or decrease in the period-end foreign currency exchange rates between periods. The functional currency of our foreign

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subsidiaries is pounds sterling. The period-end foreign currency exchange rate of pounds sterling to the U.S. dollar decreased 7.6% to 1.7696 as of September 30, 2005 from 1.9160 as of December 31, 2004.
Income Taxes
      Consolidated tax expense increased $3.5 million, or 38.0%, to $12.6 million for the nine months ended September 30, 2005 from $9.1 million for the comparable period in 2004, primarily due to the increase in our pre-tax income. Our effective tax rate decreased to 33.1% for the nine months ended September 30, 2005 from 34.8% for the comparable period in 2004. The effective tax rate for the nine months ended September 30, 2005 is lower than the statutory rate primarily due to an increase in anticipated federal and state research and development tax credits, and due to the $2.6 million tax benefit recognized on the repatriation of certain foreign earnings under the Jobs Act. This was partially offset by a $2.0 million increase in our estimate of U.S. residual taxes due on the remaining undistributed earnings of our foreign subsidiaries. The decrease in the effective tax rate from the nine months ended September 30, 2004 to the nine months ended September 30, 2005 was also primarily due to an increase in anticipated research and development tax credits during the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 and due to the Jobs Act tax benefit, partially offset by the increase in our residual taxes on the foreign undistributed earnings.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Overview
      Consolidated net income increased $8.6 million, or 64.1%, to $21.9 million for the year ended December 31, 2004 from $13.4 million for the comparable period in 2003. During this period, net income from our futures business segment increased $2.1 million, or 15.6%, to $15.6 million for the year ended December 31, 2004 from $13.5 million for the comparable period in 2003 and net income from our OTC business segment increased to $6.3 million for the year ended December 31, 2004 from a net loss of $126,000 for the comparable period in 2003. Consolidated operating income, as a percentage of consolidated revenues, increased to 29.9% for the year ended December 31, 2004 from 20.2% for the comparable period in 2003. Consolidated net income, as a percentage of consolidated revenues, increased to 20.2% for the year ended December 31, 2004 from 14.3% for the comparable period in 2003.
      Our consolidated revenues grew by $14.7 million, or 15.6%, to $108.4 million for the year ended December 31, 2004 from $93.7 million for the comparable period in 2003. This increase is attributable to increased trading volumes on our electronic platform and increased non-transaction revenues, including data services fees, trading access fees and the Chicago Climate Exchange licensing, service and development fees. A significant factor driving our revenues and volume growth during this period was the growth in trading volumes of our cleared OTC contracts.
      Consolidated operating expenses increased slightly to $76.0 million for the year ended December 31, 2004 from $74.8 million for the comparable period in 2003, representing an increase of 1.6%, compared to a 15.6% increase in consolidated revenues during the same period. Given the fixed nature of our operating expenses, we generally have been able to increase revenues through increased trading volumes while holding operating expenses relatively constant. This operating leverage has resulted in improved profitability and we believe is one of the key benefits of operating our electronic platform.
Revenues
Transaction Fees
      Consolidated transaction fees increased $9.5 million, or 11.6%, to $90.9 million for the year ended December 31, 2004 from $81.4 million for the comparable period in 2003. Transaction fees, as a percentage of consolidated revenues, decreased to 83.9% for the year ended December 31, 2004 from 86.9% for the comparable period in 2003.
      Transaction fees generated in our futures business segment increased $5.5 million, or 13.9%, to $45.5 million for the year ended December 31, 2004 from $40.0 million for the comparable period in 2003,

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while declining slightly as a percentage of consolidated revenues to 42.0% for the year ended December 31, 2004 from 42.6% for the comparable period in 2003. The absolute increase in transaction fees was primarily due to increased trading volumes and an increase in the pounds sterling to U.S. dollar exchange rate, partially offset by $2.3 million in fees rebated in November and December 2004 as part of our rebate program for IPE Brent Crude futures contracts traded electronically. Volumes in our futures business segment increased 6.6%, to 35.5 million contracts traded for the year ended December 31, 2004 from 33.3 million contracts traded for the comparable period in 2003. The average exchange rate of pounds sterling to the U.S. dollar increased 12.0%, to 1.8296 for the year ended December 31, 2004 from 1.6341 for the comparable period in 2003.
      Transaction fees generated in our OTC business segment increased $3.9 million, or 9.5%, to $45.4 million for the year ended December 31, 2004 from $41.5 million for the comparable period in 2003, primarily due to increased trading volumes, which was partially offset by a reduction in our order flow shortfall payments. Transaction fees in this segment, as a percentage of consolidated revenues, decreased to 41.9% for the year ended December 31, 2004 from 44.2% for the comparable period in 2003. The number of transactions or trades executed in our OTC business segment increased by 55.1% to 1,061,629 trades for the year ended December 31, 2004 from 684,495 trades for the comparable period in 2003. The increase in trades was partially offset by a 17.9% decrease in the average revenues per transaction for the year ended December 31, 2004 as compared to the comparable period in 2003. The decline in average revenues per transaction was due in part to an increased number of lower volume transactions, primarily as a result of newer market participants generally trading in smaller contract sizes, and a change in the mix of contracts traded, with a larger number of contracts traded related to commodities with lower commission rates. Increased volumes in our OTC business segment were primarily due to increased trading volumes in North American natural gas and power markets as a result of the availability of cleared OTC contracts and the improvement in credit quality in the merchant energy sector, as well as increased liquidity brought by new market participants. Transaction fees generated by trading in North American natural gas contracts increased $12.2 million, or 72.7%, to $29.0 million for the year ended December 31, 2004 from $16.8 million for the comparable period in 2003. In addition, transaction fees generated by trading in North American power contracts increased $3.7 million, or 64.9%, to $9.5 million for the year ended December 31, 2004 from $5.7 million for the comparable period in 2003. The continued growth in trading volumes in cleared OTC contracts can be attributed to the following trends:
  •  The use of cleared OTC contracts eliminates the need for a counterparty to post capital against each trade and also reduces requirements for entering into multiple negotiated bilateral settlement agreements to enable trading with other counterparties. We believe that the introduction of cleared contracts has facilitated trading by market participants that otherwise would not have engaged in trading in energy derivatives.
 
  •  The increase in participants in the markets for energy commodities trading has increased overall liquidity in our markets, particularly the liquidity of cleared North American natural gas and power contracts.
      The increase in transaction fees generated by trading in OTC North American natural gas and power contracts was partially offset by a decrease in transaction fees generated by our OTC global oil contracts. Transaction fees derived from trading in global oil contracts decreased $4.8 million, or 54.8%, to $4.0 million for the year ended December 31, 2004 from $8.8 million for the comparable period in 2003. This decrease is attributable to several factors, including the expiration of order flow agreements in late 2002, the effect of which manifested itself in 2003 and 2004, entrenched competition in the OTC oil market and, to a lesser extent, limited sales and marketing resources committed to this market relative to that in our natural gas and power markets.
      Revenues derived from order flow shortfall payments in our OTC business segment decreased $6.0 million, or 84.9%, to $1.1 million for the year ended December 31, 2004 from $7.1 million for the comparable period in 2003. This decrease was due to a $6.4 million shortfall payment recognized from the Gas and Power Firms for the year ended December 31, 2003, partially offset by an increase of $365,000 in the 2004 European gas shortfall payments as compared to 2003 European gas shortfall payments. Consolidated order flow

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shortfall payments, as a percentage of consolidated revenues, decreased to 1.0% for the year ended December 31, 2004 from 7.6% for the comparable period in 2003. These agreements are no longer in effect.
      Revenues derived from electronic trade confirmation fees in our OTC business segment increased 378.3% from the year ended December 31, 2003 to the year ended December 31, 2004. During the year ended December 31, 2004, 199,290 trades were matched through our electronic trade confirmation service, compared to 64,383 trades for the comparable period in 2003. Consolidated electronic trade confirmation fees, as a percentage of consolidated revenues, increased to 0.7% for the year ended December 31, 2004 from 0.2% for the comparable period in 2003.
Data Services Fees
      Consolidated data services fees increased $1.9 million, or 25.2%, to $9.7 million for the year ended December 31, 2004 from $7.7 million for the comparable period in 2003. This increase was primarily due to increased data services fees in our OTC business segment related to fees from ICE Data view only screen access and End of Day reports, which we introduced in November 2002. The number of companies that subscribe for ICE Data view only screen access increased to 200 as of December 31, 2004 from 185 as of December 31, 2003. We also continued to enroll new monthly subscribers for these services within these companies. In March 2004, we also launched a data service known as Market Price Validation, which provides monthly price validation curves, and 21 companies subscribed to this service as of December 31, 2004. Consolidated data services fees, as a percentage of consolidated revenues, increased to 8.9% for the year ended December 31, 2004 from 8.3% for the comparable period in 2003.
Trading Access Fees
      Consolidated trading access fees increased $1.1 million, or 46.1%, to $3.6 million for the year ended December 31, 2004 from $2.5 million for the comparable period in 2003. This increase was primarily due to the growth in monthly minimum commission fees received in our OTC business segment. The monthly weighted-average number of participants required to pay monthly minimum commission fees increased to 212 for the year ended December 31, 2004 from 143 for the comparable period in 2003. We continued to increase both the number of participants subject to monthly minimum commission fees as well as the number of users accessing the platform at these participants. During the years ended December 31, 2004 and 2003, we received $2.4 million and $1.7 million, respectively, in monthly minimum commission fees in our OTC business segment and $1.2 million and $762,000, respectively, in membership subscriptions and system user fees in our futures business segment. Consolidated trading access fees, as a percentage of consolidated revenues, increased to 3.3% for the year ended December 31, 2004 from 2.6% for the comparable period in 2003.
Other Revenues
      Consolidated other revenues increased $2.1 million to $4.2 million for the year ended December 31, 2004 from $2.1 million for the comparable period in 2003. This increase was primarily due to increased licensing, service and technology development fees charged to the Chicago Climate Exchange and increased communication charges in our futures business segment. Consolidated other revenues, as a percentage of consolidated revenues, increased to 3.9% for the year ended December 31, 2004 from 2.2% for the comparable period in 2003.
Expenses
Cost of Hosting
      Consolidated cost of hosting expenses decreased $436,000, or 25.4%, to $1.3 million for the year ended December 31, 2004 from $1.7 million for the comparable period in 2003, primarily due to reduced costs associated with our move to an Internet-based platform from a private network connection in early 2003. During the year ended December 31, 2004, we paid $1.2 million for hosting expenses and $76,000 for participant network expenses, compared to $1.3 million for hosting expenses, $268,000 for participant network expenses and $111,000 for security services expenses in 2003. Consolidated cost of hosting expenses, as a

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percentage of consolidated revenues, decreased to 1.2% for the year ended December 31, 2004 from 1.8% for the comparable period in 2003.
Compensation and Benefits
      Consolidated compensation and benefits expenses increased $3.8 million, or 14.6%, to $30.1 million for the year ended December 31, 2004 from $26.2 million for the comparable period in 2003. This increase was primarily due to the increase in our employee headcount and an increase in our discretionary bonus payments. Our discretionary bonus payments increased primarily due to improved operating results in 2004 as compared to 2003 and an increased number of employees receiving a bonus in 2004. As of December 31, 2004, we had 200 employees, compared to 186 employees as of December 31, 2003. Consolidated compensation and benefits expenses, as a percentage of consolidated revenues, decreased to 27.7% for the year ended December 31, 2004 from 28.0% for the comparable period in 2003.
Professional Services
      Consolidated professional services expenses decreased $615,000, or 4.1%, to $14.5 million for the year ended December 31, 2004 from $15.1 million for the comparable period in 2003. This decrease was primarily due to the renegotiation of a major vendor consulting contract in 2004 that substantially reduced fees incurred in our futures business segment, as well as to the replacement of contractors with permanent staff over the course of 2004. These reduced professional services expenses were partially offset by an increase in legal fees primarily related to litigation with NYMEX and EBS. Consolidated professional services expenses, as a percentage of consolidated revenues, decreased to 13.4% for the year ended December 31, 2004 from 16.1% for the comparable period in 2003.
Selling, General and Administrative
      Consolidated selling, general and administrative expenses increased $722,000, or 5.8%, to $13.1 million for the year ended December 31, 2004 from $12.4 million for the comparable period in 2003. This increase was due to the market-maker program that we initiated during 2004. Consolidated selling, general and administrative expenses, as a percentage of consolidated revenues, decreased to 12.1% for the year ended December 31, 2004 from 13.2% for the comparable period in 2003.
Depreciation and Amortization
      Consolidated depreciation and amortization expenses decreased $2.3 million, or 12.0%, to $17.0 million for the year ended December 31, 2004 from $19.3 million for the comparable period in 2003. This decrease was due to certain property and equipment purchased in 2000 and 2001 with estimated useful lives of three years becoming fully depreciated over the course of 2003 and 2004, as well as to our decision to extend the useful lives of certain of our property and equipment during 2004. In the first quarter of 2004, we extended the remaining estimated useful lives of various computer hardware property and equipment to December 2005. The majority of these assets had estimated useful lives that ended in March 2005. The decision to increase the estimated useful lives of these assets was based on internal analysis that indicated that the useful lives of these assets would extend beyond the original estimate of three years. The original three-year life was based on information available in 2002. However, given our limited operating history, the information available in 2002 did not include prior experience of the useful lives of this property and equipment to include in our initial estimate. The change in estimated useful lives had the impact of delaying the recognition of $676,000 of depreciation expense from 2004 to 2005. We will continue to review the remaining estimated useful lives of our property and equipment and will make adjustments whenever events or changes in circumstances indicate that the remaining useful life of an asset has changed. Consolidated depreciation and amortization expenses, as a percentage of consolidated revenues, decreased to 15.7% for the year ended December 31, 2004 from 20.6% for the comparable period in 2003.

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Other Income (Expense)
      Consolidated other income increased $380,000, or 40.0%, to $1.3 million for the year ended December 31, 2004 from $949,000 for the comparable period in 2003. This increase primarily related to an increase of $1.2 million in interest income, partially offset by an increase of $754,000 in foreign currency transaction losses. The increase in interest income was primarily due to the increase in the cash balances in 2004 compared to 2003, as well as to our cash earning a higher return during the year ended December 31, 2004 compared to the comparable period in 2003. The average monthly ending cash balance for the year ended December 31, 2004, including cash and cash equivalents, short-term investments, restricted cash and restricted short-term investments, was $100.7 million, compared to $78.4 million for the comparable period in 2003. Our average interest rate for the year ended December 31, 2004 was 2.9%, compared to 2.2% for the comparable period in 2003.
      The foreign currency transaction losses primarily related to the revaluation of the U.S. dollar cash balances held by our foreign subsidiaries due to the increase in the period-end foreign currency exchange rates during 2004. The functional currency of our foreign subsidiaries is pounds sterling. Foreign currency transaction losses increased to $1.4 million for the year ended December 31, 2004 from $644,000 for the comparable period in 2003. The year-end foreign currency exchange rate of pounds sterling to the U.S. dollar increased 7.4% to 1.9160 as of December 31, 2004 from 1.7846 as of December 31, 2003. As of December 31, 2004, our foreign subsidiaries held $20.6 million in U.S. dollar denominated cash balances, compared to $4.7 million as of December 31, 2003.
Income Taxes
      Consolidated tax expense increased $5.3 million, or 81.4%, to $11.8 million for the year ended December 31, 2004 from $6.5 million for the comparable period in 2003 primarily due to the increase in our pre-tax income. Our effective tax rate increased to 34.9% for the year ended December 31, 2004 from 32.7% for the comparable period in 2003. The effective tax rates for the years ended December 31, 2003 and 2004 are lower than the statutory rate primarily due to the impact of tax credits, which were partially offset by state income taxes. The increase in the effective tax rate from the year ended December 31, 2003 to the year ended December 31, 2004 was primarily due to lower tax credits taken during the year ended December 31, 2004 and higher state income taxes for the year ended December 31, 2004.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Overview
      Consolidated net income decreased $21.3 million, or 61.5%, to $13.4 million for the year ended December 31, 2003 from $34.7 million for the comparable period in 2002. During this period, net income for our futures business segment increased $2.2 million, or 20.0%, to $13.5 million for the year ended December 31, 2003 from $11.3 million for the comparable period in 2002, and we incurred a net loss for our OTC business segment of $126,000 for the year ended December 31, 2003 versus net income of $23.5 million for the comparable period in 2002. Consolidated operating income, as a percentage of revenues, decreased to 20.2% for the year ended December 31, 2003 from 40.6% for the comparable period in 2002. Consolidated net income, as a percentage of consolidated revenues, decreased to 14.3% for the year ended December 31, 2003 from 27.7% for the comparable period in 2002.
      Our consolidated revenues decreased $31.7 million, or 25.3%, to $93.7 million for the year ended December 31, 2003 from $125.5 million for the comparable period in 2002. This decrease was primarily the result of decreased trading volumes on our electronic platform as trading volumes in the North American OTC energy market significantly declined due to the business environment. Consolidated operating expenses remained relatively flat at $74.8 million for the year ended December 31, 2003, compared to $74.5 million for the comparable period in 2002.

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Revenues
Transaction Fees
      Consolidated transaction fees decreased $37.4 million, or 31.4%, to $81.4 million for the year ended December 31, 2003 from $118.8 million for the comparable period in 2002. Consolidated transaction fees, as a percentage of consolidated revenues, decreased to 86.9% for the year ended December 31, 2003 from 94.7% for the comparable period in 2002.
      Transaction fees generated by our futures business segment increased $8.4 million, or 26.7%, to $40.0 million for the year ended December 31, 2003 from $31.5 million for the comparable period in 2002. Transaction fees generated by this segment, as a percentage of consolidated revenues, increased to 42.6% for the year ended December 31, 2003 from 25.1% for the comparable period in 2002. This increase was due to a 9.5% increase in the trading volumes in our futures business segment, a 14.8% increase in our commission rates instituted in May 2002, as well as an 8.4% increase in the foreign currency exchange rate. Trading volumes in this segment increased to 33.3 million contracts traded for the year ended December 31, 2003 from 30.4 million contracts traded for the comparable period in 2002. The average exchange rate of pounds sterling to the U.S. dollar increased to 1.6341 for the year ended December 31, 2003 from 1.5071 for the comparable period in 2002. In May 2002, we implemented a fee increase across all futures markets from 30.5 pence per contract per side to 35 pence per contract per side. In June 2002, we implemented a fee increase in respect of Exchange for Physical, or EFP, and Exchange for Swap, or EFS, transactions from 35 pence per contract per side to 60 pence per contract per side. EFP and EFS are trades that occur off exchange and are reported for registration and clearing onto our futures markets.
      Transaction fees generated by our OTC business segment decreased $45.8 million, or 52.5%, to $41.5 million for the year ended December 31, 2003 from $87.3 million for the comparable period in 2002, primarily due to decreased trading volumes on our electronic platform, partially offset by an increase in our order flow shortfall payments. Transaction fees generated by our OTC business segment, as a percentage of consolidated revenues, decreased to 44.2% in 2003 from 69.5% in 2002. Transaction fees derived from trading in North American natural gas contracts decreased $25.0 million, or 59.8%, to $16.8 million for the year ended December 31, 2003 from $41.8 million for the comparable period in 2002, North American power contracts decreased $16.5 million, or 74.2%, to $5.7 million for the year ended December 31, 2003 from $22.3 million for the comparable period in 2002 and global oil contracts decreased $5.4 million, or 37.7%, to $8.8 million for the year ended December 31, 2003 from $14.2 million for the comparable period in 2002. The number of transactions executed in our OTC business segment decreased 29.6% to 684,495 trades for the year ended December 31, 2003 from 971,760 trades for the comparable period in 2002. In addition, average revenues per OTC transaction decreased 42.1% from the year ended December 31, 2002 to the year ended December 31, 2003. The reduced number of transactions, trading volumes, revenue per trade and associated revenues were due to several factors, including:
  •  Highly publicized problems involving merchant energy companies, including alleged manipulative trading and price reporting practices, misstatements of financial results, and other matters, which resulted in many trading companies reducing or eliminating their energy trading.
 
  •  Severely restricted credit lines for trading desks, limiting trading to asset-based transactions.
 
  •  A general loss of liquidity in the broader energy market resulting from fewer participants and reduced trading activity.
      Revenues derived from order flow shortfall payments in our OTC business segment increased to $7.1 million for the year ended December 31, 2003 from $3.3 million for the comparable period in 2002. This $3.8 million increase was due to a $6.4 million shortfall payment from the Gas and Power Firms recognized for the year ended December 31, 2003, partially offset by a $2.2 million shortfall payment recognized from the Initial Shareholders for the comparable period in 2002 and a decrease of $373,000 in the 2003 European gas shortfall payment as compared to the 2002 European gas shortfall payment. Consolidated order flow shortfall payments, as a percentage of consolidated revenues, increased to 7.6% for the year ended December 31, 2003 from 2.6% for the comparable period in 2002.

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      Revenues derived from our electronic confirmation fees increased 323.6% from the year ended December 31, 2002 to the year ended December 31, 2003. We began offering this service in April 2002. During the year ended December 31, 2003, 64,383 trades were matched, an increase of 109.7% compared to 30,696 trades matched for the comparable period in 2002.
Data Services Fees
      Consolidated data services fees increased $2.6 million, or 50.6%, to $7.7 million for the year ended December 31, 2003 from $5.1 million for the comparable period in 2002. This increase was due to increased data services fees derived from both our futures business segment and our OTC business segment of $1.2 million and $1.4 million, respectively. Data services fees derived from our futures business segment increased due to changes in the foreign currency exchange rate. ICE Data view only screen access and End of Day reports were both launched in November 2002. The number of companies that subscribe to ICE Data view only screen access increased to 185 as of December 31, 2003 from 105 as of December 31, 2002. Consolidated data services fees, as a percentage of consolidated revenues, increased to 8.3% for the year ended December 31, 2003 from 4.1% for the comparable period in 2002.
Trading Access Fees
      Consolidated trading access fees increased to $2.5 million for the year ended December 31, 2003 from $490,000 for the comparable period in 2002. This increase was primarily due to the growth in monthly minimum commission fees in our OTC business segment, which we introduced in November 2002. We initiated minimum commission fees during the last two months of 2002. During the years ended December 31, 2003 and 2002, we received $762,000 and $395,000, respectively, in membership subscriptions and system user fees in our futures business segment and $1.7 million and $95,000, respectively, in monthly minimum commission fees in our OTC business segment. These system user fees were introduced as part of the addition of trading in futures contracts to our electronic platform for the year ended December 31, 2003. Consolidated trading access fees, as a percentage of consolidated revenues, increased to 2.6% for the year ended December 31, 2003 from 0.4% for the comparable period in 2002.
Other Revenues
      Consolidated other revenues increased $1.0 million, or 98.1%, to $2.1 million for the year ended December 31, 2003 from $1.1 million for the comparable period in 2002. This increase was due to increased licensing, service and technology development fees charged to the Chicago Climate Exchange and to increased training and communication charges in our futures business segment. Consolidated other revenues, as a percentage of consolidated revenues, increased to 2.2% for the year ended December 31, 2003 from 0.8% for the comparable period in 2002.
Expenses
Cost of Hosting
      Consolidated cost of hosting expenses decreased $2.2 million, or 56.7%, to $1.7 million for the year ended December 31, 2003 from $4.0 million for the comparable period in 2002, primarily due to reduced costs associated with the migration to an Internet-based platform from a private network connection in early 2003. During the year ended December 31, 2003, we paid $1.3 million in hosting expenses, $268,000 in customer network expenses and $111,000 in security services expenses, compared to $2.4 million in hosting expenses, $516,000 in customer network expenses and $1.1 million in security services expenses during the year ended December 31, 2002. Consolidated cost of hosting expenses, as a percentage of consolidated revenues, decreased to 1.8% for the year ended December 31, 2003 from 3.2% for the comparable period in 2002.
Compensation and Benefits
      Consolidated compensation and benefits expenses decreased $1.7 million, or 6.0%, to $26.2 million for the year ended December 31, 2003 from $27.9 million for the comparable period in 2002. This decrease was primarily due to a reduction in our employee headcount and a reduction in our discretionary bonus payments.

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As of December 31, 2003, we had 186 employees, compared to 201 employees at December 31, 2002. Our discretionary bonus payments decreased primarily due to lower bonuses paid in 2003 compared to 2002, reflecting our reduced operating results for the year ended December 31, 2003, and fewer employees receiving a bonus in 2003 as compared to 2002. Consolidated compensation and benefits expenses, as a percentage of consolidated revenues, increased to 28.0% for the year ended December 31, 2003 from 22.2% for the comparable period in 2002.
Professional Services
      Consolidated professional services expenses decreased $737,000, or 4.6%, to $15.1 million for the year ended December 31, 2003 from $15.9 million for the comparable period in 2002. This decrease was primarily due to a $2.4 million charge in 2002 relating to legal and accounting expenses incurred with respect to our initial public offering that was suspended in 2002, which was partially offset by an increase in legal fees in 2003 primarily related to our litigation with NYMEX. Consolidated professional services expenses, as a percentage of consolidated revenues, increased to 16.1% for the year ended December 31, 2003 from 12.7% for the comparable period in 2002.
Selling, General and Administrative
      Consolidated selling, general and administrative expenses remained constant at $12.4 million for the years ended December 31, 2002 and 2003. Consolidated selling, general and administrative expenses, as a percentage of consolidated revenues, increased to 13.2% for the year ended December 31, 2003 from 9.9% for the comparable period in 2002.
Depreciation and Amortization
      Consolidated depreciation and amortization expenses increased $5.0 million, or 34.6%, to $19.3 million for the year ended December 31, 2003 from $14.4 million for the comparable period in 2002. This increase was due to additional depreciation expense recorded on capital expenditures of $1.6 million incurred for the year ended December 31, 2003 and capitalized software development costs of $5.2 million incurred for the year ended December 31, 2003. We also had a full year of depreciation expense recorded on the $14.8 million in capital expenditures and $6.0 million in capitalized software development costs incurred for the year ended December 31, 2002. Consolidated depreciation and amortization expenses, as a percentage of consolidated revenues, increased to 20.6% for the year ended December 31, 2003 from 11.4% for the comparable period in 2002.
Other Income (Expense)
      Consolidated other income decreased $544,000, or 36.4%, to $949,000 for the year ended December 31, 2003 from $1.5 million for the comparable period in 2002. The difference primarily related to a decrease of $263,000 in interest income and an increase of $602,000 in foreign currency transaction losses, partially offset by a decrease of $320,000 in interest expense. The decrease in interest income and interest expense were both related to the repayment of our related-party term loan note agreements in November 2002 for $16.5 million in cash.
      The foreign currency transaction losses related to the re-valuation of the U.S. dollar cash balances held by our foreign subsidiaries due to the increase in the period-end foreign currency exchange rates during 2003. The functional currency of our foreign subsidiaries is pounds sterling. The foreign currency transaction losses increased to $644,000 for the year ended December 31, 2003 from $149,000 for the comparable period in 2002. The year-end foreign currency exchange rate of pounds sterling to the U.S. dollar increased 10.9%, to 1.7846 at December 31, 2003 from 1.6095 at December 31, 2002. As of December 31, 2003, our foreign subsidiaries held $4.7 million in U.S. dollar denominated cash balances, compared to $1.6 million as of December 31, 2002.
Income Taxes
      Consolidated tax expense decreased $11.2 million, or 63.4%, to $6.5 million for the year ended December 31, 2003 from $17.7 million for the comparable period in 2002 primarily due to the decrease in our pre-tax income. Our effective tax rate decreased to 32.7% for the year ended December 31, 2003 from 33.8% for the comparable period in 2002. The effective tax rates for the years ended December 31, 2002 and 2003 are lower than the statutory rate primarily due to the impact of tax credits, which were partially offset by state income taxes.

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Quarterly Results of Operations
      The following table sets forth quarterly unaudited condensed consolidated statements of income (loss) for the periods presented. We believe that this data has been prepared on substantially the same basis as our audited consolidated financial statements and includes all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of our consolidated results of operations for the quarters presented. This unaudited condensed consolidated quarterly data should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The historical results for any quarter do not necessarily indicate the results expected for any future period.
                                                               
    Three Months Ended,
     
    September 30,   June 30,   March 31,   December 31,   September 30,   June 30,   March 31,
    2005   2005   2005   2004   2004   2004   2004
                             
    (in thousands)
Revenues:
                                                       
 
Transaction fees, net:
                                                       
   
Futures:
                                                       
     
Brent Crude futures
  $ 11,731     $ 10,390     $ 8,498     $ 8,511     $ 8,824     $ 8,563     $ 8,365  
     
Other futures products and options
    4,312       3,480       3,560       3,535       3,303       3,160       3,500  
     
Two month fee rebate program
                      (2,261 )                  
   
OTC:
                                                       
     
North American natural gas
    18,466       14,008       10,871       8,913       8,620       6,622       4,891  
     
North American power
    5,177       4,287       3,246       2,835       2,801       2,242       1,584  
     
Global oil
    509       400       436       758       915       954       1,372  
     
Other commodities markets
    28       75       116       247       244       291       260  
     
Electronic trade confirmation services
    437       395       358       264       239       166       120  
     
Order flow agreements shortfall payments
                      272       265       263       268  
 
Data services fees
    2,997       2,800       2,686       2,678       2,501       2,382       2,130  
 
Trading access fess
    1,011       916       1,069       969       842       859       925  
 
Other
    577       779       988       1,775       893       756       798  
                                           
Total revenues
    45,245       37,530       31,828       28,496       29,447       26,258       24,213  
                                           
Operating expenses:
                                                       
 
Cost of hosting
    365       341       283       219       362       341       357  
 
Compensation and benefits
    9,416       8,513       7,886       8,401       8,455       6,674       6,544  
 
Professional services
    3,047       3,230       3,884       3,379       3,583       4,316       3,245  
 
Selling, general and administrative
    3,882       3,808       3,409       3,667       3,252       3,092       3,109  
 
Floor closure costs(1)
          4,814                                
 
Settlement expense(1)
          15,000                                
 
Depreciation and amortization
    3,673       3,797       3,958       4,776       4,078       4,090       4,080  
                                           
   
Total operating expenses
    20,383       39,503       19,420       20,442       19,730       18,513       17,335  
                                           
Operating income(loss)
    24,862       (1,973 )     12,408       8,054       9,717       7,745       6,878  
Other income (expense), net
    714       1,173       992       (589 )     895       679       343  
Income tax expense (benefit)
    8,755       (659 )     4,530       2,626       3,561       2,987       2,599  
                                           
Net income (loss)(1)
  $ 16,821     $ (141 )   $ 8,870     $ 4,839     $ 7,051     $ 5,437     $ 4,622  
                                           
 
(1)  The financial results for the three months ended June 30, 2005 include $4.8 million in expenses incurred relating to the closure of our open-outcry trading floor in London, and a $15.0 million settlement expense related to the payment made to EBS to settle litigation. Excluding these charges, our net income for the three months ended June 30, 2005 would have been $12.6 million. See “— Non-GAAP Financial Measure”.

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Liquidity and Capital Resources
      Since our inception on May 11, 2000, we have financed our operations, growth and cash needs primarily through income from operations, borrowings under our related-party loan agreement and borrowings under our revolving credit facility. Our principal capital requirements have been to fund:
  •  capital expenditures;
 
  •  working capital;
 
  •  strategic acquisitions; and
 
  •  marketing and development of our electronic platform.
      We may need to incur additional debt or issue additional equity to make strategic acquisitions or investments in the future.
Cash and Cash Equivalents, Short-term Investments, Restricted Cash and Restricted Short-Term Investments
      We had consolidated cash and cash equivalents of $34.2 million, $61.2 million and $44.9 million as of September 30, 2005 and December 31, 2004 and 2003, respectively. We had $12.0 million, $5.7 million and $12.0 million in short-term investments as of September 30, 2005 and December 31, 2004 and 2003, respectively, $27.0 million in long-term investments as of September 30, 2005, and $12.1 million, $18.4 million and $36.8 million in restricted cash and restricted short-term investments held as of September 30, 2005 and December 31, 2004 and 2003, respectively. We consider all short-term, highly liquid investments with original maturity dates of three months or less at the time of purchase to be cash equivalents. We classify all investments with original maturity dates in excess of three months and with maturities less than one year as short-term investments. We classify all investments that we intend to hold for more than one year as long-term investments. We classify all cash that is not available for general use, either due to Financial Services Authority requirements or through restrictions in specific agreements, as restricted cash or restricted short-term investments.
      We invest a portion of our cash in investment-grade marketable debt securities through a third party asset management company. We also invest a portion of our cash in excess of short-term operating needs in U.S. AAA rated 28-day Auction Rate Securities, or ARS. We classify these investments as available-for-sale in accordance with Statement of Financial Accounting Standards, or SFAS, 115, Accounting for Certain Investments in Debt and Equity Securities . Available-for-sale investments are carried at their fair values with unrealized gains and losses reported as a component of accumulated other comprehensive income. We do not have any investments classified as held-to-maturity or trading.
      ARS are instruments whose interest rates or dividends are reset frequently, usually every seven to 49 days. The reset mechanism occurs via a Dutch auction, wherein purchasers and sellers submit their orders for ARS to registered broker-dealers. The highest bid that clears the auction is the interest rate or dividend applied to the entire issue until the next auction date. While there is no guarantee that a sell order will be filled, it is rare for it not to be filled due to the high credit quality of the ARS. Even though we purchase 28-day auction rate issues, we are required to classify these securities as short-term investments instead of cash and cash equivalents as the original maturity of the ARS is in excess of three months. The ARS investments are classified as current assets based on our intent and ability to use these investments as necessary for short-term requirements. We had ARS investments of $5.7 million and $12.0 million as of December 31, 2004 and 2003, respectively, and our ARS investments are presented as short-term investments on our consolidated balance sheets. We had no ARS investments as of September 30, 2005.
      We had $11.2 million, $12.4 million and $11.9 million in restricted cash held at ICE Futures as of September 30, 2005 and December 31, 2004 and 2003, respectively. The Financial Services Authority requires ICE Futures, as a Recognized Investment Exchange, to restrict the use of the equivalent of six months’ operating expenditures in cash or cash equivalents at all times. Our subsidiary, ICE Markets Limited, or ICE Markets, is authorized and regulated by the Financial Services Authority as an arranger of deals in

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investments and as an agency broker. The Financial Services Authority requires ICE Markets to maintain a minimum level of financial resources, which is calculated annually on the basis of 25% of the relevant annual expenditures, adjusted for any illiquid assets. As of September 30, 2005 and December 31, 2004 and 2003, we had $850,000, $1.0 million and $874,000, respectively, in restricted cash held at ICE Markets. In June 2001, when we acquired the International Petroleum Exchange (which we renamed ICE Futures in October 2005), $24.0 million of cash collateral was pledged by certain shareholders to secure a letter of credit issued to support our redemption obligations in respect of our Class B redeemable common stock, which we issued as a portion of our payment to the sellers. This cash was held in a facility that was controlled by the Gas and Power Firms and originally was not reflected in our consolidated financial statements. In January 2003, the FASB issued Interpretation No. 46, or FIN 46, Consolidation of Variable Interest Entities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. We adopted FIN 46 in November 2003. Given our ability to receive all of the variable interest entity’s expected residual losses and returns, we were considered the primary beneficiary under FIN 46 and we were required to consolidate the entity. The result of the adoption of FIN