ICE looks to clean up its act with the launch of new fixed income ESG indices

Darren Sinden

CTBC Investments will launch investable tracking products, such as ETFs to reflect the performance of the ESG indices.

MetaTrader 5 advances its hedging functionality

ESG, a three letter acronym for Environmental Social and Governance, has been the buzzword-du-jour for financial markets throughout 2020 and seem likely to remain so into 2021 and beyond.

Asset managers have been busy launching new funds and repurposing old vehicles to meet the demand from investors for more ethically surefooted products, whilst rating agencies are actively promoting their own scoring and ranking systems for ESG and sustainability criteria.

The exchanges don’t want to be left out and they see opportunities in creating indices and other products designed to track the performance of ESG investments and assets.

IntercontinentalExchange (ICE) which operates futures exchanges and clearing houses around the world today announced a partnership aimed at doing just that, in cooperation with CTBC Investments, a Taiwanese investment manager that is part of CTBC Financial Holdings which employs 27,000 people worldwide.

The new venture will seek to create a series of ESG indices and ETFs and ICE has launched two new bond indices to set the ball rolling. The first is a 15 year-plus large-cap carbon reduction index and the second a 15 year plus ultra large-cap US corporate ESG index.

The new indices will join the exchanges existing stable of 5000 global fixed income, equity, commodity and currency indices.

For its part, CTBC Investments will launch investable tracking products, such as ETFs to reflect the performance of the ESG indices. Both the indices and proposed ETFs having been recognised by the Taiwanese TAIPEX exchange as being viable benchmarks.

CTBC is Taiwan’s third-largest asset manager and has an established track record in ETF investing and it has become a significant player in the local ETF markets.

ICE, which was founded in 2000, is itself is a fortune 500 company which owns the NYSE, the former IPE and LIFFE exchanges and has operations in Singapore and Abu Dhabi.

Its consolidated Q3 2020 net income was US$390 million, so the new venture is unlikely to make a dramatic difference to the group earnings. However, it does open up a new geography for ICE as well as a new range of products.

The roots of the ICE exchange are to be found in the energy markets which of course are not ESG friendly, however, it is rather telling that just under half of ICE’s Q3 2020 revenues of $1.40 billion was drawn from data and listings services, rather than trading and clearing revenues.

If we are to continue to move towards an ESG focused, low carbon future then ICE will need to leverage the data and listings side of its business further as fossil fuels are eventually phased out,

though no doubt it will also look to introduce ESG and clean energy futures contracts as well.

Read this next

Institutional FX

Euronext reports double-digit growth in FX volume

Pan-European exchange, Euronext has reported a 10 percent rebound in the average daily volume on its spot foreign exchange market. The ADV figure stood at $19.6 billion in January 2022, which is up from December’s $18 billion.

Digital Assets

Voyager subpoenas FTX’s inner circle over Alameda loan

Bankrupt crypto broker Voyager Digital, represented by law firm Kirkland & Ellis, is seeking court approval to subpoena Sam Bankman-Fried’s inner circle, as well as Alameda Research’s former executives.

Retail FX

AvaTrade seals sponsorship deal with F1’s Aston Martin team

Dublin-based forex broker AvaTrade today announced that it has concluded a sponsorship deal with Formula One’s Aston Martin Cognizant team that entails sponsorship rights and other marketing benefits.

Executive Moves

M4Markets onboards Invaxa CEO Marios Antoniou as COO

Seychelles-regulated brokerage firm M4Markets has appointed Marios Antoniou, who has a colorful career within the foreign exchange industry, in the capacity of its Chief Operations Officer.

Digital Assets

GK8 now allows clients to control their digital assets as they would their fiat

“As the institutional market is increasingly turning to self custody, our policy engine empowers them to automate transactions, approvals, and even crucial workflows, while providing the highest degree of security, consistency, governance and control.”

Digital Assets

Retail CBDCs in the UK: “Welcomed” by CryptoUK and R3, but “Dystopian” for ETC Group

“At this stage, we judge it likely that the digital pound will be needed in the future. It is too early to decide whether to introduce the digital pound, but we are convinced preparatory work is justified”, said the BoE and HM Treasury.

Institutional FX

Centroid taps Iress API to provide retail brokers with real-time market data

“It has always been a challenge to have an efficient, elegant solution for market data and order execution for retail brokers, but with Iress we have found absolutely the right partner to add to our client offering.”

Digital Assets

Ramp launches FCA-approved off-ramp product, onboards Brave, Trust Wallet, Ledger

“To obtain and maintain our FCA registration, we must meet and operate within their strict anti-money laundering and counter-terrorist financing standards. This is a huge achievement for us, as compliance is a cornerstone of our business and what we stand for.”

Institutional FX

State Street launches FIX API for Fund Connect ETF platform

“Expanding from proprietary APIs to the FIX industry standard will bring us closer to our goal of 100% digital interactions. This is another example of innovations we’ve brought to our operating model as we celebrate 30 years of servicing ETFs since the launch of SPY.”