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Last up is
ICE), a firm that's been making some big moves after it announced plans to acquire
NYSE Euronext (
NYX), the parent of the New York Stock Exchange. Until now, ICE's business has been a lot more niche-focused: in total, it operates one of the largest exchanges for over the counter derivatives, or as I like to call them "less commoditized commodities". That nuanced core business gives ICE some attractive opportunities -- it doesn't compete quite as vigorously for trading flow on its platform, and it collects bigger profits as a result.
The firm's clearing business adds onto IntercontinentalExchange's profit-making abilities. It essentially lets ICE fill a role that a third-party would normally take, and that vertical integration makes the firm much more attractive for investors. Because energy and agriculture are big markets for the firm (and its biggest customers are commercial hedgers), it's less impacted by lower trading volumes in a challenging market. Firms need to hedge their commodity risks in good times and in bad ones.
Right now, IntercontinentalExchange sports a short interest ratio of 16.9. At that rate, it would take more than three weeks of buying pressure for short sellers to cover their bets against the company. While it's fair to say that a lot of that shorting comes from merger arbitrageurs, the reason for the short bets don't really matter -- a short squeeze could still happen if they try to close their positions in one fell swoop.
To see these short squeezes in action, check out this week's
Short Squeezes portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.