 After buying a $10 million mansion in Atlanta last year, Jeffrey C. Sprecher rolled up his sleeves and repaired the furnace himself. He also rewired the sound system. Now the 55-year-old chief executive officer of Intercontinental-Exchange (ICE), known as ICE, is busy remodeling the $25 trillion market for credit default swaps (CDS), the derivative contracts that played a starring role in the financial breakdown.Sprecher founded ICE a decade ago as an online marketplace for energy trading. Since getting into the business of CDS clearing—serving as a middleman in transactions involving the derivatives—ICE has become dominant. Between its operations in the U.S., called ICE Trust, and Europe, Sprecher's company has cleared more than $10 trillion in such swaps; its closest rival, CME Group (CME), has cleared $192 million.Sprecher built such a huge lead by acting fast. Mere weeks after the federal government came to the rescue of AIG, which had been driven to its knees by its massive CDS exposure, he cut a deal with 10 of the world's largest banks, including Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC), to clear their trades in exchange for sharing the profits with them. "I outmaneuvered the other service providers," Sprecher says in an interview at his Atlanta headquarters, wearing a black suit, open-collared dress shirt, and a $40,000 Patek Philippe watch that shows the time in 24 zones. Sprecher's firm and its partners stand to profit even more from President Barack Obama's July 21 signing of the financial regulatory reform act, which requires most standard derivatives to be cleared through a third party such as ICE.The CDS was developed as a way for bondholders to offset the default risk of companies and countries. Over the past decade the market has experienced explosive growth as investors turned to the swaps to bet against financial instruments they often didn't own. It's the hope of Wall Street reformers that a CDS clearinghouse will bring order and clarity to the market, as well as a safety net. ICE guarantees every transaction between buyer and seller, effectively reducing the impact of a default by a firm such as Lehman Brothers by spreading the risk among the clearinghouse members and collecting appropriate collateral on every trade. ICE so far has contributed $120 million to its two clearinghouses' guaranty funds, its maximum exposure in the event of a major default or meltdown in the CDS market. Barring that, clearing swaps is a relatively high-margin business. ICE is telling analysts that it expects revenue of about $70 million this year from CDS clearing, with 16 percent to 20 percent of that falling to the bottom line.That Sprecher uncovered a great profit-making opportunity in the rubble of the financial crisis is clear. Over the past year, ICE's shares have risen 18 percent, boosting his personal stake to more than $192 million. Whether his clearinghouse, so finely tailored to the interests of the major banks, contributes to a safer, more transparent financial system is a matter of contention.Sprecher grew up in Madison, Wis., the son of a nurse and a life-insurance salesman who still goes into the office at age 80. After graduating from the University of Wisconsin in 1978 with a degree in chemical engineering, he worked for the air-conditioning company Trane, which allowed him to get his MBA from Pepperdine University while working full-time. He left Trane in 1983 at the age of 28 to form a power-plant developer, Western Power Group.
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