UPDATE 3-ICE profit beats Street, upbeat on market reforms

* EPS of $1.18 in third quarter; $256.3 mln in revenue

* Management sees trading growth from CFTC limits

* Avg daily commissions in OTC energy up 12 pct in October

* Shares down 2.5 percent, in line with peers (Adds management quotes, byline, updates shares)

By Jonathan Spicer

NEW YORK, Nov 3 (Reuters) - IntercontinentalExchange Inc (ICE.N) beat expectations on Tuesday with a 16 percent quarterly profit rise, and management said that even position limits on speculators could boost the exchange operator, which is starting to benefit from sweeping regulatory reforms.

ICE -- whose peers have mostly logged profit drops -- beat earnings expectations by 3 cents per share, helped by better-than-expected expenses and record futures trading in the third quarter.

The company, which runs exchanges and clearinghouses on both sides of the Atlantic, could benefit as more over-the-counter contracts are exchange-traded and cleared, but could suffer if U.S. regulators impose new commodity-market position limits.

"Drivers that are having a positive impact on our business are numerous," Jeffrey Sprecher, the chief executive, said on a conference call, adding that some 14 regulators from at least seven agencies now work full-time in ICE offices.

With U.S. and European regulators making changes intended to avoid a repeat of the financial crisis, ICE has taken the lead among exchanges in clearing credit default swaps, seen as a major cause of the crisis.

But a possible crackdown on speculation in commodities markets has weighed on ICE shares, which were down 2.3 percent on Tuesday, in line with peers. The shares have only partly recovered from a tumble in early July, when the Commodity Futures Trading Commission said it was considering limits on speculators to clamp down on oil price volatility.

Sprecher said the CFTC may apply position limits on more over-the-counter energy products, but suggested such a crackdown could ultimately boost trading.

"We believe that prudently set limits will lead to an increase in confidence in properly functioning markets, and will drive transaction growth," he said, adding investors are acting in anticipation of position limit changes.

MORE GROWTH?

ICE earned $86.9 million, or $1.18 in the third quarter that ended Sept. 30, up from $75.0 million, or $1.04 per share, a year earlier. Revenue was up 27 percent at $256.3 million.

Analysts on average expected the Atlanta-based company to earn $1.15 per share on $255.6 million in revenue, according to Thomson Reuters I/B/E/S.

Average daily futures volume jumped 24 percent.

Meanwhile, average daily commissions in ICE's OTC energy business climbed 12 percent in the quarter, helping boost total transaction and clearing fees 34 percent. The commissions jumped another 12 percent to $1.4 million in October, according to a separate company presentation.

"If you're going to continue that pace, it's a pretty strong rebound," Patrick O'Shaughnessy, an analyst at Raymond James and Associates, said of the October growth.

The analyst said ICE remains a growth stock, and likely beat consensus due to better-than-expected quarterly expenses, which jumped 41 percent to $116.3 million, due partly to last year's purchase of Creditex, a CDS processor.

BEYOND CDS

ICE -- which operates futures exchanges in New York, London and Winnipeg, Canada -- began clearing U.S. index-based CDS in March, and European CDS in July. Revenue and expenses from the venture have grown quarter over quarter this year.

Management said on Tuesday it expects regulatory approval to clear single-name CDS this quarter, and that approvals have taken longer than anticipated.

Scott Hill, ICE's chief financial officer, said in an interview "there is an opportunity to expand beyond CDS." The clearinghouse and customers "all are being done with an eye to doing more than CDS over time," Hill said, adding foreign exchange and interest rate swaps are the most obvious markets beyond CDS.

Regionally, Asia "is the key area that will likely drive a lot of growth over the next two to three years," Hill said.

Meanwhile, CEO Sprecher said on the call that ICE has the capacity to do an acquisition. Hill, the CFO, told Reuters the company sees itself as an acquirer in any deal, adding "there are some attractive targets out there."

ICE shares were down $2.55 at $100.28 in New York. (Reporting by Jonathan Spicer, editing by Maureen Bavdek and Tim Dobbyn)