Consolidation Predicted For Online Trading
The energy online marketplace is crowded, confused and on the
verge of shaking out and consolidating, according to three who
should know, two CEOs of successful trading platforms and a Nymex
executive, who last week shared their predictions at the Energy
RiskTech Conference in Houston.
Rusty Braziel, founder and CEO of Altra Energy Technologies;
Vincent DiCosimo, CEO of RedMeteor.com; and Neal Wolkoff, executive
vice president of Nymex, shared a panel discussion on the future
development of electronic energy exchanges. While all seemed
confident of the future of their own enterprises, they acknowledged
that the growing number of players in online energy trading today
has made for an oversaturated marketplace.
"Clearly, liquidity has been achieved in the online
environment," said Braziel. "But it's a confused marketplace. The
big question is when is there going to be a shakeout, and how many
do we need? What is the future? Will it be the independents or the
proprietary platforms that succeed?" Answering his own questions,
he said, "frankly, I don't have a clue."
Within five years, though, Braziel predicted that the market
would become more digital than it is today. "We are seeing more
complex transactions on line and they will become more complex in
the future and a significant amount of them will be digital."
Braziel said that a more networked market would allow
information to become more integrated, and there would be more
transactions across different platforms. The "Holy Grail" would be
obtained when redundant information is eliminated and the amount of
mistakes made online is reduced.
In a sideways reference to the overwhelming market response to
EnronOnline, Braziel said that in his view, "in the next two to
three years, the market will support a number of different
platforms, but the market will not tolerate a significant single
provider. What we do see are more transactions, more liquidity."
Braziel does see a smaller pool of online traders, which won't
occur without some "fallout," though. "There will be more
alliances, more integration in the marketplace. RedMeteor.com's
DiCosimo said that it seemed as if new trading platforms were
"arriving daily." At his company, he said, the trading is not built
around the Website, but rather, around the business itself.
"The marketplace doesn't care in the end how quick it is,"
DiCosimo said of online trading. "It doesn't matter what color the
Website is. At the end of the day, it's got to make you more
But he also sees a reduction in the number of online trading
platforms. "I see a collision taking place in the market between
the Internet, bandwidth and commodity trading," said DiCosimo.
"There are still more opportunities, but it's not an end all,
simple adaptation of the marketplace."
In fact, DiCosimo said that while energy online trading has
grown, it would never replace the "human event."
"This conference could have been webcast," he pointed out, "but
the human event is very important. It is key to success in today's
marketplace." While the door is opening for "people who never
thought of trading before," online or not online, DiCosimo also
predicted there would be fewer online trading players by this time
next year. "I would have said it would take a year, but now I'm
thinking it could be a few months before we start seeing more
Nymex's Wolkoff said that he also expects some sort of meltdown
to occur within the online trading market, but he also predicted
that it would remain strong, no matter its size. "It's appropriate
to have a healthy respect for the technology. These are useful
tools. But it has to be looked at for what they can provide in the
real world, not the virtual world." Wolkoff said that Nymex is
attempting to use the lessons learned from other successful online
traders as it prepares to launch its own e-commerce platform.
Wolkoff said that if technology was the entire "solution" to
energy trading, there would be "20 pure success stories. Clearly,
we don't have that many now. And a year from now, maybe we'll see
20 new success stories." He predicted that "most" of the online
trading systems will cease to exist, and if even "two or three
exist a year from now, it will be a bit of a surprise as to who
Carolyn Davis, Houston