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ICE Deems Week One of Energy Trading a Success

ICE Deems Week One of Energy Trading a Success

It's been a little more than a week since the Intercontinental Exchange launched online energy trading among member companies, and the site already has posted $1 billion in energy transactions, putting the new exchange immediately into the running among major energy e-trading sites. The company claimed its first full week of energy trading was highly successful, with growing participation and expanding trade volumes.

"It was a week for [worldwide] oil [trading] but only a couple of days for power and gas," said spokesman Chuck Vice. "About half that billion was for oil and the other was split between power and gas with gas getting most of it."

The company reported that its scalable trading system known as "The ICE," traded over 240 Bcf of natural gas and natural gas derivatives, over 40 million bbls of crude and refined oil derivatives, and six million MWh of power in its inaugural energy trading week.

"This brings the total notional value for all OTC (over the counter) products traded to date on "The ICE" to over $6 billion, which we believe shows excellent trading activity for a market that has just started," said CEO Jeffrey Sprecher. "Moreover, we expect volume to rise exponentially once all market participants have been hooked up and trained."

Using Altra Energy Technologies' Altrade Power trading platform as a measuring stick, ICE's first week numbers are not too shabby. During the first week of its opening last October, Altrade announced its power platform performed transactions totaling two million MWh. For the month of August this year, Altrade Power did 18.9 million MWh for the month enjoying a 25% increase in users since the beginning of the year (see NGI, Sept. 18). Altrade NGL/Crude also experienced a record-setting August. On Aug.16, natural gas liquids did 2.6 million b/d, setting a daily best, with a record-setting 140 transactions. The day helped make August the highest NGL volume month with 27.9 million bbl traded.

Natural gas is also putting up top rate numbers. Altrade Gas has seen volumes rise by more than 200% since this time last year. Altra said second quarter 2000 financial gas volumes were over triple the volume traded for the first quarter of 2000.

Meanwhile, ICE is "trading firm power at all the major hubs across the U.S. and we are trading both fixed-price and index-priced physical gas, and a number of the most heavily traded basis swaps, swing swaps and some of the other financial instruments in gas," Vice said.

ICE launched power and gas trading last Tuesday. "We were actually just kind of winding down the last stages of beta testing on energy last week. It's pretty much just trading among the partner firms right now," said Vice. "We're about to open it up to a lot of other customers." The spokesman said the company expects to launch full commercial trading probably this week or next. It is expected to have about 1,500 traders logged on initially.

"We were very successful with our precious metals launch in August and are experiencing the same success with our energy complex," Sprecher said. "This launch has brought us full circle. We are now a one-stop shop for precious metals, global crude and refined oil, natural gas and power, with over 25 companies trading actively and more waiting to get connected."

The exchange was launched in March with backing from BP Amoco, Royal Dutch Shell Group, Societie Generale Investment Banking, Totalfina Elf Group, Deutsche Bank, Goldman Sachs and Morgan Stanley Dean Witter. Once launched, multiple energy companies jumped on board, including Southern Co., American Electric Power, Utilicorp United, Duke Energy, El Paso Energy and Reliant Energy.

With so many energy companies having a direct stake in the exchange, it is expected by many observers to surpass other existing sites in volume of transactions and revenue. However, it has a long way to go given that EnronOnline already is exceeding 2,100 transactions a day. Earlier this month, Enron said trades on its exchange since inception last November totaled more than $155 billion.

Even with all of ICE's support, one trader remains skeptical about its ability to compete with EnronOnline, "I am not sure whether the ICE is going to be able to stick because it charges a per trade commission," he said. "EnronOnline charges no commission on transactions on its system, but ICE takes a piece on each transaction including trades involving partners." ICE said it uses a commission system based on the competitive market rate.

Another gas marketer doesn't see that much difference. "Sure IntercontinentalExchange charges a per trade fee, and EnronOnline does not, but that just means you don't see a separate transaction fee on EnronOnline," the marketer said. And further, "I think Altrade can stay in there because it's truly independent."

In the online exchange wrap-up, True Quote, a new entrant with financial support from PG&E Corp., APB Inc., Microsoft and EnForm has rolled out its system to a select group of customers and is awaiting receipt of its CFTC "no action" letter before it turns on the trade execution capability. A spokesman for the company said it expects to be fully functional in mid-to-late November.

HoustonStreet Exchange, a trading platform based in Portsmouth, NH, expects to have transactions totaling $920 million, based less on liquidity and more on the actual value of per megawatt, or per barrel by 2004. The company declined requests to release the daily volumes traded on its physical trading platform

RedMeteor.com, a global, Internet-based, open trading platform for crude oil, gas, gas liquids and electricity continues to remain a contender. The platform was selected by Forbes.com as one of 200 web marketplaces to be named "Best of the Web B2B Directory" in July.

Another system which is already making waves before its release is eNymex. The Nymex venture is intended to be a global exchange for forward trading and clearing contracts in a range of physical commodities with initial focus on energy and metals. The exchange originally said it planned to launch the first phase of the e-commerce exchange in October. However, start-up has been pushed back to "early 2001," according to a Nymex spokeswoman.

Another exchange with significant backing is TradeSpark, which was scheduled to be launched this month. TradeSpark, LP, is powered by eSpeed and has TXU Energy Trading, Coral Energy, Dominion, Koch Energy, Williams, Dynegy and Entergy as its energy partners (see NGI, Oct. 2).

The newest trade platform in the industry, is Dynegy's Dynegydirect, a B2B trading site for energy and communications commodities. The company says this site will augment its investment in TradeSpark because TradeSpark is a neutral site, where as Dynegydirect will be tailored more for Dynegy's customers. The site is expected to go live late this month, or early next month.

Rocco Canonica; Alex Steis

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