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In Wake of Nymex-CME Electronic Trading Deal, ICE Vows to Remain Competitive

With news last week that the New York Mercantile Exchange (Nymex) had teamed with the Chicago Mercantile Exchange (CME) in an electronic energy trading venture, the IntercontinentalExchange (ICE), which arguably stands the most to lose from the deal, said that it will continue to expand its energy offerings.

While not mentioning the Nymex/CME deal specifically in a statement to the press, ICE CEO Jeffrey Sprecher said his company is firmly entrenched in the electronic energy exchange marketplace and will remain competitive. "It's early in the transition of energy commodities to electronic trading, and we believe we will continue to lead in the development of innovative products and services to serve our marketplace," Sprecher said.

Nymex reported recently that it entered into a technology services agreement with the CME, under which the CME will become the exclusive electronic trading services provider for Nymex's energy futures and options contracts. The deal will provide electronic trading of Nymex products "virtually 24 hours a day" on the CME Globex electronic trading platform (see NGI, April 10).

ICE operates an electronic global futures and over the counter (OTC) marketplace for trading energy commodity contracts, including crude oil and refined products, natural gas, power and emissions. ICE conducts its markets for futures trading through its regulated subsidiary, ICE Futures, an energy futures and options exchange in Europe. ICE also offers a range of risk management and trading support services, including cleared OTC contracts, electronic trade confirmations and energy market data.

"ICE is well positioned to compete on a number of fronts," Sprecher said. "Anticipating increased competition, ICE Futures introduced its successful ICE WTI Crude futures contract in February of this year, achieving record open interest and daily trading volume this week," he said on Friday. "More importantly, the liquidity in ICE's diverse range of energy contracts in both futures and over-the-counter (OTC) markets is unparalleled."

Commenting on the Nymex/CME deal's impact on ICE, Commercial Brokerage Corp. broker Ed Kennedy said the move does change the energy trading landscape. "I guess we can assume the merger discussions between ICE and Nymex are off," Kennedy joked. "You have to remember ICE only trades a fraction of the contracts Nymex does."

As for the emphasis on electronic trading, Kennedy said the shift was inevitable. "People might disagree with going towards electronic trading as opposed to pit trading, but folks, it's here," he said. "I don't like it, I realize the pitfalls with it, but the bottom line is it is here. Nymex had to do something to accommodate that market and that is exactly what it did with this deal. The premiere platform for electronic trading is Globex, so there is no question about it. It really is a good fit."

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