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Electronic Trading Systems Wage Price War

September 14, 1998
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Electronic Trading Systems Wage Price War

The two major electronic natural gas trading systems have started a price war, slashing transaction fees to zero at multiple locations for the month of September. In late August, Altra Energy Technologies announced a "Streamline Inventory Reduction Sale," reducing prices to $0.001/MMBtu at all its major Louisiana and Texas locations and dropping fees to zero at all of its other trading points. Soon after, QuickTrade countered by dropping fees to $0.001/MMBtu from $0.025 for day trades at major Louisiana an Texas points and Chicago, and cutting costs to zero for day trades at the Columbia Gas pool and the Henry Hub.

"We've reacted in a limited way to Streamline's across the board reductions. They called it an inventory reduction sale, but I'd classify it as a going out of business sale," said QuickTrade's Jeff Taylor. "It appears to be a rather desperate measure on their behalf," he added, claiming QuickTrade handles about double the volume of Streamline. "They can't maintain these low fees and stay in business."

"Nothing could be further from the truth," said Altra President Rusty Braziel. "Our volumes have been very good. They've been great for the last three months, especially the last three weeks," he said disputing QuickTrade's claim about doubling Streamline's volumes.

Taylor said QuickTrade hasn't noticed any reduction in volume or transactions since Streamline slashed its rates. Prior to the price war, QuickTrade said it had record volumes, with 113 Bcf traded in August, and a single day record of 13.4 Bcf on Aug. 20. On average, Taylor said the system handles about 5 Bcf and 200 trades daily at its 140 locations.

"I would question that," said Braziel. "If you include what we do on an average daily basis with what our partner does in Canada, it's going to be 4 or 5 Bcf/d. I know we've done a record day of 10 Bcf.

"It's a competitive marketplace and we plan to win this game," said Braziel. "Our objective is to encourage as much trading through our system as we can. The pricing actions that we've taken are a short-term thing, a promotional thing and a competitive issue. That's probably about as far as I need go with talking about prices."

David Hanson, QuickTrade's vice president of marketing, said, "We have seen an upward trend in trading activity throughout the year and we believe it is indicative of the growing acceptance of electronic commerce as a convenient tool for busy traders." Points with the greatest liquidity on QuickTrade include Chicago, Tco IPP and Alberta. Quicktrade has handled $1.2 billion in transactions so far this year.

Rocco Canonica

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